Now, one question arises whether or not this assistance will not help them to further absorb their competitors?

Mr. DEMPSEY. Suppose it did, Mr. Goldsborough, what about it, if they continue to operate the same or better service and afford it at the same rate or a lower rate?

Mr. GOLDSBOROUGH. Of course there would not be any reason, except that no monopoly in the history of the world has ever done that after it became a monopoly.

Mr. DEMPSEY. Well, the railroads I think you will find through their history here since the passage of the interstate commerce act have been over rather than under controlled, and I think you will find it will control the monopolistic features, if they ever do become a monopoly, which I consider extremely doubtful.

Mr. GOLDSBOROUGH. How would you control it?

Mr. DEMPSEY. Control it by compelling equal rates, with a reasonable compensation for the service.

Mr. GOLDSBOROUGH. Who would do that?

Mr. DEMPSEY. The Interstate Commerce Commission.

Mr. GOLDSBOROUGH. Have they been doing that?

Mr. DEMPSEY. Yes; I think they have been doing it very remarkably well.

Mr. GOLDSBOROUGH. You think that the Interstate Commerce Commission has been effective and that the State commissions have been effective in controlling these monopolies, do you?

Mr. DEMPSEY. I think that the public opinion is that the Interstate Commerce Commission has been, on the whole, a very useful body. Mr. GOLDSBOROUGH. How is that?

Mr. DEMPSEY. I say I think that the general opinion and the best opinion in the United States is that the Interstate Commerce Commission has been on the whole a very useful and good body, and has accomplished the purposes of the act; I think it has accomplished more than was needed to be accomplished, myself.

Mr. GOLDSBOROUGH. Now, let us assume

Mr. DEMPSEY. You asked me as to the net earnings of the railroads, and I have just been furnished that. It was a little over a billion in 1928, a little over a billion in 1929; $885,000,000 in 1930 and $535,000,000 in 1931.

Mr. GOLDER. That is simply the fixed charges that are maturing. Mr. GOLDSBOROUGH. What percentage of this $2,000,000,000 do you anticipate will be furnished to the railroad companies?

Mr. DEMPSEY. Well, all I can say in answer to that, Congressman, is that I understand their necessities between now and the first of April are $157,000,000.

Mr. GOLDSBOROUGH. Do you anticipate that $200,000,000 will be sufficient to cover the needs of the railroads and will be all they will demand or require from this $2,000,000,000 fund?

Mr. DEMPSEY. I would not say that. Frankly, I do not know, and I suggested that I try to furnish you that information this afternoon.

Mr. GOLDER. I would like to call attention to the report of the Senate Committee on pages 3 and 4, in which they set forth the total amount of fixed charges that are maturing, including bonds, loans, and bills payable, and equipment trust obligations for the entire

95808-32- -11

year, ending 1932. That probably would be a maximum, unless the administrators of the act decide to finance improvements.

I do not know whether that answers your question, but it occurred to me that that sets forth the maximum that might be required by the railroads.

Mr. GOLDSBOROUGH. I thank you very much for the information. I did not have it, but I had not looked over this report. However, it does not cover my question, because it does not indicate whether or not the the retiring of those fixed charges will be the total requirement or demand of the railroad companies on this corporation. Mr. GOLDER. That is the exact amount to finance improvements, and I suppose that would be a question of policy. I received some letters from the president of a concern who are manufacturers of the locomotives, and he indicated that he thought it ought to go to the point of financing improvements, and I wondered whether that was not pretty far afield for the purposes for which the Act was being passed. This apparently indicates the maximum of fixed charges that will have to be met by the railroads.

Mr. DEMPSEY. Let me make this suggestion: 'I understood the Congressman from Pennsylvania to state that he had in mind the financing of improvements which had been undertaken and for which the roads were obligated, such as, for instance, the electrifying of the Pennsylvania system from Washington to New York, two-thirds of which, I should say, has been completed.

