had finally developed a situation where something had to be done to stabilize or to clarify the railroad position in the country.

The financial operations of the Government, those growing out of the war, its direct operations, are of course affected by the condition of the markets of the country, and if such a large part of the credit basis of the country as these securities offered was in doubt, or occupied an anomalous position, shrinking in value all the time, with shrinkage in value of the assets of the savings banks and trust companies and banks, as well as in the credit power of firms, individuals, and corporations which had a large part of their assets invested in such securities, and which had to use them as the basis of credit which they had to get from banks, a very serious situation was presented to the country.

The CHAIRMAN. Growing out of the Government's demand on the money market.

Secretary McADOO. That, I say, in connection with the condition of the railroads generally. Some of them had broken down very badly under the strain of the increased burden that had been imposed on them, and they were finding it difficult to finance their necessities for additional equipment and betterments and improvements, and so the whole situation was one which had to be dealt with.

The CHAIRMAN. Mr. Secretary, may I ask you this question, so as to keep this clearly in line with what you are now saying? Is it your opinion that this congestion grew out of a lack of facilities rather than out of a lack of the proper use and the full use of the facilities that we now have?

Secretary McADOO. It grew out of both. It grew out of insufficient facilities, as well as an inability under separate managements to coordinate thoroughly, and effectively use the combined facilities of the railroads.

The CHAIRMAN. Under the restrictive laws that we had?

Secretary McADOO. Yes; and under the autonomous managements of the different railroads. Of course every railroad manager, of necessity, felt the obligation to the owners of the property to get all the business he could. That was his duty. The roads, quite naturally, were taking all the traffic they could carry, and more than they could carry, with resulting congestion.

Under the unified control, it is possible to make common use of all tracks and facilities and equipment. I may illustrate it at once by saying to you that when I took charge of the railroads I found on the eastern lines a terrible congestion of traffic, which has not yet been relieved, and that was due not only to the fact that they had insufficient facilities of all kinds; that is, on the most congested systems, but they had an insufficient amount of motive power. The railroad equipment of the country, the cars of the country, might be sufficient for immediate needs if we could only get the use of them, but as long as a large percentage of them are used for warehouse purposes and kept standing in terminals idle, the car equipment of the country is not sufficient for the need.

Let us take the question of motive power alone. Upon an investigation, I found that the railroad companies thoroughout the country had placed orders with locomotive builders for locomotives to be delivered in January, February, and March. The aggregate of those

orders, I think is. roughly speaking, 700 locomotives. Under private management those locomotives as delivered by the builders would have been sent to the different railroads throughout the country which had ordered them. I issued an order immediately upon discovering the situation that all of those locomotives, no matter for what company's account they were constructed, should be delivered to the order of the Director General and be sent as rapidly as delivered to those railroads which were most in need of motive power. That would not have been possible under private management, because they probably could not have agreed among themselves to any such step. Now we can distribute those locomotives where they are most needed as rapidly as they come out of the shops.

Senator ROBINSON. When congestion is threatened, the tendency is to increase it by each line holding on to all cars it can get, even though it does not need them.

Secretary McADOO. I beg your pardon?

Senator ROBINSON. Is it not the tendency to hold on to all facilities a line can get, even though they are not immediately needed, when there is a growing congestion, under private management?

Secretary MCADOO. I think that was the natural tendency, because no railroad manager would care to admit that he could not take all that was coming, and he would be anxious to get all the business he could.

Senator ROBINSON. And he would want to have the equipment necessary to handle it when it came?

Secretary MCADOO. Yes.

Senator POINDEXTER. What are the principal things you have been able to do, Mr. Secretary, since you assumed control to relieve the situation, in addition to this matter of locomotives that you have spoken about?

Secretary McADOO. A great many things have been done, Senator. We have prevented the continued delivery of cars, as far as it was practical to do so, to already overcongested lines. We have forced rerouting of freight over lines-the trunk lines-in such a way that we have gotten a better distribution of the traffic.

