the time this Act takes effect the rate or fare for any single or side trip or for any single or side return trip between any two points, or between intermediate stations, on or within any railroad system, is less than the maximum postalized rate or fare herein provided, the Interstate Commerce Commission may require the continuance of such lower rate or fare.

SEC. 6. That such fares as shall be prescribed and fixed by the Commission, under the provisions of this Act, shall not be deemed to include any services, accommodations, or facilities except the customary and usual first-class passenger coach transportation services. The Commission shall issue its order or orders for the enforcement and carrying out of the mandate herein expressed as soon as practicable after this Act takes effect and such order or orders shall be issued for a term of three years from the date or dates of its or their respective issuance and entry on the docket of the Commission, but no such order shall extend beyond midnight on the 30th day of June 1942.

SEC. 7. The Interstate Commerce Commission is also authorized to postalize fares and charges for chair, parlor, and Pullman car services and accommodations. In doing so the Commission is authorized and empowered to use the same zones as are used for first-class coach passenger service and to postalize the fares and charges for these services on a basis that will best serve the public without financial injury to the carriers.

SEC. 8. The Interstate Commerce Commission is further authorized, empowered, and directed to initiate and prosecute with all due diligence a complete, thorough, and exhaustive survey, study, analysis, and investigation of the feasibility and practicability of also postalizing express and freight railway transportation rates and charges. After such survey, study, and investigation the Commission shall report its findings and conclusions as to the desirability of postalizing freight and express rates and charges to the next general session of Congress. To accomplish the purposes of this Act the Commission is authorized to hold and conduct such public hearings at different points within the continental United States as it deems necessary in order to ascertain the facts and information it may require to make its findings.

SEC. 9. Every railroad carrier subject to the provisions of this Act shall forthwith and henceforward upon receipt of the order or orders, issued in pursuance of this Act, by its officer or agent duly authorized to accept service thereof, make effective the schedule of passenger fares therein required; and every person or corporation acting for or employed by a carrier which is affected by an order of the Commission issued and entered in pursuance of this Act, who shall knowingly violate or fail to observe any of the provisions of the said order or orders or shall knowingly interfere with or impede the proper execution thereof, shall be guilty of a misdemeanor and shall, upon conviction, be punishable by a fine of not more than $5,000; or, if a person, be imprisoned for not more than six months, or both. Each independent transaction constituting a violating of or failure to observe any provision of any order or orders issued and entered in pursuance hereof shall constitute a separate offense. The jurisdiction and the prosecution for violation of this Act or of any order by the Commission issued and entered hereunder, shall be in the district courts of the United States, or, if in the District of Columbia, in the Supreme Court of the District of Columbia, under the direction of the Attorney General.

SEC. 10. Each carrier subject to the provisions of this Act shall be indemnified by the Railroad Postalized Fare Guaranty Corporation, hereinafter provided for, for the differential between the passenger fare prescribed and fixed by the Interstate Commerce Commission as herein required and the fare for such transportation as such carrier would have received under the rate or fare last fixed and filed by such carrier with and approved by the Interstate Commerce Commission. When more than one schedule of fares shall have been filed by a carrier with, and been approved by, the Commission for any such transportation service, the Commission shall elect and specify in its order the schedule of fares to be used by the said Corporation in the computation of the differential to be paid.

SEC. 11. Nothing herein contained shall limit or restrict or be deemed to limit or restrict any powers elsewhere vested in the Interstate Commerce Commission to define standards of service or to inquire into and to modify, either on complaint or on its own motion, any fare, schedule, and tariff heretofore filed with and approved by the said Commission not inconsistent with the purposes of this Act.

