Brownsville herald. [volume] (Brownsville, Tex.) 1910-current, 1919-07-13
CONSOLIDATION
Lines OPPOSED
BY Mr.. LOVETT
Says Plan Would Impair the
Credit Of Strong Lines,
Not Better Weaker.
NOTE TO CONGRESS

NEW AOishs July i1.--Cuuooitud-
lion of all the railroads of the United
States into a few large systems
from twelve to twenty-five-as pos
siblc solution of the nations railroad
problem, is opposed by Robert s.
Lovctt, president of the Union Pa
cific Railroad, in a memorandum to
members of congress made public
here today.
For a considerable period Of the
war, Judge Lovctt was director Of
the division of capital expenditures
Of the government railroad admins
tration under William G. McAdoo as
director general. In this position,
from which he has since resigned,
Judge Lovett had charge of all i'm
provements and extensions.
The effect of the proposed con-
solidation would be in his opinion Ito
impair the credit of the strong road,
instead Of improving the credit of the
weak road. The inevitable effect
would be to reduce the average of the
credit Of all the railroads.
Congress" he asserted, "has no
right to compel one railroad to con-
solidate with another. 1t may give
one the right to acquire the property
of the other by condemnation, but il
must pay for it and, here is the diff
Guilty, pay for it in cash.
"The underwriting of fabulous
amount must be provided. Will con-
gress appropriate the billions neces-
sary? Have we the bankers enough
to. provide the money except through
series Of years? And what will
happen to the financial welfare of
the country in the meantime?
my judgment il against the con-
solidation Of all the railroads of the
country into d few t6hi ifanies. be-
cause believe the companies will be
too large and unwieldly for efficient
and economical management.
II 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 and
facilities should not only be preserv-
ed but should be extended"
Judge Lovett also opposed the plan
which has been discussed for pooling
the net earnings Of railroads by di-
viding them into groups and estab-
fishing rates sufficient to yield six
per cent or some other specified re-
turn on the book value of each group.
Earnings in excess Of the average, he
pointed out, would be set aside for
the Improbable roads that earn less.
"The substantial object sought" /"
he declared, ''is TO take, directly or
indirectly from the stockholders Of
the prosperous roads net earnings of
their properties and give the same to
the security holders of the weak
roads" Congress, he said, was
without power to do this, il would be
the taking Of private property for
public use without just compenSa-
ton contrary to the fifth amendment
of the constitution. and would be
grossly unfair to the owners of the
efficient roads and also to the pub
lic."
Suggestions put forward by many
financiers and railroad men that the
government should guarantee fair
dividends on the full value of the rail
roads and leave the management in
the hands of the railroad owners, was
characterized by Judge Lovett as i'm
practicable because he did not be-
lieve the government would take all
risk and none of the profits.
If a small return, of two, three or
four per cent, were guaranteed, he
said, this would not be sufficient TO
pay the interest on bonds already out
standing. ut would make doubly
secure what is already abundantly
secured" he continued. "but il would
afford no collateral for new issues
nor secure new loans.
"The Importance of reestablishing
railroad credit cannot be overesti-
mated" said Judge Lovett, "but new
ertheless, / am persuaded that no
guaranty short Of return upon the
full value Of railroad property will
be helpful to that end, and that a
guaranty of full value is not prac-
ticable without government operation,
which regard as beyond present dis
cussion."