The Washington herald., 1921-08-25
M'ADOO CHARGES
HARDING IS MlSLED
ABOUT RAILROADS
Denies U. s. Obligated to
Fund Carriers Debts
To Government.
BURDEN ON PUBLIC
Lines Now Owe Government
s1,444,O00, 900, "Why Lend
MOre?" He Asks.
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chargeabic to the United States is
further declared to be an emergency
power to be used by the director
general only when he finds that no
other reasonable means is provided
| by the company to reimburse the
United States and, as contemplated
by the Presidents proclamation and
by the Federal control act. II will
be the policy of the director gen
| eral to SO use such power of deduc-
ton as not to interrupt unneces-
sarily the regular payment of divt-
dends as made by the company dur
ing the test period
This provision imposed no obli-
CATION whatever on the director
general as he could not go beyond
the power conferred upon him by
law. 1t was a mere declaration of
| policy.
while I was director general
| (year 1879 and Walker D. Hines
was director general January. 1918,
to March. 1920, the railroads were
not required to pay for additions
and betterments' out of the rental
due them at the expense OF divi-
dends, nor to sell bonds or stock as
they had heretofore done, to reim
burse the government for these ex
penditures. The cost of such 'addi-
lions and betterments' was gener-.
ously advanced by the United States
so that. on March l, 1920. when the
railroads were returned to private
/ control. they owed (and still owe)
the United States the enormous
sum of sl.l44.OOO.O00. These 'addi-
tons and betterments' include mo-
tive power and equipment These
expenditures were not forced upon
the railroads. The railroads needed
them and were glad to have the
government lend them the money at
per cent. which was less than the
market rate. Congress had to ap-
propriate this $l,144, 100000 out of
taxes levied on the people and these
very appropriations for loans TO the
railroads have been used by I'M
friendly critics as a basis for the
charge that Federal control was
wasteful of government money,
whereas the debt the railroads owe
the government on this account is
valuable asset II those charged
with the execution OF the law insist
upon satisfactory security as the
Ia" requires.
S763, 1000, 900 Due Now.
"Of this vast debt. the United
States extended for a long period
the time for payment Of 1881, 0O0,-
600, representing new locomotives
and cars furnished to the railroads.
This leaves now due for additions
and betterments' the sum of ap-
proximately s763.o00.00O.
February 2s, 1920, Congress en-
acted the transportation act pro-
viding for the return of the rail-
roads to private control on March
I. 1920, and gave the President. in
substance. discretion within certain
limitations to set Off against the
debt the railroads owe the United
States any Indebtedness, arising out
Of Federal control. that the United
states might be found to owe the
railroads.
That act further provides that
any remaining Indebtedness of the
carrier to the United States in re-
spect to such additions and better
ments shall. at the request of the
carrier. be funded for a period Of
ten years from the termination of
Federal control. or shorter
period, at the option of the carrier,
with interest at 6 per cent per an
mum and upon such security as the
President. in his discretion, may
prescribe
while it is true that the trans
portation act seems to confer upon
the President discretion to deter
mine, within certain limitations.
how much Of the debt the United
States owes the railroads may be
set off against the debt the rail-
roads owe the United States. never
theless the act does not contem-
plate that none of the debt of the
United States shall be set Off but
on the contrary, assumes that it will
be, because in express terms il pro-
vtdes for funding only the remain
ing Indebtedness of the carrier to
the United States At any rate, it
is Individually clear that under the
law and the contract between the
parties, the United States is not
morally and legally bound to fund
as stated by the President in his
message, the $3.50 200, 900 of debt the
railroads owe the Treasury for 'ad-
ditions and betterments.' The
President must have been misled
into making such a statement. All
that the United States is required
to do. legally and morally. is to
fund, for ten years any remaining
Indebtedness of the carriers to the
United States" after balancing Of
accounts.
"Roads, Claim Quashed."
Up to July Is. 1920, the railroads
had filed with the director general
counter claims against the United
States aggregatinf, s75S. 100000. Dr.
rector General Davis says that the
greater part of these claims is for
under maintenance of way. struc-
lures and equipment. and that from |
10 per cent to IS per cent of that
part is for alleged 'inefficiency of
labor The director general charac-
teriZes these inefficiency of labor
claims as "of a too highly indefinite,
speculative and contingent charac-
ter to warrant consideration and
states that they are not contem-
plated by the standard contract
and that he has refused to allow
them. The Interstate Commerce
has, in a recent decis- |
ion. upheld the position of the di-
rector general.
THE President. in his message.
suggests that the claims Of the rail- |
roads against the United states may
amount to $500, 100000. 1t is diff
cult to conceive that the just claims
of the railroads against the United
States can approach any such sum.
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