because of the frequent junctions with the trunk lines, hence its earnings are such as to be wholly-well, they do not earn operating expenses. We regard that as a short line. The Atlanta & West Point Railroad is less than 100 miles long and we regard it as a trunk line. It is practically a funnel through which heavy trains run to New Orleans and its earnings are probably $20,000 a mile.

Mr. DOREMUS. There must be figures available somewhere showing the proportion which the mileage of these short lines bears to the total mileage of the country.

Mr. ROBINSON. Mr. Doremus, we have said that these short lines aggregate about 35,000 miles, but you asked for the average length. I was trying to give you some idea of the difficulty in the way of ascertaining that average. We can work it out and supply it to the best of our ability if that is desired by the committee.

STATEMENT OF MR. BEN B. CAIN, 713 UNION TRUST BUILDING, WASHINGTON, D. C.

Mr. HAMILTON. Mr. Cain, where do you live?

Mr. CAIN. I live at Dallas, Tex. I am here, or have been here for something over a year doing what I could for the salvation, I believe, Judge Sims styles it, of the short-line railroads. I am one of the executives of the American Short Line Association, vice president and general manager of the Gulf, Texas & Western Railway Co.

I have no prepared presentation. Mr. Chairman, and the patience as well as the manifest intelligence with which members of this committee have conducted this hearing lead me to believe that I should be as brief as possible, and I promise you I will; but in advance of the presentation of such amendments as we have prepared, I think it would be helpful that I should make some general observations in support of the principles which we desire to have you consider in the way of amendments to such bill as may be enacted.

Mr. Chairman, as I proceed, since we are presenting this in a somewhat informal way, it will not disturb me if members of the committee see fit to ask questions. Indeed, I believe the most helpful way in which we could proceed in the further consideration of this question is possibly through colloquial discussion.

I think every man who is familiar with the situation that confronts our country realizes that transportation is face to face with a crisis that threatens not only the comfort and the welfare of the people, but, perhaps, our national economic structure.

The issue between Government ownership and regulation through private control and operation is here. If we are to continue the operation of these properties through private control, it must be through the wisdom of Congress in providing a constructive policy that will put these properties upon a different financial footing. The financial question is at the bottom, and whether the properties are to go into Government ownership or to continue in private ownership depends upon whether we have the wisdom to put them in sound, financial condition through regulation.

We think, Mr. Chairman, that the subject must be considered in its national aspect. We are in an age and in a country where no

nan liveth unto himself. If the farmer should cease to attend his arm or to work his farm, and the shepherd should discontinue to end his flock, and the ranchman or the herder should discontinue his activities with his herd, the fires of every factory would go out and he doors of every shop and every office and every institution would be closed. If our transportation system should suddenly fail, the effect would be as though all this had happened.

The railroad is the means through which we have our sustenance ind through which we conduct our activities, and therefore should be considered as a national question. It should be considered, and so far as my presentation shall go, it will be considered from the standpoint of the public interest.

Ten years ago when I chartered the railroad which I constructed in the State of Texas, I knew that power had been reserved to Congress to regulate the commerce between the States and that that power reserved was as potent as though it had been written in my charter. Whatever doubt I may have had as to the limitation of the power of Congress with regard to regulation of the roads in the past, that doubt, if I had any, has long since been removed. So that now I do not believe there is any limitation on the power of Congress short of the public interest. Wherever the public interest ends, private right may come in.

Therefore, Mr. Chairman, what I shall say, and the propositions which I shall submit to you will be more largely from the angle of the general or the public interest rather than my interest as part owner of a short-line railroad, and it would be the same if I owned the largest railroad in the United States.

If I were not an American citizen, I would be content, perhaps, to take either of the plans that have been presented, and either of the plans which I think must inevitably be adopted by Congress, namely, Government ownership, which under any plan must pay me for my property according to its value, or regulation which we know must ultimately find its solution in the absorption or consolidation of the weaker roads. Looking at the problem from my position as representative of a short-line road, I realize that taking either horn of the dilemma, my days as a short-line railroad owner are like those of man-" of few days and full of trouble." Therefore, I am interested, and I shall present my views, more largely from the standpoint of an American citizen than from the standpoint of a short-line railroad owner.

