ment with reference to making thorough examinations and audits of books and devising some definite manner of fixing rates.

The Interstate Commerce Commission has no formula.

I was in the Senate committee yesterday, and Senator Wheeler's committee, when that statement was made by the representatives of the Commission.

We are notified under the present plan. We are notified by the Commission that such-and-such a company has filed an application for increasing its rates. There is no reason assigned for it to us as to why they make the application.

We do not have what we consider any sort of an audit of books. We do not know what the evidence is going to be until the very instant of the hearing when we have to go over there and appear as contestant litigants before another Government department.

We do not know what the reasons are, why a rate is fixed at suchand-such an amount, and there is, as I say, there is no formula. There is no plan worked out with any definite certainty as to what the basis of any rate is, and we think that, to clear up those two things, auditing and to work out a definite system for a more equitable distribution or appropriation, is about the only thing that needs to be done to this law.

I just feel confident that after going into the present law and seeing what your bill does to it that you will not feel like passing this bill.

We will be glad to furnish your committee anything else we have. I have stated everything except something about the foreign air lines.

The foreign air lines, of course, are being operated by the Department. They go all around South America. They go to China. We plan European service, and appropriations are being made by Congress for that purpose.

These foreign lines, while operated by the Post Office Department, we do that only after consultation with the Commerce Department and the Department of State and the Treasury Department, as all three of these Departments are vitally concerned about our foreign relations and some phases of this foreign air-line development. There was appointed, 3 years ago, I believe, by the President, an interdepartmental committee for international civil aviation. That committee is composed of the Assistant Postmaster General who handles air-mail matters; the Assistant Secretary of Commerce; the Assistant Secretary of State; and the Assistant Secretary of the Treasury.

This committee meets very frequently and discusses prospective international air lines from this country to foreign countries.

The Post Office Department would not think of awarding a contract, if it had the money, to other parts of the world, for air-mail service to other parts of the world, without the unanimous approval of this committee of experts.

This bill here authorizes this Bureau of Air Mail of the Interstate Commerce Commission to set up at will any lines they see fit, to any part of the world, and there are no definite plans and provisions made for that, except based upon the grounds of public convenience and necessity, and public convenience and necessity cannot ever cause

the establishment of air lines from this country to different parts of the world.

Of course, when they allow the established lines throughout the world without regard to the State Department, Treasury Department, Department of Commerce, and the Post Office Department, and fix the rates, there are two things likely to result: One is international complications. We never have them now.

The other is the gigantic cost of such lines. These lines cost a lot more to operate in foreign countries than they do in the United States. We pay about $1.70 a mile, I think, for our foreign airmail service, as contrasted with about 31, 32, or maybe 33 cents for the domestic lines; but the foreign air lines have to furnish all their radio equipment and their airports and many, many other costs of operation that they have that the domestic lines do not have, because they are provided by counties and cities and States and the Nation.

The foreign air lines, of course, are doing a fine service; but they can be overbuilt, just like anything else can be overdone, and that is a very important thing to trust to a rate-making body, such as the Interstate Commerce Commission, and to ignore these other departments.

I do not think that I have anything else to volunteer. I will be glad to give anything further that I can to you gentlemen.

The CHAIRMAN. Mr. Crowley, I think that there is a way you can be very helpful to the committee in working out this problem. As the matter stands, the existing law is largely proposed to be repealed by this bill.

Mr. CROWLEY. Yes, sir.

The CHAIRMAN. And, in lieu of those provisions, other provisions are written into this bill, generally corresponding to provisions of the railroad and motor-carrier provisions.

We find a very decided conflict here between those who have appeared as to the effect of these new provisions, and it is the responsibility of the committee, of course, to work that out.

Now, the background of the situation is that this question of air regulation has been debated back and forth over the Nation for a number of years. The President appointed a commission to make a study of it, and that commission recommended a special commission to be appointed by the President or recommended a special regulatory body be created, to have jurisdiction over aviation; but the President disapproved of that feature of the report, and favored the Interstate Commerce Commission as the regulatory body for aviation.

I think the general opinion of the country is in favor of the Interstate Commerce Commission as the regulatory body. Aviation involves transportation of passengers, mail, and express-property of various kinds-and, no doubt, increasingly so as time goes on.

It is pretty generally recognized that the Post Office Department necessarily and legitimately fits into that picture. The responsibility of the Post Office Department should not be overlooked in working out this relation.

The question of where to draw the line is one we have to work out. The Interstate Commerce Commission, under this bill, would have complete control over accounts, substantially as they do over rail

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road accounts at the present time; if the Interstate Commerce Commission were selected as the regulatory body, it would necessarily have to have control over accounts. Questions and matters arising outside those in connection with the handling of the mails would make that necessary.

Now, the question comes in there: Shall the Post Office Department also retain that control over accounts and thereby have a duplication of accounting systems, or else work out, in the Interstate Commerce Commission, a plan that would serve the purpose of both the Interstate Commerce Commission and the Post Office Department?

Then, on the question of mergers, the bill is framed on the theory that we have now applicable to railroads, that, more or less, their business is necessarily a monopoly, or should be under orderly control, as the railroads are. There is danger of permitting consolidations unless they are restrained from the standpoint of public interest, and it is proposed to give that control.

Now, I do not see that that authority could very well be vested any place else in a general set-up. It might be that the language is too broad in giving that authority; but, nevertheless, the authority must be somewhere, because, in all probability, we will have mergers that would not be lawful under the existing antitrust laws, except with the approval of the Government in some manner.

Then, as to schedules, just how far the Post Office Department would want to go in that matter, we would like to know. That directly concerns the Post Office Department.

So, the general tenor of my suggestion is and I am trying to put before you, the position of the committee in this scheme. We do not have fixed ideas; we are not wedded to any particular theory here. What the committee has to do is to work out these detailed problems, and that possibly not without difficulty.

