r. LUHRSEN. Yes; and I will herewith submit a copy without ng the names.

The copy follows:)

> Six months ago this division was 100 per cent strong, and at the present we have the record of 7 nonmembers out of a possible 14. By putting and two together I make out that this condition exists on account of an lious, intimidating propaganda instituted by an official whose club was that › railroads are going back into the hands of private control shortly and dispatchers' list will be scrutinized closely, and those who belong to this ciation will be gotten rid of." Of course these things went on behind closed s and could not be proven, nevertheless the proof of the pudding lies in eating.

>) I have been told just recently that the railroads,

in particular,

et to put the concessions in effect immediately. In almost the same breath are making the assertion that as soon as Government control has been ished they expect to canvass the system and make it a point question Co whether they (the train dispatchers) will retain their membership in association or relinquish this right for the railroad.

his same subject may have been given your consideration some time ago, it was given me as a personal favor and I thought it best to advise of the fact.

Mr. COOPER. And as one member of the committee I would like know if such action as that is being contemplated by the managents of the railroads.

Mr. LUHRSEN. Well, I think you would be interested in it and I saying that I will be glad to give it to the committee. I do not ce to read it into the record and disclose the name of the places, e points, and the men from whom I have received it.

Mr. COOPER. Because I want to say that I believe this committee, d I might say this Congress, is going to use its best efforts to try bring the managements and their employees into closer and more iendly relations.

Mr. LUHRSEN. I hope so, and that is the only thing I wanted to do. wanted to see if we could not do that. I am not accusing the Railad Administration when I speak of the officers here in Washingn, the Director General or his director of operations, and that ass of men. I am not accusing them of doing anything of the kind. is caused further down, the general superintendents, the Federal anagers, that is the class of men who are still holding that private terest in their hearts in case they go back-where will we be if they ill maintain the old policies which did maintain?

The CHAIRMAN. Will you print order No. 8 as a part of your testiony?

Mr. LUHRSEN. It is in the statement I have submitted.

The CHAIRMAN. Mr. Luhrsen, Col. Winslow would like to ask you me questions after Senator Lenroot has concluded his statement. Mr. WINSLOW. Are you going to be here for some little time, and in you be here conveniently after Senator Lenroot is through? Mr. LUHRSEN. Yes; I will be very glad to.

The CHAIRMAN. The committee will now be glad to hear Senator enroot.

Senator Lenroot, do you desire first to make a statement without terruption?

Senator LENROOT. I should like to make a statement without interuption, Mr. Chairman, and then answer any questions that may be roposed.

The CHAIRMAN. Very well, Senator, you may proceed.

STATEMENT OF HON. IRVINE L. LENROOT, A SENATOR FROM THE STATE OF WISCONSIN.

Senator LENROOT. Mr. Chairman and gentlemen of the committee, I very greatly appreciate the opportunity of appearing before you and explaining the bill that I have introduced in the Senate proposing a solution of the railway problem.

I may say that for nearly 20 years I have been active as a legislator both in the State legislature and here, although I have never had the honor of being a member of your committee in railway legisla tion, my first experience being in the State Legislature of Wisconsin where I was one of the authors of the railway commission law of that State which proved so successful and which was copied by many States as a model.

In the consideration of the solution of the railway problem it so happened that Mr. Nathan L. Amster, of Boston, who has already appeared before your committee, and I, unknown to each other. came to almost the same conclusions with respect to what would be. in our judgment, a proper solution of this great problem. That being true, we collaborated upon the bill which I have introduced in the Senate.

I wish to say in the beginning that this bill is not intended in any sense as a substitute for the bill introduced by the chairman of the committee, Mr. Esch, or the bill introduced by Senator Pomerene in the Senate which, as I understand, has the indorsement of the Interstate Commerce Commission. This is rather supplemental to that or possibly may be considered as an entirely independent proposition, but there is nothing in this bill that conflicts in any way with any of the provisions of that bill. This bill that I am going to speak upon does not purport to deal with the immediate situation: it offers rather a permanent solution which will take some years to work out, and temporary legislation of some kind would be neces sary in any event if this plan should be adopted by Congress.

