TO INVESTIGATE PUBLIC UTILITY CORPORATIONS EXCEPTING RAILROADS SATURDAY, JANUARY 16, 1932 HOUSE OF REPRESENTATIVES, The committee this day met, Hon. Edward W. Pou (chairman) presiding. The CHAIRMAN (10.30 a. m.). The next gentleman we have agreed to hear this morning is Mr. Rayburn, the chairman of the Committee on Interstate and Foreign Commerce. Mr. Rayburn is here for a rule on House Resolution 59. [H. Res. 59, Seventy-second Congress, first session] Resolved, That for the purpose of obtaining information necessary as a basis for legislation, the Committee on Interstate and Foreign Commerce, as a whole or by subcommittee, is authorized to investigate (1) the ownership and control, direct or indirect (through stock ownership or control or otherwise), of stock, securities, or capital interests in any public utility corporation engaged otherwise than as a carrier by railroad in the transportation of persons, or the transportation, transmission, or sale of property, energy, or intelligence, in interstate or foreign commerce, by holding companies, investment trusts, individuals, partnerships, corporations, associations, and trusts, and (2) the organization, financing, development, management, operation, and control of such holding companies, investment trusts, partnerships, corporations, associations, and trusts, with a view to determining the effect of such ownership and control on interstate and foreign commerce, and, to the extent necessary to determine the effect of such ownership and control, to make like investigation of public utility corporations so engaged. The committee shall report to the House the results of its investigation, including such recommendations for legislation as it deems advisable. For such purposes the committee, or any subcommittee thereof, is authorized to sit and act during the present Congress at such times and places in the District of Columbia or elsewhere, whether or not the House is sitting, has recessed, or has adjourned; to hold such hearings, to employ such experts, and such clerical, stenographic, and other assistants; to require the attendance of such witnesses and the production of such books, papers, and documents; to take such testimony, to have such printing and binding done, and to make such expenditures as it deems necessary. STATEMENT OF HON. SAM RAYBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS Mr. RAYBURN. I appear, Mr. Chairman, to ask the committee to report House Resolution 59. It will be remembered that this committee, in 1929, authorized the Committee on Interstate and Foreign Commerce to investigate holding companies in the railroad field. That investigation was taken up, pushed vigorously, and was completed last winter. The report has been filed and recommendations were made in that report and we have the legislation pending now that we hope to consider at an early date. In that report it was recommended that the investigation be extended beyond the railroad field and that it go into the field of public utilities. This resolution, in response to that recommendation, was introduced by myself and was taken up by me in the committee the other day, and the committee instructed me, or indorsed my coming here before the committee, to ask for the report of this resolution. We did not care to proceed in the railroad end of this without information. The holding company is a thing that has grown up in commerce and in business within the last 10 years. It has assumed enormous proportions. The Interstate Commerce Commission thought enough of it to recommend that an investigation be made and that investigation was made. The ownership of railroads through the holding company, however, is not as extensive as it is in the public-utility field. Frequently we will be called upon and there are bills pending before our committee now to regulate various types of public utilities doing business in interstate commerce. We read in the newspapers and hear from the stump that this public utility has the country by the throat, or the other public utility has the country by the throat; they are overcapitalized three or four times; they have interrelationships of ownership that are not in the public interest, and various things like that. Our committee, especially at this time, desiring to be cautious, not desiring to throw anything in the way of a recovery from the terrible times in which we stand, does not feel it would be justified, even with the urge and the very great urge that is behind this legislation, to proceed with it until we have developed all of the facts with referene to these mattersespecially as to the ownership and interrelationship between these various public utilities doing business in interstate commerce. And therefore we are asking this committee to report this resolution that we may go into this and thoroughly develop all of the facts in this field, before we legislate; because we believe, if we get this, we will have this knowledge ourselves, and as the instrument of the House of Representatives we will be in a better position to serve them by bringing them legislation that is well considered and that has in it the real gist of the thing and that does not go farther than we ought to