The news scimitar. (Memphis, Tenn.) 1907-1926, 1920-01-30
HINES ADVOCATES
DIVISION Of RAIL
EXCESS EARNINGS
Mold Split Up Money Re-
ceived Above Reasonable
Returns to Protect Public
NainSt Too Large Profits.


I louisville. Ky. Jan. so.--walker
D. EHnes, director general Of railroads,
IN a address before the transportation
club here last night urged the neces-
city n a division Of excess earnings Of
eailreed corporations above reason
able weturn In order TO protect the pub
Tic against excess earnings Of very
PROSPEROUS railroads and Ia order 10
insuHR fair return to all railroads,
IMose who oppose this plan seem
% assume that Il will operate as dis
souFNEemeht upon private capital said
Mr.. Hines They seem 10 assume that
" this plan is not adopted there will
be no dlscouragement on private capital
but HEY should remember the discour-
RgeFkents which have existed hereto
forew The real question Is whether a
planNshal be adopted which viii both
protect the public interest and reason
ably protect private capital or whether
on De other hand plan shall be
adopfed which will fail to do either
wttteany degree of satisfaction"
Me Hines declared his belief that
unless the railroad problem at the pres
ent hme Is dealt with in a bold and
effeelive way" the return to private
management after federal control will
be wholly disappointing" The director
general also urged the compulsory con-
selidRtion Of the railroad systems Of the
country into few large systems and
suggeeted the participation OF the pub
lie and labor in the management OF the
railroads
Wood Also Speaks.
Maj. Gen. Leonard Wood, who Is Wis
iting Louisville on an inspection trip,
was another speaker at the banquet
In his discussion OF the railroad rate
question and the reorganization OF the
railroads which he believes necessary
after government control, Mr.. Hines
said IN part:
1.-THE question now is shall the rail-
roads be returned 10 substantially the
Eame regulation which had proved so
discouraging In 1917 or shall changes
be made sufficiently fundamental 70 re-
move the difficulties upon this dues"
tom I wish 10 offer the results OF my
own study OF the problem.
Broadly, l believe that unless these
matters be dealt with In q bold and
effective way, the return to private
management will be wholly disapnoint-
Ing u l believe that no prompt, conf
dent and liberal regulation Of the rail-
roads will be practicable unless pro-
vision Is made for the appropriatinE
for the benefit OF the public interest
an important part OF the excess which
any railroad company may earn over
n clearly reasonable return. II this is
not done there will be two continuing
obstacles to securing satisfactory gen.
erRle treatment OF the rate problem.
One will be that rates sufficiently high
to protect the general situation will in
ure TO an unreasonable extent to the
benefit OF particularly prosperous roads
and this will operate to prevent the es-
Enlistment of such rates The other
4n hat 4aa frh fgkF ka sur
ficiert 10 protect the situation on the
average would operate 10 produce I'M
dulythigh returns on exceptionally PROS
porous years and this fear likewise will
have restraining influence upon sat
isfactory action upon the rate question.
On Fthe other hand, II II Is clearly
undefstood that an important part OF
the wteturn OF any company In excess
OF reasonable return win inure In
some proper way to the public benefit
those obstacles to satisfactory treat
menS OF the rate problem will disap-
pear The excess earnings thus APP
prcpftated for the public benefit ought
70 BE used largely for the creation OF
reserves 10 protect the railroad situa.
tionEif unfavorable years and thus an
additional element OF stability will be
rivsn 10 the situation.
Difficult Matter.
''The readjustment OF rates at the
preeent time to establish the credit OF
all the railroad companies operating In
drnendentlv on their separate RESPONSE
bilittes will be an exceeding difficult
matter because the abnormal conditions
Tor the past two years make IL ex-
ceedingly difficult to draw any salts.
factory conclusions as to the actual
earning capacity OF the railroads al
the moment The public Is also likely
10 come to realize that under a contin-
ued unified control large increase in
rates would not be necessary. There
fore the proposal for the large increases
IN rates which probably will be neces-
Eary. 10 establish and sustain the credit
OF fhe railroads separately under pri.
vate management, Is likely to be met
by strenuous and plausible objections
In such situation the prospect OF
obtaining the necessary Increases will
be greatly improved by the plan which
recommend because all viii appreciate
that II for any reason II should turn
out that rate increases produce more
than Is sufficient, the excess will 60
largely to protect the public interest
rather than TO give the private owners
an unnecessary additional benefit,
Iregard II RS a very important part
OF this plan To leave to the railroad
companies sufficient proportion Of
the excess earnings to stimulate their
efficiency In the public interest. but be =
yond this point | believe the plan OF
division OF earnings which ! propose is
essential to the due protection both of
the public interest and OF all legiu.
mate elements OF private interest.
Those who oppose this plan seem to
assume that 1t will operate as a dis
coutagement upon private capital They
seem TO assume that II this plan Is
not adopted there will be no discourage
meHt on private capital, but they should
remember the diseouragemen which
have existed heretofore The real cues.
ton Is whether plan shall be adopted
which will both protect the public in.
terest and reasonably protect private
capital or whether on the other hand
a plan shall be adopted which will fail