ing obligations, and taxes, rents, and other fixed charges. A substantial part of the proceeds was used to "bail" out, in whole or in part, commercial banks. The committee is of the opinion that, in the circumstances, it is fair and equitable that, as respects such loans, as well as other railroad loans heretofore or hereafter made by the Corporation, the Corporation should be exempt from being enjoined by the courts in bankruptcy proceedings from acquiring title to the collateral securing the loans in compliance with the terms of the pledge of such collateral. All railroad loans which have been made by the Corporation have been made to borrowers who could not obtain loans on reasonable terms from any other source. The provisions of the bill are designed, among other things, to effect this purpose" (H. Rept. No. 2351, 75th Cong., 3d sess). Neither of the bills in question came to a vote on the floor. The recommendation has been renewed by Mr. Eastman, chairman of the legislative committee, Interstate Commerce Commission, in his letter dated March 20, 1939, to this committee. (See pp. 28-29, 32, of letter dated March 20, 1939, to this committee.) After the favorable action on the matter by the Senate and House Banking and Currency Committees last spring, Congress enacted into law a similar provision with respect to loans made by the Maritime Commission. (See sec. 703, Public Act No. 696, 75th Cong., approved June 22, 1938 (the so-called Chandler bankruptcy bill.) It is worthy of mention that the provision with respect to loans of the Maratime Commission is contained in a law which was considered by the Senate and House Judiciary Committees. As a matter of principle, there is no more reason why loans made by the Reconstruction Finance Corporation to railroads should not have corresponding status with loans made by the Maritime Commission. The prime consideration in both cases is safety of the public funds. We set out below a memorandum, in support of our position, which was furnished to the House Banking and Currency Committee and appears at pages 89-91 of the record of the hearings before that committee on H. R. 10608 (the bill which was reported favorably by that committee on May 12, 1938): "STATEMENT IN SUPPORT OF H. R. 10505 FILED WITH THE HOUSE COMMITTEE ON BANKING AND CURRENCY BY THE RECONSTRUCTION FINANCE CORPORATION "Yesterday this committee correctly stated the issues regarding the proposed provision as being whether it is in the public interest and whether it should apply to loans heretofore made by Reconstruction Finance Corporation. This statement is presented for the convenience of this committee in an endeavor to assist in clarifying these issues. "First. The provision is in accordance with the recent recommendations of the committee of the Interstate Commerce Commission Commissioners to the President. "Second. It protects public funds that were advanced as rescue money when private lenders did not act. "The bulk of Reconstruction Finance Corporation Ioans involved in section 77 proceedings were made before section 77 became law and before the Rock Island decision alluded to. In an endeavor to make maximum funds available the liquidity of these short-term loans was an important element of their value. This element of value should not be impaired and ineed affords far less protection than is afforded other public moneys in bankruptcy where by statute they receive priority. "It should be sufficient here to state that interest accrued and owing to Reconstruction Finance Corporation by railroad borrowers now involved in proceedings under section 77 amounts to approximately $19,600,000, whereas the decline in collateral value over the period during which injunctions have been in force is graphically illustrated by the table which has been introduced at this hearing and which deals with these items of collateral behind the Rock Island loan that are listed on the New York Stock Exchange. "Third. The provision restores to full effect the portions of the Government contracts that were authorized by statute and that have since been stayed by the moratorium. Accordingly, the will of Congress is merely being reaffirmed. "Fourth. The provision does no more for public funds than is done at present for the private holders of equipment-trust certificates under existing provisions of section 77. "Fifth. To say that reorganization will be rendered impossible ignores the realities of the case. "Equipment trust certificates are exempt from injunctions under the present provisions of section 77; yet this has caused no delay. "Furthermore, in equity receiverships, where injunctive power was lacking, reorganizations were consummated without difficulty. "Finally, the only effect of the proposed provision will be in the treatment afforded reconstruction in the reorganization plan. The Corporation has no present intention of selling collateral and as a Government agency can be relied on to do so only if it is in the public interest. Proceedings that are most advanced are only before the Interstate Commerce Commission for approval of a plan. There the Corporation insists that its public funds should be afforded treatment according to their liquid value, where as other interests under the subsequent section 77 have obtained injunctions in violation of the limitations imposed by the Rock Island decision and have sought to use them to lower the Corporation's collateral value. Therefore, the proposed bill will prevent long-drawn-out litigation over injunctions, will expedite reorganizations, and will give public moneys the legal protection in reliance on which they were expended. "Sixth. The injunctions now in force against Reconstruction