Let us take the case between Chicago and New York. The through traffic between Chicago and New York-freight traffic-is being sent over whichever line can handle it quickest, regardless of the bill of lading, in which the shipper ordinarily prescribes the route. The shipper is not concerned as to what line it is carried over between Chicago and New York, but he is concerned about the delivery at New York. We can handle that because we have the common use of facilities. That is one of the first things that was put into effect. I do not know whether the committee has had presented to it the first order issued. Is that already in the record?

Senator WATSON. Order No. 1?

Secretary MCADOO. Order No. 1.

Senator WATSON. Yes, that is in the record.

Senator POINDEXTER. Has there been some substantial clearing up of the situation due to the rerouting of freight over the most convenient lines?

Secretary McADOO. Through the eastern district, Senator, I do not think there has been very much improvement as yet. The railroad

managers, all of whom I wish to repeat were left in control of their properties, except they were directed to run them and operate them on the new plan, have been given, in addition to all the powers and authority that they previously possessed, all the power and authority of the Federal Government to support them in carrying out the plan for more expeditious movement of traffic on these lines that were congested, terribly blocked, when the Government took possession. I do not offer this as an excuse, but merely as a statement of fact, which they are urging upon me as a reason why they have not been able to do more under the more favorable conditions, namely, that since the 28th of December the weather has been, of course, of the most extraordinary character. We have had successive blizzards, with temperatures ranging from zero to 20 degrees below zero; they tell me, everything has been frozen up, and it has been almost impossible to dig out these facilities before another one struck them, and that has, I am free to confess, seriously hampered railroad operations for the past three weeks. Not only that, but in the East here, the harbor at Baltimore was frozen tight, which of course prevented all shipments of coal from Baltimore by water, for the time. With the assistance of the Secretary of the Navy, we succeeded in breaking that up a few days ago. We are not equipped with ice breakers in this part of the country. It is not my business to open up channels to harbors and free them from ice. The railroads do not run those things. I have, upon appeal, exerted myself to the utmost limit in conjunction with railroad managers everywhere, and in conjunction with the Secretary of the Navy, to break up the ice in New York Harbor, in the Hudson River, and at other places where it was possible to route freight.

To let you see how serious these very low temperatures are, especially when they get as far as Norfolk: Ordinarily the movement of coal at that point is not interfered with in the winter. The Norfolk & Western Railroad and the Virginian Railway and the Chesapeake & Ohio never, as a rule, are seriously hurt by winter weather. They have had so much floating ice down there this time that they have not been able to get the ships into the docks. The coaling of them at the coal piers has been seriously hampered, and even when they could get up to the docks the coal has been frozen tight in the cars and it has been impossible to dump them. Those are real problems, gentlemen, which human skill and ability can not overcome. The only thing that can overcome that is a thaw. Those are difficulties that railroad managers have been laboring under for the last three weeks to an unusual degree.

Senator WATSON. Did not that same condition exist, Mr. Secretary, for two months before that time, cold weather and heavy snows? Secretary McADOO. This was the 28th of December, I am speaking of. Just before the 28th of December there was a blizzard which had already put the railroads in very bad shape in some parts of the country. Since that date, there was a blizzard, and those railroads which already were suffering from serious congestion, like the Pennsylvania, the Baltimore & Ohio, the Reading, the New York, New Haven & Hartford, and other lines which I need not mention, found themselves of course burdened with a new difficulty.

Senator WATSON. Was not a part of that congestion due to the fact that we lacked shipping facilities to handle this traffic when it got to New York and other places, there being no storage facilities, and as a matter of fact when it got over there they had to use the cars for storage purposes?

Secretary McADOO. Of course, Senator, as far as export freight is concerned, the shipping difficulties have added to the troubles. Senator WATSON. Yes.

Secretary McADOO. But that is not the only part of it; there are many causes.

Senator WATSON. Certainly.

Secretary MCADOO. One of the serious causes is the fact that consignees haye held freight cars for almost interminable periods, when they should have unloaded them promptly. After they were placed they should have unloaded them promptly and released the cars for service. That condition has been due to the fact that the demurrage charges have been very low and they found it cheaper to use freight cars for storage than to put their stuff in warehouses. I have tried to correct that.

