I would like to know whether or not if the Pennsylvania Railroad needs $100,000,000 or $200,000,000 to complete that undertaking it is going to be able to get the relief here through this institution or not, because it is my understanding that the banking houses that generally finance the requirements of the railroads are unable at this time to do so. I would like to have you cover that particular angle.

Mr. DEMPSEY. I will, and I will cover that in my general statement. I do not pretend, gentlemen, to be an expert, and I am talking to you with all deference and humility.

Mr. MCFADDEN. Supplementing what I have already said, it is well known that the New York Central, having need for funds, recently issued $100,000,000 of bonds, which their bankers were unable to handle.

Mr. DEMPSEY. That is true.

Mr. MCFADDEN. It is the understanding that they have advanced on their notes $20,000,000. That indicates that railroads of that type are going to require additional financing.

Mr. DEMPSEY. I have tried to point out what the disadvantages of the railroads have been in the past, and now on the question of the future-speaking, as I said, with all humility and deference.

. In the first place, I think you are going to pass legislation which will have two general purposes, as far as the railroads are concerned. First, it will unshackle them from needless and harmful regulation and, second, it will bring their competitors under reasonable regulations. Those things, in themselves, will be extremely helpful.

Mr. STEVENSON. How is it going to unshackle them from any regulation? We are not amending the interstate commerce act.

Mr. DEMPSEY. I am talking not about this bill, but in a broad way about the conditions of the railroad; and two bills of that kind are contemplated, and, I think, so far as I can learn, they will stand a very reasonable probability of being passed.

Next, you have had the railroads in this condition: For a long period we were of the mind that we must regulate the railroads, and we must keep them in competitive units; for instance, way back 20 years ago the New York Central owned the Nickel Plate and the Lake Shore, and they ran side by side. So the New York Central was compelled to sell the Nickel Plate on that theory that you must keep competition alive.

We have learend, as I said, through these large losses in passenger service, due to the competitive system, that we do not need both things we do not need regulation and competition; and the regulation was on the theory of a monopoly and, to offset the disadvantages of a monopoly, and that therefore we did not need to keep alive competition. We have found out as the result of long observation that competition has been destructive.

The hearing is going on as we are sitting here before the Interstate Commerce Commission on an application to combine all of the great railroads of the East and North into four systems. The feeling is that that will unquestionably result in an enormous saving to the railroads.

Next, there is a great disposition on the part of the railroads to offset what has been wasteful competition through the pooling of service and the discontinuing of unnecessary service, and those things will help enormously.

Next, the railroads under the stress of the present conditions have effected enormous economies. It is only a few years ago that the average run of a freight car was 13 miles per day through the open country and 1 mile per day through the congested centers. To-day the average run of a freight car is over 40 miles a day through the open country and for all through freight services one of the great economies effected within the past few years has been the routing of through freight around great centers instead of sending it through them. So that you have open-country running for all through freight for the entire distance.

Next, there is being negotiated at the present moment-I am not a party to it, so I can speak freely, though I am speaking only of newspaper information-if I were a party I would not feel free to talk the question of a reduction of 10 per cent in the wages of all the railroad employees. Already a voluntary reduction has been made on some of your Southern roads; it is absolutely in effect; it has gone into effect within the last 10 days. Personally, I feel some confidence that that reduction of wages will be in effect by the 15th of this month.

Taking that combination of things-and this is my summary: First, a reduction of regulations to the point I have named, the necessary point, not including details and not telling railroads how to operate their roads, which will unshackle them and give a freedom of action and efficiency and economy.

The CHAIRMAN. Mr. Dempsey, nobody, of course, objects to any increased earnings that the roads might be able to effectuate through their own efforts and the use of their own business machinery.

Mr. DEMPSEY. Of course not.

The CHAIRMAN. Of course, that is desirable wherever it can be properly done?

Mr. DEMPSEY. Yes.

The CHAIRMAN. But the situation with which we are dealing is whether or not the Government is going to come in and supplement the failure of the operators of the roads to accomplish such improvements in methods that will enable them to carry on in their own right; and if we are driving up to the proposition that the Government must step in and enable them to carry on when they can not do it in competition with other means of serving the public by furnishing transportation, meanwhile the inquiry arises, necessarily, as to where we are going and where it will all end.