So, in revising your remarks you have the privilege of extending in the record as you see fit; and if you will point out in this bill the features that you believe will have the ill effects you have enumerated, and point out what language in these bills would permit those things to be accomplished and that you think undesirable or take power from the Post Office Department that rightfully belongs there, we' will be glad to have your concrete suggestions. We want orderly and efficient administration. If you will give us constructive aid I am sure that it will be very helpful to the committee, and we will be glad to go through your statement carefully in working out this bill.

Mr. CROWLEY. I will be glad to write something more.

If you do not mind, you refer to three things that I have previously mentioned, too.

The first is, under the present law, the Post Office Department and the Commission has the power to make investigations and audits. The Commission is directed to do so; we have the privilege of doing it.

It is my business, as the Solicitor of the Department, to defend the Government on claims of increased rates, and I have a few auditors, four or five, that do general work there for the Department.

I want to say this, that I have taken the position, and the Postmaster General has, also, that is is not up to the Post Office Depart

ment to audit these books. That is a normal function of the Commission.

We are not trying to get any power from any commission. I can tell you that right now.

And, while our auditors would be glad to get out and do this work, yet we are operating with a very small appropriation, and we do not have the force, and we do not want the force to audit these books. That power is already held by the Commission.

There is on the Commission-I have got to be frank about it and say that I do not think that they make as thorough and complete audits as are necessary to determine, whether they are as accurate as they should be, for increasing or decreasing rates, and that is one of the provisions of the pending Mead bill.

I call it the Mead bill because he introduced it. It was drafted in our office.

It ought to be considered by this committee in connection with the present law that is already on the books.

There have been only very few cases where we have made any audits, and frankly, we made them because we just simply could not tell heads nor tails of the figures furnished us by the Commission.

We have a few of their so-called audits-about 17, I think, of the first audits-but we have not any audit that could be called accurate. The Commission does have the power to make these audits, though; that is true. It is already has that power.

Now, on the question of mergers: The merging of certain lines has been fixed as a matter of policy by the Congress to prohibit the merging of competing, parallel lines, for the purpose of destroying competition. That is prohibited as a matter of law. That is taken away. I mean, that is eliminated by this present bill here, and any sort of a merger may be allowed within the discretion of some individual or individuals in the Interstate Commerce Commission, rather than laying down broad general principles here that certain classes of mergers shall not be allowed; certain classes of mergers that all you gentlemen have been familiar with here in your work with this committee; certain classes of mergers, where competition would be destroyed, which are prohibited by the present law. That may be permitted.

Now, on the question of there being a monopoly, of there being a need for a monopoly: Of course, that is just an individual matter, but the railroads never had any such regulation as this until they had been opearting 100 years, almost; and aviation is just in its infancy. We have only actually had first-class air-mail service since about, I think, 1928 or 1929, when it began to develop as the Air Mail Service; and, as I mentioned here the other day, people all over the country are flying. Boys and girls, too, are learning how to fly; and you see these little airports all over the country, with little airships in them. We actually have in mind, and there is going to appear before the Post Office Committees in the House and Senate this week people appearing on the development of other little air-mail services to be operated at a very low cost. That is this star-route service. It will encourage aviation.

The reason this country has had such a development and is such an outstanding country in aviation is because these lines have been pretty well regulated here for the last 3 or 4 years, not by the Post

Office Department but by you gentlemen in Congress who have laid down certain rules of conduct and business practices, and so forth, and now you are about to take these away from us and repeal all of them and leave it to the whims of individuals.

I want to say again, as I said the other day, if this industry has grown so strong and so powerful that it needs to be controlled and that it does not need a subsidy, then it looks like Uncle Sam ought to get the benefit of the same kind of treatment on rates.

We are paying 20 or 30 times as much for mail as they get for carrying passengers.

Mr. REECE. Would you pardon an interruption?

Mr. CROWLEY. Yes.

Mr. REECE. Would that be true also of the cost of carrying the mails on the trains; that is, if you made a comparison of the pound cost?

Mr. CROWLEY. Well, no; it would not. No; it would not. I could not give you the exact pounds and relative cost right at this moment, but the cost is not similar at all.

Mr. O'Brien can give you that information.

STATEMENT OF WILLIAM C. O'BRIEN, ASSISTANT ATTORNEY, POST OFFICE DEPARTMENT

Mr. O'BRIEN. As I recollect, the rates are about 12 cents a carmile for a 60-foot car on the short-line railroads, and I think it is 4 cents on the long railroads, the railroads over 100 miles in length. That is per 60-foot car-mile.

Now, of course, a 60-foot car carries tons of mail.

STATEMENT OF KARL A. CROWLEY, SOLICITOR, POST OFFICE DEPARTMENT-Resumed

Mr. CROWLEY. Now, with reference to the schedules: We have to, the Post Office Department must, regulate the schedules for this service to be effective. We have got to coordinate the schedules with the railroads, with our star routes, with our bus lines, and we have trains that run all of the time, at frequent intervals; but the reason for using air mail is to expedite that mail, to get it across the country pretty fast, and if we cannot control the schedules so that we can make connecting schedules with trains as well as other air lines, then the service will suffer.

We will have maybe two trips on transcontinental trips over a line. If one of these schedules is missed, then you have got to keep your mail over until the next day.

But I will be glad to get something else up and submit it here for your consideration.

The CHAIRMAN. Yes. If you can give the specific provisions that you object to in this bill, that will aid the committee in working with the problem.

Mr. CROWLEY. Yes, sir.

The CHAIRMAN. I take it that you would not find any fault with the Interstate Commerce Commission, as a general regulatory body of aviation, outside of mail matters.