The Daily Ardmoreite. [volume] (Ardmore, Okla.) 1893-current, 1919-07-13
LOvETT OPPOSES PLAN
TO MERGE RAILROADS
INTO A FEW SYSTEMS

New York, July l2.--Consolidation Ok
all the railroads OF the United sta'eS
into a few large systems--from IL #"
25--as a possible solution OF the ma
tons railroad problem, Is opposed "
Robert S. Lovett, president Of the I'm
E ion Pacific Railroad, In msmofah'
DUN TO members OF congress maas
public here today.
Fer a considerable period OF the war
Judge Lovett was director OF the diVi'
sion OF capital expenditures Of the gov
ernment railroad administration unasr
William G. McAdoo az directorgsnerai'
In this position, from which he mas
since resigned Judge Loveu haa
charge OF all improvements and ~xteh'
sions.
The effect OF the proposed consoii
dation would be in his opinion 70
impair the credit OF the strong road
instead Of improving the credit OF ths
weak road. The inevitable effect woula
be 10 reduce the average Of the credit
OF all the railroads.
Congress" he asserted has no
right 70 compel one railroad 10 con
solidate with another II may give
one the right 10 acquire the properly
OF the other by condemnation but
must pay for it and, here is the diff
Guilty, pay for it in cash.
The underwriting Of fabulous
amount must be provided. VIII con
gress appropriate the billions neces'
gary? Have we bankers enough 10
provide the money except through
series of years? And what will happen
to the financial welfare OF the country
in the meantime?
My judgment is against the consoh-
dation of all the railroads Of the coun'
try into a few companies, because l
believe the companies will be too large
and unwieldly for efficient and econo'
mical management.
Il believe that the absorption of
some Of the weak lines by the strong
lines upon fair terms, should be pro-
NOTED but competition in service ana
facilities should not only be preserved
but should be extended"
Judge Lovett also opposed the plan
which has been discussed for pooling
the net earnings Of railroads by divid'
ing them into groups and establishing
rates sufficient to yield six percent
or some other specified return on the
book value Of each group. Earnings
in excess Of the average, he pointed
out, would be set aside for the unpro-
fitable roads that earn less.
The substantial object sought" he
declared lis to take, directly or indir-
ectly from the stockholders Of the pros
Ferrous roads net earnings Of their pro
pertiers and give the same to the secu-
Pity holders Of the weak roads" Con
gress, he said, was without power to
do this, it would be the taking of pri-
yate property for public use without
just compensation contrary to the fifth
amendment of the constitution and
would be grossly unfair to the owners
of the efficient roads and also to the
public"
Suggestion put forward by many
financiers and railroad men that the
government should guarantee fair divi
dends on the full value Of the railroads
and leave the management in the
hands of the railroad owners, was
characterized by Judge Lovett as i'm
practicable because he did not believe
the government would take all the risk
and none of the profits.
If small return, of two, three or
four percent, were guaranteed, he said,
this would not be sufficient to pay the
interest on bonds already outstanding
1T would make doubly secure what is
already abundantly secured" he con
tinued, but it would afford no collat'
eral for new issues nor secure new
loans.
THE importance Of re-establishing
railroad credit cannot be overestimat
ed" said Judge Lovett, but, never.
theless, I am persuaded that no qua
ranty short Of return upon the full
value of railroad property will be help
ful to that end, and that guaranty Of
full value is not practicable without
Government operation, which / regard
as beyond present discussion"