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CONTENTS,

Bailey, Joseph W. - Regulation of railroad rates.
Culberson, Charles a. - Regulation of railroad rates.
, Daniil, John Ve - Regulation of railroad rates.

Esch, J. Je ~- Railroad rate bill.

Foster, Murphy J. - Regulation of railroad rates.

|Foraker, J. B. - Railway rate legislation.

‘Gamble, Robert J. - Regulation of railroad rates.

‘Hepburn, William P. - Railroad rate bill,

Knox, ruilander C. - Railw., rate regulation.

La Follette, cxobert M. - Regulation of railway rates and
services. Relation of government to commerce and
transportation.

‘Littlefield, Charles E. - Railroad rate bill.

,LOuge, Henry Cabot - ‘Sovernnuznt regulation of railway rates.

Lon;, Chester I - Regulation :f railroad rates. Two kinds of
court-Peview...

NeCall, Samuel w. - Kailroad rate bill.

McCumber, P. J. - Regulation of railroad rates.

Mann, James R. - Hepburn railroad rate bill.

‘Morgan, John T. ~ Regulation of railway rates.

‘Newlands, Francis G. - Regulation of railroad rates. Nation-
al ownership of railroads, April 4-5, 1906.

Overman, Lee S. - Regulation of railroad rates.

Scott, Ne. B. - Railway rate legislation.

-/ Simmons, F. M. - Regulation of railroad rates.

‘Spooner, John C. - Regulation of railroad rates.

\Stone, William J. - Railroad rate regulation.

Underwood, Oscar G. - Railroad rate bill.
OLIN LIBRARY-CIRCULATION °
DATE DUE

GAYLORO PRINTED INU.S.A.

 
Regulation of Railroad Rates.

 

SPEECH |.
ips

HON. JOSEPH W.. BAILEY,

OF TEXAS,
IN THE SENATE OF THE UNITED STATES,

Monday, March 19, 1906.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled “An act to regulate commerce,” approved Ieb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. BAILEY said:

Myr. Presipent: I had not intended to discuss any phase of
this question until a suitable time came for me to discuss every
phase of it. But the suggestion which I made in the Senate
something like ten days ago with respect to the power of Con-
gress to limit the right of inferior Nederal courts to issue pre-
liminary injunctions has been so widely Giscussed and has been
so pointedly assailed by some that I feel required to make not
only a fuller statement of my views but to bring to the atten-
tion of the Senate the numerous decisions of the highest court
in this land sustaining in Congress the power which I have
urged it to exercise.

If the matter had simply been discussed throughout the coun-
try, or if my view had only been combated in the Senate, I
could very well defer my reply until I come to discuss all of
the questions involved in the pending bill. But as it seems to
me that there is a persistent and deliberate effort on the part of
certain newspapers not only to make it appear that I huve ad-
vanced an unconstitutional proposition, but also to make it
appear that it is so obviously unconstitutional that a majority
of the Senators with whom I have the honor to associate on this
side of the Chamber have rejected it, I have determined to ad-
dress myself to that question now.

Only this morning the Washington Post prints something like
a column account of a social gathering at which it correctly says
this matter was discussed, and then it incorrectly declares :

Senator BAILEY’s proposition to amend the bill so as to deprive the
inferior courts of the power to issue restraining orders, pending judi-
cial review of the rate fixed by the Interstate Commerce Commission,
did not develop the strength it had been thought it would have. This
does not necessarily mean that the Texas Senator will not urge his
proposed amendment, or even that Senator TILLMAN, as the floor
leader for the majority of the Committee on Interstate Commerce, will
not support the Bailey proposition. The spirit of the discussion, how-

ever, seemed to indicate the likelibood that a majority of the. Demo-
cratic Senators are not favorably inclined to Mr. BaiLey’s contention

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2

that Congress can deny to the courts the power to grant temporary
injunctions.

My. President, I do not question that the reporter who wrote
that believed it, but I deny that he had any sufficient reason for
belicying it. I am satisfied that he did not derive from any
Senator any information upon which he could predicate that
statement, because, as it is precisely the opposite of the truth, I
assume that no Senator would give him such information.
Whether the man who wrote that and similar articles is per-
sistently and deliberately trying to create in the public mind the
opinion that a majority of the friends of this legislation do not
believe it competent for Congress to abridge the powers of the
eourts, or whether the reporter believes what he writes, is not
material to the country. The material fact is that such pebli-
eations are misleading and untruthful. It did not appear yes-
terday ‘and it will not appear at any stage of this preceeding,
when the matter is carefully and fairly considered, that a ma-
jority of this side will doubt or deny the power of Congress to
abridge the jurisdiction of inferior Federal courts in the issu-
ance of preliminary injunctions.

There has been an effort to argue that in some way, which my
mind has never yet been able to comprehend, there is a differ-
ence between the power of Congress over what is known as the
equity jurisdictien of the courts and the power of Congress
over their jurisdiction in matters at law. I am not unmindful,
Mr. President, that such an opinion has found a wide accept-
ance among the lawyers of the country, and I have heard it
asserted repeatedly in my experience at the bar; but I have
never known a good lawyer who did not, upon mature con-
sideration, abandon it, no matter how frequently or how pos-
itively he had asserted it.

Sir, there is not crie sentence, there is not one line, there is
not one word in the Constitution which justifies an attempt to
distinguish between the power of Congress over proceedings in
equity and the power of Congress over proceedings at law in
the inferior courts of the United States.

The third article of the Constitution invests the judicial
power of the United States in these words:

The judicial Power of the United States shall be vested in one su-
preme Court, and in such inferior Courts ag the Congress may from
time to time ordain and establish. ‘The Judges, both of the supreme
and inferior Courts, shall hold their Offices during good Behaviour, and
shall, at stated Times, receive for their Services a Compensation which
shall not be diminished during their Continuance in Office.

The second section of the third article defines and distributes,
so far as the Constitution itself distributes, the judicial power
of the United States, and its language is this:

Section 2. The judicial power shall extend to all cases, in law and
equity, arising under this Constitution, the laws of the United States,,
and treaties made, or which shall be made, under their authority; to
all cases affecting ambassadors, other public ministers, and consuls;
to all cases of admiralty and maritime jurisdiction; to controversies
to which the United States shall be a party; to controversies between
two or more States; between a State and citizens of another State;
petween citizens of different States; between citizens-of the same
State claiming lands under grants of different States, and between a
State, or the citizens thereof, and foreign States, citizens, or subjects.

Of course, the Senate will recall that the eleventh amendment
restricts the jurisdiction in suits against a sovereign State.

Following that definition of the judicial power and in the

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3

same section comes the only constitutional effort to distribute
it, and it is expressed as follows:

In all cases affecting ambassadors, other public ministers, and con-
suls, and those in which a State shall be a party, the Supreme Court
shall have original jurisdiction. In all the other cases before mentioned
the Supreme Court shall have appellate jurisdiction, both as to law
and fact, with such exceptions and under such regulations as the Con-
gress shall make.

Thus, Mr. President, we discover that the investiture of the
judicial power, that the definition of the judicial power, and
that the distribution of the judicial power are precisely the
same with respect to the law as with respect to the equity
powers of the courts; and no living man can find in those pro-
visions any warrant for the claim that Congress may exercise
a power over one which it can not exercise over the other.
The power, whatever it may be, is exactly the same. It is
conferred in the same sentence and in the very same words.

Mr. President, another remarkable contention must be main-
tained in order successfully to assail the amendment which I
have suggested. The objectors must convince the Senate that
while Congress has power to change the rule of decision, and
may alter or repeal the rules of property which that court is
charged to administer, it stands powerless to change a mere rule
of practice. To state the proposition is to refute it.

Fortunately we are not left to decide this question upon the
weight of such poor argument as I may be able to advance.
Fortunately there is a line of decisions running from 4 Dallas
to 106 U. S., in which this precise question has been considered
by that court in more than a dozen cases, and decided by that
eourt the same way in every case, and decided, too, by the
unanimous judgment of the court. I do not believe that a
power of Congress has ever before been doubted or denied in
either House which has been so often, so unanimously, and so
explicitly recognized and affirmed by the highest court of the
Republic.

The first case—in fact, the first two cases—will be found in
4th Dallas. They were both decided in 1799, and some of those
who made the law which those cases construed had participated
in the convention which framed the Constitution under which
the law was made. In the first judiciary act Congress provided
that an injunction in certain cases should only be issued upon
notice. In the case of New York v. The State of Connecticut
this very question was passed upon by the court, and the court
begins its brief opinion in these words:

The prohibition contained in the statute, that writs of injunction
shall not be granted without reasonable notice to the adverse party or
his attorney extends to injunctions granted by the Supreme Court or
the circuit court, as well as to those that may be granted by a single
judge. (4 Dallas, p. 2, N. Y. v7. Conn.)

Under the common law the court had what is now so freely
described as the inherent power to issue an injunction without
notice, but the lawmakers of that day said it should not be
issued without notice, and the Supreme Court of the United
States sustained that statute.

Next comes the case of Turner v. The Bank of North America,
also reported in this same volume, which contains the reports of
the supreme court of Pennsylvania, as well as the decisions of
the Supreme Court of the United States. These cases were
decided before the seat of the Government was moved from the

6640
4

city of Philadelphia and while the same reporter for the
Supreme Court of the United States served as the reporter for
the supreme court of Pennsylvania, and the decisions of the
two courts are printed in the first four volumes known as Dal-
Jas’s Reports.

This very argument of the inherent power of the court to exer-
cive the jurisdiction as defined in the Constitution was made at
the bar in the case of Turner v. Bank of North America. The
two attorneys who argued that case have left imperishable
names at the American bar. One was Ingersoll and the other
Rawle, the author of an excellent treatise upon the Censtitu-
tion. In the course of his argument tu the court Mr. Rawle
asserted :

It is, then, to be remarked—

And bear in mind, Mr. President, he was assailing the consti-
tutionality of an act of Congress limiting the jurisdiction of the
circuit courts of the United States, and in support of that posi-
tion Mr. Rawle pressed this argument:

It is, then, to be remarked, that the judicial power is the grant of
the Constitution, and Congress can no more limit, than enlarge the con-
stitutional grant. In the second section of the third article, the Con-
stitution contemplates the parties to the controversy as alone raising
the question of jurisdiction, and if the existing controversy is ‘* between
citizens of different States”? the judicial power of the United States
expresly extends to it.

he reporter here incorporates a printer’s mark and in a foot-
note he reproduces the queries addressed by the Chief Justice
and by Judge Chase to the learned counsel. The query of the
Chief Justice was in these words:

How far is it meant to earry this argument? Will it be affirmed
that in every case to which the judicial power of the United States

extends the Federal courts may exercise a jurisdiction, without the
intervention of the legislature, to distribute and to regulate the power?

Judge Chase interposed in this language, which was after-
wards quoted with approval by the Supreme Court:

The*notion has frequently been entertained that the Federal courts
derive their judicial power immediately trom the Constitution; but the
political truth is that the disposal of the judicial power (except in a
few specified instances)—

And he obviously refers there to the original jurisdiction of
the Supreme Court of the United States—
belongs to Congress. If Congress has given the power to this court,
we possess it, not otherwise; and if Congress has net given the power
to us, or to any other court, it still remains at the legislative disposal.
Besides, Congress is not bound, and it would, perhaps, be inexpedient
to enlarge the jurisdiction of the Federal courts to every subject in
every form which the Constitution might warrant.

I need not tell the Senate that Judge Chase was an ardent
Federalist, ready always to assert the rights and powers of
Federal courts. It will be remembered that he administered the
alien and sedition laws with such severity in his court that the
Hlouse of Representatives presented articles of impeachment
against him before the Senate.

The question arose again in the case of the United States v.
Hudson, reported in Tth Cranch. Tudson was indicted under
the common law for libeling the President and the Congress of
the United States. He charged that Congress had voted and that
the President had approved a payment to Napsleon of $2.090,000
for the French Emperour’s permission to negotiate a treaty with
Spain. For this publication be was indicted, and upon a. de-

6640
5

murer to the indictment the circuit court certified the question
to the Supreme Court. In the course of its opinion the Supreme
Court said:

Of all the courts which the United States may, under their general
powers, constitute, one only, the Supreme Court, possesses jurisdiction
derived immediately from the Constitution, and of which the legisla-
tive power can not deprive it. All other courts created by the General
Government possess no jurisdiction but what is given them by the
power that creates them and can be vested with none but what the
power ceded to the General Government will authorize them to confer.

Here the court plainly and unequivocally lays down the doec-
trine that while Congress can not confer greater jurisdiction
“on the inferior Federal courts than is defined in the Constitu-
tion it can confer less.

Another case reported in this same volume is McIntire r.
Wood. In that case they sought a mandamus to compel the
register of a land office to issue final certificates of purchase, but
the application as denied in the following language:

This court is of opinion that the circuit court did not possess the
power to issue the mandamus moved for. Independent of the particu-
lar objections which this case presents, from its involving a questicn
of freehold, we are of opinion that the power of the circuit courts to
issue the writ of mandamus is confined exclusively to those cases in
which it may be necessary to the exercise of their jurisdiction. Ifad
the eleventh section of the judiciary act covered the whole ground of the
Constitution there would be much reason for exercising this power
in many cases wherein some ministerial act is necessary to the com-
pletion of an individual right arising under laws of the United States,
and the fourteenth section of the same act would sanction the issuing
of the writ for such a purpose. But although the judicial power of
the United States extends to cases arising under the laws of the United
States, the legislature have not thought proper to delegate the exercise
of that power to its circuit courts, except in certain specified cases.
When questions arise under those laws in the State courts, and the
party who claims a right or privilege under them is unsuccessful, an
appeal is given to the Supreme Court, and this provision the legis-
Jature has thought sufficient at present for all the political purposes
intended to be answered by the clause of the Constitution which re-
lates to this subject. (McIntire v. Wood, 7 Cranch, p. 504.)

The eleventh section referred to defined the jurisdiction of the
court as to the cases of which it might take cognizance, and the
fourteenth section authorized the circuit court to issue writs of
mandamus only in cases where such writs were necessary to the
exercise of such jurisdiction. The court thus held that writs
of mandamus could be issued only, as and when authorized by
Congress.

The question arose again in the case of Cary v. Curtis, re-
ported in the third volume of Howard’s reports, and it is
impossible to conceive a case more directly in point. I beg
the Senate to listen while I read all of the opinion which
relates to this particular question. Let us remember that they
were contending in that court then, just as it is being con-
tended in this Senate now, that the Federal courts derive their
power from the Constitution and that Congress can not limit
or abridge it.

It is contended, however, that the language and the purposes of (Con-
gress, if really what we hold them to be declared in the statute of 1839,
can not- be sustained, because they would be repugnant to the Constitu-
tion, inasmuch as they would debar the citizen of his right to resort to
the courts of justice. The supremacy of the Constitution over all offi-
cers and authorities, both of the Federal and State governments, and the
sanctity of the rights guaranteed by it, none will question. ‘These are
eoncessa on all sides. ‘The objection above referred to admits of the
most satisfactory refutation. his may be found in the following posi-
tions, familiar in this and in most other governments, viz: hat tke

6640
6 .

Government, as a general rule, claims an exemption from being sued in
its own courts. That although, ag being charged with the administra-
tion of the laws, it will resort to those courts as means of securing
this great end, it will not permit itself to be impeaded therein, save in
instances forming conceded and express exceptions. Secondly, in the
doctrines so often ruled in this court that the judicial power of the
United States, although it has its origin in the Coustitution—

Precisely as every other power exercised by any other De-
partment of this Government has its origin in the Constitution.

Although it has its origin in the Constitution, is, except_in enumer-
ated instances, applicable exclusively to this court dependent for its
distribution and organization, and for the modes of its exercise entirely
upon the action of Congress, who possess the sole power of creating the
tribunals (inferior to the Supreme Court) for the exercise of the judi-
cial power, and of investing them with jurisdiction either limited, con-
current, or exclusive, and of withholding jurisdiction from them in the
exact degrees and character which to Congress may seem proper for the
public good. ‘To deny this position would be to elevate the judicial
over the legislative branch of the Government, and to give to the
former powers limited by its own discretion merely.

It follows, then, that the courts created by statute must look to the
statute as the warrant for their authority; certainly they can not go
beyond the statute, and assert an authority with which they may not
be invested by it, or which may be clearly denied to them. ‘This argu-
ment is in no wise impaired by admitting that the judicial power shall
extend to all cases arising under the Constitution and laws of the
United States. Perfectly consistent with such an admission is the
truth that the organization of the judicial power, the definition and
distribution of the subjects of jurisdiction in the IFederal tribunals,
and the modes of their action and authority, have been, and of right
must be, the work of the legislature. The existence of the judicial
act itself, with its several supplements, furnishes proof unanswerable
on this point. The courts of the United States are all limited in their
nature and constitution, and have not the powers inherent in courts
existing by prescription or by the common law. (Cary v. Curtis, 3
Howard, 244, 245, Rapalje’s edition.)

The question arose next in the case cf Shelden et al. v. Sill,
reported in the 8th volume of Howard. Here again they at-
tacked the constitutionality of an act of Congress because it
abridged the power of the Federal court. What answer did the
court make to that contention? By a unanimous judgment they
decided against it. The court in that case reiterated what it
had said in the other cases, and absolutely declared that it
would be tedious and unnecessary to review all the cases in
which they had decided this precise question. Here is the
language of the court:

It must be admitted that if the Constitution had ordained and es-
tablished the inferior courts, and distributed to them their respective
owers, they could not be restricted or divested by Congress. ut as
t has made no such distribution, one of two consequences must result:
either that each inferior court created by Congress must exercise all
the judicial powers not given to the Supreme Court or that Con-
gress, having the power to establish the courts, must define their re-
spective jurisdictions. The first of these inferences has never been
asserted and could not be defended with any show of reason, and if
not, the latter would seem to follow as a necessary consequence. And
it would seem to follow, also, that, having a right to prescribe, Con-
gress may withhold from any court of its creation jurisdiction of any
of the enumerated controversies. Courts created by statute can have
no jurisdiction but such as the statute confers. No one of them can
assert a just claim to jurisdiction exclusively conferred on another
ae ote all

fhe Constitution has defined the limits of the judicial power of th
United States, but has not prescribed how muvee of it shall be on
cised by the circuit court; consequently the statute which does pre-
scribe the limits of their jurisdiction can not be in conflict with the
Constitution, unless it confers powers not enumerated therein.

Such has been the doctrine held by this court since its first estab-
“shment. To enumerate all the cases in which it has been cither di-
rectly advanced or tacitly assumed would be tedious and unnecessary.

6610
7

The court then addresses itself to the old case of Turner v.
The Bank of North America. and quotes with approval the
interruption of Judge Chase, to which I referred a few mo-
ments ago.

The next case is what is known as the Sewing Machine Com-
panies case, and is reported in the 18th volume of Wallace's re-
ports. The court there reiterates its former views in these
words:

Circuit courts do not derive their judicial power immediately from
the Constitution as appears with sufficient explicitness from the Con-
stitution itself, as the first section of the third article provides that
“the judicial power of the United States shall be vested in one Su-
preme Court and in such inferior courts as the Congress may from time
to time ordain and establish.” Consequently the jurisdiction of the
circuit court in every case raust depend upon some act of Congress, as
it is clear that Congress, inasmuch as it possesses the power to ordain
and establish all courts inferior to the Supreme Court, may also define
their jurisdiction. Courts created by statute can have no jurisdiction
in controversies between party and party but such as the statute con-
fers. Congress, it may be conceded, may confer such jurisdiction upon
the circuit courts as it may see fit, within the scope of the judicial power
of the Constitution, not vested in the Supreme Court, but as such
tribunals are neither created by the Constitution nor is their juris-
diction defined by that instrument, it follows that inasmuch as they
are created by an act of Congress it is necessary, in every attempt to
define their power, to look to that source as the means of accomplish-
ing that end. Federal judicial power, beyond all doubt, has its origin
in the Constitution—

Exactly as all other Federal power has—

but the organization of the system and the distribution of the subjects
of jurisdiction among such inferior courts as Congress may from time
to time ordain and establish within the scope of the judicial power,
always have been, and of right must be, the work of the Congress.
(Case of the Sewing Machine Companies, 18 Wallace, p. 577.)

The question arose again in the case, the Insurance Company
v. Dunn, reported in 19th Wallace. Here again they were
assailing an act of Congress upon the ground that it abridged
the power of the court, and this is the language of the court:

Of the constitutionality of this act we entertain no doubt. The
question is not an open one in this court. A few remarks will be
sufficient to dispose of ihe subject. The third article of the Con-
stitution declares that the judicial power of the United States shall be
vested in one Supreme Court and in such inferior courts as Congress
may from time to time establish, and that it shall extend, among other
things, to ‘controversies’ ‘between citizens of different States.”
As regards the inferior courts authorized to be established, Con-
gress may give them such jurisdiction, both original and appellate,
within the limits of the Constitution, as it may see fit to confer. How
their appelate jurisdiction shall be exercised is not declared. The
whole subject is reitted to the unfettered discretion of Congress. (In-
surance Co. v. Dunn, 19 Wallace, p. 226.)

Mr. OVERMAN. May I interrupt the Senator?

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from North Carolina?

Mr. BAILEY. Certainly.

Mr. OVERMAN. I am inclined to agree with the Senator
from Texas on that question, but in reading this morning I saw
the expression, ‘courts have a natural equity jurisdiction.”
Suppose the act of Congress should give to a court jurisdiction
of the subject-matter and the suitor, in order to protect his
property, should ask for injunctive relief to save his property
from irreparable injury. The court having been given juris-
diction over the subject-matter, can not the aid of equity be
invoked to he!p adjust the rights fairly and equitably?

Mr. BAILEY. I will answer the Senator with the decision

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8

of the Supreme Court in the case of Fink +. O'Neil, reported in
the 166th volume of U. S., and which presents even a stronger
ease than that suggested by him.

A judgement had been obtained by the United States against
O'Neil and others, in the Irederal court, and the marshal was
proceeding to sell the homestead of O'Neil, which, accarding to
the Luvs of Wisconsin, was exempt. It was contended, however,
by the Government that exemptions could not be pleaded against
a sovereign. That contention was admitted. But the court held
that the law of Congress regulating the issuance of executions
rendered it necessary to follow the law of Wiscensin, and that
case distinctly and completely negatives this dectrine of in-
herent powers, as it is now asserted. It decides that Congress
ean regulate and limit the right of courts to issue final execu-
tions, and surely the Senator from North Carolina will concede
that in doing that the court more than supports the view
which I am presenting. Who can doubt that a power which
can regulate and restrict the right to issue final executions to
enforce judgments already rendered can also regulate and re-
strict the right to issue preliminary injunctions? I especially
commend to the Senator from North Carolina this language of
the court.

This conclusion can not be avoided by the consideration which has
been urged upon us, that the process acts do not limit the sovereign
rights of the United States, upon the principle that the sovereign is not
bound by such laws, unless he is expressly named. These laws are the
expression of the sovereign will on the subject, and are conclusive
upon the judicial and executive officers to whom they are addressed ;
and as they forbid the issue of an execution in every case, except sub-
ject to the limitations which they mention, and as there is no authority
to issue an execution in any case whatever, except as conferred by
them, the sovereign right invoked is left.without the means of vindica-
tion. The United States can not enforce the collection of a_ debt
from an unwilling debtor, except by judicial process. They must bring
a suit and obtain a judgment. ‘lo reap the fruit of that judgment they
must cause an execution to issue. The courts have no innerent author-
ity to take any of these steps except as it may have been_confevred
by the Iggislative department, for they can exercise no jurisdiction ex-
cept as the law confers and limits it.

What does the Senator from North Carolina say to that state-
ment?

Mr. OVERMAN. As I stated I am inclined to agree with the
Senator, and must confess that the authority he reads rather
eonfirms me that he is right in his contention.

Mr. FULTON. Mr. President

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from Oregon?

Mr. BAILEY. I do.

Mi. FULTON. I do not wish to disturb the Senator right
now, but——

Mr. BAILEY. Not at all.

Mr. FULTON. TI wish to invite his attention to a point, and
the way it impresses me in order, if it does not disturb his line
of argument, that he may expiain the doubt or difficulty that is
in my mind. It seems to me that the line of cases he bas been
citing and has heen reading from go to establish, first, the propo-
sitions that in the matter cf the distribution of power among the
courts that Congress shall create it is purely within the dis-
<retion of Congress whether or net it will invest a court it
creates with this jurisdiction or with that. In other words,
Congress may say whether the courts shall exercise jurisdic-

66-10

 
9

tion in a particular case or not, and then, vesting it with
the jurisdiction, it may prescribe the manner of practice and
the mode of proceeding. But that gces simply to regulating
the practice, which we all understand differs entirely from the
real questions at issue or the real merits of the controversy.
The manner of conducting a trial, the mode of practice, is one
thing; the real heart of the controversy is another.

By the Constitution judicial power is vested in the courts—
the Supreme Court and such inferior courts as Congress may
from time to time create. Judicial power extends to cases at
law and in equity. Now, if judicial power extends to cases in
equity, and a party has a case in equity, and the Congress says
that a case in equity shall be tried before this court, the ques-
tion I ask the Senator is this: Is not that party entitled, being
relegated to that formm, to have his case in equity tried accord-

’ ing to the law in such manner as will protect his constitutional
rights,

Mr. BAILEY. According to the law of Congress; that is my
answer.

Mr. FULTON. But suppose that law of Congress-——

Mr. BAILEY. If the Senator will permit me to finish read-
ing this quotation probably it will afford him a better answer.

Mr. FULTON. I was going to ask for information, if the
Senator will permit me a moment——

Mr. BAILEY. Yes.

Mr. FULTON. Suppose the law of Congress says a circuit
court can try this case in equity, but it can give no relief; could
Congress do that?

Mr. BAILEY. Of course it could. Congress could abolish
every inferior court in the United States to-morrow.

Mr. FULTON. True; but suppose it gives a court of equity
jurisdiction, can it deny that court power to grant relief?

Mr. BAILEY. It only gives it jurisdiction to be exercised in
such manner as Congress prescribes.

Mr. FULTON. Suppose it does——

Mr. BAILEY. Let me finish this.

Mr. FULTON. Very well.

Mr. BAILEY. I want the Senator to hear this. I see the
Senator has not examined this case.

Air. FULTON. I do not know that I have read that case.

Mr. BAILEY. The Senator has not, for if he had examined
if he is tco good a lawyer to have missed its point. It decides
that Congress gave the court the power to hear and determine
the cause; to render a judgment, and yet it could not issue
execution on that judgment except in the manner Congress hal
provided. If there is any power more inherent in a court than
all others, except alone the power to punish for contempt, it is
the power to issue execution to enforce its judgment; and
yet the court has expressly declared, in the opinion from which
I have just read, that Congress can limit or destroy that power.
The court continues beyond what I had read, when interrupted
by the Senator from North Carolina [Mr. Overman] and the
Senator from Oregon [M. Furron}, and repeats the declaration
of Justice Daniel in the case of Cary v. Curtis. It proceeds as
follows:

And if the laws in question do not permit an execution to issue upon
a judgment in favor of the United States, except subject to the exemp-

6640
10

tions which apply to citizens, there are no others which confer authority
to issue any execution at all. For, as was said by Mr. Justice Daniel
in Corey vr. Curtis (3 How., 236, 245), the courts of the United States
are all limited in their nature and constitution, and have not the
powers inherent in courts existing by prescription or by common law.

Can the Senator from North Carolina or the Senator from
Oregon ask for authority more directly in point. The Federal
court had heard and determined the case, and yet no execution
could issue except in the manner which Congress had prescribed,

Mr. FULTON. Now, will the Senator allow me to ask him a
question?

Mr. BAILEY. Yes.

Mr. FULTON. I will say to the Senator it seems to me that
the distinction between that case and the one we have in mind
is this: What property shall be subject to execution after a
judgment shall be rendered is purely a matter of public policy,
to determine which power is reposed in the legislature; and, of
course, the legislature can limit that, but the Constitution di-
rectly and specifically protects citizens in the enjoyment of
certain rights. One of those is that their property may not be
taken without due process of law. There is a constitutional
prohibition against certain action.

Mr. BAILEY. Will the Senator——

Mr. FULTON. In a moment.

Mr. BAILEY. Very well.

Mr. FULTON. Congress establishes a court and gives to
that court the power to try suits in equity. One of the known
powers of equity, indeed the strong arm of the court of equity
since its foundation, clear back to the very organization of
courts of equity, is the power of injunction to prevent a threat-
ened injury. Therefore, in this case, the Constitution prohibits
the taking of property without due process of law, and prevents
the taking of private property for public use without just com-
pensation. A party comes into court and says, “ They are tak-
ing my property without due process of law, they are taking it
and appropriating it, and now I appeal to the court to protect
me by an injunction,’ and you answer, “It is true the Consti-
tution has said that your property may not be appropriated and
you may not be deprived ef it, except by due process of law or
having just compensation, yet the Congress has rendered the
court powerless to prevent it because we can not issue an in-
junction.” Wow, then, can Congress accomplish indirectly what
it can not do directly? Can it so provide that a citizen may be
deprived of his property without due process of law or with-
out just compensation by directly depriving the courts of power
to issue a writ of injunction?

Mr. BAILEY. Mr. President, the very section of the Con-
stitution which the Senator invokes, the due process of law
provision, declares that no person shall be deprived of life, lib-
erty, or property without due process of law. Does the Senator
from Oregon hold that it violates that constitutional provision
tor the Gevernment to arrest a man and confine him in jail
to await the final judicial determination of whether he is guilty
or not? They do that nearly every day. They arrest a man
upon a charge, they imprison him upon an indictment to await
judicial determination of his guilt or innocence. All I ask is
that when the railroad commission says “this is a fair rate,”
that it shall stand until a full judicial inquiry has been made

6640
11

and an ascertainment of its injustice found. Will the Senator
eontend that the rights of property are more sacred than per-
sonal liberty of the citizen?

Mr. FULTON. No, Mr. President.

Mr. BAILMY. Then he is not right——

Mr. FULTON. A railroad is entitled to exactly the same right
that any citizen has.

Mr. BAILWY. Of course, but.

Mr. FULTON. And we can not make a different rule applica-
ble to the railroad on the trial of its case than we can make
applicable to any citizen. They are entitled to equal protection
under the law.

Mr. BAILEY. The Senator confuses the fifth amendment
with the fourteenth amendment of the Constitution. There is
no constitutional guaranty of the equal protection of the law by
the Federal Government. The fourteenth amendment to the
Constitution forbids a State to deny the equal protection of its
laws to any person within its jurisdiction, but the fifth amend-
ment, which controls this matter, imposes no such limitation
upon the power of Congress.

Mr. HEYBURN. Mr. President:

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from Idaho.

Mr. BAILEY. When I finish my reply to the Senator from
Oregon I will yield to the Senator from Idaho.

I contend that it is an affront to the common sense of the
American people to tell them that under the law a citizen may
be apprehended upon a mere charge and lodged in prison to
await the action of the grand jury, and then upon an indictment
he may be kept incarcerated in jail to await a jucicial inquiry
into his innecence or guilt—that all of this may be done without
violating the citizen’s guaranty against the deprivation of his
liberty without due process of law; and yet that it deprives a
railroad of its property to compel it to wait for a full and fair
judicial inquiry. The railroad, like everybody else, is entitled
to a trial, but they can be made to wait for a full and fair trial.

Now I yield to the Senator from Idaho.

Mr. HEYBURN. Mr. President, the Senator seems to have
passed, for the time being at least, the consideration of the
point to which I desired to direct an inquiry ; and that was as to
the source of the power vested in the Supreme Court and in the
other courts of the United States. It is, perhaps, the primary
question for consideration in determining how much and of
what character the review in this case shall take, or rather how
much power of review shall be given and the character that it
shall take.

I understood the Senator to say—I may have misunderstood
him—that whatever power the Supreme Court bad it derived
from Congress. ;

Mr. BAILEY. Oh, no; I did not say anything of the kind.

Mr. HEYBURN. Well, in substance.

Mr. BAILEY. No; I did not say it in substance. I did not
approach saying it in substance or in shadow. The Senator
probably has used the words “ Supreme Court” when he meant
the inferior courts.

Mr. HEYBURN. Well, I was going to call the attention of
the Senator and the Senate to the language in reference to the

6640

 

 
12

two classes of courts and to the construction that Justice Story
placed upon tbat language in the Virginia cuse of Martin v.
Ilunter.

Mr. BATLEY. Iam familiar with that case. I know enough
of it to know that it does not apply to this question at this
point,

Mr. HEYBURN. Of course, if the Senator does not desire
to be interrupted, I will not interrupt him, but I will reserve
the presentation of this idea until I can do it in my own time.
It seemed, however, to be pertinent to the consideration that
the Senator was giving to t4~ question at that time.

Mv. BAILEY. I yield to the Senator from Idaho for that pur-
pose.

Mr. WEYBURN. The question has been made, you might say,
taken up or mooted, several times, and Senators have expressed
themselves upon this principle, and it seems to me that we might
just as well give it a little consideration at this time in passing.
There is no other case reported that so clearly draws the dis-
tinction between the divided—we may say divided—jurisdic-
tion of the United States Supreme Court as does this case of
Martin 7. Hunter, in which Justice Story had under considera-
tion the direct question as to the character of its jurisdiction,
and he expressed it in this way. The question was whether
or not Congress was bound to confer the jurisdiction upon the
inferior courts that is provided for in section 2 of Article III
of the Constitution, and the Supreme Court held it was not
optional with Congress to create these courts and establish their
jurisdiction, but that Congress must do it, That is what Jus-
tice Story says. Here is his language:

Let this article be carefully weighed and considered—

Referring to this article of the Constitution—

Let this article be carefully weighed and considered. The language
of the article throughout is manifestly designed to be mandatory upon
the legislature. ,

They spoke of Congress as the legislature in those days, as
they did all throvgh the proceedings of the convention that
framed the Constitution.

Its obligatory force is so imperative that Congress could not, without
a violation of its duty, have refused to carry it into operation.

That is, this power of creating such inferior courts as Con-
gress was authorized to create by the Constitution and pre-
scribe their jurisdiction. The court says:

The judicial power of the United States shall be vested—

Those last three words being italicized—

The judicial power of the United States shall be vested (not may he
vested) in one Supreme Court and in such infericr courts as Congress
may, from time to time, ordain and establish.

Those are the courts that are to have original jurisdiction
for the purpose of enforcing the provisions of the legislation
which is proposed at this time—those inferior courts that Justice
Story says it is obligatory upon Congress ‘to create, not optional.
Then he proceeds :

Could Congress have lawfully refused to create a Supreme Court, or
to vest in it the constitutional jurisdiction?

The principal subjects of the jurisdiction of the Supreme
Court are not to be vested in it by Congress, but they are vested
in it in specific terms by the Constitution. But, in addition to

6640
13

that power, Congress may invest the Supreme Court with certain
powers and functions both as to the power to hear and deter-
mine, as well as to the manner of doing it. Justice Story says
further:

The judges, both of the Supreme and inferior courts, shell hold—

And he emphasizes it—
their offices during good behavior, and shall at stated times—

Mr. BAILEY. I do not really want that case injected into
my speech, because the Senator misapprehends what Judge Story
meant. Judge Story merely meant that it was the duty of Con-
gress to do this, but he did not mean that, if Congress did not
do it, there was any power in the courts to enforce it. I wil
thank the Senator to withhold that decision.

Mr. HEYBURN. I will only say then—and I shall not inter-
rupt the Senator longer than to say it—

The VICE-PRESIDENT. The Senator from Texas declines
to yield..

Mr. HEYBURN. I understood the Senator yielded for the
purpese of allowing me to round out what I was going to say.

Mr. BATLEY. I yield to the Senator.

Mr. HEYBURN. I only desire to say that I think upon a
proper occasion I shall be able to make clear to the mind of the
Senator from Texas that Justice Story did mean to say just
what I say he meant to say; and I shall take occasion to inject
this decision into the argument, because it is a complete an-
swer to the position that the Senator has taken this morning.

Mr. BAILEY. Mr. President, of course the Senator from
Idaho thinks what he says, but upon a better reflection he will
change even his mind about that.

Mr. HEYBURN. Well, Mr. President——

Mr. BAILEY. The truth of it is——

Mr. HEYBURN. I hope the Senator will yield long enough
for me at least to answer that reflection.

Mr. BAILBY. That is no reflection.

Mr. HEYBURN. Well, it is that class of reflection that is in-
tended, and succeeds in bringing a little laugh from the galleries.
The Senator from Idaho is not a novice in the consideration of
these questions, and is entitled to be considered as understand-
ing, or, at least, is presumed to understand, these legal ques-
tiens perhaps as well as his juniors at the bar.

Mr. BAILEY. Well, it is not age that determines wisdom.
[Laughter.]

Mr. President, I do not intend to engage in a political dis-
cussion as to whether it was the duty of Congress to confer
upon the courts all the jurisdiction which the Constitution
authorizes it to confer. I am confining myself to the judicial
contention that the inferior courts can exercise no power not
eonferred upon them by Congress.

The Senator from Idaho, I take it, will not complain that
the present law denies the right of a suitor to resort to a Fed-
eral court where less than $2,060 is involved; and yet the Con-
stitution says the jurisdiction “shall extend to ail ceases,’—not
to all cases involving $2,000 and mere, but “to all cases.” The
original judiciary act drew ihe line at $500, but the Constitu-
tion draws no line; it fixes no limitation upon the jurisdiction
of the Federal courts according to amount; but every judiciary

6640
14

act in the history of the Government has recognized the power
of Congress to exclude from judicial cognizance in the Federal
courts cases below a certain amount. .

Now, Mr. President, I return from this digression to the ques-
tion whether Federal courts have inherent powers. That they
have inherent powers in a sense is true; that is. if you create
a Federal court, and do not expressly forbid it to exercise certain
powers, it possesses them by virtue of its creation. Such is
the power to issue an execution to enforce its judgment; such
is the power to punish summarily for contempt; and yet the
books are full of cases which affirm the power of Congress to
prohibit this right of the court to issue execution or to punish
for contempt, except according to the statute.

When the Supreme Court expressly has decided that Congress
can regulate the power of a circuit court to issue an execution,
in God's name how can a lawyer contend that Congress can not
regulate the right of that court to issue a mere interlocutory
decree? How vastly more important to the due administration
of justice that the court shall issue executions to enforce its
final and deliberate judgment than it is that they issue a mere
interlocutory decree! The opinion which holds that Congress
can prescribe and limit the court’s right to issue executions was
unanimous. It was not by a vote of 5 to 4 nor 6 to 8, but all—
the entire court—concurred in saying that the courts of the
Wnited States have no inherent power to enforce their own
judgments against the limitations imposed by the act of
Congress.

But, Mr. President, conclusive as that, in my judgment, is,
there is yet a stronger case. In 19th Wallace is reported the
case of Ex parte Robinson, and here is the language of the court,
the opinion being delivered by Mr. Justice Field:

The power to punish for contempts is inherent in all courts; its
existence is essential to the preservation of order in judicial proceed-
ings, and to the enforcement of the judgments, orders, and wiits of the
courts, 4nd consequently to the due administration of justice. The
moment the courts of the United States were called into existence and
invested with jurisdiction over any subject they became possessed of
this power. But the power has been limited and defined by the act of
Congress of March 2, 1831. The act, in terms, applies to all courts;
whether it can be held to limit the authority of the Supreme Court,
which derives its existence and powers from the Constitution, may
perhaps be a matter of doubt. But that it applies to the circuit and
district courts there can be no question. These courts were created by
act of Congress. Their powers and duties depend upon the act calling
them into existence, or subsequent acts extending or limiting their
jurisdiction. The act of 1N51 is, therefore, to them the law specifying
ae cases in which summary punishment for contempts may be in-

icted.

Can anything be plainer? The court declares the power to
punish contempt is inherent in all courts; and yet it sustains a
most important abridgment of that power. When it describes
the power to punish for contempt as inherent the court plainly
and only means that it is power which the court possesses by
virtue of its creation, but which may be limited and controlled
by statute.

Mr. President, within the memory of all here the Senate has
passed, by a practically unanimous vote, a bill to take from the
courts of the United States the power to punish stmmarily in
all cases of constructive contempt, and to confer upon the
citizen so accused the right of a trial by jury. That was when

6640
15

the Inbor organizations of the country were protesting against
the denial of the right of a trial by jury through the agency of
the Federal courts, which issved injunctions in order that they
might punish summarily for contempt, instead of trying men
by a jury for conspiracy. This matter bed reached a stage of
such gross abuse that, as I recall it, the Judiciary Committee
of the Senate, at the head of which then stood the venerable
Senator from Massachusetts, Mr. Hoar, long honored for his
great learning not only in the Senate but throughout the entire
country, preceived the necessity of some check.

My recollection is that a unanimous report from the Judiciary
Committee affirmed the power of Congress to withdraw from the
Federal court the right to punish for constructive contenpt,
and committed such offenses to trial by a jury of the country.
Senators concede the power of Congress to restrict and control
the issue of execution; they concede the power of Congress to
restrict and control the right to punish fer contempt, yet they
deny the power of Congress to regulate the issuance of pre-
liminary injunctions, The court says that the act of 1831 lim-

‘ited the power of all ederal courts to punish for contempt,
and yet it holds that act to be a valid exercise of the power of
Congress.

That act of 1831 has a curious history. A Missouri judge
punished a St. Louis lawyer eppressively and unjustiy for criti-
cising threugh the public press some of his opinions. He pro-
ceeded so outrageously and so oppressively that the spirit of self-
respect and love of justice. which dominates always the American
bar, revelted, and they brought the conduct of the judge to the
attention of the Ilouse of Representatives, where they asked that
he be impeached in the name of justice. The House preferred
articles of impeachment against him. The Senate tried him.
Of course the Senate acquitted him. Except in two instances it
has acquitted every man who has been tried upon articles of
impeachment, and of the two excepted cases one was a crazy
man while the other was absent. They tried Judge Peck. He
was acquitted, but his conduct was so monstrous and unjust
that the American Congress testified its abhorrence of the abuse
of the power to punish for contempt by enacting the law of 1831.
That act has passed under judicial review in other cases, and has
been sustained. In the case of Savin, reported in 131 U. S., the
court declared :

The act of 1789 did not define what were contempts of the authority
of the courts of the United States in any cause or hearing before them,
nor did it prescribe any special procedure for determining a matter
of contempt. Under that statute the question whether particular acts
constituted a contempt, as well as the mode of proceeding against the
offender, was left to be determined according to such established rules
and principles of the common law as were applicable to our situation.
The act of 1831, however, materially modificd that of 1789, in that it
restricted the power of the courts to inflict summary punishments for
contempt.

Again, in the same volume and in almost the very next case,
where Cuddy was the petitioner, the court said:

The only effect of this limitation is to narrow the field for the exer-
cise of their general power, as courts of superior jurisdiction, to punish
contempts of their authority.

Mr. President, it is neither true as a matter of law, nor is it
true as a matter of fact, that I am seeking to deprive any
railroad of its property without a just compeusation. All I

6640
16

am contending for is that the rate which the Commission, after
a full hearing, has said is a fair one shall stand until con-
demned by the final judgment of a court upon a full investiga-
tion of the case.

What rate is more apt to be just and fair—the rate fixed by
the railroad, inspired by its selfish desire to increase its earn-
ings, or the rate established by an impartial tribunal? The
railroad managers, under their view of their duty and their
situation do not owe as much to the public in the way-of just
rates as they owe to their stockholders in the way of dividends
and profits.

Let us suppose that they have abandoned the old, remorseless,
and indefensible rule of laying all that the traffic will bear, and
that they now employ the juster practice of demanding only a
fair compensation for their service. Let us assume that they
are both honest and diligent in striving to arrange their charges
with a view of doing justice to the public as well as to their
stockholders, we can not still be blind to the fact that the men
who fix those rates have a selfish interest which will lead the
most enlightened and most upright among them to favor them-
selves against their patrons.

On the other hand, here is a great Commission constituted
by the law, composed of men of high character and great ability,
charged with the high duty of doing justice—justice alike to the
railroad and to the shipper. No thought of self enters into
their calculation; all they do is done in the name of the Govern-
ment and for the sake of justice. And yet we are told that the
rates fixed by such a tribunal may be and perhaps ought to be
suspended by a judge and the railways left to collect the rate
imposed by their own selfishness and measured too often by
their own greed.

Again, Senators, I put the question to you—what rate is
more apt to be right—the one fixed by the railroad or the one
fixed by the Commission? If the rate fixed hy the Comuission
is more apt to be right, in the name of justice and on behalf
of the people, I Gemand that that rate shall stand until finally
adjudged by the court to be unjust.

They tell us that we ought not to confer this rate-making
power on the Commission because it is a task of surpassing
difficulty and delicacy. I agree that it is a difficult and delicate
task. I agree that it ought to be performed only by men quali-
fied for such a work; and yet with an argument like that on
their lips they demand that a Federal judge, who, though he
may know everything about the law may know nothing at all
about freight rates, shall have the right to set aside a schedule
fixed by a commission of experts, nnd that he may do so upon
an ex parte hearing and without any investigation of the case.

Ah, Senators, you had better be candid with the people. If
when they ask for bread you intend to give them a stone, be
brave and henest with them and refuse to give them anything.
Give what they want or give them nothing, and let us try this
issue anew before that great jury of American voters.

That the courts will abuse the power which you propose to
leave with them is a moral certainty. Mr. President, I have
here a letter written to me by a reputable lawyer in the State
of Florida, whose knowledge especially qualifies him to speak
upon the subject, and I ask the Senate to hear how a Federal

6640
17

judge has despised and trampled upon the plainest principles
of justice. This lawyer says:

The Florida railroad commission enforces its orders by mandamus
instituted criginally in the supreme court of the State, and yet Judge
Pardee has enjoined the Florida railroad commission and all of the
State officials from instituting suit in the supreme court of the State
by mandamus to compel the Louisville and Nashville Railroad Com-
pany to reduce its passenger fare from 4 cents to 3 cents per mile in
Florida, and this injunction was granted upon the affidavit of the vice-
president of the Louisville and Nashville Railroad to the effect that the
Louisville and Nashville property in Florida is worth at least
$5,200,000—this high valuation being essential to their case—and the
State produced an affidavit made by the same man one month and
twenty-eight days prior to his swearing to the bill, in which affidavit
he had sworn that the identical property was not worth exceedirs
$1,700,000; and yet on this man’s affidavit the State was temporarily
restrained from instituting mandamus proceedings in the supreme court
of Florida to enforce compliance with the rate.

Not only, Mr. President, has this inferior Federal court de-
nied the right of the State to enforce an unjust rate, but they
have restrained the State from resorting to its highest court
to settle the question of whether a given rate is just or not;
and that restraining order was issued upon the bill of the rail-
road, sworn to by its vice-president. Because I seek to with-
hold from a judge an oppressive and éxtraordinary power like
that, shall I be arraigned before the country and charged with
having proposed to violate the Constitution, and to deprive a
carrier of its property without the due process of law?

Mr. President, I have no desire to oppress the railroads. My
whole object is to prevent the railroads from oppressing the
people, and that I believe to be the unanimous desire of Sena-
tors who sit on this side of the Chamber. I do not know what
view others may take about this question, but if I stand alone
I intend to submit to the Senate the question whether it will al-
low a Federal court to exercise such an arbitrary, extraordinary,
and oppressive power as has been exercised by Judge Pardee,
as related in the letter which I have read. It can do no man
any harm, or at least it can do no man any injustice, to say
that until there shall be a full and fair judicial determination
of the question, the rate established by the Interstate Commerce
Commission shall be the lawful one.

Mr. ALDRICH. Will the Senator from Texas allow me to
ask him a question?

Mr. BAILEY. Certainly.

Mr. ALDRICH. As I understand the views of the Senator
from Texas, he is in favor of having a full and fair judicial de-
termination finally of the question whether the rates fixed fur-
nish just compensation or not?

Mr. BAILEY. I am. I have never seen the hour, and I sin-
cerely trust I will never see the time, when I can be clamored
into closing the doors of the courts against any person, natural
or corporate. The right to a trial is not only sacred under the
Constitution, but it was sacred before the Constitution was,
adopted. If you could destroy the Constitution, and if by burn-
ing its parchment you could release us from our obligation to
obey its limitations, I should still stand here contending for the
right of every man to have his day in court. But, Mr. President,
the right to a day in court, the right to have a fair and an im-
partial trial, does not embrace the right of allowing an arbitrary

6640——2

 
18

Federal judge to set aside without sufficient inquiry the deliber-
ate judgment of a competent and impartial board.

The Senator from Rhode Island [Afr. Atpricu] and every
other Senator in this Chamber, I trust, credits me with a proper
respect for the law. I not only respect the law, but I respect
the courts, and I sometimes think I go too far in yielding my
own opinion to theirs. That I should yield obedience to their
decrees is to be expected, but I doubt if goed citizenship re-
quires us to receive their reasoning as conclusive, although we
must accept their conclusions as binding.

After all the judge, when elevated to the bench, is still the
same man, with the same infirmities and limitations, both of
character and intellect, that he was when he sat in the Senate
or served his country in an humbler sphere. TI believe that the
man who for selfish or political purposes creates a distrust of
the courts does his country an irreparable injury; and yet the
injury be does is not half so great as the injury done by that
man who would teach us a debasing belief in the infallibility of
courts.

Courts make mistakes; they make honest mistakes; and self-
respecting American citizens are entitled to examine them and
eandidly to express their opinion about them. While I rejoice
to say that I do not believe there is to-day a man on our
Supreme Bench who would prostitute his great office to an un-
worthy purpose, I do not extend that confidence to the entire
judiciary of the United States. I frankly declare my belief
that there are inferior judges who will abuse this great power
Jf you leave it with them, and therefore I insist that it shall be
taken from them.

6640

O
REGULATION OF RAILROAD RATES.

THE POWER OF CONGRESS OVER THE
JURISDICTION AND PROCEEDINGS OF
INFERIOR COURTS.

The power to create and the power to destroy must, in the nature
of things, include the power to limit and control.

SPEECH

or

HON. JOSEPH W. BAILEY,

OF TEXAS,

IN TIE

SENATE OF THE UNITED STATES,

APRIL 10, 1906.

sabe
ye

WASHINGTON.

1906.
6712
re

~~
Regulation ot Railroad Rates.

SPEECH

HON. JOSEPH W. BAILEY,

OF TEXAS,
IN THE SENATE OF THE UNITED STATES,
Tuesday, April 10, 1906.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled “An act to regulate commerce,” approved Feb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. BAILEY said: d

Mr. Prestpent: When I first asserted on the floor of the
Senate that Congress possesses the power to prevent Federal
courts from suspending by preliminary injunction the orders of
the Interstate Commerce Commission, most of those who chal-
lenged that assertion attempted to draw a distinction between
the power of Congress over proceedings in equity and the
power of Congress over proceedings at law, and they contended
that there was some peculiar sanctity about the equity power
of even an inferior Federal court which removes it beyond
legislative limit and control.

It was an easy task to expose the fallacy of that contention,
and I could answer all that was urged in its behalf by simply
repeating the plain language of the Constitution. livery iutelli-
gent layman could readily be brought to understand that, as the
judicial power is extended to all cases in “law and equity ” in
the same clause of the same sentence, and in exactly the same
words, the power over the one must, by every rule of sound con-
struction, be exactly the same as the power over the other. I did
not for one moment apprehend that many intelligent men could
be misled by that shallow and unfounded distinction; but it is
neyertheless a great satisfaction to know that it has now been
completely and unconditionally abandoned. The Senator from
Wisconsin [Mir. Spooner] in the course of his speech repudiated
it in the most explicit terms when he said:

I agree that, so far as the power of Congress over the inferior courts
of the United States is concerned, there is probably no distinetion
between the courts of equity and the courts of law. I do not see that
there is. If the Congress can destroy one, directly or indirectly, I see
no reason why it might not destroy the other.

Thus, Mr. President, I am relieved from the necessity of con-
suming the time of the Senate in discussing this distinction be-
tween the power of Congress over proceedings in equity and the
power of Congress over proceedings at law, althovgh in the be-
ginning of this controversy that seemed to be the point of main
reliance on the part of those who differed with me.

6712 3
4

The Senator from Wisconsin [Mr. Spooner] has also con-
ceded, and in that concession the Senator from Pennsylvania
(Mr. Knox] has joined him, that I am right, and that I am sus-
tained by an unbroken line of decisions rendered by the Supreme
Court of the United States in declaring that all infcrior Federal
courts derive their jurisdiction from the laws of Congress and
not from the Constitution. Both of those distinguished Sen-
ators, however, insist that there is a vital distinction between
the judicial power of the Government aud the jurisdiction of its
courts, and upon that distinction they predicate their entire
arguinent.

In order that the Senate may know that I have not misunder-
stood and that I hare not misstated the position of those Sena-
tors, I will read the very words in which they tender the issue
between us. The Senator from Wisconsin states it thus:

My proposition is: That when the Congress confers jurisdiction upon
the inferior courts of the United States over any one of the cases or
controversies enumerated by the Constitution the judicial power ex
necessitate rei goes with it, including the instrumentalities which in-
here in the jurisdiction and are necessary to its efficient exercise.

The Senator from Pennsylvania [Mr. Knox], approving the
distinction made by the Senator from Wisconsin [| Mr. Spooner],
restates it in a no less definite form, as follows:

I am constrained, however, to say that, in arriving at a correct soln-
tion of this question, it is necessary to have constantly in mind the
distinction between the judicial power of the United States and the
jurisdiction of the Federal courts, as preseribed by the Constitution and
laws of the United States.

Mv. President, I do not belong to that class of men who think
they can answer every distinction made by their opponents in
debate by inveighing against the advocate’s habit of drawing
distinctions. In fact, sir, I rather delight in the mental cxer-
cise of satisfying my own mind, and of trying to satisfy the
minds*of those who hear me, that things which are similar are
not necessarily identical, and, in my opinion, no mental quality
is more valuable than that which enables us to perceive and to
point out just and proper distinctions.

But, sir, I must confess that the lawyers’ subterfuge of con-
tinually striving te—

Distinguish and divide
A hair ’twixt south and southwest side.
has gone far toward justifying the complaint so often uttered by
the Senator from South Carolina [Mr. TirtwAn] and others like
him against what they are pleased to call the endless and confus-
ing wrangles of the lawyers. I recognize the right of those who
ought to be guided by our knowledge of the law to complain
when we bewilder them with useless refinements iustend of lead-
ing them into “ the gladsome light of jurisprudence.”

If, however, the Senator from Wisconsin and the Senator
from Pennsylvania have succeeded in establishing a distinction
between the judicial power of the Government and the juris-
diction of its courts as those terins are involved in this debate,
they have rendered the Senate and they have rendered the
country a valuable service, and I hasten to acknowledge that
they are entitled to the credit of having been the first to under-
stand and to apply that distinction to a matter of this kind.

But, sir, if I can demonstrate, as I believe I can, that the
distinction which they have inverted has no relation to the
question which we now have under consideration, their best

6712
5

friends must realize that they have made a grave mistake in
ereating a doubt as to the constitutional power of Congress to
do that which all men admit in justice and in reason ought to
be done, :

JUDICIAL POWER AND JURISDICTION.

At certain times and under certain circumstances it is entirely
proper to speak of judicial power rather than of jurisdiction.
When the fathers came to establish this Government and to di-
vide it mto legislative, executive, and judicial departments, they
aptly selected the term “judicial power” to describe the ca-
pacity of the new Government to hear and determine all of the
cases and controversies subject to its decision. It is also true
that ordinarily and correctly we use the term jurisdiction te
describe the power which Congress has authorized the courts of
its creation to exercise. In this sense, but only in this sense,
there is a distinction between judicial power and jurisdiction.

What is judicial power? It has been so often defined by text
writers and by the courts that it is our own fault if we permit
ourselves to be confused about its meaning. The Senator from
North Carolina [Mr. OvermAN] read to the Senate one of the
clearest and most accurate definitions of judicial power that
can be found in the books, but, instead of relying on it, I shall
accept the definition proposed by the Senator from Wisconsin.
The definition which he gives is taken from the work of Judge
Miller on the Constitution, and I do not think it subject to any
fair objection.

Certainly the Senator from Wisconsin can not object because
the passage which I intend to use is precisely the one which he
has used, and I shall use it in exactly the same connection. In
fact, sir, the Senator from Wisconsin prefaced his quotation
from Judge Miller with the same question which IT am now
asking. ‘ What,” said he, “is the judicial power of the Con-
stitution?” and then he proceeds to answer his own question
with the following quotation. Pretermitting that part of it
which is unnecessary and coming to the precise point which the
Senator sought to emphasize, Judge Miller said:

It—

The judicial power—
is the power of a court to decide and pronounce a judgment and carry
it into effect between persons and parties who bring a case before it for
decision.

This quotation from Judge Miller is not essentially different
from the definition of all other respectable authorities. They all
concur in saying that judicial power is the power to hear and
decide, the power to pronounce a judgment and to carry that
judgment into effect.

What is jurisdiction? ‘The power to hear and determine
a cause is jurisdiction,” said the Supreme Court of the United
States in the case of the United States v. Arredondo. Mr.
Bailey, in his excellent work entitled “The Jurisdiction of the
Courts,” defines it as
the power to hear and determine the subject-matter in controversies
between parties to a suit, and to adjudicate or exercise any judicial
power over them. Bracton defines jurisdiction to be the authority to
judge or to declare the law between parties brought into the courts.
It was said by Ryan, Chief Justice, in Pierce, 44 Wisconsin, that this
definition has never been bettered and probably never would be, and is
of universal authority.

6712
6

Bouvier, in his great work. which is accepted as authorita-
tive by every court in the land, defines jurisdiction—
to be the power to hear and determine a cause, the right of a judge to
pronounce a sentence of the law on a case or suit brought before him
acquired by or through due process of law.

These are almost the same words in which Judge Miller de-
fines judicial power, and there is absclutely no difference be-
tween them in principle or in effect. I could multiply these
cefinitions until I had exhausted ihe patience of the* Senate
and they would all tend to establish that there is no distinction
between the judicial power of the Government and the juris-
diction of its courts when those terms are considered with ref-
erence to a proposition like the one now before the Senate.

But, Mr. President, suppose I admit that there is a distinction
between the judicial power of the Government and the juris-
diction of its courts even with respect to a question like the
one under debate, that distinction, sir, so far from supporting
the position of the Senators from Wisconsin and Pennsylvania,
must produce upon any unbiased mind precisely the opposite
effect. They describe the right of the Government to hear and
determine disputes as its judicial power, and they describe the
jurisdiction of its courts as the right which Congress has con-
ferred upon those courts to hear and determine certain cases.
They confess that the court has no power to act in any given
case until Congress has authorized it to do so, but they insist
that when Congress has given a court the power to act at
all, the Constitution thea gives it the power to act beyond the
limit of the law and up to the limit of the Constitution.

To state it in another way, they contend that while the court
ean do nothing without the authority of Congress, yet when
Congress gives it authority to do anything, it then has the right
to do everything which, under the Constitution, Congress might
authorize it to do. It is difficult to believe—although I must
believe it, because both Senators have argued that it is true—
that intellects like those of the Senators from Wisconsin and
Pennsylvania can embrace a doctrine so obviously fallacious.
‘Iven under their distinction between the judicial power and
jurisdiction, judicial power is the whole power of the Govern-
ment to hear and determine cases, while jurisdiction is only so
much of that power as Congress has conferred upon the courts;
and yet these distinguished Senators declare that when Con-
gress confers jurisdiction, which is less than judicial power, it
confers by necessary implication judicial power, which is more
ae jurisdiction, That is an absurdity in logic as well as in
aw,

I have long been familiar with the rule of construction which
holds that when we confer the larger power, we include, by
necessary implication, the smaller power; but it was reserved
for the Senators from Wisconsin and Pennsylvania to declare
the novel and dangerous rule that when we confer the sinaller
power we include the larger power by necessary implication.
If that reasoning, sir, is rorrect, and if it is to become a rule
of action in this country, we must not only rewrite our law
books but we must revise our school books as well. Our pro-
fessors must hereafter teach our children, not the old rule, that
the whole ineludes all of its parts, but must teach them this new
rule, aoe ery part includes the whole. 1t will not be easy,

die

 
7

Mr. President, to persuade the people of this country to accept

such a process of ratiocination, and it finds no sanction any-

where except in the speeches delivered by the Senator from

Wisconsin and the Senator from Pennsylvania; while an abun-

dant and a conclusive refutation of it can be found in the legis-

lation of Congress and in the decisions of our highest court.
LEGISLATIVE PRECEDENTS.

The judiciary act of 1793 affirmed the power of Congress to
do what I am now proposing. That act denied what is now
called “the inherent power of the court to issue injuuctions,”’
and it prohibited the granting of any injunction without notice
to the adverse party or his attorney. hat act also prohibited
the issuance of any injunction, with or without notice, prelimé
nary or final, to restrain proceedings in State courts: and that,
Mr. President, with a slight modification, has been the Jaw of
this Republic from its earliest days. It is still the law, and it
is found in the Revised Statutes of the United States as section
720, It reads:

Sec. 720. The writ of injunction shall not be granted by any court of
the United States to stay proceedings in any court of a State, except
in cases where such injunction may be authorized by any law relating
to proceedings in bankruptcy.

The Senator from Wisconsin sought to evade the force of thut
legislative precedent hy citing certain decisions, where the
Supreme Court of the United States had sustained the right of
inferior Federal courts to issue injunctions. I do not charge
that the Senator from Wisconsin intended to be uneandid with
the Senate, but I do say that the citation of those cases in
support of the argument which he was then making, and the
language which he employed, was well calculated to mislead
all who.were not familiar with the facts in those particular
cases. After quoting section 720, which I have just read to
the Senate, the Senator from Wisconsin declared :

But the Supreme Court of the United States has decided more than
once that, notwithstanding this plain prohibition to prevent friction
between the courts of the United States and of the States, it possesses
power to enjoin proceedings in the State courts not in bankruptcy,
where such injunction is essential to the protection and exercise of its
jurisdiction and to the giving effect to its decrees.

The Senator from Wisconsin italicized the words ‘not in
bankruptcy,” so as to show that the cases to which he referred
were net within the exception of the act. To say that, ‘ not-
withstanding this plain prohibition,” the courts had granted the
injunction, might mean that the Supreme Court had held that
injunctions could be granted contrary to the provisions of that
law, and this would seem to imply a doubt as to the constitu-
tional power of Congress over the subject. As a matter of
fact, the Supreme Ceurt neither expressed nor intimated any
such opinion. The court did not cast by way of any sugges-
tion the shadow of a doubt upon the power of Congress to enact
that law; and it simply held that Congress had not intended to
cover such cases as the one at bar.