Of course, we all realize that there are two primary objects to be sought in all railway legislation-efficiency in operation and reasonable rates. The bill which I have introduced proposes a unification of all of the railroads of the country. It is true that if this plan should be adopted there would be no competition. I am not going t to argue this morning the advantages of competition because I de not think it is material to the situation that confronts us. We can not, in my judgment, have competition that is efficient and that will afford the necessary transportation facilities to this country unless t first, there be an incentive furnished to all who are responsible for efficiency to be efficient, and, secondly, we can not have reasonable rates unless there be that efficiency and, in addition, security to the investors in the railways. Any of the plans or all of the plans. I may say, that contemplate turning the roads back to their former owners permanently with no other solution, in my judgment, result in practically all of them being forced into bankruptcy unless rates are made so high as to be absolutely unreasonable to the public.

will

Now, we have all heard the complaint upon the part of the rail way owners, the executives, that the loss of credit on the part

of

the railroads prior to their being taken over by the Federal Government was due to the action of the Interstate Commerce Commission. I absolutely and unqualifiedly deny the truth of that statement, and I think that your committee, in the very full investigation they have made, have also come to that conclusion, because subsequent results have shown in every instance where the Interstate Commerce Commission refused to grant the increase in rates asked by the railroads that they were justified in that refusal because the earnings of the railroads, the net earnings subsequent to that refusal were greater than at any period in the history of the railroads of this country.

It is true that because of loss of credit of the railroads they were unable to get money for necessary additions, betterments, improvements, and extensions, but, in my judgment, that was due almost wholly to the fact of the reckless management upon the part of some of the railroads of this country. For instance, when the New Haven was wrecked, which was always supposed to be one of the gilt edge railroads of this country, the stock of which was presumed to be indeed as secure as a Government bond, when that was wrecked, is it any wonder that railroad investors throughout the country became afraid to invest in any kind of railroad property? That, gentlemen, is bound to be true so long as the railroads of this country can be made the subject of financial manipulation and speculation. That is bound to be true so long as those who control the railroads can regard them primarily as a means of gaining fortunes for themselves through speculation rather than to regard them as a business proposition, rendering service to the public for a fair return to those who have invested their money in them.

So I say I do not believe it is possible under any plan of legislation, removing all the restrictive laws that hitherto bound them, I do not believe it possible for the railroads to secure the necessary credit for betterments and extensions and efficient operation unless there be furnished to those railroads through the Government a guarantee or direct financial aid from the Government. That, gentlemen, I do not believe that this Congress or any Congress will or should give to the railroads permanently so long as the present. system of management prevails. So, I repeat, that it is not a question of the benefits of competition. It is rather a question of whether we can have efficient service through competition at all, and if we can not, unless we have a Government guaranty, it seems to me that we are compelled to look to some other solution and I believe that that solution must be the unification of all of the railroads of the country.

The bill that I have introduced I shall not go into details of this morning. I shall only attempt to give you a general outline of the plan of this bill, and should the committee decide to take it up in its detail later I shall be very glad to come before the committee again if desired. I desire to say, of course, that I do not pretend that so far as the details of the bill are concerned that they like any other bill can not be very much improved.

The bill provides for the creation of a corporation to be known as the National Railway Corporation with authority to acquire, in the method that I shall hereafter speak of, all the railroads of

the country, with a capital stock sufficient for that purpose. corporation is to be controlled by a board of 11 directors, il pointed by the President and confirmed by the Senate, but se in the following manner: One of the members of the board rectors shall be a member of the Interstate Commerce Comm and shall remain a member of such board so long as he s member of the commission: 1 of the board of directors sh a member of some State board of railroad commissioners, to b lected by the President out of 5 proposed by the National As tion of Railway and Utilities Commissioners; 3 of the dir shall represent the stockholders of the corporation to be seen by the President out of 9 proposed by the stockholders: 2 of directors representing the manufacturing and business inter of the country shall be selected out of 6 proposed by the U States Chamber of Commerce; 2 shall represent the farming agricultural interests of the country out of 6 proposed by fr organizations, and 2 shall represent the employees of the s poration, the President to select 2 out of 6 proposed by the ployees acting through their unions and brotherhoods. This ice of directors, consisting of 11 members, will therefore represent e side of the public interest, the stockholders will have 3 diret the business and manufacturing interests 2 directors, the far organizations 2 directors, the employees 2 directors, and what be said to be the ultimate consumer will be represented by the ber of the Interstate Commerce Commission and the member the State Railway Commission, these directors to have full contr subject at all times to the approval of the Interstate Commer Commission. It will be its duty under the bill to select a gene manager, that general manager to be charged directly with t operation of the railroads, subject to the approval of the directe Regional operating commissions throughout the country are pr vided for.

