have them somewhere. If you would like me to present them I will be glad to do so.

The CHAIRMAN. I will ask you to incorporate them as a part of your hearing. In view of the fact that it is quite necessary to get through this morning, because there are three or four other witnesses to be heard, I will only ask one more question, and then others can use the time. I hastily examined the names on your memorial but failed to find the Mutual Life Insurance Co. of New York, the Equitable Life Assurance Society, by name, and the Northwestern Mutual Life of Milwaukee, three of the largest insurance companies in the United States.

Mr. WARFIELD. The Mutual Life I alluded to when I spoke of the president of one of the large companies being a railroad executive. In view of his dual position I had not approached him on the subject at all. Mr. Peabody, the president of the Mutual, is a member of our advisory committee, also president of the Illinois Central Railroad and a member of the Railway Executives' Association. Insofar as the Equitable is concerned, I have also explained that situation in answer to Mr. Cuyler's statement before this committee. The CHAIRMAN. Yes; I understand.

Mr. WARFIELD. In the case of the Northwestern Mutual Life, I do not know whether it has signed or not.

The CHAIRMAN. I have run over the Wisconsin list very hastily. Mr. WARFIELD. So far as I recall, it is a member, but I would not like to state that as a fact.

The CHAIRMAN. As to developing a surplus which is to be distributed either as you distribute it or the transportation conference wants to distribute it, there has been testimony that there is likely to be no surplus.

Mr. WARFIELD. Of course, Mr. Chairman, is not that a matter really for the Interstate Commerce Commission to decide? In taking up this question of the minimum we started first with 7 per cent with the idea that it would require that, in fact we had 7 per cent. in the original plan, but after numerous discussions with our attorneys, it was decided that it would be better not to make the minimum percentage return greater than we felt could be secured in any suit at law. That is one of the reasons why we have felt there ought not to be any hesitancy on the part of Congress, if you please, to make that the fixed minimum. The question of surplus is entirely in the hands of the commission to raise the minimum one-half of 1 per cent or more if they wish a greater surplus. In using the 6 per cent as the minimum and the term "not less than 6 per cent on the aggregate railroad investment as a whole," we mean this literally. In other words the return to some individual railroads may and will be much less than 6 per cent. The minimum of 6 per cent is only the peg below which the commission must not go. But it goes without saying that if the commission finds that this minimum figure must be increased to insure the stability and success of the transportation system it must then be increased. This fixed minimum will stabilize railroad credit as it has not been stabilized before.

Mr. SIMS. In the memorial in one paragraph it says: "No citizen of the United States is by any State or Federal law required to loan. money for less than 6 per cent." Mr. Warfield, that would clearly

indicate that it would require a man to loan money in excess of 6 per cent. I do not understand that to be your meaning.

Mr. WARFIELD. No, sir; it is not so intended.

Mr. SIMS. Where is there any law which compels a citizen to loan money at any rate of interest?

Mr. WARFIELD. Where is that?

Mr. SIMS. In the fifth paragraph on the first page of your memorial. It reads: "No citizen of the United States is by any State or Federal law required to loan money for less than 6 per cent." That would not prevent them from loaning money at any rate less than 6 per cent?

Mr. WARFIELD. That is very true.

Mr. SIMS. But it creates the impression that they are compelled to loan money at a certain rate; that is, above 6 per cent?

Mr. WARFIELD. That is not the intention, and I do not feel it can be so construed.

Mr. SIMS. I do not recall all of the features of your plan, but I think it has many good features. A railroad having earnings in excess of the 6 per cent, or whatever it is under the standard-that is, above that would become an outlaw, as you have said, and very properly, the profits of the owners of the property in the past measured by that standard, have been obtained from excess earnings, but nobody could bring a reparation suit against them for having received above that rate?

Mr. WARFIELD. No; not in the past.

Mr. SIMS. Not so far as the past is concerned?

Mr. WARFIELD. No, sir.

Mr. SIMS. And such excessive earnings are inevitably under regulation, as I understand?

Mr. WARFIELD. Yes, sir.

Mr. SIMS. That is an admission?

Mr. WARFIELD. Yes, sir.