In order to make it plain that I am not mistaken about this
I beg to read from the first of these cases exactly what the
court did say; and as the other cases were decided upm tie
authority of the first, what applies to this of course applies to
both of the others. Did the court doubt the power of Congress

6712
8

to pass a law forbidding injunctions to stay proceedings in
State courts? Listen:

The prohibition in the judiciary act against the granting of, injunc-
tions by the courts of the United States touching preceedings in State
courts has no application here. The prior jurisdiction of the court
below took the case out of the operaticn of that provision.

Thus the court by every fair inference and intendment affirmed
the power of Congress to forbid the issuance of an injunction,
preliminary or final, in cases where, without the statute, it
would have been competent for the Federal courts to have
enjoined the proceedings.

That is not the only instance in which Congress has asserted
this power. We have now, as a part of the Revised Statutes,
section 3224, which reads as follows:

Sec. 3224. No suit for the purpose of restraining the assessment or
collection of any tax shall be maintained in any court.

Does anybody doubt that the courts might, upon 9 bill alleg-
ing precisely what they will allege against the Commission
rate—that the complainants’ property was about to be taken
without due process of law—enjoin such action in the absence
of that statute? But will any lawyer say that, in the face of
that statute, the court can issue an injunction?

The Senator from Wiscofisin smiles as though he dissents.
It is well for him to smile now, for he will quit smiling before I
am through with this argument.

Mr. SPOONER. Yes; I know. That does not surprise me, for
I have already read it in the newspapers. But what I rose
to call the attention of the Senator to was this, that this is a
provision in the internal-revenue tax law, and if the Senator
will read the concluding section he will find that in the very
same act Congress provides an adequate remedy at law.

Mr. BAILEY. And we are going to do the same thing in
this aet.

Mr. SPOONER. If the Senator wiil permit me, as I do not
mean to interrupt him often.

Mr. BAILEY. The Senator is welcome to interrupt me.

Mr. SPOONER. The Senator will find that to be a proceed-
ing to all intents and purposes against the Government because
it is in relation to the csllection of a tax, and the power of Gon-
gress over it is largely plenary. But when the Government is
sued in the matter of taxation, it is obviously true that is a
question for the Government to say.

Mr. BAILEY. Mr. President, that argument will not answer,
because the very fact that they incorporated this provision in
the law shows that they understood that an officer of the Gov-
ernment could be restrained by injunction except for that pro-
vision.

It is true that immediately following this provision Congress
has provided for a way in which the citizen may recover or
escape unjust taxation by applying to the Commissioner of
Internal Revenue, and from him on to the court; and so we
have provided for a way to determine what is a just railroad
rate by applying to a commission of experts authorized to
settle that matter; and all we want to do is to keep the courts
off of that commission until the courts have heard all the facts
and are ready to decide the case. That is a less extreme exer-
cise of the power to prevent an injunction than that embodied
in section 8224

6712

 
9

INTUNCTION AGAINST WORK OF A COMMISSION FORBIDDEN,

But, Mr. President, that is not the only case. I have here a Fee-
tion taken from the act of 1898, and it may surprise soine Senators
that such a law could have passed the Congress without being
understood. What will the Senator say to this? This is @ wro-
vision in the act of 1898 allowing certain appeals from the United
States courts in the Indian Territory directly to the Supreme
Court of the United States.

Appeals shall be allowed from the United States courts in the In-
dian Territory direct to the Supreme Court of the United States to
either party, in all citizenship cases, and in all cases between cither
of the Five Civilized Tribes and the United States involving the con-
stitutionality or validity of any legislation affecting citizenship, or the
allotment of lands, in the Indian Territory, under the rules and regu-
Jations governing appeals to said court in other cases: Provided, That
appeals in cases decided prior to this act must be perfected in one
hundred and twenty days from its passage: and in cases decided sub-
sequent thereto, within sixty days from final judgment; but in no
such case shall the work of the Commission to the live Civilized Tiles
be enjoined or suspended ly any proceeding in, or order of, any court,
or of any judge, until after final judgment in the Supreme Court of the
United States.

That act was passed upon by the Supreme Court of the United
States, and the lawyers in that case did not think to raise this
question about the power of Congress io restrain the injunctive
process of the courts.

Mr. SVOONEER. Will the Senator allow me to ask him a
question?

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from Wisconsin’?

Mr. BAILEY. With great pleasure.

Mr. SPOONER. Dees the Senator from Texas contend that
any part of the judicial power of the United States was vesicd
in the courts of the Indian Territory?

Mr. BAILEY. I do not; but that act does not limit the
power of the courts in the Indian Territory alone; it iimits
every court to which a limitation by Congress can apply. It
says “by any proceeding in, or order of, a@uy court or any judze
until after final judgment in the Supreme Court of the United
States.”

Mr. KNOX. Mr. President

The VICE-PRESIDENT. Dees the Senator from Texas yield
to the Senator from Pennsylvania?

Mr. BAILEY. I do.

Mr. KNOX. “lav I ask the Senator.a question?

Mr. BAILEY. Certainly.

Mr. KNOX. Did not the Supreme Court of the United
States, in upholding the constitutionality of that law, this being
the Dawes Commission act, as I understand

Mr. BAILEY. Yes.

Mr. KNOX. Decide in Stevens 7. Cherokee Nation that the
reason why that proceeding was permissible, or the qualiiica-
tions upon the preceeding was permissible, was because it was
not dealing with any vested rights belonging to anyone clse,
but was dealing with a matter over which Congress had the
supreme and dominant control, and therefore it was within the
power of Congress to make any regulation affecting this remedy
of appeal that it saw fit.

Mr. BAILEY. The statement of the Senntor from Pennsyl-
vania does not meet my contention. The court held that the
yarious acts of Congress committing certain matters to the

6712

 

 
10

decision of the Dawes Commission in the first instance, and af-
terwards to the courts of the United States for the Indian Ter-
ritory, was constitutional, because they were dealing with a
matter over which Congress had plenary power. But that does
not go to the question as to the power of Congress to forbid the
obstruction of its laws by the injunctive processes of its courts,
as was done in the section to which I have just called the
attention of the Senate.

Mr. KNOX. Mr. President——

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from Pennsylvania?

Mr. BAILEY. I do.

Mr. KNOX. I think, however, that the Senator will find that
what I have stated in relation to the decision of the court is
correct; that it was based upon the ground that no vested rights
were being interfered with by the act of Congress. I am per-
fectly familiar with the case and perfectly familiar with the
statute which was construed by the case, and I discarded it as
worthless because I have always been of the opinion that the
territorial courts could not exercise any part of the judicial
power of the United States; that it is not competent for Con-
gress to vest any part of the judicial power of the United States
in the territorial courts, and therefore Congress may do as it
pleases with its processes and with its practice and with its
jurisdiction.

Mr. BAILEY. I do not intend to be drawn away from the
point I have under discussion by that suggestion because it only
goes to the question as to the power of Congress to pass the
antecedent laws. The Supreme Court held in the Stevens v.
Cherokee Nation case that this act only authorized it to con-
sider the constitutionality of the prior laws. The Supreme
Court, in passing upon the constitutionality of those prior laws,
upheld* them upon the ground indicated by the Senator from
Pennsylvania, but in this very act that authorizes it to deter-
mine the constitutionality of former acts, Congress inserted this
limitation upon the injunctive processes of the courts.

It does not say that the courts in the Indian Territory shall
not have the power, but it says—
in no such case shall the work of the Commission to the Five Civilized
a be enjoined or suspended by any procceding or order of any
court. x

That is as broad as the universe, or certainly as broad as
Congress can make it. I repeat that the lawyers, although
assailing the constitutionality of the whole scheme of legislation,
did not think it worth their while to say that this act was un-
constitutional because it limited the power of the courts to issue
an injunction. An injunction against what? Not against a
State proceeding, but an injunction against a Federal commis-
sion—the Dawes Commission to the Five Civilized Tribes.

TIE ANTI-INJUNCTION BILL.

But, Mr. President, while we bave no instance in which the
Congress has more directly asserted the power than this, we
huve a more recent instance as to the opinion of the Senate. IT
have here a bill reported to the Senate by Senator Hoar on
May 23, 1902, and substantially the same bill passed the House
of Representatives by a practically unanimous vote. This bill
was reported to the Senate without a protest from any member

6712
11

of the Judiciary Committee. Beginning in the seventh line of the
bill as it passed the House and the sixth line as it was reported
to the Senate, we find this language:

Nor shall any restraining order or injunction be issued with relation
thereto.

That bill came to the Senate with the unanimous approval of
the Judiciary Committee of this body, at the head of which then
stocd the Senator from Massachusetts, Mr. Hoar, and next to
him on the Republican side stcod the Senator from Connecticut,
Mr. Platt. The Democratic membership cf the Senate was rep-
resented on that committee by the Senator from Georgia [Mr.
Bacon], the Senator from Alabama [Mr. Prerrus], the Senator
from Washington [Mr. Turner], the Senator from Texas [Mr.
CuLBERSON], and the Senator from Kentucky [Mfv. BrLackBurn].

Mr. ALDRICH. Mr. President. me

The VICE-PRESIDENT. Does the Senator from Texas sree
to the Senator from Rhode Island?

Mr. BAILDY. I do.

Mr. ALDRICH. Justice to the memory of Senator Platt of
Connecticut requires me to say that he did not join in that
report.

Mr. BAILEY. The Senator is mistaken about the bill. He
doubtless refers to what was known as the Hill bill.

Mr. ALDRICH. I am not mistaken about the bill. I re-
member perfectly well this bill and its history, and the Senator
from Connecticut, although he may not have made a minority
report, did not join in the favorable report on that bill. He
was distinctly opposed to it at all times and everywhere.

Mr. BAILEY. I do the memory of the late Senator from
Connecticut greater honor than does his friend and neighbor,
the Senator from Rhode Island [Mr. Atpricir]. Knowing him
as I did, I am confident that, if he had believed that bill con-
trary to the Constitution, he would have filed a minority report,
if only in a word. The Senator from Connecticut was opposed
to what was known as the old anti-injunction bill or the bill
providing for a trial by jury in certain cases cf contempt.

WRIT OF HABEAS CORPUS LIMITED.

Mr. President, the right to issue the writ of habeas corpus has
been limited. Congress has not only asserted its power to deny
to the courts the right to issue injunctions, both preliminary
and final, but Congress has asserted its power to abridge the
right of the courts to issue even the great writ of liberty. The
provision relating to the writ of habeas corpus is contained in
the first judiciary act. It provides:

That all the before-mentioned courts of the United States shall
have power to issue writs of scire facias, habeas corpus, and all other
writs not specially provided for by statute which may be necessary for
the exercise of their respective jurisdictions and agreeable to the princi-
ples and usages of law. And that either of the justices of the Supreme
Court, as well as judges of the district courts, shall have power to
grant writs of habeas corpus for the purpose of an inquiry into the
cause of commitments: Provided, That writs of habeas corpus shall in
no case extend to prisoners in goal unless where they are in custody
under or by colcr of the authority of the United States, or are com-
mitted for trial before some court of the same, or are necessary to be
brought into court to testify.

There Congress asserts its power to abridge the right of the
court to issue the great writ of liberty, a writ so sacred in the
history of our race that the Coustitution makers deemed it

6712

 
12

worth their while to write it in the Constitution that it should
never be suspended “unless when in case of rebellion or inva-
sion the public safety may require it.” Yet in the face of that
provision the first Congress that assembled under the Consti-
tution, a Congress composed in part of tbe very men who had
written that guaranty against its suspension into the charter of
our liberties—provided that it should not be issued except in
certain cases. That remained the law for nearly eighty years,
and until the act of the 5th of February, in 1867, when Con-
gress extended, as it might have done in the beginning, the
privilege of that great writ to men held under any jurisdiction
contrary to the Constitution, the laws, or the treaties of the
United States.

The Senator from Wisconsin does not forget one of the most
famous cases in the annals of our judicial history, which arose
out of the act of February 5, 1867. William H. McArdle was the
editor of a Mississippi newspaper, and a man with the courage
of his convictions. Ife had denounced in unmeasured terms the
misdeeds of the reconstruction government there, for which he
was arrested by a military tribunal and charged with an offense
against the reconstruction acts of Congress. He sued out a writ
of habeas corpus before the circuit judge. The circuit judge
decided against him and remanded him to the custody of the
military authorities. From that judgment of the circuit court
he appealed to the Supreme Court of the United States, where
he was met with a motion to dismiss the appeal. Upon elabo-
rate argument the Supreme Court of the United States denied
the motion to dismiss the appeal, and the case was then argued
upon its merits. Between the argument and the decision it be-
eame apparent that the Supreme Court would discharge McArdle
from the custody of the military authorities; and in that state
of the case, when the jurisdiction of the Supreme Court had
attached on appeal, when the case had been argued twice, first
upon a motion to dismiss the appeal and again upon its merits,
Congress passed an act repealing the appellate jurisdiction of
the Supreme Court given by the act of February 5, 1867. The
President of the United States vetoed the repealing act of Con-
gress, but Congress passed it over the President's veto, and the
Supreme Court of the United States was compelled to dismiss
the McArdle appeal for want of jurisdiction.

The Senator from Wisconsin in a colloquy with the Senator
from Maryland said this is the chaos of anarchy for which we
are contending. If he wants an example of anarchy he will
find it in the McArdle case. Argued, and practically decided,
Congress prevented the judgment of the court from being put
into a legal form by repealing the authority under which the
court had heard the case.

Be WRIT OF MANDAMUS LIMITED.

Mr. President, not only has Congress asserted its right to
limit the power of the court in issuing this great writ of liberty,
but it has also asserted its right, in the section which I have
read, to control the courts in the issuance of all other writs
known to the common law. The Senator will find there that
Congress authorized the courts to issue writs of mandamus in
certain cases, and then he will find the decisions of the courts
in which they hold that they could issue writs of mandamus in
no other cases. What is the writ of mandamus? The Senator

6712
18

from Wisconsin has told the Senate what it is, and I want to
ure not only the quotation which he makes from the court, but
his own words as well. The Scnator says:

oe writ of mandamus at the common law was a high prerogative
writ.

And so it was.

It has become in later years— :

Said he, and then he follows with a quotation from the
books—
more and more assimilated to an ordinary remedy to the use of which
the parties are entitled as of right. It was in this sense that Taney,
Chief Justice, characterized it in modern practice as nothiny more
than an action at law between the parties. It is still an extraordinary
remedy at law in the same sense that injunction is in equity.

The Senator says there is no difference between the powet' of
Congress over courts of law and courts of equity. The Senator
says the writ of mandamus is to the law what the writ of injunc-
tion is to equity. I point him to the law of Congress restraining
the issuance of the writ of mandamus according to its wisdom,
and I shall later point him to the decisions of the court in which
so great a judge as Marshall himself has said that the writ
of mandamus could only issue in accordance with the statutory
provision of Congress.

RIGHT TO PUNISH CONTEMPT LIMITED,

Mr. President, Congress has exercised its power over a still
more essential function of the court; I do not say inherent,
because there are no inherent powers in Federal courts. The
duty of the Federal courts is not to make the law, but to obey
it as Congress has made it. I will not occupy my time in dis-
cussing that question, because the Senator from Mississippi
[MIv. McLaurin] in his speech on yesterday left nothing further
to say upon it.

Congress has exercised the right to abridge the power of all
Federal courts to punish for contempt. If there is one power
immore fundamental and more essential to a court than all others,
it is the power to punish for contempt. Judge Field said in the
case of Ex parte Robinson that it is inherent; that the very
creation of the court conferred upon it the power to punish for
contempt; and yet Judge Field sustained in that very ease the
right of Congress to abridge that power.

The Senator from Wisconsin and no other Senator will assail
the act of 1831. The Senator from Wisconsin and no other
Senator will impeach the wisdom or the justice of that act.
It grew out of an abuse of its power by an inferior court, an
abuse that so far as the debates show was confined almost ex-
clusively to Judge Peck, of Missouri. He exercised in an ar-
bitrary and outrageous manner the summary power to punish
an attorney of his court for contempt, for which he was im-
peached. He was not convicted, but his misbehavior left such
an impression upon the fair-minded and liberty-loving men in
both House of Congrezs that the act of 1831 was the result of his
misconduct.

If Congress, when one judge abuses his power to punish for
contempt, can limit and restrict that power, in God's name can
it be said that Congress has no power to restrict the right of
injunction when it has been abused by so many Federal judges?

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14

The Senator from Pennsylvania is of course familiar with
the decision which he will permit me to call to his attention.
It is a decision rendered at the Pennsylvania circuit by Judge
Baldwin, under the act of 1831, and here is what the learned
Justice said about the power of Congress in that respect:

As this is an inferior court, within the provisions of the Constitu-
tion, it is created by the laws with such powers—

Not jurisdiction, but—
with such powers only as Congress has deemed it proper to confer, among
which is this, ‘‘and to punish by fine or imprisonment, at the discretion
of said courts, all contempts of authority in any cause or hearing
before the same.” (I. Laws U. S. 63, act of 1789.)

The act of 1831 must be taken to be the declared construction of
this and all other laws, limiting its operation in the manner prescribed
and as generally considered. Congress is to this court what the Con-
stitution is to the Supreme Court, their acts must be construed on the
same principles and operate as constitutional amendments which is
to give such construction to the original act, as if the jurisdiction
had never been given. rn

Justice Baldwin held in that case, as Justice Field held in the
later case, that the act of 1831, limiting and defining contempts
of court, and abridging the right of the court to punish in many
cases, was a valid and constitutional exercise of power.

The Senator from Wisconsin, after referring to the Robinson
case decided by Judge Field, then calls the attention of the Sen-
ate to the Debs case, and says the court declared in that case
that the power to punish summarily is inherent. The court did
say that, just as the court had said the same in, the Robinson
ease, and still the court sustained the act of 1831.

When the decision in the Debs case was made, the country be-
lieved that the judges were exercising—I will not say usurping,
but I will say that the judges were exercising—a dangerous and
an arbitrary power which might be abused to the injury of the
citizens’ liberty, and immediately following that decision bills
were introduced in both Houses of Congress to protect the pub-
lic against the exercise of such a power in the hands of a single
man.

The bill in the Senate was introduced and managed by Senator
Hill of New York. That bill passed this hody without a diyi-
sion, and but one man lifted his voice in opposition to it. "Nhat
was the Senator from Connecticut, Mr. Platt, and yet time and
again be declared that he was not opposed to the principle of
the bill, but protested that it was being pressed for passage in
the closing hours of the session, when only a bare quorum of
Senators were in the city. We moved to postpone it to the next
session, and his motion was voted down by a vote of 30 *o 1.
Then followed a call of the Senate, in order to establish the
presence of a quorum, and when a quorum appeared that bill
was passed through this body without a division.

As it was first reported from the Judiciary Committee it
divided all cases of contempt into direct and indirect. It
allowed the court to punish summarily the direct contempts, but
it provided that indirect contempts should be tried by a ‘jury
upon the application of the offender and in the discretion of the
court. In the open Senate they struck out, without division
that part of the bill which left it to the discretion of the court
whether the offender should be tried by a jury, and passed the
bill with the right of trial by jury made absolute upon the de-
mand of the accused. Thus, Mr. President, the Senate by a
practically unanimous vote, and without a minority report from

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15

the committee, passed, without a division in the Senate, a Dill
depriving the Federal courts of the power to punish for certain
cerftempts and committing that great and, as Judge Field calls
it, inherent power to the juries of the country.

Mr. President, a melancholy reflection follows the reading of
this debate. It reminds us of the certainty of death and the
uncertainty of politics. Of the Senators who participated in
that discussion, all have passed from among us save one. The
great Senator who opposed it has been gathered to his fathers.
Fhe great Senator who championed it, in the shifting fortunes
of parties, has retired from the public service. One after an-
other they have gone—some have returned to private life, while
some have follow ed each other to “where beyond these yoices
there is peace.” The only one left who participated in that
debate is the Senator from Georgia [Mr. Bacon], and on’ that
occasion I rejoice to say he was contending for the right of. Con-
gress to limit the power of the courts.

But, Mr. President, if the legislative history of the country
affords an abundant justification for the amendment which I
have offered, the decisions of the courts are still more con-
clusive. Before I proceed to examine the decisions upon that
question, however, I desire to review the cases which have been
cited by the Senator from Wisconsin and the Senator from Penn-
sylvania. The Senator from Wisconsin cites as the first case
upon which he relies an extract from Judge Story’s opinion
in the famous case of Martin v. Hunter’s Lessee.

JUDGE STORY’S ESSAY.

I need not tell the Senator from Wisconsin, and I need not
tell other Senators, that the extract which he quotes was for-
eign to the question decided in that case. The point at issue
there was not the power of the court to act independently of
or contrary to what Congress had provided, because Congress
had incorporated into the first judiciary act the very power
which the court then sought to exercise.

That case is familiar history. It is one of the celebrated
causes. An appeal came from an inferior Virginia couvt, through
the supreme court of that State, to the Supreme Court of the
United States. The Supreme Court of the United States re-
versed the decision of the supreme court of Virginia; but the
supreme court of Virginia declined to execute the mandate ‘of
the Supreme Court of the United States, and in its order de-
clining stated that the appellate jurisdiction conferred by
the judiciary act upon the Supreme Court over judgments of
the highest courts of the States was in derogation of the Con-
stitution. The point at issue in that case was not whether Con-
gress must give all the power which it could give to the Federal
courts, but whether Congress could give the power which it had
given.

In that state of the case, Judge Story delivered the opinion
which contains the famous essay which the Senater from Wis-
consin read. <An essay is all it is. It had no relation to the
question to be decided in that case. But the distinguished jurist
indulged himself in a Labit which was all too fresuent with him
of incorporating his political tenets into his judicial opinions.

The Senator from Wisconsin says that although there was a
dissenting opinion in that case, there was no dissent from the
point which Judge Story announced in the portion of the opinion

6712

 
16

which he quoted. . The Senator from Wisconsin is a great law-
yer; he is an accurate student; but even great Homer some-
times nods, and the Senator from Wisconsin erred most griev-
ously in that statement. There was a dissent in that case from
the very doctrine which he quotes from the opinion of Judge
Story.

Perhaps the Senator from Wisconsin, being so familiar with
the doctrine, did not think it worth his while to closely read the
opinion again before invoking it, for otherwise it could not have
escaped him that Justice Johnson did dispute the very proposi-
tion of Judge Story which the Senator from Wisconsin quotes as
authority for his position. And what makes the Senator’s
oversight more remarkable still is that when Judge Story came
to write his book on the Constitution, he undertook to answer
the very criticism which Justice Johnson had made in the dis-
senting opinion which he delivered in the case of Martin v.
Hunter's Lessee. ‘

The Senator from Wisconsin also quotes from the opinion of
Justice Baldwin in Ex parte Crane to sustain his view that Con-
gress can not choose but confer upon Federal courts all the pow-
ers which the Constitution permits it to confer. The Senator
from Wisconsin said:

It is said by Mr. Justice Baldwin in Ex parte Crane—

“Though the courts of the United States are capable of exercising the
whole judicial power as conferred by the Constitution, and though
Congress are dound to provide by law for its exercise in all cases to
which that judicial power extends, yet it has not been done, and much
of it remains dormant for the want of legislation to enable the courts to
exercise it, it having been repeatedly and uniformly decided by this
court that legislative provisions are eT to give effect to a
power to bring into action the constitutional jurisdiction of the Supreme
and infericr courts.” 7

Here, Mr. President, the Senator from Wisconsin fell into
another serious lapse for which I am justified in criticising
him. “When he cited that opinion he cited it in a way to lead
any lawyer in the world to suppose that he was reading from
the opinion of the court, and yet that extract is from a dis-
senting opinion. Chief-Justice Marshall delivered the opinion
of the court in that case, and this quotation of the Senator is
from a dissenting opinion. But waiving all question about that
mistake, which I am sure was unintentional, I can not compre-
hend what comfort the Senator from Wisconsin can find in the
extract from this dissenting opinion which he has read. It is
true that Justice Baldwin does say that ‘‘ Congress is bound to

. provide by law for its exercise in all cases to which that judicial
power extends.” The Senator prints that statement in italics,
strangely overlooking the fact that in the same sentence Justice
Baldwin says this has not been done and adds that “much of
it remains dormant for want of legislation to enable the courts
to exercise it.” This is exactly what I am contending. I main-
tain that all of the judicial power of the Government remains
dormant so far as the inferior courts are concerned until legis-
lation enables them to exercise it.

I shall have occasion to refer to this extract again when I
eome to show that the courts have always ignored this
new and fine distinction between judicial power and jurisdic-
tion, but for the present I pass to the paragraph in that opinion
which immediately follows the one quoted by the Senator from
Wisconsin, and in which Justice Baldwin frankly declares that

67127
17

the opinion which he expresses about the duty of Congress is ns?
the opinion of the court. Here it is:

These principles remain unquestioned. They have long been settled,
as the judicial exposition of the Constitution, on solemn argument and
.the gravest consideration; and they are binding on all courts and
judges. I shall ever be found among the last to oppose my opinion in
‘opposition to the results of the deliberate judgment of the highest tri-
pbunal when thus formed.

The Senator from Wisconsin gave the Senate the benefit of
Judge Baldwiti’s opinion upon the political duty of Congress to
invest the court with the whole judicial power of the Govern-
ment, but he neglected to give the Senate the benefit of Judge
‘Baldwin’s admission that the court had not held the same view
of the question which he expressed. I do not intend in saying
this to insinuate that the Senator from Wisconsin designed to
mislead the Senate. My opinion is that he did not himself read
the entire opinion carefully.

Another case which the Senator from Wisconsin relies on is
the Wheeling Bridge case, in 18th Howard. The Senator
quotes a part of the opinion and then he indicates very properly
by stars the omission of a part. I want to supply that omission.
I want to rub out those stars and write in their place the words
of the court.

The Senator read down to ‘ observed,” which is the close of
a paragraph, and then he omits this:

In Robinson v. Campbell (8 Wheat., 222), it is said: “‘The court,
therefore, think that, to effectuate the purposes of the legislature, the
remedies in the courts of the United States are to be at common law
or in equity, not according to the practice of State courts, but accord-
ing to the principles of common law and equity, as distinguished and
defined in that country from which we derive our knowledge of those
principles.”

Mark the admission “ that to effectuate the purpose of the leg-
‘islature ” those principles were adopted.

_ The Senator from Wisconsin omits other matter which could
properly be omitted, and concludes his quotation from this
opinion in these words:

. Under this system, where relief can be given by the English chan-
cery, similar relief may be given by the courts of the Union.

Above that and next to it is this sentence:

By the act of Congress of 1828, proceedings at law, in the courts
of the United States, are required to conform to the modes of proceed-
ing in the State courts; but there is no such provision in regard to
ecurts of chancery.

Under the act of Congress the law proceedings must conform
to the proceedings of State courts, but as no such provision
was made in respect to equity, they follow the proceedings of
the chancery court of England. The Senator admits that there
is no difference between the power of Congress over law and
equity. Therefore when the court in this very opinion says that
Congress, in the exercise of its power, had conformed the pro-
ceedings in courts of law to the proceedings in the several States,
it asserts that Congress might have done the same as to proceed-
ings in equity, and it was only because it had failed to include
courts of equity in the statute that they were left to administer
their justice according to the chancery system of Great Britain.

A DANGEROUS DOCTRINE.

The Senator from Wisconsin, in his eagerness to exalt the
courts above the Congress, has announced the most dangerous

     
18

doctrine ever heard within the four walls of this Senate. He
has approved the old obiter dictum in the case of Calder v. Bull,
where Judge Chase declared that the courts are not limited
by constitutions in supervising the action of legislatures, and
that they may hold a law void, not because it violates a Con-
stitution, but because it contravenes the court’s idea of natural
right and justice.

I will ask the Secretary to read this passage from the Sen-
ator’s speech at length, because I regard it as the most perilous
preachment which has been delivered from a seat in the Senate
for well-nigh a century.

The VICE-PRESIDENT. The Secretary will read as re-
quested.

The Secretary read as follows:

Now, Mr. President, that brings me to the Senator's question.
There are restrictions in the Constitution upon the exercise by Con-
gress in this particular class of cases, I think, upon the power to
restrain courts of equity from issuing interlocutory injunctions, After
the adoption of the Constitution, amendments to it were adopted
which restrict in many ways the power of Congress as it was con-
ferred by the Constitution.itself. Among others is the fifth amend-
ment, which is as follows:

“No person shall be held to answer for a capital or otherwise in-
famous crime unless on a presentment or indictment of a grand jury,
except in cases arising in the land or naval forces or in the militia
when in actual service in time of war or public danger; nor shall any
een he subject for the same offense to be twice put in jeopardy of

ife or limb; nor shall be compelled in any criminal case to be a wit-
ness against himself; nor be deprived of life, liberty, or property with-
out due process of law; nor shall private property be taken for public
use without just compensation.”

Without that amendment, Mr. President, I should doubt if private
property could be taken for public use without just compensation. I do
not think it required a constitutional provision to prevent the Congress
from enacting a law taking the property of one man and vesting it in
another, because that would be violative of fundamental principles
which underlie government and which are an essential and vital part of
the social compact.as we know it.

In a decision of the Supreme Court long ago, the opinion being deliv-
ered By Mr. Justice Chase, and being one of great learning, it is de-
clared that, without constitutional restriction, there are acts so abhor-
rent to natural equity and to every sane man’s sense of justice that,
although not prohibited by written constitutions, they can not be law-
fully done. (See Calder v. Bull, 3 Dallas, 387.)

Mr. BAILEY. Mr. President, the opinion to which the
Senator refers was delivered upon a controversy that did not
involve the disquisition on natural rights which Judge Chase
wove into that opinion. Judge Chase himself in beginning this
very dissertation admits that the case before the court did’ not
present that question. He introduced the very part of the
opinion to which the Senator refers with this statement:

Whether the legislature of any of the States can revise and correct
by law a decision of any of its courts of justice, although not prohibited
by the constitution of the State, is a question of very great importance,
and not necessary now to be determined; because the resolution or law
in questicn does not go so far.

But he follows that admission that the question was not in the
case with an elahorate discussion of the duty of the court in
protecting the natural rights of man. There were three opinions
read in that case, the one by Judge Chase, another by Judge
Patterson, and a third by Justice Iredell, who in my humble
opinion has been surpassed in learning, in wisdom, and in
patriotism by very few who have served in that exalted station.
There can be no comparison between Chase and Iredell. It will
be recalled that Chase had so little regard for the rights of

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19

men that he was called to the bar of the Senate to answer im-
peachment charges for the oppressive and arbitrary manner in
which he insulted and abused the attorneys of his court.

Justice Iredell, replying to this very argument of Judge
Chase, denied it in the most explicit terms and held the true
doctrine that the legislative body has the power to do anything
not forbidden, in the case of the State, by the constitution and
anything permitted, in the case of the General Government, by
the Constitution.

I shall not read the passage from the opinion of Justice Ire-
dell in which he combats the argument of Judge Chase because
the Senator from Wisconsin did not read the deliverance of
Judge Chase. The fact, however, that the Senator from Wis-
consin has given the sanction of his name to this dangerous
heresy calls for more than a mere reference to it.

The most elaborate consideration that has been given to that
subject by any court or by any text writer within my knowledge
will be found in Sedgwick’s very excellent work on the Constitu-
tion and Statutory Construction. For more than 20 pages he
examines the question. He reviews the early English 2ases, in
which it was held that the courts might hold a law of Parlia-
ment veid because they thought it contrary to natural justice.
He also reviews the earlier State cases in this country, and this
is his conclusion:

That it is the right and duty of the judiciary to repress and confine
the legislative body within the true limits of the law-making power;
but that they have no right whatever to set aside, to arrest, or nullify
a law passed in relation to a subject within the scope of the legislative
authority on the ground that it conflicts with their notions of natural
right, abstract justice, or sound morality.

Judge Cooley, in his work on Constitutional Limitations, ex-
presses the same conclusion :

We have elsewhere expressed the opinion that a statute can not be
declared void on the ground solely that it is repugnant to a supposel
general intent or spirit which it is thought pervades or lies concealed
in the Constitution, but wholly unexpressed, or because, in the opinion
of the court, it violates fundamental rights or principles, if it was
passed in the exercise of a power which the Constitution confers. Still
less will the injustice of a constitutional provision authorize the courts
to disregard it, or indirectly to annul it by construing it away. It is
quite possible that the people may, under the influence of temporary
prejudice, or a mistaken view of public policy, incorporate provisions
in their charter of government infringing upon the proper rights of in-
dividual citizens or upon principles which ought ever to be regarded as
sacred and fundamental in republican government; and it is also pos-
sible that obnoxious classes may be unjustly disfranchised. The rem-
edy for such injustice must be found in the action of the people them-
selves, through an amendment of their work when better counsels pre-
vail. Such provisions, when free from doubt, must receive the same
construction as any other.

Lewis, in his work on Eminent Domain, lays down the same
doctrine. Referring to the early cases in which it had been held
that the States or the General Government would have no power
to apply private property to public use without making just
compensation, he lays down the doctrine thus:

The idea, however, that the legislature of a State is restrained by
limitations which are not to be found in the written Constitution is
not founded upon any sound legal or philosophical principles. The
later authorities and the better reasoning are against such a view.

Just exactly why the Senator from Wisconsin desired to re-
vive that old conflict of opinion I am not able to see. Is there
a settled determination in this country to give to the courts a

6712
20

power which the Constitution intended to lodge with Congress?
Is there a deliberate purpose not only to permit but to invite
the courts of this country to assume to themselves the right to
determine what are the principles of natural right and justice
against solemn legislative enactments? I impute no such mo-
tive to the Senator from Wisconsin, and yet I must be permitted
to say that the time was never so unfortunate as now for the
revival and indorsement of such a doctrine. For thirty years
the people of this country have been accustomed to seeing the
courts exercise arbitrary and extraordinary power; and a new
generation of lawyers has come to the bar, who think it treason
and who call it anarchy to restrain those powers.

Mr. President, I have no hesitation in saying that if this
Government was organized upon a principle which allows one
man to abuse or misuse his power and yet denies Congress the
right to restrain him, it was founded upon a false principle.
I yield to no man in my respect for the courts. To me the
judge is a nobler character than the soldier. To me the pa-
tient man who, with a clear mind, a brave heart, and clean
hands, holds the scales of justice in even balance, is a mightier
force for progress and civilization than any warrior who ever
rode to victory or death. The judge, patiently deciding the law
as the lawmaking power has made it, is to me an inspiration
and an example. But if we are to invest the courts with the
power not to declare the law as we have made it, but to declare
it in opposition to our will, and as it reposes in their own hearts
and minds, then, sir, they must in the end reduce all depart-
ments of this Government to an absolute dependence on their
power.

This is the first Government in the history of the world which
ever organized a judiciary department and gaye it the power to
annul everything that the other departments might do. God
knows, that is power enough for any small body of men to exer-
cise. Wo vest them with the right to judge whether we have
kept our oaths to obey the Constitution when we made the law
is power enough to give to even that great tribunal without
inviting it to look beyond the Constitution and assume our
duty to defend and guard the natural rights of men. We are
ninety, chosen by the very elect of all the people. They are
nine, who receive their appointment from a single man, ratified
and confirmed by us. I would not trench upon their power;
but I would hold myself unworthy of my station here if I should
yield to them a power which the Constitution has confided to
Congress.

RIGHT OF EMINENT DOMAIN.

As if to make a specific application to this very case of his
doctrine that the court is above both the Constitution and the
laws, the Senator from Wisconsin affirms that this Government
could not take private property and apply it to a public use
without making a just compensation to the owner, even without
the fifth amendment to the Constitution. Fortunately I am not
left to answer this announcement of the law with such poor
arguments as I can deduce from the nature of our Government.
Upon this difference of opinion I appeal again to the highest
court in all the land and I rest the issue upen their decision.
That very question came before the Supreme Court in the case of
Boom Company v. Patterson, reported in 98 U. S. Justice

6712
21

Field, who delivered the opinion, speaking to this very point,
laid down the law as follows:

The position of the company on this head of jurisdiction is this:
That the proceeding to take private property for public use is an exer-
cise by the State of its sovereign right of eminent domain, and with its
exercise the United States, a separate sovereignty, has no right to inter-
fere by any of its departments. This position is undoubtedly a sound
one, so far as the act of appropriating the property is concerned. The
right of eminent domain—that is, the right to take private property for
public uses—appertains to every independent government. It requires
no constitutional recognition; it is an attribute of sovereignty. ‘The
clause found in the constitutions of the several States providing for just
eompensation for property taken is a mere limitation upon the exercise
of the right.

The next was a Wisconsin case, reported in 109 U. 8, 513,
under the style of U. 8. v. Jones, and the opinion could not be
more directly in point. That part relating to this particular
question is as follows:

The position of the counsel of the United States in the court below,
as we understand it, was substantially this: That the power vested in
the Federal Government to take private property for the public uses of
the United States is, in its nature, exclusive, and its exercise by any
State is therefore prohibited as completely as though the prohibition
were expressed in terms; that the power can not, therefore, be dele-
gated to the State of Wisconsin; that the ascertainment of the com-
pensation is involved in the exercise of the power as a necessary part
of it, in as much as there can be no lawful taking until compensation
is made, and that the act of Congress transferring to the State board
and State court the function of ascertaining the value of the property
taken and the amount of compensation to be made is therefore invalid.

There is, in this position, an assumption that the ascertainment of
the amount of compensation to be made is an essential element of the
power of appropriation; but such is not the case. The power to take
private property for public uses, generally termed the right of eminent
domain, belongs to every independent government. It is an incident
of sovereignty, and as said in Boom v. Patterson, 98 U. 58., 106, re-
quires no constitutional recognition. The provision found in the fifth
amendment to the Federal Constitution, and in the constitutions of the
several States, for just compensation for the property taken, is merely
a limitation upon the use of the power. It is no part of the power
itself, but a condition upon which the power may be exercised. It is
undoubtedly true that the power of appropriating private property to
public uses vested in the General Government—its right of eminent
domain, which Battel defines to be the right of disposing in case of
necessity and for the public safety of all the wealth of the country—
can not be transferred to a State any more than its other sovereign
attributes ; and that, when the use to which the property taken is ap-
plied is public, the propriety or expediency of the appropriation can not
be called in question by any other authority. But there is no reason
why the compensation to be made may not be ascertained by any appro-
priate tribunal capable of estimating the value of the property. There
is nothing in the nature of the matter to be determined which calls for
the establishment of any special tribunal by the appropriating power.
(United States v. Jones, administrator, and others. In error to the
supreme court of the State of Wisconsin. U. 8S. Reports 109, pp.
518-519.)

Mr. President, the Senator from Pennsylvania [Mr. Knox]
though less elaborate, was not less in error on this question
than the Senator from Wisconsin [Mr. Spooner]. In all the
authorities which he quotes, except the Michigan case, it is
simply the expression of a text-book writer upon the law as it
exists and not upon the law as it could be made by Congress.
The Michigan case itself does not decide this contention in favor
of the Senator from Pennsylvania. I call the Senator’s atten-
tion to that case, and he will find that the syllabus, after an-
nouncing the points which are decided by the court, then states
that certain propositions deducible from Judge Campbell's opin-
ion, thus practically saying that they are merely the dicta of
the judge.

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22

- If the Senator from Pennsylvania, with his great industry
and legal attainments, had looked a little closer home, he could
have found a case more in point. In 69 Pennsylvania State
Reports the question of the power of the legislature to distrib-
ute the judicial power of the Pennsylvania constitution arose.
It seemed to be so obvious that a district attorney refused to
execute the law. The matter finally reached the supreme
court of that State, and I direct the attention of the Senator
from Pennsylvania to this declaration in the opinion:

The constitution having neither defined nor limited the jurisdictions
of the courts numed in the constitution—

My recollection is that the constitution of Pennsylvania not
only provided by name for a supreme court, but provided by
name for certain inferior courts as well, and therefore the case
is all the stronger:

The Constitution having neither defined nor limited the jurisdictions
of the courts named in the Constitution, or of those to be afterwards
established, the power to create new courts and new law judges carried
with it the power to invest them with such jurisdictions as appear to
be necessary and proper.

Now, let us see how the Pennsylvania judge distinguishes
between jurisdiction and judicial power. Ile has used the word
“jurisdiction” in the line which I have just read, and then
goes on:

And to part and divide the judicial powers of the State so as to
adapt them to its growth and change of circumstances—
is within the power of the legislature. Not to give jurisdic-
tion, and let jurisdiction give judicial power; but the Pennsyl-
vania court says it is competent for the legislature to part and
divide the judicial poicer of that State; and its constitution in
that respect was stronger than our own, because it named, in
addition to the supreme court, certain inferior courts which
were to be established.

The Senator from Pennsylvania quotes from certain text-book
writers as to what the law of equity jurisprudence is, but he
seemed to forget that those text-book writers in every case but
one were discussing the law as it is; and the law is as it is
because Congress has made it so. If the Senator will consult
the case of Robinson against Campbell, in 3 Wheaton, he will
find that very question discussed. I believe I will take a
moment to show the Senator why it is that text-book writers
lay down the law as they do. In almost a page of the opinion
in Robinson against Campbell the court discusses the equity
law of the United States:

It is material to consider whether it was the intention of Congress
by these provisions to confine the courts of the United States in their
mode of administering relief to the same remedies, and those only, with
all their incidents, which existed in the courts of the respective States.
In other words, whether it was their intention—

Whose intention? Not of the Constitution, but of the Con-
gress—

In other words, whether it was thelr intention to give the party
relief at law, where the practice of the State courts would give it, and
relief in equity only when, according to such practice, a plain, ade-
quate, and complete remedy could not be had at law. In some States
in the Union no court of chancery exists to administer equitable relief.
In some of those States courts of law recognize and enforce, in suits
at? Law, all the equitable claims and rights which a court of equity
would recognize and enforce; in others all relief is denied, and such
equitable claims and rights are to be considered as mere nullities at

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23

law. A construction, therefore, that would adopt the State practice
in all its extent, would at once extinguish, in such States, the exercise
of equitable jurisdiction. The acts of Congress have distinguished
between remedies at common law and in equity, yet this construction
would confound them. The court, therefore, think that to cffectuate
the purposes of the legislature the remedies in the courts of the
United States are to be at common law or in equity, not according to
the practice of State courts, but according to the principles of common
law and equity, as distinguished and defined in that country from
which we derive our knowledge of those principles.

That case involved the question whether they should admin-
ister equitable relief in the State according to the State prac-
tice, and as some of the States had no equitable relief then
it became a vastly important one. Through all of that decision
the object of the court was, to ascertain the intention of the
Congress. Their final conclusion was that they would best
conform to that intention by a certain construction of the
law, and they followed that. Now, if Congress had no power
to make it otherwise, it would have been a waste of time to
argue that the law should be construed one way or the other.
If the judicial power is what the Senator from Pennsyl-
vyania and the Senator from Wisconsin assert it to be, then
the Congress has no power to prescribe the law for courts
of equity, and therefore it was a waste for the court to con-
sider that question.

But, Mr. President, happily the Senator from Pennsylvania,
with that felicity which characterizes the really great lawyer,
finally reduces the whole question to a single sentence. Here is
where he makes the crucial test, and I accept it as decisive in
this debate. He says:

Congress can clearly say when the judicial power operating through
the circuit courts shall speak, but not how it shall speak.

That is exactly my own opinion, and I could not have stated
it more concisely. I am willing to leave with the court the
right to say how it shall decide these cases; and I only ask Con-
gress to say when it shall decide them. I do not say—and it
would be a nullity if Congress were to so say in any statute—
that the courts shall decide these cases for the Commission or
for the railroads. I ask Congress to exercise no power like
that because I know that to be a judicial power. I only ask
Congress to say that the courts shall not decide these cases at
all until it is ready to decide them right, and, according to the
Senator from Pennsylvania, that is a legislative power. I am
willing to write it in the law that Congress disclaims the
power to say how the court shall decide any case, provided that
it also be written that the court shall not decide a case under
this law at all until it is ready to decide it right. Does the
Senator from Pennsylvania agree to that? If so, probably we
can find a way out of this perplexing situation.

Mr. KNOX. Mr. President——

The VICE-PRESIDENT. Does the Senator from Texas
yield to the Senator from Pennsylvania?

Mr. BAILEY. Certainly.

Mr. KNOX. Does the Senater from Texas desire me to
answer now or at some future time? It would probably im-
pinge too much on the Senator’s time if he should pause for
me to answer at present.

Mr. BAILEY. Perhaps, Mr. President, I transgress the pro-
prieties of debate when I invite the Senator by name to
answer me.

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24

Mr. KNOX. Then I consider the invitation withdrawn.

Mr. BAILEY. I would of course yield to the Senator for that
purpose or for any other purpose.

The Senator from Vennsylvania attaches so much importance
to the difference between “ when” and ‘ how ” that he italicizes
both words. I agree with him that it is not competent for Con-
gress to say how the court shall decide the case. I only ask
him to agree with his own speech and say that it is competent
for Congress to say irhen the court shall decide it.

The Senator from Pennsylvania proposes another test by
which to settle this question, and upon which I am willing to
submit it. He says:

A correct solution of the question mooted is to be arrived at only by,
keeping in mind the fundamental difference between the jurisdiction of
a court and the judicial power which operates and extends over the mat-
ters of which it has jurisdiction, which power is itself the life of the
court. The creator and life giver of the whole judicial system is the
Constitution, and not Congress.

I will confess my error in this argument if I can not show by
many decisions that “the creator and life giver” of inferior
courts is Congress and not the Constitution. Will the Senator
from Pennsylvania confess his error if I do show that? I trust
he will be governed by a test which he has himself proposed.

Mr. President, leaving the incidental questions which the
Senators from Wisconsin and Pennsylvania have raised, I re-
turn now to the decisive question between us—to the distinction
between judicial power and jurisdiction; and I pledge myself to
produce the authority of eminent text writers and numerous de-
cisions from our highest court which will establish beyond all
doubt that such a distinction has no basis in our law when con-
sidered in reference to this question. But before I proceed with
that, I desire to call the attention of the Senate to the fact that
the Senator from Wisconsin, the Senator from Pennsylvania,
and other Senators seem to have misconceived the authority
under which the inferior courts of the United States are estab-
lished. They seem to think that Congress establishes those
courts under the judiciary clause of the Constitution and under
the power implied in the declaration that—

The judicial power of the United States shall be vested in one
Supreme Court, and in such inferior courts as the Congress may from
time to time ordain and establish the power to establish courts.

But, sir, if these Senators will turn to the section of the Con-
stitution which enumerates the powers of Congress, they will
find amongst those enumerated powers this:

The Congress shall have power to constitute tribunals inferior to
the Supreme Court.

And yet the Senators seem to think that though Congress had
the power to pass the law constituting these inferior tribunals,
it would have no power to repeal it. I declare, without the
slightest hesitation, that Congress can repeal every law on the
statute book establishing a tribunal inferior to the Supreme
Court of the United States, because every such tribunal was
established under this power.

The Senator from Wisconsin says it would be anarchy to do
so. I hardly think I would characterize it by a term so strong
ae that, for there would still be left State courts in which men
eerid vindicate their constitutional and legal rights. I remem-

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25

ber that almost the first act of Jefferson's Administration was to
repeal what was known as the “ midnight judge's law.” They
repealed the act of the Adams’s Administration which created
seventeen additional United States judges, and turned then
adrift without an office and without a district. Whether Con-
gress could deprive those judges of their right to compensatioz,
after they had been appointed is another question; but that it
could repeal the act creating their offices and defining their
districts is absolutely beyond all question.

It will not do to urge that a power does not exist because
it might be abused. The Senator from Wisconsin will not
deny that Congress has the power to declare war; and if it
were to declare war to-day against every nation in the world,
however wrongful the exercise of that power would be, the con-
stitutionality of it would be indisputable. If Congress, without
sufficient cause, should declare war against every nation on the
globe, the people of this land would scourge us from the high
places which we had disgraced—would withdraw from us the
great trust we had betrayed; and still the reckless act declaring
war against all nations would be the law of the land until re-
pealed.

The Congress of the United States can, by its proper vote, re-
peal every criminal law upon the statute book. ‘To do so would
approach dangerously close to anarchy, but no man could suc-
cessfully contend that the repealing act was beyond the power
of Congress. Mr. President, as every inferior court of the
United States was created by an act of Congress they can all be
destroyed by an act of Congress, and their jurisdiction, or, if you
choose to use the other term, their judicial power, can be limited
by an act of Congress. The puwer to create and the power to
destroy must, in the nature of things, include the power to limit
and control.

But, sir, I need not detain the Senate with an inquiry as to
whether or not Congress can destroy these courts. However
conclusively I may think that can be established by argument,
it has never been before the courts, and I prefer to confine my-
self to the cases which have been decided.

TITE TEXT-BOOKS AGREE.

Before going to the decisions of the courts I want to read from
the text writers on this subject. Their opinions are uniform.
First, I want to read from Judge Story, whose opinion in the
Martin case the Senator from Wise»nsin described as illumi-
nating. Judge Story himself thought well of that opinion,
and he incorporated an extended extract from it in his work
on the Constitution of the United States—wonderful piece of
argumentation, to write an opinion and include in it an essay,
then write a book and include in it the opinion containing the
essay, thus having the essay to support the opinion and the
essay to support the book—and yet within three pages of where
Judge Story ended his quotation from the old case of Martin v.
Hunter’s Lessee, he uses these words:

The Constitution has wisely established that there shall be one
Supreme Court, with a view to uniformity of decision in all cases
whatsoever belonging to the judicial department, whether they arise

at the common law or in equity, or within the admiralty and prize
jurisdiction, whether they respect the doctrines of mere municipal law,

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26

or constitutional law, or the law of nations. It is obvious that if
there were independent supreme courts of common law, of equity, and
of admiralty, a diversity of judgment might, and almost necessarily
would spring up, not only as to the limits of the jurisdiction of each
tribunal, but as to the fundamental doctrines of municipal, constitu-
tional, and public law. The effect of this diversity would be that a
aifferent rule would or might be promulgated on the most interesting
subjects by the several tribunals; and thus citizens be involved in
endless doubts, not only as to their private rights, but as to their
public duties. The Constitution itself would or might speak a differ-
ent language, according to the tribunal which is called upon to inter-
pret it; and thus interminable disputes might embarrass the adminis-
tration of justice throughout the whote country. But the same reason
did not apply to the inferior tribunals. Theses were, therefore, left
entirely to the discretion of Congress as to their number, their juris-
diction, and their powers.

“Tt was left,” says Judge Story, “ entirely to the discretion of
Congress as to the number, the jurisdiction, and the power of
the inferior courts.” What is the power of a court? Judicial
power, of course. They tell us that the courts can exercise no
other; and I agree to that. Therefore, when Judge Story talks
about leaving the powers of the court to the discretion of Con-
gress he means, and could only mean, judicial powers.

Here is Cooley’s small but very excellent work on the
“Principles of Constitutional Law.’ What does he say?

But, although the Constitution extends the power—

Not the jurisdiction, mark you—

But, although the Constitution extends the power to cases specified
it does not make complete provision for its exercise, except in the few
eases of which the Supreme Court is authorized to take cognizance.
For other cases it is necessary that courts shall be created by Congress,
and their respective jurisdictions defined; and in creating them Con-
gress may confer upon each so much—

Jurisdiction? Oh, no.

So much of the judicial power of the United States as to its wisdom
shall seem proper and suitable, and restrict that which is conferred at
discretion.

It seems as if he might have foreseen that some mind would
be so subtle as to invent the distinction upon which the Senators
from Wisconsin and Pennsylvania are now insisting.

Mr. HALE. Will the Senator allow me to interrupt him?

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from Maine?

Mr. BAILEY. Will the Senator allow me to finish this quota-
tion? It is only 3 lines more.

Mr. HALE. Yes.

Mr. BAILEY. Judge Cooley continues:

In doing so it may apportion among the several Federal courts all
the judicial power of the United States, or it may apportion a part only,

. and in that case what is not apportioned will be left to be exercised by
the courts of the States.

Now I yield to the Senator from Maine.

Mr. HALE. I have listened with great interest, and I think
with profit, to the fundamental proposition of the Senator from
Texas, that as to inferior courts established under the law,
Congress must have -the same power with reference to their
action and with reference, if need be, to their abolition that
it had in creating them. My mind runs with the Senator upon
that point. I do not accept the doctrine of the inviolability of
an inferior court created by Congress under the Constitution
as being beyond all control by Congress afterwards; otherwise
the provision that Congress shall establish inferior courts must

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27

be limited to the one Congress that establishes those courts. T
believe that the power to regulate and control their processes,
their life even, rests with Congress. In that I agree with the
Senator.

I rose mainly to get light upon a larger question. I enjoyed
the conservative argument of the Senater upon his cardinat
proposition; I did not fully enjoy his impassioned declaration
and the setting, to use his own language, of the ninety men here
against the nine men of the Supreme Court; and I wish to ask
the Senator, without seeking to commit him to any proposition
upon what is, I believe, the overshadowing and overmastering
question in connection with this subject—the final jurisdiction
of the court—whether, in any way, what be has said is toe
be considered as committing himself against the broadest final
review by the courts of all questions under the Constitution
and laws that arise in any given case? I go with the Sen-
ator in the preliminary stage that we may limit and con-
trol and adjust the operations of the inferior courts, but I
hope that the Senator, in arraying, as I thought he did, in very
eloquent and impassioned language, the nine men against the
ninety, did not mean to be considered as in any way committing
himself against the broadest final review under the Constitution
and law by the Supreme Court. i

Mr. BAILEY. Mr. President, the Senator from Maine mis-
understood, though it must have been my fault, what I meant
by contrasting the ninety with the nine. I was only insisting
that the judgment of ninety men with intellect and character
enough to be chosen Senators upon any question of natural right
and justice is to be preferred over the judgment of any nine
men. That was the whole purpose for which I made that com-
parison, and before I conclude I shall express myself upon the
other question raised by the Senator from Maine.

My friend, the Senator from Wisconsin, quoted Judge Miller,
whose reputation he said had added to the just fame of the
Supreme Court of the United States. I concur in that eulogy
of Justice Miller, and I hope the Senator from Wisconsin will
accept the doctrine of his book. Judge Miller says, on page
835 of his work on the Constitution of the United States:

Therefore it was that immediately after the organization of the Gov-
ernment Congress did create courts, define their constitution, and regulate
their administration. It is, however, a noteworthy fact that up to within
a very few years a large body of this judicial power—

Not jurisdiction—

a large body of this judicial power which is within the control of Con-
gress under these provisions of the Constitution was vested in no court
at all, and consequently could not be exercised by a Federal court.

Judge Miller says that a large part of the judicial power was
not vested by Congress in any court, and, therefore, that a large
part of the judicial power could not be exercised by any court.

That doctrine goes further than I have gone, though not fur-
ther than I am perfectly willing to go. I am only asserting
that the courts can not proceed in the face of a prohibition.
Judge Miller, Judge Cooley, and Judge Story all assert they can
not proceed without the permission of Congress.

Curtis, in his Commentaries, lays down the same doctrine:

So, also, it has been held that the cireuit courts in the several States
have no power to issue a mandamus to an officer of the United States,

although a mandamus is a common-law process to compel the perform-
ance of an official duty.

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28

The Senator from Wisconsin declares that a mandamus is the
same to the common law that an injunction is to a court of
equity; and he is correct. Mandamus is the arm of the common
law, just as injunction is the arm of a court of equity. Curtis
Bays:

So, also, it has been held—

And he might have added it has been held repeatedly—
that the circuit courts of the several States have no power to_ issue
a mandamus to an officer of the United States, although a mandamus
is a common-law process to compel the performance of an_ official
duty. But, at the same time, it appears also to have been held that
the authority to issue this writ is within the scope of the judicial
power of the United States; that it has not been communicated to the
eircuit courts in the several States, but that it is possessed by the cir-
cuit court for the District of Columbia as a court of general common-
law powers.

I shall refer later on to the very cases in which it was so
held, in one of which Chief Justice Marshall delivered the
opinion of the court.

Finally, I have here Conkling’s work on the United States
eourts, and the doctrine is not stated anywhere more accurately
than it is in this work.

The principle is this: That the circuit courts possess no powers—

Not jurisdiction—
except such as both the Constitution and the acts of Congress concur
in conferring upon them. :

Nothing could be more accurate than that. The circuit courts
can exercise no power not conferred by Congress. Congress can
confer no power not authorized by the Constitution. Therefore
the statement that the Congress and the Constitution must con-
cur in conferring the power.

“In other words, to enable them to act in any given case, it is not
sufficient that such case falls within the scope of the judicial pow2r of
the United States, as declared in the Constitution, unless jurisdiction
over it has been conferred by some act of Congress. Nor, on the other
hand, is it sufficient that the case is thus embraced within some legisla-
tive act, unless it also appears that it belongs to one of the classes or
descriptions of cases enumerated in the Constitution.

This important doctrine, though under one of its aspects, particularly,
it has been strenuously contested, is now definitely settled upon the
most stable basis.

He lived and wrote before the Senators from Pennsylvania

and Wisconsin had delivered their remarkable speeches.
THD SUPREME COURT DECIDES.

Mr. President, I come now to the decisions of the court, and
before presenting the cases on which I rely I will recur for a
moment to the case of ex parte Crane for the purpose of show-
ing that this attempted distinction between judicial power and
jurisdiction is not more clearly negatived in any of the cases
than it is in the very extract which the Senator from Wisconsin
read from the opinion of Justice Baldwin in that case. It will
be remembered that I called especial attention to the fact in
another connection that the Senator from Wisconsin had printed
in italics Justice Baldwin’s declaration that ‘“‘ Congress is bound
to provide by law for its exercise in all cases to which that
judicial power extends.” It will also be remembered that I
emphasized for another purpose that in the very same sen-
tence, a part of which the Senator from Wisconsin has empha-
sized by italics, Justice Baldwin admits that Congress had not

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29

provided by law for the exercise of the judicial power to its
utmost limit, and he added that ‘ much of it remains dormant
for the want of legislation to enable the courts to exercise it.”
In every line which the Senator from Wisconsin quoted from
that opinion it is made manifest that Justice Baldwin did not
take into acount any distinction between jurisdiction and
judicial power.

The first case directly on this point is that of Turner v. Bank
of North America, reported in 4 Dallas, and decided by Chief Jus-
tice Ellsworth, who, as I now recall, was a member of the com-
mittee which framed the first judiciary act, and was also, I
believe, a member of the convention which framed the Consti-
tution. While this case was being argued at the bar, one of the
counsel pursued precisely the same line of argument that has
been pursued by the Senator from Wisconsin and the Senator
from Pennsylvania. It was a Pennsylvania lawyer of great
distinction and scholarship who tried to impose upon the court
in that day the same doctrine which the Senator from Pennsyl-
vania is striving to impose upon the Senate in this day. Mr.
Rawle said:

It is, then, to be remarked that the judicial power is the grant of
the Constitution; and Congress can no more limit than enlarge the
constitutional grant.

Rawle insisted that ‘the judicial power is the grant of the
Constitution.” While he was making that argument, Judge
Chase interrupted him, and the reporter incorporates this inter-
ruption of Judge Chase in a footnote:

The notion has frequently been entertained that the Federal courts
devive their jilicial power immediately from the Constitution, but the
political truth is, that the disposal of—

What? Jurisdiction? No.

But the political truth is that the disposal of the judicial power
(except in a few specified instances) belongs to Congress. If Congress
has given the power to this court, we possess it, not otherwise; and
if Congress has not given the power to us, or to any other court, it
still remains at the legislative disposal.

Judge Chase did not say that the courts possess only such
jurisdiction as Congress has conferred, but he distinctly says
that the courts can exercise only such judicial poircr as Con-
gress has given them. Rawle was not arguing that jurisdiction
was conferred by the Constitution. The argument at bar and
the interruption from the bench were upon the question of the
judicial power of the Constitution. That interruption was after-
wards repeated and apporved by the court.

I will next read to the Senate an extract from the opinion
of Chief Justice Marshall in the Bollman case. My friend the
Senator from North Carolina [Mr. OverRMAN] brought this case
to the attention of the Senate, but it will bear repeating. This
was a case in which Bollman and Swartwout were charged with
treason and were incarcerated in a prison of the District of
Columbia. The lawyers in that case had made this same argu-
ment, that the Federal Courts derive their power to issue a
writ of habeas corpus from the Constitution. ('hief Justice
Marshall, in delivering the opinion of the court, uses this
language:

Courts which originate in the common law possess a jurisdiction
which must be regulated by the common law until some statute shall
change their established principles.

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30

Judge Marshall there recognizes the power of the law-making
department to change even the established principles of a
court existing under the common law:

But courts which are created by written law, and whose jurisdiction
is defined by written law, can not transcend that jurisdiction. It is
unnecessary to state the reasoning on which this opinion is founded,
pecause it has been repeatedly given by this court, and with the deci-
sions heretofore rendered on this point, no member of the bench has,
even for an instant, been dissatisfied. The reasoning from the bar in
relation to it may be answered by the single observation, that for the
meaning of the term “habeas corpus,” resort may unquestionably be
had to the common law.

The attorney had argued that if he did not go to the common
law, he would not be able to determine what a writ of habeas
corpus meant.

Chief Justice Marshall was answering that when he said:

The reasoning from the bar, in relation to it, may be answered by the
single observation that for the meaning of the term “ habeas corpus”
resort may unquestionably be had to the common law. But the power
to award the writ by any of the courts of the United States must be
given by writien law.

Will Senators contend that Congress can not restrain the
right to issue an injunction, which isa mere writ to preserve
a property right, and yet admit the power of Congress to deny
the right of the court to issue this great writ of liberty?
The Senators from Wisconsin and Pennsylvania say that Con-
gress can not deny the court the right to issue an injunction,
but Marshall said that the court can not issue even the great
writ of habeas corpus unless authorized to do so by the written
law of Congress. He does not, either, overlook the fact that the
Constitution provides against its suspension, because in the sec-
ond paragraph from the one which I have read he declares that
the every statute which he was construing was written by men
then Members of Congress who had served as members of the
convention that had denied the power to suspend the writ of
habeas-ecorpus except in cases when the public safety might re-
quire it. Yet he preceeds:

To enable the court to decide on such question the power to deter-
mine it must be given by written law. The inquiry, therefore, on this
motion will be, whether by any statute, compatible with the Constitu-
tion of the United States, the power to award a writ of haleas corpus
in such a case as that of Erick Boliman and Samuel Swartwout bas
been given to this court.

Chief Justice Marshall says that the courts can not award the
writ of habeas corpus without statutory authority. The Sena-
tors from Wisconsin and Pennsylvania say Congress can not
deny the right to issue a preliminary injunction.

