COOPERATION OF INTERSTATE COMMERCE COMMISSION

SEC. 316. (a) The Railroad Reorganization Court is authorized to avail itself of the cooperation, records, services, and facilities of the Interstate Commeree Commission.

(b) When in any plan of reorganization or in any other matter pending before it, the Railroad Reorganization Court deems it advisable so to do, it may certify to the Interstate Commerce Commission, for such Commission's advice and opinion in the premises, questions as to the amount of capitalization that the reorganized property or properties should reasonably have, together with the reasonable proportion of fixed charges, and for such other information as the court may desire. The proceedings before the Reorganization Court shall be stayed for a period of not to exceed sixty days to enable the Commission to furnish such information to the court. For good cause shown, said court may, by order, further extend the time within which the Commission may supply this information for such reasonable period as to said court may seem necessary. Any such order of extension shall be entered by the clerk of the court in the proceeding to which it relates, as a part of the record therein. Upon the receipt by said Reorganization Court of the Commission's advice and opinion, as provided for in this paragraph, said court shall, with all reasonable despatch, proceed to a determination of the matters pending before it.

TITLE IV-AMENDMENTS TO RECONSTRUCTION FINANCE CORPORATION ACT

SEC. 401. (a) That the portion of third sentence of the third paragraph of section 5 of the Reconstruction Finance Corporation Act, as amended (U. S. C., 1934 ed., Supp. III, title 15, sec. 605), which precedes the last proviso in such sentence is amended to read as follows:

"Within the foregoing limitations of this section, the Corporation, notwithstanding any limitation of law as to maturity, with the approval of the Interstate Commerce Commission, including approval of the price to be paid, may, to aid in the financing, reorganization, consolidation, maintenance, or construction thereof, purchase for itself, or for account of a railroad obligated thereon, the obligations of railroads engaged in interstate commerce, or guarantee the payment of the principal of, and/or interest on, such obligations, or, when in the opinion of the Corporation, funds are not available on reasonable terms through private channels, make loans to such railroads or to receivers or trustees thereof for the purpose aforesaid: Provided, That in every case of such a loan, or purchase or guaranty of obligation, the Interstate Commerce Commission and the Corporation shall, in connection with the approval and/or authorization thereof, find that the prospective earning power of such railroad, together with the character and value of the security offered, furnish, in the opinion of the Interstate Commerce Commission and the Corporation, respectively, reasonable assurance of the retirement or repayment of such loan or obligation, and reasonable protection to the Corporation:".

(b) The Reconstruction Finance Corporation Act (U. S. C., 1934 ed., title 15, ch. 14; Supp. III, title 15, ch. 14) is amended by adding a new section after section 5e to read as follows:

"SEC. 5f. For the purpose of maintaining and promoting the economic stability of the country or encouraging the employment of labor, the Corporation is authorized and empowered, upon reasonable security and under such terms, conditions, and restrictions as the Corporation may determine, to aid in the financing of such rail, shop appliances, rolling stock, and other equipment, of railroads, as may be approved by the Interstate Commerce Commission as desirable for the preservation and improvement of transportation facilities. The total face amount of loans outstanding and obligations purchased and held by the Corporation under this section shall not exceed at any one time $300,000,000.

"The title of any owner, whether as trustee or otherwise, to any such property leased or conditionally sold to a railroad, in the financing of which the Corporation as so aided, any right of such owner to take possession of such property in compliance with the provisions of any such lease or conditional sales contract, and the right of any owner of a collateral note evidencing a loan to a railroad from the Corporation at any time made under any of the provisions of this Act, as amended, to acquire title to the collateral securing such note, free and clear of any equity of redemption, in compliance with the contract of pledge, and thereafter to deal with the same as the absolute owner thereof, shall not be affected by the provisions of section 77 of the Act of July 1, 1898, entitled 'An Act to establish a uniform system of bankruptcy throughout the United States,' as amended."

TITLE V-PAYMENT BY UNITED STATES OF COMMERCIAL TRANSPORTATION RATES SEC. 501. (a) Notwithstanding any other provision of law, on and after July 1, 1939, the United States Government shall pay the applicable commercial rate for the transportation by railroad of auy persons or property for the United States or on its behalf: Provided, That nothing in this section shall be construed to affect the right of the United States Government to contract with any carrier by railroad subject to the Interstate Commerce Act, as amended, for the carriage, storage, or handling of any such property free or at reduced rates, to the extent permitted under section 22 (1) of such Act, as amended.

(Payment for the transportation of any such persons or property shall be made upon presentation of bills therefor, prior to audit or settlement by the General Accounting Office, but the right is hereby reserved to the United States Government to deduct the amount of any overpayment to any such carrier from any amount subsequently found to be due such carrier.

