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case—that it has jurisdiction-before we could grant the petition.” I think that would be unconstitutional. You can not enact worse legislation than that. I think, also, when you enter upon legislation in regard to this railroad question you can not accomplish anything good by any law or device unless it is absolutely right. Otherwise it does more harm than good.

Then, on page 8: If a carrier neglects or refuses to obey an order which is obligatory upon it as above

I think that would be made clearer by saying, “obey a lawful order.” Nobody is obliged in this country to obey any order unless it is a lawful order. So I suggest that after the word you strike out "an" and insert “a lawful” in line 10.

If those two changes be made I think there is no danger whatever in this bill of the railroads, through this power vested in this Commission, being injuriously affected in any way by any order. They are not obliged to obey any order but a lawful order. The remedies of the United States courts, through injunction proceedings, etc., with this power to suspend the application of the order and to remain suspended pending appeal, should all be left just exactly as now, without any attempt in this bill to change the powers of the court. I think those are two important changes that ought to be made.

I can not go through the bill in detail, but I will refer to one other matter. It provides that corporations shall be punishable by fine. That is right. Under the present law you can not punish a corporation, which is the only one that ought to be liable to punishment. It removes imprisonment, which is all wrong. You can not accomplish anything by a provision to imprison the officers of a corporation. That provision only embarrasses the application of the law. It drops imprisonment and provides penalties only.

One of the bills that has been introduced provides that pooling may be authorized. I want to state briefly the objections to that, and I shall not state them in my own language, but in the language of the ablest railroad man this country has ever produced. I think he was recognized by railroads as having the ablest mind on this traffic question of any man who ever held a position in railroad management in this country. I refer to Mr. Alfred Fink. His training began in this business by employment on some of the railroad systems of the country when he was 45 or 50 years old, at first being traffic manager of the Louisville and Nashville. When the Interstate Commission was organized he was recognized by the Commission as the ablest man in the country upon questions the Commission had to meet. I examined him at great length on the pooling question.

I may say here that I appeared before the Interstate Commerce Committee at one time when it held sessions in New York City, when I talked two or three days as a witness, and as a result of my testimony there I was requested to communicate with the committee and assist in drawing a bill. The suggestions I made, and which were adopted, were based upon the English act of 1854 in all provisions, except as to the appointment of the Commission, and the bill is substantially to-day as I drew it. I advised against the prohibition of pooling. I thought it wise to leave pooling as it was under the common law, which

prohibited carriers from enforcing pooling agreements among themselves. Leaving it in that way I thought they would work out the problem so that in the end it would lead to something in that line which would be a public advantage. But the House, you know, put that provision in there, through Mr. Reagan.

A pool is only possible in two ways, as Mr. Fink said when I examined him upon the question, and Mr. Fink's strong point was this: He knew everything upon this question from the railroad standpoint, but he was the only railroad man I ever knew who could get up and state the people's side of the question as well as the railroad side." He knew the whole subject on both sides, and he could reach as just conclusions as any man I ever heard talk' upon the question. For instance, as regards legislation by Congress, many of his railroads kicked against it; but he always insisted that it was a matter of safety and protection to have an interstate-commerce law which should protect the railroads as well as protect the people. He was always right. He was a German, of philosophic mind, and could take in all the bearings of the whole question.

There are two kinds of pooling and only two kinds that have ever been practiced: One is a money pool. For instance, there are two lines between New York and Chicago competing for business as between themselves. They agree that one company shall take 75 per cent of the traffic and the other 25 per cent. I asked Mr. Fink, “How about a money pool ?” A money pool would be one where, if the line entitled to the 25 per cent found at the end of its traffic period that it had only received 10 per cent, the other line would pay the remaining 15 per cent in money. Some agreements are to repay the difference in money. Mr. Fink said the difficulty about a money pool was this: That it had been found impracticable, because a road can not live without traffic. He said that many of the big lines in competition with the 25 per cent road would be perfectly willing to take the wbole 100 per cent of its traffic for one or two years and pay it three times the money that it would have earned if it had carried its portion of the traffic. But that was impossible. Why? Because it wiped out that road in the end. A road can not live without traflic. It has its equipment to keep up, its employees to pay, and it must have traffic to keep going. A money pool, therefore, simply means the extinction and wiping out of the small members of the pool in the course of two or three or four years.