I have shown that the court bas decided that a writ of habeas
corpus can not be issued without the authority of Congress. I
now propose to show that it has also decided that a mandamus
can not be issued without the authority of Congress. Here is
the case of McIntire v. Wood, decided in 7 Cranch, in which the
court says:

This court is of opinion that the circuit court did not possess the
power to issue the mandamus moved for.

And then, after discussing it, they finally conclude in these
words, and I invite particular attention to this expression:

But although the judicial powrr of the United States extends to
ceases arising under the laws of the United States, the legislature have
not thought proper to delegate the exercise of that power to its circuit
eourts, except in certain specified cases.

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31

Senators say that Congress has no right to deprive the courts
of such a power; but this case says that the courts lave no
right to exercise it unless Congress has delegated it to them.
The question there was the right of a citizen to a writ of man-
damus to compel an officer of the United States to perform what
was claimed to be a clerical duty. But the court did not inquire
whether it was the duty of the officer or not, and said it was
excluded from that inquiry because the right to issue the writ of
mandamus did not fall within any statute.

In the Bank of Columbia v. Oakley (4 Wheaton) occurs this
expression, to which I invite attention:

The forms of administering justice and the duties and powers of
courts as incident to the exercise of a branch of sovercign power, must
ever be subject to legislative will, and the power over them is inalien-
able, so as to bind subsequent legislatures.

Not only is it subject to the legislative will, but it must for-
ever remain so.

The next case is McClung v. Silliman, reported in G Wheaton,
and it is the case of McIntire v. Wood under a different style.
The court in that case said:

Both the argument of counsel, and the opinion of the court, distinctly
show that the power to issue the mandamus in that case was contended
for_as incident to the judicial powcrs of the United States. And the
reply of the court is that though, argumenti gratia, it be admitted
that this controlling power over its ministerial officers would follow
from vesting in its courts the whole judicial power of the United States,
the argument fails here, since the legislature has only made a partial
delegation of its judicial powers to the circuit courts.

They tried to procure the writ of mandamus in the case of
Wood v. McIntire in one way and failed. They went back and
brought an action in the State court, and the new case finally
reached the Supreme Court of the United States, and was dis-
posed of in an opinion which asserts that, although under the
judicial power as defined in the Constitution the award of a
mandamus in that case could have been authorized, it had not
been authorized by any statute and therefore the court had no
power to issue it.

The next is the case of Kendall v. The United States in 12
Peters. Here the courts says:

The result of these cases—

They had discussed the cases of McIntire v. Wood, of XIc-
Clung v. Silliman, and the old case of Marbury v. Madison,
which involved the right of the Supreme Court to issue a man-
damus as an exercise of original jurisdiction—

The result of these cases, then, clearly is that the authority to issue
the writ of mandamus to an officer of the United States, commanding
him to perform a specific act required by a law of_the United States,
is within the scope of the judicial powers of the United States under
the Constitution. But that the whole of that powcr has not been com-
municated by law to the circuit courts, or, in other words, that it was
then a dormant power, not yet called into action and vested in those
courts.

The next case is that of Cary v. Curtis, 3 Howard. The Sen-
ator from Wisconsin paid me the poor compliment of saying
that although I used this case in the original argument, he could
see nothing pertinent either in the- question decided or in the
opinion. I beg his attention while I read it again. Here is the
language:

Secondly, in the doctrines so often ruled in this court, that the judi-
cial power of the United States, although it has its origin in the Consti-

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tution, is (except in enumerated instances, applicable exclusively to this
court) dependent for its distribution and organization, and for the
modes of its exercise, cntirely upon the action of Congress, who pos-
sesses the sole power of creating the tribunals (inferior to the Supreme
Court) for the exercise of the judicial power, and of investing them
with jurisdiction, either limited, concurrent, or exclusive, and of with-
holding jurisdiction from them in the exact degrees and character which
to Congress may seem proper for the public good.

They use the words “judicial power” and “ jurisdiction ”
there, as they do in nearly all the cases, as synonymous. If
they use the words “ judicial power ” in the first part of the sen-
tence, for the sake of avoiding a repetition of the same words
the next time they use the word “ jurisdiction,” and if they use
the word .“° jurisdiction ” first, for the sake merely of the liter-
ary excellence of the opinion, they then use the different words
“ judicial power” in the second expression. But they use them
interchangeably and as synonyms. Further on the court said:

Perfectly consistent with such an admission is the truth, that the
organization of the judicial power, the definition and distribution of
the subjects of jurisdiction in the Federal tribunals, and the nodes of
their action and authority have been, and of right must be, the work
of the legislature. The existence of the judicial act itself, with its
several supplements, furnishes proof unanswerable on this point.

The court in this opinion further declares—

The courts of the United States are all limited in their nature and
constitution—

You can not find broader words of limitation on a court than
these—
and have not the powers inherent in courts existing by prescription or
by the common lav.

The Senator from Pennsylvania, in the course of his speech,
contends that Congress can not deprive inferior Federal ccurts
of what he calls “their inherent function of a court of equity.”
That is the first objection which he makes to the amendment
that I had the honor to offer. Here are his words:

It is hot my purpose, Mr. President, to discuss at length the propo-
sition involved in the amendment proposed by the junior Senator from
Texas, which raises the question of the power of Congress to prevent
the circuit courts of the United States from exercising what I deem
to be an inherent function of a court of equity.

Justice Daniel says in this Carey v. Curtis opinion that the
courts of the United States have no inherent power. Chief Jus-
tice Marshall declares the same thing, in effect, in the Bollman
ease; and I will show that the same doctrine was expressly
approved in Fink v. O’Neil.

The next case was Sheldon v. Sill, and there the court uses
this language:

It must be admitted that if the Constitution had ordained and es-
tablished the inferior courts, and distributed to them their respective
powers, they could not be restricted or divested by Congress. But as
it has made no such distribution, one of two consequences must re-
sult—either that each inferior court created by Congress must ezer-
cise all the judicial powers not given to the Supreme Court, or that
Congress, haying the power to establish the courts, must define their
respective jurisdictions.

Again I invite the attention of the Senate to the fact that the
words “judicial power,” the words “the power of the, court,”
and the word “ jurisdiction ” are used here as perfectly synony-
mous.

The first of these inferences has never been asserted—

ae
33

The learned justice had not heard or read the speeches of the
Senators from Wisconsin and Pennsylvania when he made that
declaration—
and could not be defended with any show of reason, and if not the
latter would seem to follow as a necessary consequence. And it would
seem to follow, also, that, having a right to prescribe, Congress may
withhold from any court of its creation jurisdiction of any of the
enumerated controversies. Courts created by statute can haye no juris-
diction but such as the statute confers,

Now, listen!

The Constitution has defined the limits of the judicial power of the
United States, but has not prescribed how much of it shall be cxeer-
cised by the circuit courts. Consequently the statute—

The statute—

achich does prescribe the limits of their jurisdiction can not be in con-
flict with the Constitution unless it confers powers not enumerated
therein.

Except that I am unwilling to impose upon the patience of
the Senate, I would read at length from the argument of counsel
in this case. Those lawyers made much the same argument to
the court which these Senators are now making to the Senate,
and at the risk of being tedious I will repeat a brief extract
from their argument.

This judicial power, therefore, to take cognizance of this case, is,
by the Constitution, vested in the circuit court, and the plaintiff claims
the constitutional right to have his controversy with Mr. Sheldon, liv-
ing in Michigan, decided by that court. Congress has said, by the
provision above referred to, that there are certain controversies between
citizens of different States which the United States courts shall not
take cognizance of; yet the judicial power of the court extends to
them by the Constitution, and citizens of the different States have the
right to have that power exercised in their controversies. Where does
Congress get the power or authority to deprive the courts of the United
States of the judicial power with which the Constitution has invested
them? Congress may create the courts, but they are clothed with
their powers by the Constitution, and we submit that the provision of
the act of Congress materially conflicts with the provisions of the
Constitution and is void.

To all of which the court replied then exactly as I am reply-
ing now; and again I call attention to the fact that in one place
they speak of judicial power, while in another they say ‘ how
much of it;’ and then in the conclusion they use the word
“jurisdiction,” plainly referring to the same power of the court
as in the expressions which had preceded.

If there could be any doubt on that point, that doubt is re-
moved on the next page of the same opinion where they quote
with approval the interruption of Judge Chase in the case of
Turner v. The Bank of North America and say:

But the court said: ‘ The political truth is, that the disposal of the
judicial power (except in a few specified instances) belongs to Congress,
and Congress is not bound to enlarge the jurisdiction of the Federal
courts to every subject, in every form which the Constitution might
warrant.’

Next, Mr. President, is the Sewing Machine case, and the
language of that is just as explicit as it is in the other cases
which I have quoted. It declares that—

Circuit courts do not derive their judicial power directly from the
Constitution.

The Senator from Wisconsin called particular attention to the
statement of the court in the Sewing Machine case that the judi-
-cial power has its oriyin in the Constitution. The court said

6712 3

 
84

the same thing in Cary vr. Curtis; and the same is true of all
Federal power. If the President of the United States is com-
manded by a statute to perform a duty, he does not derive his
power to act from the Constitution, though that be the source
of all Federal power. He derives his power from the statute.
Of course, if the statute is repugnant to the Constitution, he
may refuse to obey it, and his defense is not that he derives his
power from the Constitution, but that the Constitution limits
the power of Congress and that Congress in passing that statute
had transcended the limits of its power. No governmental
power can be exercised by any public officer in this country, ex-
cept by the President in several instances, unless that power is
conferred by statute. All Federal power has its origin in the
Constitution, but the Constitution would, in many instances, be
a dead letter unless Congress breathed into it the lhreath of life.

In 1873 Congress passed a law, a very extraordinary law in
some respects, looking to the protection of the Government
against the Union Pacific Railroad. The constitutionality of
that act was assailed upon several grounds and sustained ly
the court in an opinion, during the course of which they use
these words:

he question for decision is, therefore, squarely presented to us, as
it was to the circuit court, whether, by the aid of that statute, and
within the limits of the power it intended to confer, this bill cun be sus-
tained under the general principles of equity jurisprudence.

We say, ‘by the aid of that statute,’ because it is conceded on all
sides that without it the bill can not stand. ‘The service of compillsory
process on a party residing without the limits of the district of Con-
necticut, who is not found within them, is expressly forbidden by the
general statute defining the jurisdiction of the circuit courts. Varties
and subjects of complaint having no proper connection with each
other are grouped together in this bill, and they, by the accepted canons
of equity pleading, render it multifarious. This and other matters of
like character which are proper causes of demurrer are fatal to it,
unless the difficulty be cured by the statute.

When we recur to its provisions, which are said to authorize these
and other departures from the general rules of equity procedure, coun.
sel for the appellees insist that it is uncenstitutional, not only in the
particulars just alluded to, but that it is absolutely void as affecting
the substantial rights of defendants in regard to inatters beyond the
power of Congress. (United States +. Union Pacific R. R. Co., 98 U. 8.
Reports, pp. 601-G0z.)

Then follows matter not especially material here, and the
court, coming again to this question, says:

The same article declares, in section 1, that this ‘‘ power shall be
vested—

And that is the judicial power—

in one Supreme Court and in such inferior courts as the Congress may,
from time to time, ordain.”

The discretion, therefore, of Congress as to the number, the character,
the territorial limits of the courts among which it shall distribute this
judicial power is unrestricted except as to the Supreme Court.

I will reread this last sentence:

The discretion, therefore, of Congress as to the number, the character,
the territorial limits of the courts among which it shall distribute this
judicial powcr is unrestricted except as to the Supreme Court.

And they held this statute which was contrary to the practice
and proceedings in equity to be valid in that respect.

I want now to call the attention of the Senate to the case
of Fink v. O’Neil. That case declares—indeed, decides—that
the courts of the United States have no power to issue exe-
cutions on their judgments except such power be given by

6712
35

the laws of Congress. The court had the power—the jurisdic-
tion, if you prefer it—to read the pleadings, to examine the wit-
nesses, to hear the argument of counsel, to render a judgment,
and yet it required an act of Congress to authorize it to execute
its own judgment by final process. Will the Senator from Wis-
consin and the Senator from Pennsylvania insist that the right
to issue a preliminary injunction is more essential to the nature
and the constitution of a court than the right to issue a final
execution? Its judgment would be a barren right, or as Jus-
tice Mathews correctly said, “a right without the means of
vindication,” unless the court could issue its final process, and
yet in the face of that decision which solemnly declares that in
the absence of Congressional authority the court has no power
to execute its final judgment, these Senators contend that Con-
gress is incompetent to require the court to suspend all judg-
ment until it is ready to render a final one.

That opinion asserts that the court could not render any judg-
ment at all without a statute enabling it to do so, and they held
in that very case that the Congressional limitation upon the power
to issue an execution defeated a sovereign right. The court said—
and the court did not need to say that in order to give every
Senator here to know that it is true—that the statute of ex-
emptions could not prevail against the sovereign. But as the
court had no power to issue execution at all, except in con-
formity with the law of Congress, that law of Congress des-
troyed the right of the sovereign to disregard this privilege of
the citizen. And so the effect of that decision, as well as the
words of that opinion, is with those who believe that Congress
ean limit the right to issue an injunction. The court de-
clared that unless they issued execution in accordance with the
law of Congress they had no power to issue it at all; but it had
not then been advised of this new doctrine promulgated by the
Senator from Wisconsin and the Senator from Pennsylvania to
the effect that whenever a court has jurisdiction of any case
it may issue any writ necessary to the efficient exercise of that
jurisdiction nothwithstanding the law of Congress.

It is a safe rule of construction to say that if you give a court
the power to do a thing you include whatever power is neces-
sary to the doing of that thing. That, however, is included,
not under any constitutional command, but under a rule of
construction as old as statutes and which Congress has the
power to overrule by express enactment. The court in the
ease of Fink v. O’Neil goes further than I have gone and
further than it is necessary for me to go in this argument. There
the court declares that without the statute it could not execute
its own judgment; yet the power to execute its judgment is a
most essential power in all courts; there is reason to regard
it as more essential even than the power to punish for contempt,
because the court might proceed without that power. It would
be as turbulent, perhaps, as a barroom on occasions, but in this
American Republic and among these enlightened people, if the
courts were powerless to punish for contempt, the self-respect of
those who attend their sessions would generally preserve their
order. But, Mr. President, if after hearing the witnesses, after
applying the law, and after pronouncing its judgment, the court
had no power to execute that judgment, it would be impotent
indeed. It would be useless, it would be a mockery, it would be

6712
386

a burlesque upon civilization to give courts the right to adjudi-
cate controversies and then prevent them from enforcing their
adjudication, and Congress will never commit such an act of
folly. But the court correctly says in this case of Fink v. O'Neil
that unless Congress has authorized them to issue the execution
they are powerless to do so. Why? Now listen:

For, as was said by Mr. Justice Daniel, in Cary v. Curtis, ‘ the courts
of the United States are all limited in their nature and constitution,
and have not the power inherent in courts existing by prescription or
by the common law.”

Mr. President, I can safely vest the power of Congress to
forbid inferior Federal courts to issue preliminary injunctions,
upon the existence of a statute as old as this Government and on
the authority of an unbroken line of decisions of the Supreme
Court, speaking through its greatest justices and its greatest
Chief Justice. What Marshall has said none of us need apoli-
gize for saying, for in spite of my different convictions in
polities, in spite of the fact that I believe he nationalized this
Republic where the fathers intended only to federalize it, in
spite of the fact that I do not agree with a single political opin-
ion which he ever expressed from the bench or during his brief
political career, I accord to him the honor of being first among
all the Chief Justices of this Republic, and I believe his was the
greatest legal mind that ever illuminated the judicial history of
this or any other country. With him to sustain my contention,
and with a long line of his illustrious associates declaring that
these inferior Federal courts possess no power except what the
laws of Congress have conferred upon them, I may well be con-
tent with my opinion though no other Senator should agree
with me.

When Marshall says that the great writ of habeas corpus,
beneath whose protecting care only can the citizen stand
secure, can not issue except it be authorized by an act of Con-
gress, Mr. President, I may be excused for saying that Congress
has the power to deny to an inferior court the right to issue a
preliminary injunction. When Marshall says that the writ of
mandamus, a writ as ancient as that of injunction—and upon the
authority of the Senator from Wisconsin I may he permitted to
add as necessary to a court of law as the writ of injunction is
to a court of equity—when Marshall and his associates say that
without authority from Congress the Federal courts can not
issue that writ I must be pardoned if I therefore infer that
against the command of Congress a Federal court can not issue
a preliminary injunction. When I see that Congress has pro-
hibited Federal courts from issuing injunctions, may I not insist
that it shall again prohibit them in a case of vast importance
to the people?

If it were a doubtful power I would not invoke it; if it were
a strained construction of the Constitution I would not plead
for it, but if it is a power which Congress possesses, let us
see what reason there is to exercise it.

NO ATTACK UPON THE COURTS.

Senators on the other side scem to think that because we
insist that the judgment of the Commission shall stand until
after a full investigation we imply a distrust of all the courts.
Distrust of the capacity of all courts for this work, yes; distrust
of the integrity cf all courts, no. I trust may of our courts im-

6712

 
37

plicitly ; but some of them I do not trust at all. Some of them
I know have abused their power; and as we can not leave the
power with those who will not abuse it and take it from thos2
who will abuse it, it becomes necessary to take it from all in
order to prevent its abuse by any.

Let us see how much of force and justice there is in this argu-
ment that we are attacking the courts. <A court is presumed to
be learned in the law, and a man who is very learned in the
law is seldom very learned in any other specialty. I believe it
was Lord Eldon who, when a friend inquired of him how he
could make his ward a great lawyer, answered, in the language
of Milton, “Teach him ‘to scorn delights and live laborious
days.’” The observance of that rule has been found necessary
from my Lord Eldon’s time to this in order to make a great
lawyer; and no man ought to be made a judge until after he has
made himself a great lawyer.

Take one man of high character and great ability and put him
on the bench, thus making it his duty to devote his days and
nights to a study of the law. Then take another man of equal
character and ability and put him on a railroad commission, and
make it his duty to study railroad rates. The judge will have
many cases to try, a multitude of law books to read, and endless
papers to examine. If all of that be well done, be will have no
time for an examination into the justice and fairness of rail-
road rates. The railroad commissioner, a man of character
and ability equal to that of the judge—and if we can not get
commissioners equal to some of our Federal judges, God save the
Republic—will devote himself to the study of railroad rates,
while the judge is pursuing through dusty volumes the science
of the law. Who will be the best qualified at the end of three
years to fix a railroad rate—the judge, who the more be knows
about the Jaw the less he will be apt to know about the rail-
roads, or the railroad commissioner, who has been studying rail-
road rates instead of law? It is certain that the judge would be
the best qualified to decide the law, and it is equally as certain
that the commissioner would be best qualified to establish a rail-
road rate. I do not believe there is a Senator in this body—and
I know there is not a Senator who ought to be a member of this
body—who will contend that the judge would be better prepared
than the commissioner for that work; and if there is anybody
here who believes it, I want to warn him that there is nobody
elsewhere who believes it. But notwithstanding the superior
qualification of the commissioner over the judge for the task of
fixing railroad rates, we recognize that under the Constitution
the commissioner’s work must at last be subject to the judge’s
scrutiny ; and we onJy demand that the judge shall not be per-
mitted to set aside, without a thorough inquiry, what the com-
missioner has done with infinite care and labor.

They tell me that great injustice may be inflicted on the rail-
roads under my proposed amendment, and I answer that a
greater injustice may be inflicted upon the people unless my
amendment or some other like it is adopted. Suppose the Com-
mission fixes a rate, and a Federal court suspends it by prelim-
inary injunction. Then suppose at the end of two years the
courts finally adjudge that the rate fixed by the Commission was
a proper one. What is the result? During those two years
10,000 American citizens have been compelled to pay the rail-

6712
38.

roads more than a just compensation for their service. Of
course every one of those citizens can go into their court and
sue the railroad for the excess, and the proponents of this
measure as it stands seem to think that is sufficient. But they
seem to forget that if we deny the courts the power to suspend
the Commission’s rate, and it shall finally be decided that the
Commission’s rate was too low, the railroad can recover the
deficiency just as the shipper can recover the excess. It is, sir,
a poor rule which will not work both ways.

Under my plan, if the Commission’s rate should be con-
demned, the railroad would be compelled to sue ten thousand
shippers in order to recover the deficiency, while under the bill
as it came from the House, if the Commission’s rate should be
suspended by a preliminary injunction and then finally sus-
tained, ten thousand shippers would be compelled to sue the rail-
road in order to recover the excess. Is it worse that the railroad
should be required to sue ten thousand shippers than that ten
thousand shippers shall be required to sue the railroad?

As a matter of practical convenience the railroad can very
much more easily sue 10,000 people than 10,000 people can sue
the railroad, because the railroad has its established legal staff ;
it has its records to show what every man paid, and what
eyery man ought to have paid, and that is the exact measure of
its damage. On the other hand, the citizen bas no regular
tegal staff. He has been compelled to pay the excessive freight
to the merchant, who paid it first, and then charged it to his
customer. The consumer who has really paid it would have no
standing in court, because there was no contract or relation
between him and the carrier. He would have to go to the mer-
chant, and the merchant would have to go to the carrier. But
wholly aside from this consideration I marvel at a course of
reasoning which Ieads men to believe that it is more unjust
for the railroad to sue 10,000 people than for 10,000 people to
sue the railroad.

This brings me, Mr. President, to the question cf the Sen-
ator from Maine [Mr. Hare], and when I have answered that
1 am through with this long and tedious speech. I do not
believe that the courts are the best tribunals in which to settle
this question, but I know that under the Constitution we can not
deny a common carrier the right to a trial in the courts. I am
not so sure, however, that such ought to be the law. I say
that because the books contain many decisions which hold that
when the railroad wants to condemn a citizen's property in
order to construct and operate its line it has the right to do so,
and the award of the commissioners appointed upen its appli-
eation may be made final. It has frequently been held that such
a proceeding is according to the due process of law, and that
the ascertainment by those commissioners of the just compen-
sation which the law requires is conclusive, or can be made
conclusive, upon all parties.

I know that this doctrine has not been universally ac-
cepted, and, from intimations in the opinions of the Supreme
Court, I do not believe they would aceept it in its applica-
ention to this question. But I confess myself utterly unable to
understand the rule of law which permits three commissioners to
finally decide the value of my property when the railroad
wants to take it, and denies that the award of five commission-

G712
39

ers can be conclusive as to the value of the railroad’s service
when I want to use it.

The truth is, and the truth must always remain, that from the
power and right of the railroad to condemn my property for its
use results my right to condemn the service of the railroad to
my use. The railroad comes to my homestead, consecrated by
a thousand associations of mother and father, of wife and chil-
dren, and mocks me when I talk about the sweet and tender
memories of my childhood and plead with them to go another
way. They tell me that private interest and private sentiment
must vield to this great public convenience; and when I refuse
to agree with them upon the compensation, they apply to the
county judge, and he appoints, in many of the States, three com-
missioners to view the premises and assess the value of my
land. I plead with those commissioners; but they read me
the cold, unfeeling letter of the law, and tell me that pri-
vate property shall not stand in the way of public progress
and convenience. They find that I am entitled to so much. If
I am dissatisfied, they tell me to appeal to the court, and I ap-
peal, but pending that appeal they pay me what the three con-
missioners have awarded me, and they enter upon my land,
tear down my fences, or, if it obstructs their way, they raze
my house, and I must litigate with them in the courts the ques-
tion of whether they have paid me enough for my property.

I have in mind--and I am permitted to make a statement
from my professional experience, as the Senator from Wisconsin
did from his—I have in mind one case where the owner of a
splendid farm said “ Keep out of this bottom and build on the
table-land, and you can have the right of way for nothing.”
They said it would cost $3,000 to change the location of their
line, and upon the mere consideration of the cost refused to make
the change. The railroad offered $1,000 for the right of way,
and the owner demanded $5,000. Under this disagreement com-
mnissioners were appointed, and these commissioners assessed the
damages at only $1,500. In that state of the case the railroad
paid the owner of the land the $1,500—and if he had not been
willing to accept it they could have deposited it in the court—tore
down his fences, and built their railroad through his farm. He
appealed to the court, and when the case was tried a jury of his
countrymen said the damages were $5,000. How did the owner
of the farm obtain the additional $3,500? He obtained his judg-
ment against the railroad, and collected it like other judgment
creditors.

I would charge the commission with the duty of allow-
ing to the railroad a just compensation for its service. Of
course some men say that is too indefinite, but, Mr. President,
it is not more indefinite than the words “just and reason-
able,” because the words “ just and reasonable’ mean, and they
must be construed by the court to mean, the same as “ just
compensation.” The Senator from Wisconsin argued with great
force—and that is one part of his speech with which I agree—
that we are limited by the fifth amendment to the Constitu-
tion in dealing with this question. As the fifth amendment
provides that ‘private property shall not be taken for public
use without just compensation,” I thought it best for the stat-
ute to follow the language of the Constitution. Not only is it
the language of the Federal Constitution, but out of the forty-five

6712
40

State constitutions it is the language of twenty-nine. I believe
that there are but three State constitutions which do not provide
either for “ just” or “ adequate” compensation. There is not a
single constitution that provides for the taking of private prop-
erty at a “just, reasonable, and fairly remunerative price.” If
you strike out the words “fairly remunerative” I would not
contend a moment for the difference between a “ just and rea-
sonable rate” and “a rate that affords a just compensation,”
because they are the absolute equivalents of each other. I
propose that the railroads shall have just compensation for their
service, and I demand that the people shall have proper service
for the just compensation which they are compelled to pay.

¥ open the door of the court and authorize any railroad or any
person dissatisfied with any rate or regulation established by the
Commission to go into the court and allege that the Commis-
sion have not fixed a rate which allows a just compensation, or
that they have not established a practice or regulation which
is just and reasonable. I give the court the power to hear
and determine that question, and I only provide that what
the Commission has done shall remain effective until they have
proved that what the Commission has done is wrong.

Mr. HALE. Mr. President

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from Maine?

Mr. BAILEY. I do.

Mr. HALE. As the Senator in passing was referring to what
may be a practical question of delay, I wanted to suggest to him
whether the feature of preference if given in these cases, as it
is now given by law to a certain class of cases, in the considera-
tion finally of the subject by the court, would not to a great
degree remove the objection of delay and yet not improperly
precipitate the action of the court.

Mr. BAILEY. That is true, and I attempted to cover it, and
it is just as much in favor of the railroads as it is in favor of the
railroad commission.

Mr. HALE. Precisely.

Mr. BAILWY. In other words, the fact that the railroad can
get an early decision reduces the injustice which may be wrought
against it if the order of the commission is unjust.

Mr. HALE. Undoubtedly.

Mr. BAILEY. I have sought to reduce the injustice both
ways.

Mr. HALE. Now, if the Senator will not consider——

Mr. BAILEY. Will the Senator permit me to add a word just
here?

Mr. HALE. Certainly.

Mr. BAILEY. One of the very purposes, aside from its in-
- trinsic justice, that I-had in mind when I incorporated this pro-
vision in the amendment is to force the railroads to favor an
early. trial, and that is the only way to do it—to make it to
their interest. Perhaps that would be true of all others as well
as of the railroads.

Mr. HALE. Now, if the Senator will allow me, I want to
say that this day has been most profitably spent, and that the
therough discussion by the Senator from Texas of the particu-
lar feature which he has so much at heart and what he has
said later with reference to the final adjudication of all

6712

 
41

questions by the courts, have tended more to disentangle this
subject and to secure, I will not say an immediate, but a near
beneficent result than anything that has taken place.

The debate has all been most able and illuminating. I
think—and I speak with some hesitation, because I know that
great lawyers in the Senate will not agree—that the Senator’s
argument as to the power of inferior courts and their Hability
to be considered and controlled by Congress can not be coun-
tervailed. That great lawyers here will take the other view
I have no doubt. I believe that that is the law. But that is a
minor question.

The final question has been stated by the Senator from Texas
better than I can state it. It is that after the Commission has
passed upon a question and it is taken, without undue delay
and with the right of injunction limited by Congress, to the
courts, the court shall consider all the questions. The Senator
is right in saying.

Mr. ALDRICH. The circuit court.

Mr. HALE. Finally the Supreme Court—that is, if it gets
so far as that. The Senator is right in saying whether it
shall be “just compensation” or “just and reasonable” or
any other term, is not of importance; that the court will settle
it all and will finally decide.

I look out of this controyersy—I have not taken much part
in it—hopefully to this general result. ‘The Commission will be
strengthened. I think it ought to be. I find no fault personally
with it, but I think it is better, in the view the Senator has ex-
pressed, that we should have as good men upon that Commis-
sion as there are on the circuit courts or even on supreme
courts. I think, out of this we will get a strengthened Com-
mission. I will vote that its decision shall not be interfered
with by injunction until it reaches the final court; and then I
believe the Senate will agree to the proposition that that re-
view by the court shall be of the broadest and most ample kind.
That the Senator has largely contributed to this beneficent re-
sult is to me very plain.

Mr. BAILEY. Mr. President, it is gratifying, of course, to
have the approval of the Senator from Maine, and to know
that he agrees with me upon this most stubbornly contested
point. This discussion may not be without some value, and per-
haps it is a fortunate circumstance that the people of the
United States should again have their attention directed to the
power of their representatives as well as to the power of their
courts. .

My great regret is that I have not been able to agree with
some lawyers in this body whose judgment upon a question of
law I have been in the habit of receiving with perfect confi-
dence. We go to the books for an answer to each other, and
yet—and I say it in no spirit of flattery, Mr. President—I would
as soon accept the deliberate, unbiased, and matured opinion of
the Senator from Wisconsin or the Senator from Pennsylvania
as to accept the opinion of any text writer whom I have quoted
here to-day. Knowing their great accomplishments and their
great learning in their profession, it was a matter of profound
surprise to me when I found that both had taken a positiom
never before successfully maintained in Congress or before the
courts.

6712

 
42

The contention that Federal courts derive their powers from
the Constitution is not a new one. It has been pressed upon our
highest court by the ablest lawyers who have ever practiced
before that great tribunal, but it has always been rejected. I
am compelled to belive that those Senators expressed their opin-
ions without due consideration, and now they hate to yield. I
will not call it stubbornness. I am willing to call it intellectual
firmness. You know, Mr. President, the difference between
firmness and stubbornness is that our enemies describe the
same quality as stubbornness which our friends describe as
firmness. I am constrained to believe that the Senator from
Wisconsin and the Senator from Pennsylvania baving conunit-
ted themselves to this theory are defending it with all the power
they possess; and if any two men in the Senate or any two
men at the American bar can successfully defend it, they can.

And yet, sir, much as I regret my difference with them, it has
been a matter of sincere satisfaction to me that so many who at
first denied my proposition have now assented to it. When I
first announced it in the Senate, rather in an incidental way,
i had no thought of the clamorous dissent that was so soon to
assail me on every side. I do not know exactly, nor is it ma-
terial that I should say, when I first learned that Congress
possessed this power, but if I had not been so absolutely sure
of my position the first time I went into the cloakroom I
would have fled from it as from a pestilence, because I was
met on every side with a demand for authorities and for
argument. It is, however, creditable alike to the intellectual
candor and to the intellectual strength of the Senate that so
many Senators, upon an investigation of the question, have
renounced their first opinion and have accepted the law as it
has been written by the Congress and construed by all the
courts for a century or more.

WHERE TIIIS LEGISLATION LEADS.

Mr. President, I do not believe that this legislation will lead
to the end which some men fear. I believe that its ultimate
effect will be to promote a better understanding between the
railroads and the people. JT believe that when it has made
the railroads do the people justice, the people will feel less re-
sentful toward the railroads; and we shall consider these
questions with more of reason and less of passion. It will take
the railroads out of politics, and we will hear no more about
railroad Senators. I want to see the railroads and every other
corporation driven from the politics of this Republic. They
have no place in the politics. They are organized for profit
and can cherish no patriotic purpose. Tolitics are for men of
flesh and blood, made in the image of their God, and not for
corporations, which are the mere creations of the law.

And now, Mr. President, if we can pass this bill, amended as
it ought to be, with the concurrence of all Senators, I would
feel that the political millenium had almost come. I would
feel that the railroad and the shipper could work together in
peace and with 2 good will toward each other. I would feel
that we could bury the big stick and the pitchfork in a common
grave. [Laughter.]| I would feel that we are approaching a
new era in this devoted land where men are to be judged by

6712
43

how they act and what they think, rather than by what they
own; when intellect instead of fortune shall be the measure of
our esteem, and when an honest fame shall be the goal toward
which our ambitious youth will toil and hope.

Mr. President, I am one of those who believe that such a time
may come. Of course I am not so simple-minded as to dream
that the old bucolic days of small fortunes and great content-
ment will ever come again to bless the land, but I do believe in
the coming of a better day than this, when the poor man who
knows that he is just and honest will feel that he is happier in
his condition than his more prosperous neighbor whose riches
have been corrupted through injustice.

I pray for the time to come when we shall have a new and
loftier standard to guide our children; when we shall teach
them that justice is better than power, and lead them into the
ennobling faith that truth shall conquer falsehood in every home
where peace abides and in every Jand where men are free. Un-
der the influence of higher ideals and more unselfish aspirations
all hate and envy will vanish from our minds, and the only evil
thought which still must vex us will be the malice which the bad
shall forever feel toward the good. When conduct instead of
fortune is made the rule by which we judge all men, then every
boy in this fair land, no matter how humble his parentage or
how limited his opportunity, will feel the thrill of hope, and the
carpenter's son will know that if only he is just and brave and
honest he will be more respected than the son of any millionaire
who ever wasted his father's fortune in idle dissipation or soiled
his father’s ame by gross excesses.

Mr. President, I apologize to the Senate for the length at which
I have spoken; I thank the Senators for their long and patient
attention, and Iam done. [Applause in the galleries.]

As the following amendments are the ones which have pro-
voked the foregoing discussion they are printed herewith as an
appendix:

APPENDIX.

Amendment intended to be proposed by Mr. Baruny to the bill (H.R.
12987) to amend an act entitled ‘‘An act to regulate commerce,” ap-
proved February 4, 1887. and all acts amendatory thereof, and to
enlarge the powers of the Interstate Commerce Commission, viz:
Beginning after the word ‘ what” in iine 19, on page 10, strike out all
down to and including the word “ prescribed” in line 5, on page 11,
and insert the following:

A rate or charge which shall afford a just compensation to the carvier
or carriers for the service or services to be performed and a regulation
or practice which shall be just and reasonable. The rate or charge,
regulation or practice so determined and prescribed shall be the only
lawful rate or charge, regulation or practice, and the carrier or carriers
shall not thereafter demand or collect any other rate or charge or fol-
low any other regulation or practice.

Amendment intended to be proposed by Mr. Barivy to the Dill (I. R.
12987) to amend an act entitled “An act to regulate commerce,” ap-
roved February 4, 1887, and all acts amendatory thereof, and to en-
arge the powers of the Interstate Commerce Commission, viz: Insert
the following: :

Any carrier, or person, or corporation, party to such complaint, and
dissatisfied with the rate or charge, regulation or practice so estab-
lished and prescribed, may file a bill against the Commission in any
circuit court of the United States for the district in which any portion
of the line of the carrier or carriers may be located, alleging that such
rate or charge will not afford a just compensation for the service or

6712
44

services to be performed, or that the regulation or practice is unjust
and unreasonable; and if upon the hearing the court shall find that
such rate or charge will not afford a just compensation for the service
or services to be performed, or that the regulation or practice is unjust
and unreasonable, it shall enjoin the enforcement of the same: Pru-
vided, hoirerer, That no rate or charge, regulation or practice pre-
scribed by the Commission shall be set aside or suspended by any_pre-
{Iminary or interlocutory decree or order of the court. Said proceedings
shall have precedence over all other cases on the docket of a different
character, and the court shall have power to make orders to secure the
attendance of persons from any part of the United States, and the
existing laws relative to evidence and proceedings under the acts to
regulate commerce shall be applicable. Wither party to said proceeding
shall have the right to appeal directly to the Supreme Court of the
United States, and such appeal shall have precedence in said Supreme
Court over all other cases of a different character pending therein,

6712

O
 
REGULATION OF RAILROAD RATES.

SPEEC H

OF

Hon. CHARLES A. CULBERSON,

OF TEXAS,

IN TMUE

SENATE OF THE UNITED STATES,

Monnay, Marcu 12, 1906.

ae

WASHINGTON.

1g06,
€627
SPEECH

HON. CHARLES A. CULBERSON.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled “An act to regulate commerce,” approved Tei-
ruary 4, 18S7, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. CULBERSON said:

Mr. Presipent: On the 2Gth of February I offered a bill in
the nature of a substitute for the bill which has been reporte:l
from the Senate Committee on Interstate Commerce. The sub-
stitute occupies common ground with the committee bill to the
extent of proposing to enlarge the powers of the Interstate
Commerce Commission. There is material difference, however,
in other particulars between the bill which I propose and the
bill reported by the comuniittee.

The bill which I propose, among other things, will restore
the punishment of imprisonment against persons who give and
persons who receive rebates. In addition, the bill which IL
propose contains important provisions on the central proposition
involved in this discussion, that conferring emergency powers
on the Interstate Commerce Commission, and I will read that
section of the bill for the information of the Senate, as I have
perfected it.

That whenever the Interstate Commerce Commission, created by “An
act to regulate commerce,’ approved February 4, 1887, and exercising
powers thereunder and under acts amendatory thereof, and under this
act, shall, upon complaint and hearing, as provided by said acts, or
either of them, decide that any rate fixed for service which is subject
to the provisions of said acts, or either of them, is unjust and unreason-
able, said Commission shall have the power, and it shall be its duty, to
fix a just and reasonable rate for such service and make an order speci-
fying the time, which shall be within thirty days from the date of said
order, when such rate shall take effect; and thereafter such rate shall
be the only lawful rate which the carrier may charge for such service
for the period of one year from the time such rate may become opera-
tive, unless otherwise ordered by the Commission: Provided, That if
such rate so fixed by the Commission is confiscatory of the property of
the carrier, the carrier affected or auy stock or bond holder thereof may
proceed against said Commission by appropriate proceedings in cquity

6627 3
4

in any court of the United States of competent jurisdiction to enjoin
the enforcement of such order and rate; and in such proceedings either
party to the suit may appeal immediately and directly to the Supreme
Court of the United States from the final decree therein or from any
interlocutory or temporary restraining order therein by which the
enforcement of the rate or order so established and made by the Com-
mission is enjoined in whole or in part, and said case so appealed shall
be advanced and take precedence in the Supreme Court of the United
States of all cases of a different character therein pending: Provided
further, That in determining what is a just and reasonable rate and
what is a confiscatory rate no consideration shall be given fictitious
stock issued by the carrier, or bonds or other obligations of the carrier
issued in excess of the fair value of its property.

Mr. President, what I shall say to-day will have reference to
the bill which I have proposed, and particularly it will have
reference to the central question involved in the bill and in the
committee bill to create emergency powers in the Interstate
Commerce Commission.

It has been suggested that an effective measure by Congress
for the regulation of commerce may tend to trench upon the
Democratic doctrine of State rights. To my mind that involves
undue apprehension or a misconception of that doctrine. To
the political belief which would preserve unimpaired all the re-
served rights of the States within the true meaning and spirit
of the Constitution my adherence has always been given, and my
loyalty to it will continue until the end, because it is based upon
historic truth, upon a just interpretation of the Constitution,
and upon sound political philosophy.

What that faith is in its relation to the party creed and to the
particular question under debate it is important to understand,
at least in its general aspect. Fundamentally the faith of the
Democratic party rests upon inherent principles of liberty, of
which free government itself is not the source, but only the ex-
pression. So far as that faith, in its narrower scope, is founded
in our dual system of State and Federal Governments, so far as
it depends upon the construction of the Federal Constitution, it
was stated in its breadth and fullness by Jefferson in his first
inaugural address, that great paper which, read in connection
with the Declaration of Independence and the Constitution, is
the charter of the Democratic party. There he declared that
the essential principles of our Government, which pertain to this
question, consist “in the support of the State governments in
all their rights as the most competent administrations for our
domestic concerns, and the surest bulwarks against antirepub-
lican tendencies ” and “ the preservation of the General Govyern-
ment in its whole constitutional vigor as the sheet anchor of our
peace at home and safety abroad.”

Not only the outward form, but the broad spirit of this state-
ment of Democratic faith, meets now, and has always met, my

6627
5

unqualified approval. In their respective spheres the State
and Federal governments are supreme, and the supremacy of
each, the Federal as well us the State governments, should be
steadfastly maintained. The reserved powers of the States,
the powers not delegated to the Federal Government, but which
remain in the States or in the people, comprising the great mass
of governmental functions, should be absolutely free from Fed-
eral interference and control, while the limited and enmnerated
powers delegated by the Constitution to the Federal Govern-
ment should be equally upheld and sustained. While it is the
duty of the Democratic party to maintain inviolate all the re-
served rights of the States, it is also its duty to sustain the
unduubted powers of the Federal Government in their whole
constitutional strength. In my judgment, the doctrine of con-
eurrent power in the State and Federal governments, except
where expressly given, is without warrant in the Constitution,
although it is sometimes supported by the highest judicial au-
thority.

But, Afr. President, it is not my purpose to enter upon a gen-
eral exposition of cur system of government. The inquiry here,
the single inquiry to which my attention will be directed to-day,
relates to the power of Congress to regulate foreign aud inter-
state commerce and the extent of that authority.

The Federal Government being one of limited and enumerated
powers, if a given power exists it must be found in the Consti-
tution. The authority of Congress to regulate foreign and in-
terstate commerce does not spring, as has been suggested by a
distinguished Senator, from the general-welfare clause of the
Constitution. That phrase is used but twice in the Constitu-
tion—once in the preamble and once in that section which con-
fers upon Congress power to lay and collect taxes, duties, im-
posts, and excises, to pay the debts, and provide for the common
defense and general welfare of the United States.

While, in exercising this power to tax, commerce may be af-
fected, it is manifest from the context, that the substantive
power in Congress to regulate foreign and interstate commerce
ean not be derived from this taxing provision, and consequently,
if derivable at all from the general-welfare clause, it must be
from that employed in the preamble. :

It is equally obvious to me, Mh. President, from the nature
and office of the preamble, that it does not confer such power
or any power whatever. It was not intended to be and it is
not the source of goveramental authority of any character. It
is a mere declaration of the purposes sought to be accomplished,
and in the manner therein provided, by the establishment of the
Constitution. The declaration of the preamble that—

6627
6

We, the people of the United States, in order to form a more perfect
Union, establish justice, insure domestic tranquility, provide for the
common defence, promote the general welfare, and secure the blessings
of liberty to ourselves and our posterity, do ordain and establish this
Constitution—

is not in itself a grant of power, but imports only that, by the
establishment of the Constitution which follows, it is the purpose
to promote the general welfare and attain the other high con-
ceptions of a free people which are named. The general welfare
was not to be promoted by the exercise of authority drawn from
this reference to it in the preamble, but by the establishment
of the Constitution, with the grants and prohibitions and reser-
yations which it contains. It follows logically from what I
have said that, in my judgment, the vital and potential author-
ity in Congress in respect to this subject is to be found exclu-
sively and necessarily’ in that provision of the Constitution
which expressly confers upon Congress power “to regulate
commerce with foreign nations and among the several States
and with the Indian tribes.”

It is a remarkable fact of history that the necessity for some
such provision as this, the necessity for the regulation of for-
eign and interstate commerce by some general authority, was
the chief concern of the statesmen who framed the Constitu-
tion. Indeed the convention of 1787 was not called to frame
a Constitution, but solely to revise the Articles of Confedera-
tion, and especially to secure some adequate general regulation
of this character of commerce by such revision.

At the commencement of the American Revclution the thir-
teen British colonies were sovereign political communities.
They were protected by Great Britain against foreign danger
and in a degree against internal discord, but with reference to
their domestic concerns, they were, as between themselves,
separate and independent. With respect to foreign and inter-
nal commerce they were independent of each other and in
a large degree of the parent country. There was no general
authority over either foreign or intercolonial commerce, and
consequently irritating and discriminating regulations of such
commerce often resulted.

Taxation of such commerce by some of the colonies through
whose ports it passed was followed by severe and hurtful
retaliation. New Jersey, placed between Philadelphia and New
York, was likened to a cask tapped at both ends, and North
Carolina, between Virginia and South Carolina, to a patient
bleeding at both arms. Relief from these jealousies, conflict-
ing regulations, and unjust commercial impositions was sought
in the adoption of the Articles of Confederation. This form of

government, howerer, afforded no adequate remedy, because,
6627
7

like the previous condition of the colonies, there was no ex-
clusive and general authority over commerce, and especially
commerce among the States. The complaints which were made
under the colonial system, complaints of inharmonious regula-
tions, of unjust tribute levied upon the products of neighboring
States, and of contracted commercial intercourse under which
trade was stifled and paralyzed, were revived and emphasized.
Even Washington, mortified by the conduct of some of the
States, declared that selfishness, commercial greed, and the
indisposition to do justice were sources of national embarrass-
ment. In the midst of these conditions the purpose to seek
relief in a further change of government began to take shape
and form.

The Constitution of the United States, which was the result
of this movement—the greatest product of constructive states-
manship in the annals of mankind—was not only not fore-
shadowed by contemporaneous events, but the supreme and im-
pelling motive of its formation was freedom of trade rather
than freedom of man. It may be that the latter was thought
to be already secure, and yet it is still remarkable that such an
instrument as this Constitution, framed in the shadow of the
Revolution, by States yet in the infancy of independence, which
declared new guaranties of liberty and discovered untried
philosophies of government, should have sprung primarily, not
from the higher aspirations and nobler impulses which conse-
crated the struggle for independence, but from the demand for
some general authority over commerce. That this is true is as
indisputable as it is extraordinary.

To the Commonwealth of Virginia—God bless her—as in
other cases of conspicuous and illustrious services to mankind,
belongs the high honor of having initiated the movement which
culminated in the adoption of the Constitution of the United
States. Bear with me, Mr. President, a moment, while I put in
a few sentences the history of that period.

In January, 1786, commissioners from that Commonwealth,
consisting of Madison, Randolph, Tucker, Mason, and others,
were appointed to confer with such commissioners as might be
selected from other States—

To take into consideration the trade of the United States; to exam-
ine the relative situations and trade of said States; to consider how
far a uniform system in their commercial regulations may be necessary
to their common iaterest and their permanent harmony, and to repurt
to the several States such an act relative to this great object as, when
unanimously ratified hy them, will enable the United States in Congress
assembled effectually to provide for the same.

Commissioners from only five States, pursuaut to this call,
met at Annapolis in September, 1756, and in consequence of
6627
8

this partial representation of the States no action was taken,
except to adopt general resolutions and to recommend that a
convention convene at Philadelphia in May. 1787.

When this report was submitte:l to Congress that body re-
solved that a convention should be held at Philadelphia, but
“for the sole and express purpose of revising the Articles of
Confederation.” The result of the deliberations of that great
convention, called to revise the Articles of Confederation, and
not to form a constitution, is known of all thinking men, and
further consideration is unnecessary here. Nor does the oc-
casion invite an extended examination of the proceedings of
the convention which resulted in the adeption of the commerce
clause of the Constitution, which is the subject of this debate.
It is sufficient to declare, Mr. President, as the truth of history,
that the imperative necessity to provide a general authority
for the regulation of foreign and interstate commerce aroused
the country; that this was the dominating motive for calling
the convention; that, although the convention was composed
of men of different political schools, and although many plans
of a constitution were submitted, all of them contemplated
conferring this power upon the Federal Government; and that
the grant of the power to Congress to regulate foreign and in-
terstate commerce is exclusive and complete. Referring to
foreign and interstate commerce and expressing the undoubted
sense of the convention, Madison, who mere than any other
man was the author of the Constitution, declared he was
“more and more convinced that the regulation of commerce was
in its nature indivisible and ought to be wholly under one
authority.”

When, therefore, Mr. President, the subject of proposed legis-
lation is commerce and, moreoyer, is commerce with foreign na-
tions or among the several States, the authority to regulate it is
exclusively and completely in Congress. The converse of the
proposition is true. If the subject of proposed legislation is not
commerce, or is a mere aid, auxiliary, or incident to such com-
merce, or if it be in fact commerce. yet commerce of a domestic
or intrastate character, the authority to regulate it is exclusively
and completely in the States.

The authority of the States continues, likewise, when the
legislation does not amount to regulation, but touches foreign
and interstate commerce only incidentally and remotely, and
also when the subject of iegislition pertains to the general
police powers which are reserved to the States.

The power delegated to Congress, which we are considering,
Mr. President, is to regulate foreign and interstate commerce.
The bill under consideration, so far as need be stated now, pre-

6627
9

supposing that Congress itself may fix rates to be charged by
carriers of foreign and interstate traffic, provides that the In-
terstate Commerce Comission, when a rate is found by it, upon
complaint and hearing, to be unjust and unreasonable, shall fix
in lieu thereof a just and reasonable rate.

At the threshold of an inquiry into the autherity of Congress
to enact such a statute several matters of importance may be
assumed as being thoroughly established. Since the great case
of Gibbons v. Ogden (9 Wheaton) there has been no question
that commerce, the subject of this provision of the Consti-
tution, embraces both tratlice and commercial intercourse with
foreign nations and among the States. It is equally accepted
law that this commerce includes foreign and interstate naviga-
tion and transportation, by whatever motive power carried on,
and that the authority to regulate such commerce necessarily
comprehends authority to prescribe and establish the rules by
which it is governed, managed, and conducted. Obviously,
therefore, as foreign or interstate transportation is foreign or
interstate commerce, the question here is whether the power in
Congress to regulate such commerce includes the power to fix
rates to be charged for such transportation, and if so, whether
this power, to the extent proposed in this bill, may be delegated
to the Interstate Commerce Commission.

It should be borne in mind that the authority of Congress to
regulate commerce is limited to foreign and interstate com-
merce—to traffic, commercial intercourse, navigation, and trans-
portation between the States and foreign nations and between
the States themselves.

Prior to the adoption of the Constitution the regulation of
such commerce was under the control of the respective States.

The commercial intercourse with foreign nations and between
the States which existed at that time was not carried on as
inatter of right, but by comity or authority of the States.

Each State being sovereign, and there being no general au-
thority over the subject, each State might prohibit such com-
mercial intercourse altogether, or permit it upon terms which it
might impose. By the adoption of the Constitution the regula-
tion of such commerce was taken from the States and conferred
upon Congress, and the whole power which the States possessed
in this respect was thereby delegated to the Federal Goyern-
ment, under the limitations and restrictions of the Constitution.
Commercial intercourse with foregin nations and among the
several States continued after the adoption of the Constitution,
and whether conducted by individuals, by State corporatioius, or
by Federal corporations it is subject to the regulatisn of Con-
gress.

6627
10

What, then, is this power to regulate commerce which is
vested in Congress, and does it include the power to fix rates of
transportation? Whether authority to regulate embraces au-
thority to engage in such commerce; whether the United ‘States,
with limited, not general sovereignty, may.construct and oper-
ate railroads, it is unnecessary to determine, because each of
these inquiries may be denied, and yet, under the power to regu-
late commerce, Congress may fix the rates of transportation.

To regulate, Mr. President, is to arrange, adjust, dispose,
methodize, direct, order, rule, or govern. On principle, and as
an original question, the power to regulate cominerce includes
the power to fix rates of transportation, because transportation
is commerce; and to fix the rates is to that extent and neces-
sarily to prescribe the rule by which it is governed.

Transportation for hire, which is the only kind sought to be
regulated, from the very nature of the subject-can not be car-
ried on without establishing the amount of the wage or re-
muneration to be paid, and to fix this wage or remuneration is
but to prescribe pro tanto the rule which is absolutely neces-
sary for its conduct and its government.

Mr. President, the proposition approaches if it dces not reach
the self-evident and the axiomatic. Congress may fix and
establish this wage or rate in general terms, as that it shall be
reasonable; or a specific or maximum rate may be established,
because either is within the broad and comprehensive power to
reguiate and govern. Not only as a question of first impression,
but on the highest judicial authority, the power to regulate com-
merce includes the establishment of rates. From time im-
memorial the government of turnpikes, bridges, and ferries,
under individual or corporate ownership, has been held to carry
with it authority to fix tolls and charges, and as the rate of
passage over there is a part of the entire cost of transportation,
the principle involved in each is undeniably the same.

But, Myr. President, there is far more pertinent authority.
Chicf Justice Marshall, in Gibbons v. Ogden (9 Wheaton, 195),
declared :

It is the power to regulate; that is, to prescribe the rule by which
commerce is to he governed. This power, like all others vested in Con-
gress, is complete in itself, may be exercised to its utmost extent, and
acknowledges no limitations other than are prescribed in the Consti-
tution.

The same principle was recently declared in Buttfield v.
Stranahan (192 U. S&, 470, 492), and in Northern Securities
Company v. United States (193 U. S.. 197, 341, 367). In
Gloucester Ferry Company v. Pennsylvania (114 U. 8, 203),
the court said:

OORT
11

The power to regulate commerce is the power to prescribe the rule
by which it shall be governed—that is, the conditions upon which it
shall be conducted.

If the power to regulate is complete in itself and may be
exercised by Congress to its utmost extent, subject only to the
limitations prescribed in the Constitution—if the power to reg-
ulate includes the conditions upon which transportation may
be conducted—then unquestionably the power to regulate em-
braces the power to fix rates of transportation, because this is
not only within the unlimited power described, but to establish
rates of transportation, whether done in general terms, as that
they shall be reasonable, or in specific terms, naming maximum
or actual rates, is to prescribe the conditions upon which it may
be conducted.

The Supreme Court of the United States in the case of
Philadelphia Steamship Company v. Pennsylvania (122 U. S.,
338), used this language:

The application of this reasoning to the case in hand is obvious.
Of what use would it be to the shipowner, in carrying on interstate
and foreign commerce, to have the right of transporting persons and
goods free from State interference if he had not the equal right to
charge for such transportation without such interference? The very
object of his engaging in transportation is to receive pay for it. If
the rezulation of the transportation belongs to the power of Congress
to regulate commerce, the regulation of fares and freights reccivable
for such transportation must equally belong to that poicer.

Construing the municipal power to regulate the streets of a.
city, the same court said, in St. Louis v. Western Union Tele-
graph Co. (149 U. 8., 465, 469) :

The word “regulate”’ is one of broad import. It is the word used
in the Federal Constitution to define the power of Congress over for-
eign and interstate commerce, and he who reads the many opinions of
this court will perceive how broad and comprehensive it has been held
to be. If the city gives a right to the use of the streets or publie
grounds, as it did by ordinance, it simply regulates the use when it
prescribes the terms and conditions upon which they shall be used. If
it should see fit to construct an extensive boulevard in the city and then
limit the use to vehicles of a certain kind or exact a toll from all who
use it, would that be other than a regulation of the use?

I understood the distinguished Senator from Ohio [ Mr. For-
AKER] the other day to say that no case could be found where
the Supreme Court had decided that Congress could fix rates.
In the case of Interstate Commerce Commission v. R. R. Co.
(167 U. S., 494), the same court said:

There were three obvious and dissimilar courses open for considera-
tion. Congress might itself prescribe the ratcs; ov it might commit to
some subordinate tribunal this duty; or it might leave with the com-
panies the right to fix rates, subject io regulations and restrictions, as
well as to that rule which is as old as the existence of common carriers,
to wit, that rates must be reasonable.

Mr. FORAKER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from Ohio?

6627
12

Mr. CULBERSON. Certainly.

Mr. FORAKER. What I said in the remarks referred to by
the Senator from Texas was this: That there were some expres-
sions, particularly in the case from which the Senator is now
reading, which indicated that the Supreme Court entertained
that view, but that none of these expressions were made in a
ease where that question was before the court and where they
were passing on that question. That I repeat.

Mr. CULBERSON. Mr. President, the Senator's explanation
is in accordance with what I understood and in accordance
with what I attempted to say. In the case to which I catled
attention a moment ago, in 122 United States, in an opinion
delivered by Mr. Justice Brewer, the court, in a case where it
Was necessary to say so declared that the power to regulate
rates of: freight and passengers belonged to the power to regu-
late commerce. In the care in 167 United States, to which the
Senator has just referred, the court had for consideration the
whole question involved in the regulation of commerce, and it
distinctly declared that there were three methods open; that
Congress itself might prescribe the rates; that it might delegate
the power to a subordinate tribunal, or that it might leave the
matter to the railroad companies themselves.

But proceeding, Mr. President, with this matter of authori-
ties. In the case of Ames vr. Union Pacific Railway Company
(G4 Fed. Rep., 165, 178) Mr. Justice Brewer, on the circuit,
said:

But within the scope of the word “regulation,” as commonly used,
is embraced the idcu of firing the compensation which the owners of
railroad property shall reccive for the use thereef.

In the dissenting opinion in Northern Securities Company v.
United States (193 U. 8., 868) Mr. Justice White said:

The plenary authority of Corgress over interstate commerce, its
right to regulate it to the fullest extent, to fix the rates to be charyed
for the movement of interstate commerce, to legislate concerning the
ways and vehicies actually engaged in such traffic, and to exert any

and every other power over such commerce which flows from the
authority conferred by the Constitution is thus conceded.

Congress has so construed this provision of the Constitution
and acted upon it. By section 18 of the act approved July 1,
1862, which is the charter of the Union Pacific Railroad Com-
pany, it is provided that in the event the net earnings—

Afier deducting all expenditures, including repairs and the furnish-
ing, running, and management of said road shall exceed 10 per cent
upon its cost, exclusive of the 5 per cent to be paid to the United
States, Congress may reduce the rates of fare thereon, if unreasonable,
Gad may fix and establish the same by law.

This is the precise authority which I am secking to establish—
the authority ef Congress to fix rates by law when those fixed
S627
18

by the companies are found to be unreasonable. Like power in
Congress is asserted in the act approved March 3, 1871, which
is the charter of the Texas Pacific Railroad Company, where
it is provided in section 15 that—

The rates charged for carrying passengers and freight. per mile, saall
not exceed the prices which may be fired by Congress for carrying pas-
sengers and freight on the Union Pacific and Central Pacific railroads.

Mr. FORAKER. I called attention to these acts of Congress
in the remarks I made on the occasion referred to by the Sen-
ator, but differentiated those cases from the others we had been
discussing, and the difference is this: In that case the United
States was exercising its proprietary right to grant it a fran-
chise, and it had a right to attach any conditions it saw fit as
the conditions of the taking of the right.

Mr. CULBERSON. ‘The Senator ought also to have said that
Congress in granting this franchise to the railroad company
was doing so under its authority to regulate commerce. It was
using it as a means, among others, to regulate ecommerce, and
Congress can not assume authority to fix the rates of transpor-
tation over any railroad except it be under the authority to
regulate commerce.

Mr. FORAKER. There are some expressions in some of the
cases to the effect that Congress may have the right to build a
railroad in the exercise of its power to regulate commerce; but
I do not know of any case decided by the Supreme Court where
that question was before it in which they have held that Con-
gress was undertaking to exercise its power to regulate com-
merce when it granted charters for the construction of these
railroads. In the acts and in the decisions they are referred to
as having been authorized by the Government in the exercise
of its power to establish post-roads, provide for the national de-
fense, ete.

Mr. CULBERSON. Assuming, therefore, on principle, on
judicial authority, and on Congressional precedents, that Con-
gress itself may fix the rates of transportation of foreign and
interstate commerce, the further question is whether it may, to
the extent proposed in the bill, delegate this power to the Inter-
state Commerce Commission. It has often been decided by the
highest State courts and by the Supreme Court of the United
States—so often that citation of authorities on the subject is
unnecessary—that State legislatures may fix rates directly, or
delegate the power to do so, as to domestic commerce, to rail-
road commissions. These decisions are persuasive, but not con-
clusive of the question as presented here, because the authority
of the States over domestic commerce is derived from their gem-
eral sovereignty, while that of Cougress rests upon the specific

6627
14

grant of power to regulate commerce, and also because in some
of the States where the cases arose the legislatures were ex-
pressly authorized by the State constitution to create such com-
missions and inyest them with such powers. This is particu-
larly true of the celebrated Reagan case (154 U. §., 362), for
by an amendment to the constitution of Texas, adopted for the
purpose, the legislature, in regulating rates, was expressly au-
thorized to “provide and establish all requisite means and
agencies invested with such powers as may be deemed adequate
and advisable.”

Myr. KNOX. Before the Senator leaves the proposition that
Congress has the power to establish rates of interstate trans-
portation, I wish to ask him if he does not attach a great deal
of importance to this fact: The courts have decided over and
over again that the States may not regulate the charges upon
interstate transportation, because it would interfere with the
regulative power of Congress, and therefore must it not be
within the regulative power of Congress?

Mr. CULBERSON. Undoubtedly; and I thank the Senator
from Pennsylvania for suggesting it.

Returning to the proposition which I desire to submit to the
Senate now—that is, that Congress may, to the extent proposed
in this bill, delegate the rate-making power to the Interstate
Commerce Commission, the Federal Constitution declares that—

All legislative powers herein granted shall be vested in a Congress
of the United States.

The power in Congress to regulate forcign and interstate
commerce is necessarily a legislative power. This is not only
the innate character of the power, but the Constitution declares
it to be such by vesting it in Congress, which, besides being
clothed with all Federal legislative powers, except in instances
not pertinent here, as in making treaties, is without authority
to exercise any other power.

As Congress may establish rates of transportation, under its
authority to regulate commerce, the power to establish rates
inust be legislative, and as a distinctly Federal question it has
been so expressly decided in Interstate Commerce Commission v.
Railroad Company (i187 U. S., 499).

To deny that the power to fix rates of transportation is legis-
lative in character is to deny that Congress may exercise it, be-
cause Congress may not constitutionally exercise any other than
legislative powers.

Mr. President, I concede as a general and essential principle
of American constitutional law that Congress may not delegate
its legislative powers, and consequently Congress may not dele-
gate its legislative power to regulate commerce. While the

GGLT
15

power of Congress to fix rates of transportation is included in
and derived from and incident to its broad legislative power to
regulate commerce, it does not follow that, after making gen-
eral provision for the regulation of commerce, it may not de-
volve on 2 board or commission the power to fix rates.

Mr. RAYNER. May I interrupt the Senator from Texas
while he is upon this proposition?

Mr. CULBERSON. Certainly.

Mr. RAYNER. I should like to say to the Senator from
Texas that, while I agree with him in the main point he is
arguing, the case that has given me more trouble than any other
is that of the Northern Securities Company against The United
States. which is the latest decision we have upon the subject,
and there the court intimates that the question is not closed.
The Senator read from the dissenting epinion.

Mr. CULBERSON. Yes.

