THE CREATION OF A VERY LIMITED NUMBER OF GIANT RAILROAD SYSTEMS HANDLING PRIMARILY BULK MATERIALS FOR ONLY THE LARGEST SHIPPERS AND THE SYSTEM MAY NOT. IN FACT, MEET THE NEEDS OF THE NATION'S COMMERCE FOR THE BASIC NATIONAL DEFENSE NEEDS. THE HISTORY OF THE PAST HUNDRED YEARS HAS PROVED THAT PRIVATELY DO. IN FACT, FLOURISH. = OWNED COMMON-CARRIER SYSTEMS SUBJECT TO REGULATION CAN AND DO EXIST, AND THE MONTANA WHEAT RESEARCH & MARKETING COMMITTEE HAS A CONCERN THAT WITH THE STAGGERS RAIL ACT, CONSIDERATION BY THE INTERSTATE COMMERCE COMMISSION OF ASPECTS OF THE HOLDING COMPANIES, RAIL MERGERS AND GENERAL RATE JURISDICTIONS HAVE BEEN SO DIMINISHED THAT THERE IS NOT A PARLANCE OF CONSIDERED THOUGHT FOR INVESTIGATIVE WORK BEING DONE TO MAKE SURE THAT THE PUBLIC INTEREST IS BEING SERVED. ARGUMENTS WERE MADE THAT THE RAILROADS SHOULD BE DEREGULATED BECAUSE THE AIRLINES AND TRUCKS WERE DE REGULATED. THERE IS A GREAT DIFFERENCE BETWEEN DEREGULATION OF A NATURAL COMPETITIVE INDUSTRY AND A NATURAL MONOPOLISTIC INDUSTRY. IN FACT, IF ONE LOOKS AT THE AIRLINE AND THE MOTOR CARRIER DEREGULATION, THE QUESTION IS STILL UNDECIDED AS TO WHETHER THAT WAS A GOOD THING. IT MAY WELL BE THAT TOO MUCH COMPETITION AND PREDITORY PRICING WILL SUFFICIENTLY UNDER MINE THE FINANCIAL STABILITY OF THE AIRLINE INDUSTRY AND DESTROY THEM AS PRIVATELY OWNED COMMON-CARRIER SYSTEMS. 98-762 O 82 - 29 THE RAILROADS ARE MAKING MORE MONEY THAN THEY EVER HAVE, AND ARE DOING SO UNDER A RECESSED ECONOMY. IT IS NOT, HOWEVER, FREE COMPETITION IN A FREE MARKET PLACE THAT HAS PRODUCED SUCH RESULTS FOR THE RAILROADS. IN CONTRAST TO THE AIRLINE AND MOTOR CARRIER INDUSTRIES, THERE HAS NEVER BEEN A FREE COMPETITIVE MARKET SYSTEM IN RAILROAD TRANSPORTATION--AND THERE NEVER WILL BE. ALL OF THE ANTI-TRUST LAWS IN THE WORLD WILL NEVER GUARANTEE A FREE MARKET PLACE IN THE RAILROAD TRANSPORTATION MARKET PLACE. THERE COULD NEVER BE COMPETITION WITHIN THE RAILROAD INDUSTRY WITHOUT THE RIGHT OF FREE ENTRY, AND THERE CAN NEVER BE FREE ENTRY IN THE RAILROAD = SYSTEM AS THERE IS IN AIRLINES AND TRUCKS. SHIPPERS LOCATED IN MONTAÑA ARE CAPTIVE TO THE RAILROAD INSOFAR AS THE RAILROAD IS CONCERNED. IN THE ABSENCE OF GOVERNMENT COMPULSION. A SHIPPER CANNOT REACH ANOTHER RAILROAD WITHOUT THE PERMISSION OF THE RAILROAD ON WHOSE LINE HE IS LOCATED. TO DAY THAT IS BEING BROUGHT HOME WITH FORCE TO MANY SHIPPERS WHO A YEAR AGO WOULD NOT HAVE BELIEVED WHAT WAS GOING TO HAPPEN TO THEM. OUR PURPOSE HERE TODAY IS NOT TO HARANGUE THE RAILROADS OR. IN FACT, TO RELEGISLATE THE STAGGERS RAIL