New-York tribune., 1920-01-30
Division of Rail
Excess Returns
Urged by Hines
Action Called Necessary to
Project Public and In
sure Fair Profits for All
Roads After the Change
Private Capital Protected
Consolidation Into Few Sys.
tens. With Labor Aidin~
i'm Rule, Is Sought

Hines, Director General OF Railroads,
in an address before the Transporter
tion Club here tonight. urged the no
cessity Of q division of excess earnings
Of railroad corporations above 8 rea-
sonable return, in order to protect the
public against excess earnings of very
pro porous railroads and in order to
insure fair return to all railroads.
"Those who oppose this plan seem to
assume that II will operate as a dis
courage ment upon private capital" said
Mr.. Hines. They seem to assume that
# this plan is not adopted there will be
no discourage on private capital,
but they hould remember the discour-
egements which have existed hereto
fore. The real question is whether a
plan shall be adopted which will both
protect the public interest and reason
ably protect private capital, or whether,
or the other hand. plan shall be
adopted which Will fail to do either
with any degree of satisfaction"
disappointment Is Feared
Mr.. Hines declared his belief that
unless the railroad problem at the pres
ent time is dealt with "in bold and
tfec,ie, way the return to priva g
manage ment after Federal control will
10 WnOlly appointing.
The Director Genera also urged the
compulsory consolidation OF the rail.
road 1ystems OF the country into few
arg systems and suggested the par
ticipauon of the pub ic and labor in
ne management of tho railroads.
In his discussion of the railroad rate
question and the reorganization of the
railroads which he believed Hecessary
after government control, Mr.. Hines
aid:
"Intelligent consideration will be
greatly aided by recalling the condi-
ions of rail Dad regulation as they ex-
sted in 1917. and as they will again
exist under private control unl less fun
iamentaily changed by new legislation.
"ln 1917 railroad executives were
profoundly discouraged as to the con-
ditions of railroad regulation. They
ound extreme difficulty in proving to
he pubic satisfaction what they re-
sarded as their absolute necessities in
the way Of increased rates. and they
rad no salts actory method of dealing
With the labor problems which were
constantly becoming more. pressing.
5oth rates and service were being reg
dated by Federal and state egis ative
1odies and commissions Common action
res much easier for the labor organiza-
IONS than 1t was for the railroads. The
esult WAS that so-called private man
cement of the railroads was regarded
y the executives themselves as argely
iguratiVe. because they felt that to
sreat extent the management was vir-
.ual taken out of their hands
The question now is shall the rail
"oads be returned to substantially the
anne regulation which had proved 80
Encouraging in 1917, or shall changes
ne made sufficiently fundamental to
remove the difficulties upon this qucs-
ion. wish to offer the results OF
ny own study Of the problem.
Future Policy Defined
"Broadly believe thae unless these
matters be dealt with in a bold and
i'ectlve way the return to private
management will be wholly disappoint-
ne. believe that 10 prompt, CON
dent and liberal regulation Of the
silroads will be practical unless pro
,ision is made for the appropriating
Or the benefit OF the public interest an
important part of the excess which any
abroad company may earn over
-.eariy reasonable return If this is
not done there will be two continuing
obstacles to securing satisfactory gen
sral treatment of the rate problem
"One Wi! be that rates sufficiently
1tgh to protect the general situation
VIII inure TO an unreasonable extent
. the benefit of particularly prosper
'us roads and this will operate to pre-
'ent the establishment Of such rates
Fhe other viii be that rates which
ght be suficient TO protect the stu
erion on the average would operate to
produce unduly high returns in ex-
eptonally prosperous years. and this
Il ,.,,Il
influence upon satisfactory action upu n
he rate question.
Benefit for Public
son the other hand, If Il Is clearly
understood that an important part Of
re return Of any company in excess
Of reasonable return Will insure in
some proper way 20 the public benefit
these obstacles TO satisfactory treat
nent OF the rate problem viii disap-
pear. Inc excess earnings .hus an
rFoprlated Tor the public benefit ought
. be used largely Cor the srcation OF
reserves to protect the railroad gjtua-
nor IN untavorab.e years and thus ar
additional elemen. of stability wiu be
gwen TO the situation.
me reacJustmcnt OF rates at rha
2nespn' time TO tablish the credit OF
~ '"' '0'fVad companies operatlrg in.
.NIl''' eA''H Vt4 eHelJ separate re-
sponSlblities viii be an cxceed;nc,
d'hcu.t matter, because the abnorma,
CONDITION. Of the last two veara maks
u exceedingly d.fficu. TO draw anv
Aa'lsi actoty conclusions IS TO the nctn,,l
ea' ''''E Saiaci ~ % the railroads At T "a
A'0''v"@- ne pub lc is also likely 10
con- 10 realize Tat under q continued
o'i"cd control large increaae IN
rate would not be NECESSARY
hereiore. the proposal for .he
A'fe increases IN rates shicn protah. u
"'.I oe nscc sary to establish ard st.s.
.~'h me cretl. Of the railroads ser,-
"a, Fa'e under pirate management j.
~ 70 ne met by s0renuou4 e~d
V'a~sloie objections. Ia such = s,,.
a'.'" 'he prospect Of obtaining III.
"e0essaTs incFeases will be creatfv ~
proved D. the plan which ro.n-.
metdec, because al will aprDeciatc ,h,,
Il Fof any reason on any railroaa 49,
generally, II sh1u.d turn out 1at ra,.
increases produce more. ..kTs is nng,
sieni me excess will 80 lnrgely to pro.
rct The public ntcr<st ru her than -
giFe the pr'N"te owHers an dnneccssary
add .-lonal benea,y
i regard 1t as q very Yrrnportaot r. p.
81 'h's plan 20 Fave to lae rajl!oad
orrpari.s { su:Acient prSrortjo3 '% ~
TwTz zyxTx3 For ar,