Senator WATSON. You have increased the demurrage charges?
Secretary MCADOO. I have; yes.

Senator WATSON. How much?

Secretary McADOO. They have two days' free service and then a progressive scale of demurrage begins, I think at $3 a day, on the third day. Two days free, and on the third day it is $3 and runs up to $10 a day on the eighth day, and $10 per day after that. It is going to have a helpful influence, if we can release freight cars and keep them moving. It is necessary to get new motive power as well as to repair existing motive power, which is in very bad shape on some of the roads, and there is a shortage of labor also. The draft has hit the railroad labor to some extent and a great many railroad men have volunteered. There is a general condition which ramifies the situation and must be overcome. I think it can be very largely remedied in a short time. Railroad managers themselves concede that with the steadying influence of the Federal Government and the power it can exert in enforcing coordination and common use of all of these facilities, both at terminals and along the lines, that we ought to get a very much more efficient operation of the railroads of the country. It can not be brought about, I may say, gentlemen, in a day or a week, or in two or three weeks, but it can be brought about eventually.

Senator POINDEXTER. The taking over by the Government did not have any effect on the weather. You still have that to contend with. Secretary McADOO. I wish it had affected the weather, Senator, favorably. It seems to have affected it unfavorably.

The CHAIRMAN. Mr. Secretary, will this bill enable you, in relation to general traffic, to utilize those ports that are not subject to this condition of freezing up, making it impossible for you to handle the freight?

Secretary MCADOO. It will be possible, Senator, to reroute freight, and a good deal of that is being done already. Such of it as is possible is being sent to Gulf ports. That, in turn, is determined by the ability to get ships there. Up to the present time, because of the

shorter ocean voyage, and for other reasons that have been prevailing, most of the ships have been sent to New York. That has put an undue strain upon the port of New York that should not have been put there, I think. In other words, it should have been distributed better. That is one reason why the Government control will be an advantage. I think that we can force a distribution of railroad traffic that will compel the sending of these ships to other ports where they can be turned quickly and gotten out of the way. The weather that we have had for the last four weeks and the freezing up of the harbors has made it very difficult to get bunker coal to New York and there has been an accumulation of tonnage there, which, in turn, has been unable to move. That has left all the freight for export

untouched.

Senator WATSON. Mr. McAdoo, are the railroads to blame because the ships choose to load and unload at New York Harbor?

Secretary McADOO. No, I do not think they are wholly to blame. I think under the competitive system of course the lines terminating at the port of New York wanted to get all the business to New York that they could.

Senator WATSON. Precisely.

Secretary McADOO. And very naturally they wanted to carry it where they would get the business. Under the existing system I have already set in motion the necessary studies to determine how far it is possible to distribute freight among the great ports of the country more equitably with reference to their facilities, the facilities of the different ports, and that means of course that we must get the cooperation of those who control the ships, the Allied powers as well as the Shipping Board here. I think that cooperation can be had without any difficulty.

Senator WATSON. Has not the Railway War Board already taken steps to divert traffic from the north down to some of the southern ports?

Secretary McADOO. I am not so sure about that; perhaps they have. Senator WATSON. I think they have, as a matter of fact. That has been testified to here.

Secretary MCADOO. I think that may have been done.

Senator WATSON. Let me ask you this general question: Were you familiar with the operation of the railroads under the management of the Railway War Board?

Secretary McADOO. To some extent only. They were trying by agreement to get what I think they could not get in full measure. I have no doubt, Senator, that they were doing some good work.

Senator WATSON. They have testified here, those of them that we have examined, that there was no single instance in which an order issued by them was violated or in which the company to whom it was directed failed to carry it out.

Secretary McADOO. That may be; I do not doubt it.

Senator WATSON. If that be true, I was wondering just how far the antipooling law in your judgment affected their ability to completely coordinate, and whether or not that was the main advantage in having complete Governmental control.

Secretary McADOO. You see it is not a question of the antipooling law only, Senator.

38872-18-2