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THE CREATION OF A VERY LIMITED NUMBER OF GIANT RAILROAD SYSTEMS HANDLING

PRIMARILY BULK MATERIALS FOR ONLY THE LARGEST SHIPPERS AND THE SYSTEM

MAY NOT. IN FACT, MEET THE NEEDS OF THE NATION'S COMMERCE FOR THE BASIC NATIONAL DEFENSE NEEDS.

THE HISTORY OF THE PAST HUNDRED YEARS HAS PROVED THAT PRIVATELY

OWNED COMMON-CARRIER SYSTEMS SUBJECT TO REGULATION CAN AND DO EXIST. AND

DO. IN FACT, FLOURISH.

THE MONTANA WHEAT RESEARCH & MARKETING COMMITTEE HAS A CONCERN

THAT WITH THE STAGGERS RAIL ACT, CONSIDERATION BY THE INTERSTATE COMMERCE COMMISSION OF ASPECTS OF THE HOLDING COMPANIES, RAIL MERGERS AND GENERAL

RATE JURISDICTIONS HAVE BEEN SO DIMINISHED THAT THERE IS NOT A PARLANCE OF CONSIDERED THOUGHT FOR INVESTIGATIVE WORK BEING DONE TO MAKE SURE THAT THE PUBLIC INTEREST IS BEING SERVED. ARGUMENTS WERE MADE THAT THE

RAILROADS SHOULD BE DEREGULATED BECAUSE THE AIRLINES AND TRUCKS WERE DE

REGULATED. THERE IS A GREAT DIFFERENCE BETWEEN DEREGULATION OF A NATURAL

COMPETITIVE INDUSTRY AND A NATURAL MONOPOLISTIC INDUSTRY. IN FACT, IF

ONE LOOKS AT THE AIRLINE AND THE MOTOR CARRIER DEREGULATION. THE QUESTION

IS STILL UNDECIDED AS TO WHETHER THAT WAS A GOOD THING. IT MAY WELL BE

THAT TOO MUCH COMPETITION AND PREDITORY PRICING WILL SUFFICIENTLY UNDER

MINE THE FINANCIAL STABILITY OF THE AIRLINE INDUSTRY AND DESTROY THEM

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THE RAILROADS ARE MAKING MORE MONEY THAN THEY EVER HAVE, AND ARE

DOING SO UNDER A RECESSED ECONOMY. IT IS NOT, HOWEVER, FREE COMPETITION

IN A FREE MARKET PLACE THAT HAS PRODUCED SUCH RESULTS FOR THE RAILROADS.

IN CONTRAST TO THE AIRLINE AND MOTOR CARRIER INDUSTRIES, THERE HAS NEVER

BEEN A FREE COMPETITIVE MARKET SYSTEM IN RAILROAD TRANSPORTATION--AND

THERE NEVER WILL BE. ALL OF THE ANTI-TRUST LAWS IN THE WORLD WILL NEVER

GUARANTEE A FREE MARKET PLACE IN THE RAILROAD TRANSPORTATION MARKET PLACE.

THERE COULD NEVER BE COMPETITION WITHIN THE RAILROAD INDUSTRY WITHOUT THE

RIGHT OF FREE ENTRY, AND THERE CAN NEVER BE FREE ENTRY IN THE RAILROAD SYSTEM AS THERE IS IN AIRLINES AND TRUCKS. SHIPPERS LOCATED IN MONTAÑA ARE CAPTIVE TO THE RAILROAD INSOFAR AS THE RAILROAD IS CONCERNED. IN THE

ABSENCE OF GOVERNMENT COMPULSION, A SHIPPER CANNOT REACH ANOTHER RAILROAD

WITHOUT THE PERMISSION OF THE RAILROAD ON WHOSE LINE HE IS LOCATED. TO

DAY THAT IS BEING BROUGHT HOME WITH FORCE TO MANY SHIPPERS WHO A YEAR AGO

WOULD NOT HAVE BELIEVED WHAT WAS GOING TO HAPPEN TO THEM.

OUR PURPOSE HERE TODAY IS NOT TO HARANGUE THE RAILROADS OR. IN FACT,

TO RELEGISLATE THE STAGGERS RAIL ACT: BUT RATHER TO OFFER THIS COMMITTEE

SOME SUGGESTIONS ON STRENGTHENING THE RAILROAD SYSTEM IN THIS COUNTRY AND CONCURRENTLY PROTECT THE PUBLIC INTEREST.

