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there was uncertainty as to how long it would continue to function. A railroad executive with a jealous regard for the interests of his stockholders had some justification for hesitating to give up something which might permanently benefit a natural rival and permanently affect adversely the value of his property. These incidents in the main attached to traffic relations; they had little bearing upon the strictly operating features.






Y December, 1917, the railroad situation had become acute. There was much conjecture

as to what would be done. The Interstate Commerce Commission, in a special message to Congress, recommended that complete unification of the railroads should be effected, either by the carriers themselves, with the assistance of the Government, or by their operation by the President as a unit during the war.

“If the unification is to be effected by the carriers," said the Commission, “they should be enabled to effect it in a lawful way by the suspension, during the period of the war, of the operation of the anti-trust laws, except in respect of consolidations and mergers, and of the anti-pool provision of the commerce act. In addition they should be provided from the Government treasury with financial assistance in the form of loans, or advances for capital purposes, in such amounts, on such conditions, and under such supervision of expenditure as may be determined by appropriate authority. * If the other alternative be adopted, and the President operates the railroads as a unit during the period of the war, there

, should be suitable guarantee to each carrier of an adequate annual return for use of the property, as well as of its upkeep and maintenance during operation; with provision for fair terms on which improvements and betterments, made by the President during the period of his operation, could be paid for by the carrier upon return to it of the property after the expiration of that period.”

Commissioner McChord, in a dissenting opinion, disagreed with the majority recommendation that the carriers be permitted to bring about complete unification themselves with aid from the Government. Instead he urged that “the supreme arm of governmental authority is essential,' either by the exercise of the President's authority to operate the roads or by the creation of a single governmental administration control. In his opinion unification of diversified governmental control was as vital as unification of the properties.

The uncertainty in the situation was dissolved by the President on December, 26, 1917, when he took possession of the railroads of the country as a war measure, and appointed William G. McAdoo, Secretary of the Treasury, as Director General of Railroads, to act for the President.

This action was taken under the authority granted to the President by the Army Appropriations Act of August 29, 1916. One section of the Act reads as follows:

“The President, in time of war, is empowered, through the Secretary of War, to take possession and assume control of any system or systems of transportation or any part thereof, and to utilize the same to the exclusion as far as may be necessary of all other traffic thereon, for the transfer or transportation of troops, war materials and equipment, or for such other purposes connected with the emergency as may be needful or desirable.

This section of the Act was probably intended to provide for an emergency which might arise in connection with Mexico in 1916. At the time of its passage there was no immediate prospect of the United States entering the European war.

The President's proclamation and his letter to Congress are such important historical documents that they are reprinted in full in the Appendix. They intimate that the impelling motive for federal control was one of finance. Complete unity of administration in the present circumstances involves upon occasions and at many points a serious dislocation of earnings, and the committee (the Railroads' War Board) was, of course, without power or authority to rearrange charges or effect proper compensations and adjustments of earnings. Several roads which were willingly and with admirable public spirit accepting the orders of the committee have already suffered from these circumstances and should not be required to suffer further."

The tenseness of the labor situation was another ground for the federalization of railroads. The high wages paid in the shipbuilding yards, in munition plants, and in other work on war supplies, and the sharp advances in the cost of living, had caused much unrest among railroad workers. While the railroad executives were deliberating, there were threats of strikes, and the situation during the latter part of 1917, just preceding federal control, was exceedingly acute.

But, with all the emphasis placed upon matters of finance and their effect upon the pressing problems of enlargement, upon labor unrest, and upon the coordination of facilities, other reasons were in the background. One of the great obstacles to complete coordination of facilities under voluntary agreement among the railroads was lawmade rather than railroad-made. The things which the United States Railroad Administration at once set about to do were the very things that the railroads as private corporations were forbidden to do by the anti-trust and anti-pooling laws. What the Railroads' War Board had done in voluntary unification was, in important respects, directly contrary to those laws, and the executives knew that they might be held personally liable. There were no informal “understandings” that under the emergency conditions the Department of Justice would overlook the situation. On the contrary, there were positive indications by official inquiries that the Attorney General was keeping himself informed of every move. The laws obliged railroads to compete; they prohibited the pooling of facilities and earnings. Under the war conditions the maximum of transportation production depended to a large extent upon effective coordination, which required the pooling of resources. This phase of the situa

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