Mr. COUNTY. I do not know. I never spoke to Mr. Maguire on the subject. Mr. TAYLOR. I offer for the record, Mr. Chairman, a copy of a letter dated December 29, 1932, on the letterhead of Walter P. Maguire, signed "Walter", and addressed to "Dear Elisha"-that being Mr. Elisha Lee, vice president of the Pennsylvania Railroad? Mr. COUNTY. Yes. Senator TRUMAN. It may be received. (The letter referred to was marked "Exhibit No. 2948" and is included in the appendix on p. 9401.) Mr. TAYLOR (reading from "Exhibit No. 2948") : I am indebted to you for notification of my election as a Director of the Canton Company Canton Railroad. This is very highly appreciated and about the only way I may reciprocate is to assure you of my loyal co-operation at all times. With best wishes to you and yours for the New Year, and hoping to have the pleasure of thanking you personally, very soon. So, Mr. Maguire felt that Mr. Elisha Lee was the moving spirit in his election? Mr. COUNTY. I guess he thought he was helpful. Mr. TAYLOR. Mr. Elisha Lee had no connection with Pennroad? Mr. COUNTY. Yes, sir; and I think Mr. Walter Maguire was wrong. I think Mr. County had him elected. Mr. TAYLOR. Did Mr. Lee think he was wrong? Mr. COUNTY. I do not know what he thought about that. Mr. County knew that, but he does not go around telling all his friends what he does for them. Mr. TAYLOR. I offer for the record, Mr. Chairman, a copy of a memorandum from the files of the Interstate Commerce Commission, which, in turn, was taken from the files of the Pennsylvania Railroad, or Pennroad, dated December 29, 1932, from Mr. Lee to Mr. Walter Maguire. Senator TRUMAN. It may be received. (The memorandum referred to was marked "Exhibit No. 2949" and is included in the appendix on p. 9401.) PURCHASE BY THE PENNROAD CORPORATION IN 1929 OF STOCKS OF THE SEABOARD AIR LINE, ATLANTIC COAST LINE, AND SOUTHERN RAILROADS Mr. TAYLOR. Mr. County, the Pennroad Corporation invested a substantial amount of money in stocks of the Atlantic Coast Line, the Southern, and the Seaboard, did it not? Mr. COUNTY. That is right; in the three railroads that connect with the Pennsylvania Railroad on the south, with which they exchange traffic. Mr. TAYLOR. The three major southeastern systems. Mr. COUNTY. Yes, sir. Mr. TAYLOR. None of those railroads runs north of Washington, D. C.? Mr. COUNTY. No; except, of course, out in the west the Atlantic Coast Line does. 111983-39-pt. 21--9 Mr.TAYLOR. The Pennsylvania Railroad and the Baltimore & Ohio compete for the traffic exchanged at Washington with these three systems, do they not? Mr. COUNTY. That is right. Mr. TAYLOR. There are no nother major competitors? Mr. COUNTY. No; not northern lines. Mr. TAYLOR. During the middle and latter part of the 1920's there had been a great increase in the perishable-freight traffic from Florida, had there not? Mr. COUNTY. Yes, sir. In fact, the whole South, from the time of the war almost up to date-up to 1932-had shown probably the greatest growth and the finest future. Nothing like it before had appeared in the South. There was extensive manufacturing. A great many New England people, even, had gone down there. The growth of population, money, and industries was tremendous. There was a large steel industry, fruits and vegetables, and the citrus business. It certainly was a delightful picture. Mr. TAYLOR. This perishable traffic was an unusually profitable business for those roads, was it not? Mr. COUNTY. Not unless it is carried in trainloads. Mr. TAYLOR. When carried in bulk it is an extremely desirable traffic? Mr. COUNTY. That is right. In a year like 1932, when people ate fruits and vegetables, even though they did not buy steel, coal, and things like that, it was a very desirable traffic to have. Mr. TAYLOR. The competition between the Baltimore & Ohio and the Pennsylvania to get this exchange of traffic at Washington was unusually keen was it not? Mr. COUNTY. I think it is keen at all times and my friends, Mr. Willard, Mr. Shriver, and Mr. Galloway are very live people. Mr. TAYLOR. Was not the competition especially sharp in this line of traffic? Mr. COUNTY. I suppose it may have been. In addition to the railroads, of course, there was the beginning of the very severe competition of the trucks on the highways. Mr. TAYLOR. During the 1920's both the Pennsylvania and the Baltimore & Ohio invested large amounts of money in