ACT: BUT RATHER TO OFFER THIS COMMITTEE SOME SUGGESTIONS ON STRENGTHENING THE RAILROAD SYSTEM IN THIS COUNTRY AND CONCURRENTLY PROTECT THE PUBLIC INTEREST. A FEW BASIC ISSUES SHOULD BE COMMENTED ON IN DETERMINING WHETHER HOLDING COMPANIES HELP OR HINDER AGRICULTURE IN OUR STATE. OF PARAMOUNT CONCERN IS THAT A HOLDING COMPANY IS NOT ENGAGED IN TRANSPORTATION AND DOES NOT HAVE DIRECT CONTROL OVER THE PROPERTIES OF THE CARRIER ALTHOUGH IT OWNS DIRECTLY OR THROUGH SUBSIDIARIES, THE STOCKS OF THAT CARRIER AND STOCKS OF VARIOUS OTHER COMPANIES THAT ARE NOT CARRIERS AND UNRELATED TO TO ALL THESE SEPARATE ENTITIES EXCEPT BY AFFILIATION THROUGH A COMMON PROPRIETOR. WHEN A HOLDING COMPANY'S INVESTMENTS AND INTERESTS ARE WHOLLY UNRELATED TO TRANSPORTATION, AND ITS INTEREST IN THE TRANSPORTATION CARRIER IS SUBORDINATE TO ITS PRIMARY INTEREST IN EITHER PRODUCTION OR SOME OTHER SERVICE OTHER THAN FREIGHT TRANSPORTATION, THEN THERE CAN BE A TEN DENCY TOWARD SERVING THE PRIMARY INTERESTS OF THE HOLDING COMPANY AS OP POSED TO THE SERVICE OF TRANSPORTATION. HOLDING COMPANIES ARE NOT ACCOUNT ABLE TO ANY ENTITY GOVERNING TRANSPORTATION AND. THEREFORE, THERE CAN BE A TENDENCY TO USE ASSETS CREATED BY THE TRANSPORTATION SERVICE ITSELF TO ADVANCE THE INTERESTS OF OTHER ENTITIES THAT COULD NOT SURVIVE ON THEIR OWN. WHILE ADVANCES TO NON-CARRIER AFFILIATES, TYPICALLY THE PARENT HOLDING COM PANY, MAY BE TECHNICALLY CHARACTERIZED AS AN ASSET TO THE CARRIER. THE REALITIES OF THE BUSINESS WORLD AND THE SEARCH FOR GREATER RATES OF RE TURN IN NON-CARRIER INVESTMENTS INDICATE THAT THE USEAGE OF THIS ASSET IS OFTEN PERMANENTLY LOST TO THE CARRIER. WHAT GOES UP TO THE PARENT PANIES ARE ALLOWED TO BE FORMED WITH THIS TYPE OF ACTIVITY GOING ON, THEN THERE IS NO QUESTION THAT THE FORMATION OF HOLDING COMPANIES WOULD HINDER AGRICULTURAL SHIPPERS, ESPECIALLY IN AREAS WHERE THEY ARE CAPTIVE, SUCH AS MONTANA. AGRICULTURAL PRODUCTS, BASICALLY GRAIN, CONTRIBUTE A = HANDSOME SHARE TO THE NET PROFIT OF BURLINGTON NORTHERN. UNDER A HOLDING COMPANY ARRANGEMENT. THESE FUNDS CAN BE LEGITIMATELY INVESTED ELSEWHERE AND THEN WHEN THE CARRIER REACHES A CONDITION OF ECONOMIC RECESSION, HE TURNS TO CAPTIVE SHIPPERS AND THE PRODUCTS THEY PRODUCE AND REQUIRES THEM TO MAKE AN EVEN GREATER CONTRIBUTION THAN THEY HAVE IN THE PAST. IN MY VIEW, A HOLDING COMPANY THAT OWNS AND CONTROLS THE STOCK OF A TRANSPOR TATION ENTITY MUST BE GOVERNED BY THE AGENCY FIXED WITH THE RESPONSIBILITY TO PROTECT THE PUBLIC INTEREST, AND CURRENTLY THAT IS THE INTERSTATE COM MERCE COMMISSION. IF