New-York tribune., 1919-02-07
Warburg Offers Plan
For the Solution of
Railway Problems
Advocates Federal Reserve
System and Railroad Ad-
ministration; Objections
to Federal Ownership

Paul M. Warburg, speaking before
the Chamber of Commerce of the State
OF New York yesterday expressed his
opinion that a solution of the railroad
problem that confronts the nation
might be reached by combining some
of the features of the United States
railroad administration with the gem
eral plan of the Federal Reserve sys-
tenn.
at would involve" the former dep
uty governor Of the Federal Reserve
Board declared, "the Transformation
of the Interstate Commerce Commits
sion into a body at Washington of five
or seven, half judicial and half admin
istrative, dealing with the railroads
through the medium of regional
boards, on which the state commits
sions might be represented along with
railroad men and the best business
and expert elements in the district"
Must Not Go Too Far
After explaining his reasons for be-
heving that both private operation
without government supervision and
feasibility, Mr.. Warburg pointed out:
I'm our zest to secure greater unifica-
ton let us remain ever conscious, how
ever, of the fact that it is most i'm
portant that unification does not go
too far. For the continued intensive
and free development of a country
whose resources we have only begun
to unfold we need an, aggressive spirit
of enterprise-not the lazy and arbi-
trary bureaucratic and autocratic at
mosphere that with us would be GER
tain to follow if one great regional
corporation would cover each section
United States. A business spirit of
rivalry must be kept alive by the pres
ervation of number of large units of
railroads competing on broad lines
not in rates, but in service-and by
the opportunity given them to earn
more than the guaranteed minimum.
"l should like to see net earnings
beyond 6 per cent divided between
stockholders, government and labor,
with a fixed maximum beyond which
the earnings of stockholders shall not
go. I strongly believe in the idea that
capital and labor must consider them
selves partners"
Mr.. Warburg summarized the essen
tial details of his plan of private ,oper-
alton under government regulation as
follows:
That this basis must have an unGuali-
fed assurance to private capital of amini-
mum return:
That there must be an honest and sub
stantial chance for private capital to earn
more than the minimum, so as to preserve
a spirit OF enterprise which should per-
meate the entire staff from top to bottom
!, That government should be a partner of
the railroads in sharing profits up TO a
certain limit. while beyond that limit all
profits should 20 to the Government;
That consolidation should be encouraged
so as to bring about smaller number of
existing roads would form the natural
backbone. bu that this unhcation should
not go tar enough to destroy Il healthy
and easonable-eompettion in efficiency.
IN service. and IN opening new fields of
enterprise
And. finally, that preference should be
given to plan which at this time would
disturb as little as possible outstanding
well established and we'll protected railroad
securities. and that would avoid to the
largest possible degree the direct use of
the governments credit
-Four fundamental objections make
government ownership undesirable, he
sald, enumerating them as follows:
Because 1t is bound to polute our po-
litlcal and social life, and
because it makes for stagnation and
inenic'ency" 1t would mean unprogressivc
ana costly operation. resulting in poor SER
wee to the public and high rates
Because experience in foreign coun-
sries tries SHOWS that the saving to be derived
from the use of the governments crn5;t
Is not likely to be SUFFICIENT 10 make I'M
lor M the loss resulting from the higher cost
OF government operation. while the exces
sive use OF the governments credit ia hnrt
iul to its standing and bound to increase
'he s.e rate at which it generally borrows.
\. sueh advantages as the ssyeater un;fca.
pon Dor, OF operation produced under the u. S.
railroad Administration can he secured hw
proper amendment of the Sherman ast anS
.ne grant Of Federal franchise without
ssun,ecting the country to the dangers md
o;sadvantases W., of governing operation. quo
Inc Chamber adopted resolution
'hdorsing plan for bi-state action in