cut a melon and distribute the money among their stockholders instead of taking up the public note, and then go on and charge the public on this debt as though it had never been paid.

That is the same trouble in the general water power act. It says after 20 years we may have an amortization fund, but if you continually build these charges you are building higher cost factors all the time. It is one way of exploiting the public deliberately and willfully.

Mr. HAYDEN. Are you sure about that provision of the water power act?

Mr. SILVER. It is risky to talk from recollection, but my recollection is that after 20 years you may charge for one. Of course, if they did charge an amount sufficient to amortize every 20 years there would be a melon cut because there would be no requirement of distributing it otherwise.

Mr. HAYDEN. It seems to me it would be within the power of the Federal Government, in issuing a license, to require that after the initial stages of development an amortization fund shall be established. The Federal Power Commission could follow up the bookkeeping of the power company and see that the money was used to retire its bonds. It is possible to do that, is it not?

Mr. SILVER. The reports of operating companies show it has not been the practice and the public has had that unhappy relation to it. It has been used to exploit it.

Mr. HAYDEN. Twenty years has not run against any power company as yet?

Mr. SILVER. Not under the general dam act, no; because that is not yet 20 years old.

Mr. RAKER. What is the Stetson plan after 50 years?

Mr. HAYDEN. After 50 years has expired the Government would have the right to take over his dam under the terms of the Federal water power act.

Mr. RAKER. And after another 50 years?

Mr. HAYDEN. The same condition would prevail.

Mr. RAKER. No; Stetson quits.

Mr. HAYDEN. Like Henry Ford, he would long have been gone to his reward.

Mr. RAKER. That is all right, but his successors would not. The Government then without any payments would be entitled to take over the whole project without any cost at all.

Mr. HAYDEN. I have not examined that detail of the Stetson offer. Mr. SWING. He means under the Federal power act.

Mr. RAKER. I mean the Stetson proposition.

Mr. SWING. His proposition is under the water power act, supplemented.

Mr. HAYDEN. I would think that no one would agree to a 100 per cent amortization and at the end of 100 years. It would have to be cared for gradually. If the Stetson interests carried on a proper amortization plan they would have all their money back.

Mr. RAKER. Mr. Stetson is here. What is it after 100 years? Mr. STETSON. I think Mr. Clark can answer that better than I. Mr. RAKER. You have 50 years, and if the Government does not take it over, another 50.

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Mr. CLARK. All but 25 per cent of the original investment would be amortized over the second period of 50 years.

Mr. RAKER. So you would be paid back all the money you invested?

Mr. CLARK. Seventy-five per cent in the first period of 50 years.
At the end of the second period 100 per cent would be paid back.
Mr. RAKER. But at 100 years the Government would take the
project over.

Mr. CLARK. The entire project.

Mr. RAKER. Without any cost?

Mr. CLARK. Without any cost.

Mr. SILVER. Then they would not take it under the general dam act by appraisal, etc.?

Mr. RAKER. No.

Mr. SWING. That is your individual proposal. You do not say that is the Federal water power act?

Mr. CLARK. No; that is the proposal we made.

Mr. SILVER. Keep in mind this question of amortization from the start and whether additional charge is justified on the cost of the original investment. A study of the reports of the power companies shows that from 70 to 80 per cent of the cost of electricity where produced can be saved by money rates of interest and the amortization fund. In other words, when the amortization is completed, if you use a fair basis, why, from 70 to 80 per cent of the cost has been eliminated instead of being carried on, but if the amortization fund is collected and not used to retire the indebtedness you have not saved anything.

Now, if you use the money as proposed in the Ford tender at a 4 per cent rate, you can not only pay the amortization fund and yet cut the cost of electricity over the person who pays 8 or 10 per cent, or such a matter, which is often paid by hydroelectric companies. If the difference of cost was been between 5 and 10 or 4 and 8-I do not care what the illustration is--would be east of the intermountain section reducing from $30 to $40 per horsepower year to $16 or $17 per horsepower year, so your amortization is not a burden to the present generation if you use the right basis at the start.