Mr. HAMILTON. Broadly speaking, what do you mean when you speak of a short-line railroad?

Mr. CAIN. Mr. Hamilton, there are in the United States about 1,000 railroads doing a general transportation business. Out of that 1,000 there are not quite 200 numbered as class 1 carriers, and the others are in class 2 and in class 3. There are just 14 railroads in the United States whose stock has sold at par and above from the year 1914 up to January 1, 1919. Those 14 railroads have a total mileage of 50,286 miles. There are over 900 other roads, exclusive of the 14 which I have listed before me, and out of that total, the 900 roads have a mileage of 205,672 miles.

According to a statement filed by Commissioner Woolley, which I find in volume 1 of the Senate hearings on the "extension of tenure

of Government control of railroads," at page 407, et seq., there is a list of all of the railroads which were in Federal control January 2, 1919. The total roads in Federal control according to that statement are 621, which includes the 14 to which I have alluded. Out of the 621 railroads 66 of them are roads over 500 miles long, 555 are less than 500 miles long, so that in that category are what you might call all the short lines and a few of the weak lines of the United States which are in Federal control.

Mr. SIMS. When you say 500 miles long you mean all the mileage

Mr. CAIN (interposing). All the mileage that they own.

Mr. SIMS. Yes.

Mr. CAIN. The total mileage. I am glad you raised that point. Mr. MERRITT. Single track.

Mr. CAIN. Yes; single track.

Mr. MERRITT. I mean that there are 500 miles of single track. Mr. CAIN. Yes; 500 miles or less of single track, exclusive, of course, of sidings and spurs.

Mr. DOREMUS. Does it necessarily follow that because the stock of a railroad is selling below par that it is not earning dividends on its stock?

Mr. CAIN. Well, I am not prepared to answer definitely that question, Mr. Doremus, but I think that roads that have regularly earned dividends and paid dividends their stocks are around par and above

par.

Mr. DOREMUS. I have in mind the Atchison, Topeka & Santa Fe, and my recollection is that that railroad pays 5 per cent on its common stock.

Mr. CAIN. Yes; and always up to recent years that stock was above par; that is, it was above par as late as 1916 and from time to time since then, even in the present year 1919.

Mr. DOREMUS. It has been selling below par, if my recollection serves me right, for a number of years.

Mr. CAIN. In the last year I know the stock has declined, so that it was in the eighties. I happen to know about the Atchison because I represent some children who own stock in that road.

Mr. DOREMUS. Is not that also true of a number of the other big roads?

Mr. CAIN. Yes. There is but one road in the United States at this time, I believe, or perhaps two, whose stocks are selling above par; that is, from the quotations I have observed within the last two days. One of these is the Union Pacific, whose stock is quoted at 125, and the other is the Southern Pacific. On account of a decision in California, which affects the rights of the Southern Pacific to oil lands, which was decided in their favor, that stock went above par within the last two days.

Mr. DOREMUS. The Delaware & Hudson, I think, is paying 9 per cent, and has for a long time, and yet its stock at the present time is selling for a little above par. What I am getting at is whether the fact that the stocks of many of these roads are selling at so low a price on the market now is an indication of any inherent weakness in the road itself.

Mr. CAIN. Oh, not at all. I did not so present it. I did not present it for that purpose, but I did present it for the purpose of show.

ng you gentlemen the difference between a strong road and a weak road in a crisis, showing you that there are a very few strong roads hat can weather a storm such as we are in now, whereas the other roads can not weather it, and I think it brings sharply to your attention the necessity for such legislation as will take care of this great ransportation machine as a whole.

Mr. HAMILTON. Mr. Cain, is not the term "short line" really a misnomer, because these lines may be comparatively long lines and interstate lines, and they may be comparatively strong lines also.

Mr. CAIN. Mr. Hamilton, there is this distinction, which you ought to keep in mind: The short line in its general acceptation means a short feeder or producer road, in contradistinction to an intermediate carrier or a longer road that has overhead business. Of course, there are some short roads that are intermediate carriers. There are some short roads that are as strong as the strongest road I have listed in the 14 roads here, but they are strong because they do a through business.