What is the other kind of pooling? That is traffic pooling. That is where they agree that each of the lines in the pool gets its percentage of the traffic. Mr. Fink always maintained that that was the only practical way of pooling. But the inherent difficulty about that, the difficulty for which no remedy has been proposed and I think the gentlemen who are in favor of pooling will have great difficulty in proposing an adequate remedy--is that it can not be maintained without violating the inherent right of every shipper to route his own traffic. You are at Chicago, and you want to ship grain to New York; you want your grain to go by the Penusylvania road, not by the New York Central, because the Pennsylvania is the shortest, quickest, and best equipped.

But that being so, if 25 per cent of your traffic, under a pooling arrangement, has got to go around three or four hundred miles farther by the Canadian Pacific or the Grand Trunk, then your right to route your traffic has got to be violated by the sending of your case—that it has jurisdiction-before we could grant the port's I think that would be unconstitutional. You can not ensinos legislation than that. I think, also, when you enter upon lerrin in regard to this railroad question you can not accomplish good by any law or device unless it is absolutely right. Otten: does more harm than good.

Then, on page 8: If a carrier neglects or refuses to obey an order which is obligator above

I think that would be made clearer by saying, “obey a la" Nobody is obliged in this country to obey any order im ful order. So I suggest that after the word you strikes insert "a lawful” in line 10.

If those two changes be made I think there is no (dik" • in this bill of the railroads, through this power veste

sion, being injuriously affected in any way by any not obliged to obey any order but a lawful order. the United States courts, through injunction prin this

power to suspend the application of the ori. pended pending appeal, should all be left just for any attempt in this bill to change the powers those are two important changes that ought ki

I can not go through the bill in detail, but matter. It provides that corporations shi That is right. Under the present law you tion, which is the only one that ought to !, removes imprisonment, which is all wro anything by a provision to imprison ti That provision only embarrasses the ali imprisonment and provides penalties on

One of the bills that has been introdi. be authorized. I want to state brief, shall not state them in my own lang ablest railroad man this country ha l'ecognized by railroads as having tion of any man who ever held a i this country. I refer to Mr. Alfry business by employment on some try when he was 45 or 50 years the Louisville and Nashville. organized he was recognized }); the country upon questions the him at great length on the pox

I may say here that I appear: mittee at one time when it he talked two or three days as a there I was requested to comm drawing a bill. The sugge were based upon the English the appointment of the Comi as I drew it. I advised again it wise to leave pooling as is hibited carriers from enfor

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under one ownership, where they can all be dealt with tom, than where you have a half a dozen in a pool. I

Bicy of legislation has been in that direction.

TILLVN. Can you explain the difference between a pool of ******* apers and a combination with one owner? Onix. Suppose here are two systems of six railroads, each

If those six roads are put into one ownership, that elimimnotition between those six roads. If the other six are put

ownership, that eliminates competition among those six roads. pou still have left competition between the two systems. Bring *1.into one ownership and then competition is entirely eliminated.

nership of the whole business will finally be brought about. toudily progressing. ******tor TILLMAN. But that creates monopoly and leaves us at the rott of monopoly. top KERNAN. No, sir; I think Congress can deal more easily with ito ownership of lines than it can with competing ownership,

111se, don't you see, in every pool the entire pressure is to give to .. weak line something to which it is not entitled? The CHAIRMAN. Is it your judgment that pooling has always protop the weaker and smaller line? Hr. KERNAN. I think that every pool that was ever formed was apped into existence through some bankrupt corporation. A corpora.. in the hands of a receiver can ultimately force a pool. the CHAIRMAN. That is my idea. Mr. KERNAN. No pool was ever made except through the action of me bankrupt corporation.

