The Barre daily times. (Barre, Vt.) 1897-1959, 1919-07-14
r. r. CONSOLIDATION
OPPOSED BY LOVETT
The Effect Of Consolidation Would, He
Believes, Be to Impair the Credit of
the Strong Road Instead of I'm
proving the Credit of the
Weak Road.

New York, July decentralization of
all the railroads of the United States
into few large systems from IL to 25
las possible solution of the nations
railroad problem, is opposed by Robert
S. Lovett, president of the Union Pacific
railroad, in a memorandum to members
of Congress made public here.
For considerable period Of the war
Judge Lovett was director of the division
Sf capital expenditures of the govern
ment railroad administration under Will
liam G. McAdoo as director general In
this position, from which he has since
resigned, Judge Loyett had charge of all
Improvements and extensions
The effect of the proposed consolida-
ton 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 rail-
roads.
Congress" he asserted, "has no right
to compel one railroad to consolidate
with another. 1t may give one the right
to acquire the property of the other by
condemnation, but it must pay for it,
and, here is the difficulty, pay for it in
cash.
"Fhe underwriting of fabulous
amount must be provided Will Con
gress appropriate the billions necessary?
Have we bankers enough to provide the
money except through a series of years
And what will happen to the financial
welfare Of the country in the mean
timer
my Judgment is against the consoli-
dation Of all the railroads of the country
into few companies, because / believe
the companies will be too large and I'M
wieldy for efficient and economical man
agement.
81 believe that the absorption of some
of the weak lines by the strong lines,
upon fair terms, should be promoted but
competition in service and 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 dividing
them into groups and establishing rates
sufficient to yield 6 per cent 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 Improbable roads that earn
less.
THE substantial object sought" he de-
clared lis 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, it would
be the taking OF private property for
contrary to the fifth amendment of the
constitution and would be grossly un-
fair TO the owners of the efficient roads
and also to the public"
Suggestions put forward by many
financiers and railroad men that the gov
eminent should guarantee fair dividends
on the full value of the railroads and
leave the management in the hands Of
the railroad owners, was characterized
by Judge Lovett as impraeticable be-
cause he did not believe the government
would take all the risk and none of the
profits.
Ii a small return Of 2, or 4 per cent,
were guaranteed, be said, this would not
be sufficient to pay the interest on bonds
already outstanding. 1T would make
doubly secure what is already abundant
~ secured, he continued, "but it would
afford no collateral for new issues nor Sc.
cure new loans.
THE Importance of re.establishing
railroad credit cannot be overestimated, Z
said Judge i,0yett "but nevertheless
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 fun value is not
practicable without government opera
ton, which ! regard as beyond present
discussion"