Mr. HAMILTON. A good many people think of them as intrastate roads mainly.

Mr. CAIN. Yes; they are largely and perhaps almost altogether intrastate roads, in so far as their physical location is concerned. There are some short roads of a few miles that extend across a State line and are therefore interstate. I think, with you, that it is a misnomer to speak of the short roads as being a designation that would cover the weak roads. I think that the short roads generally are in the nature of a branch line and serve the purpose that the branch lines do to the main or trunk lines.

Mr. MERRITT. Would it be proper to think of them as trunk lines and nontrunk lines?

Mr. CAIN. Yes; I think that would be a better classification, Mr. Merritt, for this reason: Trunk lines are roads that run from a ratemaking to a rate-breaking point. Therefore a trunk line might not be a very long line and yet be a trunk line. The road that does not reach a rate-breaking point would fall outside of the classification of a trunk road as we understand that term.

Mr. WATSON. During your experience have you found that trunk lines encourage the building of independent short lines?

Mr. CAIN. No, sir. On the contrary, Mr. Watson, I think that the short line or the branch line road necessarily suffers from a lack of what I might call sympathetic treatment. If the short line had the same kind of treatment as the branch line-that is, the independent short line, I think they would have been in a much better condition.

Mr. WATSON. I understand that trunk lines do not encourage the building of short lines as connecting roads. They regard the short lines as parasites and that they cause more trouble than their financial worth.

Mr. CAIN. If you will permit me to reply to that suggestion, I was talking with a gentleman of wide experience a short time agoit would not be improper for me to give you his name, because it was not confidential-it was Mr. Clifford Thorne-we were discussing the short-line problem, and he stated to me that a few years ago one of the strong system lines of the West had an annual meeting in

which they had up the question as to the value of its branch lines. and the matter was of such importance that the stockholders passed a resolution creating a committee of experts and financed that committee to make an exhaustive investigation as to the value of the branch lines to the system in order that it might adopt a policy of retaining those lines or doing away with them. The committee of experts made its investigation, and, after presenting the facts in detail, closed their report with this conclusion:

There is not a single branch line on your system paying operating expenses. And they follow that with this proposition:

Your system would be in bankruptcy if you did not have the branch lines. I asked Mr. Thorne if that report was available. He said. “I have it in my office." My recollection is he stated the name of the road. I would not be sure that my recollection is accurate about it, but I think it was the Burlington system. You may take another instance which occurred recently. Mr. Morse, who is the engineer of the Railroad Administration, a man for whom I have the highest respect and in whom I have the greatest confidence, made the statement in a recent paper that the branch lines of all of these roads brought the traffic to the junction with a deficit in the cost of hauling and that the trunk lines absorbed that deficit.

Mr. Robinson seems to have it in his possession. I will read it to you:

Taken alone and considered as a unit, practically none of these small branch lines pays expenses, but as gatherers of freight and passengers to increase the density of traffic on the main line they are a source of profit. As after the traffic gathered by them is turned over to the main line with a deficit attached, which has to be overcome through the main-line movement before any profit is made, it would be a decided advantage if this traffic could be delivered to the trunk line by means of the motor truck, tractor, and automobile without this bill of expense attached.

Mr. HAMILTON. Did you hear Mr. Bryan's plan?

Mr. CAIN. I am sorry I did not. I was only present a part of the time.

Mr. HAMILTON. As outlined, his plan provides that the Government should control a trunk system which should touch every State in the Union and that the States should own the intrastate roads, each State owning the system within itself, and the trunk system then would take the traffic of the various State systems; but he argued that the Government would not by that plan be controlling all the paying business, that the business of the State systems would be practically as good as governmental trunk system. Your statement here seems to contradict the conclusion of Mr. Bryan in that

connection.

Mr. CAIN. Judge, from my experience I have had considerable experience as an operating man as well as a constructor of railroads, and I have had much to do with short lines-I do not believe any railroad, long or short, can live on its local rates. It must share in through business to be successful.

Mr. HAMILTON. That is, it is essential to have the through business also?

Mr. CAIN. Yes, sir. You would perhaps be interested to know that the through business as contradistinguished from the local business of the railroads of the country is as much as 85 per cent.