SEC. 12. RAILROAD POSTALIZED FARE GUARANTY CORPORATION.-There is hereby created in the District of Columbia a corporation, to be known as the Railroad

Postalized Fare Guaranty Corporation (herein referred to as the Corporation). The members of the Interstate Commerce Commission shall be and be deemed to be the incorporators and the incorporation shall be held effective upon the enactment of this Act. The Board of Directors of the said Corporation which shall govern and direct its affairs in the exercise of the functions and powers vested in it by this Act shall consist of three members of the Interstate Commerce Commission, selected by and from the membership of the said Commission, the Secretary of the Treasury, the Attorney General, the Postmaster General, the Secretary of Commerce, the Secretary of Labor, and their respective successors in office, together with one nominee chosen by each of the following: (a) The President of the United States, (b) the Brotherhood of Railway Trainmen, (c) the Association of American Railroads, (d) the Association of Life Insurance Presidents, (e) the Savings Bank Division of the American Bankers Association, (f) the Securities and Exchange Commission, and (g) the Chairman of the Reconstruction Finance Corporation. Vacancies occurring in the Board of Directors of the said Corporation shall be filled by the interest represented by the directors whose vacancy shall have been created. SEC. 13. The Corporation shall have power to sue and be sued in any court, to adopt and use a corporate seal, to make contracts incident to the purposes of its creation, and shall have such other powers necessary and incidental to carrying out its purposes and duties. The Corporation shall have power to select, employ, and fix the compensation of its officers, employees, attorneys, accountants, economists, or agents as may be necessary for the performance of its duties under this Act. All such appointees or employees are to be selected through civil-service examinations and regulations. The Corporation shall be entitled to the free use of the United States mail for its official business in the same manner as the executive departments of the Government and shall determine its necessary expenditures under this Act and the manner in which they shall be incurred, allowed, and paid without regard to the provisions of any other law governing the expenditure of public funds.

The Board of Directors is authorized to make such bylaws, rules, and regulations not inconsistent with the provisions of this Act as may be necessary for the proper and efficient conduct of the affairs of the Corporation.

SEC. 14. The Corporation shall have a capital stock of $500,000,000, which shall be represented by stock of one class without voting privileges or powers and which shall be subscribed to and be paid for and be held by the Secretary of the Treasury for and in behalf of the United States of America. Payments for such subscription shall be subject to call in whole or in part by the Board of Directors of the Corporation and shall be made at such time or times as the Secretary of the Treasury deems advisable. The Corporation shall issue to the Secretary of the Treasury receipts for payment by him for or on account of such stock, and such receipts shall be evidence of the stock ownership by the United States. In order to enable the Secretary of the Treasury to make such payments when called, the Reconstruction Finance Corporation is hereby authorized and directed to make available to the Secretary of the Treasury the sum of $500,000,000, or so much thereof as may be necessary; and for such purpose the amount of the notes, bonds, debentures, or other obligations which the Reconstruction Finance Corporation is authorized and empowered under the Reconstruction Finance Corporation Act, section 9 thereof, as amended, to have outstanding at any one time, will be increased by such amounts as may be necessary by reason of the provisions of this Act.

SEC. 15. The Corporation shall as soon as practicable, after the issuance of any order or orders by the Interstate Commerce Commission prescribing and fixing the fares for passenger transportation on class I railroad carriers, as aforesaid, make and execute with and deliver to each such railroad carrier an agreement in writing by the terms whereof the Corporation agrees to pay to each such carrier annually, semiannually, or otherwise, as may be agreed, during the term for which the Commission has issued its order or orders as herein required, the differential between the postalized fare, as herein defined, charged, and collected by each such carrier and the fare last filed with and approved and authorized by the Interstate Commerce Commission for the carriage of each passenger whose transportation rate for carriage shall have been affected by the order or orders of the Interstate Commerce Commission issued and entered as herein prescribed: Povided, however, That the Corporation shall not be liable for and shall not pay or be required to pay such differential to each such carrier after the sum of the passenger fares collected and the differential paid or to be paid shall total a sum equal to the average annual passenger fares collected by each such carrier between the 1st day of January 1930 and the 31st day of December

