The CHAIRMAN. They make complaint, however, that they are really discriminated against in that regard.

Mr. CAIN. Yes; there is a discrimination.

The CHAIRMAN. Do you think that matter should be covered by the provisions of the bill?

Mr. CAIN. I have not thought that it was necessary to mention an industrial line or a plant facility, or anything else. I think that any road doing a general transportation business or any road coming within the terms of this act and doing interstate commerce, would cover the industrial line as well as the other.

The CHAIRMAN. Of course, the industrial line connects with the trunk lines, and hence its product gets into interstate commerce? Mr. CAIN. Yes.

The CHAIRMAN. And it would be under the regulatory control of the pending bill, under the amendments you have suggested? Mr. CAIN. Yes.

The CHAIRMAN. Therefore, you do not think it would be necessary to specifically legislate for the Independent lines?

Mr. CAIN. I do not think so. I do not think it is necessary. The CHAIRMAN. Are these short lines, so-called, embarrassed by reason of the operations of the boiler inspection act?

Mr. CAIN. My experience is not very-in fact, it is confined to my own road. I have never been very much embarrassed, because I have been able to get rather liberal treatment on the part of the inspectors who came. Of course it has necessitated a very considerable expenditure which we could ill afford at the time.

The CHAIRMAN. Any other questions? If not, we will hear from Mr. Cass.

STATEMENT OF MR. L. S. CASS, REPRESENTING THE AMERICAN SHORT LINE RAILROAD ASSOCIATION.

The CHAIRMAN. Give your name and address and whom you rep

resent.

Mr. CASS. L. S. Cass; home Waterloo, Iowa. I am president and principal owner of the Waterloo, Cedar Falls & Northern Railroad. an electric railroad now being operated by the United States Railroad Administration. I am also receiver and president of the reorganized corporation of the Kansas City & Northwestern Railroad, not now being operated by the United States Railroad Administra tion.

My railroad experience covers a period of 37 years in various departments. I was formerly with the Chicago Great Western Railroad. I started on that property in 1885, went through all departments, train service, station agent, telegraph operator, train master, superintendent, assistant general manager, general traffic manager, and vice president of the property.

Mr. Chairman, I had made a number of notations upon the subjects which I felt that I wanted to address this committee upon, but in going through the work this afternoon with Mr. Cain, and the questions that have been asked Mr. Cain, that has more or less disarranged the various subjects that I was going to take up. I see that it is very near your closing time. Without wishing to thrash

er any of the straw that has gone already through the mill, and king up merely that part of some of the subjects which I feel have t been fully cleared up in your minds, if I might suggest, I should e to start on my general proposition, and general statement to you ntlemen in the morning, if that is agreeable to you. It is now arly 5 o'clock.

The CHAIRMAN. We will run to 5 o'clock, anyway. We will utilize ery minute until 5 o'clock.

Mr. Cass. What did you say?

The CHAIRMAN. We will continue until 5 o'clock.

Mr. CASS. The short-line railroads in this country are now and ve in the past, ever since I have known anything about the shorte situation, suffered through their inability to make proper trading rangements with the stronger trunk-line railroads. I have myself t in judgment upon the short-line railroads as a trunk-line traffic anager, and I do not know of any short-line railroad division, in 1 of the short-line divisions that I have come in contact with as a affic manager of a trunk-line railroad and as an executive of the merican Short Line Railroad Association, which work I have been rrying on in connection with Mr. Robinson and Mr. Cain since the eat short-line trouble and the great railroad problem has become e problem that it is now-I do not know of a single division that is ir to the short-line railroads.

I never made a division when I was a trunk-line executive that was solutely fair to the short-line railroad, and I do not believe any her trunk-line executive ever started out and absolutely made a ivision with a short-line railroad that was a fair division.

The theory upon which divisions with short-line railroads have lways been made in the past has been based upon the service perormed by the two carriers, and that service is generally considered ne number of miles each carrier hauls the freight, with a minimum f 25 per cent to the short line. There is no rule or reason why that hould have ever been the division, but there had to be some division etween the railroads, and the trunk lines felt that a mileage pro rate ith a minimum of 25 per cent was a pretty fair division between the runk lines, because where the trunk lines to-day carried his freight short distance and got the 25 per cent, to-morrow the shoe would e on the other foot, and he would get the long carriage of freight gainst the other trunk-line neighbor.

