I will first ask Mr. Crowley to take the stand.

STATEMENT OF KARL A. CROWLEY, SOLICITOR, POST OFFICE DEPARTMENT, WASHINGTON, D. C.

The CHAIRMAN. We have before us, Mr. Crowley, the recommendation of the Post Office Department to the President with reference to his ship subsidy message. In the message of the President it is stated that the quasi-judicial and quais-legislative duties of the present Shipping Board Bureau of the Department of Commerce should be transferred for the present to the Interstate Commerce Commission. Are you prepared to say what whose quasilegislative and quasi-judicial duties are?

Mr. CROWLEY. I am prepared only, Mr. Chairman, to state to you such facts as were developed at the recent hearings that were held by the Post Office Department. I assume the President means the quasi-judicial and quasi-legislative functions of the Shipping Board and I am not familiar enough with the Shipping Board to state just what they are.

The CHAIRMAN. Does that recommendation come from the Post Office Department as to the transfer of those quasi-judicial and quasi-legislative duties?

Mr. CROWLEY. No, sir; that comes from the President.

The CHAIRMAN. I did not know whether it was made by the Post Office Department or not.

Mr. CROWLEY. Why, the Post Office Department is not interested in the administration of these ocean-mail contracts, or any subsidy for the merchant marine. I mean by that, it is not a normal function of the Post Office Department to attempt to administer a ship subsidy. The CHAIRMAN. You are interested in building up the merchant marine of this country, are you not?

Mr. CROWLEY. They are, of course, as stated by Mr. Farley in his letter.

The CHAIRMAN. That is stated and after a very full investigation lasting for a number of days; but has the Post Office Department any suggestion to make as to how we can build up the merchant marine if we eliminate these ocean-mail contracts, or what the subsidy shall be in place of them?

Mr. CROWLEY. The Post Office Department feels that the administration of this subsidy, if it is to be continued, should be placed in the hands of some other Department that is better equipped to administer a subsidy than the Post Office Department. We have not any experts there who know the needs of commerce, or who are familiar enough with shipbuilding, the cost of maintenance and operation; and, of course, the Post Office Department, not being so equipped to properly administer a subsidy, ought not to have control of it as it has had in the past in connection with the Shipping Board. The CHAIRMAN. Well, has the Post Office Department given any consideration to what form of subsidy shall be substituted for these ocean-mail contracts?

Mr. CROWLEY. I think not; because as I stated to you, we are not familiar with the needs of commerce. These subsidies have been disguised as mail contracts and called mail contracts when, in fact, they were not mail contracts. Very few of these routes have any

value as mail routes. They were intended, of course, to establish an American merchant marine, and that the subsidies would be used to build a merchant marine as well as to provide, incidentally, an adequate postal service, and we have concerned ourselves principally there with the mail and the proper manner of handling it, and that is all we are concerned with now at this time, that is, so far as the Department itself is concerned. We feel that some other department, some other agency of the Government, that is better equipped to administer the subsidy should administer it, providing, of course, for the carrying of our mails by those lines that obtain the subsidies. The CHAIRMAN. In the report of the Post Office Department, the statement is made there were 220 vessels sold to operators by the Shipping Board that are being used in mail-contract services, the original cost of which was $516,174,249.48. Those were war-time prices, were they not, Mr. Crowley?

Mr. CROWLEY. Yes, sir; that was the original cost of the vessels, as I understand it.

The CHAIRMAN. Do not you think it would have been better, for the general information of the public, in a report of this kind going out, if it should have been made known those were war-time prices and that the ships were not being sacrificed in making a sale of those ships as they were?

Mr. CROWLEY. Well these figures state the facts.

The CHAIRMAN. But the ships were built at a time when everything was high and were really built for the purpose of carrying on the war; were they not?

Mr. CROWLEY. That is correct.

The CHAIRMAN. So that would not be a measure at all of the value of the ships in making a sale and it is rather unfair-I am not saying of the Post Office Department, but I mean as a fair proposition-to consider the value of these ships as the war-time prices; is not that true? Mr. CROWLEY. I do not know what you mean by "unfair." We have stated the facts as they appear from the records.

The CHAIRMAN. I am not criticizing the Post Office Department for stating the facts

Mr. CROWLEY. These ships cost some five-hundred-and-odd million dollars. They were kept in excellent condition and repair, according to the testimony by the Shipping Board; they were depreciated to approximately $64,000,000 on the books and they were then sold to ship concerns at about $41,000,000 and, of course, as I understand it the reason for that-there were several reasons, possibly, for the reduction in price, but the main reason was to establish our commerce and, of course, as you say, the vessels had been built at a big price and they were not worth that much; they were not worth the original cost and were depreciated almost 90 percent in order to place them in the hands of private operators.

The CHAIRMAN. You speak of that depreciation and you say they were appraised in 1923 and subsequently depreciated. Do you know what was the appraised value that was made in 1923?

Mr. CROWLEY. I think that is the figure of $64,972,000.

The CHAIRMAN. There was no possibility of selling the ships at that figure, was there?

