The New York herald., 1920-01-08
Director General Urges Con
Solidation of Lines Into Few
Great Systems.
WOULD ESTABLISH
STANDARD OF RATES
Declares That Without Adop-
ton of New Ideas the Result
Will Be Disappointing.


Railroads, in a comprehensive address de-
liyered last evening before the Associa ton
of the Bar of the City of New York. for
mulated the policies which he believes
should be adopted for the control and op-
GRAFTON of the railroads after their re-
turn to private management on March !
next
In summarizing his views Mr.. Hines
said
Il believe there must be fundamental
changes which Will consolidate the rail-
roads into few great systems. I believe
that the public and labor, as well as CAPT.
tai, must be represented upon the manage
ment of those systems. / believe that a
definite standard of rates must be es-
tablished and that earnings clearly in ex-
cess Of reasonable return must be divided
and must go largely to providing adequate
reserves to take care of years of depres-
sion, and at the same time enough Of the
excess must be left with the company
earnings to provide adequate stimulus for
efficiency.
I'm my opinion, II an effort be made to
return the railroads to private control
without the fundamental reconstruction
which i advise. the result will be prog
ressively disappointing, and in few years
the dissatisfaction Of the public will mani
fest itself through a persistent demand
for a radically different plan. which is
not likely then to stop short of outright
government ownership"
Difficulties of Old Methods.
At the beginning OF his address Mr.
Hines sketched in some detail the diff
culties and embarrassments. attending the
old methods Of mana cement, with capital
and labor each clamorous of its rights
with the rate making power vested in fed
eral or State commissions, with some rail-
roads excessively profitable while others
failed to meet their running expenses al
the self-same freight and passenger
charges. and with the public treated as
though it were largely minor factor in
the problem. Coming down TO what he
regarded as the practical remedies. the
speaker said:--
First, l believe there win not be a
prompt and liberal treatment of rate
questions until profits clearly in excess
of fair return arc appropriated in part
10 tho public interest. / have in mind one
important railroad company whose rail-
road even in this difficult year, will earn
more than 1f) per cent of the standard re-
turn, and this company in the past has
paid high dividends and in addition. has
had large annual surplus. An increase
OF twenty per cent in the freight rates
of this company would give it n net operat-
ing income more than twice the standard
return, assuming that it continued TO en-
joy the same business.
II have no doubt that such a prospect
would stimulate the most persistent OPP
Tao nd f1.A
might be that an increase seriously needed
by other companies would be defeated
simply because the giving Of the increase
would yield what would be regarded as
grossly excessive profit for this
favored company.
Urges Division Of Excess.
81 see no way TO meet such situation
except to provide for the division of the
excess over a clearly reasonable return. OF
course, enough OF the excess should be
given TO the company TO stimulate ef-
ficiency in operation. but beyond that
noint the fact that the company would get
The excess would be a serious obstruc-
tion 10 the railroads I'm general getting
an increase TO which on the average they
might be entitled. The excess thus APP
propriated for tho public interest should
be largely placed in reserves. so as 10
protect the general railroad situation In
ouiet agitation, would stabilize the situa-
tion, and without it | believe IL would
be impossible to get pr~ppi and lihlrtl
treatment of any rate increase question.
"I believe there must be n definite
standard BY which the reasonablencss
of the general rate level can be meas
ured In the past there has been nc
appreciable standard. Plausible argu-
ments could be made against any in
crease that was sought under any con-
ditions The rate making body had &c
take all the responsibility and odium OF
creating a standard. as we'll as apply
ing IL. In my opinion Congress itself
should establish a general but work
able standard and leave TO the rate
making body the application of this
standard according to the facts.
For Mutual Understanding.
"I do not believe there can be sue
cessful regulation of the railroad in
dustry without basis for mutual un-
derstanding between those representing
the public labor and the owners respec-
lively. In the past there has been nc
basis for understanding except at the
end OF dispute and controversy. Each
of the three great interests has worked
to a great extent entirely aloof from
the other two.
1--WE make a grave mistake in assum-
ing that the representatives OF capital
can alone manage the situation. The
scheme of the past has been on that
false theory and the result has been
that the public has injected itself into
the management through all sorts OF
agencies. and labor has injected itself
into the management through It's own
organizations, not only through direct
tossUnu.d on rage -Four, Col. Three,