The stock of the corporation, as I have stated, is limited only: the value of the roads that it may acquire, subject to the approval the Interstate Commerce Commission. That stock will be either so to the public or exchanged with the present owners of the railro for their property, either through acquiring a majority control the stock or acquiring the physical properties and utilities.

The Government guarantees a minimum return of 4 per cent all stock issued by it, and the stock may receive a maximum return not more than 6 per cent, but it may be less than 6 per cent if th stock can be sold at par for a less maximum return. Whatever th maximum return is must be printed upon the face of the shares of th stock issued.

The powers of the corporation are the usual powers necessary to b exercised by any railway corporation. No stock, however, can b issued or sold without the approval of the Interstate Commerce Com mission. No stock can be sold at less than par. No stock can issued in excess of the value of the properties sought to be acquire as found by the Interstate Commerce Commission except that no exceeding 1 per cent of the capital stock outstanding or proposed t be issued may be used as a fund for working capital, and that must be kept intact as a part of the capital account or rather replaced from earnings subsequently whenever it is used.

All antitrust laws, so far as this corporation is concerned, are repealed. As I said, the dividends are not to exceed 6 per cent; but, in addition to that, provision is made that the Interstate Commerce Commission may permit earnings of not more than 2 per cent in excess of the maximum, whatever that maximum may be. The excess over the maximum, which would be 2 per cent or possibly more, is to be divided into three ways-30 per cent to go to the stockholders of the corporation as extra dividends, 40 per cent to go to the employees of the corporation, and 30 per cent to the Government. The Government's share is to be utilized, first, to reimburse it for any moneys that it may have been called upon to pay in fulfillment of the minimum guaranty of 4 per cent. Any portion not required for that purpose is to be loaned to the corporation without interest, and may be utilized by the corporation for three purposes. It may be utilized, first, to build up a reserve fund for working capital; it may be utilized to pay dividends; and whenever that fund exceeds $500,000,000, it may be utilized for no other purpose than the building of extensions and improvements; but in no case can any of this excess fund that is used for extensions, improvements, or in any way used as a capital account by the railroads, in no case can that sum be used as the basis of rate making. In other words, this fund, whatever it may be, is furnished by the shippers of the country; and it would be most unfair to permit that fund to be capitalized, as is the case under the existing system, to be utilized by the roads to further increase their rates or their return upon it.

The Interstate Commerce Commission is also required to permit such rates as will pay this maximum return, and in its discretion, as I have said, it may permit rates not more than 2 per cent in excess of that maximum return. It is this ratio between the maximum return and what the company may be permitted to earn that will furnish the efficiency in the operation of the roads. Forty per cent goes to the employees. Every employee upon the railroads will know that whether or not he is to receive any dividends at the end of the year in addition to his ordinary wages, will be dependent upon the efficient conduct of the road, and the more efficient the transportation business is conducted the greater dividends to everyone concerned, greater dividends to the stockholders, greater dividends to the employees, and greater returns to the public.

I wish to say that, as you will at once see, there is no element of Government ownership or operation in this bill. There is no possibility of political control over the directors of this corporation. The President is restricted in all his selections by the recommendations of nonpolitical bodies. Not one political director could be appointed, unless you say that the member of the Interstate Commerce Commission that is to be selected might be a political appointee, no other director out of the entire 11 can be subject to political influence, unless you will grant that the United States Chamber of Commerce that will propose 2 of the 11 is subject to political influence, or the National Association of Railway Utilities Commissioners, or the farm organizations. It seems very clear that the dominant and the only motive upon the part of these different businesses, manufacturing and farm organizations in making recommendations to the President for the selection of these directors will be but one