Mr. CASS. No; I did not think that, Mr. Chairman. I know it is common knowledge that the electric railway transportation is in just as bad, and in many cases worse, condition financially than steam railroads. I made the statement to the Senate committee that there was a segment of the electric railroad industry that was in much better financial shape than a great segment of the steam railroad industry, but I think that the conditions are relatively the same in both electric and steam rail transportation.

Mr. BUSBY. And you stated to the Senate committee there were about 200 electric railroads?

Mr. CASS. That is correct.

Mr. BUSBY. And that they probably comprise 10,000 miles altogether?

Mr. CASS. Between 9,000 and 10,000 miles.

Mr. BUSBY. That would give you, if there were 10,000 miles, an average length of all of these lines of about 50 miles.

Mr. CASS. Yes.

Mr. BUSBY. What type of interstate commerce do you construe as being included if your amendment as proposed is written into the bill?

Mr. Cass. Well, the same kind of interstate commerce that brings all railroads under the jurisdiction of the Interstate Commerce Commission.

Mr. BUSBY. For instance, you mentioned the District of Colum bia street-car lines, and one of them is supposed to be prosperous here and the other is supposed to be in straightened circumstances. What would be their eligibility under the provisions of

Mr. Cass. I do not want to be misunderstood about that. If you will read my statement carefully

Mr. BUSBY. I have only referred to the statement; but I asked you an independent question.

Mr. CASS. I want to explain it, because I do not want any misconception about it. I was asked the question as to whether the local street railways should be included in this relief, and I said that such subjects could be considered, and that perhaps a line like the Capital Traction Co. in Washington was of considerably more consequence and importance to a good many more people than a 3-mile log road in the South.

Mr. BUSBY. You are evading it in both the ways that you used to illustrate it.

Mr. CASS. I merely illustrated that, because a 3-mile log road engaged in interstate commerce was included in the bill.

Mr. BUSBY. You say a 2-mile log road in your hearing. Mr. CASS. Well, all right; I accept the amendment-2 miles. Mr. BUSBY. However, a 2-mile log road could be a factor by itself.

Mr. CASS. Well, 2-mile short-line railroads are quite numerous, that are engaged in interstate commerce. When I said log road. of course, that was used as an illustration, for the purpose of emphasis.

Mr. BUSBY. I am impressed with the proposition of your kind. and other kinds, have taken this legislation, and practically run away with it, as having been proposed primarily for them and them only. They seem to be appearing herein great numbers to

1

tell of their wishes and wants, almost to the exclusion of everybody else.

Mr. CASS. I would not think that you could consistently say that the electric railroads, that have been affirmately left out, have run away with the legislation. I doubt if that conclusion is accurate. Mr. STRONG. Would not you feel that these short lines that are of national importance-that the Government should go to their aid? Mr. CASS. You mean the electric roads?

Mr. STRONG. The electric roads.

Mr. Cass. Yes; I think they are just as important as the short steam roads.

Mr. STRONG. Do you think that the short steam roads

Mr. CASS. I think they are all of vast importance to the country. Mr. STRONG. To the whole country?

Mr. CASS. Yes; I think if you should scrap four or five hundred short steam roads in this country, it would be devastating in its effect on the commercial life of the country.

Mr. BUSBY. Is it not the purpose of the long railroad systems to scrap the short lines? They are not trying to save the short lines they own, and are scrapping them as fast as the Interstate Commerce Commission will permit them to do so.

Mr. Cass. I know some of them are being scrapped, but others are being kept together.

Mr. BUSBY. Is it not the argument that the short line is always a burden on a system?

Mr. Cass. I do not think so.

Mr. BUSBY. And the Supreme Court of the United States, of course, can keep them in, because it compels them to consider the earnings from the standpoint of knowledge of the whole system, and not from the standpoint of the earnings of the short lines? Mr. CASS. I do not understand you. I do not understand what I do not follow you.

you mean.

Mr. BUSBY. I think it is plain, if you have got a system with 2,000 miles in it, and it has a feeder line that runs out into the isolated territory 30 miles, and the main line gets the credit for the revenue from the full, entire haul, and when you, in cutting down expenses, try to scrap the depot or try to scrap the mileage, it shows against the short line, when really it is a feeder to the long line and is worth more than the big system pretends it is worth. Mr. Cass. I concur fully with you in that, sir.