ASSURANCE COULD BE GUARANTEED THAT AGRICULTURAL SHIPPERS, OR SHIPPERS CAPTIVE TO RAIL, HAVE SOMETHING TO GAIN BY ALLOWING THE FORMATION OF A HOLDING COMPANY GOVERNING THE TRANSPORTATION ENTITY FOR WHICH THEY ARE TOTALLY DEPENDENT, THEN PERHAPS OUR POSITION WOULD CHANGE. THERE ARE NO GUARANTEES THAT I AM AWARE OF: NOR AM I CONVINCED AT THIS POINT THAT HOLDING COMPANIES PLACE PRODUCERS OF AGRICULTURAL PRODUCTS IN A BETTER POSITION THAN THEY ARE TODAY AND. THEREFORE, I AM SKEPTICAL THAT THE ALLOWING OF A HOLDING COMPANY TO OWN AND CONTROL THE RAILROAD IN THE STATE OF MONTANA WOULD BE IN THE BEST INTERESTS OF OUR INDUSTRY. OUR CONCERN IS SIMPLY THAT THIS CONGRESS TAKE A STRONGER OVERVIEW OF HOLDING = COMPANY REORGANIZATION BECAUSE OF THEIR PROPENSITY FOR ABUSE. OUR SECOND MAJOR CONCERN DEALS WITH THE AREA OF COMPETITIVE RAIL SERVICE. HISTORY TELLS US THAT IN ANY OF THE TRANSPORTATION INDUSTRIES THE ONLY THING THAT MAINTAINS SERVICE IS COMPETITION. SERVICE COMPETITION IS WHAT HAS BUILT THE GREATEST RAILROAD SYSTEM IN THE WORLD. AS MORE AND MORE CARRIERS MERGE INTO LARGER AND LARGER SYSTEMS, AND THE FACT THAT EACH MAJOR RAILROAD SYSTEM IS GIVEN THE LEGAL RIGHT TO CONFINE TRAFFIC THAT IT ORIGINATES ON ITS OWN LINES TO ITS OWN LINES, THERE WILL BE NO INCENTIVE TO MAINTAIN OR IMPROVE SERVICE. IT MAY BE THAT THIS COUNTRY MAY BE FACED WITH SIX OR SEVEN GIANT RAILROAD MONOPOLIES WITHIN THE NEXT TEN OR FIFTEEN YEARS. CONGRESS MUST DEAL WITH THIS PROBLEM SOON. WITH ONLY SIX OR SEVEN MAJOR RAILROAD SYSTEMS IN THE COUNTRY, THEY CAN START TO HANDLE NOTHING BUT BULK COMMODITIES AND AS THERE IS NO COMPETITION AMONG THEMSELVES OR WITHIN THEIR SYSTEMS, THEY WILL NOT BE FORCED TO MAINTAIN COMPETITIVE ROUTES. THE TRAGEDY OF THIS SITUATION IS THAT ONCE THESE LARGE REGIONAL RAIL SYSTEMS ARE COMPLETED, THEY WILL EACH ONE BE ABLE TO MAXIMIZE RATE LEVELS WITHIN THEIR OWN SYSTEMS AND MAY, IN FACT, MOVE AWAY FROM A NATION = AL RAIL SYSTEM THAT WILL SERVE ALL SHIPPERS AT REASONABLE RATES. NOW, DEALING WITH RAILROADS MORE SPECIFICALLY. IF I WERE TO DES CRIBE THE MAJOR DIFFICULTIES THAT GRAIN FARMERS ENCOUNTER IN DEALING WITH THE BURLINGTON NORTHERN, I WOULD FIRST SAY THAT LITTLE CONTACT IS MADE DIRECTLY BETWEEN THE GRAIN GROWER AND THE RAILROAD ITSELF. THE GENERAL METHOD USED IN MERCHANDISING OUR GRAIN IS TO MAKE DELIVERY TO A LOCAL ELEVATOR WHERE TITLE IS CONVEYED AND THEN SUBSEQUENTLY SHIPPED AND, THEREFORE, THE TRANSPORTATION PHASE OF THE TRANSACTION BECOMES THE RE SPONSIBILITY OF THE TITLE HOLDER, NAMELY THE LOCAL GRAIN ELEVATOR OR THE |