are going to get the benefit of the waterways of this country, we must let the commerce move on the waterways, and let the commerce move on the waterways at the lowest rates the water carriers can afford to charge. Regulation would defeat that purpose. It would not help it.

I want to mention briefly some specific provisions of the Lea bill and also of the railroad bill, of which I have here a committee print.

THE LEA BILL

Railroad consolidations-Land-grant rates

Taking first the Lea bill, there are two sections which we can endorse in accordance with the principles adopted by the Mississippi Valley Association which I read to you yesterday. I refer to the provisions of part II of the Lea bill, section 12, dealing with the consolidation of railroads. We favor the elimination of the compulsory consolidation plan. We favor giving the railroads a chance to consolidate, if they will, voluntarily.

As to the provisions in title V, land grant repeal, we endorse that as a measure which would help the railroads a little bit. Let the Government pay commercial rates, even though the railroads did get a lot of land and a lot of donations, for which they would now use the hated term "subsidy."

DISCRIMINATORY REGULATION OF RIVER CARRIERS

We object to the provisions in the Lea bill for the regulation of common carriers by water.

Note that section 21, pages 8 and 9 makes the provisions applicable only to common carriers on the rivers and not common carriers using the high seas, or the Great Lakes.

That, we submit, is a discrimination against the inland waterways commerce which the inland commerce cannot and should not stand. Referring to sections 24 to 32, inclusive, the provisions with reference to the authority of the Commission over transportation facilities and the traffic, the rates, maximum and minimum of water carriers, requiring certificates of public convenience and necessity before carriers can operate on the inland waterways-all of those are by their terms, restricted to common carriers and to the common carriers on the rivers only, not the carriers operating coastwise, intecoastal, or on the Great Lakes.

I shall make this exception that certain coastwise carriers operating on the inland sounds, and so forth, that is to say, not on the high seas, would be regulated, but they are an unimportant part of the whole. Of course they are important to the communities they serve. Section 41, part IV, deals with coordinations, minimum rates. Again that is objectionable as we see it, because it applies to common carriers only.

As to title II, the Transportation Administrator, our association i has taken no position.

That is true also with regard to title III and title IV dealing with railroad reorganization amendments to the Reconstruction Finance Corporation Act.

RAILROAD BILL POLICY

That briefly states our position on the Lea bill.

Turning now to the railroad bill: Section 1, declaration of policy. Note that there is carefully omitted from the declaration of policy anything with reference to the effect of rates on the movement of commerce; anything with reference to traffic moving at the lowest cost consistent with the furnishing of the service.

We believe that is a most important omission.

SCOPE, EXEMPTION OF LAKE BULK CARRIERS

Section 2 dealing with scope and application.

Paragraph (5) in this section, which provides that the act shall not apply to interstate contract carriers by water, which by reason of the inherent nature of the commodities transported, requirement of special equipment, shipment in bulk, is not actually and substantially competitive with transportation of interstate commerce, we believe that is intended to carry out the railroads' suggestion that bulk freight carried on the Great Lakes shall not be regulated.

Bulk freight carried on the Great Lakes is just as much competitive with the common carriers on the rivers, and common carriers by rail, as bulk commerce on the rivers is competitive.

On the Ohio River, on the Mississippi, the Missouri, and the Illinois the great part of the tonnage today consists of transportation of such bulk commodities as coal, grain, and steel.

The railroads propose to regulate all of that and leave similar commerce on the Great Lakes free of regulation, which would, of course, destroy the movement of bulk freight on the rivers.

FILING TARIFFS

Section 7 provides for the filing of tariffs by commercial carriers and would apply the present elaborate set-up which the Interstate Commerce Commission imposes on the railroads on every common carrier by water and would greatly increase the water carriers' operating costs.

There is, you will notice in this part of the bill, no section corresponding to section 4 of the present Interstate Commerce Act. In other words, the railroads wish to be free to charge lower rates for long-distant transportation which they consider competitive and higher rates at the intermediate points which they consider noncompetitive.

I stated, I think, in sufficient detail our objections to that practice yesterday.

COMMODITIES CLAUSE

Section 12, commodities clause, would require after January 1, 1941, that every carrier-that means every water carrier, I presumeshall not transport products in which its owner is interested.

There is no public demand for any such prohibition as that so far as water carriers are concerned. Many of our most useful water carriers, inland, coastwise, and Great Lakes, are carriers which haul

some freight for their owners and some freight for the public for hire. By so doing they reduce their costs. They reduce the cost of transportation to the public; they injure no one. We see no object whatever in prohibiting this useful practice.

RIGHT TO RECOVER DAMAGES LIMITATIONS OF ACTION

Section 20 and section 22 deals with damages and with limitations of actions and would appear to limit the rights of the public to recover damages for unreasonable rail rates to cases where actual pecuniary injury is proven. That would make it practically impossible for anybody to recover damages for unreasonable rates. It is hard enough, I may say, to persuade the Interstate Commerce Commission to award reparations for unreasonable rates now.

There should be some provision whereby the public, if it has paid exorbitant, extortionate rates, would have some right of recovery similar to the provisions of the present act. If a limitation of 90 days or 6 months is fixed on the right of recovery, it will not only prevent people who do not act within that period from maintaining an action for recovery of damages to which they are entitled, even the recovery of overcharges, but it would be a most prolific source of discrimination if a railroad for one reason or another delayed for 90 days or 6 months the collection of its tariff charges from some shippers and collected those charges from others.