Mr. HAYDEN. Does no that depend on the rate of amortization? Mr. SILVER. The rate of interest and the rate of amortization, the two together. But if you take public moneys at 4 per cent instead of private money at 8 per cent, you have gotten one of the greatest items of economy.

Mr. RAKER. In construction of this kind you would amortize it in 50 years; you would have to figure a rate of interest, whether you put it at 4 or 5 per cent, paying that during 50 years, paying upkeep and maintenance, and paying back the original sum in 50 years?

Mr. SILVER. Yes; if of a temporary nature, but if of a permanent one why not for a longer time with ensuing economies.

Mr. RAKER. So that at the end of 50 years you would be able to readjust the matter, and the public from that time on would then have to pay enough for the maintenance and upkeep and expenses? Mr. SILVER. Yes, sir.

Mr. RAKER. And be able to get power without amortization at all? Mr. SILVER. Yes.

Mr. RAKER. Then it is paid for?

Mr. SILVER. Yes.

Mr. RAKER. And it would be charged with a sufficient amount of money to maintain it and keep it, deterioration, etc.?

Mr. SILVER. After the amortization is complete you ought to get the power on the cost of maintenance, operation, and depreciation, etc.!

Mr. RAKER. So that would be a benefit as against the other?
Mr. SILVER. Yes.

Mr. HAYDEN. Under the reclamation law-and I am sure that every member of this committee is a very ardent advocate of that law--the Federal Government furnishes the initial capital to finance a reclamation project. I can perhaps best illustrate what I have to say with the one with which I am most familiar-the Salt River project in Arizona. There the Federal Government has advanced something over $10,000,000 to build a great reservoir and canal system. By the investment of that $10,000,000 the Federal Government has created about $100,000,000 in new national wealth. Mr. SILVER. Yes.

Mr. HAYDEN. The reclamation act requires the payment of no interest. I doubt whether it would be possible in these times, when the Government has to borrow so much money, to again do that, and interest would probably be required to be paid on the Colorado River development. Nevertheless, as you have pointed out, money could be borrowed by the Federal Government at a less rate than by a private enterprise, and thereby obtain a great advantage in the very beginning.

Mr. SILVER. Correct.

Mr. HAYDEN. The reclamation act does not contemplate that the Federal Government will continually remain in the business of storing and distributing water. From the very inception of every project there is an organization of farmers under it who are to benefit by the project. When the project is completed it is contemplated by the reclamation law that it will be turned over to the water users to be operated and maintained by them. Under the Salt River project the water users have made a contract for the repayment of the construction cost and they will pay the money back to the Government. When the final payment is made at the end of 20 years the capital invested by the Government in the project will be completely wiped out. The water users will have no interest charge to nieet from then on. The title of the property will remain in the United States, but its actual management and control remain with the farmers.

Mr. SILVER. Yes.

Mr. HAYDEN. It has occurred to me with respect to the Colorado River development, why could not the same plan be followed in the entire lower basin. Why could there not be created an organization of the consumers of water and the consumers of power, into whose hands the operation and management might ultimately fall just as the Salt River reclamation project has passed into the control of the farmers under it?

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Mr. SILVER. That would be all right and should come to pass in order that we may always protect ourselves in operations.

Mr. HAYDEN. Is there anything fundamentally wrong with the idea?

Mr. SILVER. No, sir; on the contrary it is fundamentally sound. Mr. RAKER. Still you would include in this project from now on new projects, to be fair with all the people, and it ought to pay for the advancement of the money, the use of it, a reasonable and fair rate of interest as a business proposition, ought it not?

Mr. SILVER. I spent days arguing with Mr. Ford when the Ford tender was under consideration, discussing the question whether that would be industrial money, which means credit without interest, or whether bonds paying interest, which money goes to the Government, and my contention all the time was, and is yet, that-the rate of interest commensurate with what the Government pays should be returned as well as the principal, and that was so stated in the Ford tender, we not only returned the principal, but do pay interest at 4 per cent, so it returns both interest and principal.

Mr. RAKER. So when that project is completed you get the interest back, you use the money, the people have not lost a cent, and you can take the money and put it in another project.