Finance Cor poration are in disregard of the limitations imposed by the Rock Island decision itself. This is slowly being recognized in the appellate courts. (See the Prudence decision in which Messrs. Root, Clark, Buckner & Ballantine as counsel for Reconstruction Finance Corporation succeeded in vacating an injunction against the sale of collateral.) That slow process of lifting injunctions by appeal will merely delay reorganizations in these difficult times. Emergency legislation instead is needed. "It should be noted that in the Rock Island and the Prudence decisions the courts stressed that injunctions might continue for reasonable periods only, regardless of whether reorganization was consummated by that time or not. In the Rock Island decision the court said that the period would have been too long had it not been for the litigation then before it. At that time 1 year and 4 months had elapsed. Since then 3 more years have elapsed and the injunction is still in force. "Seventh. The proposed provision is not retroactive. "If it should be made not to apply to loans heretofore made, public moneys would have no protection in future bankruptcies. "Furthermore, in existing bankruptcies it can concern itself solely with future injunctions and the continuation of injunctions. It is no more retroactive than was section 77 with respect to pending equity receiverships. "Finally, the proposed bill would make it impossible to make future advances on existing collateral which might be the only way a particular road could obtain much needed funds; thus without it the contemplated emergency program would be materially impeded. "Eighth. As to future loans, with relatively little collateral available for pledge by railroads, the emergency program will be materially impeded if Reconstruction Finance Corporation must, in valuing collateral, attempt to figure what it will be worth if a protracted injunction ensues. "Ninth. Even when collateral consists in part of obligations of the debtor, as was true in the case of the Roch Island loan, an injunction would be unwarranted. The effect is not, as has been stated, to balloon the debts of the road. That was done when those obligations were issued. Thereafter, as assets of the debtor, Government funds were advanced on their fair value in the public interest. It is then too late to say that the assets cannot be given full effect. It would be grossly inequitable to permit the subsequent enactment of section 77 and the injunctions obtained thereunder to jeopardize public funds by taking away the saleability of the assets that they had previously possessed and that was an important element in fixing a value for a Government loan. "Tenth. As of December 31, 1937, of a total of $643,597,795 of loans authorized by the Reconstruction Finance Corporation to railroads, $119,890,352 was loaned for meeting interest requirements, $327,378,691 for meeting bond and equipment trust maturities and $54,445,126 to meet bank and other short-term loans, and $31.354,291 to meet taxes. "The figures just mentioned are illuminating, since they illustrate how very greatly, though indirectly, insurance companies and other financial institutions have benefited from the proceeds of Reconstruction Finance Corporation loans to railroads. Some $539,772,767, or nearly five-sixths of the total Reconstruction Finance Corporation authorizations, have been for the purpose of meeting taxes (which come ahead of funded debt), rents, fixed interest, and capital requirements. It has been estimated that about one-third of the funded debt of the railroads is owned by insurance companies and mutual savings banks. A large proportion of the Reconstruction Finance Corporation loans to such borrowers accordingly has gone through the medium of the borrowing carriers into the treasuries of insurance companies and mutual savings banks. "What the objectors in effect ask for is that after having received the benefit of the loans the Reconstruction Finance Corporation, a public agency which made the advances, should be prevented from protecting itself against loss if it becomes necessary to look to its collateral. The amendment is in the public interest to protect public moneys. There is no unfairness or inequity about making it applicable to existing proceedings, since section 77 itself, when it was passed in 1933, was applicable to existing receiverships of railroads, and the amendment of section 77 in 1935, with respect to equipment trusts, applied to equipment trusts involved in then pending section 77 proceedings.' "The reasons why such a provision is in the public interest are as strong today as they were nearly a year ago. "As pointed out in the above-quoted memorandum, the provision is not retroactive. Furthermore, since the date of that report no railroad borrower from the Reconstruction Finance Corporation has initiated a section 77 proceeding, so that the statement made in House Report No. 2351 still correctly states the facts, viz: "The bulk of the loans made by the Reconstruction Finance Corporation to roads which, after the disbursement of the loans, filed petitions under section 77 of the Bankruptcy Act, as amended, were made by the Corporation prior to March 3, 1933, the effective date of that law [sec. 77 of the Bankruptcy Act]. None of such loans were made after the decision of the Supreme Court on April 1, 1935, in Continental Illinois Bank & Trust Co. v. C. R. I. P. Railway Co. (294 U. S. 648), which permitted a temporary injunction. " The CHAIRMAN. That concludes the hearings on this subject. This is the end of 10 weeks of hearings. Now, we hope that the committee will be able to use the information that has