Evening star. [volume] (Washington, D.C.) 1854-1972, 1919-11-01
Congress Should Instruct.

We are convinced that it is abso-
luteiy essential that Congress shall
instruct the ratemakins body to
maintain rates which will produce a
think that the additional Il per cent
should be fixed and not left to the
discretion of the commission. an as
sured return of 51h per cent will go
long way toward solving the rail-
roads problem. Last month we ex-
pressed the opinion that return of
51a per cent would be the minimum
on which it was reasonable to ex-
pect new capital to be attracted. In
the past the railroads have been reg
ulated on the theory that they ought
to be permitted to earn reasonable
return on the fair value Of their prop
erty; but the rule was theoretical
am not practical. for no one could
prove what fair value was, neither
could a reasonable return be agreed
upon. One of the unknown quanti-
ties in the equation is in process of
determination as a result of the fed
eral valuation act. The other UH-
known quantity will be settled if this
bill becomes a law.
The Interstate Commerce Commits
Sion itself desires Congress to in
struct it in the matter of rate-mak-
ing The following is an extract from
statement of Commissioner Clark.
The question of what constitutes
carrier is left for the admin istrative
tribunal to decide, in so far as it
could determine rates on that basis.
Some people come before US and argue
that per cent is liberal enough.
Others say that it ought to be more,
or or 8 per cent. Now, in the
light of all the circumstances, what
is reasonable standard of return for
these public service utilities that are
subject to governmental regulation at
H.
administrative tribunal to which Con-
gress delegates its powers? I think
that 1t would be simpler, 1 think it
would avoid endless controversy and
would put an end to interminaDle dis
cussion and argument, if the law laid
down the standard which it recog-
nized as reasonable. just as the law
lays down the recognized standard of
interest rates in the various states"
Government Advances.
The Cummins bill has been de-
scribed as the first broad, friendly
legislative expression toward the
raI-roads in probably the past fifteen
or more years. In addition to the
establishment of a minimum rate of
return, it proposes that the indebte ed
ness of the roads to the government
for capital expenditures during fed
eral control is to be funded. The
10 " tHlS liluSDleQ-
ness for period not exceeding ten
years at per cent per annum. In
view of the need of the railroads to
raise large amounts of new capital at
once, 1t is very fortunate that they
will not be compelled to go into the
market at this time for funds to re-
pay the governments advances. which
are believed to exceed one billion
dollars. The bill also provides for a
return of the working capital that
was taken over with the roads and
which is estimated to amount to about
200.o00.000.
The Consolidation of Properties.
We have previously indicated our
disapproval of that provision of the
bill which empowers the railway
transportation board "a new body
created by the act) to group all of the
roads of the country into large COM
peting systems of not more than
While the necessity for the absorp-
ton of smaller corporations is ap-
parent. there being no less than 1880
companies reporting to the Interstate
Commerce Commission. we consider
that such impending arbitrary conSol-
idations would have an extremely det-
rimental effect on the mind of the
investor.
The policy of the bill. recognizing
that under existing conditions some
roads show very large earning power
and some roads small earning power,
aims to remove this discrepancy
through consultations, and it is well
said that somebody must do the un-
profitable business and the way to do
it is to combine the Improbable bust
ness with the profitable. We believe.
however, that a sterilization of rail-
road credit will result ID voluntary
consultations which will prove more
efficient agencies of transportation
than any that could result from the
Of arbitrarv rulings