Mr. GOLDER. I call your attention to the fact that improvements have been started, and my information is, from the little investigation I have made, that the railroads have taken it upon themselves, in the absence of any money, to enter into contracts on the cost plus basis, and millions and millions of dollars have been spent by railroads to erect beautiful structures as memorials for their past presidents. The Pennsylvania in Philadelphia is spending $50,000,000 or $60,000,000 improving their property on the cost plus basis, which nobody knows anything about except the officials of the railroads. who give out the contracts, and the contractors who do the work, and the public have to pay the bills; and I think that the contracts entered into by a great many others have been corrupt, full of graft, and the people have been paying for it, and I think the railroads come to Congress very often with a very poor face, after spending $50,000,000 or $60,000,000 on one building operation, and then come in and ask for $200,000,000 from the Government to take up their bonds.

Mr. DEMPSEY. Let me answer that, so far as I can, from personal observation. The New York Central Terminal in the city of New York is one of the best paying investments, as I understand, that there is in the United States. It has absolutely developed that part of New York; Forty-second Street has become a distinct and wonderful portion of the city, and probably the most progressive part, the best-rented part of the city, and the New York Central has received a very large income and a constantly growing income, and the whole city has developed around that center. I should say that is the leading part of the city of New York to-day.

Go out to Cleveland. Cleveland is a great railroad center, and they had there what they called the "neck of the bottle." It was

almost impossible to get through that city. They have built a railroad terminal there at a cost, I understand, of $50,000,000, and that has absolutely solved the problem of congestion and speed in going through that city, and I have no question that that terminal will pay for itself many times over.

Take the city of Buffalo. We had the most tremendous congestion and we built a station there. I think they built it too far out; that is just my individual nonexpert opinion, but it is a marvel for the dispatch of business.

These results to which I referred on increased freight traffic movement from 13 to 43 miles for the freight car per hay have been accomplished, in very considerable measure, by the construction of modern terminals, with all of the vast improvements that we get in a modern terminal, and did not have until these modern terminals were constructed.

Mr. GOLDER. I am not complaining about improvements. but I do complain about the manner in which improvements are made, because, after all, it is the man who travels on the train and pays for hauling the freight that is paying for it all; and when it comes to $50,000,000 or $60,000,000 expended on the cost-plus basis and nobody checks up the cost, nobody checks up the pay rolls, and nobody checks up the amount that is paid back and forth, I think it is high time for the railroads to conserve that money and be better able to come with a clean facé.

I am in favor of the bill, but I do not think that the railroads come in with very clean hands.

The CHAIRMAN. Let us interrupt the proceedings for a moment, which I regret to do. The House is meeting, and our presence may be required on the floor, much as I dislike to interrupt the discussion here.

Mr. GOLDER. I spoke more than I should have.

The CHAIRMAN. I do not mean for you not to have all the time for want. But the House is in session, and I am wondering just what should be done. How much more time do you think you would like to use, Mr. Dempsey?

Mr. DEMPSEY. I do not think I want to use any more time, unless the committee wishes to inquire further. I have said all and a great deal more than I desired to say.

The CHAIRMAN. Does anybody desire to ask any more questions of Mr. Dempsey?

Mr. STEVENSON. I would like to direct Mr. Dempsey's attention to an error into which he fell when he said there had never been any legislation helping the railroads in the history of the Congress. I am sure he remembers the "War Finance Corporation."

Mr. DEMPSEY. Yes; I agree with you on that.

Mr. STEVENSON. And that was directly for the purpose of assisting their business, whose operations should be necessary for the general welfare.

Mr. DEMPSEY. You are entirely right.

Mr. STEVENSON. That was done, but there was a limitation put in there that there should not be more than a certain percentage of the capital of that concern loaned to any one interest.

(After informal discussion.)

Mr. MCFADDEN. I move that the committee recess until 2.30 o'clock this afternoon.

The CHAIRMAN. Without objection, it is so ordered.

(Thereupon at 12.07 o'clock p. m., the committee recessed until 2.30 o'clock this afternoon.)

AFTER RECESS

(The committee reconvened at 2.30 o'clock p. m., at the expiration of the recess.)