been given to us to the advantage of the country. The committee will stand adjourned. (Thereupon, at 11:40 a. m., the hearings on H. R. 2531 and H. R. 4862 were concluded.) Congressman CLARENCE F. LEA, COLLIER OWNERS' ASSOCIATION, Boston, Mass., March 23, 1939. Chairman, House Committee on Interstate and Foreign Commerce, Washington, D. C. DEAR SIR: I appreciate the opportunity granted me at the hearing before your committee last Thursday, March 16, to submit a brief on H. R. 4862. I am forwarding our brief herewith and have enclosed enough copies for each member of your committee. Very truly yours, F. B. CRAVEN, Secretary. MARCH 23, 1939. Congressman ssman CLARENCE F. LEA, Washington, D. C. DEAR SIR: STATEMENT OF OWNERS OF COASTWISE COAL CARRYING STEAMERS WITH REFERENCE TO HOUSE BILL 4862 Pursuant to permission granted by your committee, this statement is submitted by the following Boston and New York companies: Coastwise Transportation Corporation, Diamond Steamship Transportation Corporation, Hartwelson Steamship Co., Mystic Steamship Co., New England & Southern Steamship Co., Pocahontas Steamship Co., M. & J. Tracy, Inc., Wellhart Steamship Co., Wilmore Steamship Co., comprising the Collier Owners' Association, 10 Post Office Square, Boston, Mass., Hartwelson Steamship Co., and Wellhart Steamship Co. not voting. 130981-39-pt. 453 The above-named companies include private and contract carriers by water owning fleets of colliers engaged in transporting over 15,000,000 tons of bituminous coal annually between ports along the North Atlantic coast from Hampton Roads to Maine, representing substantially all of the coal shipped from southern ports. These colliers also occasionally carry other bulk cargoes such as ore, coke, fertilizer, sulphur, and phosphate rock. This outside tonnage is essential to a sound, economical, and efficient operation of the coal carrying trade and results in lower costs which make possible lower rates of water transportation to the consumers of coal and of these other bulk commodities. Colliers do not operate as common carriers, and do not compete with common carriers by water. It is submitted that colliers do not come within the purposes sought to be accomplished by the proposed legislation and that the public interest does not require regulation of this mode of transportation. It is respectfully requested that insofar as it may affect colliers, the bill be amended so as to expressly exclude this mode of transportation from its application and thus not injuriously affect the operations of the coal-carrying fleets of the North Atlantic coast. The bill in its present form applies to all contract carriers by water engaged in interstate or foreign commerce, insofar as such transportation takes place within the United States, and in case of water transportation, is performed by nonocean-going vessel (sec. 2 (1) (c)). If this is intended to exclude from the application of the bill all contract carriers by water transporting cargoes in interstate commerce in sea-going vessels and does, in fact, exclude this class of carriers, the collier group offers no objection to the bill, except as to the commodity clause. Subsequent portions of the bill, however, raise doubts as to whether contract carriers by water of the class above mentioned are excluded. For example: In section 3, subdivision (13) a contract carrier is defined as any carrier other than a common carrier, which transports passengers or the property of others by motor vehicle, by water, etc., for compensation or hire, and in section 4 (3) it is provided that every contract carrier shall establish and observe reasonable minimum rates and charges. Again, section 8 requires every contract carrier to file with the Commission and keep open for public inspection schedules of minimum rates, or, in the discretion of the Commission, complete and exact copies of every contract, charter, agreement, or undertaking for transportation subject to the bill. Section 19 authorizes the Commission to require reports from all carries and to prescribe the classes of property for which depreciation charges may properly be included by carriers under operating expenses and the percentage of depreciation which shall be charged with respect to each of such classes of property, also to prescribe the forms of any and all accounts, records, and memoranda to be kept by carriers, and to require all carriers to file with the Commission a tue copy of each and every contract, agreement, or arrangement between such carrier and any other person in relation to any traffic affected by the provisions of the bill, to which it may be a party. Section 44 provides that no person shall engage in transportation subject to the bill, as a contract carrier by water unless he holds an effective permit issued bythe Commission authorizing such operation. Before such permit issues the applicant must agree to conform to the requirements, rules, and regulations of the Commission. Section 36 makes it unlawful for any carrier subject to the bill to issue any securities without first obtaining the consent of the Commission. It would seem from the foregoing that notwithstanding the apparent exemption under section 2 (1) (c) of contract carriers by water where transportation is performed by sea-going vessels, all contract carriers by water may be subject to the bill. Accordingly, it is submitted that the bill should be amended so as to expressly exclude contract carriers by water operating colliers. As colliers occasionally carry other bulk cargoes such as ore, coke, sulphur, fertilizer, and phosphate rock, it is respectfully submitted that section 2 (1) (c) be amended by adding thereto the words "Provided, however, That contract carriers by water and private carriers by water engaged exclusively in the business of transporting full cargo lots of bulk commodities are hereby excluded from the provisions of this act." The importance of the service of colliers to industry and to the public generally cannot be overemphasized, since colliers make possible low-cost transportation of coal which is a basic commodity, the cost of which finally enters into the cost of all manufactured products. Colliers transport bituminous coal sold for use by industrial plants, public utilities, and for household heating. The coal-carrying trade is a seasonal business with large peak demands. The flexibility obtained in the operation of collier fleets by the transfer of colliers to other bulk cargo trades during slack periods has aided in securing low-cost fuel transportation. Experience has shown that the coal industry has been compelled to make large investments in special-type ships to meet their coalcarrying requirements, since independent ship lines have been unwilling to incur the expenditures necessary to make general trading vessels suitable for this special cargo. Outside capital cannot be secured to build colliers without any guaranty of tonnage to fill them or with the probability that they would have to be laid up from time to time. The collier trade has built up a fleet of vessels suitable for carrying coal and other bulk cargoes, and, therefore, desirable from the standpoint of national defense. As was proved in the World War, steam colliers are a valuable auxiliary to our Navy in time of war. It is submitted that it would serve no useful purpose to place owners of colliers under governmental regulation. On the other hand, such regulation would seriously injure an industry which has grown up over a period of 40 years and in which large sums of money have been invested with the resultant saving to the coal-consuming public. There is beneficial competition in the coal-carrying trade which should be permitted to continue, free from governmental regulation. It would, for example, be detrimental to the business of collier owners to establish and file with the Commission schedules of minimum rates or copies of every contract, charter, agreement, or undertaking for the transportation of coal or other bulk commodities. It is also submitted that there is no necessity or valid reason why such carriers should be required to obtain a permit as a condition to conducting the transportation business. The nature and flexibility of the business conducted by collier owners would make it impossible to operate successfully under such regulation. The highly competitive nature of the business conducted by collier owners which, in turn, is reflected in savings to the coal-consuming public, of necessity requires that operators of colliers should have the privilege of conducting their business like any other private industry. Governmental regulation of this mode of transportation would be a detriment rather than a benefit to the public. In submitting this statement, section 2, subsection (5) of the bill has not been overlooked. It is to be noted, however, that this section provides only for a conditional exemption of interstate contract carriers by water who are not actually and substantially competitive with transportation by interstate common carriers. In the 1935 water-carrier bill (S. 1632, 74th Cong., 1st sess., as reported by the Senate Committee on Interstate Commerce, rept. 925, calendar day June 21, 1935), it was pointed out in the majority report (p. 2), that the bill excluded from regulation "all contract transportation not actually and substantially competitive with transportation by common carriers by water in the same trade or route." It would appear that in drafting H. R. 4862, it was intended that the words "by water in the same trade or route" should follow the words "interstate common carriers" in line 23 on page 6 and that the omission of these words was an oversight. It is submitted that these words should be included in the present bill, and that the word "by" should be substituted for "in" in the 19th line on page 6. While section 2, subsection (5) of the bill, if amended as suggested above, would be helpful to the extent that it would provide for the exclusion from the bill of transportation of property by interstate contract carriers by water which is not actually and substantially competitive with transportation by interstate common carriers by water in the same trade and route, it would be preferable to have the bill expressly exclude from its operation transportation by interstate contract carriers by water engaged exclusively in the business of transporting full cargo lots of bulk commodities, for the reason that the exemption provided for in section 2 (5) is a conditional exemption which requires determination by the Commission of the transportation to be excluded, and further provides for possible modifications of its findings. It is submitted that, by reason of the nature of their business, owners and operators of colliers are entitled to an express exemption from the operation of the bill, which could be accomplished by amending section 2 (1) (c) as suggested above. With reference to the commodities clause (sec. 12), the attention of the committee is respectfully directed to page 3 of the majority report of the Senate Committee on Interstate Commerce of the water-carrier bill of 1935, above referred to, in which it is stated that a similar commodities clause in S. 1632 was eliminated entirely "with the idea that if, after experience with the administration of the law, the Commission should find it in the public |