There is not a trunk-line man to-day-and I say this advisedly— tho will give you a reason or a rule for making divisions with shortine railroads other than the service performed, or some other charcter of a similarly unfair statement. The rule for making shortine divisions in the past has more or less been a matter of barter ind trade. If a short line was built, and it was built where there vas a great deal of competition, then the longer lines, when traffic was thin and they wanted business, would go in and bid for this felow's traffic, and in that way some of the short lines got good divisions. They were not made because the fellow thought it was the fair division to give the short line, but they were made because they wanted the traffic.

But that lasted for a very few years. As time went on, the trunk lines began getting together and discussing the situation, and finally

arrived at the general proposition of a mileage pro rate with a minimum of 25 per cent to the short line. There is not a short-line division with an independent short line, I do not believe, in the United States to-day that grants to the short line an equal sum for the serv ice performed that it would cost the trunk line to perform the same service on its own lateral branch lines. Their rule for making divisions has been and is now based upon a division less than the cost of the same service to their main line for branch and lateral line _service.

There are many things that enter into the making of a short-line division, and the short-line division is so vital to the existence of the short line that we feel it is absolutely necessary to permit the commis sion to say what the division shall be between the short-line and the trunk-line railroad, taking into consideration the necessities and cost of service of the short line as well as the trunk line; in fact, as well as all of the lines performing the service.

Now, if I may illustrate: You take the division of a mileage prorate with a minimum of 25 per cent, and I will show you how unfair a division of that character is, and that is the division that has been enforced upon these weak roads, and it will continue to be enforced upon them unless the weak roads are given protection by the Interstate Commerce Commission, with mandatory instructions from Congress.

A shipment starts from a point of origin to the point of destination. The short line draws that shipment 50 miles; the trunk line draws it 200 miles. Therefore, the trunk line says that "You should have that proportion of the rate that 50 miles is to 250 miles." Not at all. The short line performs every service in connection with that ship ment that the trunk line performs, except the difference in the actual cost of transporting it over its rails. The short line solicits the freight, it bills it, it issues the bill of lading, it switches it, puts it in its train, and draws it to the trunk-line connection, and there the trunk line puts it in its train and it draws it to its destination. At its destination the trunk line expenses it, collects the freight, and remits the short line's proportion to the short line.

The shipment that moves in the other direction, of course, the operation is reversed. The trunk line bills it and the short line collects.

Therefore, the only actual service that is performed between the short line and the trunk line that is not identical is the distance traveled by the shipment over the two railroads. Therefore, it comes to the cost of transporting the freight.

The cost of transporting freight upon all of the railroads in the United States before the war, when I was familiar with the total cost--and I think it is somewhere near those figures now-was 36 per cent of the rate. Thirty-six per cent of the rate is all that it has cost to transport the shipment over the rails.

Mr. SIMS. Both long and short?

Mr. CASS. Yes. Therefore, as a matter of fact, instead of a mileage prorate with a minimum of 25 per cent of the total rate, it should be a mileage prorate of the cost of transporting the shipment, mileage prorate of 36 per cent of the actual rate. There are not any of my trunk-line brothers that will subscribe to that doctrine, because

or 3

does not give them enough of the rate, and I am simply illustrating here to show you that the best method now used of dividing rates tween the short line and the trunk line is not fair; it has never been ir; and it never will be fair if it is left to the strong lines to say at the short lines shall have.

Mr. WEBSTER. Do you think the amount that should be prorated the 36 per cent, and that the remainder should be divided equally? Mr. Cass. It should be; yes, sir; each performing the same service, cept distance traveled; that that is the very minimum fair division at can be made between a short line and a trunk line.

Mr. SIMS. What are the facts? As a rule, is there more freight at originates and comes off the short line onto the trunk line, or is ere more freight that originates on the trunk line and goes onto the ort line? Or is there any difference?

