The news scimitar. (Memphis, Tenn.) 1907-1926, 1919-07-18
OPPOSES
CONSOLIDATION Of
AMERICAN ROADS
Such Plan Would Only Impair
Credit Of Big Line Without
Helping Small Road, Says
Texas Rail Expert.

NEW YORK, July decentralization
OF all the railroads of the United States
into a few large systems-from l2 to IS
As a possible solution Of the nations
railroad problem, is opposed by Robert
;. Lovett, president OF the Union Pacific
railroad, In a memorandum TO members
of congress.
For a considerable period Of the war
Judge Loyett was director Of the divi-
sion Of capital expenditures OF the gov
eminent railroad administration under
william q. McAdoo as director general.
IN this position. from which he has
since resigned. Judge Lovett had charge
of all improvements and extensions.
The effect OF the proposed ~consolida-
ton would be. in his opinion. Ito i'm
pair the credit Of the strong road, in
stead 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 consolidate
with another. 1t may give one the
| right to acquire the property of the
other by condemnation. but it must pay
for 1t and, here Is the difficulty, pay
for II in cash.
Fabulous Money Needed.
The underwriting Of a fabulous
amount must be provided, VIII con-
l " NPlA thAN AtfN hltAl'AtN tN''H~
sary Have we bankers enough to pro-
vide the money except through a series
of years? And what will happen to
the financial welfare Of the country
In the meantime?
my judgment Is against the coHsoli-
dalton Of all the railroads Of the coun-
try into a few companies, because | be
lieve the companies will be too large
and uuwieldy for efficient and econom-
ical management.
Il believe that the absorption Of some
Of the weak lines by the strong lines,
upon fair terms, should be promoted,
but competition in service n factli.
ties should not only be preserved but
should he 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 s per cent or
some other specified return on the book
value Of each group. Earnings In ex-
cess Of the average. he pointed out
would he set aside for the Improbable
roads that earn less,
Plan Is ALI Wrong.
THE substantial object sought" he
declared, lis to take, directly or indi-
rectly from the stockholders Of the pros
porous roads net earnings Of their prop
critics and give the same to the secur-
| lIS nOldRfS OF Ine weak TuhuHt IuH-
gress, he said, was without power to
do this; it would be the taking of pri-
vate property for public use without
lust 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 fl
nanciers 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 IOvett as impracticable be-
cause he did not believe the govern
ment would take all the risk and none
Of the profits.
II a small return of 2, : or I per cent
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 continued,
but II would afford no collateral for
new issues nor secure new loans.
1.-THE Importance Of re-establlshlng
railroad credit can not be over esttmat-
ed said Judge I0vett, but, neverthe-
less, | am persuaded that no guaranty
short of a return upon the fun value OF
railroad property win be helpful to that
end, and that n guaranty OF full value
Ia not practicable without government
operation, which | regard as beyonc
nreHent discussion"