Mr. BUSBY. It is my conclusion, and I would like to know yours— my conclusion is that the big railroads are not favorable toward keeping repaired and maintained these short lines.

Mr. CASS. Well, I do not think that you could generalize on it like that, Mr. Congressman. I think there are some short-line railroads that the steam railroads, the large steam railroads, if you please, want to keep open.

Mr. BUSBY. If I understand your statement in regard to the short lines which constitute the whole system

Mr. CASS. I know some independently operated short lines that are very important to the steam-railroad connections, and I am sure they would not want to take them and scrap them. I do not think that you can generalize on the value of the short-line railroads any

more than you can generalize, perhaps, on the value of some trunkline railroads.

Mr. BUSBY. Has not the automobile and truck business affected very greatly the short-line railroads?

Mr. CASS. Highway transportation has perhaps had more effect upon the short-line railroads than perhaps on the long railroads.

Mr. BUSBY. It would be a case, would it not, of requiring that they be kept going for the help of the long lines, ordinarily? Mr. CASS. No; I do not think that follows.

Mr. BUSBY. They have been hit harder than the long lines, do you say?

Mr. CASS. There may be some that could not qualify, in the opinion of the board of directors of the corporation. Of course, the discretion is lodged with the corporation to loan or not loan. What I am getting to is the admitted disqualifications in the language of the

bill.

Mr. MCFADDEN. Mr. Chairman, it seems to me that in the operations of the old War Finance Corporation is largely the knowledge to be the basis of this particular system. I recall, in the operations of the War Finance Corporation, that they saw fit, in the emergency, to advance large sums of money, running into millions of dollars, to the B. R. T., in New York City, an electrically operated system. So, if that is any precedent that needs to be established, it seems to me that would be the precedent to justify it, even to a greater extent than is stated here by the witness.

The CHAIRMAN. I do not remember the language of the original War Finance Corporation act, as compared with the language of the two bills before us, but what you say took place under that bill

Mr. GOLDSBOROUGH. Mr. Chairman, it seems to me, if you do include them, there is no burden upon those who administrate this act, to help them. Their case will stand on its own feet, and you are not imposing any strenuous burden by putting them in, whereas it might be creating a hardship to keep them out. The mere fact that you have put them in does not mean that they must take the help; it will be a question of fact in each case. If the administration determines in a certain case that the public good requires help, it will give it.

The CHAIRMAN. As far as I am concerned, I am in hearty accord with the view you express.

Mr. GOLDSBOROUGH. I do not think it is mandatory in the administration of the act to give them help; that is, in every particular case. If they are not entitled to it, they get nothing, any more than the steam railroads, if the administrators of the act

The CHAIRMAN. I can appraise fully the point the gentleman raised at the outset that, inferentially, we draw a distinction as to the needs of the two systems in the consideration of credit. It would be just about like your differentiating between a wheat farm and a cotton farm.

Mr. Cass. Mr. Chairman, may I make this suggestion: If the language of your bill read for example-where it says now that the corporation might lend to a banker, suppose it read it might lend to a blue-eyed banker engaged in a commercial bank. I suggest that

the black-eyed banker engaged in investment banking would be up here in force objecting to the provisions of the bill.

Electric railroads are engaged in interstate commerce, and those that are engaged in interstate commerce are entitled to no different treatment than steam railroads.

The CHAIRMAN. That is all, unless some gentleman wishes to ask some question.

Mr. CASS. I appreciate the time of the committee.

Mr. DISNEY. Mr. Chairman, I move, if the committee reports the bill favorably, that the word "steam" be stricken.

Mr. STRONG. Let us wait until we get final action.

The CHAIRMAN. Gentlemen, I want to introduce to the committee a former member of the House from Pennsylvania, Mr. E. J. Jones, who desires to make a brief statement on behalf of the American Short Line Railroad Association. Go ahead and tell them.