Mr. DEMPSEY. I was going to now summarize what I said. I say that in my opinion--and I believe in the opinion of all sober-minded, conservative men-this difficulty is a temporary one, and I believe all loans that are conservatively and carefully made here will be repaid, and be repaid within a reasonable time, and that there will be no losses to the Government of the United States. I base that opinion upon two things: First, that the railroads have been reasonably prosperous throughout their history in this country, and second, that these contemplated changes, these changes which are imminent, will add very greatly to the economy of their operations and to their net returns; and I just summarize that by saying that I mean freedom of action by amending the interstate commerce law, freedom of action by permitting these mergers, these consolidations which

will effect tremendous economies in overhead and in operation, both; the reduction of comparative service to the point where waste is avoided, reduction of wages, which as I believe, from the newspaper reports, is voluntarily to be made by the employees, and the general greater efficiency which has been brought about through the stress of necessity, as illustrated by me in the runs of the freight car-and that is true of the engines as well-from 13 miles up to about, as I understand, the average now, 43 miles per day.

The CHAIRMAN. Of course, those of us who attempt to represent the public would welcome any economies in improvement on the part of the roads, so long as it does not affect the public welfare adversely. But when it comes to the question of having the Government step in to make up for the failure of the roads to get along successfully, either by furnishing funds out of their treasury or by stifling competition in the way of service satisfactory to the public, as a substitute for the service now rendered by the railroads, a different situation confronts us, and we naturally want to know where we are going, at either point, when it comes to that.

Mr. DEMPSEY. Let me say this: You say that it is a question in your mind as to extending aid to the railroads on account of the public. Now, let us see: Have we not unduly stifled freedom of action, economy, and efficiency of operation

The CHAIRMAN. If we have, I am in hearty accord with you that we should cooperate to improve that situation.

Mr. DEMPSEY. Has not that been part of the cause and a very considerable part of the cause of the present railroad situation? Have you not done it in two ways, not only through the interstate commerce act in its general operations being too stringent, but through refusing to permit these roads to effect consolidations which are economic, which would result in better service, which would result in more economic service, and which would result in service better for the public? In other words, have we not in Congress sat down and done that thing over a long period of years? Has not that in very, very large measure caused the condition which we are now facing, and should we not only remove the cause but attempt also to extend this remedy which is needed because we have refused consolidation and because we have had too stringent laws? If we have put these railroads in a position where they need help, should we not extend help, since we partly have brought about those results? The CHAIRMAN. The answer to your inquiry is manifest, but the thing that naturally occurs to us is how far shall we go with the Public Treasury to cure these difficulties, or how far shall we go in dealing with this matter of competition, which you say has sprung up of late? If it is a new method of transportation that is satisfactory to the public and can be furnished more cheaply than the railroads and railways can do it, why, we are up against an economic development with which we should attempt to deal in an economie

way.

Mr. DEMPSEY. Mr. Chairman, let me answer your last suggestion, and, before I do, let me say this to you; I am not appearing here as the representative of the railroads-do not get that in your minds. I do not represent the railroads at all.

Mr. MCFADDEN. Might I make this observation in that connection, that in this bill while there is no provision for the financing of the

railroads, so far as my knowledge goes, no railroad executive has appeared either before the Senate committee or the House committee in relation to this measure.

Mr. STEVENSON. It might be interesting at this point to have you say just who you represent.

Mr. DEMPSEY. I represent here the National Association of Owners of Railroads and Public Utility Securities (Inc.), though last evening I did not give the full name.

Mr. STEVENSON. I was not here when you first appeared.

Mr. MCFADDEN. Mr. St. Jean tells me that a representative of the Baltimore & Ohio was present before the Senate committee. But it is evident that notwithstanding this provision in the bill that permits the loaning of funds of this corporation to the railroads, that whatever the legitimate requiremens of the railroad may be, whether it be $100,000,000 or more

Mr. DEMPSEY. $156,000,000 or $157,000,000, the immediate requirements.

