Evening star., 1924-01-10
i. s. RAIL DIRECTION.
PART OF NEW PLAN.
Consolidation and Guarantee
of Earnings to Small Lines
Proposed by Experts.
BY FREDERIC WILLIAM VILE.

Far-reaching proposals calling for
federal direction Of consolidated rail-
roads and for guarantee Of earnings
to weaker lines are being discussed
in Washington. They originate in
authoritative quarters-among men
qualified to know both the Interstate
Commerce Commission viewpoint and
the attitude of railroad executives.
Sponsors of the scheme declare II is
the only feasible plan for effecting
consolidation under private owner
ship as urged by Presidents Hard
ing and Coolidge and recommended to
this weeks. transportation confer
snce IN Washington by SECRETARY,
Hoover. ssy y r
Under this project consolidated rail-
road groups would be chartered like
national banks. Government repre-
sentatives would sit on their boards
of directors. Treasury grants-in aid
would be at the disposal of the more
prosperous railroads as an induce
ment to consolidate with weaker
lines --.
The proponents say some such
scheme Is the only alternative either
to government condemnation of the
yate interests or outright govern
ment ownership, with all Its attend
ant expense and disorder.
The administra ratfon'S consolidation
plans seek to unite. Americas several
hundred Independent railroad lines
into some twenty large systems. 1t is
desired to construct these systems so
that competition and good service
Will be maintained, earning power
fairly eQualized under uniform
schedule of rates and the public as
sured of adequate service at reduced
rates. .---
Must Guarantee. Return.
One of the authorities who have
worked out the scheme herein mar
rated thus explained it to the writer:
mo practical results can be OBJ
tained by the government II 1t ex-
Dc cts, to enforce a general plan of
consolidation unless the government
in a limited. way UNDERWRITERS the, cost
Of operating the weaker lines eff
Iciently.
'.The mere statement of such a
proposition will result In vocfferous
denunciation by those who refrain
from impartial study of the question
who fail to recognize that good
railroad service is the backbone of
national prosperity. Careful con-
sideration of the proposition will
demonstrate that something OF the
kind is essential to the consolidation
plans success and can be carried out
without any ultimate cost to the
TT can be shown that the plan
would result in more efficient service,
create a stable and permanent sys-
tenn of transportation. reduce and
eoualize rates, rehabilitate the credit
of the carriers by creating a market
for capital stock, essential to pro-
vide funds for necessary improve
ments; forever take the railroad
problem out of politics. and put IL
tional banks in the federal scheme
of finance.
"A skeleton of the plan includes the
following main subdivisions:
"A. All interstate carriers reor-
panizing under the consolidation plan
to take out identical federal charters
similar to national banks. This would
give all of the consolidated companies
i6enficaI powers and subject them to
the same liabilities and detailed public
control.
aB. The consolidated companies to
he limited in number by the Interstate
Commerce Commission.
&C. The authorized stock and bonds
of each consolidated company would be
based solely upos the physical value OF
tion uses This value would be fixed
without regard. to existing stock and
bonds or present book and investment
value. Making the physical valuation
the basis for stock and bond issues
would do away with any question of
watered stock, or obligations issued
without representing 100 per cent in
value.
properties would be fixed by the Inter-
state Commerce Commission under the
rule OF the United States Constitution,
as defined by the Supreme Court, viz:
"a fair return upon the aggregate value
Of the property OF the carriers held
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