Evening star., 1933-02-15
COMBINED RAILWAY
/ SYSTEM IS URGED.
Companies Blamed in Part
r for Plight After Com
-. mittee Study.
By the Associated Press.


the responsibility for the financial
plight of Americas 10000, ,0o0, 900 raj
system had been placed squarely on
their own doorsteps by the report OF
the National Transportation Committee
This non-partisan committee, which
conducted a sweeping investigation OF
the transportation problem at the be-
hest of savings banks, insurance CON-
panies and other large investors, urged
drastic measures toward consolidation
eliminating wasteful competition.
Large Saving Seen
"It has been estimated on good au-
thority," said the report, that several
hundred million dollars, or enough to
pay interest on large part of the out
standing railroad bonds, can be saved -
The committee found some justice in
railroads complaint that they have
been hamstrung by inept regulation, but
reported tendency to over-empha-
size this argument" Declaring regula-
tion has ''left something to be desired -
the report added:
THE railroads should do much that
they have not done to improve their
condition without any Government help
at all. They should be promptly freed
Of all unnecessary restrictions on the
doing of it.
"It has been estimated that less than
20 per cent increase in traffic would
put most of them on an earnings basis
In view of the narrowneSS of this mar
gin of loss. and the very great savings
possible in railroad operation, we regard
the outlook as far from hopeless"
Asks Government Withdrawal.
With the perfection Of regulation and
the appearance of competing forms of
transport, the committee held the
Government should abandon its old
policy of fostering artificial competi-
tion among the railroads.
Furthermore, the committee said
Government assumption of ALI or part
OF the costs of inefficient competing
transport as defense against monop-
oily Is no longer warranted and should
be abandoned" 1t called attention to
an average expenditure of about $780,
100000 annually on inland waterways
IN the past few years, and found mo
commensurate economic benefits"
The report, issued last night, was
signed by Bernard M. Baruch, who sue
ceeded the late Calvin Coolidge as
chairman; by Clark Howell and Alex
ander Legge.
Not Signed by Smith.
Alfred E. Smith, while stating that
ne was In substantial agreement with
the greater part of the report, did not
sign it. He issued a supplementary
memorandum, placing the emphasis
where I think it belongs"
Declaring that parallel lines are
wasteful and unnecessary the COM
mittee report said, regional consolida-
tions should be hastened, and, where
necessary, enforced, looking eventually
to single national SYSTEM
Smith expressed himself vigorously on
consolidation, saying, II am convinced
that the fundamental problem of the
railroads Is that of Nationwide con-
solidation and reorganization to re-
ouce costs and rates, and write off
losses =
Whatever may be the basis of valua-
ton and rate-making, there must be a
scaling down of many railroad securi-
ties. I believe that banks, trust COM
panies, insurance companies and other
holders of railroad securities must be
realistic about this phase of the prob
lem. The public will not stand for
making them preferred class of in-
vestors. *"*
THE question for the railroad execu-
tives, directors and security holders to
decide is whether the steps taken in
this direction should be compulsory or
voluntary. To date voluntary consoli-
dation under the auspices of the Inter-
state Commerce Commission has made
little progress. The question has been
whether compulsory consolidation is
constitutional.
Condemnation Proposed.
eff the railroads show no willingness
TO reorganize, reorganization can surely
be brought about by some form of con-
demnation or eminent domain. I be-
ieve the railroads will be unsuccessful
In attempts to maintain their present
physical, operating and financial struc-
ture at the expense of the general pub
lie by penalizing competitors and rails
ing competing transportation costs. in
Hating securities, raising rates, limiting
taxation by States and municipalities
through Federal legislation, borrowing
Government money without adequate
security and other like devices" Nor
can they expect to make labor the
only Scapegoat," he added
Those who are responsible for pres
ent railroad management need not
complain of radical or drastic govern
mental action in the near future" he
concluded, IF they are unwilling even
to attempt to meet their problems in
a bold. fortnight way through their
own initiative and cooperation. They
have an unrivaled opportunity to do
themselves and the country a great
service. They should have the guild
ance and help of the National and
State Governments in this effort
As emergency measures, both the
committee report and Smiths memo
rancum recommended revision of bank
ruptcy procedure TO facilitate reorgan-
1zation. although Smith would limit
this procedure to the period of the
emergency. Both also agreed the re-
capture provision Of the transportation
act should be repealed, retroactively.
Revision of Rate Making Urged.
The committee report also recon-
mended revision of the statutory rate
making rule as an emergency measure
abandoning the old policy of trying to
appraise property value, then saying
that the roads are entitled to earn a
fair return on the appraisal. I'VE see
no reason why the rate-making rule
should not say in plain English that
railroads are entitled to make a rea-
sonable profit based upon costs of eff
cient operation and that they are not
entitled to earnings merely to preserve
present structures if overcapitalized.
While opposing the policy of support.
Ing competing transportation forms
such as waterways. with public funds
all members asserted trucks and othel
competitors should not be Handicapped
to benefit the railroads
Railroads were found remiss in MOI
leading in the development of such new
forms as automotive transport and tht
arplane, rather than seeking to handi.
cap them. The committee thought reg.
ulatory jurisdiction should be EXTENDED
TO all forms Of transportation, "bu
applied only to the extent necessary fo
public protection
The committee said the margin O
present railroad losses seemed mar
row enough to invite robust action /,