WIFY There is no question about that, sir. STATE MAN A Government representative on all of the boards, at there ought to be a close check on all of their expenditures attorized Government agents? wry. I do not know about membership on the board of best their accounts ought to be audited systematically and HARMAN. Do not you think it would be some protection, to vera ent, even, if the Government were permitted to have a er on the board of directors? CROWLEY. Oh, undoubtedly so. BAIKMAN. Probably you would not be qualified to speak, but it true, or do you know whether it is true, that in the case of theen Mary practically all of the money has been put up by the ent that it is practically Government-owned and that the vertinent is represented in all of the management of that concern? owify I do not krow, sir. CHAIRMAN. I think it may safely be stated that is the fact, • Government is putting in every dollar there, and we had one before this committee a few days ago, at another hearing, who who is very well posted on the merchant marine, Mr Duffy, Word-Telegram, a Scripps-Howard paper, and he said that with st vast expenditure by the British Government on the Queen the Queen Mary would carry about 90 percent of her passengers re American citizens, and the United States would pay the bill Mr CLOWIFY. Well, that company is controlled by the British ment, is it not? ~CHAIRMAN I think it is. Mr LEHUBACH. Oh, no, it is not controlled by it at all. CHAIRMAN. I should say that this ship was controlled. Mr CUKINI think that is true; I think the records show the ship ... aufhost entirely by Government money. M: LEHE BACH. That is practically the case with every Cunard M CUKIN. They stopped building here and then the Italian and in s. ips came in, and then the Government came in again and hesh Government completed the ship. That is the popular - CHAIRMAN. I wanted to ask you, Mr. Crowley, with reference vtement on page 9 that the mail pay after June 30, 1934, in of American poundage rates, was $103,723,247 53 and really, 2 to tias report, that appears as a payment on the part of the sent for carrying the mail in excess of what would have been fcarried at the poundage rates, as a matter of fact, did not the riment get a number of other benefits from that payment, than arruge of mail of the United States? Coway. Well undoubtedly they got our commerce carried, was carried, by these vessels. Ï- CHARMAN Did not it get these items: that these ships under st are required to sail on schedules specified, carrying whatever mail was offered; second, that the ships would have to be Americanowned and American-built; third, that they would be maintained in the designated service for the life of the contract, for 10 years, without deviation therefrom; fourth, that the contractor should build in American yards the tonnage as required by the Postmaster General; that these ships should be built on plans and specifications approved by the Navy Department, for use as naval auxiliaries in time of war; that their crews should be two-thirds American; that they should carry mail messages for the Post Office Department without charge; that they should be subject to be taken over by the President in the event of national emergency, or in time of war, and that the contractor upon such a taking should be compensated only under the rule of limited liability, and are not those considerations that passed to the Government for its $103,000,000 and odd that was paid out, as well as the carrying of the mails? Mr. CROWLEY. Yes; I assume that is all true. The CHAIRMAN. So that you would not measure the mail aid as being aid only for the carrying of mail over and above the poundage rates? Mr. CROWLEY. No; indeed. The CHAIRMAN. That is the impression that has gotten around through the country, frequently when the claim is made that the Government carried the mail, a few packages of mail, for so many thousands of dollars that the Government was getting only the carrying of the mail; whereas the Government is getting all of these other benefits which it had never gotten before. Mr. CROWLEY. The Government is supposed to get all of those benefits you enumerated there; I do not know that they have in every instance. The CHAIRMAN. In some cases of replacement, I think you are right, that they are not; but has not that been partly due to the depression which has existed for so many years in shipping? Mr. CROWLEY. Well, I do not know what the cause of it has been, but these companies have been able, for the most part, to pay dividends right on up through the depression, and high salaries and other expenses, and they have not built any ships. The CHAIRMAN. There is no doubt about it, there are many things. there they have left undone that ought to have been done; there is no question about that. We want to find out now how to build a merchant marine and to make them do those things that they are required to do. In that same statement there is a differential in interest rates that is charged up as Government aid, of $34,855,511.68 and in working out that differential it is between the interest that was paid and a 5-percent interest. We lend money to the farmers at less than 5 percent, do we not? Mr. CROWLEY. That was just put in there as a comparison between what would be an ordinary commercial rate and what were the rates actually charged. And some of these companies have been paying as low as one-eighth of 1 percent interest. Mr. LEHLBACH. But that was under the old law and has since been corrected. The CHAIRMAN. Yes, and it was afterwards corrected to 3% percent; that was corrected as soon as it was brought to the attention of this and it was never intended, and the Shipping Board should permitted or the Government should never have percontracts to be made at one-eighth of 1 percent. TALBACH No. -HAIRMAN They knew it was not the intention of Congress e of the passing of the bill that that low rate of interest ' ternitted TUGBACH. No. CHAKMAN. It is not your contention, however, that the rate test that would be charged for a construction loan should go 5 percent, is it? CROWLEY Not necessarily; that is just put in there as a basis We could have used 34 percent and have gotten a r figure or 4 percent. Lovic When the Leviathan was taken over by the United apting Lanes, I understand the contract read that she was --i to minke 13 runs across the ocean during the year and she es; a certain mail subsidy for it. But she only ran a few times, I understand they lost about $60,000 to $80,000 every time d ran one way or the other. What happened to the mail • there? W11 The Leviathan never was a mail-contract ship. sastaps of that company were the Manhattan and the WashingThe Roosevelt and the Harding I think were on the same line. WAIKMAN. Now in this report and this is one reason we si to get your information and advice if we could--- the recomins made and I think very properly by the Post Office ent that we should pay a subsidy, but the statement is made ted