1938, both dates inclusive. When the postalized fares and the differential paid or to be paid in any calendar year during the term of the agreement have reached such annual average sum, as aforesaid, the Corporation shall cease making payments of such differential and shall no longer be liable for the payment of same. The passenger revenue received by the carrier in excess of the annual average, as aforesaid, shall be accounted for by the carrier to the Corporation and, after making an allowance to the carrier of 20 cents per passenger-car-mile for each passenger-car-mile operated to serve traffic in excess of the annual average traffic, as aforesaid, shall be divided equally between the carrier and the Corporation to the extent only of the amount of the differential paid by the Corporation to the carrier. If the passenger-fare revenue of any such carrier shall be not equal to the annual average or if the Corporation part or share in any passenger revenue in excess of the annual average shall be not sufficient to repay to the Corporation the amount of the differential, which the Corporation has paid or may be required to pay, the carrier shall not be liable for the amount of the differential or any unpaid part thereof. The Corporation shall require in each such agreement the right of inspection and audit of the passenger-revenue accounts of each such carrier and each such agreement shall contain such conditions, covenants, and reservations as may be necessary for the proper and effectual carrying out of the purposes of this Act.

SEC. 16. The Corporation is further authorized and directed to retire the stock of the Corporation as rapidly as the resources will permit. Upon the retirement of such stock the reasonable value as determined by the Board of Directors shall be paid into the Treasury of the United States, and the receipts issued therefor canceled. The Board of Directors shall proceed to liquidate the Corporation when its purposes have been accomplished and shall pay any accumulated funds into the Treasury of the United States.

SEC. 17. The Commission is hereby directed to make and submit to the Congress, on or before the 10th day of February 1942, its report in respect of the continued or permanent practicability and desirability of the postalized fare, and its recommendation in respect of the application of the postalized rate to other transportation services, together with such information and data as it shall have accumulated in respect of the effect of the postalized passenger rate upon the state of the Nation.

SEC. 18. SEPARABILITY PROVISION.-If any provision of this Act or the application thereof to any carrier is held invalid, the remainder of the Act and the application of such provisions to other carriers shall not be affected thereby. SEC. 19. When used in this Act, the term "postalized" or "postalized rate" or "postalized fare" shall mean a fare or rate of fare which shall not be measured or be measurable, or be fixed, in relation to distance or miles; but which shall be uniform and alike for travel by railroad, regardless of the distance of carriage. Any section or part thereof of the Interstate Commerce Act, as amended, which is inconsistent with the provisions of this Act, is, to the extent to which it is so inconsistent, repealed for the purpose or purposes to which the provisions of this Act apply.

SEC. 20. There is hereby authorized to be appropriated, out of any money in the United States Treasury not otherwise appropriated, the sum of $100,000, or so much thereof as may be necessary, to carry out the provisions of this Act. Senator BONE. Mr. Hastings, will you please come forward?

STATEMENT OF JOHN A. HASTINGS, WASHINGTON, D. C.

Mr. HASTINGS. Mr. Chairman and Senators, my name is John A. Hastings.

Senator BONE. Mr. Hastings, I wish you would make a brief statement. You understand that other men have to read this record and are not privileged to hear what you have to say. There will be only three members of the Senate committee here.

Senator JOHNSON of Colorado. Mr. Chairman, I must go at 10:30, to attend another meeting. I should like to ask the witness one question and have him answer that before I go; and then I shall read the balance of the testimony in the record.

Senator BONE. Yes; go right ahead. I want him to summarize generally his viewpoint, of course, and to make a statement, out of the fullness of his experience, which will summarize and epitomize this proposal; because these Senators will have to pass judgment upon the matter, and must have the information before them.

Senator JOHNSON of Colorado. I should like to have Mr. Hastings answer this in his own way: Please tell us the experience regarding a passenger train going from Washington to Chicago; tell us the number of seats in that train and the total capacity of the train and the total cost of operating that train, including everything that goes into the cost of train operation-trackage, and interest on bonds, and overhead expenses of the company, and everything that could possibly be figured in the cost of the train-and then tell us how much revenue your plan will give to the railroads. Just take one train, now, from Washington to Chicago, if you please.

Mr. HASTINGS. Senator, in the first place it is absolutely impossible to calculate the total cost of a particular train movement. All that you can determine, with any degree of accuracy, is the out-ofpocket expense in connection with that.