Mr. RAYNER. In the opinion of the majority of the court
there is this statement:

Will it be said that Congress can meet such emergencies by prescrib-
ing the rates by which interstate carriers shall be governed in the
transportation of freight and passengers? If Congress has the power
to fix such rates—and upon that question we express no opinion.

That looks very much like the court had never expressed an
opinion on the subject that bound them in any way.

Mr. CULBERSON. I remember the language used by Mr.
Justice Harlan in that case, and I have not been unmindful of
it in what I have said. But under the previous decisions of
the court, where the question was discussed thoroughly, it seems
to me there is no resisting the conclusion that the court as
a court has determined the question.

Early in our history Chief Justice Marshall, in Wayman v.
Southard (10 Wheat., 46), said:

The difference between the departments undoubtedly is that the legis-
lature makes, the executive executes, and the judiciary construes the
law, but the maker of the law may commit something to the discre-
tion of the other departments, and the precise boundary of this power
is a subject of delicate and difficult inquiry, into which a court will not
enter unnecessarily.

By declaring that rates of transportation shall be just and
reasonable Congress would prescribe the comprehensive rule by
which it would be regulated, and while it possesses the naked
power to fix the rates directly, it may rightfully vest in a board
or commission authority to fix such rates.

That would merely give effect to the general purpose of the
act-to establish just and reasonable rates and would be a means
used by Congress to exercise its power to regulate commerce.
It would not add to or subtract from the law as such; it

6627
‘16

would not alter or amend it; it would not be new or additional
legislation preper; it would only effectuate and enforce the
general standard of rates fixed by the law. Under the circum-
stances it would be legislation only in a qualified sense, fer the
controlling legislation on the subject would be the law deciaring
that the rates should be just and reasonable.

The act of Congress approved March 2, 1897, to prevent the
importation of impure and unwholesome tea is a type of such a
law. It prohibited the importation of tea inferior in purity,
quality, and fitness for consumption to the standards prepared
by a board and approved by the Secretary of the Treasury.
The act was attacked on the ground that it delegated legisia-
tive power to the Secretary of the Treasury to fix the standard
of purity of tea, but its validity was sustained by the Supreme
Court of the ae States in the recent case of Buttfield v.
Stranaham (192 U. 8., 470, 496), where it is said:

Congress legislated on the subject as far as was reasonably practi-
cable, and from the necessity of the case was compelled to leave to
executive officials the duty of bringing about the result pointed out by
the statute. To deny the power of Congress to delegate such a duty
would, in effect, umount to but declaring that the plenary power vested
in Congress to regulate foreign commerce could not be efficaciously
exerted.

The sound rule of interpretation announced in this case is
applicable to the question under consideration. The proposed
act provides the general rule that rates shall be just and reason-
able. Congress has the power to go further and fix the rates
which should conform to this rule, but it would be inconvenient,
if not impracticable to do so. It may therefore leave it to the
railroad companies to fix the rates, as it has heretofore done,
sometimes by implication and sometimes expressly, or it may
authorize the Interstate Commerce Commission to fix the rates.
The former method has never been questioned, and on principle
the latier is equally beyond controversy, because the power is
the same, and if it may be delegated in one case it may he also
delegated in the other. Neither would involve an unlawful
delegation of legislative power. By providing that rates shall be
just and reasonable Congress will legislate as far as is reason-
ably practicable, and by giving authority to the Commission,
which is constantly in session, composed of impartial and
learned members, and provided with appropriate machinery for
exhaustive inquiry and prompt action, is but to devolve upon the
Commission the “duty of bringing about the result pointed cut
by the statute,” which is to fix just and reasonable rates.

The legislation proposed here is freer from constituticnal
objections than the act regulating the importation of tea. ‘There

the power to fix the general standard of tea, as well as its en-
6627
17

forcement, was devolved upon the Secretary of the Treasury,
while here Congress will fix the general standard of rates, leav-
ing only to the Commission authority to effectuate the general
purpose.

Mr. President, while the grant of legislative powers to Con-
gress carries with it authority to pass all necessary laws, yet
the Constitution expressly and significantly, as I think, gives
discretion to Congress as to laws it may pass to execute its
powers. After granting all Federal legislative powers to Con-
gress, the Constitution enumerates those powers, and then de-
clares that Congress shall have the additional power—

To make all laws which shall be necessary and proper for carrying
into execution the forcgoing powers, and all other powers vested by this
Constituticn in the Government of the United States or in any Depart-
ment or officer thereof.

This is not authority to make provision for the enforcement
of laws which have been passed, but more than that. It is au-
thority to make laws for ‘“ carrying into execution the foregoing
powers,” one of which is to regulate foreign and interstate com-
merce, and the proposed law is necessary and proper to execute
that power. This provision of the Federal Constitution, al-
though of a more general character, is akin to that clause of the
constitution of Texas which authorizes the legislature, in exe-
cuting its power to regulate rates, to ‘provide and establish
all requisite means and agencies, invested with such powers as
may be deemed adequate and advisable,” and under which the
railroad commission of that State was organized and invested
with this legislative power.

Nor can it be justly said, Mr. President, as has been contended
by a distinguished former Secretary of State, that the standard
of “reasonable” is too broad and general, wanting in that spe-
cific character which should mark a rule of civil conduct which
can be executed by a board or a commission. ‘he standard of
reasonable in its application to common carriers was fixed by
the common law, and its meaning is as clear as that of any other
general principle of that great system of our ancestors. While
the common law is not of itself in force in the United States,
yet this standard of the common law by which the charge of
earriers is measured has been frequently adopted in the stat-
utes of the United States and its signification and limitations
have been so repeatedly declared judicially that it may be re-
garded as a part of American law. As a consequence, because
its meaning and boundaries have been crystallized in our juris-
prudence, the attempt to fix a different standard, as is done in
some of the bills on this subject—as that the rate shall be law-
ful, fairly remunerative, and the like—not only tends to conru-

6627——2
18

sion, but to the destruction of a standard which has been thor-
oughly defined and which has marked the industrial progress of
the country.

If, Mr. President, the power to establish rates of transporta-
tion of foreign and interstate commerce is comprised in the gen-
eral power to regulate commerce; if this power to fix rates may
be exercised directly by Congress, or, to the limited extent pro-
posed, may be devolved upon the Interstate Commerce Commis-
sion, when and upon what grounds may the courts of the United
States interfere in the interest of the carrier to prevent the en-
forcement of rates so established? This question as it relates
to State regulation of rates has been frequently decided by the
Supreme Court of the United States, and while the decisions
are not decisive of the question as it arises here, the reasoning
is applicable and instructive.

The grounds upon which the Federal courts will arrest the
operation of rates fixed by legislatures or State commissions
have been thus stated in the leading cases:

It is not to be inferred that this power of limitation or regulation is
itself without limit. This power to regulate is not a power to destroy
and limitation is not the equivalent of confiscation. Under pretense
of regulating fares and freights the State can not require a railroad
corporation to carry persons or property without reward; neither can
it do that which in law amounts to a taking of private property for
public use without just compensation or without due process of law.
(Railroad Commission cases, 116 U. 8., 307, 311.)

Quoting the language above from the Railroad Commission
eases, and holding that the rates fixed by the legislature were
not unreasonable, the Supreme Court said:

Still less does it appear that there has been any such confiscation as
amourtts to a taking of property without due process of law. (Dow v.
Beidelman, 125 U. S.. 680.)

If the company is deprived of the power of charging reasonable rates
for the use of its property and such deprivation takes place in the ab-
sence of an investigation by judicial machinery, it is deprived of the
lawful use of its property, and thus, in substance and effect, of the
property itself, without due process of law and in violation of the Con-
stitution of the United States; and in so far as it is thus deprived,
while other persons are permitted to receive reasonable profits upon
their invested capital, the company is deprived of the equal protection
of the laws. (Railroad Co. v. Minnesota, 134 U. 8., 418, 458.)

The legislature has power to fix rates and the extent of judicial inter-
ference is protection against unreasonable rates. (Railroad Commission
cases, 116 U. 8., 807; Railroad Co. v. Minnesota, 134 U. S., 418.)

* * * * * * *

Surely before the courts are called upon to adjudge an act of the
legislature fixing the maximum passenger rates for railroad companies
to be unconstitutional, on the ground that its enforeement would pre-
vent the stockholders from receiving any dividends on their invest-
ments, or the bondholders any interest on their loans, they should be
fully advised as to what is done with the receipts and earnings of the
company. (Railroad Co. v. Wellman, 143 U. S., 339, 344, 345.)

We are of opinion that the act of the legislature of New York is not
contrary to the fourteenth amendment to the Constitution of the United
States, and does not deprive the citizen of his property without due

6627
19

process of law; that the act, in fixing tbe maximum charges which it
specifies, is not unconstitutional, nor is it so in limiting the charge for
shoveling to the actual cost thereof.

ae * 4 a8 k Df *

In the cases before us the records do not show that the charges
fixed by the statute are unreasonable or that property has been taken
without due process of law or that there bas been any denial of the
equal protection of the laws, even if under any circumstances we could
determine that the maximum rate fixed by the legislature was unrea-
sonable. (Budd v. New York, 143 U. 8., 517, 544, 548.)

In the Reagan case the biil of complaint charged that the rates were
unreasonable and confiscatory, and that their enforcement would
amount to a deprivation of property withcut due process of law, and
without adequate compensation, in violation of the State and Iederal
constitutions. ‘ Still there can be no doubt of their power and duty
(the courts) to inquire whether a body of rates prescribed by a legisla-
ture or a commission is unjust and unreasonable and such as to work
a practical destruction to rights of property, and if found so to be, to
restrain its operation.”

* * * * * ad *

These cases all support the proposition that while it is not the prov-
ince of the courts to enter upon the merely administrative duty of
framing a tariff of rates for carriage, it is within the scope of judi-
cial power and a part of judicial duty to restrain anything which,
in the form of a regulation of rates, operates to deny to the owners
of property invested in the business of transportation that equal pro-
tection which is the constitutional right of all owners of other prop-
erty. * * * The equal ‘protection of the laws which, by the four-
teenth amendment, no State can deny to the individual, forbids legisla-
tion, in whatever form it may be enacted, by which the property of one
individual is, without compensation, wrested from him for the benefit
of another or of the public. (Reagan v. Loan and Trust Co., 154 U. S.,
362, 397, 399.)

There is a remedy in the courts for relief against legislation estab-
lishing a tariff of rates which is so unreasonable as to practically
destroy the value of property of companies engaged in the carrying
business, and that especially may the courts of the United States
treat such a question as a judicial one, and hold such acts of legisla-
tion to be in conflict with the Constitution of the United States, as
depriving the companies of their property without due process of law,
and as depriving them of the equal protection of the laws. (Railroad
Co. v. Gill, 156 U. 8., G49, 657.)

These principles must be regarded as settled:

1. A railroad corporation is a person within the meaning of the
fourteenth amendment declaring that no State shall deprive any per-
son of property without due process of law nor deny to any person
within its jurisdiction the equal protection of the laws.

2. A State enactment, or regulations made under the authcrity of a
State enactment, establishing rates for the transportation of persons
or property by railroad that will not admit of the carrier carning
such compensation as under all the circumstances is just to it and
to the public would deprive such carrier of its property without due
process of law and deny to it the equal protection of the laws, and
would therefore be repugnant to the fourteenth amendment of the
Constitution of the United States.

3. While rates for the transportation of persons and property within
the limits of a State are primarily for its determination, the ques-
tion whether they are so unreasonably low as to deprive the carrier of
its property without such compensation as the Constitution secures,
and therefore without due precess of law, can not be so conclusively
determined by the legislature of the State or by regulations adopted
under its authority that the matter may not become the subject of
judicial inquiry. (Smyth v. Ames, 169 U. 8., 466, 526.)

If the rates are fixed at an insufficient amount within the meaning
of that term (just compensation) as given by the courts, the law

6627
20

would be invalid as amounting to the taking of the property of the
company without due process of law. (Railread Co. v. Smith, 173
U. 8., 687.) ne

When we recall that, as estimated, over ten thousand millions of
dollars are invested in railroad property, the proposition that such a
vast amount of property is beyond the protecting clauses of the Con-
stitution; that the owners may be deprived of it by the arbitrary
enactment of any legislature, State, or nation, without any right of
appeal to the courts, is one which can not for a moment be tolerated.
(Railroad Co. v. Tompkins, 176 U. 8., 172.)

It is sufficient, however, for the purpose of this case to say that the
action of the Commission in fixing the rate complained of as to this
particular class of freight has not been shown to be so unjust or un-
reasonable as to amount to a taking of property without due process of
law. (Railroad Co. v. Minnesota, 186 U. S., 268, 269.)

Referring with commendation to the principles announced in the
Reagan case, Mr. Justice Brewer, on the circuit, in Ames v. Railroad
Company (64 Fed. Rep., 173), said:

“But the grave question still remains, are the rates prescribed in
this act, as the maximum over which the railroad companies may not
go, unreasonable, and so unreasonable as to justify the courts in stay-
ing their operation?”

Mr. CLAY. Mr. President——

The VICE-PRESIDENT. Does the Senator from Texas
yield to the Senator from Georgia?

Mr. CULBERSON. Certainly.

Mr. CLAY. The only question that worries me about the
ease of Smyth v. Ames (169 U. S.) is this: I concede that
Congress can not empower the Interstate Commerce Commission
to make a rate that is not compensatory for the services per-
formed. I should like to ask the Senator this question: If we
empower the Interstate Commerce Commission to make a rate,
and declare that that rate must be reasonable and just and
compensatory, and the carrier should come to the conclusion
that the Commission had exceeded the authority of Congress,
and had put in operation a rate that was not reasonable and
just, can we deprive the carrier of the right of going into a
court of equity and enjoining the enforcement of that rate
until there is a final hearing? In other words, can we provide
that the rates fixed by the Commission shall be effective until
there is a final hearing under the Constitution?

Mr. CULBERSON. Mr. President, in the course of what I
have intended to say I will reach that suggestion of the Senator
from Georgia presently, and I hope I will answer him satis-
factorily. ‘

Mr. President, from these extracts from the opinions in the
leading Federal authorities it is plain that in cases arising
under State regulation of rates the grounds of judicial inter-
ference have been wholly constitutional. The language of the
gpinions varies, it is true, but the decisions unquestionably rest
upon the proposition that when rates are so unreasonable ag to

justify judicial interposition it is because, in violation of the
6627
21

fourteenth amendment to the Federal Constitution, they amount
to a deprivation of property without due process of law or to a
denial of the equal protection of the laws.

There runs through these decisions also the principle that
the courts will not interfere with the large discretion in Jegig-
latures and commissions in fixing rates, will not interpose their
judgment in matters of policy and business affecting rates. and
that to justify judicial interference the rates must not only be
unreasonable, but so unreasonable as to amount to confiscation.

This is because rate making is a legislative and not a judicial
function.

Mr. FULTON. Mr. President:

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from Oregon?

Mr. CULBERSON. Certainly.

Mr. FULTON. I should like to ask the Senator right there
if he does not understand that the Supreme Court has prac-
tically established the proposition that a rate which does not
furnish a revenue that will bear expenses of operation and also
supply a fair remuneration or return on the investment is con-
fiscatory?

Mr. CULBERSON. I do not so understand the decisions.

Mr. FULTON. What does the Senator understand that the
Supreme Court would consider a rate that would be confiscatory ?

Mr. CULBERSON. The latest expression upon that question,
as the Senator is aware, is in the case of Smyth v. Ames, in 169
U.S. ,

Mr. FULTON. The Nebraska case?

Mr. CULBERSON. The Nebraska case, in which the court
for several pages makes general observations with reference to
the elements of a reasonable rate. Taking it all together it
amounts to saying that each case must stand on its own foot-
ing, and it said, besides, that there are some cases in which
rates would be intolerable if they permitted a return on the
actual cost or the actual investment in the railroad property.

But, Mr. President, the proposition that I was discussing——

Mr. FULTON. Will the Senator allow me right there?

Mr. CULBERSON. Certainly.

Mr. FULTON. I bappen to have here a quotation from the
Nebraska case. It says:

 

What the company is entitled to ask is a fair return upon the value
of that which it employs for the public convenience.

Mr. CULBERSON. Certainly, that is the general basis; but
the Senator will observe that there are qualifications of that in
the opinion.

6627
22

Mr. FULTON. If the Senator will allow me, if the company
is entitled to a fair return on that which it employs for the
public convenience, then anything which would deprive it of
that fair return would, in the judgment of the court, be con-
fiscatory, or, at least, it would be that entrenchment upon the
rights of the company which would justify the court in inter-
fering, would it not?

Mr. CULBERSON. In that very case Mr. Justice Harlan
said, in delivering the opinion, if the rate is such as not to per-
mit a fair return, or such compensation as the Constitution se-
cures to the company, it would be confiscatory, and its enforce-
ment might be arrested by the Federal court.

I was observing, Mr. President, when interrupted, that the
force of these decisions rests upon the proposition that rate-
making is a legislative not a judicial function; that rates are
based upon considerations so multitudinous, conflicting, and
yarying as to afford no definite legal rules for their ascertain-
ment which the courts may apply, and that it is contrary to the
genius of our Government that the judiciary shall control legis-
lative functions so long as they are exercised within constitu-
tional limitations. If a statute, State or Federal, authorized
the courts to review generally or at any stage where discretion
may be exercised the fixing of rates by the legislative branch
of the Government or by a commission, it would be an unwar-
ranted attempt to confer legislative power on the courts.

When rates are fixed by the legislature or a commission act-
ing under a statute to fix just and reasonable rates, the legisla-
tive act of regulation of commerce by the establishment of rates
is complete, and the only inquiry which the courts may then
institute is whether these rates have been established without
passing the bounds of constitutional authority.

Primarily and generally it may be said that when a power,
whether exercised by the legislature or a commission, is legis-
lative in character, the courts, from the very nature of the
judicial attribute and our constitutional system, may not or-
dinarily interfere with its exercise. It is only when the action
of the legislature or the commission is arbitrary, despotic, and
violative of the organic law, passing the limits of legislative
authority, that the courts may interfere to restrain or limit
their action.

Mr. President, both the constitutional questions and the ques-
tions of business and policy, which enter into rate making, were
clearly presented by Mr. Victor Morawetz, general counsel of
the Atchison, Topeka and Santa Fe Railroad Company in his
statement before the Senate Committee on Interstate Commerce
in April, 1905. It hag all the force of a declaration against in-

6627
23

terest and is entitled to your serious consideration. Let me
read it:

2. My second point, which is well settled, is that Congress has no
constitutional power to reduce the charges of a carrier so far as to
deprive the carrier of a reasonable return upon his property. Uncdsr
the fifth amendment to the Constitution any act of Congress or any
order of a commission established by Congress limiting or fixing the
rates of a railway company would be unconstitutional if the enforce-
ment of that act of Congress or order of a commission would in effect
deprive the carrier of a reasonable return upon the property used for
the purpose of furnishing the service to the public.

3. The third point which I wish to make is this: There is a wide
range between a rate that is unreasonably high, and therefore illegal
as against the shipper, and a rate that is so low as to be confiscatory
as against the carrier. For example: Assuming that a railway com-
pany may charge 40 cents a hundred pounds for carrying a given
article between two points without making the rate unreasonably high,
and therefore illegal, it is quite possible that this rate might be re-
duced by legislative action 1o, say, 30 cents a bundred pounds without
violating any constitutional right of the carrier. In this case the
maximum rate which would be reasonable and which could be imposed
by the carrier upon the shipper would be 40 cents a hundred pounds,
and the minimum rate which could be imposed by the legislature on
the railway company would be 30 cents a hundred pounds. The adjust-
ment of the rate between these two extremes would depend upon con-
siderations of business policy and would not be governed by the appli-
cation of any legal principles or definite rules. The charges of carriers,
like the charges in any other business, are fixed largely by considera
tions of business policy, such as the desirability of encouraging certain
industries or of developing incidentally other sources of traffic. Many
other elements must be considered besides the cost of doing the busi-
ness, such as competition by land and water, the volume of the business,
the character of the business, the length of the haul, the rates which
ean be paid in competition with producers of similar articles at other
places, the existence of return loads, ctc. It is rarely, if ever, true
that there is but one just and reasonable rate for the transportation of
a given article between two points. In nearly every instance there is
a wide range within which any rate would be just and reasonable, and
it is wholly a question of business policy at what point the rate shall
be fixed within that range.

Mr. President, the prohibitions of the fourteenth amendment
to the Federal Constitution which were applied in the State
eases, to which I have called attention, have no direct applica-
tion to the question as presented here. The limitations upon
the power of Congress or a commission created by it are those
of the fifth amendment to the Federal Constitution, to the effect
that no person shall be deprived of life, liberty, or property with-
out due process of law, nor shall private property be taken for
public use without just compensation.

The first of these provisions, that relating to the deprivation
of life, liberty, or property without due process of law, is pre-
cisely the same as that on the same subject in the fourteenth
amendment, the one prohibitive of Federal action and the other
prohibitive of State acticn, and consequently the logic of the
eases to which I have referred applies to the Federal question
here.

6627
24

Undoubtedly under these decisions similar rates fixed by
Congress or a Federal commission would be held violative of this
provision of the fifth amendment, and undoubtedly also, under
these State cases, it would be held that the courts would not
concern themselves with the questions of business and policy
involved in rate making, and that in order to justify interference
the rates must not only be unreasonable, but so unreascnable
as to be equivalent to confiscation.

Mr. HEYBURN. Mr. President——

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from Idaho?

Mr. CULBERSON. Certainly.

Mr. HEYBURN. I am very much interested in the discus-
sion of this legal question which the Senator is so ably pre-
senting. I should like to know whether, in his judgment, the
fifth amendment would apply to what might be termed the
reasonable profits which a person would be entitled to make
upon his business, or whether it would have any application
except where the question of confiscation attached, which would
be at the line between the actual cost and where the profits
began? That is a question which seems to me to be very impor-
tant to consider, because it goes to the question of the jurisdic-
tion of the court to review. It is based upon that principle
when reduced down. I should be very glad, indeed, if it would
not interrupt the line of the Senator’s argument, if he would
give us the benefit of his suggestion as to where the fifth amend-
ment attaches—to be explicit, whether it attaches until the
principle of confiscation commences or whether it involves the
question of a reasonable profit.

Mr. CULBERSON. Mr. President, I was attempting to pre-
sent that particular question, and I had said that in my judg-
ment, under the decisions in the State cases to which I have
invited attention, the same principles would apply; and that
with similar rates fixed by Congress or the Interstate Commerce
Commission they would be declared in violation of that provi-
sion of the fifth amendment against the deprivation of property
without due process of law, as those cases have elucidated that
question.

Mr. NELSON. Mr. President——

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from Minnesota?

Mr. CULBERSON. I yield to the Senator.

Mr. NELSON. Is not the eriterion of these cases found in
Sse last paragraph of the amendment—‘ Nor shall private
property be taken for public use without just compensation?”

6627
25

Is not that always the criterion as to whether it is just com-
pensation, and is not that the counterpart and equivalent of
the phrase ‘ta reasonable rate?”

Mr. CULBERSON. Mr. President, I was about to reach that
clause of the fifth amendment when interrupted by the Senator
from Minnesota. I was about to say that when rates are con-
fiscatory and wanting in just compensation, within the mean-
ing of these decisions, it would probably be held to be a taking
of private property for public use without just compensation,
in violation of this clause of the fifth amendment, although in
strictness the regulation of the use of property would not be a
taking, and although such a construction might extend this pro-
vision beyond the conception of its framers.

Mr. CLAY. Mr. President

The VICE-PRESIDENT. Does the Senator from Texas yiel#
to the Senator from Georgia?

Mr. CULBERSON. Certainly.

Mr. CLAY. Then do I understand the Senator from Texas to
concede that Congress can not pass a law which will temporarily
deprive the carriers of the right to go into the courts and test
the question as to whether or not the rate is confiscatory ?

Mr. CULBERSON. I am coming to that, if the Senator will
allow me. Mr. President, as the grounds of judicial interposi-
tion are constitutional, there is, in my judgment, no necessity
for embodying the right of judicial review in this bill, although
I have done so. This right of judicial review exists by virtue
of the Constitution, and a statute may not add to or subtract
from it. Still, if it is incorporated in the bill, confining it to
the constitutional provision upon which it properly rests, and
not extending it to matters of business and policy respecting
rates with which the courts will not concern themselves, because
it is no part of the judicial function, it will but recognize the
constitutional right which already exists, and though entirely
useless will not be objectionable.

Mr. FORAKER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from Ohio?

Mr. CULBERSON. Certainly.

Mr. FORAKER. When the Congress, as is proposed in the
bill under consideration, provides that the rate shall be just and
reasonable and fairly remunerative, is not that a legislative
requirement that it would be proper to have the courts protect
in the execution of this law, if we saw fit to give that authority?

Mr. CULBERSON. Mr. President, that is the very matter
which I am endeavoring to guard against, the proposition to

6627

 
26

change the standard by which rates are measured, the proposi-
tion to introduce a new standard. Do not misunderstand me.
Without reflecting upon anyone and without intention to reflect
upon anyone, the proposition to introduce a new standard by
which rates will be measured and determined is to legislate in
favor of the railroad companies and give them an opportunity
to have a different and more favorable standard established
than that which is now in existence.

Mr. FORAKER. I only want to exactly understand the
Senator in that connection. If I do understand him, he is op-
posed to the employment of the language “ fairly remunerative.”

Mr. CULBERSON. I have said so.

Mr. FORAKER. 1 wanted to understand perfectly the ground
on which it establishes a new standard not. heretofore known
to the law. It is the Senator's idea that ‘ justly compensatory,”
if that is a eccrrect expression, would conform to the standard
that has heretofore been employed?

Mr. CULBERSON. My bill uses the words “ just and reason-
able,’ which have been repeatedly construed by the Supreme
Court of the United States, and I think that standard should
be adhered to.

Mr. FORAKER. I simply wanted to understand the Senator,
and I would have understocd him, no doubt, if I had been fol-
lowing him a little bit more closely, but my attention was dis-
tracted for a moment. I know that the Senator in his bill em-
ploys the language “ just and reasonable,” but I have seen it
stated in the newspapers that it will be contended that the
words “ fairly remunerative ” should be stricken out of this bill
and the words “justly compensatory " inserted in lieu thereof.
I only wanted to understand exactly where the Senator stood
with respect to that; and I wanted to follow it with a question
as to whether he does not think that that would be establishing
a new standard also?

Mr. CULBERSON. Mr. President, I have already said that,
in my judgment, the attempt to fix a new standard, as that the
rate shall be fairly remunerative, would tend to confusion and
to the destruction of the standard which has been fixed, the
meaning of which is thoroughly established by the decisions
and understood by the public.

Now, I will stop a moment and go out of my line to say a
word on the pending bill, although I did not intend to discuss
the particular features of the bill to-day, which is in the keep-
ing and under the guidance of the distinguished Senator from
South Carolina [Mr. Tirrtman]. That bill in respect to the
question just presented by the Senator from Ohio amounts to

6627
27

this: The railroad company is required by the bill to fix just
and reasonable rates; when the Commission is authorized to
hear complaints the-Commission is required to fix what, in its
judgment, is a just and reasonable and a fairly remunerative
rate, which is a far more liberal standard, as I think, or at
least a different standard, from that which the railroad com-
pany is authorized and required to establish and the meaning
of which has been crystallized in the law.

Mr. SPOONER. Will the Senator allow me to ask just one
question? 7

Mr. CULBERSON. Certainly.

Mr. SPOONER. Does the Senator see any distinction or
contend for one between the just compensation of tie fifth
amendment as applied to this subject-matter and the reasonable
compensation of the common law?

Mr. CULBERSON. Mr. President, I have already stated
that when this question reaches the Supreme Court it will
probably apply—as, in fact, it has applied the same language in
State constitutions—‘ just compensation” to the words ‘ just
and reasonable,” which come down to us from the common law,
and that the courts would probably hold a rate which would
not give the return that the decisions say they ought to give
would be lacking in just compensation within the meaning of
the fifth amendment, and therefore would be unconstitutional.

Mr. SPOONER. Then the Senator is not contending for dif-
ferent degrees of confiscation, of course?

Mr. CULBERSON. Surely not. I am surprised that the
Senator should ask the question. *

Mr. SPOONER. I did ask it.

Mr. CULBERSON. Yes; that is evident.

But, Mr. President, when interrupted I was speaking with
reference to what ought to go into this bill with respect to the
right of judicial review. I have said that, in my opinion, it is
unnecessary to incorporate such a provision, but that it would
be harmless if incorporated. I desire to say now that if the bill
undertakes affirmatively to limit or deny the constitutional right
of review, that provision of the bill would be void, although the
other part of the act might stand and be effective.

Mr. President, by the Constitution the judicial power of the
United States is vested in one Supreme Court and in such in-
ferior courts as Congress may establish; and the judicial power
of the United States extends, among others, to all cases in law
and equity arising under the Constitution. It is within the
power of Congress to abolish all courts inferior to the Supreme
Court, or to take from them jurisdiction of cases arising under
the Constitution. But so long as they have jurisdiction of such

* 6627
28

cases, as now, the exercise of the judicial power to determine,
in a proper ease, whether rates have been established in viola-
tion of the Constitution can not, I think, be limited, abridged,
or denied by statute. If the courts are authorized. as is con-
eeded, to enjoin the operation of confiscatory rates by final de-
cree to deny them authority to do so previous to this, although
jurisdiction has attached, would in effect limit the exercise of
the judicial power which springs from the Constitution. Juris-
diction is conferred in this instance by statute; but the judicial
powet arises primarily from the Constitution. Under the Con-
stitution, Mr. President, persons may no more be deprived tem-
porarily of their property without due process of law, or for
public use without just compensation, than they may be deprived
of it permanently. A remedy, as proposed in this bill, against
the improvident use of restraining orders is to authorize imme-
diate appeals from such orders directly to the Supreme Court of
the United States, where it is not to be doubted these questions
will receive that consideration which their importance and gray-
ity demand, and will be determined in accordance with those
great principles of justice which lie at the foundation of judicial
power.

Mr. FORAKER. If I do not interrupt the Senator——

The VICE-PRESIDENT. Does the Senator from Texas yield
to the Senator from Ohio?

Mr. CULBERSON. Certainly.

Mr. FORAKER. The Senator is making a very able and a
very interesting argument, and I only want to get the Senator’s
views. I do not interrupt him for any other purpose. JI under-
stand the Senator to have stated that he recognizes that there is
a difference between confiscatory rates and what are just and
reasonable rates; and I understand him to be contending now
that the court, without any statutory enactment, has the power
to intervene at the suit of an aggrieved party to protect from
confiscatory rates; but do I understand the Senator to contend
that that power extends to an inquiry as to whether or not a
given rate is a just and reasonable rate, or does it stop with the
question whether or not it is confiscatory?

Mr. CULBERSON. Mr. President, the Senator misunder-
stands me in a degree. The Supreme Court has said, in the
different opinions, as I undertsand them, that the courts have
no authority to interfere with the rates so far as the standard
of just and reasonable is concerned, except when they are so
unreasonable as to justify the charge or claim that they are
equivalent to confiscation.

Mr. FORAKER. Then the reverse of that proposition, as I

understand the Senator, is that they have no power at all as
6627
29

to just and reasonable rates, but their sole inquiry is whether
or not the rates are confiscatory?

Mr. CULBERSON. That is my opinion of the law.

Mr. FORAKER. Does the Senator not concede that Congress,
requiring just and reasonable rates, as contradistinguished from
all other kinds of rates to be fixed, may at the same time
authorize the court to inquire as to whether or not the rates in
a given case are just and reasonable and in accordance with
the requirements of the statute?

Mr. CULBERSON. I do not think so at all, Mr. President,
because there is a latitude in the fixing of just and reasonable
rates, between rates which, popularly speaking, for instance,
would be extortionate as to the shipper and those which would
be confiseatery as to the carrier. Within those limitations, in
my judgment, Congress has no power to authorize the courts to
go, because it involves the execution of a legislative power
rather than a judicial power.

Mr. President, not only may Congress fix the rates of trans-
portation, or, to the extent involved in this bill, delegate that
power to the Interstate Commerce Commission, but, in my judg-
men, it is expedient and wise to do so. It has been said that
the abuses in the management and operation of railroads, whieh
are admitted to have existed, have passed away, and that con-
sequently there is no necessity for the passage of such a law as
this.

There is abundant evidenee, some of it adduced before the
Senate Committee on Interstate Commerce during the past year,
that this assumption is wholly unfounded. Rebates continue
to be paid in some degree; and, although the bill under consid-
eration, in direct legislation, only adds to the punishment for
such offenses, yet this feature, as well as the entire act, will
exert a wholesome and restraining influence. Discrimination
against commodities and places is perhaps as rife as at any
other period during our history.

Much has been said in the consideration of this subject here
and elsewhere respecting the general downward trend of rail-
road rates. For the greater portion of the last thirty years
that great economic fact has been evident; but for the last few
years, according to the Interstate Commerce Commission, rates
have been on an aseending scale.

The grain rate has advanced. In five years the rate on
yellow-pine lumber has advanced 20 per cent. During recent
years the rate on live steck from Fexas to Wyoming and Mon-
tana has advanced from $55 to $100 per carload. The south-
western systems of railroads, at one bound and by concerted
action, advanced the rates on all classes of goods and commodi-

6627
80

ties from 7 to 20 per cent. By reclassification of freights
throughout the United States, made between 1900 and 1203,
under which commodities were transferred to classes bearing
higher rates, the average increase was 21 per cent; and the
income for 1903, due largely to this advance in rates, exceeded
the income for 1899 by $155,C00,000. The railroads of the
United States for the year ending June 80, 1903, earned a net
income of 5.1 per cent on a total stock and bond valuation of
$63,000 a mile, which was at least $23,000 a mile in excess of the
fair value of the property, and therefore for purposes of reve-
nue from rates was excessive and fictitious. But aside from
these specifications, aside from rebates and discriminations,
aside from increased and burdensome rates, aside from the
tribute levied upon the commerce of the country to support
speculative and fictitious issues of stock and bonds, this power
should be conferred upon the Commission as a guard against
possible injustice to the public.

Railroads are public highways, and the companies exercise
functions of sovereignty. They possess the power of eminent
domain and the authority to take tolls. Their franchises, which
were granted subject to the rights of the people, enter into the
value of railway property, which is clothed with a public inter-
est and charged with a public trust.

It is true, Mr. President, that the railroad companies and the
stock and bond holders made their investments upon the implied
understanding that they would be permitted to charge reason-
able rates, but whether rates are reasonable does not depend
wholly upon the revenue they will yield. The right of the
public to insist upon reasonable rates, upon rates which are rea-
sonable both to the public and to the companies, is superior
and paramount to the naked right of the companies to revenue
and income. The companies, as a rule, and for obvious rea-
sons, will establish rates chiefly upon considerations of revenue
and income, while an impartial and disinterested commission
will consider the interests both of the public and the companies.

Under different conditions, when wealth was dispersed and
competition in force, the Government wisely abstained from
exercising its authority to establish rates. But conditions have
changed. Competition has been destroyed by combinations
and mergers and traffic arrangements. The railway wealth of
the land challenges belief, and its rapid accumulation in the
hands of a few, with the stupendous commercial and political
and selfish power it exerts, is a dangerous tendency, which,
while it may not, be averted, should be minimized, directed, and
eontrolled.

6627
31

Between the public and corporate avarice there stands to-day
nothing save the law against extortion, which, in the hands of
the private citizen against great aggregations of capital, is a
futile and worthless remedy.

Already, Mr. President, the general establishment of rates
throughout the United States is dictated by a body of capital-
ists who control the great systems, not much greater in number
than the Interstate Commerce Commission, and the philosophy
of this bill is to protect the public in some degree against the
selfishness 6f this combination by conferring limited and emer-
gency powers upon an organized, legal, and impartial tribunal
which will represent fairly every interest entitled to considera-
tion, and which will be actuated and guided by principles of
justice, and not the merciless and despotic standard of what the
traffic will bear. And the public will ultimately come into its
own. Special interests may disregard popular rights for a time,
may despise and deny and trample upon them for a season, still
they will triumph; and, if need be, these interests will be made
to feel that the people have not yet lost the spirit of resistance.

6627

O
REGULATION OF RAILROAD RATES.

1. The complete power of Congress to fix rates in Interstate Com-
merce,

2. The right to delegate power to Commissioners to fix the figures
that fulfill the standard of justice.

3. Review of rates by courts should be confined to the question, Are
they just?

4, When due process of law requires juridical process.
5. Methods of review recommended.

 

 

 

SPEECH

OF

HON. JOHN W. DANIEL,

OF VIRGINIA,

IN THE

SENATE OF THE UNITED STATES,

MAY 1 AND 2, 1906.

aha
“y

WASHINGTON.

1906.
6778
SPEECH

HON. JOHN W. DANIEL.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled ‘An act to regulate commerce,” approved Feb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. DANIEL said:

Mr. Presipent: The Senate confronts the greatest economic
problem of this age, and, I may add, of any age. As the rail-
road system of the United States is the mightiest framework of
commercial organization that the world has ever known, so it
presents problems more diverse, more interesting, and more
practical than ever have before challenged the mind of man.
More complex and not less important than the tariff, these prob-
lems exact patience and conjure the highest faculties of re-
search and understanding. However simple they may seem to
the casual onlooker or auditor, to those who have studied them
they grow in reach and width and depth and complication with
every progressive step of inquiry, and the honest mind that
seeks to compass them must be profoundly impressed, if not
overweighed, by the limitations of knowledge and by the per-
plexities of irregular conditions and countervailing influences—
geographical, financial, social, political, juridical, and economic.

A NEW PROBLIM.

This problem is unlike either the currency or the tariff, in the
fact that it is a new problem. The currency and the tariff are
old customers. Like the poor, they have been with us, and they
will be with us always. This is a new face at the Congres--
sional door, a young stranger, I may say, knocking for admis-
sion, and surely coming in, whether one political party or
another says “not in” to the knocker. It is a child of the
nineteenth century, and it is one of its rapid and gigantic
growths. No one could or did forecast the destiny of: this child
when it was born and lay in its crude cradle. No one dis-
cerned the signs of royalty on its infantile brow. We know now
that it was an infant Hercules; Hercules has grown to full
statue and wields a club as big as many big sticks, pitchforks,
and muck rakes bound together like the Roman fasces. Her-
cules is rich, too, and of near kin to Midas; so rich that in
comparison Croesus and Monte Cristo are faded specters and
Plutus has his rival.

Transportation between the States and foreign nations and
the regulation thereof—that is the broad significance of this
problem.

It divides itself naturally into the discussion of law and the
discussion of facts. We must consider the law first, and must
then seek to apply and adjust it to the facts, for here, so to

2 6773
3 '

speak, we are in a sense judges and also jurors, and must
determine both the law and the facts in so far as they enter
{nto our consideration.

THE SCIENCE OF MOVEMENT.

This problem of transportation is a fundamental problem of
the human race. Edward Atkinson has an expression on this
subject that arrested my attention when I first saw it. It is
a sententious utterance: “ Man can create nothing: he can only
move something.” Out of this window of thought flashes a
great light. Man can not even create so much as a mote that
floats in the air. His mission is movement—movement of him-
self, movement of others, movement of thought, and move-
ment of things of matter which do unto him pertain.

Things of the vegetable creation can not move themselves. A
tree stays where it takes root, and there may remain while
generations and centuries pass by. The grass witbereth where
it springs in fixed localities; but the winds bear the seeds of the
tree and the plant hither and thither as they listeth, and fruits
grow where the autonomy of natural forces plants them.

Animated creatures were created to move themselves, some
over the earth, some in the waters under the earth, some in the
air above the earth. But man, by the contrivances of nature
and of his creative genius, moves everywhere, over Jand and
over sea, and he penetrates even the kingdom of the air with
his tentative designs and contemplations, which give omen and
partial assurance of his yet undeveloped powers and foretoken
his achievements in regions just dawning within the range of
his ambitious thought.

THE SHIP AND THE ROAD.

Man not only moves his own body by the exercise of its limbs,
but also by the subjection of the creatures of the land to his
uses. The camel, the ox, the horse, the ass bear him and his
burdens as he ordains. Turning the woods of the forest into the
implements of convenience, he makes the ocean. the Jake, the
river the common highway of his movements, and turning them,
too, into appliances for the land, he hardens those appliances
with metal taken from the mines and wheels over its surface.
To his vehicle he sometimes attaches his fellows, sometimes a
four-footed captive of the animal kingdom, and whatever force
he collects he appropriates to his own use and purposes.

The ship and the road—these have been the greatest of all the’
instrumentalities of man for the convenience and development
‘of his own movements. The great nations have been those who
recognize and who perfect the utility of their uses. Behold a
nation that has ships in plenty and good roads, and you will
behold a nation that has seized time by the forelock and taken
methods of advancement by the right handle. It is the science
of movement that we are to consider in our interstate relations,
and the time is ripe for action.

DELAY IN DEALING WITH THE SUBJECT.

Prof. Arthur T. Hadley, instructor in political economy at
Yale and commissioner of labor statistics of Connecticut, is a
man of learning and of weight. No one who has read his book
on railroad transportation is likely to attribute to him the dis-
position of the iconoclast. I commend the things which he
says which go to explain why Congress did not earlier take up
this subject.

6772
4

In 1860 a storm burst in this country, a storm that had col-
lected through many centuries, and lay at the deep root of long
conditions of human affairs. At that time an American citizen
eligible to the Senate—that is, 30 years old—was just about the
age of our then railroad system, for on the Fourth of July, 1828,
Charles Carroll of Carrollton laid the first rail of the Baltimore
and Ohio Railroad. He was the last signer of the Declaration
of Independence, and his passing from the scene in the third
decade of the nineteenth century marked the beginning of the
new era of transportation. But while this new era was dawn-
ing, clouds were also gathering over the people of this country.
Their thoughts were so surcharged with present things that
their concentration on things economical was in a degree di-
verted. But the earlier railroad movements of this country, Mr.
President, were initiated by the States and not by the Federal
Government, and it is natural that the States should have ma-
tured systems of public control earlier than the Federal Govern-
ment has done so. Now, the railroad system has grown and
overspread the country ere we have undertaken in any compre-
hensive way to regulate it.

A NATIONAL AND WORLD-WIDE PROBLEM.

This question has important local aspects; but it is not a
local, but a wide, embracing subject in the phases which it pre-
sents to us, although it involves the fortunes of many localities
and of many persons. It is not a State problem in the immedi-
ate view of this bill, though the fact underlies it that the States
compose the nation, and that they possess connecting problems
of their own which come to a focus in the central national
power. It is preeminently, however, a national problem—one
that concerns the whole people of the United States, both in the
aggregate and in the severalties of their communal and indi-
vidual parts. ;

But more than this, it is not only as broad as the country; it
stretches beyond the ocean, through the necessities, through the
vehicles, through the contacts, through the exchanges, the reci-
procities and the affinities of trade and commerce, and its lines
in verity run out to the uttermost parts of the earth.

Antedating the railroad system of the world lie six thousand
years of history and the countless ages of prehistoric times.
Before the steam engine was invented and before the iron rail
was laid, civilization had overspread the earth in the older con-
tinents and had appeared and made wonderful advancement in
our own country. Great cities had been builded. Immense
ports and harbors had been constructed. Ships had circumnavi-
gated the globe, and nations had risen and fallen. Peoples and
languages had come and gone, and great masses of capital in
money and other properties had been invested in many of the
perfected works and establishments of man.

DISTURBING AND IMPEDING ELEMENTS IN THE PROBLDMS PRESENTED.

When a new system was thus interjected into and made to
overlay an old one, it is obvious that disturbing factors would
immediately present themselves to the harmony and to the
equitable conduct of it according to idealistic views. I will
point out briefly ere I discuss the question some of these dis-
turbing factors which reveal themselves as soon as one under-
takes to solve any of the given problems which are presented to

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5

us, any one of which it would take a master mind to discuss
thoroughly, and a long essay to explain to other minds.

Some of these disturbing factors may in some degree be of a
permanent nature. They are certainly of an existent nature.
They must be noted and they must be weighed by every fair
mind that seeks to understand the causations of rates which do
not take the distance traversed in the transportation of passen-
gers and freight as a standard of the principle of price for car-
riage. Some of them are these: First, the distant and estab-
lished markets of foreign nations—Liverpool, for instance. Un-
less the wheat of the Northwest and other surplus farm products
of our country can reach and have a competitive part in the
Liverpooh market, a great amount of our own trade would be
curtailed and immense material crowded baak upon us. This
has led to discriminating practices with respect to our foreign
commerce which at the first blush strike the mind as exceed-
ingly unjust and which may need the processes of correction.
The result, however, of this*condition is a substantial fact exist-
ing in the nature of civilization. So it has come to pass that
less rates are charged to-day for delivery of wheat in the Liver-
pool market than for its delivery in the city of New York.

Then, again, Mr. President, the seas and the oceans which con-
nect us with all foreign nations, from our western and from our
eastern shores, are in themselves the causation of great currents
of traffic and travel, and then these waterways constitute in
themselves a free road connecting all the seashore nations. An-
other disturbing factor is found in our own rivers, lakes, and
canals, the internal navigable waters of our own country. We
have developed these waters by immense appropriations. We
have shaped, constructed, or tmproved their channels for the
convenience of our own people, and the result is that oftentimes
a longer route between two points furnishes cheaper transporta-
tion by a water course than shorter routes by rail, and railroads
are put under conditions which it is difficult for the most phil-
osophic and the most equitable mind to treat with justice and
with due regard to all the conflicting interests which are in-
volved. :

So, Mr. President, the seaports and the harbors of this
country and the seaports and the harbors of other countries
which are at varied distances from the initial point of transpor-
tation or to the terminal points are in themselves diverting and
sometimes most imperious causes of great systems of traffic
and differentials in rates.

Look at the great American seaports—Boston, Baltimore, New
York, Philadelphia, Norfolk, Newport News, Wilmington, Sa-
yannah, Charleston, New Orleans, Tampa, Galveston. How
much*money have the whole people of the United States ex-
pended upon them? How have the light-houses risen at popular
cost to guide the mariner? How have the harbors been dredged
and dug out? How have all the improvements of art and con-
structive genius been applied to them?

Moreover, Mr. President, a harbor is like a mountain pass.
Nature originated it, and a harbor is in a certain sense a general
and a pervasive public possession and convenience.

Then again, Mr. President, comes the competitive force of
rival railroad lines at varied distances from important initial

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6

and terminal points, introducing the perplexities and the vari-
ants of active and constant competition. 5

Then, Mr. President, arise practices which have grown in 4
measure out of irregular conditions—the grouping of a number
of cities and of large sections within prescribed distances from
initial or terminal points on one basis of charge for travel or
traffic. This is what railroad men call the “ basic system.”

Then; Mr. President, man is a gregarious animal. It has been
the habit of the human race since they commenced their jour-
ney through this world to collect together in tribes, societies,
and organizations of all kinds, to build habitations and cities
by systems, sometimes demanded by necessities of defense.
Out of the social nature of man have grown great centers of
manufacturing, of mining, or agricultural produce, of educa-
tion, of art, and great emporiums of eommerce which supply
enormous bulks of traffic that can and do obtain carriage at
wholesale rates, while retail rates are charged communities
which supply less material for carriage.

I have not time, in the space that I shall endeavor to occupy
the attention of the Senate, to discuss fully the nature of any
of these variant and diversified causations that are constant
qualities in determining the rates of traffic. I have suggested
them, to begin with, that I may bring to the realization of the
minds of those who have not pondered how complex, how intri-
cate, how irregular these problems are, and how impossible in
the nature of the case it is for the wit or the wisdom of man to
provide at this stage of our railroad and social development
any perfected code which will reach all evils or will harmonize
the whole system in accordance with any perfected theory of
human action.

LHADING QUESTIONS.

I shall now turn, Mr. President, to discuss a few of the prac-
tical questions which are before us. Has the Congress of the
United States been invested by the Constitution with power to
regulate passenger and freight charges in transportation from
State to State? ne

Does the power to regulate passenger and freight charges
include the power in Congress to fix the identical rate at which
a passenger or a certain weight of freight may be carried from
State to State?

Does the power of Congress include the right to fix passenger
and freight rates from any station or any place in one State
to any other station in another State, or is it confined to fixing
the rates of carriage simply across a State line?

Has Congress the power to declare the principles upon which
rates shall be fixed, and then by statute to enforce compliance
with such principles on the part of the transportation companies
which conduct the transportation?

Can Congress authorize a commission to ascertain and fix
reasonable and just rates for the carriage of passengers and
freight from State to State in compliance with the principles
which it has defined by law?

Can Congress authorize a commission to enforce compliance
or through the courts to seek compliance by transportation
companies with the rates fixed by the Commission in accordance
with the principles which it has declared by law?

To each and every one of these questions my mind readily
yields an affirmative response, and to my reading the position

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which those answers assume is abundantly sustained by the
decisions of both the State and Federal courts of this country,
and by consensus of opinion on the part of the great majority
of lawyers and publicists who have studied them. Indeed, Mr.
President, the affirmation of these doctrines is so intrenched
in American jurisprudence by the concurrence of judicial and
scholarly minds and by popular acceptation that persistence
in disputing any of them seems rather to flow from the egotism,
from the pride, or from the enthusiasm of individual opinion
or from inflamed passion of interested motive than from any
fairly grounded hope or expectation that they will ever be re-
versed.

It is highly important, however, that the public mind be
rightly informed on this subject, that it should understand the
juridical status of these questions, and that our own minds
should contemplate the situation from the status in which
judicial decision has placed it, whether that status be one
altogether pleasing to us or no. These are the reasons that
actuate me in reviewing some of the ground which has already
been so well occupied by others, whose profound researches and
whose enlightening expositions have made this debate memor-
able for its display of intellectual faculties and of legal lore.
FAIR CONSTRUCTION OF THE CONSTITUTION, RATHER THAN REFINED AND

METAPHYSICAL RHASONING.

Certain other questions besides these are in the public mind
and have become practical here. But for the present I will
pass them by to discuss those which are fundamental.

Chief Justice Marshall uttered these words in the great case of
Gibbons v. Ogden, which was decided in 1824. That case fills
240 pages of the ninth volume of Wheaton’s Reports, and it
seems applicable to the strenuous refinings and contractions
of Congressional power which I have heard here and there in
the debate made upon this floor. He said:

Powerful and ingenious minds, taking, as postulates, that the powers
expressly granted to the Government of the Union are to be contracted
by construction into the narrowest possible compass and that the
original powers of the States are retained, if any possible construction
will retain them, may, by a course of well-digested but refined and
metaphysical reasoning, founded on these premises, explain away the
Constitution of our country and leave it a magnificent structure indeed
to look at, but totally unfit for use.

They may so entangle and perplex the understanding as to obscure
principles which were before thought quite plain and induce doubts
where, if the mind were to pursue its own course, none would be
perceived. In such a case it is peculiarly necessary to recur to safe
and fundamental principles to sustain those principles, and, when sus- -

tained, to make them the tests of the arguments to be examined.
(Gibbons v. Ogden, 9 Wheat., 222; A. D. 1824.)

THE CONGRESSIONAL POWER TO REGULATE COMMERCE IS SPECIFIC, COM-
PLETE, AND COMPREHENSIVE.

Indeed, Mr. President, when we take up the Constitution,
these refinements and perplexities which infest a few minds
disappear before a fair and natural construction of the language
employed, especially when considered with reference to the his-
tory of States and Territories. The power of Congress to regu-
late commerce was not conferred in any meager fashion by the
Constitution of the United States. ‘ Regulate” is a word of
sovereignty; it is an imperial, a kingly word, as comprehensive
as “sovereignty.” It was uttered by the voice of the whole
people of the United States, and it is as comprehensive as either
sovereignty over the land which we inhabit and over every

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person and everything which pertain thereto. ‘“ God said Let
there be light; and there was light.” This phrase is a little
briefer than that in which the people have conferred their sov-
ereign powers upon Congress; but there is nothing meager in
the one phrase more than in the other. The one applies to that
creative power above us all which made that light, which he
who has eyes to see let him see. The other applies to that
creative and necessary power of human government which,
originating in the sovereign people, was transferred by them to
Congress as their servants. To these servants the people gave
all of their sovereign power to regulate all of their concerns of
commerce among the States. And what is “regulate?” It is
“to prescribe the rule by which commerce is to be governed.”
“This power, like all others vested in Congress, is complete in
itself, may be exercised to its utmost extent, and acknowledges
no limitations other than prescribed in the Constitution.” So
says Chief Justice Marshall in Gibbons v. Ogden (9 Wheaton,
196).

It is a dangerous power indeed. All power is dangerous, for
all power may be abused. Nevertheless, it must exist, and
it does exist, and it is for us, as we may, to use it wisely, in
so far as it has been committed to our hands for use. It is a
sweeping and it is an all-comprehending power. Necessity and
propriety are its only limitations; for Congress is given power
also “to make all laws which shall be necessary and proper
for carrying into execution the foregoing powers ”’—that is,
those that had been enumerated. (Art. I, sec. 8.)

In ascertaining the sense in which the word “necessary” is used
in this clause of the Constitution, we look also to that with which it
is associated. The only possible fact it has to qualify its strict and
rigorous meaning and to present to the mind an idea of some choice
of means of legislation is straightened and compressed within the nar-
row limits of dire necessity.

So arguing, the Supreme Court held that so the end be le-
gitimate and within the scope of the Constitution, and all means
which are appropriate which are plainly adapted to that end,
which are not prohibited and which consist with the letter and
spirit of the Constitution, are constitutional.

The Supreme Court says also, Judge Brewer giving the
opinion, in South Carolina v. U. S., 199 U. S., 448.

The Constitution is a written instrument. As such its meaning does
not alter. That which it meant when adopted it means now. Being
a grant of powers to a government, its language is general, and as
changes come in social and political life, it embraces in its grasp all
new conditions which -are within the scope of the powers in terms
conferred. In other words, while the powers granted do not change,
they apply from generation to generation to all things to which they
are in their nature applicable. This in no manner abridges the fact
of its changeless nature and meaning. Those things which are within
its grants of power, as those were understood when made, are still
within them, and those things not within them remain still excluded.

Yea, Mr. President, the Constitution in its outlook is like the
camera obscura, which has its face always turned toward the
front. Constitutions were made solely for the future. If they
did not have a forward look, they would be meaningless and
vain. Although the thing that the Constitution deals with may
not have existed in being, or even in the imagination of man,
the moment it comes within the purview of the power extended
it enters into and is grasped by the Constitution, exactly like
an image which passes before the glass and is reflected on the
camera.

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9

ALL NATIONS AND STATES EXHRCISE POWER TO REGULATE COMMERCE AND
FIX RATBS.

There is no nation of this earth to-day, Mr. President, which
bas any part in the civilization of mankind, certainly none of
the advanced nations, that does not assume and exercise the
power to regulate railroad traffic and to fix rates. Out of all
the forty-five States that compose the American Union there
has not been a State which has denied that it possessed this
power within the range of its own jurisdiction.

If it were true, as has been eagerly suggested here, that the
people of the United States have withheld from Congress the
power to fix rates and the power to employ the natural and ap-
propriate administrative agencies to assist them in that work,
this would, indeed, be the oddest nation that ever happened in
all the tide of time.

It would also be the most impotent nation in its intimate and
most important concerns that ever asserted for itself the attri-
butes of sovereignty or that ever flew a flag on land or sea.
It would stand forth the most prodigious monument of oddity
and helplessness that the wondering world has ever known.

If it be true, Mr. President, that the Constitution of the
United States did not intend in conferring power “to regulate
commerce with foreign nations, and among the several States,
and with the Indian tribes,” to convey complete and all-em-
bracing power in that sentence, it would seem that those who
have been called the “sages of the Revolution” were ignorant
persons who little understood the meaning of the words they
were using, and that our people have been under delusion in
regarding them as wise and far-seeing men.

If it be true that Congress can not fix the principles and
confer on executive bodies or commissions the details of ex-
amining rate questions and of ascertaining the figures which
conform the rates to the principles declared, such doctrine
would paralyze government by imposing upon Congress an im-
possible task and nullifying practical, expedient, natural, and
convenient methods by which alone Congressional powers of
this description can be properly and fitly exercised.

It is well-nigh inconceivable to my mind that any other mind
that is reasonably conversant with human concerns, and that is
reasonably fair and righteous in reaching its conclusion, could
for a moment dwell upon such nullifying doctrines without per-
ceiving that they are weird, eccentric, destructive, and indeed
impossible.

CONGRESSIONAL POWER MUST BE CONFERRED IN MANY CASES ON

SUBORDINATE AUTHORITIES.

This Government has been, and now is, and the more and
more must be, as populations increase, in the habit of transfer-
ring to subordinate authorities and to executive bodies the vast
details of its administration, whether that administration refers
to the fulfillment of either legislative, executive, or judicial
powers.

Congress itself could not accomplish its work unless the ex-
ecutive agents of the two Houses were empowered to buy and
sell, to print, to travel, and to do the myriad essential things
in execution of the powers of each House or of the Congress
which they compose.

Every Cabinet minister and his subordinates must of neces-
sity hear and determine a vast variety of questions which per-

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tain to administration. Our public lands could not be handled.
Our rivers and harbors could not be improved for navigation.
Our courts could not have commissioners in chancery or re-
ceivers. Our armies and navies could neither be organized,
clothed, armed, fed, or moved. Our customs and tariff laws
would be burdened with dead letters. Our immigration laws
and quarantines would be like the Pope’s bull against the comet.
The Interior and Agricultural Departments would be aliunde.
The Pension Bureau would become a nonentity. In short, such
a doctrine, generally applied, would be as if the ice age had
come again, and the glaciers had taken the place of cities, or-
chards, and fields, where civilization had been, but was not.

The Congressional power to regulate commerce among the
States is ‘“ exclusive ” as well as complete.

Not only, Mr. President, is this power to regulate commerce
all embracing—“ complete ” and “ entire,” as the courts express
it-it is an exclusive power. No other agency in the United
States but Congress and those whom it appoints to administer
it can exercise it. The power of the State ends at its bound-
ary line. The power of the United States only, ends where the
oceans have circumscribed the range of its steam and its sail
vessels and where its own immense boundaries meet those of
foreign nations.

The Constitution of the United States having given to Congress the
power to regulate commerce, not only with foreign nations, but among
the several States, that subject is necessarily exclusive whenever
the subjects of it are national in their character or admit only of one
uniform system or plan of regulation.

So said the Supreme Court, through Judge Bradley, in Rob-
bins v. Shelby County Taxing District (120 U. S., 489-492) ;
and so it repeated, through Judge Brewer, in Atlantic Tele-
graph Co. v. Philadelphia (190 U. S., 162, 1902).

Out of this power of Congress, Mr. President, rises all the
subordinate and fitting powers which are necessary to consuni-
mate and to accomplish it. To regulate commerce carries with
it the power to build and maintain light-houses, piers, and
breakwaters: to employ revenue cutters; to cause surveys to be
made of coasts, rivers, and harbors; to appoint all necessary
officers at home and abroad, to prescribe their duties, fix their
terms of office and compensation; to define and punish all
crimes relating to commerce within the sphere of the Constitu-
tion. ;

Any carriage of goods which crosses a State line is inter-
state commerce; and the fact that transportation from one
State to another is accomplished, in whole or in part, through
the agency of independent and unrelated carriers up to and
trom the State line does not affect the character of the transac-
tion in this respect. For whenever an article destined to a
place without the State is shipped or started therefor it be-
comes a subject of interstate commerce, and carriers employed
in the transportation thereof, although neither of them may
pass from one State to the other, are subjects, as instruments
of such commerce, to national legislation and control.

A steamer plying between two points within a State is en-
gaged in commerce between the States so far as she is employed
in transporting goods destined for other States. (Daniel Ball
(1870), 10 Wall., 557.)

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11

When a part of the route of carriage is on a loop, outside of
the State transportation on such route is interstate commerce
and not within the power of the State.

Communication by telegraph and telephone is commerce if
earried on between the different States, and lies as much within
the power of Congressional regulation as the transportation of
material things. .

REGULATION OF COMMPRCE WITH FOREIGN NATIONS, AMONG THD STATES,
AND WITH INDIAN TRIBES.

Then, Mr. President, we come to the argument of analogy.
The power to regulate commerce is specified in three respects—
with foreign nations, among the States, and with Indian tribes.
The courts have decided that these are commensurate powers,
complete in themselves, exclusive in themselves, and equally
comprehensive within themselves. They have also decided
that those powers which the States may exercise within their
domestic jurisdiction with respect to a regulation of freights
and traffic the United States may exercise within the same re-
gion and to the same extent in interstate-commerce matters.

The power of Congress to regulate commerce among the States
is sovereign, exclusive, amd complete. Congress may legislate
in respect thereto to the same extent, both as to the rates and
all other matters of regulation, as a State may do in respect
of purely local or internal commerce.

As to the conduct of commerce, the whole subject of the liability
of interstate railroad companies for the negligence of those in
their service, these may be covered by national legislation en-
acted by Congress under its power to regulate commerce be-
tween the States. (Peirce v. Van Duzer, 58 Fed., 700.)

The power of Congress on this subject is plenary. It may
legislate as to the qualifications, duties, and liabilities of em-
ployees and others on railway trains engaged in that commerce;
and such legislation will supersede any State action on the
subject. But until such legislation is had it is clearly within
the competency of the States to provide against accidents on
trains whilst within their limits. (Nashville XC R. R. Co.,
123 U. S., 99.) :

“COMMERCE,” NOT “ARTICLES OF COMMERCE” ONLY, WITHIN THD
POWER.

It was argued by the able Senator from Obio [Mr. Foraker]
that a rate is not an article of commerce, and therefore not to
be fixed by Congress. The shortest and simplest answer to
that is that the power is not one to regulate “articles of com-
merce,” but to regulate “commerce.” Mr. President, if you
were to take the rate out of interstate commerce, I fancy that
Hamlet would be completely out of the play. You might as
well take the axle out of the wheel or the spoke out of the
hub. The rate is the thing that moves all, the mainspring of
commerce amongst the States; and it would be just as reason-
able to say that you can not regulate the rate because it is not
an article of commerce as to say, ‘ There is my watch; fix it up;
but leave out the mainspring, and take care that you do not
regulate that.” There is nothing that concerns commerce among
the States as a part thereof, the machinery thereof, or the per-
sons employed therein that is not within the complete and ex-
elusive regulation of the Congress of the United States,

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12

NEVER A SINGLE JUDGED HAS GIVEN OPINION THAT THB LEGISLATURDS IN
STATES OR THE CONGRESS CAN NOT FIX RATES.

