The CHAIRMAN. You mean as regards other forms of transportation?

Senator CLARK. As regards other forms of transportation.

Mr. BRENT. No, sir; I know of no such thing. Certainly the competition of the coastwise and intercoastal trade from both the trucks and railroads is quite as keen; in other words, the competition from New York to New Orleans is just as keen as it is from Chicago to New Orleans by the inland trades. So that neither of us seeks a subsidy. They do not need the loan provisions because there is a large fleet of boats already in existence. Many of the coastwise boats do need the loan provisions because their equipment is old and needs to be replaced. I know from my own experience. When you go to get loans for that kind of construction you find yourself up against very difficult conditions. Your stocks have not shown an earning value sufficient to warrant them as good bank collateral. That is the reason we think that the coastwise lines do need the assistance of this construction-loan provision.

Senator CLARK. In whose behalf do you appear, Mr. Brent? Mr. BRENT. Well, personally in behalf of my own little line, the Coast Transportation Co., and in behalf of a group known as the Gulf Coast wise Lines, all of whom are small operators.

Senator CLARK. You are not now connected with the Inland Waterways Corporation?

Mr. BRENT. No, Senator Clark; I have no connection with them. Senator CLARK. You were formerly connected with them?

Mr. BRENT. I was the Federal manager of the Barge Lines for 9 years.

Inasmuch as it has been brought up this morning, Senator, I want to express my objection to that proviso on page 77, line 21, reading as follows:

Provided, That after the expiration of 2 years from the effective date of this act, the President is hereby authorized by Executive order to transfer to the Interstate Commerce Commission all of the powers and duties hereby vested in the Authority insofar as such powers and duties relate to the regulation of rates in coastwise and intercoastal commerce.

Senator CLARK. You are referring to the Copeland bill?

Mr. BRENT. I am referring to S. 3500.

The CHAIRMAN. You do not want that to happen?

Mr. BRENT. I do not want it ever to happen.

The CHAIRMAN. Did you hear any talk this morning about bills being compromises?

Mr. BRENT. Yes.

The CHAIRMAN. This is a compromise, as far as I understood. Mr. BRENT. Yes, Senator; I understand it is a compromise, but Senator Clark has asked me about my experience. That experience covered 9 years of very hard effort to build up joint relations between the railroads and the water lines under Interstate Commerce jurisdiction, under the law which now exists and which gives them the power and the duty to prescribe and support that sort of coordination, and after 9 years of actual operation and effort, and another 8 years of observation since, I want to get no closer to the Interstate Commerce Commission on water traffic than I can help. Senator CLARK. Mr. Brent, I am just as much in favor of water transportation as you are, but, as the Assistant Secretary of Com

merce said here on yesterday, of course the operation of any Commission must necessarily depend upon its personnel.

Mr. BRENT. That is quite true.

Senator CLARK. Do you have any reason to believe that this Maritime Commission, Maritime Authority to be set up under this bill would be more devoted to public interest than the Interstate Commerce Commission has been?

Mr. BRENT. It would be devoted to the development of waterway traffic, to the development of waterway lines, to the improvement of both our foreign and domestic facilities for low-cost transportation. That would be its only duty.

Senator CLARK. I personally have taken some very serious exceptions to some of the decisions of the Interstate Commerce Commission in regard to water transportation.

Mr. BBENT. I know that, Senator.

Senator CLARK. I do not believe that such a commission, as set up in this bill, would necessarily be any fairer or any more upright than the Interstate Commerce Commission has been. I personally think that the solution of the problem would be such a bill as is now pending in the Senate for the enlargement of the Interstate Commerce Commission, with divisions to handle railroad transportation, highway transportation, and water transportation.

Mr. BRENT. I understand that you favor it. Unfortunately I am opposing the whole scheme of regulation of water traffic by the Interstate Commerce Commission. My experience leads me to do

that.

Senator CLARK. That is because you do not like the Interstate Commerce Commission.

Mr. BRENT. I would not have you put it that way for anything. That is not true. It is because the paramount duty of the Interstate Commerce Commission, under section 15 (a) of the law is to provide sufficient revenue to maintain adequate and efficient rail transportation. That is their first and greatest duty.

Senator CLARK. That would not be true under the pending law, would it?