go, but that goes as far as we ought to go in order to protect the public interest in legislation dealing with public utilities transacting business in interstate commerce. The report that was made on the holding companies in the railroad field has been filed. It was one of the most popular reports ever made. Every volume that the Government Printing Office printed has been sold, and I think that even some of the railroads who were a little fearful of that investigation, when it was over, were of the opinion that they themselves-not only the public in general, but they themselves-had been done a service. We hope to do the same thing with an investigtion of the utilities that are engaged in interstate commerce. We have before our committee now a bill that is being urged very much, and that is to apply the commodities clause act to pipe lines,, both gas and oil; that is, to divorce production from transportation. It will be remembered that about 1906 the Congress passed a law that prohibited any company that was engaged in the carrying busi ness from owning anything that it carried. It especially struck at coal. Now we are being urged to apply the same doctrine to the pipe lines in gas and to the pipe lines in oil. There are a great many people who believe there is enough information at hand to act upon it. We do not; we do not feel we have enough information at hand to act upon any of these matters growing out of complaints in the utility field. Therefore, we asked this committee to give us authority, through a subcommittee or otherwise, to make this investigation in order to find out the facts only with reference to those matters. Mr. PURNELL. Is it your idea, Mr. Rayburn, that the investigation will all be made here in Washington? Mr. RAYBURN. No, sir. It can not be. The practical end of it, Mr. Purnell, is this: If the committee itself undertook to make this investigation, we would have to divide ourselves into subcommittees; we would have to go to New York, where these books are, to Philadelphia, to Boston, to Dallas, Tex., to New Orleans, to St. Louis, to San Antonio. The last time we had this conducted under the direction of a subcommittee composed of the chairman, Mr. Mapes, and myself. None of us left town, but we sent an investigator out with his staff. A great many of the experts of the Interstate Commerce Commission were loaned to them and we did not have to pay them, and it is the cheapest investigation, I think, that has ever been made. And they went to the books of those people clothed with the authority of Congress to obtain those books if they did not open them to us themselves, and there was no kick, and we did not have to go into court in a single instance. We can not very well order those books down here to Washington, and, as many and manifold as our duties are, we can not leave here, even in subcommittees, and go to these various sources. So we want authority to send out an investigator, as we did in the investigation of the holding companies in the railroad field, under the direction of Mr. Parker, and follow it in that way. The CHAIRMAN. Approximately what did that investigation cost? Mr. RAYBURN. The investigation cost, I think, $39,000, and allow me to take just a minute of the committee's time, if I may, to say what we developed in that investigation. We developed the ownership of every railroad in the United States, its capital stock, its 30 largest stockholders, the holding companies that owned into it, the holding companies that it owned, the directors of the railroads, and, in columns in that report, every name of a man who is a director of a railroad is set down, and opposite his name is the name of every railroad in which he is a director, and on top of that a map is drawn of every railroad system in the United States. In other words, the much mooted question of who owns the railroads was developed in that investigation and we have it before us, and it is in this report that Mr. Parker holds in his hands, 1,700 pages. Mr. Cox. What length of time did it take to make that investigation? Mr. RAYBURN. I think Doctor Splawn, who was appointed by Mr. Parker, took about six months to make his examination; but in the bringing together and the assembling of the reports and getting it ready to file in our committee, it was about 11 months. Mr. Cox. Is it your thought that the Congress might reasonably hope to get this report by the next session? Mr. RAYBURN. Partially. This is a bigger field, I will say to the gentleman from Georgia, Mr. Cox, than the field known as interstate commerce by the railroads. This takes in the pipe lines, both gas and oil; the transmission of power, and everything commonly known as the utility, and every utility that does business in interstate commerce, with the exception of the railroads. And when this resolution was up in our committee, the question was raised that it was broad enough to cover railroads again, so I suggest an amendment in line 7, page 1, after the word "engaged," to make it definite that we are not going into an investigation of the railroads again. I suggest in line 7, page 1, after the word "engaged" to insert "otherwise than as a carrier by railroad." Of course, we do not