Mr. President, there is one remarkable thing about this ques-
tion. On the great questions of income tax and of currency
and on nearly all the great questions which have agitated the
public mind we have seen vacillating and divided courts. Up to
date not a single judge of the United States, not a single judge
of all the hundreds who have had this subject under advise-
ment, either in the State or in the Federal tribunals, has ever
yet said that Congress has no power to fix rates in interstate
commerce. There is more unanimity upon this subject in the
judicial mind of this country than there has ever existed upon
any subject since our Constitution was founded and submitted
for the interpretation of man.

THE FOUNDATIONS OF CONGRESSIONAL POWER.

I shall refer now to the foundations of this power. When we
turn to the specific source of Congressivual power over the reg-
ulation of commerce we find them in more than one clause of
the Constitution. Indeed, there as no less than five provisions
of our Constitution which should be considered in endeavoring
to grasp this subject.

Article I, section 1, of the Constitution says:

(1) All legislative powers herein granted shall be vested tn the Con-
gress of the United States, which shall consist of a Senate and a House
of Representatives.

There is a general grant of “all legislative powers.” Then
come specific enumerations :

(2) To regulate commerce with foreign nations, among the several
States, and with the Indian tribes. (Art. I, sec. 8.)

* * * * * *

£3} To establish post-offices and post-roads. (Art. I, sec. 8.)

4) The Congress shall have power to dispose of and make all need-
ful rules and regulations respecting the territory and other property be-
longing to the United States. (Art. IV, sec. 3.)

That stretches over the District of Columbia and through
the Territories, which are under the immediate jurisdiction of
Congress.

(5) To make all laws which shall be necessary and proper for car-
rying into execution the foregoing powers, and all other powers vested
by this Constitution in the Government of the United States and in
any Department or officer thereof.

Is this not as wide, specific, and clear as lucid language can
make it? It is all power, saving only in so far as some restric-
tion may be placed upon it by other parts of the Constitution,
as, for instance, that—

No preference shall be given by any regulation of commerce or reve-
nue to the ports of one State over those of another; nor shall vessels
pound to or from one State be obliged to enter, clear, or pay duties
in any other.

If there be any matter that belongs to commerce among the
States, that matter is comprehended and embraced in that
power.

How, Mr. President, can one at this stage of debate on this
subject find provocation or comfort in challenging a power so
universally recognized and just upon the stage of application?
The inventive genius of man is strained to discover a trace of
difficulty or doubt upon this subject. But a little comfort has
been taken by’ a recent expression of Judge Harlan. In the

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13

course of his opinion in the Northern Securities case, 193 U. S.,
page 343, he used the following words:

Would it be said that Congress can meet such emergencies by pre-
seribing rates by which interstate carriers shall be governed in the
transportation of freight and passengers? If Congress has power .to
fix such rates, and upon that question we express no opinion, it does
not choose to exercise its power in that way or about that question.

Judge Harlan in that case simply recognized a condition,
that Congress was not regulating rates. He had no provoca-
tion to express a decisive question of the decisive subject, and
any allusion was obiter dictum. But it does not follow that
the judge has any doubt on this subject.

A corporation—

As he has said—

maintaining a public highway * * * must be held to have ac-
cepted its rights, privileges, and franchises subject to the condition
ot the government creating it, or the government within whose limits
it conducts its business may by legislation protect the people against
unreasonable charges for the services rendered by it.

In that same case, in which Judge Harlan thus passed by
without opinion, Mr. Justice White said:

The plenary authority of Congress over interstate commerce, its
right to regulate it to the fullest extent, to fix the rates to be charged
for the movement of interstate commerce, to legislate concerning the
ways and vehicles actually engaged in such traffic, and to exert any
and every other power over such commerce which flows from the au-
thority conferred by the Constitution, is thus conceded.

In the case of the Interstate Commerce Commission v. Cincin-
nati, etc., Railroad (167 U. S.), known generally as the ‘ Maxi-
mum Rate case,” Justice Brewer, giving the opinion of the Su-
preme Court, used these expressions:

There were three obvious and dissimilar courses open for considera-
tion. Congress might itself prescribe the rates, or it might submit to
some subordinate tribunal this duty, or it might leave with the compa-
nies the right to fix rates, subject to regulations and restrictions, as
well as to that rule, which is as old as the existence of common car-
riers, to wit, that rates must be reasonable. * * * Administrative
control over railroads through boards or commissions was no new thing.
z= pad been resorted to in England and in many of the States of the

nion.

Thus has the Supreme Court given the imprimatur of its utter-
ance on this question.

NO CONTRACTION OF CONSTRUCTION JUSTIFIED BY THE HISTORY OF THH
COMMERCE CLAUSE.

It has been said, Mr. President, that the history of the com-
merce clause of the Constitution of the United States is con-
ducive to narrow and contracted construction of its meaning.
Let me read a little from Bancroft:

Of many causes promoting union, four above others exercised steady
and commanding influence. The new Republic as one nation must have
power to regulate its foreign commerce, to colonize its large domain,
to provide an adequate revenue, and to establish justice in domestic
trade by prohibiting the separate States from impairing the obligations
of contracts. Each of these four causes was of vital importance; but
the necessity for regulating commerce gave the immediate impulse to a
more perfect Constitution. (Bancroft on the Constitution, 1st vol., 146.)

While these ends, Mr. President, were being discussed, and
while the Americans were getting their minds together with
a view to settling commercial questions, a British order in
council was made in July, 1783, restricting to British subjects
and ships the carrying of American produce from American

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14

ports to any British West India island and the carrying of the
produce of those islands to any port in America. :

This act of British imposition stung and aroused American
spirit and drew together and impelled the States together to
resist the common adversary.

VIRGINIA MARSHALS THE UNITED STATHS ON THDIR WAY TO 4 BETTER
UNION.

At the same time, while we were turning the face of the com-
ing nation toward the East, there were those who were also
looking toward the West. .

The complete cession of the Northwest and the grant of the desired
impost were the offerings of Virginia to the general welfare. Simul-
taneously, her legislature, in December, took cognizance of the aggres-
sion on equal commerce. The Virginians owned not much shipping
and had no special interest in the West India trade, but the British
prohibitory policy offended their pride and their sense of honor, and,
as in the war they looked upon “union as the rock of their political
salvation,” so they again rang the bell to call the other States to
council. They complained of ‘‘a disposition in Great Britain to gain
partial advantages injurious to the rights of free commerce and repug-
nant. to the principles of reciprocal interest and convenience, which
form the only permanent foundation of friendly intercourse,” and unani-
mously consented to empower Congress to adopt the most effectual
mode of counteracting restrictions on American navigation so long as
they should be continued. And Governor Harrison, by their direction,
communicated the act to the executive authority of the other States,
requesting the immediate adoption of similar measures, and he sent to
the Delegates of his own State in Congress a report of what had been
done. This is the first in the series of measures through which Vir-
ginia marshaled the United States on their way to a better Union.
(Bancroft on the Constitution, 1st vol., 148.)

WASHINGTON SEEKING TO GRAPPLE EAST AND WEST TOGETHER.

Soon Washbington’s practical mind was seeking to grapple the
East and the West together, and in the autumn of 1784, he was
journeying among the streams and paths of the Alleghenies,
sketching in his mind a system of internal communication of the
Potomac with the Ohio; an affluent of the Ohio to Cuyahoga,
and so from the site of Cleveland and Detroit and onward to the
Lake of the Woods.

A little later the people of Maryland and Virginia petitioned
jointly the legislatures of their respective States for the united
action for improving the navigation of the Potomac, and we find
Washington himself as the leading Virginia negotiator, where
he successfully consummated his mission, the plan adopted
being speedily passed by the legislatures of both States to their
mutual satisfaction, and, as Washington hoped, to the advantage
of the Union.

This is but a slender noting of a great chapter in our consti-
tutional history. It shows, on the one hand, how, looking to the
ocean, foreign commerce inspired union, and how, on the other
hand, looking to the West, internal commercial communication
by practical methods was begetting in the minds of men, a con-
sideration which in time found expression in placing the regu-
lation of commerce between the States on the same footing in
the Constitution as that of regulation of commerce with for:
eign nations, whether by land or by sea. The Senator from
Texas (Mr. CULBERSON] has admirably presented a phase of
these views, which I will not repeat, but it powerfully reen-
forces them. It was from the broadest view and the wisest
perspective of the human mind, looking to all points of the com-
pass, that there grew out of the minds of the Constitution
builders a foundation commensurate with the mighty framework

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15

which they were about to erect, all-comprehending as to the
commercial power, exclusive in its nature, leaving nothing of
commerce between State, foreign or domestic, that was not put
in the power of the Congress of the United States.

JUDICIAL BXPOSITIONS ON THH POWDR TO FIX RATES,

Mr. President, if we have been embarrassed, in mild degree,
at least, by the injection of subjects of debate which would
seem to have passed out of that category into settled question,
the arguments employed deserve to be completely answered, not
only by the philosophy of history and by the natural reading of
our constitutional papers, but as well by the juridical expositions
which have been passed upon this subject. In the centennial
year, 1876, the case of Munn v. Illinois was decided by the
United States Supreme Court. Chief Justice Waite, of Ohio,
a broad-minded and learned man, one of great industry and pa-
tient attention, gave the opinion. His opinion is one of the
most learned essays that have gone forth on this subject. The
basic principles upon which he rested it have not from that day
to this been disturbed or overruled. He showed how, under the
power inherent in every sovereignty, a government may regu-
late the conduct of its citizens toward each other, and, when
necessary for the public good, the manner in which each held
or used his property.

He showed further how the exercise of these powers had been
customary in England from time immemorial; how they had
been exercised in this country from its first colonization to
regulate ferries, common carriers, hackmen, bakers, millers,
wharfingers, innkeepers, and, in so doing, to fix the maximum
charge to be made for services rendered, accommodations fut-
nished, and articles sold. The statutes of all the thirteen orig-
inal States, Mr. President, abound with such illustrations and
show that our forefathers, when they were building States and
molding them into a nation, had themselves no sense of the im-
perfection and impotence of the work which they were con-
structing.

Said Chief Justice Waite, in Munn v. Illinois (94 U. S., 113):

With the fifth amendment in force, Congress in 1820 conferred
power upon the city of Washington to regulate rates of wharfage at
private wharves; the sweeping of chimneys, and to fix the rates of fees
therefor, * * * and the rate and quality of bread (3 Stat., 587,
sec. 7); and in 1848 to make all necessary regulations respecting
hackney carriages and the rates of fare of the same, and the rates of
hauling by cartmen, wagoners, carmen, and draymen, and the rates
of commissions of auctioneers (9 id., 224, sec. 2).

From this it is apparent that, down to the time of the adoption of
the fourteenth amendment, it was not supposed that statutes regulat-
ing the use, or even the price of the use, of private property neces-
sarily deprived an owner of his property without due process of law.
Under some circumstances they may, but not all. The amendment
does not change the law in this particular; it simply prevents the
States from doing that which will operate as such a deprivation.

- This brings us to inquire as to the principles upon which this power
of regulation rests, in order that we may determine what is within and
what without its operative effect. Looking, then, to the common law,
from whence came the right which the Constitution protects, we find
that when private property is ‘‘ affected with a public interest it ceases
to be juris privati only.’”’ This was said by Lord Chief Justice Hale
more than two hundred years ago in his treatise De Portibus Maris
(1 Harg. Law Tracts, 78), and has been accepted without objection
as an essential element in the law of property ever since. Property
does become clothed with a public interest when used in a manner to
make it of public consequence and affect the community at large.
When, therefore, one devotes his property to a use in which the public

6773
16.

has an interest he, In effect, grants to the public an interest in that
use, and must submit to be controlled by the public for_the common
good to the extent of the interest he has thus created. He may with-
draw his grant by discontinuing the use, but so long as he maintains
the use he must submit to the control.

Mr. President, it will be perceived that not only does the regu-
lation of commerce by Congress come within the clear and
specific meaning of an expressly enumerated grant of power,
but that in the very nature of the case and by the exercise of
public employment under the jurisdiction of a sovereign power—
the United States—it is a power so necessary to sovereignty, so
absolutely indispensable to society, so inherent in the nature of
the government of man that for centuries before this nation
came into being it was exercised by our mother country, that
it was brought here and introduced into every one of the States
of this Union, and that by the common law, by the verdict of
history, by the invariable habits of mankind, and by distinctive
and clear expression of the Constitution of the United States
Congress stands in the possession of this power to-day.

My distinguished and able friend the Senator from Ohio [Mr.
Foraker], who has made on this subject a speech of great in-
struction, one which illuminated to my own mind phases in
the practical bearings of it which I had not understood or appre-
ciated until I heard his discussion, will permit me to say—I
hope without diminishing from my conception of his ability,
his earnestness, his patriotism, or his power—that I conceive
that he has used a misleading argument in his speech when he
points out that Congress in chartering the Pacific railroads was
exercising a proprietary power and not a power of regulation
im prescribing their freights or putting conditions upon them
such as we invoke here.

If the Senator will read the charter of the Pacific railroads,
and if he will read the decisions of the courts in expounding
that charter, he will see that the Supreme Court of the United
States does not rest the power under any such narrow line
of thought as that which he deliminates. It appears that
that “charter was not only over the territory described by him
as under the proprietary rights of the United States, which
owned it and was its immediate legislator, but that it applied
as well to sovereign and perfected States. In the case of Cali-
fornia v. Pacific Railroad Companies (127 U.S. Rep., p.1) it will
be found that the Supreme Court has held, in defining this
power, that it is within the power of Congress to charter a
railroad to run anywhere in the United States, across the
States as well as across the Territories.

In the case of the Gettysburg battlefield the Supreme Court
settled another question, which up to that time——

Mr. FORAKER. Mr. President——

Mr. DANIEL. One moment, just let me finish the aentende—.
which up to that time had not met with its definite adjudica-
tion—that is to say, that the United States possess complete
eminent domain and for any public purpose may condemn and
take the land of any citizen anywhere. In 127 United States
they apply that to the charter of interstate-commerce corpora-
tions, making the circle round of the completed power of the
United States on this subject.

Mr. FORAKER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Virginia
yield to the Senator from Ohio?

6773
17

Mr. DANIEL. With pleasure.

Mr. FORAKER. If I rightly understand the remarks of the
Senator from Virginia, he entirely misapprehended the sense
in which I employed the term “ proprietary ” in the connection
mentioned by him. I did not employ that term in that connec-
tion to indicate that the Pacific railroads, the nature of the
charter for which we were then considering, were constructed
through lands belonging to the United States or other lands over
which the United States had exclusive jurisdiction, as over the
Territories; but I employed the term to indicate that it was
the United States Government that had the proprietary right
in the case mentioned to grant the charter, and, granting the
charter, it had a right to attach, as a condition precedent to
the enjoyment of the charter, any condition it saw fit to pre-
scribe; and if it saw fit to prescribe in the granting of a charter
under which a railroad was to be constructed a right to regu-
late rates of fare, the taking of a charter was an agreement to
that restriction. That was the only sense in which I used the
term. I had no thought of using the word “ proprietary” in
connection with the territory through which the road would run.

Now, as to the charter of those roads, the Senator will look
in vain for anything in it indicating that the Congress granted
that charter in the exercise of its power to regulate commerce.
It granted the charter, as.is expressly stated both in the title
to the act and in the body of the act, in the exercise of its
power to provide for the national defense, to establish post-
offices and post-roads, ete.

It is true that in 127 United States, as the Senator says, there
is found in the opinion of the court a statement to the effect
that Congress, in the exercise of its power to regulate commerce,
may authorize the construction of a road, and, I think, it goes
so far as to say may construct and operate a road; but it is
not true, as I understood the Senator to say, that that was an
opinion of the court and that that part of the opinion of the
court was necessary to the decision of that case. It was not.
It was, on the contrary, as pure an obiter dictum as was ever
uttered from the bench. It had no relevancy to the questions
before the court at all. The opinion was written by a very
eareful judge, Mr. Justice Bradley, one for whom I have the
most profound respect, but it was, nevertheless, nothing in its
relation to that case than an obiter dictum pure and simple.

The point I made all the way through—I hope I do not inter-
rupt the Senator too much; and, if I do, I shall be glad, of
course, to desist——

Mr. DANIEL. I yield to the Senator with great pleasure.

Mr. FORAKER. The point I made all the way through in
connection with the use of the word “ proprietary” was that
the power to regulate commerce conferred by the Constitution
on the Congress, subject only to the restrictions of the Consti-
tution, is a plenary power, just as complete in itself as is the
power of a State to regulate commerce.

But the question remains, What is the power of the State to
regulate commerce? I contended then that the power of the
State to fix rates was a proprietary right that does not belong
to Congress in that connection. The State has the same right
that the United States Government exercises when it grants a
charter. The State incorporating a railroad can prescribe—and
\t retains the right, if it does not see fit so to prescribe in the

6773 2

 
18

charter—any regulation it may see fit. ‘That is perfectly com-
petent to the State, and the Supreme Conrt of the United
States has never in any decision whatever passed unon the
question of the right of the Federal Government in the exercise
of the power to regulate commerce to prescribe what rates
shall be charged, maximum or otherwise.

In the Munn case, on which the Senator comments and in
connection with which he pays such a deserved tribute to the
late Chief Justice Waite, the question was whether or not the
State of Lllinois had the power to prescribe maximum rates
of charges for the‘use of elevators. In that connection, speak-
ing of the sovereignties that were complete in themselves that
have this proprietary right, he did quote what had been done
by Congress with respect to the city of Washington in author-
izing this city to prescribe maximum rates of charges for ferries
and other public conveniences, but I called attention to the fact
that, according to all the elementary authorities, that is not a
delegation of legislative power in the sense in which we ordi-
narily discuss that question, but that it is an exception to that
rule, quoting one authority only out of many that I might have
quoted, because it is so elementary a proposition I did not
think it necessary to dwell upon it.

So that there is nothing in the Munn case, where the authority
under consideration was that of a State which had not only
power to regulate commerce, but had the proprietary right to
fix rates, and nothing in the citations the Senator makes as to
what Congress did in respect to the city of Washington, which
is out of the ordinary rule, that contravenes in any respect
anything for which I contended.

The Senator will pardon me for such an extended interrup-
tion. I would not have done it only he was so gracious and so
obliging that somehow or other when you get started in impos-
ing on him you can not help it.

Mr. DANIEL. I am very glad the Senator interrupted me,
but I think the Senator will take a good deal longer to explain
his explanation. I hope, however, he will not do it now.

Mr. FORAKER. I will be content to let it stand in the
Recorp alongside with what the Senator says, trusting that
anybody who will read it will conclude that it does not need
any explanation.

Mr. DANIEL. I did not mean to reflect upon the Senator
at all, but I was attending in my own reflections to the fact
that, instead of diminishing the powers of Congress, the Senator
had shown by his remark that they had an additional power
about building railroads, and that one of self-defense or
national defense. Of course, if they may charter a railroad
and build it and create it, they may put any regulation they
please upon it. They can regulate it; and it occurs to me,
Mr. President, that in developing a new aspect of the subject
the Senator has in no wise contracted my argument, but simply
enlarged and reenforced it.

Mr. FORAKER. Mr. President, if the Senator will not com-
plain of me—I will not interrupt the Senator for a moment
longer than it is agreeable—the Congress does have powers be-
yond the one power to regulate commerce. The point I am
making is that we are proceeding here under the one inde-
pendent power to regulate commerce, and that this power to do

6773
19

these other things is deducible, not alone from that power, but
from the other powers that hawe been conferred by the Consti-
tution on the Federal Government.

Mr. DANIEL. Mr. President, we are proceeding here under
all the powers we have got under the Constitution. If we have
power to so proceed, whose business is it to question the power
we are exercising, if we have got that power?

Furthermore, the Senator says, as if making some criticism
or detraction from the arguments and citations that have been
made, that the Supreme Court has never yet in a direct case
passed upon a rate and held that a Congressional rate was all
right. It has not passed upon such a question directly for the
simple reason that no such question has ever been or could
have been before it.

Mr. FORAKER. Mr. President, all I want——

Mr. DANIEL. Let me finish my sentence, if you please.

Mr. FORAKER. It is an open question.

Mr. DANIEL. It has never passed upon a rate enacted by
Congress, because no rate enacted by Congress or an agency of
Congress has ever been before it. The Senator says it is
therefore an open question. That is a very broad remark to
make in view of the fact that the court has time and again, over
and over, year in and year out, recognized the power of a State
within itself to make a rate, and declared, or taken for granted,
and expounded as a principle that our power over commerce
is complete, exclusive, and unlimited in the Constitution of the
United States, and built up an analogous system on the subject
in the United States compared with that of the States. It is
true, however, and is obliged to be true, that this particular
case in this particular form has never been presented to the
Supreme Court of the United States—a fact that should be
taken in connection with the other fact, that all the indicia of
opinion and of expression on the subject have pointed to their
conclusion in like manner as has been thus stated.

Mr. FORAKER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Virginia
yield to the Senator from Ohio?

Mr. DANIEL. Certainly.

Mr. FORAKER. I was only going to suggest to the Senator
that there is no difference of opinion between him and me as to
what has been decided. The only point I was making a mo-
ment ago was this, that all the decisions of the Supreme Court
with respect to rates have been with respect to rates made by
the States through the acts of their legislatures or through
agencies appointed by the legislatures of the States, and I was
trying to distinguish now, as I did try at considerable length
to distinguish when I addressed the Senate on that subject on
February 28, between the power of the State to do that and the
power of the Federal Government in the exercise of its power
to regulate commerce.

That reminds me to say that the Senator a few moments ago
commented upon my remarks at that time and took exception
to what he said my statement was, that a rate was not an ar-
ticle of commerce. It is true I said it was not an article of
commerce. I said more than that. I said that the rate charged
by a carrier was not an article of commerce; neither was it an
instrumentality of commerce; neither was it a facility of com-

6773
20

merce; neither was it anything that had to do with the purpose
of commerce which looks to the safe carriage of life and the
safe carriage of property.

I can not any more than call attention to that at this time
without unduly interrupting the Senator, and, of course, I do
not want to do that; but I take advantage of this opportunity,
through his kindness, to broaden his statement a little bit as to
what I then said.

Mr. DANIEL. Mr. President, of course I can not quote an
opinion of the Supreme Court which has decided this question
on the presentation of the actual case involving a rate made by
Congress. All I claim is that the views expressed by the Su-
preme Court comprehend and embrace such a case, and be-
fore——

Mr. NELSON. Mr. President——

The VICE-PRESIDENT. Does the Senator from Virginia
yield to the Senator from Minnesota?

Mr. DANIEL. I yield for a question.

Mr. NELSON. Has not the Supreme Court, in substance,
time and again decided that the power of Congress over inter-
state commerce is as broad and complete as that of the State
over State commerce?

Mr. DANIEL. I think I have shown that that is the view of
the courts.

Mr. FORAKER. If the Senator from Virginia will allow me,
what the Supreme Court of the United States has time and
again decided, to which the Senator from Minnesota refers, is
that the power to regulate commerce conferred by the Constitu-
tion on the Federal Government is as broad and plenary as the
power to regulate commerce that belongs to a State. But the
State, being a complete sovereignty, has this inherent pro-
prietary right which enables it to go further than the Constitu-
tion authorizes the Congress to go. That is the distinction
which has been made all the time.

Mr. NELSON. I want to say to the Senator from Ohio that
if the State has the power to regulate rates, why has not, in
like manner, Congress the same power over interstate commerce
that the State has over State commerce?

Mr. FORAKER. If the Senator will read the remarks I
made here on February 28 he will see stated at length why,
in my opinion, the State has the power to regulate rates that
does not belong to the Federal Government under the power to
regulate commerce. I can not, in the time of the Senator from
Virginia, answer at the length that it would be necessary for
me to answer to properly make response to what the Senator
from Minnesota says.

Mr. DANIEL. Mr. President, I will conclude what I have
to say on this subject—that is, the power of Congress—by read-
ing an extract from the opinion in the case of the Pensacola
Telegraph Company v. The Western Union Telegraph Company
(96 U. S.), in which Chief Justice Waite again gave the opin-
ion. He sustained in that case the broad regulating power of
Congress, and held that these powers extended in their appli-
cation to telegraph lines, to the postal service, to military and
post roads, and covered the whole territory of the United
States, whether crossing State lines or no. He said:

The powers thus granted are not confined to the instrumentalities

of commerce or the postal service known or in use when the Constitu-
6773
21

tion was adopted, but they keep pace with the Constitution of the
country and adapt themselves to the new developments of time and
circumstances.

They extend from the horse and his rider to the stage coach, from
the sailing vessel to the steamboat, from the coach and the steamboat
to the railroad, and from the railroad to the telegraph as these new
agencies are brought into use to meet the demands of increasing
population and wealth. ‘

They were intended for the use of the business to which they
relate at all times and under all circumstances.

As they were intrusted to the General Government for the good of
the nation, it is not only the right but the duty of Congress to see
to it that intercourse among the States and the transmission of in-
telligence are not obstructed or unnecessarily encumbered by State
legislation.

These, Mr. President, are broad and deep-rooted principles,
and it would be most curious indeed if the all-embracing power
which has been expounded and illustrated in so many diverse
forms, as going down to the hackney coach and to the ferry, across
the ocean, along the railroad, and the telegraph line did not
embrace that important, substantial, and most moving matter—
the rate of freight os passenger travel upon a road. I am
content thus to leave it.

THD POWER OF CONGRESS TO CREATE COMMISSIONS.

I will address myself now to another question. It is with
reference to the power of Congress to put its power in the
hands of a commission, and to a consideration of what is the
due process of law which must be observed in dealing with
questions which arise under the provisions of this measure. I
heard, and I have read with deep interest. the able speech
which was made on this floor by the Senator from Pennsyl-
vania [Mr. Knox]. We predicated much that he had to say
upon a general declaration in that speech, with which I feel
obliged to take issue. He said:

It is the heritage of every English-speaking man or association of
men to have his rights determined in a court. It is for the court to
decide what those rights are.

This is an idealistic view of the Federal Constitution. As I
read that document this view is not sustained by an examina-
tion of the Supreme Court decisions. If we regard the facts
disclosed by those decisions the declaration of the learned and
distinguished Senator would only be made to conform accu-
rately with them when qualified so as to read that ‘“ sometimes
it is the heritage of every English-speaking man to have his
rights determined in a court,” for it is equally true, as a general
allegation, that sometimes, indeed many times, it is not so, ac-
cording to the Supreme Court view and according to the Amer-
ican practice.

The conclusions drawn from this broad assertion by the Sen-
ator from Pennsylvania he thus expressed :

An attempt to specify what right shall be determined by the court
might be fatal to the constitutionality of the legislation. If the speci-
fication should not include all his rights, he would be shorn of a con-
stitutional privilege. Should it undertake to enumerate rights which
he could not establish, it would be meaningless and unintelligent leg-
islation. If his rights are determined solely by the Constitution, that
instrument would be the measure employed in their determination.
If he has rights vested upon some other foundation, a limitation placed
upon him to have nothing but his constitutional rights determined
would be a fatal objection.

So the declaration of the Senator is designed by him to apply
to every right of a citizen, and to maintain that as to his every
right he can not be made to suffer without having provision

6773

.
22,

made by Federal law that deals with it for testing that right in
court. Any other test by an administrative board, however
dignified, however competent, would be to his mind incomplete
and would lack the qualities of due process of law.

But the declaration of the Senator and his conclusions are
alike refuted by the Supreme Court of the United States in
many decisions to which I shall presently advert. Here let me
say that I do not overlook the fact that the Senator, from whose
utterance I dissent, has been eminently fair and impartial in
applying the doctrine he contends for, and by no means confines
its protection to the carrier. He upholds, amplifies, and ex-
tends it to the shipper and the passenger. He would require,
when an injunctive process issues from a court, to suspend for
a time being a rate fixed by the Commission, a cash deposit or
bond should be given by the carrier that would secure to the
parties entitled to repayment the difference between the Com-
mission’s rate and the railroad rate if the Commission’s rate
were sustained.

OFTEN NOT THE HERITAGE OF AN AMERICAN CITIZEN TO HAVE HIS RIGHTS
DETERMINED IN A COURT.

I undertake to say, in contravention of the broad, general,-
axiomatic expression of the Senator, that there are many cases
in this country in which the highest and most sacred rights of
property and of persons are passed upon finally under adminis-
trative law. I also undertake to say that they are of equal
dignity, if not of greater dignity, than anything that is in-
volved in the rates of passenger or freight traffic.

I wish, then, Mr. President, in order to get at the meat of this
matter, as it underlies the measure which we are endeavoring
to mold, to discuss what is due process of law.

Mr. KNOX. Mr. President——

The VICE-PRESIDENT. Does the Senator from Virginia
yield to the Senator from Pennsylvania?

Mr. DANIEL. With great pleasure.

Mr. KNOX. Of course it was my own misfortune as well.as
my own fault if the Senator from Virginia understood that por-
tion of my remarks which he has just read to apply to any other
class of rights than the class of rights proposed to be dealt with
in this legislation—that is, rights of property, vested rights.
Of course I would probably be one of the last men to stand
upon the floor of the Senate and deny that under the domain
of administrative law, where the nation or a State is dealing
with that over which it has complete control, the rights of
parties are very often, indeed almost generally, disposed of
through administrative boards, as, for instance, the rights of the
citizen to transmit his mail and the conditions under which he
shall be permitted to transmit it through the post-office. That
is a matter over which the Congress has complete control, and
of course the administration of the affairs of that Department
can be dealt with by Congress as it sees fit. So in the case of
the distribution of public lands; so in the case of the citizenship
of Indians; so in the case of immigration. Anything over
which the Government has complete control and where it defines
the rights of parties, of course can be handled through an
administrative board.

Mr. ALDRICH. In custom matters.

6773
23

Mr. KNOX. And in custom cases. But my proposition, of
course, had to do only with the rights we were undertaking to
deal with in this legislation; and I hold myself unfortunate that
I did not more specifically indicate it. I presumed it would be
assumed by those who read my remarks, and any criticism the
Senator from Virginia may have upon the assertion based upon
these administrative cases of course I freely accept.

Mr. DANIEL. I have no doubt the Senator fully under-
stands the difference between those cases in which adminis-
trative law is held to be conclusive by the courts and those in
which it is held that the term “ due process of law” involves
juridical process. At the same time, I had to treat the Sena-
tor’s speech as he uttered it. I have seen that broad, sweep-
ing sentence of the distinguished Senator from Pennsylvania
put in newspapers as a campaign banner, so to speak, and as
matter of rebuke and caution to those who would undertake
to narrow the jurisdiction of the Federal courts in this matter.
. I am sure it was simply a general utterance, and had the
Senator cautioned his own mind he would have confined it, as
the courts confined it, to a particular class of cases, to which I
shall presently refer.

Mr. KNOX. Mr. President——

The VICE-PRESIDENT. Does the Senator from Virginia
yield further to the Senator from Pennsylvania?

Mr. DANIEL. Certainly.

Mr. KNOX. Only for a moment. I merely want to add to
what I have already said that the Senator will observe that all
of the authorities I cited in support of that proposition show
the distinction which I have just now undertaken to draw be-
tween the two classes of rights. So one could hardly in reading
the speech as a whole or in listening to it as a whole be mis-
taken as tothe intention.

Mr. DANIEL. I have not the slightest doubt in my own mind
as to the perfect fairness and candor of the Senator from Penn-
sylvania. I never intended to intimate a criticism of that
character in any way whatsoever. But the Senator speaks from
a standpoint of such authority upon questions of law and his
reputation and character are so well known that I merely
apprehended that if that broad statement were continuously
quoted without the explanations which belong to it, it might
put some who entertain somewhat different opinions from the
Senator from Pennsylvania in an ill light of criticism before
other minds which did not appreciate these distinctions as he
does.

I also wish to make it a basis for showing, if I may, the dis-
tinctions taken on the class of cases in which the courts con-
sider that due process of law involves juridical process and
those taken on that other class of cases which require only
administrative powers as due process of law. ,

“DUE PROCESS OF LAW” AND “LAW OF THE LAND.”

Due process of law is generally interpreted in our form of
government to be an expression equivalent, or nearly so, with
the term “law of the land” as used in Magna Charta. It is
that law which the people themselves have ordained and laid
down for the regulation of their society and to which they have
become accustomed.

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(1) The constitution of a State is the law of. the land for
that State, and observance of the procedures which it commands
is due process of law.

(2) The Constitution of the United States is the law of the
land for the whole Union, and procedures in consonance with
that Constitution, and none other, are due process of law.

No interpretation of the law of the land or due process of
law has go put its inhibition upon the power of Congress or of
a State legislature as to require either body to preserve upon
the statute books of the country any particular remedial statute
of jurisdiction whatsoever, whether of criminal law, municipal
law, civil law, or equity, which may be there at this time,
provided only that a legislature under the Constitution and ac-
cording to judicial construction can not remove an existing
statute upon which contracts have been built so as to tear
down those contracts or to subtract from their substance
and foundation; provided, too, that jury trials are preserved
where required by the law of the land; and provided also,
that in changing some existing due process of law a legislature
shall leave a fitting and appropriate remedy against constitu-
tional wrong which preserves to the citizen the right to be heard
in court when the original question of legal right or wrong is
juridical, or where the original question is purely administra-
tive leaves the right to be heard by an administrative body. To
go beyond this would be to freeze, if not to completely paralyze,
the powers of the legislation, and to put a bar to those changes
of legal progress which may be deemed essential by repre-
sentative bodies to advancement in the science of judicature
and administration.

“DUE PROCESS OF LAW ” OLDER THAN MAGNA CHARTA.

The term ‘due process of law,” as used by constitutions and
courts, is older in English history than Magna Charta, accorded
by King John to the Barons at Runnymede in 1215, nearly seven
hundred years ago. Since that period of English history, what-
ever aberrations our race has been afflicted with, however star-
chamber courts, military courts, or usurping magistrates have
invaded the law of the land, and however passionate mobs or
revolutionary movements have swept over it in waves of frenzy,
the masses of the people of our country and of our race have
adhered in their devotion to the sacred rights of due process and
law of the land, for they are basic to our liberties. These terms
are a legal guaranty, and there is no principle of our liberties to
which we should be more devoted or which we should more faith-
fully defend.

CORPORATIONS, LIKW INDIVIDUALS, BNTITLED TO PROCHSS OF LAW.

Since the rise of corporations—artificial persons, as they are
called—and since the fourteenth amendment was adopted, it has
been established beyond debate by the courts that the corpora-
tion is a person in the sense of the Constitution, and decisions to
this effect are so accepted that no one challenges them or seeks
to reverse them.

It is to be remembered in the consideration of such a matter as
this that whatever may be the weaknesses or the wickedness of
corporations which have been developed, and whatever and
however justly offenses have been imputed to them, they are no
more and no less than an aggregate of human beings, concate-

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nated together by popular opinion and by regulative enactment,
and with all their vices and with all their faults they are no
more and no less than reflexes of the conduct of the people of
flesh and blood who compose them. It must be remembered, too,
that if they be but man-made, artificial creatures, the people
were and continue to be their creators, and in some respects
their beneficiaries as well as their victims. Like all artificial
and natural creatures they are mixtures of good and evil.

A corporation is, in fact, only a shell with a fancy name upon
it. Everything inside of the shell is property acquired under
charters which the people themselves have granted, plus the
human beings who own the property, in the shares prescribed
by law, and plus or minus the water which may in some sort of
fashion have inflated the shares. These corporations, being
created by law and living by and under 4aw, have just the same
title to be protected by the law of the land and by due process
of that law as has every individual citizen of our country,
whether he be on the inside or the outside of the corporate shell.

What, then, is the definitive meaning of law of the land and
process of law as applied to such cases as this? Just this:
That every individual, whether a human person or a composite
person called a corporation, is entitled to have and hold his,
her, or its property, his, her, or its liberty, in accordance with
the laws of this land, made in pursuance of constitutional
authority. The law of the land embraces the statutes as well
as the Constitution. It is the general law, which, as Daniel
Webster declared, ‘‘ hears before it condemns, which proceeds
upon inquiry and renders judgment only after trial; ” “ and has,”
he added, “the meaning that every citizen shall hold his life,
liberty, property, and immunities under the protection of the
general rules which govern society.”

Another master of jurisprudence has said:

The good sense of mankind has at length settled down to this, that
they were intended to secure the individual from arbitrary exercise
of the powers of government, unrestrained by the established prin-
ciples of private right and distributive justice.

“DUB PROCESS OF LAW” SOMETIMES INCLUDES JURIDICAL POWERS AND
SOMETIMES DOES NOT.

This law of the land, or due process, however, does not re-
quire that there shall be the same process of law or the same
law of the land with reference to classes of persons or things
which are in their nature different and which according to
their nature require a variation of methods.

Story struck the right keynote when he said in his work on
the Constitution that different principles are applicable in dif-
ferent cases and require different forms and proceedings. In
some they must be judicial; in others not. (See Story on the
Constitution, sec. 1943-1946.)

Every lawyer must realize that procedures must vary accord-
ing to the nature of the things to be governed. A proceeding in
attachment against an absconding debtor must ex necessitate
rei vary from that of a suit of ejectment for land.

THB SETTLED MEASURES OF LAW FOR THE PROTECTION OF RIGHTS MUST
BE OBSERVED.

A proceeding in libel against a piratical ship must vary from
a proceeding for the partition of an estate or for enforcing
in equity a resulting trust. So Story adds that “ due process

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of law” in each particular case means such an exercise of the
powers of government as settled maxims of law permit and
sanction, and under such safeguards for the protection of the
individual rights as those maxims prescribe for the class of
cases to which the one being dealt with belongs. In short,
then, we must deal with these cases of interstate transportation
according to their kind, using such instrumentalities, observ-
ing such mechanisms, using such safeguards, as properly, nat-
urally, customarily apply to the conditions and interests which
we deal with and directing them to the protection of all indi-
viduals and all corporate rights involved.

JUDICIAL REVIEBW OR APPEAL, OR BOTH, IN EQUITY. j

Let me now advert to the application of these general princi-
ples and bring them to bear upon the question which has been
here raised. That question is twofold. Shall we provide in
this bill for the juridicial review or a judicial appeal from the
action of the Interstate Commerce Commission in a given case?
Are we obliged to do it or otherwise leave the bill in unconstitu-
tional form? I share in the opinion that it is wisest and best to
provide for either a judicial review or appeal, but at the same
time I do not doubt that if no judicial appeal or review were
provided for, the system of equitable jurisdiction which has
been administered with reference to such cases for at least
thirty years would prove sufficient to comprehend and to secure
to all parties in interest every right to which they may justly
lay claim. .

COMMISSIONS AND COURTS BOTH LIABLB TO ERROR.

When a passenger or a shipper has brought a case of alleged
wrong before the Interstate Commerce Commission, that body
may decide in favor of him or against him. It is just as liable
to err as a court, or if not so, it would be only because the
Commissioners are more apt to be more familiar with the intri-
eacies and bearings of rate questions than courts are. The men
who constitute the Commission are likely to be and are assumed
to be upright and honorable men. As a rule also, judges are
likewise ; and if there be any difference between judges and the
Interstate Commerce Commission with respect to liability to
err, there is a certain degree in favor of the lesser liability, in
so far as the law is concerned, in favor of the judges, from the
fact that they must be technically at least learned in the law,
and are more apt to be trained and versed in that profession. |

Now, suppose the Interstate Commerce Commission decides
against a shipper or a passenger, of whosoever may claim that
the transportation company has acted with error. No matter
what the shipper or passenger may lose, he is at the jumping-
off place and is done with unless he may appeal to a court.

Suppose that there should be such a decision against a cor-
poration, and the corporation goes off with a sense of griev-
ance—and the side that goes off is apt to go with a sense of
grievance—is it wisest and best for the people of this country
to leave the matter solely with the Interstate Commerce Com-
mission? Men are more careful and painstaking when a review-
ing body may scrutinize and pass upon their work.

THH EXISTING JURIDICAL STATUS. ;

But, Mr. President, I apprehend that we are foreclosed from

the consideration of that subject by the juridical status of this
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27

ease. As an original question, it may have been wisest and best
to have reposed the whole subject of freight making in the
hands of an expert and honorable commission, who would study
that single subject continuously and make themselves thor-
oughly conversant therewith; but we do not do it, and the
courts have established a system of equitable review. We
have the same power to do it that the States have with respect
to State charters, and that the country has with respect to Fed-
eral or national charters to repose such power in the directors
of railroads. No director of any railroad has any natural right
to fix freight or passenger tolls on a public highway. There
has not been a day in the history of this country since a rail-
road was run that the tolls of that railroad were not fixed
under powers delegated by the State legislatures or under
powers delegated by the Federal Government. The cor-
poration itself had no power whatsoever save what the State
gave it in the one case, and the Federal corporation had no
power, nor have its directors any power, nor have its officers
any power, save such as were granted by Congress.

If Congress could grant to the corporation the power to make
tolls and to directors to act for them in making tolls, it has the
same power to grant to commissions to make tolls.

Then, Mr. President, when they grant the power to prescribe
tos according to the certain standard of reasonable and just
tolls, why may they not close the matter there and let the Com-
mission’s judgment stand for good and all?

PUBLIC AND PRIVATE CORPORATIONS ; AND CORPORATIONS OF PUBLIC
SERVICH IMPRESSED WITH A PUBLIC USH.

Mr. ALDRICH. Will the Senator allow me to ask him a
question ?

Mr. DANIEL. Certainly.

Mr. ALDRICH. I assume the Senator would also claim that
the directors in any corporation would have no powers except
such as were granted by a State or by the National Govern-
ment?

Mr. DANIEL. Why, of course.

Mr. ALDRICH. The Senator, I suppose, does not mean to
have us infer from that that either a State government or the
National Government would undertake to say what private
corporations should charge for articles of merchandise, or how
they should conduct their business?

Mr. DANIEL. Mr. President, the consideration of private
corporations has no more to do with the subject we are dis-
cussing than has the man in the moon, and the Senator might
as pertinently ask me as to whether or not I consider——

Mr. ALDRICH rose. :

Mr. DANIEL. Let me answer the question, please. Just
wait a little while until I answer. The Senator might as per-
tinently ask me whether I consider that the moon is made of
green cheese. The transportation corporations of this coun-
try are neither public nor private corporations. A public cor-
poration is one that is solely organized for public purposes,
such as a city, a town, a county. That is a public corporation.
A private corporation is one that is solely organized for pri-
vate purposes, such, for instance, as a corporation to sell green
groceries or books. A transportation company or common car-
rier is in the nature of both a public and a private corporation,

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public in the sense that it has granted to it the State or Fed-
eral power of eminent domain, that it is authorized to take
the realty of the citizen in invitum and appropriate it to its
own use, and, in the next place, because it exercises a public
calling which its charter has authorized it to pursue, either by:
the State or by the nation. That is the difference.

Mr. ALDRICH. Mr. President——

The VICE-PRESIDENT. Does the Senator from Virginia
yield to the Senator from Rhode Island?

Mr. DANIEL. Yes. sir; for a question, but I would like to
get on with my discourse.

Mr. ALDRICH. I was not about to ask a question, but I
was about to state the reason why I asked the question which
I did.

The Senator was proceeding upon the theory that directors
of railroad corporations have no rights except those given them
by the Government, and therefore that the Government could
transfer the powers of railroad directors to a commission of its
own creation. He made no distinction, and apparently the sole
reason was the fact that the corporation existed by reason of
national action or State action, and therefore we could under-
take to control all of its affairs. He did not then make the dis-
tinction which he has since made between what he calls pri-
vate corporations and railroad companies, which I supposed
be would make.

Mr. DANIEL. Some of us can not say all we are thinking
in one sentence, and we apprehend, as a rule, that gentlemen
who are hearing that sentence understand its connection. I
have no doubt a little reflection would have brought these same
thoughts to the mind of the Senator.

Mr. ALDRICH. I was afraid the Senator might be led into
the same style of argument of which he accused the Senator
from Pennsylvania a few minutes ago. He is a great lawyer,
and he is speaking ex cathedra upon these subjects. I was
afraid somebody might hear his remarks or read them and
conclude that he thought the Government of the United States.
having created private corporations, it could appoint commis-
sions to control their business.

Mr. DANIEL. I am speaking, Mr. President, on one subject,
on the subject of the corporations to conduct commerce between
States—public-service corporations—that offer themselves as
carriers for public patronage, that have exercised the right of
eminent domain in the State and could get it from the country
for public use. If the Senator will read, after it is printed.
what I have said and should find that I have run off the track
and made too broad an assertion, I would be very glad to
correct it.

I was merely defining what I conceive to be the status of
these corporations in order the better to apply to questions
before us a consideration of what is due process of law with
respect to them in this case. I will turn at once now to that,
and to a differentiation of the juridical cases and those which
are administrative in their nature.

THE JURISDICTION OF FEDERAL COURTS AND THE INJUNCTION.

It is proposed, Mr. President, to recognize in this bill the
right of a carrier which has been subjected to a rate to which it
was opposed by the Interstate Commerce Commission to file

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29

an original bill in equity in a circuit court of the United States,
and thereby to set aside the rate fixed by the Commission. It
is contended that it would be appropriate after the Commission
had fixed the rate to withhold from the power of the circuit
court the legal right to issue an injunction and stay the appli-
eation of the rate prescribed by the Commission until the whole
case was fully heard.

I am not permitted by my own reading of cases upon this
subject to follow what might be the bent either of my own
preference or my own opinion. The juridical status of any
legal question is as much a fact as if it were composed of so
much matter which could be weighed or measured. As I read
the decisions of the Supreme Court of the United States, and
there are not a few of them, it practically holds that when a
rate has been fixed by any commission acting under Congres-
sional power, the court of equity is open for that rate to be
brought in question by any party in interest who has suffered
by its infliction, and that it is appropriate under old and hoary
principles of equity jurisdiction to issue an interlocutory in-
junction and hold, the whole matter in abeyance until the sub-
ject is completely investigated and adjudicated.

Finding many decisions to this effect and finding that this
practice has been observed in many cases from States in which
the actions of State legislatures and State commissions have
been brought to the bar of equitable consideration, I am obliged
to recognize that such is the established equity practice in this
country, and such’also is the settled view of the Supreme Court
of the United States.

THE INJUNCTION OLDER THAN MAGNA CHARTA.

The injunctive process of the court of equity is a very ancient
process, older than Magna Charta. Mr. Spence, in his great
work on equitable jurisprudence, finds, as he says, the first
introduction of the injunction in the reign of Henry Beauclere,
the annual date of which is not given, but it was between 1100
and 1136, the period of his reign. From that day to this injunec-
tion has grown. It was borrowed from the Roman law, the in-
terdict of the old Roman pretor, and, like the great body of the
refined and conscionable principles of equity jurisprudence, it
was ingrafted upon the narrow though manly and self-assertive
jurisprudence of the common law by importation from the rich
and fertile judicial system of Rome, the greatest nation of an-
tiquity.

Mr. BAILEY. Will the Senator from Virginia permit me to
ask him a question?

Mr. DANIEL. Certainly.

Mr. BAILEY. Does the Senator from Virginia hold that not
only the processes and writs and practices of the court of chan-
cery in England were adopted, but that the whole body of equity
jurisprudence was adopted by the Constitution of the United
States?

Mr. DANIEL. Mr. President, the Senator must let me an-
swer, perhaps, by paraphrase. I do not hold that this country
or this Congress is held down to any particular practice of any
former generation whatsoever, saving only what is embodied in
the Constitution of the United States. I have endeavored to
define as clearly as I could in a previous portion of my remarks
that if the new statute or amendment of existing law takes

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30

place so as to preserve in vitality and vigor a complete remedy
to the person who has an ancient remedy, it is enough. I will
illustrate, if the Senator will withhold his question a little
while, in what limitations I express this view and why I fear
the danger point would arise if his amendment were adopted,
and also how I would respectfully suggest that some of the
danger in that point might be avoided.

Mr. BAILEY. Mr. President——

The VICE-PRESIDENT. Does the Senator from Virginia
yield to the Senator from Texas?

Mr. DANIEL. Certainly.

Mr. BAILEY. I meant to indicate to the Senator the diffi-
culty that would arise if we hold that Congress is powerless
to modify the practice of proceeding or writs of a court of
equity, because it must necessarily follow, then, that the great
principles of equity jurisprudence are beyond the control of
the Congress. I hardly think that any Senator would be willing
to go that far. To say that we can not change the practice or
processes, and yet that we can abolish the rule of decision, seems
to be a very curious contention. 2

But I waive that aside, in view of the Senator’s answer, and
I ask him if he will be good enough to lay before the Senate
any decision which holds that intermediate process is necessary
to the due process of law? I heard him quote, during the course
ot his remarks, Webster’s famous definition of the law of the
land, which, as I recollect now, was a part of his address to
the court in the Dartmouth College case. He’ described it as a
system under which the matter is heard before it is decided.

So far as I am informed, I do not believe the Senator can
find any cases which hold that intermediate process is essen-
tial to due process of law. I am glad, however, to see that
the Senator from Virginia abandons the objections offered by
others to my amendment and puts it upon the due-process
clause of the Constitution instead of the judicial clause.

Mr. DANIEL. Mr. President, I am undertaking to develop
a conception of this case which requires a succession of ideas
and not the summary utterances of a single one. While inter-
ruptions may be naturally provoked by a certain unqualified
utterance of a speaker, it is very often the case that if he were
to unfold the whole of his thought the interruption would itself
be answered. Do not suppose for a moment that I am com-
plaining, Mr. President. I consider that the Senator’s exposi-
tion of the powers of Congress with respect to the inferior
courts of this country, which it is authorized by the Constitu-
tion to create, was a masterly and unanswerable exposition of
that great theme. I will not say that I heard every word of
it; I will not say that I have read every line of it; but its
substantive thought utters my convictions not less than his.
Nevertheless, there is an honest and sincere difficulty in my
own mind in reaching the conclusion that it is wisest and best
to prohibit the issue of an interlocutory injunction or a sus-
pension of the rate until a court has passed upon it.

If I were at this moment called upon as a judge to decide that
question, I should hesitate and I should desire to study it
further. It is one of the most delicate subjects of our whole
jurisprudence; and until I had heard it discussed pro and con
and had had the very best light put before my mind that could

6773
31

be adressed to its consideration, I should hesitate to express my
own judgment. The leaning of my mind, just as is that of the
Senator from Texas, is against political power in courts, and
many of the decisions of the Supreme Court on this great sub-
ject I have read with much comfort and pleasure, because the
judges have time and again declared that in no case would
they set aside the action of a commission unless it was palpable
to their minds—plainly and clearly palpable—that the Commis-
sion had in effect taken property without full compensation. It
is apropos of that declaration, which is one of the fundamental
principles of the Supreme Court upon this subject, that I feel
that there arises a danger in this case, to express it mildly, of
undertaking by Congress to say that a remedy which has been
elmployed for thirty years, which has become customary to the
jurisprudence of the United States, which is habitual in its
exercise before the courts, and which the courts have employed
with the approbation of all their judges—I am afraid that if
that were to go before that same court, as it naturally would,
they would say that in this case the carrier has not had due
process of law, and then, Mr. President, what would be the
situation of this controversy? I do not doubt that you can
make the general jurisdiction of the circuit court, or of any
other court which Congress creates, what in your wise judg-
ment may be your pleasure, but the case before us is not one
as to the jurisdiction of the courts so much as it is what are
you going to do with a case, by subtracting a case or a par-
ticular class of cases from a general jurisdiction which you have
declared to be wise and just? It is a narrower question we
are now discussing than the general jurisdiction of courts.
_It will be observed when we read certain other decisions
that however it may be with administrative matters before
the executive department of this Government, it has been the
habitual ruling of the Supreme Court, that with respect to
rates fixed by a State legislature or rates fixed by a State
commission, neither the legislature nor the commission can
make those rates conclusive, but that a United States court has
the right, under the Constitution of the United States and
through the process of a bill in equity, to bring the parties
before the bar of a United States court, and, if such rate is
found to be unjust, to set aside that rate as one that lacks in
due process of law.

Nor can it be doubted that the same jurisprudence will be
exercised by the United States courts as to matters of the
United States. That is a juridical status that looks Congress in
the face. Now, then, what has the interlocutory injunction
to do with it? What is an issue in an interlocutory injunc-
tion? The issue of an interlocutory injunction is never a mat-
ter of right, but rests in the sound discretion of a court. In
order’ to obtain an interlocutory injunction a plaintiff must
show one of several things: First, either that there is no doubt:
of the wrongful nature of the act sought to be enjoined. Sup-
pose it be true that it is obvious to a chancellor, as soon as
he looks at a bill in equity, that a wrong has been done; is
it wise for Congress to say that he shall not relieve the
plaintiff? Second, or that his own claim of right has been ac-
quiesced in without question for a long time, or that the in-
jury which will result to himself from. the refusal of the

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injunction will be very great and that to the defendant, from
the issue thereof, very slight. Otherwise an interlocutory in-
junction will be denied.

I take that from a short summary in Foster’s Federal Prac-
tice, volume 1, page 233.

THE STATUS WHEN THERD IS A CONFISCATORY RATE ON THF CARRIER ON
ONE SIDE AND A HBAVY FINE ON THE OLHER. :

Let us put ourselves in the attitude of a carrier suitor in a
United States court in a case where the Interstate Commerce
Commission has fixed a rate which it charges is confisc..tory
of its property and does not accord to it the just compensation
which is required by the Constitution of the United States.
By another provision of this bill, section 16, that carrier is
charged $5,000 a day as a fine while he is suing in court to
ask the court simply to let matters stand in statu quo until
he can be fully heard. Unless he has instantly adopted and
put in force the rate to which he objects, $5,000 fine per day
is accumulating upon him; and when, on the other hand, the
difference between what the carrier considers a righteous rate
and what the Interstate Commerce Commission considers a
righteous rate may amount to another $5,000 a day going out
of his pocket. Is it wise, is it just, is it equitable, uncon-
ditionally to put that individual, be it corporation or man,
under the pitiless storm of an incessant fine and subject him
at the same time to an incessant loss until such time as every-
body may be fully and finally heard and denying him the cus-
tomary process of the court for his protection? It does not
strike my own mind, Mr. President, as wise and equitable to
do this.

JUDGE CURTIS’S OPINION IN 18 HOWARD’S RBPORTS, REVENUE CLAIMS.

I am further disturbed in my meditations on this subject
by reading some of the decisions of the United States Supreme
Court, out of which I deduce what is regarded by the courts
of this country as the difference between due process of law
in purely administrative cases and due process of law in those
cases of a peculiar kind, which require juridical process to their
finality. I turn, Mr. President, to the case of Murray’s Lessee
et al. v. The Hoboken Land and Improvement Company. It is
in 18 Howard’s Reports, 272.

It was an action of ejectment. Both parties asserted title
under Samuel Swartwout, the plaintiff, by virtue of an execu-
tion, sale, and deed made on judgment obtained in the regular
course of judicial proceedings against him and the defendant,
by a seizure and sale by the marshal of the United States, under
the distress warrant issued by the Solicitor of the Treasury,
under the act of Congress of May 20, 1820. Let it be noted that
the Solicitor of the Treasury issued the distress warrant, not
a judge. The Supreme Court of the United States unanimously
held that the power exercised was executive and not judicial,
and that the issue of the writ and the proceedings under it were
due process of law within the meaning of the Constitution.

Judge Curtis gave the opinion of the Supreme Court. It is
rare than one can read a more minute, learned, or more care-
fully considered opinion. It enters into the sinuosities and ir-
regularities of our jurisprudence and into the diversified forms
of process of law. In holding that the distress warrant was
due process of law in the taking and selling out of real estate

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33

on executive action, he reaches that conchusion by a profound
study of the history of English and American jurisprudence.
It was a Government claim which related to the revenue which
had in English jurisprudence the peculiarities which belong to
the summary process that pertains to the revenues of the Crown.
The judge said:

Tested by the common statute law of England prior to the emigra-
tion of our ancestors, and by the laws of many of the States at the
time of the adoption of this amendment, the proceedings authorized
by the act of 1820 can not be denied to be due process of law when
applied to the ascertainment and recovery of balances due to the
Government from a collector of customs, unless there exists in the
Constitution some other provision which restrains Congress from
authorizing such proceedings.

So that you trace the due process of law in this case to the
fountain of the revenues of the Crown in England and of the
Government in the United States.

DUB PROCESS GENERALLY IMPLIDS A SETTLED COURSD OF JUDICIAL
PROCEEDING.

Now I read another sentence from this eminent jurist:

For, though “due process of law” generally implies and includes
actor, reus, judex, regular allegations, opportunity to answer, and a
trial according to some settled course of judicial proceeding.

I would underscore those words, marked as they were in
the language of this judge, that as a rule due process of law
required the regular hearing and the trial according to some
settled course of judicial proceeding.

Yet—

He said—
this is not universally true. There may be, and we have seen that
there are, cases under the law of England after Magna Charta, and
as it was brought to this country and acted on here, in which process
in its nature final issues against the body, lands, and goods of certain
public debtors without any such trial; and this brings us to the ques-
tion whether those provisions of the Constitution which relate to the
judicial power are incompatible with these proceedings.

WORDS OF CAUTION.

To avoid misconstruction—

Says the judge, and here come in words which I read with a
sense of caution and from which I take warning—

To avoid misconstruction upon so grave a subject, we think it proper
to state that we do not consider Congress can either withdraw from
judicial cognizance any matter which, from its nature, is the subject
of a suit at the common law or in equity or admiralty, nor, on the other
hand, can it bring under the judicial power a matter which, from its
nature, is not a subject for judicial determination.

Ask the question, “Is this question of a rate as confiscatory
of property made by a commission now—if so, how long has it
been—the subject of a suit at the common law or in equity or in
admiralty?’ Unquestionably, Mr. President, the true answer
to that question must be that to-day and through the whole
course of the jurisprudence of the United States Supreme
Court on this subject this is a case held to be peculiarly appro-
priate to equity. Yet it is proposed to paralyze the strong arm
of equity while the law is inflicting a penalty at the rate of
$5,000 a day upon the one hand and while, if there be wrong,
the pocket is open and pouring out upon the other.

Mr. President, in this great opinion, which is basic of nearly
all the decisions which have since ramified through the Depart-
ments and the courts, I think the judge takes to pieces this

6773-——_3
34

whole subject and clarifies it with the illuminations of a learned,
honest, and just mind.
At the same time—

Says Judge Curtis—

At the same time there are matters involving public rights which
may be presented in such form that the judicial power is capable of
acting on them and which are susceptible of judicial determination, but
which Congress may or may not bring within the cognizance of the
courts of the United States, as it may deem proper.

That is the second class of cases.

The third class he thus refers to:

Equitable claims to land by the inhabitants of ceded territories”
form a striking instance of such a class of cases, and as it depends
upon the will of Congress whether a remedy in the courts shall be
allowed at all in such cases, they may regulate it and prescribe such
rules of determination as they may think just and needful. Thus it
has been repeatedly decided in this class of cases that upon their
trial the acts of executive officers, done under the authority of Con-
gress, were conclusive, either upon particular facts involved in the
inquiry or upon the whole title.

* * * * * * *

The fourth class he thus points out:

It is true also that even in a suit between private persons to try
a question of private right the action of the executive power, upon a
matter committed to its determination by the Constitution and laws,
is conclusive.

Thus it will be seen that there are four classes of cases to
which the Supreme Court in the case I am considering refers.

1. Those in which “due process of law” includes juridical
process—that is, cases which are the subject of suits at com-
mon law or in equity or admiralty. These are the cases de-
clared to be unwithdrawable by Congress from judicial cog-
nizance.

2. Matters involving public rights, which Congress may place
within judicial cognizance or not as it may deem proper.

3. Cases in which Congress may grant a remedy or not as
it sees fit and prescribe such rules of determination as it con-
siders just and needful.

4 Certain matters of private right which Congress may sub-
mit to Executive determination conclusively.

THE CLASS OF CASES TO WHICH THE FIXING OF A RATE BELONGS.

Now, Mr. President, I have examined this proposition to take
away the right to issue interlocutory injunctions from a court of
equity pending that time when a rate is hanging between the
decision of the Interstate Commerce Commission and the in-
vited further decision of a court.

Originally a rate is fixed generally in this country by the di-
rectors of a corporation. If that rate be an erroneous and op-
pressive rate, everybody who has that rate imposed upon him
for passenger travel or for freight traffic is wronged; but, Mr.
President, there is not a moment after that wrong commences
when the courts in this country are not open to the citizen to
challenge the wrong and to assert his remedy against it. As
soon as the wrong, if it be one, in interstate commerce is chal-
lenged, the Interstate Commerce Commission investigates it.
When it decides that the rate was wrong and puts in another
one, the process of law is in course of ‘progress toward maturity,
and the corporate property and the use thereof and the compen-
sation therefor are matters in a certain sense under the sur-

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385

veillance and protection of the court, or at least within reach
of a remedy.

It is almost as ancient as the hills that when property is in
litigation and in course of legal procedure a court of equity
will hold the scales in hand between the parties and keep
things in statu quo until it is ready to make up its mind upon
the subject, and say which way the right or the wrong shall go.
The interlocutory injunctions which are issued in rate cases
are predicated upon doctrines almost as old as equity, and if
you intend to exercise the equitable jurisdiction and leave the
bill in equity as the proper procedure in this case, I can not see
my way clear to maim the hand which is lifted to apply the
reniedies of equity, or to attempt to shear the court of any of
the rights and discretions which properly belong to the chan-
cellor in such a case. I do believe, however, that the nature of
this case is such that a better way may possibly be devised,
and one which would lead to swifter decision, which, indeed, is
the great end which all are seeking to subserve through the
processes that are being devised.

PHD LAW’S DELAY.

I have read of a case quoted here in which there was a loss
of $300,000 on one side before the case could be heard. Mr.
President, undoubtedly the great evil that underlies the double
jurisdiction of Commission and court arises from the fact of
the law’s delay. Delay is destructive of equity. Rates are like
perishable goods. A rate is of to-day. How it would fit three
months hence who can tell? What it may be a year hence who
can tell? The danger is that the wrong will have been accom-
plished before you get a hearing of the voice that appeals for
right, and that conditions are so fluctuating and changeable
that it is very difficult in any event to reach a rectification.
CARRIERS FREQUENTLY PUT ONLY PART OF THEIR TESTIMONY BEFORD THA

COMMISSION.

Now, the present system is that when the rate is fixed by the
Commission a bill is filed in a Federal court. What happens?
The carrier goes into that court and makes the case entirely
de novo. I am informed that out of some thirty-two cases de-
cided by the Interstate Commerce Commission, while some
twenty-six of them were overruled, it was by new testimony
which went to the court and which did not go to the Commis-
sion. I have no doubt that the Commission has suffered in
public estimate and certainly has undergone most unjust criti-
cism from the fact that the cases decided by the court, which
took different* views from the Commissioners, were wholly dif-
ferent cases, made up in the court after the Commission had
passed upon the subject. In several of these cases in the United
States courts the judges have commented upon the fact and
have rebuked the practice of railroad companies making new
cases in the courts after they have made an imperfect showing
and but a partial presentation of their case before the Com-
mission.