Mr. BRENT. Yes, it would. It is not modified in the least. It would be not only their duty, but they have already indicated what their attitude would be in cases of the kind where rates by water are so low that the railroads complain of them. They said in decision just a few days ago, where the Illinois Central was trying to reduce its rates on grain, to take away the grain traffic from the barge lines on the Mississippi River, and where the barge lines were making a profit on the rate of 2 mills a ton mile, the Commission would not allow the railroad to reduce its rates, which would yield it 3 mills a ton-mile, because they said it is not a compensatory rate, but they said, "If we had the power to fix the water rate we would know what to do with this case. We do not want to be in any such company because we know, under the present law and under any continuance of the existing Interstate Commerce Act, water transportation is bound to be subordinated to the needs of the railroads for more money.

Senator CLARKE. That is again a question of personnel, isn't that right?

Mr. BRENT. No, it is a question of law; it is a question of fact, that the paramount duty is to find something for these railroads, something to keep them alive on a rate based on a capitalization so high that the public cannot afford to pay it.

Senator CLARK. Mr. Brent, I criticized the Interstate Commerce Commission, as I say, very bitterly about some of the opinions, but I was not able to find any such provisions in the law as you seem to find.

Mr. BRENT. It is there all right. If you read section 15 (a) you will find it is their paramount duty. Every decision which they have made since the railroads got into difficulties has been such as to subordinate water transportation completely and to make water lines go down, down, and down to the point where they have little left.

Senator CLARK. I think that is a matter of personnel rather than law.

Mr. BRENT. You might change the personnel as much as you please, but if their paramount duty is to find for the railroads what they need in revenue the only way they are going to do it is to take away from the water lines and fix the rates so close to the rails that the water lines will not get the traffic.

Senator CLARK. If you find any such provision as that in the law I will be glad for you to put it in the record.

Mr. BRENT. I will read it to you. It is section 15(a).

Senator CLARK. If you find it just put it in the record, or come back and read it.

Mr. BRENT. I will.

(The section referred to by Mr. Brent is as follows:)

15. (a) Fair return for carriers, disposition of excess; loans and leases to carriers. * * *

(2) Rates to permit carriers to earn fair return. In the exercise of its power to prescribe just and reasonable rates the commission shall initiate, modify, establish, or adjust such rates so that carriers as a whole (or as a whole in each of such rate groups or territories as the commission may from time to time designate) will, under honest, efficient, and economical management and reasonable expenditures for maintenance of way, structures, and equipment, earn an aggregate annual net railway operating income equal, as nearly as may be, to a fair return upon the aggregate value of the railway property of such carriers held for and used in the service of transportation: Provided, That the commission shall have reasonable latitude to modify or adjust any particular rate which it may find to be unjust or unreasonable, and to prescribe different rates for different portions of the country. * * 15 (a) Fair return for carriers.

(1) When used in this section, the term "rates" means rates, fares, and charges, and all classifications, regulations, and practices relating thereto.

(2) In the exercise of its power to prescribe just and reasonable rates the commission shall give due consideration, among other factors, to the effect of rates on the movement of traffic; to the need, in the public interest, of adequate and efficient railway transportation service at the lowest cost consistent with the furnishing of such service; and to the need of revenues sufficient to enable the carriers, under honest, economical, and efficient management, to provide such service. (As amended June 16, 1933, c. 91, title II, sec. 205, 48 Stat. 220.)

The CHAIRMAN. Now, I recognize some familiar faces in the audience, members of the shipping industry. I have heard a good deal about collusion on the part of these gentlemen. I hope they have formulated some plan by which they can be heard through a few spokesmen. Has there been any collusion to that effect?

Mr. IRA CAMPBELL. The American Steamship Owners' Association is represented by its chairman and counsel. The chairman is prepared to make a statement now.

The CHAIRMAN. You come over here, Mr. Franklin. John Franklin.

This is Mr.

Mr. CAMPBELL. We have a written statement here and some extra copies.

STATEMENT OF JOHN M. FRANKLIN, AMERICAN STEAMSHIP OWNERS ASSOCIATION

Mr. FRANKLIN. Mr. Chairman, I am here as chairman of the American Steamship Owners' Association, a voluntary association

The CHAIRMAN. Excuse me just one minute. Mr. Brent, I failed to ask you whether you are in favor of S. 3500, with such amendments as have been offered.