big terminals for the perishable traffic. Mr. COUNTY. That is quite right. Mr. TAYLOR. You built terminals at Philadelphia and New York. Mr. COUNTY. Oh, yes; and at Pittsburgh, Detroit, and, I think, Chicago. Mr. TAYLOR. And the Baltimore & Ohio built a big terminal in Philadelphia. Mr. COUNTY. That is right. Both of us had terminals, and we enlarged them very much. Mr. TAYLOR. The Seaboard Air Line had never been a particularly profitable carrier up to 1927 or 1928, had it? Mr. COUNTY. That is my understanding. Mr. TAYLOR. The collapse of the Florida real-estate boom in 1926 and 1927 had brought about a decline in its earnings. Mr. COUNTY. I think that is so. We had a series of most extraor dinary occurrences. We had the hurricane, the Mediterranean flv. the blasting of all the real-estate investments, and the closing of the banks. I do not know whether there was an earthquake or not. I think that was the only thing that was missing. Mr. TAYLOR. The fixed charges of the Seaboard had been substantially increased just before and during the Florida boom, in order to finance new construction down there, had they not? Mr. COUNTY. That is right. Mr. Warfield had built that southern Florida extension, and the way Florida business was going at that time, he thought—and perhaps some of the rest of us thought-that half of the United States was coming there. Mr. TAYLOR. In the early part of 1929-I believe Moody's Manual shows on May 27, 1929-the Seaboard had announced a plan of voluntary readjustment of its finances, had it not? Mr. COUNTY. Yes. Mr. TAYLOR. That called for changing some of its debt into stock through an exchange offer. Mr. COUNTY. That is right. Mr. TAYLOR. The principal bankers for the Seaboard were who? Mr. COUNTY. I think there were two groups at that time-Dillon, Read & Co., and Ladenburg, Thalmann & Co. Mr. TAYLOR. The principal bankers were Dillon, Read & Co., were they not? Mr. COUNTY. I think so, but they worked in and out of the Seaboard. Both had been interested in the finances of the Seaboard, or parts of it, for years. Mr. TAYLOR. In 1929 the Seaboard was also in need of cash, was it not? Mr. COUNTY. I assume so. I will tell you what was going on. This readjustment of its finances to which you referred had been worked out in the early part of 1929-the end of 1928 and the early part of 1929-and a very attractive proposition at that time was brought forward, including subscriptions, and new stock, and was laid before the Interstate Commerce Commission. Mr. TAYLOR. They proposed to raise this new cash by offering a new issue of common stock for subscription by the Seaboard stockholders. Mr. COUNTY. That is right. Mr. TAYLOR. This was to be no-par stock. Mr. COUNTY. No-par stock. Mr. TAYLOR. And the offering was to be underwritten by Dillon, Read & Co. and associated banking firms. Mr. COUNTY. That is right. Mr. TAYLOR. Did Dillon, Read & Co. believe that the Pennsylvania Railroad Co. might be interested in making an investment in the Seaboard? Mr. COUNTY. I think they did. Mr. TAYLOR. Did they approach the Pennsylvania Railroad Co. with reference to that? Mr. COUNTY. They did. Mr. TAYLOR. Who was the partner of Dillon, Read & Co. who handled this matter? Mr. COUNTY. Mr. Bollard, I think. Yr. TAYLOR. Mr. Ralph Bollardỉ Mr. COUNTY. I do not know what his first name is, but he is one of the partners of Dillon, Read & Co. Mr. TAYLOR. Mr. Colpitts, of Coverdale & Colpitts, was also interested in the Seaboard, was he not? Mr. COUNTY. Yes; they were interested because they had made a full review and study of the Seaboard and its future, and what was needed on the property, and had made a very thoroughgoing review of its operating features, traffic features, and so forth. Mr. TAYLOR. Mr. Colpitts was a director, was he not? Mr. TAYLOR. Was he not interested in the syndicate underwriting the Seaboard stock? Mr. COUNTY. He was in the syndicate, and so was Mr. Coverdale, too. Mr. TAYLOR. I offer for the record, Mr. Chairman, a copy of a memorandum from the files of the Pennsylvania Railroad Co., dated July 11, 1929, signed by Mr. Jay Cooke. Senator TRUMAN. It may be received. (The memorandum referred to was marked "Exhibit No. 2950" and is included in the appendix on p. 9401.) Mr. TAYLOR. Mr. Jay Cooke was a director of the Pennsylvania Railroad Co. ? Mr. COUNTY. That is right. Mr. TAYLOR. And a voting trustee and director of