changes must be made in the administration of the subI wanted to find out if you could tell us what the decided «Loud be? - CLOWIFY I do not think, Mr. Chairman, I could go beyond e President has said here, that there should be an entire gation of the machinery for the administration of the subsidy. it has been, of course, there has been no pretense that the law These contracts were not awarded here as a result of ve bidding: they were awarded as a result of conferences the table and they were awarded without any investigation as tests of commerce or even the needs of the Postal Service. are just awarded helter skelter by post-office clerks, for the .. who would certify, prepare the certification papers to the Beard, that it was desired to establish a postal route, a mail ever such-and-such territory. HALEMAN Was the Shipping Board only to certify that it ential route" HOWLEY The Post Office was to certify it was an essential An essential mail route, that is what it was to certify. d certify all those routes were essential mail routes, but they -- routes that would carry one letter and, while carrying one Dey would not be carrying that except for a ruling of the er General requiring them to carry some mail in one case nt to the Court of Claims, the American West African, I Mr. LEHLBACH. Did you say the Shipping Board was to certify that it was an essential mail route? Mr. CROWLEY. No, the Post Office Department was to certify it was an essential mail route. The Shipping Board's duty was to certify to the Postmaster General the kind and type of vessels and the frequency of service, and so forth-the kind and type of vessels that should be operated over the route. Mr. LEHLBACH. What mail contract was awarded by a post-office clerk without any consideration and without any examination of the facts as to the necessity of the trade route whether it was being operated, what foreign competition there was and in what manner it would benefit American shipping and the American shippers? Mr. CROWLEY. There is no record of any investigation of any kind or character showing that anybody investigated the necessity of these routes as mail routes. Mr. LEHLBACH. Do you know of any contract covering a mail route that did not include one of the 31 essential routes that the Government was operating previous to the 1928 act? Mr. CROWLEY. I do not know what the Government was operating, but I know the system followed was for an operator who desired to get a contract, he would come to the Post Office Department, he would get the Post Office Department to certify this as an essential mail route to the Shipping Board, and the Shipping Board would then immediately certify back to the Post Office Department the kind and class of vessels that should be employed on that route and in each case they happened to fit the man who was then already operating over the route. I think our letter here states fully anything I could possibly say on the subject, and that was the purpose of it. Mr. LEHLBACH. Well these mail contracts were given to operators of Government routes in order to take them over and operate them privately, and their necessity, their cost, the nature of the ships that were on them, the kind of ships desired, their value, and so forth, had been meticulously investigated over many years by the Shipping Board and by other agencies of the Government during the operation of these Government routes, and I would like to know a single example of a mail contract that was awarded under the 1928 act that was awarded haphazard, without knowledge of the facts and which has been shown to be unnecessary. Mr. CROWLEY. I do not know what routes the Shipping Board was operating before this act was passed. Mr. LEHLBACH. But you are testifying here to facts, alleged facts, that these contracts were awarded in a haphazard fashion by post office clerks without anybody knowing the facts and making any investigation, or having any knowledge of the circumstances of the situation. Mr. IGOE. His testimony is limited to the Post Office Department, and he said he did not know what the Shipping Board was doing. Mr. CROWLEY. I have said that several times, and I repeat when these contracts when the application for a mail contract came to the Post Office Department, the ocean-mail contracts have been administered by people of the Post Office Department who had no eige, never have had, of the needs of commerce or whether or e trade route was essential, or whether it was not essential; ave had no knowledge as to how many sailings should be made ately care for our commerce, and the contracts have been est in that manner. MLSHI BACH. Oh, that is true enough V: CROWITY Now the Shipping Board, of course, would consider ie Est Oa ce Department was primarily responsible for the adminprst of these contracts and its responsibility under this law was ited to a statement as to the kind and classification of the at should be used V LEBACH As I understand, you are simply testifying, as far The Post Othce Department is concerned, it was made to assume the ****","lity without having an adequate knowledge and adequate et on the matter? (YOWIEY I will say this to you M LEHI BACH I understood that you said by the Governmentagency of the Government, that the contracts were made .: knowledge, and so forth. CROWIFY I can make that statement-- Lantrach We are talking at cross purposes, I think. He says he is willing to make that statement to you WIFY I can make that statement to you by hearsay If sx whoever is in charge of trafle over in the Cominerce they will tell you there was no investigation made to • the trade necessity for these routes at the time the conwere awarded I thrk that is true KOVICH. Who was Secretary of Commerce at that time? LEHT BACH. Well the Secretary of Commerce when the act h was Herbert Hoover CROWLEY He was Secretary of Commerce when the act was CULKIN Of course you recognize, Mr. Witness, that in order at me ships on the sea, this fiction of a subsidy for the nominal of mail was necessary, do you not? Mr COWLEY I am sure it was M» CULKIN. And that was the broad policy, was it not? Vir (ROWLEY. Yes; but the act provided for the awarding of contrets after competitive bidding and they were not awarded that way; it provided that the Post Office Department should administer ly and it never had any business administering the subsidy. ever has had an organization that could efficiently do it. It is not areas at all and it ought to be stopped. CHAIRMAN. To clear up the matter about the subsidy, was at the Shipping Board by the express mandate of the law required to determine and to certify to the Postmaster General, the type, size, speed, and other characteristics of the vessel which should be emved on each of such routes; the frequency and regularity of their ... and all other facts which bear upon the capacity of the is to meet the requirements of the service stated by the Postmaster General, and that the Board, in making its determination, 130006-35 |