Hon. H. B. STEAGALL,

AMERICAN ELECTRIC RAILWAY ASSOCIATION,
Washington, D. C., January 6, 1932,

Chairman Committee on Banking and Currency,

House of Representatives, Capitol Building, Washington, D. C.

MY DEAR MR. CHAIRMAN: Following your suggestion to me this afternoon while on the witness stand before your committee, I beg to submit briefly the following facts and figures taken from the annual report of the Interstate Commerce Commission, covering electric railways engaged in interstate commerce for the year ended December 31, 1929:

Total miles of electric railroad engaged in interstate commerce..
Investment in road and equipment.

Number of employees..

Total taxes paid.--.

Total unmatured funded debt_-

Total number of electric railroads engaged in interstate commerce, reporting to the commission the same as steam railroads.

10, 076

$1, 132, 889, 698

47, 397 $9,887, 897 $686, 238, 100

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Any further information you or your committee desire in respect of electric railroads engaged in interstate commerce, or any individual electric railroad, will be very gladly furnished.

Yours very truly,

C. D. CASS, General Counsel.

STATEMENT OF E. J. JONES, REPRESENTING THE AMERICAN SHORT LINE RAILROAD ASSOCIATION

Mr. JONES. My name is E. J. Jones, and I am counsel for the American Short Line Railroad Association at this hearing.

I was interested in the discussion on this transportation act, because I happen to have been a member of the Interstate and Foreign Commerce Committee that drafted the act of 1920, and I may now make this suggestion: I think there is a great deal of merit in the case, in what several Members, especially the chairman, raised as to the words "steam railroads." I am not so sure in my own mind that the word "railroads " alone is going to fill this bill. That may open it up for interpretation by the courts. I think it was our custom in the drafting of the transportation act to use the words "railroad and/or railways," so as to leave no question as to the motive power that was employed.

As far as this association is concerned, we are in accord with Mr. Cass's request for the inclusion of railways or railroads that have electric power.

It is not a question of the power that is used; it is a question as to whether the company is engaged in the interstate commerce business, whether it is a steam, gasoline, electric, or what-not. They are transportation companies, engaged in the business of interstate commerce, and there should be no question about their coming under the provisions of this act.

This association, known as the American Short Line Railroad Association-the word "short" probably is a misnomer-if you men would take the time to investigate, you would find that there are approximately 700 short-line railroads in the United States, running anywhere from possibly 2 miles to hundreds of miles, and there is one short line 600 miles long. The better designation for them would be class 2 and class 3 railroads. And if your investigation would go further, you would find that they are the backbone of the transportation systems of the United States. These railroads were the only railroads that created the revolving fund under the recapture clause of the act of 1920. Thinking that I could not appear personally, I prepared a report or statement. I thought I would have to be before the Interstate Commerce Commission this afternoon. And with your permission, I will just file this report and save the time of the committee. The closing paragraph, however, I want to give in the light of the testimony given by Mr. Cass:

Several of the members of the American Short Line Railroad Association are roads electrically operated, although the principal part of their revenue is derived from the transportation of freight, and said lines, but for the fact that they are electrically operated, are in all respects similar to the steam roads; hence this association suggests that the bill be amended by striking out the word "steam" in line 14, paragraph 5, page 6, of the bill.

The American Short Line Railroad Association is an organization composed of 362 so-called short-line railroads, located in the several States of Continental United States, all of which railroads are engaged in interstate commerce and therefore come within the purpose and intent of the pending bill.

The association is in favor of the above-mentioned bill as to its purpose and intent.

The association held its last annual meeting in the city of Louisville, Ky., on October 14 and 15, 1931. That meeting was the most largely attended meeting ever held by the association and was the occasion for a most thorough discussion of the financial situation as it affects the railroads generally, and particularly the condition of the short lines represented at the convention.

It is a matter of common knowledge that among the different causes that have contributed to the crisis through which the railroads are now passing, the competition of the automobile, bus, and truck has had marked effect upon the earning power of all of the railroads, but that competition has more seriously affected the earnings of the short lines than any other class of carriers. Automobile competition is known to be the most effective where the haul is short.

At the Louisville meeting resolutions were unanimously adopted directing the attention of the President of the United States to the perilous situation of the short-line railroads in the present emergency.