Now, then, delay is the great trouble to be obviated, if pos-
sible, and the partial hearing before the Commission, ante-
dating full hearing before the court, has been one of the
processes by which this delay was increased and by which
additional wrong was done. It is the policy and duty of Con-

6773
36

gress, and it should challenge the best efforts of constructive
statesmanship to devise the best plan, regardful of everybody’s
rights, to get the case from the Commission into the court and
to get a speedy hearing. If Congress can accomplish that great
result in this bill it will be the author of a piece of remedial
legislation which will be useful to all the good citizens of this
country and a pillar of righteous, equitable, and just Federal
jurisprudence.

CARRIERS AND OTHER PARTIES SHOULD BH REQUIRED TO PUT IN ALL THEIR

EVIDENCD BEFORH THE COMMISSION.

It is with diffidence, sir, that I make any suggestion upon the
subject, and yet these thoughts have occurred to my mind as
thoughts which perhaps might be useful to one who would
undertake to accomplish this end. The suggestion that I would
make would first be this: Require in this bill that the carrier
and all other parties in interest who have a case before the
Interstate Commerce Commission shall adduce all the evidence
in their behalf on the hearing before the Commission. Why
not? Is not that right? Leges vigilantibus, non dormientibus
perveniunt.

That is the way the wise jurisprudence of old Rome dealt
with such matters. The laws are ready to help people who are
awake, but not those who sleep upon their rights. Congress have
provided at great cost to the people of this country an able
tribunal to hear these cases. Parties in interest are duly chal-
lenged and notified to make known their minds and the state
of facts respecting a question of great public interest, and the
public as well as individuals have the right to require that
the truth be fully told and not partially told. Therefore, require
it to be told and compel them to tell it when they are sum-
moned there.

ONLY SUCH EVIDENCE AS COULD NOT HAVB BEEN OBTAINED BY DUE

DILIGENCE SHOULD BE HEARD BY THE COURTS.

Second. Require that no other evidence as to any rate fixed by
the Commission shall be heard by any court in any subsequent
proceeding saving only such as could not have been obtained by
the reasonable diligence of the party offering the same prior to
the final order in such case entered by the Commission. There
would then be no danger of anybody being taken by surprise.
There would be no danger of anybody being curtailed in right.
There would be no danger of anybody being shorn’ of either
legal or equitable remedy. Then, why not? That is due process
of law, because it preserves in complete integrity, in unmaimed
and in perfect stature, the complete right of a man to be heard
both before the Commission of original investigation and to
have his case heard again before a court of his country. That
deprives him of the opportunity to do injustice in trifling with
the laws by making an imperfect showing in the first place
and exposing his full hand in the second. That is econoinical,
in that it does not repeat the testimony and procedure, and it
guards against the possibility of wrong by allowing out of grace
the liberty to introducé any new testimony which could not in
diligence have been obtained before.

A COPY OF THH RECORD BEFORE THE COMMISSION SHOULD ACCOMPANY
THE BILL OR OTHER PROCESS IN COURT.

Third. Require, in the next place, that the copy of the record

before the Commission, with all the testimony written and
6773
37

taken down from verbal recitation, shall be presented and made
a part of the entire petition, whether you call it appeal, review,
or bill to the upper court.

There, Mr. President, when you do that you have withheld
one of the stimulants to interlocutory injunctions. If you file a
bill in equity ordinarily to review some past procedure, you are
not obliged to put the record of that procedure in your Dill.
You may put some affidavit of your own or any suggestive thing
that you deem proper. The court will look upon the face of
what you present. But if you require the complainant in the
bill, appeal, or petition of review to put with his papers the full
record of what was done before, you at least guard against a
partial presentment of the case to the chancellor who will act
upon it. ‘

NOTICH OF APPLICATION FOR INJUNCTION.

Then, Mr. President, the suggestion by the Senator from
North Carolina [Mr. OveRMAN] as to requiring that notice be
given—five days is his suggestion—before any application for
injunction is made would also be a just expedient and within
the range of the proprieties of process to give the adverse party
a full opportunity to do what might be necessary to defend
his interests. And thus, Mr. President, you would reduce to a
minimum the friction between two bodies, which ought to be
made to work as nearly in affinity as the case may be and
which should not be put in rival relations to each other. Thus,
too, would be avoided the opportunities of turning down the

- Commission by new evidence purposely withheld from it and
afterwards used in court to the unjust injury of its reputation
and to the delay of justice. ,

These, Mr. President, are some of the suggestions which have
occurred to my mind. ‘They obviate, in a measure at least, the
danger that might arise were Congress to withdraw a remedy
now known and now practiced, ancient, based on sound prin-
ciples, and in vogue in the courts, without substituting some-
thing equally substantial and less liable to abuse than it has
proved to be.

Wednesday, May 2, 1906.

Mr. DANIEL. Mr. President, in the case of Railway Com-
pany v. Gill (156 U. S. Rep., p. 666), the Supreme Court, citing
Mr. Justice Miller, uses the following language:

The remedy for a tariff alleged to be unreasonable should be sought
in a bill in equity dr some equivalent proceeding wherein the rights of
oe as well as those of the company complaining, can be pro-

Two things have been determined by the Supreme Court on
this subject:

First. That the question of the justice or reasonableness of
a rate requires juridical process to determine it.

Second. That the juridical process which now exists and is
proper in the premises is a bill in equity, “else some equivalent
proceeding.”

HOW THE ABOLITION OF THE INTERLOCUTORY INJUNCTION WOULD LBAVE
THE RATE QUESTION.

The amendment to abolish the interlocutory injunction leaves

the question of a rate suspended in the air, denied the full
6773
38

remedy of equity which is there referred to, and with no
equivalent proceeding to substitute it.

In the course of his observations on this subject in the debate,
the Senator from Texas [Mr. BatLEy] said:

The only possible way to protect the Commission and to protect
the people against frivolous suits instituted in bad faith is to pro-
vide that the court can not set aside the rate until the question has
been fully adjudicated.

Two troubles suggest themselves to my mind about this
declaration. They are practical difficulties and are hard to
get over.

First. If a court can not act by interlocutory injunction on
the question whether a rate is just until the whole case is fully
heard, great delay may ensue in the application of any remedy.
Pending that delay, the irreparable injury which has invoked
equity jurisdiction may come to pass and be largely consum-
mated.

Second. If the jurisdiction of the court be nullified for any
period and if its preventive hand be stayed by positive law for
that period, obviously there is created a wrong without a
remedy. That wrong is a constitutional wrong. That wrong
consists in the continuous, and for the time uninterrupted, tak-
ing of property without just compensation which is correspon-
sive to its use. Nature abhors a vacuum. So does justice.
The equity devised to fill the vacuum being denied, the vacuum
remains.

The weak spot in the argument for making the order to cor-
rect delay lies in the fact that the Supreme Court, if it adheres
to its present views of equity jurisdiction, would ignore the act
of Congress, unless a judicial revolution takes place.

I have been asked the question, Mr. President, if I conceive
that the jurisdiction of the high court of chancery in Great
Britain was made a part of the due process of law of this coun-
try. My reply was it was not. Nevertheless it is also true that
the general principles of equity jurisprudence as known to the
high court of chancery were made a part of our jurisprudence,
and are always put in play when without them thereis no remedy
with which a party may defend a right held to be one under the
protection of the juridical process of the country.

Observe, Mr. President, I do not say all rights. There are
many rights of the citizen of the most sacred character which
are disposable by administrative process; but when there is a
right the disposition of which can not be effected without
juridical process, and when the law has not provided a complete
and adequate remedy equity jurisprudence will always asscrt
itself; and in that fact lies the great place which equity juris-
prudence has obtained for itself in the judgment of mankind
and in its adoption as a part of our State and Federal institu-
tions.

GENERAL PRINCIPLES OF EQUITY.

The general limits of the equitable jurisdiction of the Federal
court, as has been stated time and again, are those that pre-
vailed at the time when the Constitution was adopted and were
recognized by the high court of chancery in England. It is pro-
vided in the Revised Statutes of the United States, section 723,
that suits in equity shall not be sustained in the courts of the
United States in any case where plain, adequate, and complete
remedy may be had at law. This section is regarded simply

6773
39

as declaratory of the law as it existed when the Federal Consti-
tution was adopted. The Supreme Court of the United States
has said on this subject, in the case of the Mississippi
Mills v. Cohn (150 U. S., 206), that the inquiry to be made to
ascertain whether or not a particular case is cognizable in equity
in a Federal court is this: Whether by the principles of common
law and equity, as distinguished and defined in this and the
mother country, at the time of the adoption of the Constitution,
the relief sought was one obtainable in a court of law, or one
which only a court of equity was fully competent to yield.

It is obvious, Mr. President, that in the state of the law on
this subject as we find it to-day this remedy of the bill in
equity and the injunction process is one which only a court of
equity is competent to yield; and it is obvious also that if you
paralyze the interlocutory injunction, which is the hand that it
uplifts in order to yield it, you strike down and withdraw for
that whole period the protecting hand of any court of the
United States.

Now, Mr. President, this interlocutory injunction in this par-
ticular case belongs, as it would seem to me, to that class of
cases to which Judge Curtis referred in the great leading
Hoboken Land Company case, in 18 Howard, when he said
that he would not contend that cases could be withdrawn from
equity jurisdiction. I venture to say, though I can not declare
that I have investigated every one of the cases which have been
cited here in debate, that when you examine the record of
those cases you will find that where Congress has eliminated
any part of an ancient process their action has been sustained
because the party who had the right to the benefit of that
process have been left with full and adequate remedies, which he
could assert instead thereof. This is notably true in that case
which has been cited here, I believe, by several of the debaters
on this subject—the casé of Bank of Columbia v. Oakley (4
Wheat., 235)—-where, in an old statute passed five years after
the revolution, an execution was allowed to be issued by a bank
in certain cases, and Congress subsequently withdrew the right
to issue that execution. The court said Congress had all right
to give the execution and had all right to take it away, but
after it had taken it away it left the party in full possession
of his rights at common law, and they were perfectly effective
to secure and protect him. But if you deprive in this case the
party who is entitled thereto under the settled system of pro-
cedure by interlocutory injunction, which has perfected itself in
our courts, you leave that party naked and remediless to cor-
rect the intervening evil.

SHIPPERS AIDED IF BETTER PROCEDURD CAN BE SUPPLIED.

Now, Mr. President, I do not agree with any of those gentle-
men who have asserted that the only possible way of protecting
the people—the shippers, the passengers; that mass of people
to whom we should have a clear eye and should endeavor to
protect by every means in our power—is by stopping the inter-
locutory injunction. The equity procedure in this case’ has
grown out of the fact that Congress has not provided any other
procedure which would reach the evil complained of. It was
wise in the eminent judge, who used the sentence with which
I began my remarks, to say that that proceeding or some
equivalent proceeding was the system that should be followed.

6773
40

AN EQUIVALENT PROCEEDING TO THH BILL IN EQUITY CAN BE PROVIDED.
When the Interstate Commerce Commission has got through
with its work and its administrative duty is completed, it is
the consensus of this body, if I may judge by the many ex-
pressions of opinion which have been made by gentlemen in
debate, that there should be a review provided for. It was
assumed in the bill and justly under the decision which I have
read, and under many others which might be quoted, that equity
would intervene. So it would. But there is no difficulty, ac-
cording to our American systems of jurisprudence and accord-
ing to the elasticity and inventiveness of Congressional legisla-
tion, to provide any other remedy which you please which will
reach the case and make itself perfect to guard all the rights
that are involved therein.
a SUITABLE REMEDY PROPER TO THE NATURD OF THE CASB AND SANCTIONED
BY USAGH SUFFICES.

There is a notable case about due process of law in the
State of Michigan. It is that of Attorney-General v. Jochim, 99
Michigan, 871. Judge Hooker, in that case, sums up the prin-
ciple which underlies due process of law. I will not read all
of this able opinion, but here is the sum of it in conclusion:

It is in all cases that kind of procedure which is suitable and
proper to the nature of the case and sanctioned by the established
customs and usages of the courts.

The kind of procedure which is suitable and proper to the
nature of the case and which has been sanctioned by the estab-
lished customs and usages of the courts of the United States
ever since this became a juridical question is the stretching forth
of the equitable act and the issuing of the interlocutory in-
junction to prevent intermediate wrong. But at the same time
that the courts have done that they have recognized the fact
that it was within the power and within the discretion of Con-
gress, if they chose to do it, to provide any other more con-
venient, more flexible, or more suitable method that would sub-
stitute the equitable relief and equally guard and defend the
litigants.

APPEALS, WRITS OF HBRROR, BILLS IN EQUITY, WRITS OF CHRTIORARI, AND
PETITIONS FOR REVIEW.

Now, Mr. President, what forms might a measure emanating
from this body take? First, that of an appeal to any appro-
priate court. Doubt has been suggested as to every idea which
has been put forward as to methods of procedure in cases be-
fore the Interstate Commerce Commission. Appeal, it is true,
is borrowed from the civil law. It is usual in equitable cases.
It translates to the upper court the whole case.

Writ of error is a common-law writ, applicable in its methods
to cases before courts and juries in which common-law rights
have been litigated.

The writ of certiorari is another way in which superior courts
require the records of inferior ones to be brought before them,
and the learning on the subject is complete. It is a known sys-
tem, which is now fully in vogue and practice.

Then there is another method. It is one which has origi- .
nated out of our American concerns. I find an illustration of
it in an act of Congress of March 3, 1851. It is a petition for
review, and it is provided by section 9 of that act, which is
entitled “An act to ascertain and settle the private land claims
in the State of California,” that an appeal or petition of re

6773
41

view rather, to use the accurate word of the statute, will lie
from a decision of the three commissioners who settled the land
claims in California to the United States court, and that with
that petition the review should be a transcript of the whole
record of the case. That case was carried into the United
States Supreme Court without any objection on the part of
that body to this method of procedure.

I cite the section here that the method may be fully seen:

Src. 9. And be it further enacted, That in all cases of the rejec-
tion or confirmation of any claim by the board of commissioners, it
shall and may be lawful for the claimant or the district attorney, in
behalf of the United States, to present a petition to the district court
of the district in which the land claimed is situated, praying the said
court to review the decision of the said commissioners, and to decide
on the ey of such claim; and such petition, if presented by the
claimant, shall set forth fully the nature of the claim and the names
of the original and present claimants, and shall contain a deraignment
of the claimant's title, together with a transcript of: the report of the
board of commissioners, and of the documentary evidence and testi-
mony of the witnesses on which it was founded; and such petition, if
et by the district attorney in behalf of the United States, shall

e accompanied by a ae of the report of the board of commis-
sioners, and of the papers and evidence on which it was founded, and
shall fully and distinctly set forth the grounds on which the said claim
is alleged to be invalid, a ony, of which petition, if the same shall be

resented by a claimant, shall be served on the district attorney of the

nited States, and, if presented in behalf of the United States, shall
be served on the claimant or his attorney; and the party upon whom
such service shall be made shall be bound to answer the same within
a time to be prescribed by the judge of the district court; and the
answer of the claimant to such petition shall set forth fully the nature
of the claim, and the names of the original and Present claimants, and
shall contain a deraignment of the claimant’s title; and the answer of
the district attorney in behalf of the United States shall fully and dis-
tinctly set forth the grounds on which the said claim is alleged to be
invalid, copies of which answer shall be served upon the adverse party
thirty cave before the meeting of the court, and thereupon, at the first
term of the court thereafter, the said case shall stand for trial, unless,
on cause shown, the same shall be continued by the court.

There are several other cases, Mr. President—the cases of the
Cherokee Nation against Southern Kansas R. R., 185 U. S., 641,
the case of U. S. v. Duell, 172 U. S., 576, an appeal from the
Commissioner of Patents; and the Fossat case, 2 Wallace, 649,
are instances. Wherever Congress has been of opinion that it
could devise a method of procedure not strictly in the lines of
equity and not strictly in the lines of common law, but could
use the writs, petitions, and other agencies known to the law
to put a case decided by commissions, by boards, by depart-
ment officers, or others before the courts, there is no possible
constitutional objection to it; and it has been done in practice,
approved by the Supreme Court of the United States, and
acknowledged in at least three separate courses of procedure
which I have examined.

Now, Mr. President, it seems to me that if Congress desires
to do something that is practicable for the benefit of the ship-
pers and travelers of this country, to assure to them their
rights, and put into their hands the methods of defense which
they can promptly use, they should not leave it to equity to
beat its own pathway over a country which the law had not
explored, but should itself explore that country and should
then devise and adopt the methods of procedure and juris-
prudence which will best effectuate the remedy in view.

PROPER PROVISIONS FOR A REVIEW.

Provide a petition of review in the United States court, and

require, first, that all the parties put in their evidence before
6773
42

the Interstate Commerce Commission; provide, second, that no
other evidence shall be heard in a court thereafter unless such
evidence as could not have been obtained by due diligence until
after the Interstate Commerce Commission had disposed of
the case; third, require a copy of the record to be carried up
before the court which is thus appealed to; fourth, require that
notice be given—say, five days—by any person moving to suspend
or enjoin the action of the Commission; fifth, require that a full
bond be given, and see that that bond defended and covered
all the rights of the case before the party gets a suspending
order; sixth, require that the case shall be made a preferred
one on the docket and shall be promptly heard, and, seventh,
as far as practicable to do so, assure that hearing during that
period of time when the Commission's order is suspended by
itself and is not declared to be in force, covering the period
that might come thereafter by requiring a good bond to be
given.

Now, I should like to know upon what ground can such a
system as that be challenged? The right of due process of
law, fundamentally speaking, is the right to be heard fairly and
fully. Will it be said that the courts must take all the evi-
dence over again? Who more competent to take evidence in
such a case than the Interstate Commerce Commission, with
the lawyers of each side to superintend it? Will it be said
that they are not just as competent as any casual notary public
or commissioner in chancery or justice of the peace, who in
this State or that is the usual person for taking testimony?

I undertake to say that no more respectable, no more intel-
ligent, and no better informed commissioners for taking testi-
mony could be devised by law than the Interstate Commerce
Commission. To guard against mistake, and in the full grace
of generous law, any evidence that they had not put in and
could not have obtained by due diligence, let them put in. Does
anyone suggest that the courts would not permit this limita-
tion- upon testimony? Hardly, I think. But suppose the court
did, no damage would be done, for the court would simply
admit other testimony and take it de novo, and your statute
would not be set aside as unconstitutional, because it did not
foreclose the door or prevent the court from ruling, whatever
its conscience and its learning and its judgment might dictate
upon the subject.

SWIFT AND FINAL HBARING SHOULD BH PROMOTED.

Unless, Mr. President, we shall give attention to the subject,
avoid the delays which have brought the Interstate Commerce
Commission, unjustly in some cases, under criticism and re-
buke, put parties back, and so postpone their rights that the
case was virtually lost in benefit to them before it was heard,
this bill will multiply its present deficiencies and will be a
sorer disappointment to the people than it would otherwise be,
even with the many deficiencies which it contains.

The bill is far from a complete one; but if in this measure
we can secure the one thing that is obtainable, a swift hearing
before a competent tribunal upon that question in which the
tribunals all hold they must have the opportunity to hear—if
that is done, you will have positive and veritable progress in
the right direction.

6773
48

All reforms, Mi. Fresident, have always moved slowly. The
greatest difficulties in reforms are often found in the over-
eagerness of their advocates and in their desire to accomplish
everything at once. Any positive, firm step forward is a great
advancement, either in jurisprudence or in economics, and this
point has focused the attention and elicited the debate of the
best minds in the Senate over and over again, because they
realize that it is therein the people may be disappointed and
that it is therein they are looking for some relief and progress
in their methods of getting right before the tribunals of the
country. :

I do not dispute, Mr. President, and I shall not dispute, the
right of Congress to control the jurisdiction of the courts. It
is not true, as a general principle, that whatever either the
Senate creates or the House of Representatives or Congress
creates it can destroy. The power to destroy is not coeval with
or coequal with the power to create, and the second is not the
corrollary of the other, but with respect to the jurisdiction of
courts which the Constitution has committed entirely to the
jurisdiction of Congress, undoubtedly the Congressional power
to create is the power to destroy. Senators hold up their
hands in holy horror at the idea suggested to their minds that
Congress has the power to destroy the inferior tribunals of the
country. It is no new thing, Mr. President. They have had
that power ever since this Government was created, and they
have had the power to destroy the country, too, by taxation.
Any man who has a pistol in his hand has the power to shoot
another, but it does not follow that he is going to do it, and it
does not follow that Congress is going to destroy anything that
is wise and good.

There is no disposition, here, Mr. President, to destroy either
the general jurisdiction of the inferior courts or the courts
themselves. Congress has always treated, and continues to
treat, the courts with the highest respect and to make full and
generous provision for them. It has given their judges salaries
higher than it gives it own Members; it has amplified their
conveniences with libraries, and upheld them in the exercise
of their offices; it has made provision for the retirement of
judges on pay; and these suggestions of alarm or danger, it
seems to me, rather arise from the exigencies of argument than
from any composed view of the public situation or any alarm
for the good of the country.

But, Mr. President, the destruction of the courts or changing
the courts is an utterly and wholly different thing from en-
deavoring to declare how a court, whose general jurisdiction is
maintained, shall do or not do about a particular case or a
particular class of cases. I am apprehensive that, if the Con-
gress of the United States were to enact that a court of equity,
which has jurisdiction of the case, might still keep that juris-
diction, but should not exercise it in that particular case which
particularly invoked it, and then by so doing leave a wrong exist-
ent without a remedy—I am apprehensive that the courts might
say as to that particular item of statutory law, that it was
unconstitutional and left the case entirely without the due
process of law which is habitual and in constant practice in all
such cases as this,

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THE BXTENT OF JURIDICAL INTERFHRENCE AS TO RATES.

Now, Mr. President, I want to say something about reason-
able rates. In the case of Chicago and Grand Trunk Railway
Company v. Wellman (143 U. S., 339), the Supreme Court, in
answer to a suggestion that the legislature had no authority to
prescribe maximum rates for railroad transportation, through
Judge Brewer said:

The legislature has power to fix rates, and the extent of judicial in-
terference is protection against unreasonable rates.

There, Mr. President, in two lines and one sentence you have
the sum of equitable jurisprudence, apart from its practice, of
the United States Supreme Court on this subject.

In the case of Reagan v. Farmers’ Loan and Trust Company
(154 U. S., 397), Judge Brewer expressed pretty similar ideas
in this language:

The courts are not authorized to revise or change the body of rates
imposed by a legislature or a commission; they do not determine
whether one rate is preferable to another, or whether under all circum-
stances would be fair and reasonable as between the carriers and the
shippers; they do not engage in any mere administrative work.

JUST COMPENSATION THH SOLE ISSUH BEFORD THE COURTS.

So, Mr. President, the sole function of the court is to hear the
case, to suspend decision until it is fully heard, and at the end
of that time to ask itself the question, “ Is this rate just; and, if
unjust, does it impose upon the carrier, and in a confiscatory
sense?” And unless the court sees palpably and plainly, and is
clearly of opinion, that it does so impose upon the carrier it dis-
misses the procedure.

It will be observed, Mr. President, that the term ‘“ reasonable
rates,” the term “ just rates,” and the term “ fair return for sery-
ice and property,” and the term “ fair remuneration ” are some-
times used in discussing this subject. The appropriate term to
use, and the only legal term which properly defines the issue be-
fore a Federal court, is the term “ just compensation.” I like
that word “just.” It is the ancient term of our fathers, em-
bedded in the jurisprudence which they brought with them from
the mother land; it is a yardstick of morality and justice, which
commands to the mind that is measuring property, Be just.

The term “reasonable” is used time and again throughout
many decisions of the Supreme Court. It has been used in de-
bate here, and it is commonly used in conversation between
learned men, as well as amongst those who do not weigh the
precise meaning of terms, as the synonym of “ just.” That term
“reasonable” has a different origin as applicable to this case.
It is a term of commerce and common law rather than a term
of the Constitution. It is more elastic and flexible than “ just.”
It is like the quantum meruit in an action of assumpsit—what
do the services merit—or like the quantum valebant in an ac-
tion of assumpsit—what is this property worth? It does not
string up and confine the mind of the judge to the severe and
proper question, Is this price just, is it right?

Mr. President, I will read on this question a note, and a very
valuable note, of Judge Noyes, in his book on. American Rail-
road Rates. Judge Noyes is a scholar, a jurist, and a railroad
president. He has no relation to this case which might possibly
class him amongst those who were too partial toward popular as

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45

against vested rights. In his book on Railroad Rates, on page
212, he says:

Dicta may be found in this—

The decision on which he is commenting—
and in other decisions to the effect the courts may prevent the en-
forcement of a schedule of rates made by a railroad commission upon
the ground that it is umreasonable. The: word “unreasonable” in
this case and most others is, however, used in the sense of “ confisca-
tory.” If a broader meaning were intended the dicta would not seem
well founded. As we have seen, when the legislature confers upon a
commission discretionary power to make a rate, the result of the com-
mission’s action is the same as if the legislature itself had acted.
The rate when made is made by legislative authority. It becomes in
legal effect a law. The courts can deal with it only with respect to
its constitutionality. If not confiscatory it is not invalid. The ques-
tion is not whether the legislative-made rate is unreasonable, but
whether it is so unreasonable as to amount to a taking of property.
As said by the Supreme Court of the United States in its latest de-
cision upon the subject (Minneapolis Railroad Company v. Minnesota,
186 United States Reports, 268, decided in 1902), in holding rates made
by the Minnesota commission valid: ‘“‘ The action of the commission in
fixing the rate complained of as to this particular class of freight has
not been shown to be so unjust or unreasonable as to amount to a tak-
ing of property without due process of law.”

The reasoning, Mr. President, of Judge Noyes in this note to
his valuable book is so clear that he who runs may read it.
It is so convincing that any suggestion to the contrary of its
conclusions, whether made in the able and considerate speech
of the Senator from Pennsylvania [Mr. KNox] or by anyone
else on this floor, is obliged to fail as soon as that mirror is
held up to the decisions of the Supreme Court of the United
States and to the analysis of a clear mind that can read and
appreciate their meaning.

WHAT IS “ REASONABLE” IS AN ADMINISTRATIVE QUESTION UNLESS THE
UNREASONABLENESS AMOUNTS TO CONFISCATION.

Let me add, Mr. President, to these reflections of Judge Noyes,
that the question whether a rate is reasonable or not, unless it
be so unreasonable that it amounts to a taking of property
without just compensation, is purely an administrative question.
Such is the flexibility of the human mind and such are the vari-
ations in the situations and conditions of properties that there
is obliged to be in reason a margin of price or a margin of value.
While we assess values for taxes and for other purposes in the
accurate expressions of dollars and cents, it is impossible in the
nature of things to measure them by any such precise scale as
you muy apply in the apothecary shop or by the refined instru-
mentalities of physical science; but in so far as the question lies
within the range of reasonableness it is not a judicial question,
and can not be made one unless the unreasonableness is so great
and is so patent that the mind can discern the fact that in adopt-
ing that rate the property has been taken without just compen-
sation. So that, whether you were to approach this line of
thought upon the question of reasonableness or upon the ques-
tion of just compensation, the mind is obliged to wind up in
holding up to itself the one standard of the Constitution—“ Is
this just as a return for that. property or that service?”

Mr. ALDRICH. Mr. President——

The VICE-PRESIDENT. Does the Senator from Virginia
yield to the Senator from Rhode Island?

Mr. DANIEL. Certainly.

6773
46

Mr. ALDRICH. Does the Senator think that the rate which
affords just compensation for the service rendered is a reason-
able rate?

Mr. DANIEL. I do.

Mr. ALDRICH. And that a rate which does not afford just
compensation is an unreasonable rate?

Mr. DANIEL. I do not care to enter into any speculations
which do not belong to the controversy.

Mr. ALDRICH. I am not entering into any speculations
at all.

Mr. DANIEL. Neither am I,

Mr. ALDRICH. I am asking a simple question.

Mr. DANIEL. Well, what is it?

Mr. ALDRICH. I asked the Senator whether he thought
that a rate which afforded just compensation for the service
rendered was a reasonable rate.

Mr. DANIEL. I do.

Mr. ALDRICH. And that a rate which did not afford just
compensation was an unreasonable rate.

Mr. DANIEL. I should like to take time to reflect on that
question.

Mr. ALDRICH. That is the whole controversy, as I under-
stand it.

Mr. DANIEL. It may be or not, but I am not answering
unnecessary questions. I am arguing the case which is before
us and as the courts have put it, but I have seen courts
impair the force of their opinions by obiter dicta and I have
seen Senators ruin good points by making bad ones. The point
which I make is—and I set it forth clear as a flag which all
men can see—that the Supreme Court of the United States says
that the question is one of just compensation, and that wherever
it has used the word ‘‘ reasonable” instead of “ just,’ it meant
“just,” but was, perhaps, a little infelicitous in terms, as I
might also be if I were to stop to answer questions that do not
belong to the gravamen of this controversy.

WHY THE TERM “JUST” IS DIFFERENTIATED FROM THH THRM “ RHASON-
ABLE.”

Mr. President, I want to show how this question arises
or where it comes from. Why is it that this question of what
is a just rate has been differentiated by the courts of the United
States from the great mass of matters purely administrative
which are passed on by the President, by the courts not sitting
in court, but as the delegates of Congress in fixing rates, and
by all our Cabinet ministers? If we were to seek the genesis
of the idea of the courts of the United States that a rate was
a matter which must be passed on by juridical process, instead
of being concluded by administrative process, we would prob-
ably find that it originates in part in the Constitution of the
United States in the conference of equitable powers upon the
judiciary. It would probably be found also in the great atten-
tion which was paid to the fourteenth amendment after the
civil war. :

It took a long time, Mr. President, after the war was over to
get the feverishness out of the blood which war had engendered.
A large portion of the people looked more and more to the
courts for the guardianship of rights, and in the fourteenth

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amendment, too, there was a clause as to equal rights and as
to due process of law.

Chief Justice Waite, in the case of Munn v. Illinois, calls
attention to the fact that, while the term “due process of law”
had been in the Constitution of the United States by the fifth
amendment since the foundation of the Government, it was not
until after the fourteenth amendment was adopted that the
courts began to apply it to cases of this description or to con-
ceive that it was applicable to those cases in which States or
communities regulated common carriers and prescribed rates
of hire for their service and use by the people. Whatever may
be the tracery and trail of the genesis of the doctrine, its head-
quarters are found now in the various provisions of the Con-
stitution of the United States to which the judges referred in
-applying it.

THB JURIDICAL QUESTIONS THAT ARISE UNDER THD CONSTITUTION.

We have, first, in the fifth amendment to the Constitution
that no person can be “deprived of life, liberty, or property
without due process of law.” What is due process of law is
thus made a Federal and constitutional question.

Second. The words that follow in the fifth amendment to the
Constitution are “nor shall private property be taken for public
use without just compensation ;” so that a second Federal and
constitutional question is presented in the inquiry, “Is this
rate prescribed for the use of the property and service em-
ployed in interstate commerce just compensation therefor?”

Third. Sometimes the question of equal protection of the laws
becomes a Federal and constitutional question, although by
consequential effect, rather than by the direct words of the
fourteenth amendment as applicable to the Congress of the
United States.

No State—

Says the fourteenth amendment; not Congress—
cen deprive any person of life, liberty, or property without due process
0 aw—

That applies to States—
nor deny to any person within its jurisdiction the equal protection of
the laws.

So that equal protection of the laws as well as what is due
process of law arises in every State of this Union as a question
in the conduct of State regulation of its domestic affairs, in-
cluding transportation. Originating as an inquiry in the State,
under the fourteenth amendment, in the first instance, it be-
comes, the moment that the State passes on that inquiry, a
question of Federal jurisdiction in the Federal courts. But,
Mr. President, the principles upon which these inhibitions upon
the State are based and emboded in our organic law are such
that, overspreading as they do the area and embracing as they
do the whole population of the United States, they have, as it
were, by percolation, gone into and been absorbed by the chan-
eellors of the country, and are almost as persuasive in Federal
affairs, though they are not in the terms of the Constitution di-
rectly a limitation upon this body. It is by these various
clauses of the Federal Constitution that the shipper and the
carrier in the United States find their protection against the

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48

oppressive, extortionate, and discriminatory schedules fixed in

transportation by the directories of corporations engaged in

interstate commerce or fixed by the Commission, should they, in

executing either a legislative or, in Federal affairs, a Congres-

sional enactment to regulate commerce, apply unjust standards.

RATHWS MUST BH PALPABLY UNREASONABLD AND UNJUST TO JUSTIFY
JUDICIAL INTERFDBRENCE.

It results, Mr. President, from this standard of just compen-
sation, from its being made a constitutional question, that the
carrier engaged in interstate commerce can demand just com-
pensation for the use of his property, and just compensation
only, and the shipper can accordingly get remedy in the courts
for any excessive rate which may be charged against him.
The courts have never been given authority by Congress, and
do not assume constitutional power or jurisdiction, to super-
vise commissioners or boards in every respect, nor in any re-
spect, saving only in that particular respect which relates to
the justness of the rate fixed by the Commission or the board.
Many times in addition to those cases to which I have referred
have the courts so declared.

The courts can not, after the board has fully and fairly investi-
gated and acted by fixing what it believes to be reasonable rates, step
in and say its action shall be set aside and nullified because the
courts:upon a similar investigation have come to a different conclu-
sion as to the reasonableness of the rates fixed.

So, while the court in this opinion is using the word “ reason-
able” it is acting upon it as if it meant “just,” for it says
that even though the court may say it is not reasonable, in
its own judgment, it can not set it aside, showing how vain it
would be for us to put that question before the court.

There must be actual fraud in fixing the rates or they must be so
Peet and grossly unreasonable and unjust as to amount to the same

This language which I have just quoted is the language of
the supreme court of California in the Springs Valley Water-
works case, 82 California, 286. It is made a part of the opin-
ion of the Supreme Court of the United States rendered by
Judge Harlan in the San Diego Land Company case, 174 United
States, 750. I shall presently refer further to that case, for it
is, to my mind, one of the most clear, equitable, and just of all
the many essays which have emanated from the courts on this
subject.

WHAT IS JUST COMPENSATION ?

Mr. President, let us ask ourselves what is this just compen-
sation which is to be the standard. I know of no words which
may Ssynonymously interpret these two plain words. Of course,
justice, like every attribute or virtue which is intelligently ex-
ercised, must float in the atmosphere of reasonableness. But
when one comes to exercise simply the faculty of reason without
straightening it up to the ideal of justice, there is more flexi-
bility about it than when the moral idea is impressed upon the
conscience and when the conscience and the intellect, as it were,
are commanded to pull together. When you put into a statute
new words, like “ fairly remunerative,” you are suggesting to the
mind a new train of thought not suggested by “ just compensa-
tion.” You are getting out of the four corners of the Constitu-
tion of the United States. You are getting away also from the
old body of common law, which applied reason. You are hold-

6773
49

ing dangling, as it were, before the eye of desire remuneration,
profit, greed, ambition, and all that train of things that appeal
to the human imagination when it fixes its eye and follows the
trail of attention in that direction.

Woe be unto him who upsetteth the landmark! Just compen-
sation is an ancient landmark and a strong tower. By that
standard the railroad has taken other people’s, property in
invitum and laid its iron rail from the Atlantic to the Pacific
ocean. No man could properly have asked the question when
this land was taken, “Is this fair remuneration?” Remunera-
tion was not the thing. Justice was. Why the desire to sub-
stitute a new dress for an old uniform which all eyes recognize
and know? Who would like to see the State coat of arms or
national standard changed? The dreams and the deeds of
years close around and fasten upon the things that they are. So
with our jurisprudence, and so with the bed-rock principles and
expressions that underlie it and upon which systems of law and
equity and of conscience have been builded.

Mr. President, I turn to the case of the San Diego Land Com-
pany v. National City. It is reported in 174 United States Re-
ports, 750. It destroys some of the overweening conceptions
of what is meant by due process of law, but it hews to the line,
in my judgment, as to what substantially is due process of law.
Let me state the case.

Under an act of the California legislature it was the official
duty of the board of supervisors, town council, board of alder-
men, or other legislative bodies of any city, county, or town to
fix water rates. National City, in California, by its governing
body proceeded to fix water rates. They were assailed as a
taking of property without just compensation, and therefore a
deprivation of property without due process of law. The rates
were sustained and the bill dismissed.

The grounds of dismissal are instructive. It was insisted
that the State constitution and laws authorized rates to be
established without notice to the corporation or person {mme-
diately interested in the matter and without hearing in any
form, and therefore they were repugnant to that clause of the
Federal Constitution which declares that no State shall deprive
any person of property without due process of law.

When the case went to the Supreme Court Judge Harlan ex-
pressed himself fully upon the question of notice. It was a
loose order of hearing. It was no such order of hearing as we
will have before the Interstate Commerce Commission with
lawyers on each side; no such set and precise way of hearing
testimony as there; but, nevertheless, the notice and the hear-
ing were all held to be sufficient. As to the meetings of the
council that fixed the water rates, the judge said:

These meetings are public and not secret. The time and place for
holding them are fixed by law.

There is no ground to say that the appellant did not in fact have
or was denied an opportunity to be heard upon the question of rates.

Next Judge Harlan strikes a key to which our ears should
attend.

It was equally clear—
He says—

that this power could not be exercised arbitrarily and without refer-
ence to what was just and reasonable as between the public and those
who appropriated the water and supplied it for general use, for the

6773-4
50

State can not by any of its agencies, legislative, executive, or judicial,
withhold from the owners of private property just compensation for
its use. That would be a deprivation of property without due process
of law.

The same principles which are thus so clearly expressed in
objection to laying down an arbitrary rule as to the exercise
of process which is recognized to be one which has a right to be
established in court are also applicable to the stretching forth
of the Congressional hand to deny the writ of injunction in a
proper case, made to the satisfaction of a court in ascertaining
what is due process and in guarding the property while the
process is moving. It shows the differentiation of the question
now before this body in saying whether or not we shall embody
the inhibition of interlocutory injunction, from the broader and
general question as to whether or not we can in the architec-
ture of courts say what jurisdiction we shall give or take away
from them. We are complete masters in the latter case. But
when we have set judicial process in motion and are providing
it, we can not arbitrarily take away a part of that general proc-
ess which has grown up as a system of law applicable to the
ease and leave the person who invokes the aid of equity to find
a one-armed and maimed judge instead of one who has two
hands to relieve him.

RATES MUST BH PALPABLY CONFISCATORY TO BD SBT ASIDE.

The court points out, as it has done in some of the previous
citations, what are the limitations upon itself.

But it should also be remembered that the judiciary ought not to
interfere with the collection of rates_ established under legislative
sanction unless they are so plainly and palpably unreasonable as to
make their enforcement equivalent to the taking of property for public
use without such compensation as under all the circumstances is just
to both the owner and the public—that is, judicial interference should
never occur unless the case presents clearly and beyond all doubt
such a fiagrant attack upon the rights of property under the guise
of regulations as to compel the court to say that the rates prescribed
will necessarily have the effect to deny just compensation for private
properyy. taken for the public use. (Chicago and Grand Trunk Rwy. v.

ellman, 143 U. S., 339, 344; Reagan v. Farmers’ Loan and Trust Co.,
154.4U. S., 862, 399; Smyth v. Ames, above cited. See also Henderson
Bridge Co. v. Henderson City, 173 U. 8., 592, 614, 615.)

In view of these principles, can it be said that the rates in question
are so unreasonable as to call for judicial interference in behalf of the
appellant?

In the residue of this opinion are most thoughtful sugges-
tions as to various matters which may be considered in making
arate. I regard the opinion as so instructive, so correct in its
differentiations, that I give it still more fully:

AS TO NOTICE AND HEARING ON THE FIXING OF RATES.
On this point Judge Harlan ‘said (174 U. S., 752):

Was the appellant entitled to formal notice as to the precise da:
upon which the water rates would be fixed by orinanned. We think
not. The constitution itself was notice of the fact that ordinances or
resolutions fixing rates would be passed annually in the month of Feb-
ruary in each year, and would take effect on the ist day of July there-
after. It was made by statute the duty of the appellee, at least thirty
days prior to the 15th of January in each year, to obtain from the ap-
pellant a detailed statement, showing the names of the water-rate pay-
ers, the amount paid by each during the preceding year, and “all rev-
enue derived from all sources,” and the “expenditures made for supply-
ing water during said time.” It was the right and duty of the appel-
lant in January of each year to make a detailed statement, under oath
showing every fact necessary to a proper conclusion as to the rates
that should be allowed by ordinance. (Act of March 7, 1881, sec. 2
above cited.) Provision was thus made for a hearing in an appropriate

6773
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way. The defendant’s board could not have refused to receive the
statement referred to in the statute, or to have duly considered it
and given it proper weight in determining rates. If the State, by its
constitution or laws, had forbidden the city or its board to receive and
consider any statement or showing made by the appellant touching the
subject of rates, a different question would have arisen. But no such
case is now presented. In Kentucky Railroad Tax cases (115 U. S.,
821, 333) it was said: ‘‘This return by the corporation through its
officers is the statement of its own case, in all’ the particulars that
enter into the question of the value of its taxable property, and may be
verified and fortified by such explanations and proofs as it may seem
fit to insert. It is laid by the auditor of public accounts before the
board of railroad commissioners, and constitutes the matter on which
they are to act. They are required to meet for that purpose on the 1st
day of September of each year, at the office of the auditor at the seat of
government. * ™* These meetings are public, and not secret.
The time and place for holding them are fixed by law.”

There is no ground to say that the appellant did not in fact have or
was denied an opportunity to be heard upon the question of rates.
On the contrary, it appears in evidence that the subject of rates was
considered in conferences between the local authorities and the officers
of the appellant. Those officers may not have been present at the
final meeting of the city board when the ordinance complained of was

assed. They were not entitled, of right, to be present at that particu-
ar meeting. They were heard, and there is nothing to justify the
conclusion that the case of the appellant was not fully considered before
the ordinance was passed.

That it was competent for the State of California to declare that
the use of all water appropriated for sale, rental, or distribution should
be a public use and subject to public regulation and control, and that
it could confer upon the proper municipal corporation power to fix
rates of compensation to be collected for the use of water supplied to
any city, county, or town, or to the inhabitants thereof, is not disputed,
and it is not, as we think, to be doubted. %

MISCONCEPTIONS POINTED OUT AS TO THE NECESSITY OF RATES PAYING
OPDRATING BXPENSES AND DIVIDENDS IN ALL CASHS——-PUBLIC CON-
SIDERATIONS ARH PRIMARY.

The court then comments on some misconceptions, which can
not be too firmly expressed. Judge Harlan said:

What elements are involved in the general inquiry as to the reason-
ableness of rates established by law for the use of property by the
public? This question received much consideration in Smythe v. Ames,
above cited. That is, it is true, related to rates established by a
statute of Nebraska for railroad companies doing business in that
State. But the principles involved in such a case are applicable to the
present case. It was there contended that a railroad company was
entitled to exact charges for transportation as would enable it at all
times not only to pay operating expenses, but to meet the interest regu-
larly accruing upon all its outstanding obligations and justify a divi-
dend upon all its stock; and that to prohibit it from maintaining
rates or charges for transportation adequate to all those ends would
be a deprivation of property without due process of law and a denial
of the equal protection of the laws.

After observing that this broad reposition involved a misconcep-
tion of the relations between the public and a railroad corporation, that
such a corporation was created for public purposes and performed a
function of the State, and that its right to exercise the power of emi-
nent domain and to charge tolls was given primarily for the benefit of
the public, this court said: “It can not, therefore, be admitted that a
railroad corporation maintaining a highway under the authority of the
State may fix its rates with a view solely to its own interests and ignore
the rights of the public.” Then he points out that the fair value of
property must be considered.

“But the rights of the public would be ignored if rates for the trans-
portation of persons or property on a railroad are exacted without ref-
erence to the fair value of the property used for the public or the fair
value of the services rendered, but in order simply that the corporation
may meet operating expenses, pay interest on its obligations, and de-
clare a dividend to stockholders.’’ He then shows that fictitious values
must not weigh. “If a railroad corporation has bonded its property
for an amount that exceeds its fair value, or if its capitalization is
largely fictitious, it may not impose upon the public the burden of such in-
creased rates as may be required for the purpose of realizing profits upon
buch excessive valuation or fictitious capitalization ; and theapparent value

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52

of the property and franchises used by the corporation, as represented
by its stocks, bonds, and obligations, is not alone to be considered when
determining the rates that may be reasonably charged. (169 U. S.,
544.) In the same case it was said: “ The basis of all calculation as
to the reasonableness of rates to be charged by a corporation maintain-
ing a highway under legislative sanction must be the fair value of the
property used by it for the convenience of the public.” He then notes
some of the elements of value: “And in order to ascertain that value
the original cost of construction, the amount expended in permanent
improvements, the amount and market value of its ponds and stock, the
present as compared with the original cost of construction, the probable
earning capacity of the property under particular rates prescribed by
statute, and the sum required to meet operating expenses, are all mat-
ters for consideration and are to be given such weight as may be just
and right in each case. We do not say that there may not be other
matters to be regarded in estimating the value of the property. What
the company is entitled to ask is a fair return upon the value of that
which it employs for the public convenience. On the other hand, what
the public is entitled to demand is that no more be exacted from it for
the use of a public highway than the services rendered by it are rea-
sonably worth.” (169 U. S., 466, 546.) He finally concludes that jus-
tice to all parties must be subserved. . ,

“This court had previously held in Covington and Lexington Turnpike

Road Company v. Sandford (164 U. S. 578, 597, 598) —which case invo ved
the reasonableness of rates established by legislative enactment for a
turnpike company—that a corporation performing public services was
not entitled, as a right, to realize a given per cent upon its capital
stock; that stockholders were not the only persons whose rights or in-
terests were to be considered, and that the rights of the public were
not to be ignored. The court in that case further said: ‘Hach case
must depend upon its special facts, and when a court, without assum-
ing itself to prescribe rates, is required to determine whether the rates
prescribed by the legjslature for a corporation controlling a public
highway are, as an entirety, so unjust as to destroy the value of its
property for all the purposes for which it was acquired, its duty is to take
into consideration the interests both of the public and the owner of
the property, together with all other circumstances that are fairly to
be considered in determining whether the legislature has, under the
guise of regulating rates, exceeded its constitutional authority, and
ractically deprived the owner of the property without due process of
aw. * * * The utmost that any corporation operating a public
highway can rightfully demand at the hands of the legislature when
exerting its general powers is that it receives what under all the cir-
cumstances is such compensation for the use of its property as will be
just both to it and will be just to the public.

“These principles are recognized in recent decisions of the supreme
court of California. (San Diego Water Company v. San Diego (1897),
118 California, 556; Redland’s Domestic Water Company v. Redlands
(1898), 53 Pac. Rep. 843, 844.)

RDAL VALUES HE INSISTS SHALL BE CONSIDERED.

“The contention of the appellant in the present case is that in as-
certaining what are just rates the court should take into considera-
tion the cost of its pant; the cost per annum of operating the plant,
including interest paid on money borrowed and reasonably necessary to
be used in constructing the same; the annual depreciation of the plant
from natural causes resulting from its use, and a fair profit to the
company over and above such charges for its services in supplying the
water to consumers, either by way of interest on the money it has ex-
ET for the public use, or upon some other fair and equitable basis.

ndoubtedly all these matters ought to be taken into consideration and
such weight be given them when rates are being fixed as under all
the circumstances will be just to the company and to the public. The
basis of calculation suggested by the appellant is, however, defective
in not requiring the real value of the property and the fair value in
themselves of the services rendered to be taken into consideration.
What the company is entitled to demand in order that it may have just
compensation is a fair return upon the reasonable value of the prop-
erty at the time it is being used for the public. The property may
have cost more than it ought to have cost, and its outstanding bonds
for money borrowed and which went into the plant may be in excess of
the real value of the property. So that it can not be said that the
amount of such bonds should in every case control the question of
rates, although it may be an element in the inquiry as to what is,
all the circumstances considered, just to both the company and the
public.” (174 U. &., 752-758.)

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53

This opinion shows, in answer to some of the arguments that
have been made, that it is not the constitutional right of any
common carrier or of any public service corporation to require
that a rate be so fixed that it shall derive a profit. It de-
clares that the carrier has no right to fix the rate with entire
regard to itself. Let it speak for itself. It shows further-
more that the public interest.

Mr. ALDRICH. Mr. President——

The VICH-PRESIDENT. Does the Senator from Virginia
yield to the Senator from Rhode Island?

Mr. DANIEL. I will yield to the Senator in a moment. I
may have to read the whole case to him before I get through.

Mr. ALDRICH. Oh, no.

Mr. DANIEL. It shows that the public interest is itself an
element to be considered and calculated in making the rate,
and that neither the carrier nor any commission has a right to
disregard that element in the compensation or the quid pro quo
for services. Now I yield to the Senator from Rhode Island.

Mr. ALDRICH. I understood the Senator from Virginia to
say that the carrier had no right in making rates to take into
consideration the element of profit.

Mr. DANIEL. No; I did not say that.

Mr. ALDRICH. The Senator said something which seemed
to me like that.

Mr. DANIEL. It was like that. Nullus similis est idem.
Like is not the same.

Mr. ALDRICH. What I should like to ask the Senator from
Virginia is what he means by “profit.” Does the Senator
mean that the carrier shall not be permitted to pay dividends?

Mr. DANIEL. No, sir; I do not.

Mr. ALDRICH. Or to pay interest upon its bonds?

Mr. DANIEL. I do not.

. Mr. ALDRICH. They are permitted, then, to earn sufficient
money, through the rates fixed, to pay their fixed charges——

Mr. DANIEL. I refer the Senator to the reports of the New
York Stock Exchange. He will see the carriers are doing it
every day.

Mr. ALDRICH. No.

Mr. DANIEL. Nearly every day, including dividends upon
much watered stock.

Mr. ALDRICH. Will the Senator permit me to finish my
question?

Mr. DANIEL. Certainly.

Mr. ALDRICH. Without undertaking to say whether the
stock is watered or not, the railroad, I think, has the right to
collect rates that will provide for the, payment of running ex-
penses, fixed charges, interest upon bonds, and a reasonable divi-
dend upon its stock.

Mr. DANIEL. That depends. If the railroad chooses to
give to its president a salary of a hundred thousand dollars, or
an extortionate price for his services, a court will look at- that
and see to it that the expenditures are reasonable and not
extortionate.

Mr. ALDRICH. Unquestionably. I do not think that propo-
sition has ever been disputed.

Mr. DANIEL. Therefore it is not the right of a railroad com-
pany, regardless of its expenses, operative or for salaries, to

6773

 
54

demand a profit that will pay dividends without considering the
public interest in it and making them subordinate to that public
whose creature it is.

Mr. ALDRICH. Unquestionably. I think there is no con-
tention at all upon the other side of that proposition.

Mr. DANIEL. Then there is nothing.

Mr. ALDRICH. Supposing all those things are done——

Mr. DANIEL. The Senator can not raise a controversy with
me if there is no such contention.

Mr. ALDRICH. I am not trying to raise a controversy with
the Senator at all. I am only trying to recall to his attention
the fact that a reasonable rate, based upon the payments which
I suggested, would be the kind of a rate that the Commission
must fix and which the court would uphold; and that a rate
less than that

Mr. DANIEL. Less than what?

Mr. ALDRICH. Less than the rate I have just defined.

Mr. DANIEL. May I ask what is the Senator's definition?

Mr. ALDRICH. A rate which would permit the railroad
company to pay its running expenses, its fixed charges, interest
upon its bonds being included in fixed charges, and a reasonable
dividend upon its stock. Supposing in all these cases that the
payments are reasonable and proper, made within the exercise
of a wide discretion, I say that rates fixed upon that condition
are just and reasonable rates, and rates that do not permit
those payments would be unjust and unreasonable rates and
would not afford just compensation for services rendered and
would therefore have to be set aside by the court.

Mr. DANIEL. Mr. President——

Mr. CLAPP. Will the Senator from Virginia yield to me
for a moment?

Mr. DANIEL. Certainly.

Mr. CLAPP. I think the Senator from Virginia is the first
Senator who has struck the keynote of what in its last analysis
has got to be the basis upon which a rate is fixed—a rate that
is fair alike to the shipper and the carrier. If the Senator
will ‘pardon me, I will make the request that at this time he
read that decision. I think it would be well if he would do so.

Mr. ALDRICH. I agree perfectly with the Senator from
Minnesota in regard to this matter, and I think there is no one
here contending for any rate to be adopted by anybody which
is not fair both to the public and to the carrier. I think that
is one of the things to which every man in the Senate will agree.

Mr. CLAPP. If the Senator from Virginia will pardon me
further——

The VICE-PRESIDENT. Does the Senator from Virginia
yield further to the Senator from Minnesota?

Mr. DANIEL. I do. ‘

Mr. CLAPP. The speech made here last week by the Sen-
ator from Arkansas [Mr. CuarKE] I think proceeded en-
tirely upon the theory that the rate must be one that would
yield a fair return upon the present value of the property,
entirely ignoring the right of the shipper in a relative position
to the carrier. If the Senator from Virginia will analyze that
decision, I think it will go far toward clearing up a misappre-
hension on that point.

Mr. ALDRICH. Mr. President——

6773

 

 
53

The VICH-PRESIDENT. Does the Senator from Virginia
yield further to the Senator from Rhode Island?

Mr. DANIEL. Certainly.

Mr. ALDRICH. In the absence of the Senator from Arkan-
sas, I will'say that I have no doubt if he were present he would
disclaim any suggestion that he was ignoring the rights of the
public or of the shipper in his contentions in regard to rates.

Mr. DANIEL. Mr. President, a man can not, by a mere cate-
gorical answer to this question or that, dispose of a question on
which the mind must bring to focus the multiform considera-
tions which must be held in view in making a rate. In the case
in which I have put in the whole residue of the opinion, or
nearly the whole, which I feel it would be a trespass upon my
colleagues to read in full, the Senator from Rhode Island and
others will find their questions answered.

But basic to the opinion is this declaration, the public inter-
est and the value of the property, which is at the base of the
use, are the things primarily to be considered, and I happen to
hold in my hand at this moment numerous other points which
are to be considered in bringing before human judgment the
matters and things out of which the justice of a rate is to
be constructed. Mr. Snyder, in a small book which embodies
notes on the interstate-commerce act, has given this list of
things:

Amount of through and local business; bonded debt; bulk; character
of commodity ; comparison of rates.

A thing some want to leave out, but it is most material.

Competition.

My own observation about competition is that some is wise,
and some is exceedingly meretricious, deceitful, and so designed
as necessarily to injure.

Consequence of rate changes; cost of production; cost of service;
cost of local business ; distance; dividend on capital] stock.

Certainly these things are to be considered, but you can not
charge more for your property than it is worth in order to do
anything. .

Hmpty cars.

That is a casual consideration. It is obliged to enter. Some-
times you can put a train halfway across the continent and
bring the cars back full. Sometimes the course of trade is
such that you have to bring them back empty. This is often
the case with the great coal trade that moves from our moun-
tains down to the seaboard, and the conditions in this regard
are of course considerations that address themselves to the
minds of justice.

Fixed charges.

Your fixed charges, operating expenses, of course are to be
considered; but you must consider them first, if you be the
carrier, and must see to it that they are held within reasonable
bounds, because if you put your salaries too high or misspend
your money you can not rob Peter to pay Paul.

Mr. ALDRICH. Mr. President—— :

The VICE-PRESIDENT. Does the Senator from Virginia
yield.to the Senator from Rhode Island?

Mr. DANIEL. Yes, sir.

6773
56

Mr. ALDRICH. Is the Senator willing to concede that the
ceurt must take all these things into consideration in deter-
mining whether a rate affords just compensation?

Mr. DANIEL. I do not care to do so many immaterial things.
My concession on the subject is not a factor in this case. I am
only showing what courts have considered, and I concede that
they have considered them. What a court is going to do in
the future one must judge by the past. My concession or the
Senator’s concession, however intelligent it might be, is not 4
matter that should at all worry the Senate in the consideration
of this matter. i

Operating expenses; other articles consumed ; population along the
line; proportion to local traffic; relative reasonableness of rates;
yelative amount of through and local business; return loads; revenue;
rates prima facie; risk; special train service; storage capacity; un-
settling of rates; use to the public; value of freight ; volume of busi-
ness; weight:

Do not forget, but hold ever in mind, that the railroad is a
public highway ordained and dedicated by the State and the
nation to public use. When the Senator on yesterday asked
me something about a private corporation which is doing a
mere corporate business he compared to this subject a matter
which has no more relation to it than has the conduct of a
citizen in his own home, which is his castle, compared to the
Capitol of the United States dedicated by the nation to publie
use.

Mr. ALDRICH. Mr. President——

The VICE-PRESIDENT. Does the Senator from Virginia
yield to the Senator from Rhode Island?

Mr. DANIEL. I will yield.

Mr. ALDRICH. I made the observation which I did because
the Senator was basing the right of the United States to fix
rates not upon the ground that they were public corporations
doing a public business, but that they were corporations and
creatures of the State or of the United States, and therefore
that the creator could do these things. I called his attention to
the fact that he was stating that proposition so broadly that it
might include private corporations, and not for the purpose of
contesting the right of Congress to fix rates for a corporation
doing a public business.

THE INTERSTATH COMMERCE COMMISSION MUST BXERCISH THH FACUL-
TIES OF JUDGMENT AND DISCRETION IN PASSING ON FACTS,

Mr. DANIEL. Now, Mr. President, another thing I wish to
show, and then I have done. In the exercise of its duties to
fix a rate, the Interstate Commerce Commission must exercise
its own individual judgment and discretion. The standard of
that independent judgment and discretion never has been in
all civilization put into the form of a mathematical equation.
The human mind never existed that could take all the con-
siderations that are worthy of reflection in going to make up
the composite thing of human judgment, label one of them 2
per cent, and another 3 per cent, and another 10 per cent.
“What is truth?” asked the jesting Pilate, and turned away,
not waiting for an answer. What is judgment? It is a cer-
tain attribute of the buman mind indefinable by any words in
which we would attempt to put our idea and concept of it.
And what is justice? A thing of conscience, a. thing of intelli-
gence, a thing of desire to do the right thing. But no standard

6773
57

ever has bottled up judgment into a mathematical equation,
and it is vain for man to attempt to take a bond of fate and
reduce to exact science those things which belong to the specu-
lations of the human intellect and to the throbs of the human
heart and the movements of the nerves in man’s body.

But let it be understood that the Interstate Commerce Com-
mission, as well as a court, must have power to exercise the
faculties of the human understanding, matured into its own
independent and conscionable judgment, and to put that judg-
ment into the equation of rates which they fix for the people of
this country.

Now, Mr. President, on this line I am going to read, or at
least analyze, some of the cases in which it is shown clearly,
as I conceive it, that this country is obliged to execute the pow-
ers of Congress by delegations of power to its subordinate in-
struments. The distinguished Senator from Texas, who sits
on my right, in his own very admirable address on this subject,
pointed out that in conferring powers upon Congress in the
Constitution that instrument had given it powers to confer upon
others whatever powers were necessary and proper to execute
its own powers; that that is in itself a substantive part of the
Constitution of the United States, and that in the exercise of
that additional conference of power upon the Congress of the
United States, Congress had delegated its legislative power in a
sense to the President of the United States, to the Supreme
Court of the United States, to every Cabinet minister that is an
executive hand of the President, and to many bureau officers.
It is a fact of political history which we ought to recognize
that to-day were it not for this power of Congress which has
been challenged here about this matter, the whole Government
of the United States would be flabby and fall to the earth like
a helpless bag.

DELEGATED POWERS OF CONGRESS CONFERRED ON THD PRESIDENT BY

CONGRESS.

I start with the President of the United States. In the year
1890, by the act of October entitled “An act to reduce the reve-
nues and equalize duties on imports,” the President was author-
ized to suspend by proclamation the free introduction of sugar,
molasses, coffee, tea, hides. When? When “he is satisfied ’—
not when we, the delegated lawmakers of the people, who can
enact laws on this subject—‘* that any country producing any
such articles imposes duties or other exactions upon the agri-
cultural or other products of the United States which he may
deem to be reciprocally unequal or unreasonable——

Mr. ALDRICH. The Senator from Virginia is a great lawyer,
and I know he wants to be accurate in this matter. Congress
did not authorize the President of the United States to suspend
duties, and it could not have done it. Congress itself suspended
duties when the President found certain facts to be in existence.

Mr. DANIEL. Certainly.

Mr. ALDRICH. The Senator inadvertently, I have no doubt,
said Congress authorized the President to suspend duties.

Mr. DANIEL. Well, we did so through him. That is the
point.

Mr. ALDRICH. Oh, no; Congress allowed the President of
the United States to ascertain facts.

Mr. DANIEL. Exactly.

6773
58

Mr. ALDRICH. And upon the proclamation of those facts
Congress itself suspended certain duties.

Mr. DANIEL. Just exactly as in this case we propose to au-
thorize the Interstate Commerce Commission to fix the point
of reasonableness or justice, and then we say that is the rate.
As I was saying, this might be done by the President when sat-
isfied another country imposed duties or other exactions upon
the products of the United States which he might deem to be
reciprocally unequal or unreasonable. This was held to be con-
stitutional. A single man for 80,000,000 of people, without
judge, without jury, without Congress, ascertains and determines
the facts upon which devolve levies of taxation on the people of
the United States. The act left to his—the President’s—* satis-
faction” the ascertainment of certain things. It left to his-
“ deeming ”—that is to say, to his judgment or opinion—the con-
clusion of the fact as to the duties or other exactions imposed
by other countries on agricultural or other products of the
United States. Predicating on his “satisfaction,” “ deeming,
and judgment in the law, we enacted what he said in that process
to be correct.

THH DISTINCTIONS MADH BY THE SUPREME COURT.

In passing upon this case, Mr. Justice Harlan said:

The true distinction is between the delegation of power to make the
law, which necessarily involves a discretion as to what it shall be, and
conferring authority or discretion—

Mark the word “ discretion ”’—
ag to its execution, to be exercised under and in pursuance of the law.
The first can not be done; to the latter no valid objection can be made.

The latter is just what we propose to do in this bill. In these
words Judge Harlan quoted the language of Judge Ranney, of
Ohio, in the case of the Cincinnati, Wilmington, etc, Railroad
against Commissioners, 1 Ohio State, 88.