Mr. SIMS. So it is impossible to prevent excess earnings under your plan or any other, but you provide for the distribution of the excess, first, one-third to the road making the excess?

Mr. WARFIELD. Yes, sir.

Mr. SIMS. That is in the nature of an incentive?

Mr. WARFIELD. Yes, sir; that is the idea.

Mr. SIMS. And one-third to the employees of the railroads as an incentive to them to make something more than the wages they receive?

Mr. WARFIELD. Yes, sir.

Mr. SIMS. And one-third to be devoted to the public interest, as you have determined, by the Interstate Commerce Commission? Mr. WARFIELD. Yes, sir.

Mr. SIMS. That does not prevent the accumulation of an excess, but it shows what to do with the excess?

Mr. WARFIELD. Yes; that is the idea.

Mr. SIMS. But the parties who pay these rates, except to the extent of the public interest, never participate in that excess; they lose 100 per cent of the excess by paying the excess, and they never, except indirectly, get a return on more than one-third of that which they have been required to pay?

Mr. WARFIELD. In the first place the excess is created by reason of the necessities of the great majority of the roads of the country. If you make a rate that will suit them and enable them to perform the service, if it goes below 6 per cent on the aggregate investment, they will not secure sufficient operating revenue. When you make the required rate, you necessarily make more earnings for the more favorably situated roads. That is the only way you can do it. If you do not take it away from the more favorably situated roads, you will never be able to make rates that will suit the great bulk of the railroads.

Mr. SIMS. Then, that is similar to the problem of the strong and weak roads; but inasmuch as only one-third goes to the public interest, it seems to me that it does not do as much good as it ought to do.

Mr. WARFIELD. If you will consider that just a moment, is it not in the public interest to have one-third of the excess go to the employees of the railroads?

Mr. SIMS. As an incentive?

Mr. WARFIELD. Yes. Does that not provide better service?
Mr. SIMS. That is, in the nature of profit sharing?.

Mr. WARFIELD. Yes, sir.

Mr. SIMS. I think it would have that tendency.

Mr. WARFIELD. Therefore, it is in the public interest, and therefore those who paid that rate have obtained something in the way of service. The one-third that we propose to be spent in the public interest for transportation we suggest shall be invested in buying equipment and that rates will not be increased as would be the case if each railroad was compelled to invest an amount in equipment equal to what would be thus invested from the excess earnings of all of the railroads after a fair and reasonable return is allowed each railroad, including sufficient to give incentive. If you can supply the congested areas of the country with equipment and we know that that has been the shippers' complaint in the past, we can provide better service to the shippers.

Mr. SIMs. If the equipment should go to the roads unable to supply themselves it would be indirectly transferring the earnings from the strong to the weak, that would result in the public interest?

Mr. WARFIELD. No such result is obtained; it would help all railroads alike for every railroad will receive the benefits from such equipment and this fund is thus transferred to the benefit of the shippers. The railroads ought to form a corporation for the purpose of buying the equipment for every road. This is one of the intentions of the National Railways Association to which I have alluded as part of our plan. Then the railroads will have the equipment necessary to give adequate service, and to meet the peak load, you may say. The railroads will not buy sufficient equipment because part of the time it will not be used. Therefore the shipper is not furnished facilities. If you get a plan under which you have a lot of floating equipment it will be of considerable benefit to the shippers.

Mr. SIMS. Undoubtedly.

Mr. WARFIELD. That is one of the purposes.

Mr. SIMS. Whether Government or corporation ownership, I can not get away from the idea that unified ownership, not unified opera

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tion in the sense that it is all done in one office in Washington, but unified ownership of the railroads, under which all the earnings go to the common owners-the equipment must be there-it would give the public the best service with the least burden-they would not have to pay more than they ought to pay?

Mr. WARFIELD. Do you believe that with one big unit you can get the incentive, the initiative of each person who is connected with it, and provide good service?

Mr. SIMS. There would not be extreme competition, but there would be extreme lack of reasonable charges for service at those points that are not competitive. In fact, private ownership can force that just as well as the Government?

Mr. WARFIELD. Yes, sir.

Mr. SIMS. With regulation and power to regulate being in a central body and if we have the Interstate Commerce Commission fixing the increase of the rates?