A FEW BASIC ISSUES SHOULD BE COMMENTED ON IN DETERMINING WHETHER

HOLDING COMPANIES HELP OR HINDER AGRICULTURE IN OUR STATE. OF PARAMOUNT

CONCERN IS THAT A HOLDING COMPANY IS NOT ENGAGED IN TRANSPORTATION AND

DOES NOT HAVE DIRECT CONTROL OVER THE PROPERTIES OF THE CARRIER ALTHOUGH

IT OWNS DIRECTLY OR THROUGH SUBSIDIARIES, THE STOCKS OF THAT CARRIER AND

STOCKS OF VARIOUS OTHER COMPANIES THAT ARE NOT CARRIERS AND UNRELATED TO

TO ALL THESE SEPARATE ENTITIES EXCEPT BY AFFILIATION THROUGH A COMMON

PROPRIETOR. WHEN A HOLDING COMPANY'S INVESTMENTS AND INTERESTS ARE

WHOLLY UNRELATED TO TRANSPORTATION, AND ITS INTEREST IN THE TRANSPORTATION CARRIER IS SUBORDINATE TO ITS PRIMARY INTEREST IN EITHER PRODUCTION OR SOME

OTHER SERVICE OTHER THAN FREIGHT TRANSPORTATION, THEN THERE CAN BE A TEN

DENCY TOWARD SERVING THE PRIMARY INTERESTS OF THE HOLDING COMPANY AS OP

POSED TO THE SERVICE OF TRANSPORTATION. HOLDING COMPANIES ARE NOT ACCOUNT

ABLE TO ANY ENTITY GOVERNING TRANSPORTATION AND. THEREFORE, THERE CAN BE

A TENDENCY TO USE ASSETS CREATED BY THE TRANSPORTATION SERVICE ITSELF TO

ADVANCE THE INTERESTS OF OTHER ENTITIES THAT COULD NOT SURVIVE ON THEIR OWN.

WHILE ADVANCES TO NON-CARRIER AFFILIATES, TYPICALLY THE PARENT HOLDING COM

PANY, MAY BE TECHNICALLY CHARACTERIZED AS AN ASSET TO THE CARRIER, THE

REALITIES OF THE BUSINESS WORLD AND THE SEARCH FOR GREATER RATES OF RE

TURN IN NON-CARRIER INVESTMENTS INDICATE THAT THE USEAGE OF THIS ASSET
IS OFTEN PERMANENTLY LOST TO THE CARRIER. WHAT GOES UP TO THE PARENT
COMPANY FREQUENTLY DOES NOT FLOW BACK TO THE CARRIER. IF HOLDING COM-

PANIES ARE ALLOWED TO BE FORMED WITH THIS TYPE OF ACTIVITY GOING ON,

THEN THERE IS NO QUESTION THAT THE FORMATION OF HOLDING COMPANIES WOULD

HINDER AGRICULTURAL SHIPPERS, ESPECIALLY IN AREAS WHERE THEY ARE CAPTIVE,

SUCH AS MONTANA. AGRICULTURAL PRODUCTS, BASICALLY GRAIN, CONTRIBUTE A

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HANDSOME SHARE TO THE NET PROFIT OF BURLINGTON NORTHERN. UNDER A HOLDING

COMPANY ARRANGEMENT. THESE FUNDS CAN BE LEGITIMATELY INVESTED ELSEWHERE

AND THEN WHEN THE CARRIER REACHES A CONDITION OF ECONOMIC RECESSION, HE

TURNS TO CAPTIVE SHIPPERS AND THE PRODUCTS THEY PRODUCE AND REQUIRES THEM

TO MAKE AN EVEN GREATER CONTRIBUTION THAN THEY HAVE IN THE PAST. IN MY

VIEW, A HOLDING COMPANY THAT OWNS AND CONTROLS THE STOCK OF A TRANSPOR

TATION ENTITY MUST BE GOVERNED BY THE AGENCY FIXED WITH THE RESPONSIBILITY TO PROTECT THE PUBLIC INTEREST, AND CURRENTLY THAT IS THE INTERSTATE COM