Half the statutes on our books—

Says the Pennsylvania court, which Judge Harlan quotes
front, in Moers v. City of Reading (21 Penn. St., 188, 202)—

Half the statutes on our books are in alternative, depending on the
discretion of some person or persons to whom is confided the duty of
determining whether the proper occasion exists for executing them.
pe a ean not be said that the exercise of such discretion is the making
0 e law.

So, in Locke’s appeal (72 Penn. St., 491, 498) :

To assert that a law is less than a law because it is made to depend
on a future event or act is to rob the legislature of the power to act
wisely for the public welfare whenever a law is passed relating to a
state of affairs not yet developed, or to things future and impossible
to fully know.

The proper distinction, the court said, was this:

The legislature can not delegate its power to make a law, but it can
make a law to delegate a power to determine some fact or state of
cuings upon which the law makes or intends to make its own action

epend.

Suppose we deny this principle, Mr. President. Here is the
consequence which the court points out:

To deny this would be to stop the wheels of government. There are
many things upon which wise and useful legislation must depend which
can not be known to the, lawmaking power, and must, therefore, be a
subject of inquiry and determination outside of the halls of legislation.

So, Mr. President, it is determined that Congress can leave
it to the “satisfaction,” to the “power,” to the “ discretion,”

6773
59

and “deeming judgment” of one man to ascertain and to deter-
mine without appeal to any court the facts upon which hinge
the taxes upon the whole people of the United States, and that
nothwithstanding the fact that Congress is in exclusive posses-
es unrivaled, of the whole tax-laying power of the United
ates,
CONGRESSIONAL POWERS DELEGATED TO THB COURTS.

I turn now, Mr. President, to the courts themselves. We are
told that the courts will not accept and should not exercise any
administrative function. That is true as a general principle;
but let me ask argumentatively a question in relation to that
proposition. It will be perceived how nearly they have gone
toward doing it. Whence are derived the ninety-four equity
rules which are the law of the land for the people of the United
States? Congress never enacted them; they are not in any
ancient equity that by any construction can be taken to have
been embodied in the jurisprudence of the United States, and
yet they are a part of the law of this land, and they control
the practice of equity in the inferior courts of the United States.

How did those rules get into force and being? The Supreme
Court of the United States made them. By any inherent power
of the court? Notso. I have little faith in the inherent power
of courts. The inherent power of courts is, to my contempla-
tion, first cousin to the divine rights of kings. Courts have no
power except that which the sovereign people of this country
have specifically or by necessary implication conferred upon
them, and they: are just as much trustees in the exercise of
powers subordinate to the sovereign as is any officer or agent
of the United States.

POWERS EXCLUSIVELY LEGISLATIVE CAN NOT BE DELEGATED, BUT THOSE
NOT EXCLUSIVELY LEGISLATIVH CAN BH DELEGATED.

The authority given to the Supreme Court to make these
rules is found in the Revised Statutes, sections 913 and 917.
These rules embrace the taking of testimony and the reference
to the proceedings before masters. We have provided that
they must not be inconsistent with any law of the United
States, and the right of Congress to delegate its power over
process and to make rules for the courts of the United States
to the Supreme Court has been upheld and sustained in Way-
man against Southard, 10 Wheaton, page 42, in the year 1825.

Now, Mr. President, the opinion which was given in up-
holding this power of Congress and this delegated power of
the court is an instructive one, and it makes a distinction which
I have not heard referred to in this debate. Judge Marshall
gave the decision, and I read an extract:

It will not be contended—

Says he—

It will not be contended that Congress can delegate to the courts,

or to any other tribunals, powers which are strictly and exclusively
legislative.

That is what the well-informed lawyer means when he says
that the legislature can not delegate its powers. It means
those powers which are strictly and exclusively legislative and
belong and appertain necessarily to itself as a legislative body.

But—

He says—

Congress may certainly delegate to others powers which the legisla-
ture may rightfully exercise itself. Without going further for exam-
6773

.
60

ples, we will take that, the legality of which the counsel for the
defendants admit, the seventeenth section of the judiciary act and the
seventh section of the additional act empower the courts respectively
to regulate their practice. It certainly will not be contended that this
might not bedone by Congress. The courts, for example, may make rules
demanding the return of writs and processes, the filing of declarations
and other pleadings, and other things of the same description.
will not be contended that these things might not be done by the leg-
islature without the intervention of the courts; yet it is not alleged
that the power may not be conferred on the judicial department.

The line has not been exactly drawn which separates those important
subjects, which must be entirely regulated by the legislature itself,
from those of less interest, in which a general provision may be made
and power given to those who are to act under such general provisions
to fill up the detail.

So, Mr. President, to start off with, we have the assured
right to delegate certain powers to the President and to the
courts with respect to matters about which we might act, but
in which it has been concluded we may better act by the em-
ployment of these executive hands.

THE INTBPRIOR DEPARTMENT AND DELEGATED POWERS TO LAND COMMIS-
SIONERS.

Mr. President, I will step from here over to the Interior De-
partment. The decree of the three Commissioners which I
have pointed out in the California Land case, which was ap-
pealed to the courts, although they were not themselves a court,
was passed on in the case of United States v. Halleck, 1 Wal-
lace, 489; United States v. Billings, 2 Wallace, 448, and in The
Fossatt, 2 Wallace, 649. It was held by the Supreme Court
that an appeal lies to the district court and thence to the Su-
preme Court under the act referred to.

Now, we find further in the Land Office of the Interior De-
partment and in various bureaus of the Interior Department
the gravest questions are passed upon by subordinate officials
involving interests and titles to millions of acres of land.
These questions are determined entirely by the administrative
officers of the United States without the power of any judge
whatsoever to pass upon any of them.

«On yesterday, Mr. President, I called attention to the decla-
ration of the Senator from Pennsylvania [Mr. Knox] that it
is a right of every American citizen and English-speaking man
to have his legal right passed on by a court and to have a day
in court to show that it was mere imagination and not basie
under any American principle of jurisprudence in the great
body of American things, for the reason that many were seek-
ing to put at disadvantage those who upon this floor contended
that the Interstate Commerce Commission should have the right
to fix a rate, and that that should be made as nearly conclusive
as it is in the power of Congress to make it.

Now I will cite some further cases. I cite the case of Bur-
fenning v. The Chicago and St. Paul Railroad (163 U. S.).
There it is said:

Whether, for instance, a certain tract Is swamp land or not, saline
land or not, mineral land or not, presents a question of fact not rest-
ing on record, dependent on oral testimony; and it can not be
doubted that the decision of the Land Department, one way or the
other, in reference to these questions is conclusive and not open to
relitigation in the courts, except in those cases of fraud, etc., which
permit any determination to be reexamined.

Of course, Mr. President, I always except fraud. The truth,
legally speaking, about fraud is sententiously expressed by a
great English judge, who said, “ fraud cuts down everything.”

6773
61

. In another case, Riverside Oil Company v. Hitchcock (190
U. S., 316), it is said:

Whether he decided right or wrong is not the question. Having
urisdiction to decide at all, he had necessarily jurisdiction, and it was
is duty to decide as he thought the law was, and the courts have no

pOWEE whatever under those circumstances to review his determination
y mandamus or injunction.

The next case I quote is Marquez v. Frisbie, 101 United
States, 473. This is a bill in equity to review the decision of
the Land Department in a preemption case. Mr. Justice Miller
gave the opinion of the court.

This means—

Said the judge— /
and it is a sound principle of law, that where there is a mixed question
of law and fact and the court can not so separate it as to show
clearly where the mistake of law is, the decision of the ‘tribunal to
which the law has confided the matter is conclusive.

I refer next to Gaines v. Thompson, 7 Wallace, 347. It was
held in that case that the Supreme Court would not interfere,
either by injunction or mandamus, to control the head of a
Department.

In Dunlap v. Black, 128 United States, 40, it was said that the
courts will not interfere by mandamus with the executive offi-
cers of the Government in the exercise of their ordinary official
duties, even where those duties require an interpretation of
the law, no appellate power being given them for that purpose.

The rule upon this subject may be summarized as follows:
That where the decision of questions of fact is committed by
Congress to the judgment and discretion of the head of a De-
partment, his decision thereon is conclusive; and, second, that
even upon mixed questions of law and fact, or of law alone,
his action will carry with it a strong presumption of its cor-
rectness, and the courts will not ordinarily review it, although
they may have the power and will occasionally exercise the
right of so doing.

Mr. DOLLIVER. Mr. President—— .

The VICE-PRESIDENT. Does the Senator from Virginia
yield to the Senator from Iowa?

Mr. DANIEL. Certainly.

Mr. DOLLIVER. I was interested in the suggestion of the
Senator from Pennsylvania [Mr. Knox] yesterday, that these
matters to which the Senator from Virginia is referring are mat-
ters relating to the Government dealing with its own, and I
should like to ask the Senator from Virginia if there is a real
distinction in law between the Government’s rights when dealing
with its own—that is to say, for example, with public land or the
postal service or the customs service—and its right to deal with
property and property interests not particularly its own?

Mr. DANIEL. I think the courts have drawn a distinction,
and I am going to sum up what I conceive to be the judicial dis-
tinction as I wind up. I can not state the distinction all at
once. That is the misfortune of a speech, that you can not state
everything in a lump. I am approaching the conclusion of my
own mind, and I hope I may have the concurrence of the dis-
tinguished and able Senator from Iowa when I get to that point.

Though I may be a little tedious in reaching it, I think that
some who have occasionally misconceived some of these principles
might perhaps follow the delineations of the courts without being
6773

)
62

entirely harmed in their knowledge of the Constitution of this
country as it is construed and practiced.

Mr. DOLLIVER. I will say to the Senator——

Mr. DANIEL. I am not referring to the Senator.

Mr. DOLLIVER. I will say to the Senator from Virginia that
I was simply anxious that he, being a recognized master of the
law, might clarify the matter, although I think his conclusion
would reach by proper judicial reasoning an opinion that I have
cherished rather on instinct than on any other basis.

Mr. DANIEL. I hope and believe we will not be far apart.
Of course, I was not referring in the slightest degree in any
light way to my friend, whose ability I much admire. I sup-
pose he knows that. He does not need any assurance of that.
But I appreciate the fact, Mr. President, that we have got one
of the most delicate questions to handle here that Congress
has ever undertaken to deal with. It is sincerely my desire—
and nothing else would actuate me to speak so long on the
question if I did not wish to seek to put this measure, when it
goes before the Senate foursquare to all the winds that blow,
without incurring the risk needlessly, according to my own con-
ception, of being uprooted or curtailed by judicial decision ;
and I have taken pains to follow through their intricacies the
lines of thought that underlie the various decisions on this
question in order the better to show how we may avoid dan-
ger and how danger does lie, as I apprehend, in a certain
direction. That is all.

ADMINISTRATIVE POWERS OF THE POST-OFFICE DEPARTMENT CONCLUSIVB.

Before I undertake to answer the Senator’s question, let me
eall his, attention here to another case. It is the case of the
Clearing House v. Coyne (194 U. S., 497), where the highest
civil rights are dealt with—not public lands, which we may
dispose of as we please; we have passed out of that. Congress
sought to suppress—

First. Schemes for the distribution of money, etc., by lot,
chance, or drawing of any kind; and,

Second. All schemes or devices for obtaining money or any
real or personal property by any kind of means of false or
fraudulent pretenses, representations, or promises. To this
end it enacter, in 1890, September 19 (26 Stat., 465), that—

The Postmaster-General may, upon evidence satisfactory to him
that any person or company is engaged in conducting any lottery,
gift enterprise, or scheme for the distribution of money, or of any kind
of real or personal property by lot, chance, or drawing of any kind,
or that any person or company is conducting any other scheme or
device for obtaining money or property of any kind through the mails
by means of false or fraudulent pretenses, representations, or promises,
instruct postmasters at any post-office at which registered letters arrive
directed to any such person or company to return all such
registered letters to the postmaster at the office at which they were
originally mailed, with the word “fraudulent” plainly written or
stamped upon the outside thereof.

By section 4041, the Postmaster-General is authorized in
similar terms to forbid the payment by any postmaster of any
postal money order in favor of any person engaged in the
prohibited business; and by section 4 of the act of March 2,
1895 (28 Stat., 963), the power thus conferred upon the Post-
master-General by the preceding section, 3929, is extended and
made applicable to all letters or other matter sent by mail.

6773
63

The Supreme Court said, in passing upon the right thus
devolved upon a single man to decide these numerous questions,
that—

If the ordinary daily transactions of the Departments which involve
an interference with private rights were required to be submitted to
the courts before action was finally taken, the result would entail
pete e e suspension of some of the most important functions of the

overnment.

Again (194 U. S., 515):

But, as already indicated, it would practically arrest the executive
arm of the Government if the heads of Departments were required to
obtain the sanction of the courts upon the multifarious questions aris-
ing in their Departments before action was taken in any matter which
might involve the temporary disposition of private property (p. 515).

So the Senator will observe that a temporary disposition of
private property, a matter of individual right, is thus permitted
to be disposed of under the positive enactment of the Congress
of the United States by one man, and that it is unchallengeable
before any tribunal whatsoever of this country and is con-
elusive as to all law and all facts. In that decision the court
went a step further than it did in those I before cited and
answered in some measure the question which the distin-
guished Senator put to me. The letters were not “our own,”
but letters of our citizens and patrons that were condemned.

THD SECRETARY OF COMMERCE AND LABOR AND HIS FINAL DECISIONS.

I step a little further, Mr. President, as to the rights of an
-American citizen. I read next, or give a citation, from the case
of The United States v. Ju Toy (198 U. S., 258). Ju Toy wasa
citizen of the United States; he was a native of the United
States. He had just the same right to the protective power of
the Constitution and the laws of the United States that my hon-
orable friend and myself enjoy. One of our rights is to go here
or there, as we may please, to California and back, or out of the
country and back. What were his rights? He was denied per-
mission to land in the city of San Francisco, in his own native
home country, when returning on shipboard after temporary de-
parture. By whom denied? ‘The collector of the port detained
him. The Secretary of Commerce and Labor, to whom he ap-
pealed, sustained the collector’s ruling. In habeas corpus pro-
ceedings the Supreme Court held the administrative process to
be due process of law and to be final. Not even the sacred
writ of habeas corpus could take by the hand the native-born
American citizen and give him that right which we hear her-
alded here to be the sacred right of every English-speaking
man, and the citizen could not receive that heritage which it is
said belongs to us all.
1HE SECRETARY OF THE NAVY AND HIS FINAL DECISION OF A PENSION

CLAIM.

I have another case which, I believe, I want to cite before I
finish this subject. I can not lay my finger on it at this mo-
ment, Mr. President, but it is the case, in 14 Peters, of Decatur
against Paulding. The appellant there was the widow of
Stephen Decatur, a naval officer of the United States of very
distinguished and honorable career. At that time the Secre-
tary of the Navy was Paulding, and under the statutes of the
United States it became his duty to pass upon her right and
title to a pension provided in certain cases by Congress. He

6773
64

passed upon the claim of the widow of Stephen Decatur and
denied the pension. It was, as she contended, a matter of
right. It was predicated upon those considerations of honorable
service to the country which all nations of high spirit hold dear.
Her appeal was denied. Notwithstanding that, the Secretary
of the Navy had to pass upon the interpretation of the laws in a
certain judicial sense and had to take the responsibility of de-
termining the question, like a court. The Supreme Court de-
elared that the Secretary’s opinion was conclusive.

So, Mr. President, whether it be the sacred right of personal
freedom, the sacred right of private property, the right of going
and coming, the right of receiving a benefit decreed by law,
the right of being made infamous by having “fraud” written
upon your back, so to speak, by a Cabinet minister—no matter
how high these rights are, no matter how dear they are to the
human beings who possess them, they are within the power of
the Congress of the United States, and daily, in the exercise of
that power, those rights are administered, as necessarily they
must be, by one man or by the subordinates that Congress has
chosen as trustees to carry out these things.

Yet, Mr. President, when on a public highway in this country
Congress undertakes to give to a commission of public admin-
istrators, chosen by the President of the United States, and, in
the nature of things, men of learning and dignity and character,
the power to fix a toll upon a public road—a thing which was
done by our ancestors through generations without question by
the courts—we are first met in this debate by the challenge of
the commercial power of Congress, and then by the assertion
that we must guard this or that in the administration of the
laws.

DIFFERENTIATION OF THIS CASH FROM PURELY ADMINISTRATIVE CASES.

I intend to march up to the very truth and justice of this case
wherever I may find it, and, no matter where the chips may fall,
to hew to the line of wisdom as to our legislation, as I may best
see that line through the mysteries of jurisprudence. Where is
the differentiation in this case from all of these administrative
cases? Here, in the fact that the Supreme Court of the United
States, construing what it regards to be due process of law, has
held that in questions which involve the right and title to prop-
erty dedicated to public use and coming quite near to the thought
which the Senator from Iowa [Mr. DoLLIveR] suggested to me,
and especially where property is taken in invitum by condemna-
tion originally or where the owner is constrained by public law
to allow its use for a fixed compensation, in such and in similar
cases the words “due process” involve and require a settled
course of judicial procedure. Furthermore, for thirty years the
laws of this country have been administered with that under-
standing, and the whole system of jurisprudence has so grown
up.

Seeing those facts to exist, having them before our eyes, and
with an expression of the Supreme Court of the United States,
in words and form which I will presently read, I can not believe
that. I would be acting as a wise and prudent legislator, and as
one who held foremost the good of the people in whose service
we are to legislate, if I undertook to take away from the courts
such jurisdiction as they had asserted themselves to possess, and

6773
65

which had been recognized as the law of the land and as due
process of law for thirty years. Here are some of the expres-
sions of the Supreme Court on this subject:

The question of the reasonableness of a rate of charge for transpor-
tation by a railroad company, involving as it does the element of rea-
sonableness both as regards the company and as regards the public, is
eminently a question for judicial investigation, requiring due process of
law for its determination. (Chicago, Milwaukee and St. Paul R. R.
Co. v. Minnesota, 134 U. S., 458.)

Again it says:

While rates for transportation of persons and property within the
limits of a State are primarily for its determination, the question as to
whether they are unreasonably low as to deprive the carrier of its prop-
erty without such compensation as the Constitution secures, and thcre-
fore without due process of law, can not be conclusively determined by
the legislature of the State or by regulations adopted under its au-
thority, that the matter may not become the subject of judicial inquiry.
(Smythe v. Ames, 169 U. S8., 526.)

Again the Supreme Court says:

When we recall that, as estimated, over ten thousand millions of dol-
lars are invested in railroad property, the proposition that such a vast
amount of property is beyond the protecting clauses of the Constitution,
that the owners may be deprived of it by the arbitrary enactment of any
legislature, State or nation, without any right of appeal to the courts, is
one which can not for a moment be tolerated. (Chicago, Milwaukee,
etc., R. R. Co. v. Tompkins, 176 U. S., 172.)

When the Supreme Court has thus solemnly declared that
neither State nor nation, which means neither a legislature nor
Congress, can take away the right of appeal to the courts in a
ease like this, shall we not hesitate to deprive the courts of
any appropriate and customary power that belongs to such
appeal? Should we not strive to avoid collision between Con-
gressional enactment and court decisions and seek all reasonable
and honorable methods to that end? If the courts did not tol-
erate what we do the people would suffer thereby.

Let me observe here, Mr. President, that it is not attempted
nor sought in the amendment proposed, which I am now de--
bating, to take away entirely from the court the power of
injunction; neither is it asserted that there is any purpose to
intercept or prevent the power of appeal or review in some way
or other. What, then, is it that is sought to be done? Not
anything that does any particular good to anybody except for
a short period, and, Mr. President, that particular thing which
is done for a short period, which is a period of delay, is the
very vital thing which provokes the power of equity in the case,
and it goes in itself to the very heart and core of the matter in
so far as the carrier is concerned.

No lawyer can contemplate these decisions—at least none can
if he interprets them as I do—without at least the grave and
serious apprehension that, should we adopt that amendment
to this bill, which abolishes the interlocutory injunction, we
would be like the commander of a ship who whirled his broad-
side to the guns of an enemy instead of bearing down upon
that enemy with thé prow foremost. I can not see that it is
prudent or that it is wise to do this or that it is judicious
legislation. If a man must take a risk, let bim take it wholly
and without regard to consequences; but no wise man takes any
risk which he may fittingly, honorably, and prudently avoid.
So should no statesman,

6773 5

 
66

HCW RISK MAY BE AVOIDED.

How may we prudently avoid it? By providing for a review
modeled upon the California land act; by requiring the record
to be produced in the petition for review; by requiring the
parties to put in all their testimony before the Interstate Com-
merce Commission, except such as they could not get bold of
by due diligence; by requiring five days’ notice of a motion for
any suspensory order or injunction; by requiring a good and
full bond to be presented as condition to that suspension order
or injunction; and bs putting the period of appeal or review as
near as possible to the decision of the Interstate Commerce Com-
mission. Thus as short a time as may be will go by as between
the decision of the intermediate and administrative body and
the conclusive order of a court. Thus, too, the best practicable
ends we may subserve by procedure may be accomplished.

To my mind, Mr. President, we can not subserve the interests
of the great population of the United States who ship their
produce by rail, or the immense public that must travel by rail,
better than by giving them a water-tight remedy; one that can
not be easily assailed; one that has got all of our Anglo-Saxon
rights, equities, and liberties cased up and fortified in it; one
that exposes them to nobody, but challenges the just sense of
everyone who impeaches its justice by provisions for the fair-
est, fullest, and most complete hearing that the wit and wisdom
of man can devise for the ends of justice between all parties to
the case.

6773

O
RAILROAD RATE BILL.

SPREE CH

OF

HON. JOHN J. ESCH,

OF WISCONSIN,

IN THE

HOUSE OF REPRESENTATIVES,

Saturday, February 3, 1906.

ee

WASHINGTON.

1906.
6587
SPEECH
HON. JOHN J. ESCH.

The House being in the Committee of the Whole House on the state
of the Union and having under consideration the bill (H. R. 12987) to
amend an act entitled “An act to regulate commerce,’ approved Feb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. ESCH said:

Mr. CHarrnMAN: The American people are a patient people and
are slow to anger. They long endure oppression without revolt,
and if relief from such oppression must come through national
legislution they are indeed patient and long suffering, but when
once aroused, when once made conscious of wrong unjustly en-
dured, they straightway seek a remedy, and rash would be he
who would put obstacles in their way.

Railroading in America may be said to have five ages. First
came the age of construction. That was followed by the age of
competition. Next came the age of combination, which in turn
is about to be followed by the age which this legislation is to
usher in—Government control—and there is the fifth and last
age, that of Government ownership, from which may God save
us. In regard to this evolution, let me call your attention to
the status of affairs just prior to the enactment of the original
interstate-commerce law. It was a chaotic stage in railroad
construction and management. There was instability in meth-
ods and instability in rates and charges. Business was not safe,
because it could not make definite plans. The moral atmos-
phere seemed obscured. Rebates were brazenly asked and as
brazenly granted.

It was at this time that the American people became aroused.
As a result an investigation was demanded at the hands of
Congress, and the Cullom Commission of 1886 resulted. That
Commission developed some remarkable conditions and showed
to what lengths American railroads had gone or been forced to
go in the preceding decade. It was this Commission of 1886
which developed the startling evidence in reference to the opera-
tions of the Standard Oil Company, to the effect that that com-
pany had demanded of the carriers a 10-cent per barrel rate
on the oil it shipped, and at the same time had demanded that
the carriers should ask of all independent shippers and pro-
ducers 35 cents per barrel, and that of the 35 cents per barrel
the Standard Oil Company was to be paid for its own use 25
cents. Never before had such a case of extortion, such a case
of acquiescence on the part of the carrier, been presented to the
American people; and this situation, with others, had much to
do with promoting the legislation in the following year.

6587 3
4

The gentleman from Pennsylvania [Mr. Srprey] yesterday
or the day before stated that all anarchists, all paternalists,
and all socialists favored this kind of legislation. I would like
to ask him what act would more promote paternalism, social-
ism, and anarchy than these acts of the Standard Oil Company?
[Applause.] It is a clear fact known of all men that anarchy
and socialism and paternalism thrive in the great centers of
population. They grow by what they feed upon. Why do
these forms so alien to our institutions exist and grow in the
great cities of our country? They grow there because in them
the masses feel first and most keenly the iron heel of monopoly.
In them the citizen sees the franchises which he grants to
quasi-public corporations through the common council free of
cost immediately capitalized, and then finds himself compelled
to pay charges and fares to pay large dividends upon his own
gift.
Under the interstate-commerce law of 1887, with the powers
which that law gave to the Commission, great good was done
and many of the evils which had existed theretofore were in
large part abated. Business became more stableized, because
rates became more fixed and certain. The railroads themselves,
conscious that the Commission had the power, did not violate
the law, but evinced a desire to obey it in spirit and letter. I
know it is charged here, and it has been frequently charged by
the learned counsel of railroad companies, that the Commission
did not have the power to determine what rate should be sub-
stituted in lieu of one found to be unjust or unreasonable. And
there has been a suggestion made on this floor that the Commis-
sion had even doubted its own authority to fix rates prior to the
decision in the Maximum Rate case.

In replying to such contention and to resolve a doubt, if any
exists, I wish to read the statement made by the Hon. William
R. Morrison, one of the first Commissioners appointed, and one
who was the Chairman of the Commission when, in 1897, the
Maximum Rate case was decided. He used this language in
the annual report of the Commission following this decision:

The Commission exercised its power in a case commenced in the
second month after its organization and continued to exercise it for a
period of more than ten years, during which time no member of the
Commission ever officially questioned the existence of such authority or
failed to join in its exercise. As already stated, the authority of the
Commission to modify and reduce an established rate and to enforce a
reasonable rate for the future was not questioned in the answer—

Mark you—
in the answer of the defendant in the Atlantic Rate case, decided March
30, 1896, nor had it ever been denied in any answers made in more than
four hundred previously commenced, many of them alleging unreasonable
and unjust charges, and praying the Commission to afford a reduction
and lower the rates in the future.

Sir, the surest test as to the purview of any law or the powers
granted thereby will be found in the answers to any «complaints
brought under the law. Where would you expect to find doubts
or suspicions as to the powers of the Commission if not in the
answers filed by the defendants—the railroad companies? And
yet, according to this unimpeachable authority, no such defense
was ever made during the first ten years of the operation of the
law. But in 1897, as has been so often said, the Comission
lost its power to fix the rate for the future, but it did not on
that account hecome a worthless body. It still had duties to

6587
5

perform, and still had the power of investigation; it still could
hear complaints as to rates and determine as to their reason-
ableness, but had no power to make its orders effective.

Mr. CLAYTON, May I interrupt the gentleman?

The CHAIRMAN. Does the gentleman from Wisconsin yield
to the gentleman from Alabama?

Mr. ESCH. Certainly.

Mr. CLAYTON. I understood the gentleman to say that the
Commission lost its power in 1897 by this decision of the
Supreme Court. But it lost only one power by the adjudication
of the court, which was fixing a rate for the future to govern
the railroad in its operation. Was not that the only power it
lost?

Mr. ESCH. Exactly; the gentleman is right. The power to
fix a rate for the future was lost, but the power to declare
whether the rate was reasonable or unreasonable still remained,
with no authority to put its findings into effect.

Mr. CLAYTON. But all other powers, the gathering of sta-
tistical information, and making rules other than prescribing
the rate, has never been denied by the Supreme Court.

Mr. ESCH. The gentleman is right. Its investigations of the
Joint Traffic Association, the Northern Securities merger, of the
coal strike, of the beef trust, and numerous other unlawful com-
binations have resulted in focusing public attention upon them
and securing the evidence for their successful prosecution.
Although it suffered a loss of power, it has justified its cost to
the Government. Even the decision in the Maximum Rate case
did not result in a useless body. But, Mr. Chairman, it is true
that the fact that the Commission lost its power to fix the rate
for the future and to enforce the execution thereof diminished
the respect and wholesome fear which railroad companies had
for the Commission. They no longer put their entire case before
the Commission in the event of a complaint and a hearing. It
has been said on this floor, and has been often repeated, that the
Interstate Commerce Commission rarely if ever has hit the mark
in cases of appeal to the Supreme Court. One attorney for the
railroads said before our committee that out of thirty-two cases
they had hit the bull’s-eye once, had come within the circle once,
and missed thirty times; but he was unfair in failing to state
the circumstances and conditions under which these reversals
were obtained. In no less than six of these cases the Commis-
sion, insisting upon its rights to declare rates for the future,
was overruled. With a multitude of circumstances and condi-
tions surrounding a given contest over any rate or rates, is it
wonderful that six cases applying the law should have been
brought to the Supreme Court? Fourteen of these thirty cases
arose under the long and short haul clause. The Commission
was trying to enforce section 4 of the original act and to give
it some effect, and thus carry out the purpose of Congress.

The Supreme Court, by these repeated decisions, has refined
away the qualifications set forth in section 4, until to-day section
4is an absolute nullity. These men who criticise the Commission
for failing to hit the mark failed themselves to tell the whole
truth. They did not tell that since the Maximum Rate case the
railroads in many cases bad refused to put in their entire testi-
mony before the Commission, but when the case came before the
court the defendant companies would put in new evidence which

6587
6

had never been heard by the Commission. On this new evidence
the court would make its decisions.

Finally this unwarranted practice became so aggravated that
the courts themselves declared they would not decide a case
where the evidence had not been first fully presented to the
Commission.

Mr. WM. ALDEN SMITH. How many cases have been ap-
pealed? :

Mr. ESCH. There were thirty cases a year ago in which de-
cisions had been made by the Supreme Court reversing the Com-
mission.

Now, in reference to the extent of the present agitation for
this legislation. It was said by the learned gentleman from
Massachusetts [Mr. McCati] that this demand of the Presi-
dent in his message of December, 1904, was “a non sequitur,”
and that even a busy President might be permitted to indulge in
non sequiturs. What did he mean by declaring that the Presi-
dent’s message of 1904 was a non sequitur? Did he intend to
say, did he imply, that there was no demand in the country,
that there was no request being made of Congress for any legis-
lation looking to an increase in the powers of the Commission?
I wish to say that the President’s declaration in his annual mes-
sage of a year ago asking Congress to confer “on the Commis-
sion the power to revise rates and regulations, the revised rate
to go into effect and stay in effect unless and until the court of
review reverses it,” was not a non sequitur. There were mem-
bers of the Committee on Interstate and Foreign Commerce who
for a year before that message had been urging upon that com-
mittee and upon Congress legislation to increase and enlarge
the powers of the Commission. I want to say that for the last
eight years this important subject has been before the country
and committees of Congress had been considering it. In the
Fifty-sixth Congress Senator Curtom introduced a bill giving
to the Commission enlarged powers practically along the line
of the bill under discussion to-day. His bill was succeeded in
the Fifty-seventh Congress by the Nelson-Corliss bill, upon
which hearings were had. That, in turn, was succeeded by the
Quarles-Cooper bill in the Fifty-eighth Congress, upon which
hearings were had; to be in turn succeeded by the bill which
my distinguished colleague from Michigan and myself had the
honor to present at the last session. That, in turn, is now suc-
ceeded by the bill which we are now considering, presented by
the able and distinguished chairman of our committee.

Does all this show a non sequitur? Was it a chance thought
of the President when he called the attention of the American
people to the necessity of this legislation? No; this question
had been agitating the minds of the people in various sections
of the country for years. The President knew, and for some
time must have known, the nature, extent, and volume of this
agitation. He knew, as some people of the East do not even
yet know, how, especially in the Middle West, the birthplace of
national ideas, the birthplace of Republican policies, rate legis-
lation was a burning question, and one which the people,
through their legislatures, were settling in the form of law.
{Loud applause.] Is it a non sequitur to say that the President
“suddenly saw a great light” and therefore inserted this
recommendation in his message of December, 1904, when all the

6587
7

papers of the land, when more than a thousand industrial, com-
mercial, and shipping bodies throughout the land had sent peti-
tions, and when more than twelve State legislatures had sent
memorials to Congress asking for this identical legislation?
No. The President well knew the sentiment of the American
people and well knew the extent of the demand back of this
legislation. The President of the United States is not narrow;
his knowledge of the wants and wishes of his countrymen is not
confined to the Atlantic seaboard. He is not “ cribbed, cabined,
and confined” in his ideas. He knows the United States; he
knows every State in the Union as no other President ever has;
he became conscious of the popular will, and so made that
declaration in his message of 1904. [Loud applause.] And
great good did the message do. It gave life to the whole sub-
ject of rate control; it gave hope and courage to the friends of
this proposition. The first definite results came in the last
Congress, when the House took favorable action. The Presi-
dent is with the people in the demand for this legislation, and
this House is about to put, so far as it can, his recommendation
in the form of a law. He will sign this bill if it reaches him.
The House of Representatives will perform its duty and will
pass the bill. The question will then remain whether ‘“ Ma-
homet should go to the mountain, or whether the mountain
should come to Mahomet.” Congress can not afford to adjourn
without passing it. I feel confident that rate legislation will be
enacted at this session, and that we can go back to our several
constituencies and say, “‘ We have tried to do our part.”

There were other reasons which brought on this agitation for
rate control, some of them deep seated and of slow but certain
growth. There is now and for some time has been an opinion
among the people that there is a large and unwarranted over-
capitalization of railroads. It is generally believed that, while
the total capitalization is rated at $12,000,000,000, there is but
little more than half of it actual valuation. The conclusion fol-
lows that, as dividends and interest must be paid on the stocks
and bonds, the money to meet such payments must be derived
from the rates, fares, and charges demanded, and that therefore
the public is excessively taxed.

It was a knowledge of such stock manipulation and other
evils that led the President, in his annual message of December,
1904, to utter these words:

The Government must in increasing degree supervise and regulate
the workings of the railways engaged in interstate commerce, and such
increased supervision is the only alternative to an increase of the pres-
ent evils on the one hand or a still more radical policy on the other.

These words are reenforced by those of similar import in his
message of last December. They are the words of a fearless
Executive. In these days, when corporate influence seeks
through financial contributions to reach the seat of political
power, it is a brave thing to say that “ the highways of commerce
shall remain open to all on equal terms.” The President said
these words. We expected him to say them. We feel confident
that he will make them good. The people further understand
that a few men control the railroad interests of the country to-
day—that only a hundred men in different directories through-
out the land practically have control of 90 per cent of the rail-
road business and management of the country. And with that
tremendous power, exerted by men responsible to nobody but to
their stockholders, and sometimes not even to them, the people

6587
8

have a well-founded fear that all may not be well with the Re-
public if this condition is to continue. The people further under-
stand that competition as originally designed no longer obtains ;
that railroad companies, by combining into systems, by traffic
agreements, by community of interests, by numerous other de-
vices are so far stifling competition that it no longer serves as a
regulator of trade and commerce; and this being true, the com-
bination being so extensive tliat six or seven banking syndicates
control 65 per cent of the mileage of the country, the people de-
clare “ the Government must enter into the solution of the prob-
lem if we are to be saved against an unconscionable despotism.”
We have a right to demand at the hands of Congress the relief
afforded by this legislation.

Now, with reference to the bill here presented, I wish to call
attention to the phenomenal fact that it has the almost unani-
mous indorsement of the Members on both sides of the Cham-
ber and the unanimous indorsement of members of both parties
on the committee. A unanimous report ought to insure the
passage of any bill. Unanimity in committee was not secured
by the sacrifice of principle by any member of it. All were
agreed as to the principle, and as to details each yielded
something. It is now brought in here really as a nonpartisan
measure, and it will receive the support of men of both parties.

This attitude of the Ainerican House of Representatives ought
to do much toward paving the way for the successful passage of
this legislation. Each year’s delay will result in an increase
of the demand for rate legislation.

It is now presented for your suffrages. I can not take it up
in detail, but I wish to call attention to some of its specific
features. To my mind, as now drafted it is broad enough to
cover express companies. The old law did not reach express
companies, but the language of this measure, as indicated ou
page 38, is broad enough to bring them within its purview. It
reads :

And the term “transportation” shall include cars and other ve-
hicles and all instrumentalities and facilities of shipment or carriage,
irrespective of ownership or of any contract, express or implied, for
the use thereof and all services in connection with the receipt, deliv-
ery, elevation, and transfer in transit, ventilation, refrigeration or
icing, storage, and handling of property transported.

Under the original law the question whether that law ex-
tended to express companies was raised within six months after
that act went into operation, and by a decision of the Commis-
sion, handed down in December, 1887, it was held that under
the language of the original act express companies could not be
considered as under that act. In stating the decision the Com-
mission used this language:

So far as the public is concerned, this business—

That is, of receiving and delivering the goods—

is wholly done by the express companies, the shipper and receiver of the
property having no contract relation with the corporation or the per-
sons owning the railroad or other system of transportation employed,
but dealing exclusively with the express companies operating on the
route desired, to which alone he looks in case of loss or damage. ‘The
express company itself thus becomes a common carrier, employing in-
strumentalities of commerce in part its own and in part hired from
other carriers, but ‘having the responsibilities, duties, liabilities, rights,
and liens of a common carrier in its relations with the public. Its
position in this respect has been judicially ascertained and is well un-
derstood throughout the country, and is not seriously in dispute.
6587
9

There is need of regulating express companies. While held to
be common carriers, they have escaped the restrictions which are
imposed upon such earriers. Starting as forwarders of small
and valuable packages, their business has grown to enormous
proportions until to-day it covers items of traffic from coins to
live stock. Most of what they carry is freight, and what they
earry deprives the railroads of an equal amount.

These express companies, especially the Adams, United States,
American, and Wells-Fargo & Co., have contractural relations
with the great railway systems of the country. By the terms of
their contracts the latter furnish the cars and haulage, and
secure from 40 to 60 per cent of the gross receipts. As such
percentage of the gross receipts brings to the carriers a far
larger return than would receipts on an equivalent amount of
traffic carried as freight the railroads do not complain, but, in
fact, are inclined to encourage the express business. This busi-
ness is a very lucrative one, the dividends of some of these
companies being 8 per cent per annum, with additional stock
dividends. The total capitalization of these four companies is
sixty millions. They have 40,000 agencies, 50,000 employees, and
last year handled over 100,000,000 packages, besides 20,000,000
money packages and 7,000,000 money orders.

There is virtually no competition between the companies,
and but one express company can do business on a given line of
road. Representatives of the Adams and the American express
companies have entered the directory of the United States
Company. There is no control whatever over the charges they
can make, and these charges are three and four times higher
than the freight charges would be on the same goods. The only
plea for such higher charges is the greater safety and speedier
delivery which this service insures.

There seems to be no limit to the activities of the express
companies. They are becoming agents for the sale as well as
the carriage of goods. In some States where prohibition obtains
they act as agents, disposing of liquor in original packages.
One of them recently advertised that it would do a commission
business handling fruit and meats.

With this enlargement of the scope of their activities, with
their irresponsibility as common carriers under existing law,
the time has come when Congress, in connection with its con-
trol over railroad rates, should extend such control to these
companies. Their business is practically railroad business and
there is no reason why it could not be carried on successfully
by the railroad companies themselves. In fact, this has been
done. In Europe the carriers do their own express buginess
and the money they receive from it goes to swell the total of
freight receipts and in some measure accounts for the increase
of such rates as compared with the freight rates in this coun-
try. Under this bill I believe these express companies can be
required to file their tariff schedules, and upon complaint made
against them the Commission can determine whether the rates
they charge are just and reasonable. Under section 20 as
amended full reports as to capitalization, indebtedness, amount
of business, the schedule of rates and charges, the character of
contracts with the railroad companies, and other valuable data
necessary to a fair, reasonable, and wise control of these com-
panies can be secured.

6587
10

It was supposed that the passage of the Elkins Act in Feb-
ruary, 1903, providing for the payment of penalties for the
giving or receiving of rebates, would suppress this widespread
iniquity. Its enactment, however, has not destroyed rebates,
but has had a tendency to change their form. The open rebate,
with cash payments, is a kind of work too “ rough” to be longer
practiced, and it has given way to more insidious forms, dis-
guised as damages, claims, commissions, and gifts and the dis-
criminations effected through private car lines. The abolition
by the Elkins Act of the imprisonment clauses of the original
interstate-commerce act has robbed the law of some of its
terrors and restraining influences, although encouragement may
thereby have been given to rival railroad officials to inform
upon one another. By the advice of Attorney-General Moody,
recently given to the United States district attorneys, all prose-
cutions because of rebates whenever possible were to be brought
under the conspiracy statute, which provides for imprisonment,
instead of under the Elkins Act. Vigorous prosecutions of this
kind in various sections of the country, supplemented by the
enactment of the pending bill, will be a serious, and I trust
fatal, blow to the whole rebate evil.

The ills from which the shipping and general public have
suffered as a result of unjust charges and discriminations con-
nected with industrial and terminal lines, switching, icing, ele-
vation, and refrigeration were less heard of and less com-
plained about prior to the enactment of the Elkins law than
since. As these ills arose out of instrumentalities of shipment
or carriage and were not due to the carriers themselves, im-
munity from prosecution under the Elkins Act was claimed. It
is to prevent any further claim from such immunity that this
bill makes the common carriers themselves solely responsible
for all such instrumentalities and facilities of shipment or car-
riage, so that they, irrespective of any contracts or agreements
they may have, may be held responsible.

Mr. STEENERSON. Mr. Chairman——

The CHAIRMAN. Does the gentleman from Wisconsin yield
to the gentleman from Minnesota?

Mr. ESCH. I do.

Mr. STEENERSON. I would like to ask the gentleman under
what provision of the present bill the authority over maximum
charges of the express companies will be found?

Mr. ESCH. I have read the provision—part of the section on
the top of page 3. I think that applies to express companies.

Mr. STEENERSON. It seems to me that if the authority is
found there, it is by implication.

Mr. ESCH. Well, where you specify in a statute, there is al-
ways danger of elimination. If you use general terms, you are
more apt to reach what you are after.

Now, Mr. Chairman, the private car line is like the express
business, an evolution. Both have grown to large and even
overpowering proportions as a result of the neglect or unwill-
ingness of the carriers to supply all the necessary facilities to
accommodate the carriage of the products naturally tributary to
their lines. But all railroads have not thus surrendered this
part of their business to third parties, but have themselves sup-
plied their lines with a sufficient number of special cars of the
most approved pattern and in many respects are giving better

6587
11

service than is now being given by the so-called “ private car
lines.” The refrigerator car has come to stay. Whether owned
by the railroad itself or by a separate company there is almost
constant use for it the year round. In these days, when
railroad systems are practically transcontinental, something
can be found for these cars to do during the greater portion of
the year, and should there be a shortage for any reason on any
one system, there is no reason why one company could not secure
a supply from other lines, as is constantly done in the case of
box cars.

It is the contention of the Armour and other private car lines,
for the use of whose cars the carriers pay a rental of three-
fourths of a cent a mile, loaded or empty, that a much more sys-
tematic and speedy distribution of these cars can be made over
a greater territory, and that as a result of this fruits and vege-
tables can be safely shipped greater distances in better condition,
assuring more stable prices to producers and a more even mar-
ket for the consumers. But in payment for such advantages
these private car lines receive, besides the rental from the car-
riers for the use of their cars, exorbitant prices for the icing
of them.

As these private car lines, especially the Armour line, in-
sist upon making exclusive contracts for the use of their cars
with railroad companies, producers are placed at the mercy of
the car-line companies and must pay whatever price is de-
manded. The exclusive contract feature of this business cre-
ates an absolute monopoly, and subjects whole communities to
a tax from which, under existing law, there is no escape.

I wish to read a section of one of these exclusive contracts.
It is found in the testimony given before our committee at the
last session.

The railroad agrees and obligates itself to use the car-line cars ex-
clusively in the movement of fruit and vegetables under refrigeration
from points on the lines of the railways owned, leased, or operated by
it during the life of this contract so long as the car line shall furnish
sufficient equipment to protect said business.

The railroad agrees to this contract, and the consumers at
once feel its monopolistic and, hence, price-raising effects.
Charging for icing almost double what the railroads them-
selves get for freight, charging from 100 to 400 per cent above
the cost of the ice, charging in one instance $67.20 for a little
over 2 tons of ice, are instances of extortion which a free
people ought not to tolerate.

Think of it! the railroad company surrenders an obligation
it owes to the general public in not itself furnishing the neces-
sary refrigerator cars to accommodate all the traffic which
originates along its line; it surrenders this to an independent
company, and permits this independent company, because of
supplying the required number and type of cars, to demand of
the railroad company in return an exclusive contract for all
the refrigerated freight along its road.

A significant instance of an increase of rate for icing charges
after the carrier bad entered into an exclusive contract is
shown by the Pere Marquette case in Michigan. If I remem-
ber rightly, the Pere Marquette and Michigan Central roads
bad been making an icing charge of only $20 per car from
Michigan to New York, and of from $7 to $15 per car to Du-
buque or St. Paul and Duluth prior to making exclusive con-

6587
12

tracts with the Armour car-line company; but soon after
these exclusive contracts had been entered into the charge per
car to New York was raised from $20 to $55, and from Michi-
gan to Dubuque, St. Paul, and Duluth from $7, $12, and $15 up
to as high as $35.

These exclusive contracts forbid the shipper having his own
ears, icing them at his own expense, when he could get the ice
for $2 a ton and even less. This right has been denied the ship-
per. The exclusive contract prevented the railway company
from asserting its independence and the private car line com-
pany dominated the situation. I do not believe that any such
situation is tolerable under the American system of jurispru-
dence. [Applause.] For one I believe that we should so
legislate as not to permit any such power to do wrong to be
permitted in any section of the country. These so-called “ icing
charges,” exorbitant as they are, have been giving the shipping
world much trouble because of the uncertainty and insufficiency
of the relief. When it was attempted to secure relief the pri-
vate car line companies said: “ Why, we are not interstate
carriers; the interstate-commerce act does not apply to us; this
refrigeration of cars is a purely local matter. We have stations
along the line of road stocked with ice from which the bunkers
of the cars are filled, but all this is purely a local matter.”
This is their contention; hence, not being concerned with inter-
state commerce, the interstate-commerce act could not apply,
the Elkins Act could not apply, and the shippers, producers, and
consumers are left remediless. If this bill becomes a law, how-
ever, it will be broad enough in its application to subject these
companies to the restraint of law, it will compel them to
give public notice of their tariff schedules and changes therein,
and what is more, will compel them to separately note upon their
bills of lading their icing charges, so that the shipper will know
the amount of ice supplied him and the price he pays for the
same. If there was nothing else in this bill than the provision
giving a remedy against these private car lines I would most
earnestly support it.

This erying demand for relief from the exactions of private
ear lines comes not merely from the commission merchants
throughout the country, but also from the large fruit growing
districts of Arkansas, Missouri, Georgia, California, and other
sections. As a result of this appeal and doubtless in anticipa-
tion of the passage of necessary rate legislation this very week
representatives of the Santa Fe road and of the Armour re-
frigerator service have agreed upon a reduction of rates on fruit
from California points to Eastern markets varying from $10
to $17.50 per car. A remarkable feature of this agreement is
“that no rebates or other special concessions shall be granted
to any fruit shipper in California, and that the reduced rates
shall be strictly maintained.”

The passage of this bill will place the charges for terminal
tracks and switching and industrial lines within the jurisdic-
tion of the Commission. When a great industrial corporation,
doing a vast annual freight business, owns and controls a spur
track a fraction of a mile in length connecting with trunk
lines, it can, under the guise of a joint tariff, secure in return
for routing its freight over a given line a certain amount per
car as payment for use of its spur track. This charge is out

6587

2
18

of all proportion to what the spur track bears to the through
route, but carriers pay the same in order to secure the busi-
ness. This undue share of the through route is nothing but a
species of rebate to the industrial company, and gives it by so
much an advantage over all other companies engaged in the
same locality in the same line of business.

This bill will permit the Commission to grant speedy relief
to shippers who allege that they have been unjustly diserimti-
nated against in withholding facilities of shipment, such as
spur-track connections, car allotments, ete., for we give the
Commission in this bill the power to determine and order “ what
regulation or practice in respect to transportation is just, fair,
and reasonable.”

By requiring thirty days’ public notice of a change of rates
the rank injustice of the midnight schedule from which the
Middle West has suffered in recent years will be curbed, if
not entirely checked. Under the existing law only three days’
notice of a reduction of rates is required. This short notice
permits the railroad company to enter into secret negotiations
with large grain dealers or owners of elevator lines for hauling
to market vast quantities of produce within a short space of
time and at a lower rate. As soon as the produce has been
hauled the carrier gives the ten days’ notice now required for
an increase of the rate. In the meantime, however, the smaller
buyers and independent concerns, not knowing of a contemplated
reduction in the rate, are unable to take advantage of the re-
duction and are thus made to suffer loss. A thirty days’
notice, as required in the pending bill, will give ample oppor-
tunity for all to be apprised of the change of rate, and will
place all upon an equal footing.

To my mind, the crux of this legislation is contained in sec-
tion 4, which amends section 15 of the original act by giving to
the Commission the power “to determine and prescribe what
will, in its judgment, be the just and reasonable and fairly re-
munerative rate or rates, charge or charges, to be thereafter
observed as the maximum to be charged” in any given case
where complaint has been made and a hearing had. It is this
grant of power around which the contention with reference to
rate regulation has raged for the last year. Those favoring the
proposition do so because of their conviction that the time has
come when the Government must assert the power given it under
the Constitution to provide the necessary safeguards against
railroad combinations. Those who oppose it do so in the belief
that it will establish a dangerous precedent, that it is contrary
to our economic traditions, will lead to abuse, and as a result
will affect disastrously the railroad interests of the United
States. I am not at all persuaded that any such result will
follow. It has not followed in any of the twenty-four States
which have adopted more or less rigid laws for the regulation
of railroads within their respective borders. In my own State
a rate law was enacted a year ago more drastic and far-reaching
than has yet been enacted by any State save possibly Texas.
Since this law went into effect no injurious results have fol-
lowed—railroad business is as prosperous now as ever—nor has
the law lessened the wages of railroad employees.

Mr. PALMER. Mr. Chairman, will the gentleman permit an
interruption?

6587
14

The CHAIRMAN. Does the gentleman yield?

Mr. ESCH. Yes.

Mr. PALMER. I recognize the gentleman as one of the
fathers of this bill, and so I desire to ask him a question. What
provision is there in this bill for appeal by the railroad com-
pany against whom a decree has been passed by the Commis-
sion—against whom the Commission has found a rate to be un-
reasonable and has fixed a new rate?

Mr. ESCH. I have that provision, if the gentleman will per-
mit me to follow my own line of argument.

Mr. PALMER. I would like to ask the gentleman prac-
tically how the railroad company is going to get an appeal or
get a chance for a rehearing?

Mr. ESCH. The provisions of the bill allow any change
or modification to be made of a given rate——

Mr. PALMER. By the Commission?

Mr. ESCH. Yes; and if the railroad company feels aggrieved
it can go into court and secure relief on the ground.

Mr. PALMER. But who will be the defendant in that case?
Suppose the railroad wants to go into court, who is going to be
the defendant?

Mr. ESCH. Under the provisions of the bill the Government
assumes the load when the carrier enjoins the going into effect
of the rate fixed by the Commission.

Mr. PALMER. The Government?

Mr. ESCH. Yes; the cost in this case is at the expense of
the Government, the Attorney-General——

Mr. PALMER. The district attorneys are charged with pros-
ecuting these penalties.

Mr. ESCH. Yes.

Mr. PALMER. Suppose a railroad company wants to take
an appeal, wants to have the reasonableness of the rate which
is declared to be unreasonable adjudged by somebody else;
who is to be the defendant in that case? Is it the Interstate
Commerce Commission or is it the complainant?

Mr. ESCH. I should say it would be the Commission. Its
action could be enjoined by the court and would be defended at
Government expense.

Mr. PALMER. If it is the Interstate Commerce Commission
who is going to pay the expenses, who is going to hire the law-
yers for the Commission?

Mr. HSCH. I understand that is paid out of the general
fund.

Mr. PALMER. Is there anything in the bill that provides
any such thing?

Mr. ESCH. I believe there is.

Mr. PALMER. I would like to have the gentleman point it
out.

Mr. ESCH. Notice is required, before either reducing or
raising a rate, of thirty days.

Mr. PALMER. This bill provides for every offense, for every
violation of a decree of the Commission, that there shall be a
penalty of $5,000 for every offense. Well, any railroad com-
pany worth considering would violate a decree about a thou-
sand times a day, I suppose, and there is a penalty of $5,000
for every offense—— 2

Mr. ESCH. Yes——

6587

 
15

Mr. PALMER. Now, pending an appeal or pending an ascer-
tainment of the question whether this Commission is right or
not, would these penalties accumulate? I will not ask the gen-
tleman to stop and look for it——

Mr. ESCH. I was finding that provision as to the fund out
of which prosecutions were to be paid, but we make provision
for that in the bill itself.

Mr. PALMER. On page 15 it is provided:

It shall be the duty of the various district attorneys, under the di-
rection of the Attorney-General of the United States, to prosecute for
the recovery of forfeitures. The costs and expenses of such prosecu-
tion shall be paid out of the appropriation for the expenses of the
courts of the United States.

Now, the question I am asking is, If a railroad company goes
into court who is going to be the defendant, who is the proceed-
ing to be against, and who is to pay the cost of that proceeding
on the part of the Interstate Commerce Commission, if the
Interstate Commerce Commission is to be the defendant?

Mr. ESCH. My idea is, the Interstate Commerce Com-
mission is the defendant, and the cost is to be paid out of the
general fund provided in the bill.

Mr. PALMER. Will the gentleman refer me to any line or
any place where such a provision is to be found, or any place
where an appeal is given to a railroad company under any cir-
cumstances?

Mr. ESCH. As I stated, the main proposition of this legis-
lation lies in this grant of power to the Commission. We do
not attempt to change the procedure in the courts. We have
not added to nor taken from them any of their constitutional
rights, and if the Commission exceeds the rightful authority
conferred upon it carriers can secure relief through the courts.

On the ground that Congress has the right to regulate com-
merce between the several States and because the railroads
are public highways, we have the right to enact this law. Ags
the basis for this declaration I wish to read a part of a decision
of Judge Harlan in the so-called “ Nebraska case.”

A railroad is a public highway, and none the less so because con-
structed and maintained through the agency of a corporation deriving
its existence and powers from the State. Such a corporation was
created for public purposes. It performs a function of the State. Its
authority to exercise the right of eminent domain and to charge tolls
was given primarily for the benefit of the public. It is therefore
under governmental control, subject, of course, to the constitutional
guaranties for the protection of its property.

Many years ago Justice Bradley, of the Supreme Court, made
this statement:

A superintending power over the highways and the charges imposed
upon the public for their use have always remained in the Government.
This is not only its indefeasible right, but it is necessary for the pro-
tection of the people against extortion and abuse.

This is the principle which guided us in placing only upon
complaint and after hearing this power in the Commission, and
being justified on constitutional grounds, we have no hesitancy
in presenting this measure to you for your support. There is
no such danger arising from the exercise of this power by Con-
gress as has been predicted by the gentleman from Pennsyl-
vania [Mr. SipLey] or the gentleman from Massachusetts [Mr.
McCatt]. I have no sympathy with the dolorous forecasts of

6587
16

the gentleman from Massachusetts. Scholarly and eminent In
his way, he seems to be born on anti lines and his independence
is one of the chief characteristics in him which we admire.
I have no fear that these dangers will ensue if we enact this
provision. As I have already stated, disaster did not ensue in
the twenty-four States where commissions were given powers
not merely of regulation, but even of rate initiation. Disaster
did not follow the original enactment in 1887. There was no
widespread ruin. There was no going into bankruptcy by the
railroads of the country. In fact, an era of prosperity ensued.
The gentlemen to whom I have just referred cited to us as a
horrible example the case of Germany as a reason why we
should not enact this legislation. The gentleman from Pennsy!-
vania and also the gentleman from Massachusetts have taken
their ideas with reference to the German system of railway
management from Prof. H. R. Meyer, of the University of
Chicago, as set forth in his book, Government Regulation of
Railway Rates. I question somewhat the authority of Pro-
fessor Meyer, and I do so upon the statements of men who are
familiar with the German system of operation and ownership
because of residence or actual knowledge.

Mr. CLAYTON. Mr. Chairman, may I interrupt the gen-
tleman?

The CHAIRMAN. Does the gentleman yield?

Mr. ESCH. Certainly.

Mr. CLAYTON. Have not the great railroad systems of the
country flooded the mails with such works as Professor Mey-
er’s and with similar literature against this proposed legisla-
tion?

Mr. ESCH. The gentleman is quite right.

Mr. CLAYTON. All ex parte, and all of which tells only a
part of the truth and does not disclose the whole case as we
have it before us to-day in the Congress.

Mr. ESCH. I quite agree with the gentleman from Alabama.
And I will quote from an unquestioned authority with reference
to Professor Meyer’s statements relative to the operation of the
German railway system. I quote from the words of Dr. Alfred
von der Leyen, a member of the Prussian ministry of public
works, being part of his recent review of Professor Meyer’s
book. He says:

For a long time there has been no difference of opinion in Germany
that a State railway system deserves the preference over private rail-
way systems. Professor Meyer apparently can not realize that it is the
duty of the State to administer the great monopolies of transportation
as a unified system in accordance with the principle of the welfare of
the great masses. The professor continually moves about in contra-
dictions, declaring on one page that the State can make tariffs only
with the yardstick, and on the next criticising it for making certain
exceptions. He also confuses his readers continually by rehearsing the
difficulties which are encountered in adjusting certain tariffs in such a
manner that they will be beneficial on the one hand and not injurious
on the other, and then carefully omitting to tell how the State has
succeeded in nearly every case cited by him in arriving at a satisfac-
tory solution, to be sure only after a very careful investigation of all
the circumstances entering into the situation. And whether this
method of procedure, which may sometimes be a little tedious, deserves
the preference over the practice obtaining in America according to
which the great railways judge economic questions chiefly by their own
subjective estimates and from the viewpoint of their own interests or
that of favored shippers, is a matter with respect to which no German,

and I am convinced also many American traffic men are not in the
least in doubt.

6587
17

In hstening to the arguments of these distinguished Members
of the House one would infer that German trade was stagnant,
that cities once powerful were going into decay, and that the
mighty Empire itself was on the decline. What is the truth?
What nation of Europe has made the greatest progress in com-
merce and manufactures in Europe in the last two decades?
Germany. What nation has become our greatest competitor
in the world’s markets? Germany. What nation has the most
highly developed internal commerce? Germany. If there are
tears to shed, do not waste them on Germany.

But why go so far afield as have the gentlemen from Pennsyl-
vania and Massachusetts? Why go to New Zealand and Aus-
tralia? Let us stay at home, where we can see an illustration
of the operation of a similar law in a neighboring country of
ours, the great Dominion of Canada. Canada has had a rate law
on her statute books for a little over a year. The gentleman
from Massachusetts [Mr. McCaLt] yesterday said that it has
been in operation only a little over a year, but that this was
hardly time enough for us to determine its defects or its merits.
The railroad attorneys, on the other hand, who appeared before.
the Senate committee declared that if Congress gave the Commis-
sion the power to fix a rate for the future the railroad property
and interests would go to ruin inside of three months. The
Canadian law, in a country like our own, with railroads con-
structed like our own, with the same rolling stock as in our
own, is operating exceedingly well. According to the testi-
mony of Mr. Bickerdike, a member of the Canadian Parliament,
Canada has a railway commission which really controls. It
has got power, not only over rates and schedules and classifi-
eations, but it has got power over the construction of roads,
over the speed of trains.

We do not assume to give our Commission any such powers in
this bill—far from it. He says:

Canada has a railway commission which really controls. Its powers
are as absolute as legislation can make them, and anyone reading the
daily papers of the country may see constantly how these powers are
being exercised in the interests of the people. The commission has been
in control for over a year now, not a very long time, perhaps, but long

enough to satisfy the people that a court of this nature is an absolute
necessity.

And again:

Instance after instance might be mentioned to show how satisfac-
torily the board has attended to the appeals of the shippers. Not all
appeals have been granted; many have been unjust to the railways.
Many other cases have been adjusted by a meeting between the railways
and the commissioners.

And again:

It may be objected by many in the United States that the railroads
there will gain their ends by bribing the commissioners. The safe-
guards in Canada against this are the character of the commissioners
and the tariff officer, their high office and liberal remuneration, the
importance of the business interests at stake, and the publicity given to
the appeals made to the board and to its decisions.

The CHAIRMAN. The time of the gentleman from Wiscon-
sin has expired.
Mr. HEPBURN. Mr. Chairman, I yield ten minutes more of
time to the gentleman from Wisconsin.
Mr. ESCH. It is needless to say that if Canada can get good
men—mien who will not be subject to bribery or yield to political
6587——2
18

influence in order to enforce this railway commission law—this
country can secure talent, ability, and integrity of the same
kind. We do not yield first place to Canada in this particular.
In that Dominion, with a drastic rate law, there has been no
injury to railroad interests. In fact, on consulting the railway
statistics and financial reports, I find that in the last year
railway stocks and bonds have increased in value, while the
gross earnings of its railroads have also increased. Now, with
this example at our door, with the fact that disaster has not
followed when drastic laws have been enacted in a majority of
the States, that no misfortune came to the country after 1887,
and during the time the Commission exercised the power of
declaring what was and enforcing « reasonable rate, what need
we fear from the operation of this bill should it be enacted?
This is wise legislation, framed along conservative lines—lines
which if carried out will prove to the advantage of the shipping
and general public.

I have noticed that railroad labor organizations have been
protesting against the enactment of this law, and representa-
tives of these orders came before the President two or three
months ago and requested him to desist from his fixed purpose
of urging this legislation upon Congress. I can not agree with
the premises which these organizations present. I can not
see how the enactment of this law will adversely affect them.
They fear that if this law is passed railroad receipts will be
impaired and consequently railway wages will be reduced.
When in the history of American railroads have the wages of
railway employees borne a fixed ratio to the income of the
roads? Have railway employees upon some of these lines
which have been recapitalized into millions ever obtained any
benefit from the effects of that action? No; their increase in
wage has seldom been proportionate to the increase of income
and profit of these great corporations. Their wages depend
upon their organization and the law of supply and demand.
The passage of this bill will not be inimical to their interests,
nor to the interests of any road honestly administered, in my
humble judgment.

The almost unanimous belief in the passage of some form of
rate regulation at this session has not discouraged railroad con-
struction planned for the present year. On the contrary, the
present year is destined to surpass all others in new mileage,
in permanent improvements, and in the purchase of equipment.
Some of the leading railway officials of the country do not be-
lieve rate regulation will have disastrous effects. President In-
galls, of the Big Four, recently declared:

I do not look for an n eff ral r
on the earnings ane eaoaltiens otic nas Peers Aare rep SoE ee

General Manager Miller, of the Wabash system, states that—

It is doubtful whether Federal rate supervision would have any effect
on traffic conditions.