Mr. SILVER. The people can well afford to pay the interest when they get the benefits of this. Just going a step farther in addition to what I have said about the irrigation purposes, that is, the water to wet the land and for domestic purposes, why, if you make cheaper electricity for all sorts of industrial purposes you make a less cost factor of the thing that industry produces. In other words, some engineers figure that cheaper electric power, as proposed at this point at Muscle Shoals will produce steel for around half the cost of coke oven methods. If you can produce your steel for less. fabricated into binders or horse rakes or cookstoves, and all the other things we use, as well as fabricate our wool and cotton into cloth, every one of those things is bringing a benefit to the user; consequently, it is of vital importance to start at the right place, start on an economical basis, start on a basis that does not permit of building on the cost factors, but reduces by amortization the capital and maintenance at a low cost ll the way down the line. So if you have the benefits that accrue by giving the public these less cost factors, the interest is a minor charge and they can well afford to pay it.

Mr. SWING. Just one question with reference to the proposal that we might turn the Boulder dam over to a private concern like the Edison Co.

Mr. SILVER. I did not understand you to say the dam, but the industry that would be run from the dam.

Mr. SWING. I am going several questions back.
Mr. SILVER. I beg your pardon.

Mr. SWING. The proposal to turn the Boulder dam over to a private concern, like the Edison Co.. would only be following the example of turning Muscle Shoals over to Henry Ford. May I ask whether or not a more accurate parallel would be that placing Boulder dam with the Edison Co. would have been like placing Muscle Shoals with the Alabama Power Co. to-day, which would be to perpetuate a monopoly in each instance, but to do what was done

with Muscle Shoals and to do what we propose here is to break a monopoly in each section of the country.

Mr. SILVER. May I go back there

Mr. LEATHERWOOD. In answering Mr. Swing's question, I would like to have you say why Mr. Ford does not get a monopoly of Muscle Shoals if he gets it under the same plan that has passed the House.

Mr. SILVER. To start with, there was no thought in anything I said, or intended to say, that you would turn the dam over to anybody, because it must essentially under this plan remain the property of the people, the Government property, the dam itself. The thought was, and what I had in mind in discussing it was that private industry might be permitted to use by lease the water or power from the dam. but not turn the dam over. I would not care if we took Boulder Canyon as an illustration and the Government put in that great project, developed it; how many private persons might set up factories around and consume power from it?

That is altogether in line with our thought, but that is not turning over title to the dam to anybody to control or to use; but with the very purpose of the Government putting the money in is not only to have cheap money, but to at all times control the source of the power so the public can be protected in the enjoyment of the service. from it. If you turn that dam over as is done under the general dam act the public specifically does not have any protection nor are they guaranteed any service. The owners and operators of that dam and the industry can exploit to whatever extent their ingenuity and greed will permit them, not in conflict with any laws that may exist, and as the consumer may be willing to be imposed upon, they can go and do go the limit often.

All hydroelectric companies are not bad. I do not say that; and all people in them are not bad. But the corporation is a moneymaking corporation and its job is to make for the stockholders what money it can, and they exploit the people in so doing in all too many

cases.

With reference to Mr. Leatherwood's question as to why Mr. Ford does not get a monopoly of Muscle Shoals under the plan that has passed the House: first, Mr. Ford does not get a monopoly of power, because there is a large amount of developed and undeveloped power in that section with which he must compete. He does not get a monopoly of fertilizer manufacture, because he will compete with nitrate of soda and with ammonium sulphate, which is exactly what the farmers desire; and if he should choose to manufacture aluminum he will not have a monopoly but will be in competition with a present monopoly-the American Aluminum Co.

Possibly the thought in Mr. Leatherwood's mind is that we have no justification to turn over all this power to Mr. Ford, and that is exactly what we do not do, for Mr. Ford guarantees under his proposal to use the continuous primary power developed by the two dams and the steam plants in the manufacture of fertilizer, because it will require this much continuous power to manufacture the amount of fertilizer that he agrees to produce. Consequently the continuous power which is developed by the activity of the Government is pledged to the service of the public, to be used in the manufacture