MERCE COMMISSION. IF ASSURANCE COULD BE GUARANTEED THAT AGRICULTURAL

SHIPPERS, OR SHIPPERS CAPTIVE TO RAIL, HAVE SOMETHING TO GAIN BY ALLOWING

THE FORMATION OF A HOLDING COMPANY GOVERNING THE TRANSPORTATION ENTITY FOR

WHICH THEY ARE TOTALLY DEPENDENT, THEN PERHAPS OUR POSITION WOULD CHANGE. THERE ARE NO GUARANTEES THAT I AM AWARE OF: NOR AM I CONVINCED AT THIS

POINT THAT HOLDING COMPANIES PLACE PRODUCERS OF AGRICULTURAL PRODUCTS IN

A BETTER POSITION THAN THEY ARE TODAY AND. THEREFORE, I AM SKEPTICAL THAT

THE ALLOWING OF A HOLDING COMPANY TO OWN AND CONTROL THE RAILROAD IN THE

STATE OF MONTANA WOULD BE IN THE BEST INTERESTS OF OUR INDUSTRY. OUR

CONCERN IS SIMPLY THAT THIS CONGRESS TAKE A STRONGER OVERVIEW OF HOLDING

COMPANY REORGANIZATION BECAUSE OF THEIR PROPENSITY FOR ABUSE.

OUR SECOND MAJOR CONCERN DEALS WITH THE AREA OF COMPETITIVE RAIL

SERVICE. HISTORY TELLS US THAT IN ANY OF THE TRANSPORTATION INDUSTRIES
THE ONLY THING THAT MAINTAINS SERVICE IS COMPETITION. SERVICE COMPETITION
IS WHAT HAS BUILT THE GREATEST RAILROAD SYSTEM IN THE WORLD. AS MORE AND

MORE CARRIERS MERGE INTO LARGER AND LARGER SYSTEMS, AND THE FACT THAT EACH

MAJOR RAILROAD SYSTEM IS GIVEN THE LEGAL RIGHT TO CONFINE TRAFFIC THAT IT

ORIGINATES ON ITS OWN LINES TO ITS OWN LINES, THERE WILL BE NO INCENTIVE

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TO MAINTAIN OR IMPROVE SERVICE. IT MAY BE THAT THIS COUNTRY MAY BE FACED WITH SIX OR SEVEN GIANT RAILROAD MONOPOLIES WITHIN THE NEXT TEN OR

FIFTEEN YEARS. CONGRESS MUST DEAL WITH THIS PROBLEM SOON. WITH ONLY

SIX OR SEVEN MAJOR RAILROAD SYSTEMS IN THE COUNTRY, THEY CAN START TO

HANDLE NOTHING BUT BULK COMMODITIES AND AS THERE IS NO COMPETITION AMONG

THEMSELVES OR WITHIN THEIR SYSTEMS, THEY WILL NOT BE FORCED TO MAINTAIN

COMPETITIVE ROUTES.

THE TRAGEDY OF THIS SITUATION IS THAT ONCE THESE LARGE REGIONAL

RAIL SYSTEMS ARE COMPLETED, THEY WILL EACH ONE BE ABLE TO MAXIMIZE RATE

LEVELS WITHIN THEIR OWN SYSTEMS AND MAY, IN FACT, MOVE AWAY FROM A NATION

AL RAIL SYSTEM THAT WILL SERVE ALL SHIPPERS AT REASONABLE RATES.

NOW, DEALING WITH RAILROADS MORE SPECIFICALLY. IF I WERE TO DES

CRIBE THE MAJOR DIFFICULTIES THAT GRAIN FARMERS ENCOUNTER IN DEALING WITH

THE BURLINGTON NORTHERN, I WOULD FIRST SAY THAT LITTLE CONTACT IS MADE

DIRECTLY BETWEEN THE GRAIN GROWER AND THE RAILROAD ITSELF. THE GENERAL

METHOD USED IN MERCHANDISING OUR GRAIN IS TO MAKE DELIVERY TO A LOCAL

ELEVATOR WHERE TITLE IS CONVEYED AND THEN SUBSEQUENTLY SHIPPED AND, THEREFORE, THE TRANSPORTATION PHASE OF THE TRANSACTION BECOMES THE RE

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SPONSIBILITY OF THE TITLE HOLDER, NAMELY THE LOCAL GRAIN ELEVATOR OR THE

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