The New York herald., 1920-01-30
HINES ASKS SPLIT
ON ROADS PROFITS
Urges Division of Excess Earn.
ingS to Insure Fair Return
No All Lines.
WANTS PUBLIC IN MANAGING
Compulsory Consolidation of Rail
Systems Advocated by Director
General in Louisville Address.

LOUISVILLE, KY, Thursday.-Walker
D. Hines, Director General of Railroads
in an address before the Transportation
CLUB here tonight, urged the necessity of
q division of excess earnings of railroad
corporation above a reasonable return,
IN order to protect the public against ex-
cess earnings of very prosperous railroads
and 10 insure a fair return to I'll railroads.
Those W , oppose this pia 5eem to as
sumo that it win operate a discoura ge-
nent upon private capital" said Mr..
Hines. They seem to assume that If
this plan is not adopted there viii be no
encouragement on private otal. but
they should remember the discourage
ments which have existed heretofore The
real question is whether a plan shall be
adopted which will both protect the public
interest and reasonably protect private
capital or whether. on the other hand,
a plan shall be adopted which will fail
TO do either with any degree of satisfac
ton" Mr.. Hines declared that unless the
railroad problem at the present time is
dealt with in a bold and effective way
.
federal control will be wholly disappoint-
ing
The Director General also urged the
compulsory consolidation of the railroad
systems of the country into few large
systems and suggested the participation
of the public and labor in the manage
Inent of the railroads Major General
Leonard Wood who is visiting Louisville
on an inspection trip, was another speaker
at the banquet.
Discussed Rail Rates.
In his discussion of the railroad rate
question and the reorganization of the
railroads, which he believed necessary
after government control, Mr.. Hines said
ION the basis of my twenty-siX years
experience with railroad regulation. the
last two years of the period being in the
public service, I wish to express my views
as to some of the fundamentals necessary
to a successful solution.
Intelligent consideration will be great
ly aided by recalling the conditions of
railroad regulation as they existed in |
1917. and as they will again exist under
private control unless fundamentally
changed by new legislation.
I'm 1917 railroad executives were pro-
foundly discouraged as to the conditions
OF railroad regulation. They found eX-
trenle difficulty in proving to the public
satisfaction what they regarded as their
absolute neCeSSltleS IN Ine way OF IN
creased rates. and they had no satisfactory
method of dealing with the labor,problems
which were constantly becoming more
pressing. Both rates and service were
being regulated by federal and State lcgis-
Hative bodies and commissions. Common
action was much easier for the labor or
ganzations than it was for the railroads. |
The result was that so-called private man.
agernent of the railroads was regarded by.l
the executives themselves as largely figu-
rative because they felt that to great
extent the management was virtually
taken out of their hands.
THE question now is, shall the railroads
5e returned to substantially the same reg
ulation which had proved so discouraging
in 1917 or shall changes be made sufficient |
" Fundamental to remove the difficulties
upon this question? | wish to offer the
results Of my own study of the problem.
Calls fer BoIdness.
Broadly, I believe that unless these
matters are dealt with in bold and ef-
( fective way the return TO private man
| agement will be wholly disappointing. !
I believe that no prompt, confident and
liberal regulation of the railroads Will be
practicable unless provision is made for
the appropriating for the benefit of the
public interest of an important part of
the excess which any railroad company
may earn over a clearly reasonable re-
two continuing obstacles to securing sat
isfactory general treatment of the rate
problem One will be that rates suffi-
cienty high to protect the general situa-
tion will insure to an unreasonable eX-
tent TO the benefit of particularly pros
porous roads and this will operate to pre-
vent the establishment of such rates. The
other will be that rates which might be
sufficient to protect the situation on the
average would operate to produce unduiy
high returns in exceptionally prosperous
years. and this gear. likewise. Will have
restraining influence upon satisfactory ac-
tion upon the rate question.
"On the other hand, If 1t is clearly un-
derstood that an important part of the
return OF any company in excess OF
reasonable return will inure in some
proper way to the public benefit, these
obstacles 10 satisfactory treatment of the
rate problem will disappear. The excess
earnings thus appropriated for the public
benefit ought TO be used largely for the
creation of reserves to protect the rail-
road situation in unfavorable years, and
thus an additional element Of stability will
be given TO the situation.
Rate Resdjustment Hard.
The readjustment of rates at the pres
ent time to establish the credit of all the
railroad companies operating indepen-
IDENTIFY and on their separate responsible
ties will be an exceedingly difficult mat
ter. because the abnormal conditions of
the last two years make II exceedingly
difficult to draw any satisfactory conclu-
sions as TO the actual earning capacity of
the railroads at the moment The public
also is likely to come to realize that under
a continued unified control large in
crease in rates would not be necessary
Therefore, the proposal for the large
increases in rates which probably will be
i. necessary to establish and sustain the
credit OF the railroads separately under
private management. is likely TO be met
oy strenuous and plausible objections. In
such situation the prospect Of obtaining
the necessary increases will be greatly i'm
proved by the plan which I recommend,
because all will appreciate that II for any
reason any railroad or generally II should
turn out that rate increases produce more
than is sufficient. the excess will go
largely to protect the public interest
rather than to give the private owners an
unnecessary additional benefit"
BRITISH MINERS LEADER