The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-08-04
Answers Judge Lovett's OBJ
jections to Measure for Re-
turn of Railroads.
STATEMENTS INACCURATE
Not the Intention to Draw on
Prosperous Companies to
Benefit Weak Lines.

ines Judge Lovetts statements, made In
opposition to the warfeld plan for the
return Of the roads to private ownership,
as Inaccurate and his position as un-
sound. Among other things, Judge
Lovett has said that the principal pro-
vision of the warfield plan, for fixed
percentage rate Of return on property
investment for transportation purposes.
was unconstitutional. This and other
features OF the plan, Judge sLovett de-
clared, would take earnings from the
strong roads and give them to the weak.
Mr.. Johnston, in his letter to Mr. War
field, brings out that this statement ~ IN
accurate, and that Judge Lovett's views
are not shared by such OF his associates
as Alfred p. Thorn, counsel for the Asso-
citation of Railway Executives, and Dan
Tel willard, president OF the Baltimore
and Ohio, or by such men among the
advisory counsel Of the security owners
as Elihu Root, John G. MiIburn, John 8.
Miller and H. L Bond.
Propositions Summarized.
Mr.. Johnston summarizes in three
propositions what he terms the broad
assertions Of Judge Lovett's statement
and makes answer as follows;
IL. The pamphlet states that the
substantial objects sought by the regu-
lation of excess earnings OF railroads Ii
to take earnings from the stockholders
Of prosperous roads and give same TO
the stockholders of the weak roads
(pages 1910.
"The association plan proposes the
regulation Of excess earnings as neces-
sary corollary to its primary purpose OF
providing a definite minimum rate level.
1t does not propose. involve or seek the
taking of earnings from prosperous
A. A. II. ~ Ar frIrnu II
80 the paper Ii inaccurate in It's state
ment In reference to an easily ascer-
tainanle fundamental
20. The pamphlet asserts that Con-
Eress Is without power to take the net
earnings belonging to the stockholders
of one railroad company for the bene-
At of the stockholders of another rail-
road company (page 16).
'If that means to suggest that the
association plan proposes any such re-
suit the statement is inaccurate.
IF the writer means to assert that
any plan for the regulation Of the ex-
cess earnings. such as that proposed by
the association, Is unconstitutional. then
his conclusion lie demonstrably unsound.
"3. The pamphlet makes studied ef-
fort to suggest that under any plan in
volving the regulation of excess earn
tngs a direct conflict Of interest must
arise between what II denominates
weak roads and what II calls pros
porous roads, and seeks to arraign all
supposedly prosperous roads against any
division OF their excess earnings with the
Government for expenditure in the public
interest in transportation
Under the proposal OF the association
all railroads would derive their revenue
from rates and not from the treasures of
the more prosperous railroads. There
could be no possible conflict in interest
arising out OF regulation OF earnings. The
suggestion to the contrary may be based
on the erroneous assertion OF the writer
of the pamphlet that the weak roads
propose to despoil the treasures of the
prosperous roads. The association plan
proposes no such result. II the sugges-
ton was for the purpose of creating a
fictitious controversy where no basis for
controversy exists and thus confuse Con-
gress In its consideration OF this maj
ter, the effort would seem to be indo-
fensible."
warneId Plan IL Outlined.
The fundamentals of the warfield
plar are outlined as follows:
THE proposals for remedial legisl ton
presented by the association are de-.
signed to meet two stubborn conditions
which have broken down railroad credit
Tho first Is the practice of the Interstate
Commerce Commission to make rates In
every instance based on the routes or
combination of routes showing lowest
competitive cost and to disclaim any
responsibility for the result of rates in
the aggregate.
THE second condition is the demon
strated impossib.lity of securing sub
stantial lift In rate levels necessary to
prevent destruction of less favorably
circumstanced carriers without some
regulation OF the excess earnings that
would be received by moro favorably
circumstanced carriers who would apply
the new rates and which, but for that
impossibility. they would not receive.
ITO meet these conditions the funda-
mentals OF the associations proposal
are:
81. That Congress shall deliver a DER
emptory mandate to the commission
requiring It to consider the result of
rates In the aggregate and never to
permit the rate structure to reach a
level where the rates would produce a
net return OF less than s per cent. on
the combined railway investment; and
that.
"2. Congress shall be encouraged TO
grant. this statutory mandate and the
commission encouraged 70 construe IL
terest a Limitation upon any excessive
and unnecessary earnings which might
be realized under the new levels by car
riers with an earning power above the
average through surrender of a fair por-
ton of the excess.
at % proposed that this Limitation be
worked out by requiring a division with
the Government, and not with other
| railroads, OF earnings in excess of 6
per cent, after allowing the railroad
earning such excess to set aside adequate
corporate reserves 10 assure It's custom
airy dividends. to protect its credit ana
to provide against years OF subnormal
traffic. Some OF the suggested planS
| involving a Limitation upon excessive
earnings, propose some form of cash
distribution to the carriers with made
Quate revenue.
1T Is proposed that the portion to be
retained by the Government be expended
n the public interest In Transportation.
one purpose being the purchase OF cars
| for common use by all carriers, &C, and
mere directly in the interest of the
shippers who paid It in. rather than let
It be covered into the general treasury"
N~ry anNHADy--n rxxa-