Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-10-21

railways have before them q new, and
untried Interstate Commerce Commas
sion proposal for pooling monies de-
rived from surcharges on freight bills
to aid the less prosperous lines.
The railroads were left with no ep-
parent alternative but to accept the
plan. They were told by the commits
sion their Is per cent proposal would
be harmful to themselves because OF
the growing use of trucks and pipe
lines. Their executives were directed
to submit a plan for handling the pool
by December / and were informed 1t
could not operate longer than March
81, 1888.
The spectacular effort of the car
riers was brought to startling con-
clusion with announcement late yester-
day of the commission proposal. Rail-
road men and attorneys had Sconed at
the plan when shippers suggested 1t at
hearings. It was unavoidable, they said.
The commission, however, today as
serted it was workable.
Surcharges Specified.
At the same time the commission
outlined the commodities on which 1t
would permit surcharges and the
amount of those surcharges. They
were limited to a maximum of 10 per
cent. Some commodities, including
coal, ores of all kinds and forest prod
ucts, were limited to So a carload; some
others to Sc car and still others to
/ and 2 cents 100 pounds. Major
cotton, live stock and most fresh
fruits-are not to be levied against
further.
The commission disclaimed any re-
sponsibility fol keeping the income OF
the railroads up to the requirements OF
the New York and other State laws
for investment purposes.
I'VE do not find that We are justified
on this record to attempt" 1t said, by
a rate increase. to protect the margin
of one and one-half times fixed charges
set by the New York law. To provide,
SO far as practicable, that actual in
terest charges be met is justified"
The carriers were joined by savings
banks and other bondholderS OF the
roads in their petition for the increase.
on the grounds that the value OF the
securities was threatened.
A yield from the surcharge plan OF
between S10o000,0 900 and $l25.0OO, 600
annually on the basis Of present traf-
fic was estimated by the commission:
This would be pooled and the needs OF
their bonds cared for. Then the re-
mainder would be returned to the more
prosperous roads on the basis OF the
amounts paid in.
The carriers we're taken to task for
failing to put their traffic men on the
stand in the hearings which ended
September II to support the claims OF
the three railroad presidents, VINO pre-
sented the case for the carriers. the
recommendation was made that tne
traffic men study present rates. with
the view to revising some Of them. At
tention was called to many reductions
voluntarily made by the carriers.
Temporary Gain Seen.
ut is our conclusion" said the COM
mission, that a IS per cent increase
on all freight rates and charges would
increase revenue, if at all, only tenn
porarily, and that its ultimate effect
not very long postponed, would be to
harm rather than help the railroads
1t is similarly our conclusion that such
an increase would raise rates upon
many kinds OF traffic above just ano
sion applies particularly to the prod
ucts of agriculture, including live stock
The commission, after reaching ltS
conclusions. went into the railroad
future. 49,.
immediate ills of the railroads Is the
economic recovery of the country, II
said 1.-THE present low earnings are not
the result of low rates. but renect gen
eral industrial conditions: Inc eaIniss
will continue to reflect those conoltions
as business improves just as they nave
in the past.
Recovery Is Predicted.
While the tide may be slow IN turn
ing. there Is no more reason Tor thinking
that business will not improve than
there was in 1928 for thinking that DE,
pressions were thing of the past, ano
that we were in an era OF permanent
prosperity. Public emotion swings from
one extreme to the other. and there is
nothing more volatile than the emotion
of the investing public. When rallroao
earnings take a sharp turn upward, as
in due time they will, railroad creolt
will also rise.
"There are many things which can be
done to improve the situation, some OF
them by Congress, some by State Legs.
iatures, some by this commission ana
the State commissions, and some py the
railroads themselves.
AN important step Is the repeal OF
section 15A (the fair return section OF
the transportation act) and the suostl-
tuition of a better section designed 10
accomplish the same general purpose.
We recommended such legislation last
year in a special report to Congress and
shall renew the recommendation In our
annual report this year.
THE present recapture provisions I'M
pose in their enforcement vast ex-
penditure of time and money upon both
provoke litigation over complicated
questions of valuation and accounting,
they encourage extravagant expendl-
lures by the more prosperous companies
when times are good, they hang ike
cloud over the credit OF many companies
when times are bad, and under the
present law there is no effective way OF
using the funds for public advantage II
they are recaptured."
Expansion Outlined.
The commission showed the rapid
expansion of the industry during the
decade 1920 and 1929, with investments
having increased about $500, 0o0, 900.
Funded obligations totaling $6,91s,1so,-
691 par value were issued, as well as
stock totaling s1,sS7,ssl sol par value
or its equivalent. Corporate surplus in
creased from S3,142,4l6,87l to $500,
olO.O 53 and the amount Of stock-paying
dividends grew from $5,o75,o39,642 to
ST SOC, 264,973, with an average rate OF
TAT, and the average dividend on all
stock to $40 per cent.
At no time during the period did the
net railway operating income equal the
SIS per cent set as fair return by
Congress and the commission.
Then, turning to 1890 and the nrSt
half of 1881, the commission said:
THE decline in credit has been due
primarily to the shrinkage in railroad
earnings caused by loss of trafic. a
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