STATEMENT OF S. A. NEVILLE

Mr. NEVILLE. I am builder and owner

The CHAIRMAN. First, Mr. Neville, I should have introduced you. Tell who you are, give your initials, and tell us whom you represent. Mr. NEVILLE. I am builder and owner of the Meridian & Memphis and the Jackson Eastern Railway Co. and my present project is builder and owner of the Meridian and Bigbee Railway Co., extending east through Sumpter, Choctaw, and Marion County, Ala. I have caused to be invested in transportation facilities approximately $6,000,000 and the construction of over 140 miles of railroad. I am operating now under certificate of public convenience and necessity of the Interstate Commerce Commission, which embraces a project 50 miles in length. I have 30 miles of construction completed and in operation. I am unable to finance the completion of that railroad. The incompleteness of its construction and operation renders it for all practical purposes of no value. I have invested the savings of my lifetime and my life effort, even to the mortgaging of my home, to supply these transportation facilities. I am in hearty accord with the bill that is before you gentlemen, but I submit that it does not fully cover what I think the bill ought to cover.

In other words, I should like, without destroying the force or the effect of the bill so far as it goes, to suggest an amendment to the bill which has for its purpose the authorizing of the Interstate Commerce Commission to make loans for the completion of such projects as have heretofore been declared as public necessities and which, in the very nature of the situation, require their completion in order to make them effective as public instruments, and submit to the committee that this addition could be made without destroying the value or the effect of the bill in so far as it now goes and at the same time give protection to as legitimate efforts as is the case in the situations that this bill meets under the present wording.

The CHAIRMAN. Let me ask you, do you have your amendment prepared?

Mr. NEVILLE. Yes, sir.

The CHAIRMAN. You may submit that without reading it, and it will be read into the record, if it is satisfactory to you.

Mr. NEVILLE. Yes, sir.

(The amendments referred to are as follows:)

Suggested changes in S. 1 (committee print)—to provide emergency financing facilities for banks and other financial institutions, and for other purposes: After the word “section” in line 14, page 22, insert the words “except as hereinafter provided.”

After the word " commerce" in line 17, page 22, insert the following: "for corporate purposes, including funds to cover cost of new mileage where the Interstate Commerce Commission has reported under paragraph 18, section 1, of the transportation act, 1920, that such new mileage is required by the public convenience and necessity."

So that that sentence will now read:

Within the foregoing limitations of this section except as hereinafter provided the corporation may also, upon the approval of the Interstate Commerce Commission, make loans to or aid in the temporary financing of railroads engaged in interstate commerce for corporate purposes, including funds to cover cost of new mileage where the Interstate Commerce Commission has reported under paragraph 18, section 1, of the transportation act, 1920, that such new mileage is required by the public convenience and necessity, when in the opinion of the board of directors of the corporation such railroads are unable to obtain funds upon reasonable terms through banking channels or from the general public and their prospective earning power, together with the character and value of the security offered are such as to furnish adequate assurance of their ability to repay within the time fixed therefor and to meet their other obliga. tions in connection therewith.

Mr. STEVENSON. At what point in the bill do you propose to insert this amendment?

Mr. NEVILLE. On page 22. I have before me the committee print of the Senate bill No. 1.

Mr. STEVENSON.. Page 22, at what point?

Mr. NEVILLE. On line 14.

Mr. STEVENSON. That is where you want it inserted?

Mr. NEVILLE. Yes, sir.

The CHAIRMAN. Now, let me ask you how much you think you would have to have or would expect to obtain if the bill should be passed with the provision that would take care of your particular situation?

Mr. NEVILLE. Not exceeding $1,000,000.

The CHAIRMAN. You could not tell us how many similar conditions we would be asked to meet if the bill were broadened to meet your view?

Mr. NEVILLE. No, sir.

The CHAIRMAN. You could not, in the nature of things, give that information?

Mr. NEVILLE. No; I could not.

The CHAIRMAN. I have no further questions.

Mr. STEVENSON. Is that an electric or steam road?

Mr. NEVILLE. A steam road, an interstate steam road.

I would like further, Mr. Chairman, to make this point, that I think developments will occur that will render it necessary to apply a less amount than was originally contemplated in the Senate bill No. 1, which I understand is before you, for the reason that the gradual distribution of the 15 per cent rate increase is not applicable to my road at all, but it will add in large measure in excess of $100,000,000 to take care if the situation that his bill was originally intended to meet. So that I think of the situation demanding an increased amount you will find in the operation of the law that really a less amount will be required, so that anything that can be done to take care of legitimate situations will not be a burden on the bill.

Mr. STRONG. For how long would you want to borrow this money? Mr. NEVILLE. Three years with the privilege of only two years.