The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-07-13

OPPOSES PLAN FOR
FEW R. R. SYSTEMS
Robert S. Lovett Says Effect
Would Be to Impair Credit
of Strong Roads.
SENDS CONGRESS OPINION
Result Would Be Reduction Of
Average Credit Of All Of
the Companies.
CONGRESS OPINION

Consolidation OF all railroads in the
United States into a few large systems
from twelve to twenty-fve-as possible
solution of the nations railroad problem
Is opposed by Robert S. Lovett, president
of the Union Pacific Railroad, In memo
randum TO members of Congress.
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 has no right to compel ono
railroad to consolidate with another. II
may give one the right to acquire the
property of the other by condemnation,
but it must pay for it. and hero is the
difficulty, pay for it in cash.
The underwriting OF a fabulous
amount must be provided. Will Congress
Appropriate the billions necessary? Have
We bankers enough to provide the money
except through series OF years? And
what will happen TO the financial well
fare OF the country in the inca ntime?
my judgment is against the CONSOLE
dalton of all the railroads of the country
into few companies, because / believe
the companies will be too large and un-
wieldy for efficient and economic man
agement
II 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 per cent. or some
18th g., ,I,,z
OF every group. Earnings In excess of
the average, lie pointed out, would be
set aside for the Improbable roads that
earn less.
The substantial object sought" he
declared. 'Hs to take. directly or indi-
rectly. from the stockholders OF tho pros
porous roads net earnings OF their prop
critics and give the same to the security
holders of the weak roads," which Con-
gress. he said. was without power to do.
as It would be taking private property
for public use without Just compensation,
contrary to the Fifth Amendment OF the
Constitution, and would be grossly I'M
fair to the owners Of the efficient roads
and also TO the public
The suggestion of many financiels and
railroad men that the Government should
guarantee fair dividends on the full
value of the railroads and leave the MAN.
agement in the hands of the RAILROAD
owners was characterized by Judge
Lovett as inlpractcable. because he dill
not believe that the Government would
take all the risk and none of the profits
If a small return Of ., 8 or 4 per cent
were guaranteed, he said. It would not be
sufficient 10 pay the interest on bonds
outstanding. at would make doubly
| secure what is already abundanty Sc
cured he continued. but it would a ford
no collateral for new issues nor secure
now loans
The Importance or reestabl'shng rail
road credit cannot be overestimated. but
! am persuaded that no guaranty short
OF n return on the full value of ia lroad
property will be helpful to that end, and
n guaranty OF full value is not practical
bic without Government operation, which
l regard IS beyond present discussion"