, 1923-09-23

ming Bankers association conven'
ton in Douglas last week that car
ried a broad explanation OF the prob.
lens which have beset the railroads,
Reviewing tho history OF the rail-
roads up to and through tho period
o. government control. no called at
tention to tho demoralized condition
In point Of both equipment and per
sonnel in which they were turned
back to their mt "StranRula.
lion" of the roads had practically
destroyed railroad credit at the be
ginning of tho war and the 20
months that followed. Justified only
by an emergency required during
war time. led up to provisions for
earning guarantees of six months
under tho Esch-C ummins law. under
which tho roads were returned. This
guarantee continued until September
l. 1920. when followed n period OF
depression. idle cars. general demon
alizaton of business and financial
conditions. and then tho ooal and
railroad strikes in 1929.
The Dsoh-Cummlns law. however,
Il was stated by the speaker. took
an entirely new conception of the
obligation OF the government to the
railroad situation. with the result
that. the new law placed a mandate
upon the Interstate Commerce com
mission in the fixing OF rates TO so
adjust them that It would. where
practicable. give n return TO the rail
roads OF five and one half per cent
upon the vnlue OF their properties
devoted to the public use.
81 want TO call attention in pass
ing &c the fact hat this fair return,
this five and one half per cent was
fixed upon the vnlue OF the proper
ties. that value to be determined by
the Interstate Commerce commits.
sion. IND to not take into consider
alton tho stocks and the bonds OF
these properties and 80 there could
be no valid claim that in the consid'
Grafton given by the commission
there was anything allowed for So
called watered stock.
One half of one per cent was add
cd to this amount, presumably to
be used by the uflroad in actual
expenditures; and hen all earnings
of any character in excess OF ak per
cent. being tho five and one half
per cent and one half per cent. was
to be equally divided under the so
called recapture clause. Now some
railroads felt, ours among them. that
that particular feature was a very
unfair thing; that when the earning
was ~predicated upon rates in them.
selves fair and reasonable, that the
fruits Of management and foresight
A.A 1ur9A NnW~aaFW,AnN EhnN11I -AN -
taken away; but that is q part OF
the law.
"Rnllrond credit is a very real
thing. II disappears very quickly-it
ootnes back very rlowly. And so II
perhaps is well to consider what has
resulted from tho little over three
years OF operation which the rail
roads have had under this law. In
the year 1920 the return was ~ OF
1 per cent upon tho value fixed by
the Interstate Commerce commits
sion. In tho year 1921 It was a,97
per cent; in the year 1929 II was
<14 per cont; not a very large re-
turn as you a. appreciate, but a
steadily increaHinB condition.
Nov what has been the direct
anu AINAllHhAAL8 ANHlAL Oh lAAAAs n
purchase OF equipment both as 20
locomotives and cars exceeding any
thing that has ever been known;
Improvement Of the properties on a
scale unprecedented IN recent years:
an Investment IN stocks of the DIFF
terent railroads sggregating s1.10o.-
900. 900 OF now money; and Il is a
significant thing when considering
that resuit 10 remember that Our
ing that three years there has not
been n so-callod a~nti-railroad law
passed either by the federal congress
pF by any state Legislature.
80 rs a result OF three years OF
cessation from attacks from legis.
ature, and from any evidence Of a
Legislative ;r.eSt - Interfere in the
dtustion. It has Progressed as I
nave told you to n point where IN
vestors are beginning to take new
railroad securities. and arc getting
back into the older securities; 80
that the market ranges at n very
much higher level than It has for
FearH.
There are two things about n
railroad which directly affect the
public first and fundamentally the
most important is service. second,
The rate that fl charged for TINT
service. As to whether the railroads
IRE earninE unfairly, It is correct
lno fair to point out the fact that
IN tho three years which I have en-
umerated tho return upon railroad
investment. NJ found by the com
mission itself. has been only what
any man would ordinarily expect X
10 live by in any other business.
The service which tho railroads
promptly started out to arranEe re.
htes or curse intimately with their
financial utilities TO make invest.
nents IN new equipment. Last full
he railroads innuEumted a concert.
"a and oo-ordinnted movement 20
produce n certain standard OF effio-
ouoy, thereby offering better Bcrv-
ce TO tho public. TO reach a certain
aumber OF miles per car per DAY.
hereby automatically increasing the
humber OF cars available, 10 store
large amount OF coal so as to re-
case tho cars IN tho crowded per.
I'd FOR use by the public An OF
rhese things cost money, reflected
hrectly IN operating expenses.
when one considers the freight
ntcs and tho pasgcnner rntae M.