Now, answering in another way the question that you raise, may I say this: Mr. Jones, of the Reconstruction Finance Corporation, asked me if I had taken railroad costs and broken them down and then (alongside of those costs, estimated what returns there would be under the postalized rate, to see whether or not it was practical. I told him I did not believe precise costs could be determined, but what I did do was to take the last annual statistics of the Interstate Commerce Commission, which were supplied by the railroads themselves, for the year 1937, and I took the amount that they allocated to the passenger service, and then we broke down the cost of operating a seat in a Pullman car and a seat in a coach, and we came to this rather startling figure-and these are the railroads' figures, and not mine; all we did was to break them down to the lowest common denominator: The cost of moving a seat in a coach was 0.332 centabout one-third of a cent a mile.

Senator JOHNSON of Colorado. distance?

That would be 0.332 cent on what

Mr. HASTINGS. One-third of a cent a mile for any distance you may have, to move a seat in a coach a mile; it costs about one-third of a

cent.

Senator JOHNSON of Colorado. That is the total cost?

Mr. HASTINGS. That is the full cost.

Senator JOHNSON of Colorado. Why are not the railroads absolutely prosperous.

Mr. HASTINGS. That is the cost; but the reason they are not prosperous, Senator, is that for 15 years they endeavored to get 3.6 cents for something which cost them one-third of a cent to produce. Where do you think Mr. Ford would be if he tried to get $3,600 for an automobile that cost him $332 to produce in a competitive market? Senator JOHNSON of Colorado. You say it costs one-third of a cent a mile to move a seat; so why could you not take the number of miles between Washington and Chicago and multiply that number by onethird of a cent, and multiply that by the number of seats in the train, and give me an answer to my question?

Mr. HASTINGS. We do; it is done right here in these statistics I am handing you.

Senator JOHNSON of Colorado. Then what is the cost?

Senator REED. It is about 780 miles from Washington to Chicago. Senator JOHNSON of Colorado. Well, I just want his answer.

Mr. HASTINGS. The cost of moving a seat 750 miles is $2.49; and the fare, today, from Washington to Chicago, is $19.27, and under my plan the fare would be $3.75. In each instance here, Senator, I have fixed the fare at higher than the cost of producing the service. Senator JOHNSON of Colorado. Of course you are calculating that every seat will be occupied.

Mr. HASTINGS. Oh, no, sir.

Senator BONE. What occupancy do you calculate?

Mr. HASTING. Sixty percent occupancy will prove highly profitable to the railroads.

Senator JOHNSON of Colorado. If there are three seats in the train and you figure each one of them at one-third of a cent, then the three seats would cost 1 cent, of course.

Mr. HASTINGS. That is right.

Senator JOHNSON of Colorado. So that your findings are based on the seats being occupied?

Mr. HASTINGS. No. I did not reduce it to a particular train; I took the national averages. I showed the full cost, and then I fixed a rate at higher than the cost of producing the service, so that the law of diminishing returns could never come into play.

If the trains were only occupied to 60 percent of their operating capacity, it would prove extraordinarily profitable to the railroads. Senator JOHNSON of Colorado. Would you mind giving the committee the benefit of your calculations and your method of arriving at these startling figures of one-third of a cent a mile to move a seat?

Mr. HASTINGS. Yes. This is an analysis of the passenger-car mile and passenger-seat mile costs of 1937, of all the class I railroads, of all the districts. These figures were taken from the Interstate Commerce Commission's records, and have been checked by the Interstate Commerce Commission's experts.

The total passenger-service train car-miles were 3,080,215,178; the railway operating expense assigned and apportioned to passenger and allied services, for 1937, was $796,541.559.

Senator JOHNSON of Colorado. Whose allocation is that?

Mr. HASTINGS. I understand that is done by the railroads and the Interstate Commerce Commission. Am I correct about that?

Mr. CLEVELAND. It is an abritrary distribution of expense prescribed by the Interstate Commerce Commission.

Senator JOHNSON of Colorado. I am sorry to have interrupted the witness and the committee, but I like to reduce things to an abstract form, Senator, so I can understand them. I could understand this hypothetical case I have submitted, if I could get an answer to it.

If the witness is not ready to answer my question now-and he seems not to be able to-I shall appreciate if he will leave for the record an answer to my question.

Mr. HASTINGS. Why, Senator, as I said before, it is impossible.