Mr. CASS. Depending largely upon the nature of the short-line bad. A railroad in a coal-producing country is almost entirely an riginating railroad-a short line. We will take the two short lines hat I am the principal owner of. One is 140 miles long and the ther is 200 miles long. They are both through agricultural terriory and manufacturing districts, and the business of both is about venly balanced-that which comes on and that which goes off. But should say that in the territory north of the Ohio River and north of the Oklahoma State line, which is largely agricultural, that the usiness that originates on the short line and that which comes to it 'rom the trunk line is very evenly balanced.

Mr. SIMS. But the mileage haul of the trunk lines on the average s longer?

Mr. CASS. How?

Mr. SIMS. I say, but upon a mileage basis, the mileage haul upon the trunk line on an average is greater than on the short line?

Mr. CASS. Very much greater. Now, as to the divisions of short lines which we hear so much about that never should have been built; we hear in discussing this problem that this road and that road and the other road never should have been built. As a matter of fact, a large percentage of our trunk lines were at one time short lines. They were made up of a piece of road here and a piece of road there and a piece of road somewhere else, until they have grown great.

Mr. SIMS. There are 140 of them in the Pennsylvania system. Mr. Cass. Yes. Now, I am approaching this subject with the assumption that substantially all of the railroads in the United States are a necessity and perform a real service. I have not had anyone tell me what railroads never should have been built, and I do not know what railroads never should have been built; and I do not known what weak railroad now actually should not be sustained. I do know a good deal about the things that happened to the weak railroads. I happened to be on the Chicago Great Western Railroad years enough, struggling with that property, to know what the strong railroads could do with it, and did do to it, in the matter of divisions and traffic. I feel that it is very essential; in fact, I feel that one of the most important duties or one of the most important things that Congress has before it, if it is going to stabilize the railroads as a whole and avoid Government ownership, is to give to the Interstate Commerce Commission, or whatever other regulatory body may be

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created, the right-and make it the duty of that commission-to so divide the rate that it will sustain the weak line and the trunk line, in order that they may function properly for the people who are dependent upon them for transportation.

In addition to dividing the rate, it is also necessary that they should have the right to direct the routing of traffic, because the dividing of a rate without traffic does not mean anything. There would be nothing to divide. And if you go on with the consolidation of these railroads, as now seems to be the idea of the country in general, to make a few large, strong railroad systems, if you go on with the consolidation of these systems you are going to consolidate the weak line into a much weaker position than it now occupies.

I have in mind-I do not care to call the name-but I have in mind a weak railroad of 1,400 or 1,500 or 1,600 miles of track. No one would suggest that 1,500 or 1,600 miles of track that had been performing a railroad service in the United States for 30 years ought to be abandoned and taken up, and yet I feel that if the commission does not have the right to protect that property it can not possibly exist when the roads are turned back to their owners. If you can not direct traffic sent over that railroad, one consolidation that is partly now made through stock ownerships will so surround this 1,400 miles of railroad that it must live absolutely upon the local business within its territory.

And in that connection I beg to say to you that, in my opinion, no railroad can live upon its own local business. Edward Chambers said to me sometime ago that the Santa Fe Railroad could not live upon its own local business. If the Santa Fe can not live upon its own local business, what of these other railroads that the stronger lines are attempting to make live upon their own local business?

The CHAIRMAN. This may be a proper place to suspend, Mr. Cass. We will recess until 10 o'clock in the morning.

(Whereupon at 5.10 o'clock p. m. an adjournment was taken until to-morrow, Thursday, September 4, 1919, at 10 o'clock a. m.)

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

HOUSE OF REPRESENTATIVES, Thursday, September 4, 1919. The committee met at 10 o'clock a. m., Hon. John J. Esch (chairman) presiding.

Mr. ROBINSON. Mr. Chairman, with your permission, Mr. Cain, in the hurry of yesterday, apparently omitted one of the amendments and practically the most important amendment we have to propose. There is some confusion as to whether it was presented or not, and we want to ask permission for Mr. Cain to present that amendment before Mr. Cass goes on the stand.

The CHAIRMAN. Very well.

Mr. CAIN. The amendment is at line 22, of page 24, of the committee print. After the word "operated " we suggest this insertion:

And the commission on complaint or upon its own initiative without a complaint, shall exercise the power and the authority to establish through routes, joint classification regulations and practices, and joint rates as the maximum or minimum, or maximum and minimum rates to be charged, also, the divisions