intend to do that; we do not intend to go into the railroad field; but, in order to make it definite that we do not intend that, this amendment was suggested and passed upon by the legislative counsel. Mr. GREENWOOD. Do you intend to include bus lines. Mr. PURNELL. This does cover radios? Mr. RAYBURN. It might. Mr. GARRETT. It does include telegraph companies? Mr. RAYBURN. I think under this resolution we can investigate all character of communication. Mr. GARRETT. This would give you power also to go in and investigate power companies. Mr. RAYBURN. Yes, sir; any power transmitted by wire, and so forth. Mr. BANKHEAD. Let me ask you this broad question: I am in full sympathy with the purposes of your committee and I think this investigation is thoroughly justified and this resolution ought to be reported, but your committee has before it, of course, in being or in contemplation, some very important legislation with reference to these propositions that are involved in this investigation. Mr. RAYBURN. Yes, sir. Mr. BANKHEAD. They involve the whole transportation and communication facilities and utility field of the United States? Mr. RAYBURN. Yes, sir. Mr. BANKHEAD. And involve the questions of monopoly, the questions of legitimate competition, questions of unfair practices, about which we hear a great deal. Mr. RAYBURN. Yes, sir. Mr. BANKHEAD. As I understand it, in a large sense, it is the desire of your committee, in order that you may act with entire comprehension and entire justice and entire intelligence, to be fortified with the facts you want in order to formulate fair and just and legitimate legislation; is not that true? Mr. RAYBURN. Stated better than I can state it, that is true. We want to develop the facts with reference to these utilities. Mr. BANKHEAD. Because you are being pressed? Mr. RAYBURN. We are. Mr. BANKHEAD. Bills are before you and there probably will be more, in which all of these complicated questions are involved, and out of which you can find no just solution without knowing about the facts? Mr. RAYBURN. That is exactly it, Mr. O'CONNOR. What are you aiming at, generally; what do you think is the matter with all of these utilities? Mr. RAYBURN. If I knew, Mr. O'Connor, I would not ask for this investigation. Mr. O'CONNOR. You must be aiming at something. Mr. RAYBURN. We are aiming at developing the facts as to who owns, who controls these public utilities-just like we developed the facts as to who owns, who controls the railroads, and especially through holding companies. Mr. O'CONNOR. What does that knowledge serve? Mr. RAYBURN. It serves the committee in seeking to bring before the House of Representatives legislation intelligently considered. Mr. O'CONNOR. You would have to develop that a little more for me, I will say. Mr. RAYBURN. Well, I do not know just what the gentleman meant by his question. I am not aiming at punishing anybody; I am not aiming to hold anybody up to scorn; I am not intending to have an investigation that tries this case in the newspapers and in the public press. And in our investigation of the holding companies in the railroad field, under the direction of Mr. Parker (and the same man will be appointed to make this investigation, if it is made, who made that investigation), nothing was given out as to the development of that investigation until the full report was laid on the desk of the chairman of that committee, and we do not intend to go out and advertise ourselves, to advertise the committee, or to advertise the investigator as somebody who is developing a great thing that will satisfy the imagination of somebody whose imagination has probably been overactive about matters like this. But we want simply and solely to find out who owns these utilities, like we have found out who owned the railroads, so that we might develop the interrelationships in the stock ownership, their capitalization, their earnings, and so forth, and develop abuses, if there are abuses, and cure them and exonerate these people if they have not been guilty of those abuses. Mr. Cox. As I take it, you want the facts in order that you may measure your conduct, in so far as the action of the committee is concerned, as it applies to the different proposals for legislation that come to your committee? Mr. RAYBURN. We do. And allow me to say this-and I would rather say this in executive session than in open session, but I will say it in open session Mr. BANKHEAD. You can say it off of the record, if you want to. Mr. RAYBURN. No; it need not be off the record. Some of these days, following all of this talk, a rider is coming in on a bill somewhere seeking to clear up this whole situation. A great many people believe that by an amendment put on any sort of a bill, appropriation or otherwise, they can do these things. And if the committee can investigate and try to develop the facts in regard to that, we have an argument that it should not be done without complete consideration. But if we are not doing that and are not trying to develop the facts to see whether or not any sort of legislation is necessary and, if necessary, that the legislation may be intelligent, then either the House or the Senate, as the case may be, might |