THROUGH ROUTES AND JOINT RATES; DIVISIONS

With reference to section 27, the rule with reference to through routes and joint rates and divisions, there is one provision which I think is particularly objectionable. Paragraph (2) states that in the establishment of joint routes that no railroad should be required without its consent to embrace in such routes substantially less than the entire length of its road.

The Interstate Commerce Commission has pointed out how difficult it is to apply that rule to through routes and joint rates, and if the rule were applied to joint rates between rail and other modes of transportation that would mean no such joint rates could be established that did not embrace substantially the whole length of the railroad, and that is obviously impossible in many cases.

RATE-MAKING RULE

Section 30, the rate-making rule is, I think, one of the most iniqui tous perhaps of anything in the bill. It provides, in effect, that if the railroads are not earning enough to maintain their credit and obtain needed money for their properties from investors, the Interstate Commerce Commission would have nothing to say if they chose to raise rate levels to any point that they considered necessary. It would practically take the ceiling off of general rate increases. Combined with the absence of any long-and-short-haul rule, which is the other most conspicuous feature of this proposed bill, it would mean that on the commerce which the railroads consider competitive they could cut rates to the bone; they could go just as low as they saw fit, down to what they call their out-of-pocket costs, which when translated means anything in the way of revenue is considered by them

profit on competitive freight. They say they can put it in their trains anyway, and if they get $1 or $20 or $100 they are that much ahead. That is their theory of out-of-pocket costs, which means, of course, practically no limit to rate-cutting to meet or destroy competition.

On the other hand, there is in this rate-making rule, section 30, a provision which says if their total earnings are not adequate they can make any old general increase they please.

In other words, make the rates higher and higher on the traffic which they consider noncompetitive and lower and lower on the traffic which they consider competitive or where they are competing against some other agency.

That would destroy the commerce of this country and the railroads themselves if it were carried out, and yet it is the railroads' proposal.

Mr. MARTIN. Mr. Chairman

The CHAIRMAN. Mr. Martin.

Mr. MARTIN. Did you say that that was in this bill, in the Lea bill? Mr. CHILDE. I am discussing the railroad bill, Mr. Martin; the bill that was proposed here by Mr. Fletcher.

VALUATION

We come now to section 35, valuation.

I call your attention to the elaborate provisions for valuation which would be applied to the water carriers, for no conceivable reason except that it would be another way of adding to their costs.

ISSUANCE OF SECURITIES

Section 36, issuance of securities, is another most elaborate set of rules which would apply to water carriers as well as to rail carriers and further tie them up in expensive and unnecessary red tape of regulation.

CERTIFICATES OF PUBLIC CONVENIENCE AND NECESSITY

Sections 24 and 43 provide that certificates of public convenience and necessity must be issued before a common carrier, by water, can operate on the rivers; a permit must be issued before a contract carrier can operate. Those are provisions designed purely to restrict and limit water commerce, whereas we people who pay the freight are trying to develop water commerce.

Heretofore it has been, and I think, and I hope for the future will be, the policy of Congress to develop water commerce and here we are faced with a proposal of the railroads before the water channels are complete, that you adopt measures to restrict it.

Section 44 deals with dual operations. It says that no carrier could operate as a common carrier and a contract carrier both without special permission of the Interstate Commerce Commission. Another measure obviously designed to increase the cost of water. competition, to make it less useful to the public.

The same could be said of sections 45 and 46 dealing with brokerage and transfer of certificates. There is no public necessity whatever for any such restrictions.

CONSOLIDATIONS, MERGERS, AND ACQUISITIONS OF CONTROL

Section 49 dealing with consolidations, mergers, and acquisitions of control, would apply to all forms of transportation. Why there should be any such burdensome restriction on waterway transportation is beyond my conception, except as a means of hampering its development.

TRANSPORTATION BOARD

The provisions in section 49, providing for a transportation board is notable in that one of the chief duties of the board would be to investigate all forms of transportation and see to what extent they are subsidized, the purpose, I presume, being that whatever is found to be a subsidy should be put into the rate base for the purpose of raising water rates, and in a later section of the act we come to a provision for tolls.

LAND-GRANT PROVISION

Title II of the railroad bill with reference to repealing the landgrant rates, as I have already indicated, is supported by the Mississippi Valley Association.

TOLLS

Title III, the whole part of the bill dealing with tolls upon improved waterways, we object to as a device to raise the cost of water transportation to the public.

I have already stated my reasons. I call your attention to this fact, however, that this bill provides that the tolls shall apply only on improved inland waterways other than the Great Lakes.

In other words, the harbors on the coast and the harbors of the Great Lakes, and all of the connecting channels, shall be free of tolls. The rivers, and particularly the Mississippi River system, shall be subject to tolls.

That is a most indefensible form of discrimination.

Another striking feature is that these tolls shall make the Mississippi River system not only self-supporting but self-liquidating. In other words, the tolls shall not only be high enough to pay for maintenance and interest on the investment of the Government in the channels, but they shall be enough higher than that to pay the Government back the money that was put in.

Of course, that is loading up the commerce of the rivers to the point where it would not move. The Government would not get its money back, and the public would be the sufferer.

Suppose railroad rates were made on that theory, that we had to pay rates high enough, not only to maintain the railroad rights-ofway, but to liquidate them. You can readily see what would happen to rail rates. That is what the railroads are here proposing you apply on the commerce of the Mississippi River system, and not on the other water commerce of the country.

DISCONTINUANCE OF FEDERAL BARGE LINES

Title IV, discontinuance of Federal barge-line operations, provides that forthwith the operations of the Federal barge lines shall be discontinued and then the line shall be sold for whatever it will bring.