of tariffs results in much uncertainty among buyers and sellers, and tends to prevent uniform and satisfactory application of the reduced rates for account of all whose necessities in time of great emergency are equal. Opportunities for the exercise of favoritism are greater than if clear and unambiguous tariffs are filed specifying the conditions upon which reduced rates are available.

We recommend that the provisions of section 22 (1) having to do with the establishment of reduced rates for interstate transportation with the object of providing relief in the case of calamitous visitations or disaster be so amended as to provide that carriers subject to the act shall not be deemed to have violated that act with reference to undue prejudice or preference or unjust discrimination by reason of confining the application of such rates to those designated by authorized agents of the United States or of any State as in distress and in need of relief, and provided such rates be made only after the publication and filing of tariffs specifying the areas to or from which such rates apply and the period during which they are to remain in effect, and clearly defining the classes of persons entitled thereto.

PASSENGER FARES

In previous reports we referred to the almost constant decline since 1923 in the number of passengers carried by and in the passenger revenues of the railroads, and to the steady increase in the number of passengers carried by other agencies of transportation. We mentioned the experimental, reduced fares which became effective December 1, 1933, and have since been maintained, of 1.5 cents per passenger-mile in coaches and 3 cents, one way, in sleeping and parlor cars in the South, and of 2 cents in coaches and 3 cents, one way, in sleeping and parlor cars in the West; and to the fact that the eastern carriers were still maintaining their basic fares at 3.6 cents in all types of equipment, plus a Pullman surcharge equivalent to about 0.5 cent per mile. We said that we had instituted an investigation, entitled Docket No. 26550, Passenger Fares and Surcharges, into the lawfulness of the passenger fares and Pullman surcharges maintained on all common carriers by railroad subject to our jurisdiction, and that at the time of our last report that proceeding stood submitted and a decision might be expected shortly.

On February 28, 1936, the Commission adopted a report and order in Docket No. 26550, in which a maximum fare basis of 2 cents in coaches and 3 cents in sleeping and parlor cars, the Pullman surcharge being eliminated, was fixed for general application on all railroads subject to our jurisdiction, with certain unimportant exceptions. That fare basis became effective in the eastern district on June 1, 1936. Generally speaking, the experimental fares above referred to on the

southern and western carriers were not disturbed by the prescribed basis, and those fares continue in effect. Our action in this respect has brought about greater uniformity in the passenger fares throughout the country, the basic fares on Pullman traffic now being the same in all districts, and on coach traffic the same in the East and West but 0.5 cent per passenger-mile lower in the South.

The traffic and revenue results from the reduced fares thus far have been gratifying. During the first 3 months, June to August, inclusive, under the reduced fares in the eastern district the percentage increase over the same period of 1935 has been 31.8 in number of passengers carried, 16.2 in gross passenger revenue, and 37.6 in passenger-miles.

RAILWAY PASSES

By order of November 13, 1935, we required the large railways and the Pullman Co. to make quarterly reports during the year 1936 concerning the number of free passes and free tickets issued, and we have published a summary of the returns for the first quarter, which probably will be found to cover over nine-tenths of the entire year's issue. The summary shows that 2,218,261 annual or term passes, and 856,325 trip passes were issued for use in 1936, or a total of 3,074,586, of which 95.7 percent were issued to carrier employees or their families. Per $1,000 of operating revenues, some railways issued twice as many passes as others. Carriers interchange passes with each other. The issuing carrier's employees, families, and dependents received 2,070,827, and those of other carriers 871,267. Livestock caretakers received 22,431 passes; contractors, 14,164; employees of Federal, State, and municipal governments, 15,501; the clergy, educators, etc.. 24,779; and directors, local counsel, local surgeons, and all others, 55,617. The total for all persons other than the issuing carrier's own employees, families, and dependents, aggregated more than a million passes. Inasmuch as the information was not kept by the carriers, it was not practicable to ascertain or report the value of the transportation represented by such passes in the aggregate. It seemed to us appropriate to investigate further the cost to the carrier of granting free transportation to other than the issuing carrier's own employees and by order of September 29, 1936, we have required the class I railways for the year 1937 to report the number of persons carried on such passes and what the value of such free service would be at the average fare per mile paid by revenue passengers.

COOPERATION OF FEDERAL AND STATE COMMISSIONS

Since our last report we have cooperated with State commissions in seven proceedings involving interstate-intrastate rate relations. Of these, five were complaints filed with us in respect of rates in

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effect, one was an investigation and suspension proceeding arising out of orders issued by us and by State commissions suspending the effective dates of rates proposed by carriers, and one was in connection with an application by carriers seeking relief from the longand-short-haul provision of section 4 of the Interstate Commerce Act. In these cases we had the cooperation of six different State commissions. We received cooperation from the State commissions in the further hearings held in Ex Parte No. 115, Increases in Freight Rates and Charges, 1934, and in Docket No. 26550, Passenger Fares and Surcharges, elsewhere referred to in this report. We have also received cooperation from State commissions in 15 cases involving the acquisition of railroad properties, the construction of new and the abandonment of old railroad lines. Cooperation with State commissions under the provisions of part II, the Motor Carrier Act, 1935, is treated separately in the chapter relating to the bureau of motor carriers.

