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operating with the Government in this all-important matter have done the utmost that it was possible for them to do; have done it with patriotic zeal and with great ability, but there were differences that they could neither escape nor neutralize. Complete unity of administration in the present circumstances involves upon occasion and at many points a serious dislocation of earnings, and the committee was, of course, without power or authority to rearrange changes 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. In mere fairness to them the full authority of the Government must be substituted. The Government itself will thereby gain an immense increase of efficiency in the conduct of the war and of the innumerable activities upon which its successful conduct depends.

The public interest must be first served, and, in addition, the financial interests of the Government and the financial interests of the railways must be brought under a common direction. The financial operations of the railways need no's then interfere with the borrowings of the Government, and they themselves can be conducted at a great advantage. Investors in railway securities may rest assured that their rights and interests will be as scrupulously looked after by the Government as they could be by the directors of the several railway systems.

Immediately upon the reassembling of Congress I shall recommend that these definite guarantees be given. First, of. course, that the railway properties will be maintained during the period of Federal control in és good repair and as com plete equipment as when taken over by the Government, and, second, that the roads shall receive a net operating income equal in each case to the average net income of the three years preceding June 30, 1917; and I am entirely confident that the Congress will be disposed in this case, as in others, to see that justice is done and full security assured to the owners and creditors of the great systems which the Government must now use under its own direction or else suffer serious embarrassment.

The Secretary of War and I are agreed that, all the circumstances being taken into consideration, the best results can be obtained under the immediate executive direction of the Hon. William G. McAdoo, whose practical experience peculiarly fits him for the service and whose authority as Secretary of the Treasury will enable him to coördinate as no other man could, the many financial interests which will be involved and which might, unless systematically directed, suffer very embarrassing entanglements.

The Government of the United States is the only great Government now engaged in the war which has not already assumed control of this sort. It was thought to be in the spirit of American institutions to attempt to do everything that was necessary through private management, and if zeal and ability and patriotic motive could have accomplished the necessary unification of administration, it would certainly have been accomplished; but no zeal or ability could overcome insuperable obstacles and I have deemed it ny duty to recognize that fact in all candor, now that it is demonstrated, and to use without reserve the great authority reposed in me. A great national necessity dictated the action, and I was therefore not at liberty to abstain from it.

New York Times, Dec. 27, 1917.

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YEAR 1918


(January 4, 1918)


I have asked the privilege of addressing you in order to report to you that on the twenty-eighth of December last, during the recess of the Congress, acting through the Secretary of War and under the authority conferred upon me by the Act of Congress approved August 29, 1916, I took possession and assumed control of the railway lines of the country and the systems of water transportation under their control. This step seemed to be imperatively necessary in the interest of the public welfare, in the presence of the great tasks of war with which we are now dealing. As our own experience develops difficulties and makes it clear what they are, I have deemed it my duty to remove those difficulties wherever I have the legal power to do so. To assume control of the vast railway systems of the country is, I realize, a very great responsibility, but to fail to do so in the existing circumstances would have been a much greater. I assumed the less responsibility rather than the weightier.

I am sure that I am speaking the mind of all thoughtful Americans when I say that it is our duty as the representatives of the nation to do everything that it is necessary to do to secure the complete mobilization of the whole resources of America by as rapid and effective means as can be found. Transportation supplies all the arteries of mobilization. Unless it be under a single and unified direction, the whole process of the nation's action is embarrassed. It was in the true spirit of America, and it was right, that we should first try to effect the necessary unification under the voluntary action of those who were in charge of the great railway properties; and we did try it. The directors of the railways responded to the need promptly and generously. The group of railway executives who were charged with the task of actual coördination and general direction performed their difficult duties with patriotic zeal and marked ability, as was to have been expected, and did, I believe, everything that it was possible for them to do in the circumstances. If I have taken the task out of their hands, it has not been because of any dereliction or failure on their part but only because there were some things which the Government can do and private management cannot. We shall continue to value most highly the advice and assistance of these gentlemen and I am sure we shall not find them withholding it.

It had become unmistakably plain that only under government administration can the entire equipment of the several systems of transportation be fully and unreservedly thrown into a common service without injurious discrimina tion against particular properties. Only under government administration can an absolutely unrestricted and unembarrassed common use be made of all tracks, terminals, terminal facilities and equipment of every kind. Only under that authority can new terminals be constructed and developed without regard to the requirements or limitations of particular roads. But under government administration all these things will be possible, -not instantly, but as fast as practical diffulties, which cannot be merely conjured away, give way be fore the new management.

The common administration will be carried out with as little disturbance of the present operating organizations and personnel of the railways as possible. Nothing will be altered or disturbed which it is not necessary to disturb. We are serving the public interest and safeguarding the public safety, but we are also regardful of the interest of those by whom these great properties are owned and glad to avail ourselves of the experience and trained ability of those who have been managing them. It is necessary that the transportation of troops and of war materials, of food and of fuel, and of everything that is necessary for the full mobilization of the energies and resources of the country, should be first considered, but it is clearly in the public interest also that the ordinary activities and the normal industrial and commercial life of the country should be interfered with and dislocated es l'itle as possible, and the public may rest assured that the ir-czest and convenience of the private shipper will be as car fully served and safeguarded as it is possible to serve and safegard it in the present extraordinary circumstances.

While the present authority of the Executive suffices for alı purposes of administration, and while of course all private interests must for the present give way to the public necessity, it is, I am sure you will agree with me, right and necessary that the owners and creditors of the railways, the holders of their stocks and bonds, should receive from the Government an unqualified guarantee that their properties will be maintained throughout the period of federal control in as good repair and as complete equipment as at present, and that the several roads will receive under federal management such compensation as is equitable and just alike to their owners and to the general public. I would suggest the average net railway operating income of the three years ending June 30, 1917. I earnestly recommend that these guarantees be given by appropriate legislation, and given as promptly as circumstances permit.

I need not point out the essential justice of such guarantees and their great influence and significance as elements in the present financial and industrial situation of the country. Indeed, one of the strong arguments for assuming control of the railroads at this time is the financial argument. It is necessary that the values of railway securities should be justly and fairly protected and that the large financial operations every year necessary in connection with the maintenance, operation and development of the roads should, during the period of the war, be wisely related to the financial operations of the Government. Our first duty is, of course, to conserve the common interest and the common safety and to make certain that nothing stands in the way of the successful prosecution of the great war for liberty and justice, but it is also an obligation of public conscience and of public honor that the private interests we disturb should be kept

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