Senator WALCOTT. Well, it is probable that the Senate will adjourn some time to-night, or before to-morrow morning. We are now through with our regular hearings. What have you in mind, Mr. Thom?

Mr. THOM. I wanted to explain something.

Senator WALCOTT. If you have something written out it could be put in the record.

Mr. THOм. No; I have nothing written. I wanted to explain something about the working of this new railroad credit corporation and the limitations of it.

Senator WALCOTT. How long will it take you?

Mr. THOм. A very short time.

Senator WALCOTT. All right. Take your seat on the other side of the table here and go ahead and make your statement.

STATEMENT OF ALFRED P. THOM, COUNSEL FOR THE ASSOCIATION OF RAILWAY EXECUTIVES, WASHINGTON, D. C.

Mr. THOм. I shall attempt to make my statement very brief, Mr. Chairman.

As the committee knows, the Interstate Commerce Commission has recently permitted increases on specified commodities, with the expectation that the additional revenues derived from those increases shall be marshaled in such a way as to be used as far as necessary in preventing defaults.

An effort has been made by the carriers to carry out that view. They have formulated a plan for carrying it out involving loans from a corporation organized under the laws of Delaware into which these increased revenues would be paid and constitute the fund referred to.

Of course it was necessary to get pretty unanimous consent of the railroads in order to make such a plan workable, for the reason_that competing roads must do business on the same level of rates. I am glad to say that all the Class I railroads of the United States, with the exception of three of the smaller systems, has assented to that plan. And efforts are now being made to determine by those assenting whether, in their opinion, a sufficient number have assented to make the plan practically operative.

The situation about it, however, is this: Supposing that the increased rates become effective as of January 1. It will take some time after the end of January before the results in January will be known. That is estimated at 40 days. The plan requires that within 10 days after that 40 days the amount of the revenue derived from the increased rates shall be paid in to this corporation. That will mean, therefore, that before any funds are derived from these increased rates 50 days after the 1st of February must elapse before they are available.

That railroad credit corporation is confronted, therefore, with the problem of what it can do to anticipate the receipt of those revenues, and they are working on this plan. They have no power to borrow money, but it is conceived that if they give a certificate to an applicant for a loan, that when, and if revenues are derived from these increased rates they will take up a loan, if that carrier

is not then in default it may enable that carrier to get from a bank a temporary loan on that assurance. I mention this to show that the funds from that source are by no means certain to be available for some little time during the first part of this year.

Therefore I welcome the provisions which are made in this bill on page 6 as follows:

Within the foregoing limitations of this section, the corporation may also make loans to or aid in the temporary financing of steam railroads engaged in interstate commerce * * *

With the possibilities from this railroad credit corporation and that power it seems to me it ought to go a long way toward providing for this $156,000,000 that it is indicated they will mature in these first four months. But I think it is of the utmost importance to get this in effect soon, because there is no way of being assured that funds will be derived from the other source in time to take care of the situation unless you do.

This is the statement I want to make.

Senator WALCOTT. That is a very clear statement, Mr. Thom.

Just give attention for a moment to the suggestion that Mr. Harrison made on line 15, will you? See what you think of that. Mr. THOм. I would like to see that done.

Senator WALCOTT. I will read it the way he stated it. Starting with the beginning of that sentence in line 12:

Within the foregoing limitations of this section, the corporation may also make loans to or aid in the temporary financing of steam railroads engaged in interstate commerce

Now here is the change:

When such railroads are unable to obtain funds upon reasonable terms through banking channels or from the general public and the corporation will be reasonably secured, in the opinion of the board of directors

That is not a complete sentence.

Mr. THOм. In the opinion of its board of directors.

Senator WALCOTT. Yes.

Mr. THOм. That is a complete sentence.

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Senator WALCOTT. It is better to do it that way than to put when in the opinion of the board of directors of the corporation.' Mr. THOм. I should think it would be very much better to put it that way.

Moreover, it was suggested here yesterday, Mr. Chairman, that it would be desirable to have the Interstate Commerce Commission pass on these applications for loans as an aid to the corporation in determining whether or not it would make them. We see no objection to that at all. I had prepared something along that line. I see that Mr. Meyer has prepared a paper, and that seems to me to take care of it reasonably well.

Senator WALCOTT. All right.

Senator FLETCHER. Does it always mean that an increase in rates means an increase in revenues?

Mr. THOм. No, sir; it does not. But the Interstate Commerce Commission in scheduling these rates is of opinion it will in those

cases.

Senator WALCOTT. And they have estimated the possibilities at about $100,000,000, I believe.

Mr. THOм. About $100,000,000 to $125,000,000. And of that amount it is estimated that from $70,000,000 to $80,000,000 will be necessary to be loaned to the weaker roads in order to tide them over these difficult times.

Senator WALCOTT. And I understand that sum from those increased earnings will be pooled.

Mr. THOм. The whole sum will be pooled.
Senator WALCOTT. That is what I say.

Mr. THOм. And whatever remains after the necessities of the trust are satisfied, will be paid back to the roads that earn it.

Senator BROOKHART. I talked with a manufacturer from Des Moines to-day and he said that he had already started arrangements to put on trucks to carry his articles that were increased, and would take traffic away from the railroads instead of adding to them.

Mг. THOм. Yes, we hear a good deal of that. Of course we have to rely upon the managers of these roads, if traffic is being lost, to have the rates rearranged so that traffic will not be lost.

Senator WALCOTT. We are much obliged to you, Mr. Thom.
Mr. THOм. Have you gentlemen-

Senator BROOKHART. Mr. Cass is here, representing the electric railways.

Senator WALCOTT. I am sorry; I did not see you, Mr. Cass.