Mr. WARFIELD. I do not believe you would get good service.

Mr. SIMS. The weak roads would have to pay the same amount of wages, and if they had no excess earnings that would naturally drain from those roads the best of the classified operating officials or employees, because they would naturally go to the road where this onethird would make an increase, and you would have an incentive only on those roads where labor participated in the one-third of the excess earnings and on the other roads labor would be just as dissatisfied? Mr. WARFIELD. In the first place the great bulk of the roads of the country would have to earn up to the 6 per cent.

Mr. SIMS. Then there would be no incentive?

Mr. WARFIELD. There would be the incentive of getting up to the 6 per cent. That is the great incentive.

Mr. DENISON. As I understand, this one-third of the excess goes to labor and goes to all labor in the district, and not to the particular road?

Mr. WARFIELD. Yes, sir; that is the idea.

Mr. SANDERS of Louisiana. Following up the inquiries of Judge Sims, if one of the regions created under this bill should make, say, 12 per cent instead of 6 per cent, as I understand it, it would be devoted 2 per cent to the railroad, 2 per cent to labor, and 2 per cent to the public interest. Would it be clearly within the power the Interstate Commerce Commission to reduce the rate the next year in that region so that they would not make 12 per cent?

of

Mr. WARFIELD. Yes; the Interstate Commerce Commission could do that if it saw fit.

Mr. SANDERS of Louisiana. So as to bring the railroads to the 6 per cent basis?

Mr. WARFIELD. On the aggregate amount.

Mr. SANDERS of Louisiana. Would not that answer many of the objections suggested?

Mr. WARFIELD. Yes, sir.

Mr. SIMS. If you reduce it there will be no incentive to the men? Mr. WARFIELD. No sir; not if you go below the 6 per cent level. The CHAIRMAN. Mr. Warfield, we desire to thank you for presenting your case to us, making such a full presentation.

Mr. WARFIELD. I thank you, Mr. Chairman, and gentlemen of the committee, for your attention.

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
HOUSE OF REPRESENTATIVES,

August 29, 1919.

STATEMENT OF HON. WILLIAM JENNINGS BRYAN.

Mr. BRYAN. Mr. Chairman and gentlemen of the committee, in the first place I desire to express my appreciation of the privilege you extend to me of presenting my views on this subject, and I appreciate this opportunity all the more, because public thought is turning to the subject and the time is ripe for action.

It is difficult to get all the people to consider any question far in advance of the time of its solution, but when the time is ripe they consider what is said, examine plans, and decide.

If you will pardon an illustration, I was thinking this morning of a story I heard some years ago. An atheist was trying to present his side of the religious controversy to his own child, who was attending Sunday school. He wrote on the blackboard, “God is nowhere." The child looked at the statement and read "God is now here."

For years, when we have talked about Government ownership, the subject has seemed to be nowhere. We can now describe it as a subject that is now here. It is because it is here, and because the people are reading and thinking about it, that I appreciate this privilege of presenting here a plan that I have. tried to present for many years, but for which I have not found a hearing because the time was not ripe.

In the second place, I recognize that my views have no weight except as the reasons that support them may have weight. You have had before you persons who spoke for organization, some for security holders, some for stockholders, some for railroad managers. And you have had those who have spoken for labor organizations. When men speak for others, you weigh their words in proportion to the importance of the organization for which they speak, or in proportion to the numbers for whom they speak. I speak merely as an individual, as a citizen, and can claim no greater attention than you are willing to give to one who is interested in every problem of government and who has had some opportunity to consider this question and to watch the development of the forces that will finally settle it.

In order that I may present exactly what I want to say, I have written down and will read, with comments, certain propositions which I regard as fundamental.

The first question to be asked and answered is: Shall the railroads be owned and operated by private corporations or by the public? Until this question is answered we can not intelligently consider plans, because all the plans presented involve one theory or the other, and according as one takes the side of private ownership or the side of Government ownership, he will be interested in the plans that embody that idea. The first question to be decided, therefore, is that fundamental question, whether the railroads shall be owned and operated by private corporations or owned and operated by the Government.

This question must, in my judgment, be answered in favor of public ownership and operation of the railroads. I am led to this