Mr. MCFADDEN. What Mr. Dempsey has referred to as meeting the requirements, or whether it be a billion dollars, if the funds are going to be furnished through this corporation to take care of the necessary needs of the railroads. I am impressed with the fact here now because of the point the witness has just made before the committee, that there is apparently in the immediate offing a definite plan for the coordination of the eastern trunk-line railroads-whether it is the purpose that a part of the great resources of this bill may not be used to furnish the necessary financial assistance for that consolidation, because we all know from the nature of such type of consolidations handled by the bankers there are great requirements for funds. Therefore, I think this committee should know and have the full facts as to what is in contemplation in the way of financing the railroads of the United States at this time. I think it is important that the representatives of the railroads be called before this committee and this information obtained for the Congress.

Mr. DEMPSEY. Mr. Chairman, I want to answer your last suggestion, because I have given a good deal of thought to it, and I have had some experience.

The CHAIRMAN. Let me supplement what I said, that we naturally desire to afford any temporary aid or relief that we can in this situation as representatives, but if we are dealing with a situation that is hopeless and grows out of difficulties which are bound to continue, and which are inherent in the economic situation, then we want to know where it ends.

Mr. DEMPSEY. Now, Mr. Chairman, I have answered so far as I was able, giving my general views as to the future of the railroads. I am now going to answer, with your permission, your suggestion that possibly new methods of transportation have arisen which are more economical and more convenient for the public.

Some 20 or 25 years ago a new trolley line, 65 miles in length, was being built from Lockport to Rochester, N. Y., through as rich and productive a country as there is in the world-apples, peaches, pears, quinces, and all kinds of smaller fruits and vegetables of the finest quality are raised in great abundance-the richest land and the most productive land I know of anywhere. It was a day when everyone was proclaiming the suburban line with the same enthusi

asm, Mr. Chairman, which is now evident when some people who have not considered the question adequately talk of the truck and the bus to-day. Senator Ellsworth, one of the greatest lawyers our State has produced, was the local attorney for that trolley line. He was my dear friend, and I have a great reverence for his memory. He died quite suddenly, and they came to me as attorney. So I was in on the building of that road; and if any road of that kind was to prosper it would be that road. The people talked with the same enthusiasm and looked with the same hope and aspiration to the suburban lines in those days, and compared its advantages to the disadvantages of the steam lines, in just the same way as people do the trucks and busses to-day. And now what has become of that line? Toward the end of my service the president of the company said, "Don't you want to take one of our $1,000 bonds?" I said, "Yes." I could afford to whether it ever paid me anything or not. I paid $900 for that bond. In about two years they made an assessment of 25 per cent, so I paid $250, and that cost me $1,125. Well, along in about three or four years more they took up the bonds and substituted $500 preferred and $750 common stock. They never paid a cent on the common stock; they paid on the preferred for a few years. Within six months that trolley has been scrapped, the rails have been torn up, and the road absolutely abandoned.

That is the history of suburban lines. Now, let me say that I fear that you may see just the same history in respect of your busses and your trucks.

The CHAIRMAN. Let me answer you there for a moment, because I am not suggesting anything, I am only making inquiries: Let me call attention to this, if that is true, if that is what is going to happen, there would not be any necessity for this legislation.

Mr. DEMPSEY. Oh, we are talking about the present. It may be that I am going to have a half million dollars in cash in six months from to-day, though to-day I may not have enough money to buy a sandwich; and that is the condition of your railroads. It is a temporary difficulty as I stated.

I just want to finish

The CHAIRMAN. I did not understand that you referred to these new forms of competition of the roads as temporary difficulty; I thought you said that would require legislation to deal with that?

Mr. DEMPSEY. I said that in reply, Mr. Chairman, to your suggestion, that it might be that the public was securing more economical and more convenient service through the truck and the bus than through the railroads, so that the railroads' future might be hopeless. I am trying to answer that question, and I had gotten about halfway through it, and I just want to finish.

Mr. MCFADDEN. May I interrupt you?

Mr. DEMPSEY. Yes.

Mr. MCFADDEN. On what do you base your statement of the temporary situation?

Mr. DEMPSEY. The railroad situation?

Mr. MCFADDEN. Yes.

Mr. DEMPSEY. I think on the whole all of the things I have said: First, there is a shortage of freight, incident to a depression. The CHAIRMAN. That is unquestionably true.