The CHAIRMAN. As a general proposition, were not the larger unds opposed to pooling?

Mr. KERNAN. Yes. That is a matter of simple observation. Take che New York Central; it does a great business and gets great returns. then there enters into the problem a competing line, which goes into the hands of a receiver. It does not have to earn fixed charges or pay interest on bonds. It pays nothing except operating expenses. If that road has an entrance into Chicago, and has 5 per cent of the Chimago business, it can cut the rates on the entire 95 per cent that goes by the other lines. Railroads do not want pooling unless they are forced into it.

Senator TILLMAN. Are not such bankrupt railroads subject to the orders of the court? Is not the receiver the servant of the court? What right has the receiver to cut under the rates fixed by business interests or by the Interstate Commerce Commission?

Mr. KERNAN. It is because his road must have traffic; otherwise he can not pay expenses, and it is his business to do that. Therefore he is justified in taking such measures as will at any rate prevent his discharge from his receivership. He must discharge bis duties as receiver. He does not have to pay any interest on bonds; he does not have to pay dividends on stock. All he has to do is to operate his road, pay operating expenses, and show a good balance sheet at the end of the business.

The CHAIRMAN. When he is out of the pool that is what he says. When he is in the pool he says, “Go ahead, and we will treat you

"AN. That involves a commission or something he is not der the ordinary laws of trade.

traffic by the longer and poorer line. That is the difficulty about traffic pooling that has never been answered, so far as I know. I think it interferes with the inalienable right, which must be protected, of every shipper to route his traffic as he pleases, and that you can not justly compel shippers to put their traffic in the hands of railroads, to be routed by the poorer and slower routes, without violating that right. I do not think that any such proposition can be considered.

Senator TILLMAN. Right there, I should like to ask you if the remedy for that would not be to allow the longer and poorer road a higher rate, supposing pooling were granted, or a lower rate to get more traffic. In other words, does not pooling destroy competition, and is it not, therefore, in itself bad? Are you opposed to pooling or not?

Mr. KERNAN. I am not opposed to pooling in a certain way. I have never changed my idea from what I originally said about that, that it was unwise to put a provision in the interstate-commerce law about pooling. There are good things about it, and the railroads were working it out under the simple, common-law disability. Leave it there. I think they have worked it out through the joint-ownership proposition.

The CHAIRMAN. You know there are a great many railroads opposed to pooling

Mr. KERNAN. I know it.
The CHAIRMAN. I think that is one of our troubles.

Mr. KERNAN. I think that the prohibition of pooling has led to the joint ownership of competing lines, and that is much better. It is a great deal easier for Congress and the courts and the Commission to deal with a single one of half a dozen competing lines than it is to deal with a pool of those lines. Why? For this reason: Here are a weak road and a strong road in a pool. You have constantly to be yielding to the weak line what it does not deserve in order that it may live, so that you are constantly forced to do something which, under the laws of trade, is wrong in order to maintain the pool and keep it going. But if the small line and the big line come to be owned by one man, then don't you see that the revenues of both roads go into one pool, and then the question always is simply whether the earnings of the entire system are sufficient to permit this, that, or the other road to live. You do not have to keep dealing with exceptional conditions, which are always forcing you to do something wrong, under the requirements of trade, in order to keep a certain road alive.

Senator TILLMAN. I would like to ask you, Mr. Kernan, whether you can conceive of competing lines coming under one ownership? They would be natural competitors if they were owned by different people, but if owned by one person can there be competition?

Mr. KERNAN. Why, no.

Senator TILLMAN. You said a while ago that this condition was bringing about single ownership of competing lines. Mr. KERNAN. Certainly. Senator TILLMAN. Then they are no longer competitors?

Mr. KERNAN. Certainly, there is no competition left. Where association is possible competition is no longer possible. That is an old axiom that is being worked out. Competition has been diminished. That is what we relied upon when railroads were started—that competition would protect the public. But that has all been wiped out. . That is the way they have accomplished pooling. I think it is safer to

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