Mr. Cass. Mr. Chairman, it will take me but a very few minutes. Senator WAGNER. You were going to say something, Mr. Thom? Mr. THOм. I was going to ask you if you had considered giving a discretion to the President of more than the two years? One of the important carriers in the country has brought that to my attention, and feels that it would be very beneficial if, in these uncertain times, the President should have a larger discretion than to add one year as to the time in which loans may be made.

Senator WALCOTT. Yes, that was made by one or two of the witnesses. We have that under consideration.

STATEMENT OF C. D. CASS, COUNSEL FOR THE AMERICAN ELECTRIC RAILWAY ASSOCIATION

Senator WALCOTT. Will you state your official position with the electric railway association?

Mr. CASS. My name is C. D. Cass, counsel for the American Electric Railway Association, which is the national organization of electric railways, and contains the substantial part of all the electric railway mileage in the United States in its organization.

I want to call the committee's attention to the fact that this bill in its present form completely disqualifies electric railways from receiving loans directly from this corporation. The language on page 6 reads: "the temporary financing of steam railroads engaged in interstate commerce." That is an affirmative disqualification of all the electric railroad mileage in the United States.

Now there are about 40,000 miles-between 35,000 and 40,000 miles of electric railroads in this country, with a property investment of between four and one-half and five billion dollars.

Senator FLETCHER. How many of them interstate?

Mr. CASS. There are nearly 200 electric railroads that are engaged in interstate commerce and report to the Interstate Commerce Commission.

Senator FLETCHER. How much mileage?

Mr. CASS. Between 9,000 and 10,000 miles. With a capital investment of nearly a billion dollars.

Now I submit to you gentlemen that the disqualification primarily in this piece of legislation against electric railways is unwarranted and unjust. I also suggest to you that the disqualification as it is contained affirmatively in this bill may, as a legal proposition, lead through to the financial institutions and disqualify electric railways from receiving loans even from the financial institutions. That is a contingency.

I can not see any warrant at all in setting up this disqualification to start with. You provide in this bill a very broad measure of discretion in the directorate of the corporation. And then on top of that broad discretion you affirmatively disqualify our entire industry from receiving any of the benefits that are to be derived from this measure. It seems to me that it is unwarranted, unfair, unjust, and will do the industry I represent a very great amount of harm.

On the other hand I want you to also realize the fact that you do qualify affirmatively in this language the loaning of money to between 500 and 600 class 2 and class 3 steam railroads, many of them 1 and 2 and 3 miles long, many of them mill-plant facilities, if you please, and still you disqualify an electric railroad that might have 500 or 600 miles of track, engaged in interstate commerce, and handling thousands of cars a year, the same as 500 or 600 miles of steam road.

Senator WALCOTT. Mr. Cass, this applies, I think, only to steam railroads engaged in interstate commerce.

Mr. Cass. How is that, Mr. Chairman?

Senator WALCOTT. I say I think it is intended to apply to the financing of steam railroads only that are engaged in interstate

commerce.

Senator GLASS. Well, the Interstate Commerce Commission has practically decided that every railroad on the face of the globe is engaged in interstate commerce. And they have practically invaded the rights of the States along that line.

Mr. CASS. Well, the Interstate Commerce Commission issues an annual report of electric railways reporting to the commission and under its jurisdiction.

Senator WALCOTT. Is your application intended to include not only those doing an interstate commerce business, but intrastate?

Mr. CASS. Well, Senator, I do not want to take the time of the committee unduly, but I think that is a question that would merit some consideration on your part. We have, of course, in our organization a great deal of purely urban electric railway mileage. I think it may be stated as a fact that the urban mileage, for instance, in a city like Washington, is of more importance to a great many more people than a 2-mile logging road in Alabama. One you qualify under this bill and the other you do not.

Senator WAGNER. Mr. Cass, I do not think you touched the question as to whether financially you need the aid which is provided for in this legislation.

Mr. CASS. Well, I believe that we would be willing to admit without argument that the electric railway industry as a whole is probably just as seriously in need of help as the steam railroad industry as a whole. I also, however, would make the statement rather positively that there is a large segment of the electric railroads of the country that are in much better financial position than a very large segment of the steam railroad industry. We are affected, of course, by the same general conditions that affect all rail transportation. And I do submit to you that you should consider what you are doing to this great industry when you disqualify them affirmatively in this piece of legislation.

Senator FLETCHER. Would it be satisfactory to you to add after the words "steam railroads "-" and electric railroads "?

Mr. Cass. Yes; that would be satisfactory to me.

Senator FLETCHER. “Steam railroads and electric railroads engaged in interstate commerce."

Both.

Senator WALCOTT. That would eliminate about three-quarters of your roads, would it not?

Mr. CASS. It would eliminate the urban lines. It would take them all out. It would take the urban lines out of this so that they could not borrow directly from the finance corporation. And it would put the interstate electric railroad in the bill, where I think they ought to be alongside of Colonel Thom's railroads. He represents a lot of railroads besides the kind that Daniel Willard speaks for when he comes down here.

Senator WALCOTT. Are there any questions that any of the Senators would like to ask Mr. Cass?

Senator BROOKHART. These roads were included in section 210 of the transportation act?

Mr. CASS. All railroads engaged in interstate commerce were included in section 210. And may I make this further suggestion, Senator?

Senator WALCOTT. Surely.

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Mr. CASS. If you want to confine the application of this to railroads engaged in interstate commerce strike that word steam instead of adding the word "electric."

Senator FLETCHER. Yes; I think so, too.

Senator WALCOTT. Any further questions? We are very much. obliged to you, Mr. Cass.

Mr. CASS. Thank you.

Senator WALCOTT. We will have an executive committee meeting

now.

(Thereupon, at 5.40 p. m., Tuesday, December 22, 1931, the hearings were concluded, and the committee went into executive session.)