Mr. CROWLEY. I do not know.

The CHAIRMAN. As a matter of fact, was there a possibility of selling ships at any figure, except a few of them, until the ocean-mail

contract was provided for, which was an inducement to purchasers to buy these ships?

Mr. CROWLEY. Well, I do not know about that. There were a large number of vessels that had been sold prior to the 1928 act and there were many well established trade routes and each ship-sales agreement contained a provision whereby the purchaser agreed to operate the vessel over an established trade route for a period of 5 years, and in some cases more, and provided a bond guaranteeing the performance of that service. Just what would have been done if that had not been done, I do not know.

The CHAIRMAN. Regardless of what the value of the ships may have been shown on the Shipping Board's books, the real value of the ships would only be the price at which they could be sold and, if there was nobody to purchase them at the price at which they were carried, they were not worth that much, were they?

Mr. CROWLEY. I suppose not.

The CHAIRMAN. And there were no purchasers. The reason I asked that question is because I cannot understand why $23,561,229.90 should be carried as a Government aid given to contractors when there was no available market for ships.

Mr. CROWLEY. I think the record shows there was an available market for ships.

The CHAIRMAN. Where was it?

Mr. CROWLEY. Among the very operators who bought these ships, and that they were given these liberal terms in the purchase of the ships in order to establish those routes in commerce. I think that is

shown by the records of this committee.

The CHAIRMAN. I do not know whether you examined our hearings in 1928, at the time this ocean-mail contract was provided, but the evidence we developed at that time was to the effect that they could make no sales of ships and that these routes would not buy the ships at the then figures without some provision for Government aid; and we were already paying out anywhere from thirty to, I think, forty and fifty million dollars for the maintenance of these routes that could not be sold; and the Shipping Board, as I understand, was always ready and willing to sell these ships if they could find a purchaser, but they could not find a purchaser.

Mr. CROWLEY. Really, I do not know much about the early history

of this.

The CHAIRMAN. I understand that; and I am not trying to embarrass you on that, but I am just trying to bring out the facts.

Mr. CROWLEY. I would have to confine myself to the more recent developments.

The CHAIRMAN. But those are important facts to be considered by this committee in working out a question of the merchant marine. Mr. MANSFIELD. I have heard it said that these ships, many of them, were of a type that was more or less obsolete. Can you give us any information in regard to that?

Mr. CROWLEY. Judge Mansfield, the best evidence we have about that is that these ships have a normal life of about 20 years. They were built in 1920 and 1921, for the most part, and they are slow vessels; that is, the vessels that were sold by the Shipping Board. They are mostly 10-knot ships; there are very few that will make more than 10 knots.

Since these ships were built, other nations of the world have continued too build much faster vessels and that is what we mean by "obsolete"; that, as compared to these other ships that they must sail in competition with, they are obsolete and are becoming more useless every trip.

Mr. MANSFIELD. A slow ship cannot compete very successfully with a fast ship, can it?

Mr. CROWLEY. That is what the evidence shows; the operators make that statement.

The CHAIRMAN. I am perfectly willing to agree with you on that and I do not know whether you are able to answer this question, but how in the name of Heaven will the American people ever build up an American merchant marine when every policy they advocate is being shot at all the time?

Mr. CROWLEY. Well, the American people have spent several hundred million dollars since this 1928 act was passed and I think the Postmaster General in his report shows that very little of that has gone into the upbuilding of the merchant marine. The Post Office Department is not shooting at the merchant marine. The CHAIRMAN. I do not say that you are.

Mr. CROWLEY. We have only attempted to get such facts as were necessary to comply with the President's order.

Mr. LEHLBACH. May I ask a question, Mr. Chairman.

The CHAIRMAN. Yes-and let me say, Mr. Crowley, these questions are not asked in criticism, but we are just trying to build up the facts.

Mr. LEHLBACH. We are just trying to get the facts in the record. You spoke of the sales of ships before 1928. Do you refer to all sales or more particularly to sales of ships outright, or to the sales of ships in connection with their serving a particular specified trade route?

Mr. CROWLEY. The ships I referred to were the ships that were certified to operate over the so-called mail routes. We have not attempted to investigate all the sales of ships.

Mr. LEHLBACH. How many such services were operated either by the Government itself or by the purchasers of such service routes and the ships operated on them, before 1928?

Mr. CROWLEY. You would have to get that information from the Shipping Board.

Mr. LEHLBACH. Well, they started out with almost 100 and got down, I think, at the time of the passage of the act, to something like 35. Now, how many of those 35 trade routes, which were certified to be essential for the operation of an adequate merchant marine under the American flag, were sold previous to the ocean-mail contracts to private operators?

Mr. CROWLEY. I could not give you that information offhand. Mr. LEHLBACH. Can you name any other except the United States Lines, and the American Export Line?

Mr. CROWLEY. Well, it would be more or less guesswork without having an opportunity to look up the records on it.

Mr. LEHLBACH. You know, of course, the United States Lines went broke and the Government had to take the ships back?

Mr. CROWLEY. Well that is quite a story They did get involved in financial difficulties.