be met. And rates cannot and will not be raised beyond a certain very restricted extent before the people of these United States will insist on sitting into the game; and the American people have a habit, fortunate at times, at times very unfortu nate, when they get really interested in a hand of playing the limit-and the limit is government ownership.

Fortunately at present the government has other and more urgent uses for all the funds it can command than to employ twenty billions of them in the purchase of the railroads, besides the one billion a year that would be required for several years for their urgent present needs; and therefore government ownership, with its gigantic initial investment, its regular deficit in maintenance-vide other government services, and the same service, government-owned, under similar governments to ours-its inevitably poor operation, its unavoidable, politically induced, waste, and wasteful extensions and superfluous service, and, above all perhaps, its locust swarms of additional officeholders, at once a curse, and a menace to our institutions in their very possible and likely political solidarity and self-perpetuation; all these evils seem for the present measurably distant.

Why not, then, while we are fortunate enough to have a breathing spell, though it is only war-given, try to find some solution for our railroad troubles? Few of us would think of a return to the old, independent, unrestricted, cut-throat, days of a hundred unconnected and hostile lines; besides, such a return would be impossible with to-day's railway organization, and under to-day's business conditions; and the celebrated unraveling of Standard Oil's wicked and tangled skein of life would be child's play to the task of him who sought to set once again on their long-since atrophied feet the individual railroad corporations that go to make up the present American system or systems. On the other hand, many years we have tried regulation by commission-and by courts on top of them and few candid ones there be among us but would admit that the total net result has been only a befogging of ourselves, and a gradual, but none the less sure, and now almost complete, strangulation of our railroads.

Do you know that during the year 1915, there was, in this whole great country, less new railroad construction than during any prior year since the Civil War; and that that, and the succeeding year, together, showed, in this nation of boundless resources and practically unlimited money, and with development in other lines advancing by leaps, only some thirteen millions of dollars raised on railroad stock issues? The people just do not and will not, under present conditions, invest in railroad expansion. What then is the remedy and answer?

Some one has suggested Federal incorporation, as hereinafter outlined. Plenty of precedent exists for incorporation by act of Congress, and the sustaining of the same by the Supreme Court: e. g., the Bank of the United States Act (4 Wheat. 316); a bridge across a navigable river separating two States (153 U. S. 525); and the trans-continental railroad acts (see 169 U. S. 466, and decided in 1916—241 U. S. 295). A part of this last decision (itself quoting from an earlier decision of the court) may be noted:

"The charter of incorporation not only creates it, but gives it every faculty which it possesses. The power to transact business of any description . . . is given and measured by its charter, and that charter is a law of the United States . .

Can it be doubted, under the above reasoning, that Congress would be judicially held competent to create, or recreate, by Federal charter, and to regulate therein, down to the last detail, even to the exemption of them, if it willed, from State taxation, the interstate railroads, many of which are even now asking for those very Federal charters? Yea, is it even doubtful that Congress, if it so chose, could force all railroads, as a condition precedent to engaging in interstate business, to become incorporated by act of Congress— when we call to mind the recently-enacted Federal Child Labor Law?

There is scarcely danger of the States' representatives in Congress passing such acts of incorporation as would release, as could certainly be done (see 18 Wall. 5; 162 U. S. 91),

from State taxation, property which now pays the States collectively an annual tribute of upwards of one hundred million dollars; but that Congress should, in all other respects, incorporate, and by or through the Act of Incorporation control, in every detail, interstate carriers, begins to seem both necessary and desirable.

And that upon the following general plan:

(1) A Federal Railroad Board, named by the President, and confirmed by the Senate; and which board shall name the directors of each of the railroads chartered by act of Congress.

(2) The Federal charters to forbid State regulation of the railroad in any way, thus doing away with the State commissions. The interstate commission would also be done away with, as unnecessary, for government-appointed directors would be actuated by the same mainspring of public interest, and would investigate and act much more expeditiously and less clumsily.

(3) The government to guarantee say, a three per cent. dividend on the stock of the Federal corporation, with the opportunity of receiving, in addition, up to say seven per cent., if earned. This to induce, as it doubtless would, the investment of new money now so needed in railroads.

This plan, only sketched here, would certainly remove the throttling hand of excessive regulation, would eliminate discriminations and rebates, and the wasteful competition of the present system,-witness the rival trans-continental trains,and prevent duplication of officers and employees, and obviate the present vast expense of the costly commissions. It might even lower rates, through this elimination of waste, reduplication and expense.

Would politics creep into the management? Certainly if it did it would have to do so over the protest and influence of the almost countless stockholders, placed at every crossroad in the country, and intent on the earning of their extra dividends by their company; and it would have to do so through a series of officials and officers from the President and Senate, down through the board, the directors, and the management, who would all be, more or less, government officials, and with

no other natural conceivable interest than to see the properties they were handling operate successfully. And has the similar Federal Reserve Board, controlling the banks, had any such charge of politics brought or sustained against it?

Finally, it is to be noted that Great Britain has, during this war, and ever since its outbreak, been operating-not owning-its railroads under a virtually identical scheme; they were taken and placed, where they still are, in the hands of an operating committee made up of their several general managers; and the government guarantees and pays stockholders the same rate of dividends as were being earned before the taking over.

We may learn several things from England before the present war has ended.

THE FINANCING OF THE WORLD WAR AND THE RELATION OF THE FEDERAL RESERVE BANKS THERETO.

PAPER BY

HOLLINS N. RANDOLPH,

OF ATLANTA.

Mr. President, Ladies and Gentlemen:

It would be interesting to give a brief sketch of the events leading up to and which produced the war with Germany, but that must be left to abler hands, and, furthermore, they are outside the purposes of this paper. It is sufficient to say that, after submitting to Germany's repeated violations of International Law and frequent disregard of the rights of this country upon the high seas as a neutral, with a degree of patience which challenged the admiration of the world, excepting, of course, Germany, the Congress declared war on April 6, 1917. Prior to the declaration the heaviest responsibility had fallen upon the President, and, all resources of diplomacy having failed and his patience, long-suffering as it had been, being exhausted, on April 2, 1917, he appeared before the Congress, in joint session, and declared, in an address destined to become immortal, that nothing was left in the situation except a declaration of war against Germany. Within four days the Congress acted under its constitutional authority, and the first step in the drama of war was taken.

War having been declared, it became necessary to immediately make the declaration effective and since April 6th, various bills have passed providing for the raising and support of the army to carry on the war. It is not necessary to refer in detail to these here, because this paper has to be restricted to a discussion of how the war is to be financed and not how it is to be fought.