Evening star., 1934-02-20
M'KELLAR SCORES
OCEAN SUBSIDIES
Senator Sees Cancellation
in Address on Star
Radio Forum.

In q vigorous attack on the ship
ping subsidies granted under the
Jones-White act of 1923, Senator Nc
Kellar, Democrat, of Tennessee, in
an address last night, described
them as "a damnable waste and
misuse of the peoples money" and
predicted the contracts on which
they are based would be Cancelled as
have those for carrying airmail.
The Tennessee Senator, who was
On a Senate Committee which two
years ago went into this subject,
spoke in the National Radio Forum,
arranged by The Star, and broad
cast over a coast-to-coast network
Of the National Broadcasting Co.
Named Shipping Firms.
Senator Mcclellan named shipping
concerns he said were favored with
mail-carrying contracts since the law
was enacted, declaring they obtained
awards at maximum rates without
proper competitive bidding.
'"They talk about these subsidies
being used for the purpose of build
ing up an American Merchant
Marine. It is just so much poppy
cock" he asserted.
OF As contracts. Senator McKellar
expressed the opinion that with pos
sibly one exception, all should be
voided.
The text Of Senator McKellar'S
speech follows:
am invited by the Radio Forum
to speak to you tonight on the sub
ject of ocean Mail Contracts"
have no doubt that am invited be-
cause I was a member of a committee
which made a partial investigation OF
this matter two years ago A better
title for my address would be Ocean
Mail Subsidies" because, perhaps,
nearly nine-tenths of all money paid
by the Government for the carrying of
our ocean mail is pure subsidy. The
carving of the mail is entirely a
secondary consideration in the making
of these alleged contracts.
The so-called Jones-White Mer-
chant Marine act of 1928, approved
NAV 90. 1928, was the vehicle by
which hundreds of millions Of dol
lars were given out to favored ocean
mail contractors.
In order that the matter may be
thoroughly understood, I should say,
at this point, that under previous acts
of Congress a revolving fund had been
set up In the Shipping Board for the
benefit Of shipping companies, in the
sum Of S125,00O,000, which fund was
to be used by the Shipping Board to
lend to American companies which
5a.;r.L {a h,,ild ,opU Shinc IF T re-
member correctly, this fund was
afterwards increased to $285,0OO,O0
These loans were to be made for 20
years, at a rate of interest first fixed
at 31a per cent, and, then, by a
Joker in the law of 1928, and a
ruling by the then Secretary of the
Treasury was construed by the Ship
ping Board to authorize them to lend
this money to these shipping companies
at astonishing rates of interest. as low
as n per cent. I should stop here
long enough to say that comparatively
little of the money of the loans or
the nominal interest has been paid
back. These loans were made by the
Shipping Board on three-fourths Of
the cost Of the vessels constructed, or
three-fourths of the cost of remodel
ing the vessels.
Favoritism Shown.
After the passage of the Jones'
White act of 1928, all kinds Of ocean
shipping companies came forward. A
favorite of the Administration would
buy q Shipping Board vessel, at a
nominal cost, running over many
years. within which to pay the initial
payment Of this nominal cost, and
immediately he would be allowed
to have q mail contract running into
millions. If he wanted to recondition
his ship, he could borrow three
fourths of the alleged value of the
ship from the revolving fund. In this
way, he could get a subsidy in the
purchase Of his ship, another subsidy
In borrowing money from the revolv-
ing fund and third subsidy in his
mail contract.
The act of 1928 specifically required
that the Postmaster General should
give public notice by advertisement
for 80 days for bids, and peremptorily
required him to award the contract to
the lowest bidder. From the first, the
Post Office Department seemed to feel
that 1t was its bounden duty to avoid
this mandate of competitive bidding
under the law. The Postmaster Gen
eral, up until March, 1882, let some
Is contracts, and with one exception
certainly, and with four exceptions pos
sibly, there was never a competitive bid.
The law required the bidding vessels
to be divided into seven classes and
the maximum pay for each class was
fixed In the law, the seventh class,
81 so per mile; the sixth class, $3.50
per mile; the fifth class, 81 per
mile; the fourth class, Sc per mile;
the third class So per mile; the
second class, SO per mile; the first
class, $12 per mile. The Shipping
Board was required to certify the rates
and the kind of vessels to be run on
such routes. The Postmaster General
let the contracts. Up to March 5,
1882, Is contracts on As routes had
been entered into. There was no COM
petition in bidding on 40 of these
contracts, and as to these 40 contracts
the advertisement for each was 50 ar
ranged that competitive bidding was
practically impossible There was
some kind of competitive bidding on
contracts, but each of these require
explanation.
Contracts Held Void.
The 40 Contracts.-These 40 con-
tracts, as I have said before, were,
and are, today, absolutely void.
The First Routes-Take routes
(, 5, 6. and 10. Bids were adver-
tised for by the Postmaster General
on June 8, 1923, just eight days after
the approval of the Merchant Marine
act. Bids were TO be received July
9, 1923. Operations of ships on the
several routes were required to begin
on August 1, 1928. This limitation of
time, between June and August 1,
made it impossible for any other COM
panies, except the ones then running
on these routes, to bid on them. They
were the only companies having the
kinds Of vessels specified. They were
the OnlV cOmfoanieS that colIld hid in