FEDERAL COORDINATOR OF TRANSPORTATION

The provisions of title I of the Emergency Railroad Transportation Act, 1933, which were extended by Joint Resolution (74th Cong., 1st sess.) until June 17, 1936, were not further extended beyond that date, so that the office of Federal Coordinator of Transportation, which had been held under that act by Commissioner Eastman, then ceased to exist and he resumed full duties as a member of the Commission.

On January 21, 1936, we transmitted to the President and to Congress, in accordance with the provisions of section 13 of title I of the Emergency Act, a report of the Coordinator containing recommendations for transportation legislation, which was afterward published as House Document No. 394, Seventy-fourth Congress, second session. This report recommended (1) a bill for the regulation of water carriers by the Commission; (2) a similar bill for the regulation of so-called wharfingers; (3) in the event that recommendation (1) was followed, a bill for the reorganization of the Commission; (4) a bill for the creation of a Coordinator of Transportation to be associated with the Commission; (5) a bill providing for dismissal compensation for railroad employees displaced by coordination projects; (6) three bills proposing minor amendments of part I of the Interstate Commerce Act.

We were able to approve unanimously the bills providing for Federal regulation of water carriers and wharfingers. We were unable to approve the bill for the reorganization of the Commission. We did not approve or disapprove the bill providing for a Coordinator of Transportation, believing Congress to be well advised

on this point. Pointing out that the bill providing for dismissal compensation for railroad employees related to a subject not within the scope of any functions which Congress has hitherto imposed on us, we recommended that it be given consideration in connection with the recommendation in our last annual report:

That further statutory provisions be enacted to protect employees from undue financial loss as a consequence of authorized railway abandonments or unification found to be in the interest of the general public, or otherwise lawfully effected.

We approved unanimously the bill to enable us to prescribe minimum as well as maximum joint rail-water rates and to establish through routes where deemed necessary in the public interest regardless of the "short-hauling" of any carrier. We also approved the bill to amend section 4 of part I, Interstate Commerce Act, by eliminating the so-called equidistant clause. While in previous reports we had approved the bill to shorten the statutory periods of limitation with respect to claims against the railroads, we stated that some of the Commissioners had come to doubt the wisdom or justice of such legislation, and that we would give the matter further consideration and bring forward an appropriate recommendation, if the results of our investigations should indicate a change to be desirable. Two Commissioners did not concur in any amendment relating to the fourth section. One approved the Coordinator's recommendations nos. 3 and 4, and another approved no. 4 as made and no. 3 with one minor change. The reasons for our conclusions were fully stated in our letter of transmittal, which was made a part of House Document No. 394.

On March 26, 1936, we transmitted to the President and Congress a further report of the Coordinator on Unemployment Compensation for Transportation Employees containing the text of a proposed unemployment compensation act which the Coordinator recommended be enacted. While we agreed that any system of unemployment compensation for persons engaged in interstate transportation should be set up and administered by the Federal Government rather than by the States, and that it was no doubt highly desirable that early consideration be given to bringing the present system as to such persons under one authority and to putting it on a uniform basis, the subject mattter of the proposed bill did not come within the scope of any functions which Congress had hitherto entrusted to us. Therefore, we did not have in our records information upon which we could intelligently base recommendations. Because of the importance and scope of the subject we did not feel that we should attempt to submit definite recommendations without wide and careful study, including public hearings. Because such an investigation would result in undue delay in transmitting a report, we transmitted it

without recommendations. No legislation resulted at the last session of Congress from the Coordinator's or our own recommendations.

REORGANIZATION OF RAILROAD COMPANIES

In our latest report we pointed out the comprehensive revision of section 77 of the Bankruptcy Act embraced in the act of August 27, 1935. Subsequently, by act approved June 26, 1936, the section was further amended to clarify the intent with reference to the rights of the United States as a creditor or stockholder. It is now expressly provided that where the United States or any agency thereof, or any corporation, other than the Reconstruction Finance Corporation, the majority of the stock of which is owned by the United States, is a creditor or stockholder, the interest or claims thereof shall be deemed to be affected by the plan; but that, where the United States is a creditor on claims for taxes or customs duties, no plan which does not provide for the payment thereof shall be confirmed if rejected within 90 days by the United States.

A list of the railroad reorganization proceedings now in progress and the operated mileage involved, both under section 77 and under equity receivership, is shown in appendix G.

SINKING FUNDS AND OTHER RESERVE FUNDS

Our discussion of these subjects will be confined to steam railroads. A list of the companies in receivership and of those seeking reorganization under section 77 of the Bankruptcy Act as amended is shown in appendix G. The operated mileage involved is 70,041 miles, or approximately 27.7 percent of the total operated mileage in the United States. Failure of most of these companies was due principally to loss of traffic to competing instrumentalities of transportation, both private and public, and to decline of traffic because of the general business depression. Poor financial structures and unwise surplus and dividend policies were chiefly responsible for the failure of some of these companies, and were contributing factors in the failure of most of them.

Many of the railroad companies now in trouble have been handicapped from the beginning of their corporate existence by financial structures overloaded with funded debt. When the depression came, these had failed to improve their financial structures, and others had weakened their financial structures, by pursuing a policy of providing for their financial requirements largely through the issue of long-term bonds which at maturity are refunded. Some of these companies were compelled, because of small earnings and the low market price of their stock, to finance all improvements and additions and betterments through the issue of bonds. On the other