Chairman LEA. Last spring the President appointed a committee of 15, representing various groups interested in transportation, as a committee to consider our transportation problems. After appropriate conferences at the White House, the President invited three members of that committee-Chairman Splawn, of the Interstate Commerce Commission, and Commissioners Eastman and Mahaffie-to present recommendations for legislation.

The committee of three thus appointed, headed by Chairman Splawn, gave a comprehensive report which was submitted to the Congress with a message from the President on April 11, 1938.

On September 20, 1938, the President appointed a committee of six to consider transportation problems and recommend legislation. The report and recommendations of this committee were, on December 23, 1938, presented to the White House. This committee was composed of M. W. Clement, Carl R. Gray, George M. Harrison, B. M. Jewell, Ernest E. Norris, and D. B. Robertson; three members of this committee represented railroad management and three railroad labor. The bill now under consideration is an outgrowth of these efforts of the administration to secure legislation to improve the transportation situation of the country.

The committee will first hear from Dr. Splawn, the head of the original committee of three; then it expects to hear from a representative of the management group and also the labor group of the railroads which composed the committee of six. Following them, the committee expects to hear from various persons and groups properly interested in the solution of our transportation problems.

H. R. 2531 serves as the basis of this hearing. Its provisions are not specifically endorsed by the President or by this committee. The hearing will be broader in its scope than the provisions of the bill. No one will contend the bill contains all legislation that might be helpful.

This committee will endeavor, to the extent of its ability, to prepare transportation legislation, with a view of dealing justly with our various types of transportation; so far as there is a practical legislative remedy, to endeavor to relieve the economic stress from which these agencies now suffer; and to attempt to serve the public interest of the country by this legislation.

To aid us in that purpose, we need and invite constructive suggestions in this hearing.

We will now hear from Dr. Splawn.

STATEMENT OF WALTER M. W. SPLAWN, COMMISSIONER,

INTERSTATE COMMERCE COMMISSION

Mr. BULWINKLE. Mr. Chairman, before Dr. Splawn proceeds: I know that practically all members will desire to ask Dr. Splawn some questions. Do you wish us to wait until he is through with the main part of his statement before we ask questions?

The CHAIRMAN. What will be your desire about that, Dr. Splawn? Commissioner SPLAWN. Mr. Chairman and gentlemen, I believe it will save your time and probably be more convenient in the end If I may make a preliminary statement first, and after that statement if you will then ask questions. As I go along questions will occur to you and some of them may be answered by the preliminary statement by the time it has been concluded. If I may have that understanding, then at the end of that statement, I will be glad to be questioned. I will not promise that I can answer all of the questions, but will do the best I can.

The CHAIRMAN. Without objection the committee will follow the suggestion of Dr. Splawn. You may proceed, Doctor.

Commissioner SPLAWN. Mr. Chairman and gentlemen of the committee-

The CHAIRMAN. Doctor, do you not wish to sit down?

Commissioner SPLAWN. That is very kind of you to make that suggestion. I anticipate that by the time you are through with your questions you will have me here several hours, and it is most kind of you to permit me to sit down. I thank you.

During the decade of the thirties, this committee has had before it two major transportation bills: One in 1933, the transportation act of that year, and the other in 1935, the Motor Carrier Act, which is now part II of the Interstate Commerce Act.

Aside from those two major amendments to the act, your attention. for the most part with few exceptions has been devoted to various bills which have been offered and have been acted upon by this committee on other phases of interstate commerce.

You have gone through the grueling grind of long hearings and have brought out notable bills which have been spread on the statute books relating to various phases of interstate commerce.

There are on the committee this morning, I am advised, 10 new members. By the time you have completed these hearings and formulated your bill and carried it through to presentation to the House these 10 new members will feel that they are veterans, for indeed, you are approaching one of the most important considerations of the entire field of transportation which has been before this committee in its long history of constructive legislation.

It is happy that the committee has a tradition of detached and nonpartisan consideration of this type of legislation. It occurred to me that it is very happy that the chairman of the committee was endorsed at the primaries in his district by both major parties-- the Democrats and Republicans and he was presented by both parties to his constituents at the general election.

Again and again the members of this committee, regardless of party, have stood shoulder to shoulder in working out in conferences the best legislation they could draw to meet the particular problems.

The problems which will be presented to you in the next few days will be very complicated. There will appear before you a number of able, conscientious, and sincere advocates, some of them undertaking to look at the broad national picture, in connection with various conflicting positions; others undertaking to look at the broad national picture with a background of more limited experience in particular fields; but that everyone will want to be helpful and everyone will want to do his best to give to the committee the very best of his wisdom and his judgment, there is no doubt. It is in this spirit of cooperation, of conference, and of compromise that the difficulties involved will have to be worked out. You gentlemen will feel that you are almost as much judges and arbiters as legislators, for the various conflicting interests of special groups or sections will have to be composed in the larger interest of the entire country.