Pennroad? Mr. COUNTY. Yes. Mr. TAYLOR. This is addressed to Warren Wells. Is he General Atterbury's secretary? Mr. COUNTY. He was at that time. Mr. TAYLOR (reading from "Exhibit No. 2950") : Advise Mr. Morris I expect to meet Mr. Bollard and Mr. Colpitts in Mr. Atterbury's office at 10:05 tomorrow, Friday morning if he will be in town. Would be glad to have him at meeting. So that apparently Mr. Colpitts and Mr. Bollard approached Mr. Morris and Mr. Cooke and General Atterbury in July with reference to this Seaboard matter. Mr. COUNTY. Yes, sir; not only Cooke, but Atterbury and Morris were directors of the Pennroad. Mr. TAYLOR. Did they approach them in their capacity as directors of Pennroad, or officers of the Pennsylvania Railroad? Mr. COUNTY. As directors of Pennroad. Mr. TAYLOR. You think that was what they had in mind? Mr. COUNTY. I am sure of that. Mr. TAYLOR. The Pennsylvania Railroad Co. was interested, was it not, in having, directly or indirectly, an investment made in the Seaboard? Mr. COUNTY. I do not think so. I would be very glad in every way to see the Seaboard and the Atlantic Coast Line and the Southern Railway all in as friendly relationship as possible with the Pennsylvania Railroad System. We had had long connections, and it would not pay, and we would not attempt to play favors with any single company, because it would simply have thrown its traffic, and all the years of building up relations, into the hands of the Baltimore & Ohio, to use plain language. Mr. TAYLOR. In other words, General Atterbury was worried if the Pennsylvania Railroad or Pennroad invested in the Seaboard alone, it would prejudice your traffic relations with the other two southern carriers? Mr. COUNTY. I think he was. Mr. TAYLOR. I offer for the record, Mr. Chairman, a copy of a memorandum from the files of the Southern Railway, file 6876, designated "Pennroad Corporation," dated September 20, 1929, signed by Mr. Fairfax Harrison. Senator TRUMAN. It may be received. (The memorandum referred to was marked "Exhibit No. 2951" and is included in the appendix on p. 9402.) Mr. TAYLOR. Mr. Fairfax Harrison was president of the Southern Railway at that time? Mr. COUNTY. He was president of the Southern Railway. My thought on the subject which you brought to my attention in our conversation last Tuesday has crystallized as follows: An investment by the interests which you represent in the stocks of the Southern, A. C. L., and S. A. L. is your business rather than ours and presents no apparent cause for complaint by us so long as that investment shall be kept balanced and thus involve no temptation to disturb existing traffic relationships. On the other hand, I cannot escape the conclusion that the acquisition by you of any financial interest in the Norfolk Southern would tend to endanger your relations with your southern connections at Potomac Yard, and, quite frankly, we could not regard your entrance into that situation with complacency. Mr. County, that letter indicates, does it not, that Mr. Harrison felt that if the Pennsylvania or the Pennroad invested in any one of these three major carriers, it should make a balancing investment in the other two? Mr. COUNTY. It is the Norfolk Southern you are speaking of here. Mr. TAYLOR. That is in the last sentence. Let me read again the first sentence [reading from "Exhibit No. 2951"]: An investment by the interests which you represent in the stocks of the Southern, A. C. L., and S. A. L. is your business rather than ours and presents no apparent cause for complaint by us so long as that investment shall be kept balanced and thus involve no temptation to disturb existing traffic relationships. Mr. COUNTY. That is right. Pennroad had already made an investment, if I recall, in the stock of the three companies. I have forgotten the dates. Mr. TAYLOR. That was subsequent to this, was it not, Mr. Ogden? Mr. OGDEN. Pennroad's investment? Mr. TAYLOR. It was subsequent to September 20, 1929. Mr. OGDEN. Yes. Mr. COUNTY. How much subsequent ? Mr. OGDEN. About a month or two. Mr. TAYLOR. In other words, this was before the investments were initiated. Mr. COUNTY. Yes. Mr. TAYLOR. President Harrison is telling General Atterbury that if they invest in one they ought to make a balancing investment in the others. Mr. COUNTY. Yes. He says he regards the investment in the three roads with complacency, but the Norfolk Southern—— |