Mr. BRENT. We are hopeful that some such legislation as this may pass, because we cannot see how we are going to go on with the merchant marine under the present conditions.

The CHAIRMAN. Would Mr. Bayless make the same statement? Colonel Bayless, are you in favor of such legislation as is proposed in S. 3500?

Mr. BAYLESS. We are in favor of a ship subsidy bill; yes, sir. We feel it is sadly needed, but, except for the two sections in question, we have not made a study of this bill. I cannot speak with authority for my association with regard to the specific provisions. The CHAIRMAN. Thank you very much.

Now, you may go ahead, Mr. Franklin.

Mr. FRANKLIN. I am here as a chairman of the American Steamship Owners' Association, a voluntary organization composed of 60 steamship companies, which companies own and operate the majority of the American-flag tonnage under private ownership.

Senator CLARK. Mr. Franklin, at this point would you mind putting into the record your own personal corporate connections? Mr. FRANKLIN. Yes, sir. I am the president of the I. M. M. Senator CLARK. What is that?

Mr. FRANKLIN. That is the International Mercantile Marine Co., and the United States Lines.

Senator CLARK. That is the company that operates ships under the American flag and also under other flags?

Mr. FRANKLIN. Entirely under American flags, sir. Neither of those companies own or operate any foreign-flag ships.

Senator CLARK. How long has that been true?

Mr. FRANKLIN. About 18 months.

I am instructed, first, to thank the committee for the invitation to appear. As soon as the association received committee print S. 3500 our legislative committee studied it night and day and drew up, in writing, the views of the association. These views were read yesterday at a meeting of the association and were passed upon as reprepresenting the views of the association, without one dissenting vote. I would like to read this document over to you, and if I may respectfully suggest it, in the interest of saving time, it might be

tions that might arise in connection with it would be dealt with in a later paragraph.

The CHAIRMAN. 'Very well, Mr. Franklin, you will not be interrupted. Go ahead.

Mr. FRANKLIN. The members of the American Steamship Owners' Association have given careful consideration to the bill under discussion (S. 3500 committee print Mar. 3, 1936) to determine whether under its provisions the objectives embodied in the declaration of policy can be attained. The members have endeavored to ground their consideration upon sound business principles so as to ascertain whether the aid contemplated by the bill will make it possible for American shipowners to provide adequate shipping services on all essential foreign-trade routes with the ships now in operation, or those which should be constructed if we are to have a merchant marine necessary for national defense and sufficient to carry a substantial portion of our foreign commerce.

No one questions that such a merchant marine is desirable to national welfare or that it is absolutely necessary to national defense; and if new legislation replacing the Merchant Marine Act, 1928, can be had which will produce that much desired result and bring an end to the state of uncertainty as to the future of American shipping, American shipowners will be the first to welcome and support such legislation. So the vital question is-will the proposed bill give the United States an adequate merchant marine?

We shall not take time to discuss the bill in all its details, but will confine our comments to those features which we feel require careful consideration by your committee.

The bill purports to provide three esesntial kinds of aid; first, the adjustment of the existing mail contracts; second, aid in the construction of new ships; and third, aid in the operation of ships in foreign trade. We shall discuss them in their order.

1. TITLE III.-ADJUSTMENT OF MAIL CONTRACTS

There are in force today 43 ocean-mail contracts made in accordance with the terms of the Merchant Marine Act, 1928. The oldest contract has run nearly 8 years, and the youngest has passed the third year, of their 10-year terms. With hardly an exception the contracts have been fully performed by the holders, and the Government has paid the contractors the contracted compensation. On the faith of the contracts, and with the financial aid provided by construction loans, American shipowners have expended approximately $140,000,000 in the construction of 31 new vessels, the equal of any similar vessels in the world, and have spent nearly $16,000,000 in reconditioning 44 vessels. The aid advanced to shipowners by the construction loans went directly to the shipbuilders, whence it largely passed to American labor. The shipowners gave their obligations and pledged their property to the Government for the loans. With the aid of the mail compensation these loans are gradually being liquidated, but the unpaid balances still stand on the books of the steamship companies as firm obligations to be met.

By virtue of the mail contracts the Shipping Board sold a large number of their essential services, and the vessels operated in them,