EARLY EXPERIMENTS AND DEVELOPMENTS IN TRANSPORTATION

Transportation has been of absorbing interest to the American people since the first colonists settled on the Atlantic seaboard and began slowly to creep up the rivers and look longingly toward the rich and fertile lands of the West that ever beckoned them. For two centuries the pioneers were handicapped by lack of transportation. The canoe and coastwise shipping they had to rely upon. Then came, in the early part of the nineteenth century, the steamboat on the rivers and the lakes. The steamboat revolutionized for the time the settlement of this country. Jefferson had predicted that the country east of the river could not be thoroughly occupied for a thousand years. With the coming of the steamboat, settlers hurried into all of the fertile river valleys and along the southern shores of the Great Lakes in great numbers. Then there began an eager construction of canals. Engineers pointed out that the natural waterways might be supplemented by artificial waterways-man made. The most famous of these canals, the Erie, was completed in 1825.

There was great enthusiasm for the canals and for the turnpike. With New York connected by the Hudson and the Erie Canal with the Great Lakes, Philadelphia looked longingly toward connection with Pittsburgh on the Ohio and projected canals to the West, in spite of the expensive portages that interfered with continuous transpor

tation.

Baltimore looked to the Chesapeake & Ohio Canal and the great business acumen of George Washington was brought into counsel in the promoting of that canal. Boston was shut off by the mountains. from any canal connection with the Hudson or the Lakes to the west. The advocates of the canals were in all of the States, particularly New York and the States bordering the Lakes and the navigable rivers; enthusiastic advocates of this type of transportation solicited the support of the States, the municipalities. States went into the transportation business. Candidates for Governor and for the legislature boldly claimed to their constituents that enough would be made from canal tolls to bear all of the expenses of the State government and relieve the people from all taxes, and some of them in their zeal prophesied that the earnings would even educate all of the children in the

State.

Under this spur, canals, and turnpikes, too-toll roads-were extensively built with the aid of State credit. The States became tremendously involved.

One hundred years ago this country was in the midst of one of the worst depressions in its history. It was brought on in large measure by overbuilding of canals-there were other factors, but one of the most important factors was the overexpansion of credit, public and private, in the construction of canals and turnpikes. Many companies went broke. States became bankrupt. Some States even repudiated their bonds. It looked for a time as though everyone who had anything would lose it. Banks all over the land were closed. There was stagnation and depression that ran almost uninterrupted for nearly 12 years--with some slight recovery for a year or two. In the midst of this depression the railroads proved themselves. They were a new device during the thirties. By the end of 1839, 100 years ago, we had 2,800 miles of railroads, half the mileage in three States--Pennsylvania, New York, and Massachusetts. There were all gages among these short lines, which had been promoted to supplement the waterways. Those interested in the canals looked on them askance. Those operating on the highways opposed them quite vigorously.

Through the forties there was every effort in the legislatures to get bills through which would discourage this new type of competition by railroads. The railroad which was the predecessor of the New York Central for years was required to pay tolls to the Erie Canal on the traffic which the railroad itself handled.

During the forties the country built several thousand miles of road, bringing the mileage up to about 9,000, by the end of the Mexican War, demonstrating during that period of depression that the railroad was a success; that it could be built where canals could not be built; that it was more economical than the horse-drawn vehicle on the highways.

EXPANSION AFTER 1850

So we came to the decade of the fifties, when the era of railroad, building really set in, the preceding 20 years having been merely a period of experimentation. The highways began to be neglected so far as upkeep was concerned and so far as promotion was concerned. The same was true of the canals, though the canals were used right along and were quite important until the seventies, with diminishing importance, however.

That decade of the fifties was one of the most interesting in our history. The Indians had been moved from the South, from Minnsota, Iowa, and Illinois; settlers were pouring into these new regions; farm machinery had been invented; horse-drawn vehicles and horsedrawn machinery were being used on the prairies; and the great problem was to get transportation.

Douglas, Senator from Illinois, championed a bill to make land grants to States with the understanding that the States would in turn grant it in aid of railroad construction.

By 1858, the Illinois Central was down to Cairo and the Mobile & Ohio was up to the Ohio River.

During that decade some 22,000 miles of railroad was built, most of it in Illinois, Indiana, Ohio, New York, Pennsylvania, and Massachusetts; an appreciable fraction in the Southeast and to the South.