# Philip Dru: Administrator/Chapter XXXIII

Chapter XXXIII The Railroad Problem
While the boards and commissions appointed by Administrator Dru were working out new tax, tariff and revenue laws, establishing the judiciary and legal machinery on a new basis and revising the general law, it was necessary that the financial system of the country also should be reformed. Dru and his advisers saw the difficulties of attacking this most intricate question, but with the advice and assistance of a commission appointed for that purpose, they began the formulation of a new banking law, affording a flexible currency, bottomed largely upon commercial assets, the real wealth of the nation, instead of upon debt, as formerly.
This measure was based upon the English, French and German plans, its authors taking the best from each and making the whole conform to American needs and conditions. Dru regarded this as one of his most pressing reforms, for he hoped that it would not only prevent panics, as formerly, but that its final construction would completely destroy the credit trust, the greatest, the most far reaching and, under evil direction, the most pernicious trust of all.
While in this connection, as well as all others, he was insistent that business should be honestly conducted, yet it was his purpose to throw all possible safeguards around it. In the past it had been not only harassed by a monetary system that was a mere patchwork affair and entirely inadequate to the needs of the times, but it had been constantly threatened by tariff, railroad and other legislation calculated to cause continued disturbance. The ever-present demagogue had added to the confusion, and, altogether, legitimate business had suffered more during the long season of unrest than had the law-defying monopolies.
Dru wanted to see the nation prosper, as he knew it could never have done under the old order, where the few reaped a disproportionate reward and to this end he spared no pains in perfecting the new financial system. In the past the railroads and a few industrial monopolies had come in for the greatest amount of abuse and prejudice. This feeling while largely just, in his opinion, had done much harm. The railroads were the offenders in the first instance, he knew, and then the people retaliated, and in the end both the capitalists who actually furnished the money to build the roads and the people suffered.
“In the first place,” said Administrator Dru to his counsel during the discussion of the new financial system, “the roads were built dishonestly. Money was made out of their construction by the promoters in the most open and shameless way, and afterwards bonds and stocks were issued far in excess of the fraudulent so-called cost. Nor did the iniquity end there. Enterprises were started, some of a public nature such as grain elevators and cotton compresses, in which the officials of the railroads were financially interested. These favored concerns received rebates and better shipping facilities than their competitors and competition was stifled.
“Iron mines and mills, lumber mills and yards, coal mines and yards, etc., etc., went into their rapacious maw, and the managers considered the railroads a private snap and ‘the public be damned.’
“These things,” continued Dru, “did not constitute their sole offense, for, as you all know, they lobbied through legislatures the most unconscionable bills, giving them land, money and rights to further exploit the public.
“But the thing that, perhaps, aroused resentment most was their failure to pay just claims. The idea in the old days, as you remember, was to pay nothing, and make it so expensive to litigate that one would prefer to suffer an injustice rather than go to court. From this policy was born the claim lawyer, who financed and fought through the courts personal injury claims, until it finally came to pass that in loss or damage suits the average jury would decide against the railroad on general principles. In such cases the litigant generally got all he claimed and the railroad was mulcted. There is no estimating how much this unfortunate policy cost the railroads of America up to the time of the Revolution. The trouble was that the ultimate loss fell, not on those who inaugurated it but upon the innocent stock and bondholder of the roads.
“While the problem is complicated,” he continued, “its solution lies in the new financial system, together with the new system of control of public utilities.”
To this end, Dru laid down his plans by which public service corporations should be honestly, openly and efficiently run, so that the people should have good service at a minimum cost.
Primarily the general Government, the state or the city, as the case might be, were to have representation on the directorate, as previously indicated. They were to have full access to the books, and semi-annually each corporation was to be compelled to make public a full and a clear report, giving the receipts and expenditures, including salaries paid to high officials. These corporations were also to be under the control of national and state commissions.
While the Nation and State were to share in the earnings, Dru demanded that the investor in such corporate securities should have reasonable profits, and the fullest protection, in the event states or municipalities attempted to deal unfairly with them, as had heretofore been the case in many instances.
The Administrator insisted upon the prohibition of franchise to “holding companies” of whatsoever character. In the past, he declared, they had been prolific trust breeders, and those existing at that time, he asserted, should be dissolved.
Under the new law, as Dru outlined it, one company might control another, but it would have to be with the consent of both the state and federal officials having jurisdiction in the premises, and it would have to be clear that the public would be benefited thereby. There was to be in the future no hiding under cover, for everything was to be done in the open, and in a way entirely understandable to the ordinary layman.
Certain of the public service corporations, Dru insisted, should be taken over bodily by the National Government and accordingly the Postmaster General was instructed to negotiate with the telegraph and telephone companies for their properties at a fair valuation. They were to be under the absolute control of the Postoffice Department, and the people were to have the transmission of all messages at cost, just as they had their written ones. A parcel post was also inaugurated, so that as much as twelve pounds could be sent at cost.