And I understand that President Stickney, of the Chicago
Great Western, is of like mind. In this connection it is proper
to state that Chairman Knapp, of the Interstate Commerce Com-
mission, believes that—

The proposed rate legislation will not have any material effect on
railway revenues nor in anywise disturb the fundamental conditions of

railway operation. Indeed, I believe that effective rate regulation will
prove a benefit to railway interests.

6587
19

With reference to the great subject involved in this debate
as to the constitutional right of Congress to delegate power to
the Commission, I wish to say simply that on the strength of
the Mississippi case, the Texas and Pacific case, the Nebraska
case, the old case of McCulloch against the State of Maryland,
the case of the Milwaukee road against the commissioners of
Minnesota, on this question I firmly believe that Congress, hav-
ing passed the rule that the rate should be just and reasonable,
can empower the Commission to see that the rates are made to
conform to that standard. These cases are analogous to the
case in 192 U. S. Reports, the so-called “tea case.” In that case
Congress had passed a law by which teas of a certain low grade
should be prohibited from entering the United States, and em-
powered the Secretary of the Treasury, through a commission
or board of appraisers, to determine what teas could come in
and what teas could not. The commission rejected certain teas
as being below the standard. The importers brought suit,
claiming that this was a delegation of legislative authority to
the commissioners or appraisers, and therefore unconstitutional.
The Supreme Court declared that Congress, having fixed the
standard, to wit, that teas of a certain grade only should be
allowed to enter, had fixed a rule; that the commissioners or
appraisers only were empowered to see that the rule was ob-
served; that it was a delegation of authority to an administra-
tive board, and that the board of appraisers, acting under the
rule, acted within its constitutional limitations.

I believe that on all such orders of the Commission a review
should be had only where the rate or charge fixed by the Com-
mission is unlawful or is confiscatory.

Mr. SMITH of Kentucky. I would like to ask the gentleman
a question just on that point, whether the rate fixed by the
Commission that would be unreasonable is necessarily confis-
catory? 4

Mr. ESCH. No; 1 would think the jurisdiction of the court
would only arise on the rate being confiscatory.

Mr. SMITH of Kentucky. And on none of the rates that
might lie between the point of confiscation and extortion, the
court would not have the power to investigate. Is that the
gentleman’s construction?

Mr. ESCH. I would limit the jurisdiction of the court to the
lawfulness of the Commission’s order.

The courts, as has been repeatedly decided, can not he in-
vested with the power of making the rates for the future, this
being a purely legislative function, the province of the court
being confined to the question of the lawfulness of the rate, and
the court exhausts its power when it decides this question. L
believe that any attempt to give the court the power to declare
the extent of the unreasonableness of a rate, and thereby fix the
rate, would be unconstitutional; nor would it be safe to permit
the court to certify to the Commission what it deems the lawful
rate, and that the Commission should thereupon publish the rate
so certified to it by the court and make it the future rate. As
long as we may be sure of our constitutional grounds and are
convinced that we are acting within constitutional limitations,
why hazard this entire legislation by the injection of some fea-
ture which may nullify the whole? :

Expedition in the hearing of complaints is a prime requisite
in rate regulation. The bill secures this by putting in force and

6587
20

effect the orders of the Commission thirty days after notice, and
such order is to remain in force and be observed by the carrier
unless suspended or modified or set aside by the Commission or
suspended or set aside by the court, and in case the matter in
controversy is taken into the court the provisions of the expe-
diting act under the Sherman trust law are made applicable to
the proceedings, so that a decision is made at the earliest possi-
ble moment by practically an appellate court, in which court, as
well as in the Supreme Court, the matter has precedence over all
causes save criminal causes. When it is remembered that under
the existing law cases have remained pending in the court from
four to eight and even nine years, and when decisions had been
finally rendered were of little or no avail because of an entire
change in the conditions which originally brought on the litiga-
tion, speedy decision becomes a consummation devoutly to be
wished.

Mr. Chairman, your committee realized that in order to make
rate regulation through the Interstate Commerce Commission
effective; in order to secure the suppression of rebates and un-
lawful discriminations and preferences; in order to secure the
necessary evidence to make prosecutions for such offenses suc-
cessful, it was necessary to give to the Commission visitatcrial
powers of the broadest and most thorough character. We be-
lieve that section 7, amending section 20 of the original inter-
state-commerce act, gives the Commission through its own mem-
bers and through its special agents and examiners these powers.

At present almost every carrier has its own system of book-
keeping and there is uniformity among carriers only in the
method of publishing the reports at present required by law.
Uniformity in bookkeeping would greatly lessen the task of
Government inspection. It is for this reason that we have pro-
vided in this bill that—

The Commission may, in its discretion, prescribe the forms of any
and all accounts, records, and memoranda to be kept by carriers subject
to the provisions of this act, including the accounts, records, and

memoranda of the movement of traffic as well as the receipts and ex-
penditures of moneys.

And it is further provided that—

The Commission shall at all times have access to all accounts,
records, and memoranda kept by carriers subject to this act, and it
shall be unlawful for such carriers to keep any other accounts, records,
and memoranda than those prescribed or approved by the Commission.

In order that complete and accurate statistics of railways may
be secured for the information of the public, not only annually,
but at any time, this bill requires all carriers subject to this act
to file annual, monthly, and even special reports on forms to be
prescribed by the Commission. The necessity for a uniform sys-
tem of bookkeeping as to accounts, records, and memoranda kept
by carriers and the necessity of annual, monthly, and special
reports of their earnings and expenses and the right of thorough
and frequent inspection on the part of the agents of the Govern-
ment is shown by the loose and deceptive methods practiced by
many carriers in the keeping and publication of their accounts.

In recent years so great have been the actual gross and net
earnings of some of the railroads that efforts have been made to
conceal them, with a view to deceive the general public and
thereby to silence any demand for a reduction of rates, fares,
and charges. There are many methods whereby gross and net
earnings are minimized by charging up to operating expenses

6587
21

items which should have been charged up to permanent improve-
ments. President Baer, of the Philadelphia and Reading Rail-
road, admitted that a steel bridge on his line was charged up
to operating expenses. On other roads brick depot buildings
and other structures and spur and side tracks are not charged
up to permanent improvements, but to operating expenses.
Other accounts wherein like concealment of the true situation
is practiced are the loss and damage accounts, accounts for the
repairs and renewals of locomotives, of passenger and freight
cars. These several accounts on examination will show enor-
mous increases wholly out of proportion to operating expenses.
Such unfair methods, such padding of accounts, will not be pos-
sible should this bill become a law.

In order to show the necessity of publicity of railway accounts
and of railway management I shall append and make a part of
my remarks a statement prepared by Hon. Charles S. Hanks,
of Boston, assisted by George W. R. Harriman, an engineer of
large experience, of the same city. These gentlemen, after
months of labor and with access to all Government statistics
relating to railways, have come to the conclusion that it would
be possible to make a uniform reduction of 10 per cent on rail-
way rates, fares, and charges throughout the country without
such reduction interfering in any way with the present rate of
dividends on stocks, interest on bonds, or wages of railway
employees. That such reduction is possible is shown by the
readjustment of accounts of two roads—the Southern and the
New York, New Haven and Hartford. A like investigation of
three other great railway systems in other parts of the country
leads to the same conclusion.

If, as Judge Harlan declared in the Nebraska case, the car-
rier is entitled to a fair return upon his investment, ought not
the Commission and, in case of appeal, the court take into con-
sideration not merely the question of overcapitalization, but
also the question of the padding of accounts?

No one denies the prosperous condition of the railroads of
the country during the last few years, and especially since the
general raising of rates through reclassifications in official
southern and western territory, beginning in January, 1900.
Had the rates and classifications in force prior to that date
remained, the revenues of the railroads last year would have
been less by over $100,000,000.

I am not in any sense a railroad baiter. I concede to the
railroads the right to live and prosper, and in return ask a
like concession from them to the people. I would ask them to
remember that old maxim, “ So use thine own as not to injure
thy neighbor.” With so much of their own and so much which
the people out of their generosity have given them and which
they have used as their own, I respectfully ask that they do
not injure their neighbors—the amassed millions of our popu-
lation, each one of whom in comparison has so very little.

We believe that the Commission appointed by the President
under this act—a commission of seven members—will be a non-
partisan commission, a commission of men of high integrity
and of high ability. It will not be a political body. There is
no more reason why it should be charged with being such a
body than is the Supreme Court of the United States. Its
members are named by the President; they are confirmed by
the Senate.

6587
22

It is charged that this agitation, not springing from the peo-
ple, has risen out of the lust of power on the part of the
present Commissioners. Gentlemen, when they have been ap-
pealed to under an emasculated statute, when they have been
harassed by appeals for aid from all parts of the country and
knew that their hands were tied and they could not afford relief,
do you wonder that for ten years in annual reports they have
appealed to Congress to give them the power which Congress
supposed it had originally delegated? I would think them less
than human if they had not done this, if they had not in good
faith tried to magnify their office. We can get men for the
Commission who will give to the interpretation and adminis-
tration of this act the greatest ability, the widest knowledge,
and the results, I have no doubt, will be beneficial to the coun-
try. [Applause.]

[Here the hammer fell.]

APPENDIX 1.
Statement of Hon. Charles 8S. Hanks, of Boston, Mass.
NEW YORK, NEW HAVDN AND HARTFORD RAILROAD.
Station service.

 

 

AO OI ees ad we a ee $3, 777, 000
1901 ~ 3, 885, 000
i902 > 4; 133) 000
1903 _ 4) 602; 000
1904 4) 714; 000
190K isos esse tee cree Se ea oe ee ee en 4, 670, 000

The above is approximately $2,180,000 a year more than it should be
on the percentage basis of this item of disbursements to the total dis-
bursements and is undoubtedly largely padded.

Oar service per diem and mileage (rentals).

 

 

 

 

 

1900 ao eet Seat See eee eak, $688, 000
1901 ~~ “687; 000
1902 772, 000
1903 , 230; 000
1904 aoe 1, 094, 000
1905 ~~ 1; 555, 000

 

The above is approximately $500,000 a year more then it should be
on the percentage basis of this item of disbursements to the total dis-
bursements and is undoubtedly largely padded.

In the last report published the outstanding bonds were $9,639,000,
paying, approximately, annually $385,560 in interest. The stock out-
standing was $80,000,000, paying a yearly dividend of $6,400,000. If
the liabilites of the road were carried on practically the same per-
centage basis as the other roads of the country, and if these bonds had
been increased to the amount of $44,814,500, namely, one-half of the
bond and stock issue, there would have been an annual saving to the
road of over $1,400,000, even if the bonds and stocks had been sold as
low as par. Why this was not done is obvious. In a word, the freight
and passenger rates could have been reduced $4,430,000 a year and the
road still pay its employees the same wages and the stockholders the
same dividends. That this reduction could be made is indicated from
the fact that the Great Northern road, which runs through a sparsely
settled section, is operated for 48.40 per cent of its income, and the
New York, New Haven and Hartford Railroad, which has a density of
traffic, costs 71.89 per cent of its income to operate it.

SOUTHBRN RAILWAY.

Loss and damage.

seminm $385, 000
== menor 415, 000

 

 

1905 aoa oe 1, 090; 000

The above is approximately $375,000 a year more than it should be
on the percentage basis of this item of disbursements to the total dis-
bursements, and is undoubtedly largely padded.

6587

   

 
23

Injury to person.

 

 

 

 

1900 $261, 000
WOON (teas ov ocean ei eee ee UR a 350, 000
1902 = = ty 510, 000
1908) possess Sscseee se Se el ee eee es 728, 000
1904 aise aS 962, 000
1900) oon hee sense sce ceessseeces- 7 1, 125, 000

 

The above is approximately $358,000 a year more than it should be
on the percentage basis of this item of disbursements to the total dis-
bursements, and is undoubtedly padded.

Repairs and renewals of locomotives.

 

$1, 687, 000

 

 

 

The above is approximately $377,000 a year more than it should be
on the percentage basis of this item of disbursements to the total dis-
bursements, and is undoubtedly padded.

Repairs and renewals of passenger cars.
$656, 000
696, 000

 

 

 

 

 

 

The above is approximately $193,000 a year more than it should be
on the percentage basis of this item of disbursements to the total dis-
bursements, and is undoubtedly padded.

Repairs and renewals of freight cars.

 

  
     
  

 

 

1900 2 $1, 922, 000
1901 T7TZ 3) 188; 000
1902 2) 556, 000
1903 2) 772) 000
1904 = 2).879; 000
MOOS sce sian e a eee see Ses goes wie eens 3; 091, 000

 

The above is approximately $477,000 a year more than it should be
on the percentage basis of this item of disbursements to the total dis-
bursements, and is undoubtedly padded.

The returns of the Southern ork show that it increased its
assets between 1900 and 1905 $67,000,000, as follows: By the pur-
chase of stock and bonds of other roads, $37,000,000 ; by new cost of
road, $16,000,000; by new equipment, $5,000,000; by miscellaneous
property, $16,000,000; by cash and current assets, $3,000,000. The
offset to this $67,000,000 is shown by issuing $51,000,000 bonds with-
out any additional stock issue, the balance of $16,000,000 coming from
the earnings of the road. In a word, the freight and passenger rates
could have been reduced $3,200,000 a year and the road still pay the
employees the same wages and the stockholders the same dividends.
That this reduction could be made is indicated from the fact that the
Great Northern Railroad is operated for 48.40 per cent of its income
and the Southern Railroad for 69.99 per cent of its income.

6587

O
REGULATION OF RAILROAD RATES,

SPHRECH

OF

HON. MURPHY J. FOSTER,

OF LOUISIANA,

IN THE

SENATE OF THE UNITED STATES,
Turspay, Aprit 17, 1906.

WASHINGTON.

1906.
6784
SPEECH

OF

HON. MURPHY J. FOSTER.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled “An act to regulate commerce,” approved Febru-
ary 4, 1887, and all acts amendatory thereof, and to enlarge the powers
of the Interstate Commerce Commission—

Mr. FOSTER said:

Mr. PRESIDENT: The subject-matter of this bill is justly re-
garded by many as the most momentous question that has
engaged the attention of the Congress for more than a quarter of
acentury. In some form it affects the welfare of every man and
woman and child within the borders of our country. No fortune
is too great nor home too humble not to feel its force. For the
first time in their history the American people are confronted
with the spectacle of their Government seeking to regulate one
of the factors in its economic system, whose fiscal strength is
greater than that of the Government itself, barring the right to
coin money; whose gross annual income exceeds by many hun-
\dreds of millions of dollars the revenue which the Government
derives from all sources, and whose officers, agents, and em-
ployees constitute a force three times greater than the Federal
Government employs in all branches of its executive civil serv-
ice and the Army and Navy combined.

Affecting every branch of enterprise and industry in the coun-
try, touching vast and comprehensive interests, involving grave
legislative and constitutional questions, and bearing upon the
welfare of all the people, it is but just and proper that legisla-
tion of such scope should be approached in a spirit commen-
surate with the magnitude and importance of the interests in-
volved. Its consideration should invoke the highest efforts of
patriotic endeavor, and no political or partisan bias or preju-
dice should influence our judgment or determine our action.
I trust I shall approach the discussion of this question in this
spirit.

I shall consider, first, the conditions in our industrial life
which, from time to time, have demanded such legislation, and
briefly sketch the history of the movement which has culmi-
nated in the present medsure; second, the power of Congress
to pass such legislation, and, third, the wisdom, the impor-
tance, and the necessity of governmental control of common car-
riers as provided in this bill. And in this consideration I shall
not enter into a discussion of the minutie or details of the
question, but limit myself to a treatment of the general pur-
poses and objects of the measure.

In 1885, as a result of the agitation of this same question,
the Senate of the United States adopted a resolution appoint-
ing a select body, known as the Cullom Committee, to investi-

6734 3
4

gate and report upon the subject of the regulation and manage-
ment of railroads in respect to interstate commerce. After
months of patient labor this committee submitted a report in
which it summarized the complaints against the railroad
practices of the United States, stating, among other complaints,
that the local rates were unnecessarily high as compared with
through rates; that both local and through rates were unneces-
sarily high at noncompetitive points, either from the absence
of competition or in consequence of pooling arrangements which
restrict its operation; that unjustifiable discriminations were
constantly made between individuals in the rates charged for
like service under similar circumstances; that unreasonable dis-
criminations were made between localities similarly situated ;
that the effect of the prevailing policy of railroad management
was to establish a system of special or secret rates, rebates,
drawbacks, and concessions calculated to foster monopoly and
to enrich favorite shippers, and that such favoritism and se-
crecy introduced elements of uncertainty into legitimate busi-
ness that greatly retarded the development of our industrial
system; that differences in the classifications in different
parts of the country, and in certain vases for shipments overt
the same roads in different directions, were made the means
of extortion; that the capitalization and bonded indebtedness of
the roads largely exceeded the cost of their actual construction
or their proper value, and that unreasonable rates were charged
in the effort to pay dividends on watered stocks and interest on
bonds improperly issued; that railroad corporations had im-
properly engaged in lines of industries entirely distinct from
that of transportation, and that undue advantage had been
afforded to business enterprises in which the railroad officials
were interested; that the common law failed to afford ade-
quate remedies for such grievances, and that in case of dispute
the shipper was compelled to submit to the decision of the rail-
road management or run the risk of incurring further losses
by greater discrimination.

Following this report, what is known as the Cullom act was
enacted into law. The debate on this measure was one of
the most able and instructive that has ever taken place in Con-
gress and was participated in by some of the ablest statesmen of
that or any other day. That debate discloses the fact that many,
if not all, the objections now urged against the passage of this bill
were likewise urged against that measure. It was then denied,
as now, that Congress had the power to pass such a measure.
It was claimed that great financial disturbances would follow its
passage; it was specially urged, just as now, that the charges
made by public carriers were lower in this country than any
other, and that the fixing of tariffs was such an involved and
complicated process that none but the railroads themselves
could properly adjust them. In spite of all these objections and
dire forebodings, the measure was passed. Its constitutionality
was sustained. An era of industrial activity followed, marked
by a period of railroad development and construction the like of
which was never before witnessed in this country. This law,
however, failed to meet and check the evils of railroad practice,
and in 1903 Congress passed what is known as the Elkins bill,
which was specially directed against discriminations and rebates
and other malpractices of the roads. It will be remembered
that at the time of the passage of the Elkins bill similar legis-

GT34
5

lation to that we now have under consideration was being urged
and pressed upon Congress, and that the bill was passed largely
as a compromise measure, believing that it would afford ade-
quate remedies for the evils complained of.

Notwithstanding the laws enacted on this subject looking
to the correction of these unjust and now unlawful practices,
we are to-day confronted with almost the identical conditions
which were so forcibly portrayed in the Cullom report, and
the demand for remedial legislation is as great now, if not
greater, than at that time. The bill under consideration seeks
as far as possible to meet the conditions as set forth in that
report, and provide an efficient remedy for the prevailing evils.

It is a grievous mistake to conclude that the consideration of
this great question is the result of any idle or passing clamor
of an excited or thoughtless people, or that it has its birth in
the iconoclastic appeal of the public agitator or demagogue.
This movement is not born amid the fierce storms of political
strife or popular passion, but rather in the peaceful abode of
commerce and in the sober judgment of the conservative forces
of the American people. Its origin is not of to-day, of yester-
day, or of a year, but can be traced back through many years,
accumulating additional strength and power as the years
pass by.

Nor will it do in the treatment of this subject to act upon the
hypothesis that the socialistic forces of the country are behind
the movement. No greater mistake could be made, and no
greater error can be committed. The agitation of this ques-
tion springs from the industrial and economic conditions
which modern business methods have evolved. Behind it are
the great conservative forces of the land. The farmer with the
products of his field, the manufacturer with the products of his
factory, the merchant, the miner, the producer, and the con-
sumer are all demanding of their Government that it place
some restrictions upon and exercise some regulative power over
the vast railroad corporations whose operations affect, directly
or indirectly, their welfare and interest. Cities and municipali-
ties, localities and districts, are alike appealing for some legis-
lation by which all may have a square deal and an equal oppor-
tunity in the great struggle of business and commercial life.
All that is asked, and what the people have a right to demand,
is that the highways of commerce shall be opened to all upon
equal terms, and that for the same service, under similar con-
ditions, like and similar charges shall be made to all alike.

It is equally as great a mistake to assert that these demands
spring from any hostility toward the railroads. All admit the
manifold blessings and the wonderful development which have
resulted from railroad construction and enterprise; but while it
is true that these corporations have done much for the country,
yet, on the other hand, the Government has done and is still do-
ing much for them. Millions and millions of dollars, almost
witbout end, in the way of franchises, rights of way, and exemp-
tions from taxation, have been granted to these corporations.
The Government has donated them an area of public lands al-
most as large as was the country itself at the time we entered
the family of nations—a total of 55,273,560 acres, representing
an area larger than the combined size of the States of New
Hampshire, Massachusetts, Rhode Island, Connecticut, New
York, New Jersey, Pennsylvania, Delaware, Miryland, Virginia,

6734
6

and Georgia, and enough in addition to make a State larger than
Massachusetts, while the liberal compensation made by the
Government for any service which these roads may render has
become proverbial, and is aptly illustrated by the appropriation
approximating $50,000,000 made for carrying the mails last
year. I cite these instances merely to show that there has
not been, and is not now, any disposition, wish, or purpose
on the part of the country to cripple these enterprises in their
legitimate operation or in any manner dwarf their splendid
development.

The proposition involved in governmental regulation or control
over railroad rates has nothing new or startling in it. It has
been an ever-present subject in the minds of the thoughtful and
leading men in this country since railroads assumed the im-
portance and attitude that they now bear and have borne for
years to the public interest and the private fortunes of the
people.

President Garfield, in a report to the House of Representa-
tives, of which he was then a member, on December 16, 1878,
with almost prophetic vision saw the coming of the time when
this question would have to be settled by Congress. He said:

I am persuaded that the next great question to be confronted will be
that of corporations and their relations to the people and national life.
The theory is now entertained by many of our best men that national
and State legislatures of the Union in creating these vast corporations
have evoked a power greater than the legislatures themselves. The
rapidity with which the railroad corporations have consolidated during
the last year is not the least manifestation of this power.

These consolidations, as I expect to show further on, consti-
tute one of the great, overpowering, and commanding reasons
why the Government should exercise some of its regulative
powers over these vast interests.

President Grant in his message to Congress in 1872 used the
following language:

The attention of Congress will be called during its present session
to the various enterprises for the more certain and cheaper transporta-
tion of the constantly increasing surplus of Western and Southern
products to the Atlantic seaboard. The subject is one that will force
itself upon the legislative braneh of the Government sooner or later,
and I suggest, therefore, that immediate steps be taken to gain all
available information to insure equable and just legislation.

Just as President Grant stated in, this message, the subject
is one that is now forcing itself upon the legislative branch of
our Government, and it is an issue which must be met.

On the same subject President Arthur, in his message to Con-
gress on December 4, 1882, used the following language:

.The regulation of interstate commerce has already been the subject
of your deliberation. One of the incidents of the marvelous extension
of the railway system of the country has been the adoption of such
measures by the corporations which own or control the roads as has
tended to impair the advantages of healthy competition and to make
hurtful discriminations in the adjustment of freightage. Those in-
equalities have been corrected in several of the States by appropriate
legislation, the effect of which has necessarily been restricted to the
limits of their own territory. So far as such mischiefs affect com-
merce between these States or between any one of these States and a
foreign country, they are the subjects of national concern, and Con-
gress alone can afford relief.

And I call attention again to the extremely forcible message
on this subject, of December 4, 1884, of President Arthur. He
said: :

Complaints have lately been numerous and urgent that certain cor-
porations controlling in whole or in part the facilities for the inter-

6734
7

state carriage of persons and -merchandise over the great railroads of
the country have resorted in their dealings with the public to diverse
measures, unjust and oppressive in their character. In some instances
the State governments have attacked and suppressed these evils, but
in others they have been unable to afford adequate relief because of
the jurisdictional limitations which are imposed on them by the Fed-
eral Constitution. The question how far the National Government may
lawfully interfere in the premises, and what, if any, supervision and
control it ought to exercise, is one which merits your careful consider-
ation. While we can not fail to recognize the importance of the vast
railway systems of the country and their great and beneficial influences
upon the development of our material wealth, we should, on the other
hand, remember that no individual and no corporation ought to be
invested with absolute power over the interests of another citizen or
class of citizens. The right of these railway corporations to a fair
and profitable return upon their investments and reasonable freedom
in their regulation must be recognized, but it seems only just that, so
far as its constitutional authority will permit, Congress should protect
the people at large in their interstate traffic against acts of injustice
which the State governments are powerless to prevent.

President Cleveland, in his first annual message, December 8,
1885, said:

The construction of their transcontinental lines of railways, all in
successful operation, wholly within our own territory and uniting the
Atlantic and Pacific oceans has been accompanied by results of a
most interesting and intricate nature, and has created new condi-
tions, not in The routes of commerce only but in political geography,
which powerfully affects our relations toward and necessarily in-
crease our interests in any trans-Isthmian route which may be opened
and employed for the ends of peace and traffic, or in other contingen-
cies for uses inimical to both.

Transportation is a factor in the course of commodities scarcely
second to that of their production, and weighs as heavily upon the
consumer. Our experience already has proven the great importance
of having competition between land carriage and water carriage fully
developed, each acting as a protestant to the public against the tend-
encies to monopoly which are inherent in the consolidation of wealth
and power in the hands of vast corporations.

In his message of December 6, 1886, President Cleveland said:

By a recent decision of the Supreme Court of the United States it
has been adjudged that the laws of the several States are inoperative
to regulate rates of transportation upon railroads if such regulation
interferes with the rates of carriage from one State to another. This
important field of control and regulation having been thus left entirely
unoccupied, the expediency of Federal action upon the subject is worthy
of consideration.

Upon being returned to the Presidency, Mr. Cleveland had
occasion to say, ten years later, in his message to Congress of
December 7, 1896:

The Interstate Commerce Commission has during the last year sup-
plied abundant evidence of its usefulness and the importance of the
work committed to its charge. Public transportation is a universal
necessity, and the question of just and reasonable charges therefor has
become of vital importance, not only to shippers and carriers but also
to the vast multitude of producers and consumers. The justice and
equity of the principles embodied in the existing law, passed for the
purpose of regulating these charges, are everywhere conceded, and there
appears to be no question that the policy thus entered upon has a per-
manent place in our legislation. As the present statute when enacted
was in the nature of the case more or less experimental, it was hardly
to be expected to supply a complete and adequate system. While its
wholesome effects are manifest and have amply justified its enactment,
it is evident that all desired reforms in transportation have not been
fully accomplished. In view of the judicial interpretation which some
provisions of this statute have received and the defects disclosed by the
efforts made for its enforcement, its revision and amendment appear
to be essential, to the end that it may more effectually reach the evils
designed to be correctéd. I hope the recommendations of the Commis-
sion upon this subject will be promptly and favorably considered by
Congress.

President Roosevelt, recognizing that these evils incident to the
transportation system of the country have gone on with acceler-
6734
8

ated progress during the past few years, has been even more
emphatic and specific in his recommendations to Congress. In
his last message he uses the following language:

Above all else we must strive to keep the highways of commerce open
to all on equal terms, and to do this it is necessary to pee a stop to all
rebates. Whether the shipper or the railroad is to blame makes no
difference; the rebates must be stopped; the abuses of the private car
and private terminal track and sidetrack systems must be stopped;
and the legislation of the Fifty-eighth Congress which declares it to be
unlawful for any person or corporation to offer, grant, give, solicit,
accept, or receive any rebate, concession, or discrimination in respect
of the transportation of any property of interstate or foreign commerce,
whereby such property shall by any device whatever be transported at
a less rate than that named in the tariff published by the carrier,
must be enforced. For some time after the enactment of the act to
regulate commerce it remained a mooted question whether that act
conferred upon the Interstate Commerce Commission the power after
it had found a challenged rate to be unreasonable to declare what
thereafter should prima facie be a reasonable maximum rate for the
transportation in dispute. The Supreme Court finally resolved that
question in the negative, so that as the law now stands the Commission
simply possesses the bare power to denounce a particular rate as unrea-
sonable. While I am of the opinion that it would be undesirable, if it
were not impracticable, primarily to clothe the Commission with general
authority to fix railroad rates, I do believe that as a fair security to
shippers the Commission should be vested with the power when a given
rate has been challenged, after full hearing found to be unreasonable to
decide, subject to judicial review, what shall be a reasonable rate to
take its place, the ruling of the Commission to take effect immediately
and to obtain, unless until reversed by a court of review. The Govern-
ment must in an increasing degree supervise and regulate the workings
of railways engaged in interstate commerce, and such increased super-
vision is the only alternative to an increase of the present evils on the
one hand or a still more radical policy on the other.

In my judgment the most important legislative act now needed, as
regards the regulation of corporations, is this act to confer on the
Interstate Commerce Commission the power to revise rates and regula-
tions, the revised rate to go at once into effect and to stay in effect
unless and until the court of review reverses it.

Steamship companies engaged in interstate commerce and protected
in our coastwise trade should be held to a strict observance of the
interstate-commerce act.

I make these quotations from the messages of the foremost
men of our country to show that the regulation of railways has
been an ever-present problem of commanding interest; Demo-
cratic and Republican Presidents alike, amid the many great
public questions pressing upon their time and attention involv-
ing the policies of the two great parties and the maintenance
and establishment of the principles upon which those parties are
based, have found time to turn aside from great national and
international questions and address themselves to this great do-
mestic problem which touches so closely the varied and multiply-
ing interests of our country. I call special attention to the
message of President Cleveland in 1896, wherein he states that
the law of 1887, creating the Commission, was largely experi-
mental in its nature and kardly expected to form a complete and
adequate system for the correction of all the evils complained
of, especially in view of the judicial interpretation given to that
act and the defects which its enforcement discovered.

The legislation under discussion is largely to supply, as far
as possible, a remedy for the defects in the present law, re-
ferred to by President Cleveland and made more prominent and
imperative by the recommendations of President Roosevelt.
Since the decision of the Supreme Court determining the pow-
ers of the Commission bills have been introduced in every Con-
gress, at every session, in deference to public demand, seeking

6734
9

in some way to remedy the defects in the present law in order
that existing evils might be corrected. During the last two ses-
sions of Congress and even during the recess thereof the widest
and most comprehensive investigation of the subject has been
held by the committees of both Houses. During that time the
subject has enlisted attention and discussion in every quarter of
the country. The metropolitan journals, the periodicals, and the
press generally have discussed the question in all of its phases
and details; professors, financiers, students of political economy,
publicists, railroad officials, the bench and the bar have entered
the arena of public discussion, treated the question in all of its
various bearings, and thrown much light upon it. All of this dis-
cussion and publicity has but strengthened the demand for this
legislation. :

The bill which we have under discussion comes from the
House of Representatives with the almost unanimous vote of
that great representative branch of the Government as em-
bodying the will of the House, after its members, comprising
some of the most thoughtful statesmen, ablest jurists, and most
unselfish patriots in the land, had full and ample opportunity
to read and judge and investigate the subject in all of its
bearings. Recognizing that this question rose above party
rancor or political differences, the representatives of the two
great parties, forgetting the bitterness of past struggles and the
certainty of future differences, united in the construction and
formation of this measure, which they present to the Senate as
their plan for meeting the needs, demands, and requirements of
the country. While it is true that this body, representing the
States of the American Union, is not expected to subordinate
its honest judgment or to be swerved from the conscientious
performance of its high duties by the action of the coordinate
branch of Congress, yet it must be conceded that in the con-
sideration of a measure of this vast magnitude, involving the
policy of this Government upon a great economic and industrial
problem, the deliberations of the House are entitled to the
greatest respect and most profound consideration.

The central proposition involved in this measure and the one
which has provoked the fiercest opposition is found in section 15,
which reads as follows: ;

That the Commission is authorized and empowered, and it shall be its
duty, whenever, after full hearing upon a complaint made as provided
in section 13 of this act, or upon complaint of any common carrier,
it shall be of the opinion that any of the rates, or charges whatsoever,
demanded, charged, or collected by any common carrier or carriers, sub-
ject to the provisions of this act, for the transportation of persons or
property as defined in the first section of this act, or that any regula-
tions or practices whatever of such carrier or carriers affecting such
rates, are unjust or unreasonable, or unjustly discriminatory, or unduly
preferential or prejudicial, or otherwise in violation of any provisions
of this act, to determine and prescribe what will, in its judgment, be
the just and reasonable and fairly remunerative rate or rates, charge
or charges, to be thereafter observed in such cases as the maximum
to be charged, and what regulation or practice In respect to such trans-

ortation is just, fair, and reasonable to be thereafter followed; and
o make an order that the carrier shall cease and desist from such
violation and to the extent to which the Commission find the same to
exist, and shall not thereafter publish, demand, or collect any rate
or charge for such transportation in excess of the maximum rate or
charge so prescribed, and shall conform to the regulation or practice
so prescribed. Such order shall go into effect thirty days after notice
to the carrier, and shall remain in force and be observed by the carrier,
unless the same shall be suspended or modified or set aside by the Com-
mission or be suspended or set aside by a court of competent juris-
diction.

6734
10

This section is the crux of the measure, and the storm center
around which has raged this great contest. It carries with it a
new departure in ‘our Government. It provides for the first
time in the history of our legislation for governmental control
and regulation of these vast corporations and submits to gov-
ernmental supervision and correction the rate-making power of
the public carriers. , It presents the question of governmental
control and regulation of railroads fairly and squarely before
Congress, and we are face to face with that issue. I am so firmly
persuaded that nothing short of such regulation will satisfy the
demands of the situation that I am willing to forego any objec-
tions I may have to other provisions of the bill in order to se-
cure its adoption; for it is my firm conviction that a failure to
pass this legislation will give impetus and additional encourage-
ment to the demand for Government ownership of all public
utilities.

It will be remembered that for the first ten years following
the creation of the Commission it exercised practically the
same authority as is conferred by this section, and its rulings
were generally observed. There were no disastrous conse-
quences or financial disturbances resulting from such exercise
of authority, nor was there any depression in railroad construc-
tion, but on the contrary a most marvelous development fol-
lowed.

But in 1897 the Supreme Court of the United States, in what
is known as the Maximum Rate case, decided that the Com-
mission had no authority to substitute a rate for one condemned,
and that the order of the Commission prescribing a rate for the
future could have no other force upon the carrier than a recom-
mendation. The Commission at once, therefore, ceased to have
any restraining influence on the railroads, which have never
since failed to berate its efficiency or to refuse to obey its
recommendations when they would work any loss, hardship, or
inconvenience to the roads themselves. The evils resulting
from the encroachment of the roads following that decision are
clearly indicated in the reports of the Industrial Commission to
the Fifty-seventh Congress, in which it is stated that—
the immediate effect of this decision was to prevent any enforcement
of orders relative to rates by the Commission. The carriers immedi-
ately refused to obey any orders which the Commission issued for
the redress of grievances. This policy has been manifested with in-
creasing clearness during the five years subsequent to the decision.
It has become more and more certain that the denial of the right, not
only to pass upon the reasonableness of a particular rate, but to
prescribe what rate should supersede it, means the abolition of all
control whatever. The entire inadequacy of rate-making legislation
dependent upon the mere determination of rates as applied in the
past without reference to the rates which shall prevail in the future
is apparent on all sides. More than this, all remedies for the parties
who have borne the burden of an unreasonable rate would seem to
have been removed.

Relieved from apprehension of any practical restrictions by
the Interstate Commerce Commission, since that body, while free
to recommend, was powerless to enforce its rulings, and knowing
from experience that there was little to fear from recourse to
the common law on the part of the injured or wronged shipper,
the roads were not long in lapsing into their old offenses, nor
the people long in discovering that wrongs were being seeretly
and openly practiced. Again, there was inaugurated the secret,
cowardly, and dishonorable practice of giving favored rates to
certain communities and individuals through which huge crimi-

6734
11

nal fortunes were accumulated on the one hand, while on the
other individual effort was paralyzed and private enterprises
were wrecked and ruined.

Mr. President, the rebate practice has no part in the honest
and honorable conduct of any railroad operation. It has no
defense either in the laws of trade and transportation nor in the
ethics of business competition. The shippers denounce it; the
railroad men denounce it; the courts of justice denounce it;
the laws of Congress denounce it, and yet it is flagrantly
and defiantly practiced. The extent to which it prevails, as
shown by the investigations and prosecutions of the Interstate
Commerce Commission and the Department of Justice, is suffi-
cient to excite the indignation of every advocate of fair play
and a square deal, and if necessary the whole civil and criminal
power of this Government should be used to suppress it. The
extent of this violation is well described in the ecrrespondence
of the President with ex-Secretary Morton at the time of the
Atchison Rebate case, so called. In that letter the President
said in his usual terse and vigorous language:

At the time when you gave this testimony the interstate-commerce
law in_the matter of rebates was practically a dead letter. Every
railroad man admitted privately that he paid no heed whatever to
it, and the Interstate Commerce Commission has shown itself abso-
lutely powerless to secure this heed. When I took up the matter
and endeavored to enforce obedience to the law on the part of the
railroads in the question of rebates, I encountered violent opposition
from the great bulk of the railroad men and the refusal by all to whom
I spoke to testify in public to the very state of affairs which they
freely admitted to me in private. You alone stated that you wouid
do all in your power to break up the system of giving rebates; tbat
you strongly objected to it, but that as long as the law was a dead
letter the railroads which preferred to obey it were forced to disobey
it if they were to continue in business at all under the competition
of their less scrupulous fellows.

I agreed with you cordially that the only way in which it would be
possible to secure the enforcement of the law would be by making
it effective against all railroads alike, as, if some were allowed to
violate it, it necessarily meant that the others in self-protection
would be driven to violate it also; and I can not too heartily com-
mend the fearless and frank way in which you, and you alonce, came
forward and in the interest of the Government and the public gave
legal evidence of the facts which everyone in interest privately ad-
mitted to exist, but which the Interstate Commerce Commission had
previously been unable legally to establish.

The Attorney-General in his last report uses the following
language:

Officials of railroads have in general terms assured me of their
willingness to aid the Department in every way in enforcing the pro-
visions of the law against rebates, discriminations, and departures
from published rates, but have declined to render the only assistance
that would be of the slightest value, namely, the furnishing of evidence
proving the offense. ‘To every case of this kind there are two guilty
parties. The Department has been, and is, willing to accept the evi-
dence either, of the shipper or of the railroad official, giving him the
immunity from prosecution which would result from the use of the
evidence, and to proceed by indictment against the other guilty party.
But, for reasons which will be appreciated by all, men have shrunk
from betraying their confederates. The case, therefore, in which evi-
dence has been or will be obtained, is occasional and exceptional, and
unless we are content to allow the evil of the discriminatory practice
by some carriers to continue, with now and then a punishment of
a detected crime, some remedy which reaches deeper than any law now
upon the statute book must he found. :

The Interstate Commerce Commission and the Department of Justice,
by the exercise of the utmost diligence, can discover and prohibit or
punish only a small percentage of discriminatory practices which actu-
ally exist. It seems probable that the direct payment of rebates in
money has largely diminished. It is alleged to be true, and the evi-
dence before this Department, so far as it goes, tends to support the

6734
19
ag

allegation, that, though clothed and disguised by various devices,
the practice of giving one shipper preferential treatment over another
in like situation, in substance, still continues.

If the power, upon complaint, to fix a future maximum rate and
put it into effect within a reasonable time, subject to appeal to the
courts, should be given to some administrative body created by Con-
gress, a weapon against discriminatory practices, much more potent
than any now available, would be put in the hands of the Government.
Upon proof that a lower rate has been given to some preferential ship-
per, the body clothed with the power to fix a maximum rate might
well determine that the rate which the railroad could afford to give to
the preferred shipper it could afford to give to all shippers in like
situation. Such a finding, it could be predicted with certainty, the
courts upon appeal would not reverse, for no better evidence of the
legality and justice of the rate thus fixed could be found than in the
action of the carrier itself, It would be difficult for the carrier to
maintain that a rate actually charged by it was confiscatory or unjust.

Notwithstanding the existence of these practices, one would
almost conclude from the evidence given before the committee
that they had no place in railroad management. It is my judg-
ment, Mr. President, that the railroads are not only guilty of
practicing rebates, discriminatory and preferential charges, but
are equally guilty in many instances of exacting unreasonably
high charges.

I fully indorse the statement of a recent writer when he says
the increase of freight rates, even on standard or high-grade
traffic, has been most unevenly distributed. In fact, the in-
equality or unscientific distribution of the increase constitutes a
serious ground of complaint at the present time. Few of the
changes have been made by directly increasing the tariffs. That
was the crude way by which the carriers had ineffectually
sought in previous years to arrest the downward course of rates.
These new changes have not only been subtle, they have been
effected in many cases by means which emphasize the irresisti-
ble power of the railroads over the public, provided they all act
together.

The greater part of the increase has been made by changes
in the classification. Goods enjoying third-class rate have been
lifted into the second class, and so on. Inasmuch as classi-
fication is effected not by individual railroads but by the asso-
ciated railroads through large territories, unity of action has
been as effectually secured as if it had been done by the chair-
man of a railroad pool.

Besides changes in classification, additional burdens have been
laid upon the shipper by many other devices. Almost univer-
sally, the maximum carload rating has been increased. Traflic
by the carload is carried for much less than in car lots. In
many instances the shipper who formerly enjoyed carload rates
for the shipment of 24,000 pounds now finds that he must pay
on a minimum lading of 30,000 pounds. By the abolition of
demurrage, by the prohibition of free storage, privileges and cars,
by seeking to withdraw return transportation for cattlemen, by
the increase in the charges for switching and terminal delivery,
by increased fees for icing refrigerator cars, for feeding or
bedding stock, have the total charges been increased. And
great restlessness among the shipping public has been engen-
dered as a result—a restlessness not so much conditioned by the
mere magnitude of the charges, many of which are justified by
the generally increased cost of operation, as by the fact that
they indicate indubitably the utter impotence of the shipper
when the carriers all agree to act in unity.

6734
18

The truth that most rates are reasonable and low is no better
reason for refusing a remedy for those that are wrong than is
the fact that most men are peaceful and honest—a sufficient rea-
son against the laws for the punishment of larceny and murder.
Reparation as provided for in the present law serves neither
a preventive nor cure. It is no protection against extortion,
discrimination, or unreasonable rates, nor is it in any sense
an adequate remedy to the wronged producer or consumer.
There is for him but one safeguard which the Government may
offer in its effort to regulate interstate commerce, and that one
is a correction of a rate found after investigation to be un-
reasonable,

Transportation is not a luxury that may be dispensed with
or enjoyed according to taste. It is everywhere a constant
necessity. It substantially and materially affects every interest,
every section, and everybody. It has made possible on the one
hand the general development and growth of our country. It
has, on the other hand, been the hotbed of discrimination and
resultant trusts and monopolies, with their natural evils, the like
of which surpass their kind in any other period of history.

After a calm and dispassionate analysis of all the evidence
brought before the Interstate Commerce Committee, and the
facts of the case as it is presented to me, it is my deliberate
judgment that notwithstanding the statutes denounce the prac-
tice of rebates, discriminations, and unjustly preferential
charges, these practices do exist and the country has just
grounds to complain of the inequality, injustice, and wrongs re-
sulting from these violations of the law, and that the present
remedies for the control and correction of these unlawful prac-
tices are wholly inadequate and inefficient.

Congressional rate making is impracticable if not impossible.
Individuals are helpless to prevent these abuses. Competi-
tion, the natural regulator and adjuster of freight rates,
has disappeared, and the courts can not be clothed with the
legislative function of rate making. Therefore section 15 ad-
dresses itself to my judgment as a substantial and effective
remedy for the correction of the wrongs so generally and justly
complained of. I believe every Senator in this Chamber admits
that some legislation on this subject is imperative, and up to
the present time, excluding the plan of the Senator from Ohio,
no other legislation or remedy has been suggested.

Mr. President, the American people wish this Congress to be
as fair and as just in its treatment of the railroads as it would
be in dealing with a natural or any other artificial person. For
my part I do not wish to injure the railroads or do them any
wrong, but wish this Government to see that the railroads do
not injure the people or do them any wrong. I do not wish to
take the rate-making power from the railroad companies. On
the contrary, I wish that power left with the public carriers, but
when the railroads exercise the rate-making power I wish to see
the Government assert a regulative control and supervision over
such rates, and to that end a Government tribunal should be
maintained to which the shipping public can appeal, and with
which complaints of unlawfulness, unreasonableness, and un-
justness of railroad charges and practices can be lodged and
determined. That tribunal should be an absolutely fair and im-
partial body, one which will do equal and exact justice to the
shipping interests and to the railroad interests; and when such

673
14

commission has acted, I want the rates established by that body
to supersede and have preference over the rate denounced, unless
the courts decide that such rates are unconstitutional or illegal.
As the rates of the railroads stand and are operated until the
Government tribunal has decided otherwise, so I believe that
the awards and orders of that commission should stand until its
orders are set aside by a judicial tribunal, for I believe that this
commission, representing the high purposes and objects of the
Government, is more apt to deal out exact justice in these great
railroad problems and rate-making propositions than the offi-
cials of the railroads, who are prompted largely by self-interest
and selfish considerations in their actions. There is nothing
radical, revolutionary, or dangerous in such a proposition.

If the railroad corporations can select men competent to
establish just and reasonable rates as the law requires, surely
this Government can select equally as competent men, who from
the very nature and character of the responsibilities placed
upon them, biased by no interest, prejudiced by no affiliations,
and representing no special interests, will more justly and
equitably administer the law. In other words, I think it better
to commit the administration of the law to the officials of the
Government than to the officials of the corporations. The law
now prescribes that rates shall be just and reasonable, but it
practically leaves the construction and enforcement of the law
in the hands of the railroad officials. What I wish to see is
the execution and administration of the law left with the ofli-
cials of the Government when the railroads fail to observe it.

At the very threshold of this controversy we are met with
the argument that the bill is unconstitutional and can there-
fore have no effect. It is contended with great force, fortified
with elaborate research, that Congress has no power or constitu-
tional authority to prescribe and fix a price for or to regulate
the charge of transportation by railroads engaged in interstate
commerce, and that if it had such power Congress could not
delegate the same to a commission as provided in this bill.

If either of these propositions be true, it is evident that the
foundation and basic principles upon which this bill is con-
structed are untenable, and the whole theory upon which Con-
gress is proceeding falls to the ground. I do not think that I go
too far should I say that if Congress has no jurisdiction or
power to fix rates, or having that power is without authority to
confer upon the Commission the right to fix a rate in accordance
with the rules and standards it has prescribed, then our Govern-
ment falls far short of the hope and purposes for which the
American people believe it was established, and the sooner this
fact is made known the better it will be for the country.

But I can not agree to this proposition. Article I, section 8,
paragraph 3 of the Constitution authorizes Congress—

To regulate commerce with foreign nations, and among the several
States, and with the Indian tribes.

It is unnecessary to go into a long and elaborate discussion of
the causes which led up to the grant of this power by the States
to the General Government. Suffice it to say, as is stated by
Justice Marshall, that the necessity of granting this power to
the Federal Government was the great, if not the main, cause
which led up to the establishment of the American Union.

While it is true that the General Government is a government
of enumerated powers, yet it is equally true when a power is

6734
15

conferred upon the General Government such power is as full
and complete and supreme in the Government as any of the
powers which are reserved by the States.

The grant of power to Congress to regulate commerce among
the several States, as every other power conferred upon Con-
gress, carries with it an implication of every power special and
necessary for its exercise. Judge Cooley says:

The implications from a provision of the Constitution are sometimes
exceedingly important, and have large influence upon its construction.
In regard to the Constitution of the United States, the rule has been
laid down that when a general power is conferred or duty enjoined
every particular power necessary for the exercise of the one or the per-
formance of the other is also conferred. The same rule has been ap-
plied to State constitutions, with an important modification by the
supreme court of Illinois that other powers than those expressly
granted may be, and often are, conferred by implication, is too well
settled to be doubted.

Under every constitution the doctrine of implication must be resorted
to in order to carry out the general grants of power. A constitution
ean not from its very nature enter into a minute specification of all the
minor powers necessary and obviously included it it and flowing from
the great and important ones which are expressly granted. It is there-
fore established as a general rule that when a constitution gives a gen-
eral power, or enjoins a duty, it also gives, by implication, every par-
ticular power necessary for the exercise of the one or the performance
of the other. The implication under this rule, however, must be a
necessary, not a conjectural or augmentative, one. And it is further
modified by another rule, that where the means for the exercise of a
granted power are given, no other or different means can be implied as
being more effectual or convenient.

There is no more potential factor in the regulation of com-
merce than the charges which the public carrier fixes for such
services. The unequal and discriminatory rates established by
the respective States in the regulation of commerce before the
adoption of the Constitution was the moving cause for incorpo-
rating the present article in that instrument.

Regulation carries with it the power to prescribe the rates
and fix the conditions by which commerce is governed. The
regulation of commerce must mean the regulation of exchange of
commodities among the States, and the terms and conditions of
the conveyance of these commodities forming the exchange con-
stitute the method of regulation. When this same subject was
up for debate in this body during the discussion of the Cullom
bill, that great legislator and jurist of Massachusetts, Senator
Hoar, stated:

The regulation of commerce is the regulation of the exchange of
commodities. The exchange of commodities is commerce. The regula-
tion of commerce with foreign nations is the regulation of the exchange
of commodities with foreign nations. The regulation of commerce
among the several States is the regulation of the exchange of com-
modities among the several States. _

An essential part of an exchange is the conveyance of the commodi-
ties from the seller to the buyer. Regulation is the prescribing of a rule
or law fixing the condition. ; ;

To regulate the exchange of commodities is to prescribe the rule, or
law, or condition under which such an exchange shall take place. |

An essential part of the regulation of commerce, therefore, is the
prescribing of the rule, or law, or condition of the conveyance of
commodities from seller to buyer. The fixing or regulating of tolls, or
charges, or impost for conveying commodities from the seller to the
buyer is the prescribing of a condition of that conveyance. It is there-
fore a regulation of commerce. :

Now, whenever the fixing or regulating of such imposts and tolls
come within the domain of the law-making power, or whenever such
impost or tolls should be regulated by law, the power which regulates
commerce should properly regulate them.

This is the settled and unquestioned understanding with reference to
foreign commerce. The legislature does not ordinarily regulate rates

6734
16

of freight charged by public carriers for merchandise brought from
abroad; not because such regulation would not be a regulation of
commerce, but because such carriers are engaged in a business open to
unrestricted competition, and it is deemed inexpedient to regulate com-
merce in that respect.

Before the adoption of the Constitution the power to regulate
commerce, and to establish rules and fix rates under which that
commerce was carried on, was lodged entirely within the sover-
eignty of the States, and the jurisdiction thereof was exclusive.

AS a means of regulating commerce the States exercised the
right of fixing rates and charges and imposing tolls and imposts
for conveying these commodities, and it is reasonable to suppose
that when this power was ceded to the General Government
that it was intended to grant just such powers as the States had
enjoyed over the same subject. When, therefore, the States
ceded the power of regulating commerce between the States to
Congress, they surrendered all the powers which they had over
that subject, and delegated all of such powers to the General
Government. Surely it can not be contended that in the dele-
gation of power by the States to Congress the framers of the
Constitution intended that any of the powers which the States
had enjoyed over the subject-matter would be lost to the Fed-
eral Government.

When this cession of power was given, it carried with it the
exclusive and supreme control over the subject-matter, equally
as complete as the States enjoyed, and when the States lost
their power over interstate commerce and the regulation of
that commerce Congress immediately became vested with the
same powers.

Corporations are the creatures of government. They are
artificial persons. They have no capacities other than those
which the Government gives them. They have no original
rights. All of their rights are derivative. Such rights are de-
rived from their charters, subject and subordinate to not only
the regulative control .of the State, but of the General Govern-
ment which enjoys equal powers of regulation over the com-
merce or transportation within its jurisdiction as the States
enjoy over the same subject-matter within their jurisdiction.
When the operations of these corporations extend beyond the
State, the jurisdiction of the State ceases and the powers of Con-
gress begin; then the same power which the State had to regu-
late the price of transportation or fix the charges for the services
rendered within its borders is at once transferred to the Federal
Government.

Supreme power lodges in the General Government within the
sphere of, its constitutional limitations as much as it does in the
States. The regulation of commerce is a governmental power
and Congress may employ all means not forbidden by the Con-
stitution to accomplish the objects of that power. .

The States have exclusive control and power as far as regu-
lating intrastate commerce is concerned, and one of the methods
of regulating that commerce is the prescribing and the establish-
ment of rates. So likewise has the Federal Government exclu-
sive power over interstate commerce and the saine power which
the States have to regulate and control within their jurisdiction,
so the Federal Government has a corresponding and equal right
to control the railroads and their charges so far as its authority
and power extend.

6734
17

If the States have the authority to establish just and reason-
able rates as a means or method of regulating commerce within
their borders, it seems to me that it is logical that Congress,
vested with full and plenary powers over the same subject-mat-
ter as the States enjoy within their territory, has the power
likewise to adopt the same method of regulating interstate com-
merce.

If this be not true, the anomalous position would be presented
of the States on the one hand having exclusive control over
intrastate or domestic commerce, or fixing and prescribing the
rates, schedules, and charges, and, on the other hand, the Gen-
eral Government with exclusive powers over interstate com-
merce as supreme as that of the State over intrastate commerce,
yet without authority to exercise the same powers which the
States have of controlling the same.

Chief Justice Marshall, in Gibbons v. Ogden, says:

That the power of Congress to regulate commerce among the States
and foreign nations is the power to prescribe the rule by which com-
Iuerce is to be governed; that such power is complete in itself, may
be exercised to its utmost extent, and acknowledges no limitations
other than are prescribed in the Constitution; that “if, as has already
been understood, the sovereignty of Congress though limited to specified
objects is plenary to those objects, the power over commerce with
foreign nations and among the several States is vested in Congress as
absolutely as it would be in a single government having in its constitu-
tion the same restrictions on the exercise of the power as are found in
the Constitution of the United States.”

Again, in the same case it is said, that the Federal Govern-
ment in regulating commerce among the Federal States may use
the same means as may also be employed by the States in the
execution of its acknowledged powers.

In Kentucky v. The Bridge Company (87 Fed. Rep.) the
court said:

What one sovereign (the State) may do in respect to matters within

its exclusive control, the other (the United States) may certainly do
in respect to matters over which it has exclusive authority.

In 154 U. S., 447, the court said:

Congress has plenary power, subject to the limitations imposed by the
Constitution, to prescribe the rule by which commerce among the several
States is to be governed, and it may in its discretion employ any oppo.
priate measures not forbidden by the Constitution to carry into effect
and accomplish the objects of a power given by the Constitution.

The power given by the Constitution to regulate commerce among the
States may employ such means not forbidden by the Constitution to
accomplish the object of the powers given to it by that instrument.
When Congress, therefore, seeks to regulate commerce by limiting or
restricting the railroads in their charges, and prescribing a rate in lieu
of that which it has condemned, it is clearly acting within its constitu-
tional powers and in so doing is acting against no prohibitory clause
of the Constitution or any article of that instrument.

If Congress has the power to establish rates, has Congress the
authority to confer upon the Interstate Commerce Commission
the powers enumerated in this measure, and is the conferrance
of such powers on the Commission such a delegation of legis-
lative functions as will render the act null and void? Unless
Congress has such power and is authorized to delegate it to a
tribunal of its creation, it is evident that there can be and will
be no effective rate legislation. Congress can not itself go into
the rate-making business. The subject is too complex, far reach-
ing, intricate, and complicated, and its details are too minute
for Congress to undertake the establishment of any fixed rates
by which the railroads shall be governed in their operation.

6734 2

 
18

Nor can the common-law principle, which is older than the
Constitution itself, that carriers must be just and rensonable
in their charges, practicing no discrimination or favoritisin, be
vindicated through the efforts of the individual who is a victim
of these oppressions and wrongs of the roads. The contest is
too unequal; the remedies too tortuous and slow to furnish
adequate relief. The individual is no match for the corpora-
tions in such a struggle, and he would be utterly crushed and
destroyed in the contest. The corporations, with their organ-
jzed forces of attorneys and witnesses, are too powerful against
the weak and helpless citizen, though he may be armed with right
and justice. To rest the vindication of the reasonableness of
charges with the individual citizen will result practically in
the placing of no limitations or restrictions upon the roads, and
leaving them free to fix unquestioned their charges. In speaking
of this proposition, Justice Brewer, in the 52d Federal Reporter,
page 912, said:

A reasonable compensation was all they could exact, and he who felt
aggrieved by a charge could always invoke the aid of the court to pro-
tect himself against it. With him, however, lay the burden of proving
the fact that the charge is unreasonable, a burden which all experience
shows was onerous and therefore seldom undertaken, the party ag-
grieved preferring to submit to the overcharge rather than go to the
expense and time of contesting it. Hence the effort by the State and
Nation to establish limits of charges, and means of evidence of easy
and accurate ascertainment.

Objections to Congress conferring this power upon the Com-
mission were urged in the Senate when the Cullom bill was
under discussion, and urged with great force and ability. Sen-
ator Garland, afterwards Attorney-General of the United States,
in discussing this phase of the case, said:

Now, what do we understand by regulating commerce, according to
the constitutional provision? It means no more nor less than the
power to prescribe the rules by which commerce is governed. The
word ‘‘ regulation ’’ there means the laws of commerce, so far as Con-
yrs can prescribe them. ‘This is a legislative power delegated by the

onstitution to Congress, and it is one of those powers which are
national in their character and the want of which in the old confed-
eration was one of the reasons that necessitated the enlarging the
powers of the Union and making it, in respect to this one feature, a
nation.

But when Congress, in the exercise of its legislative power delegated
to it by the Constitution, may do a thing, where do we find the power
in Congress to delegate this authority, delegated to it, to a mere com-
mission of seven, or five, or three, as the case may be? This is not
like the case of heads of departments or secretaries who are some-
times empowered by Congress with authority to make rules and regu-
lations to carry into effect certain laws, for there is no law prescribing
this bill, as we shall see as we go along, and even in the laws which
have heretofore delegated the power I speak of to commissions or to sec-
retaries or to heads of departments, they are generally circumscribed by
the power of revision in the President or some higher authority.

If the Senate gets possession of the idea 1 am working at, it is that
the Congress of the United States in this bill—in the very second sec-
tion of it—is divesting itself of its legislative yo as to regulating
commerce among the States and putting it in the hands of a commis-
sion. It is a fundamental rule, outside of any constitutional question
that a power delegated can not be subdelegated; and it is an unhear
of thing that a legislative power can be transferred from a legislative
body to any subordinate power.

While it is true that Congress can not delegate its powers to
fix rates to any subordinate tribunal of its own creation, and
thus transfer its whole authority and jurisdiction over that
subject-matter, with unlimited power and discretion on the part
of such a tribunal, yet at the same time Congress has the
power to fix and establish certain rules and regulations and a

6734
19

standard of charges and commit the execution and application
of this general rule to some tribunal it may establish. Section
1 of the bill prescribes that:

All charges made for any service rendered or to be rendered in the
transportation of passengers or property as «foresaid, or in connection
therewith, shall be just and reasonable; and every unjust and unrea-
sonable charge for such service, or any part thereof, is prohibited and
declared to be unlawful.

The bill prescribes what the rate shall be. It does not leave
that question to the discretion of the Commission. It simply
imposes on the Commission the duty of applying this general
law, and when the Commission in the exercise of this duty
fixes a standard of charges it applies the law as Congress has
declared.

It is true Congress can not delegate its powers to any tri-
bunal to make a law, or to legislate upon any subject-matter,
yet when Congress has made the law and legislated upon that
subject-matter it can delegate its powers to some subordinate
tribunal to determine some fact or state of things upon
which the law intends to make its action depend. The fixing
of rates is properly a legislative function, and Congress can
not delegate the exercise of that function to a purely ad-
ministrative body ; yet when Congress establishes a standard of
rates, and commits the enforcement of that law to a commis-
sion, or any other tribunal, it certainly does not delegate all
of its powers to such tribunal, or authorize such tribunal to
make a law upon the subject-matter confided to it, or to
exercise any other discretion than that which the law imposes
upon that body, namely, the fixing of a just and reasonable
rate, which the law itself prescribes and which the Commission
does not originate.

The power to fix a rate is a legislative power, yet when the
legislature declares that the rate shall be reasonable or otherwise
lays down a general rule for the establishment of rates for the
future, the application of such rates becomes a matter of admin-
istration, and the power delegated to the Commission to an-
nounce the rate is an administrative power. It is, however,
contended that the present measure simply prescribes that the
rate shall be just and reasonable, which is simply a declaration
of the old common-law principle and that such a provision does
not prescribe an absolute standard or guide by which the Com-
mission is controlled, and that this standard, if it can be called
a standard, is vague, uncertain, and indefinite, and commits to
the discretion of the Commission the fixing of the rates or the
construction of the law. I admit there is much force in this
contention, and should I have any doubt on this subject I shall
resolve that doubt in favor of this legislation, which I believe to
be for the common good of the country.

But in my judgment the bill is complete in itself. It de-
clares that the rate shall be just and reasonable, and the Com-
mission must obey the law. It can not legally prescribe an
unjust or unreasonable rate. What is a just and a reasonable
rate has received judicial interpretation, and this standard
has a meaning and a definition as clear as any other general
principle which the law can announce, and its limitation and
application may be regarded as well settled in the law. In-
stead of Congress entering into an investigation, which of
necessity must be inadequate in determining what the rate

6734
20

should be, it has legislated on the subject as far as was rea-
sonably practicable and delegated to the Commission the duty
of accomplishing the results prescribed in the statutes.

In the case of the Chicago and Northwestern Railroad v. Dey
(35 Fed. Rep., p. 874) we find a case directly in point and so
fully covers the points in controversy that I shall make a copious
extract from that decision. Dealing directly with the question
before us, Mr. Justice Brewer said:

‘While in a general sense, following the language of the Supreme Court,
it must be conceded that the power to fix rates is legislative, yet the
line of demarkation between legislative and administrative functions
is not always easily discerned. The one runs into the other. The law
books are full of statutes unquestionably valid, in which the legis-
lature has been content to simply establish rules and principles, leav-
ing execution and details to other officers. Here it has declared that
rates shall be reasonable and just, and committed what is, partially at
least, the administration of the law to the railroad commissioners.
Suppose, instead of a general declaration that rates should be reason-
able and just, it had ordered that the rates should be so fixed as to se-
eure to the carrier above the cost of carriage 3 per cent upon the money
invested in the means of transportation, and then committed to the
board of railroad commissioners the fixing of a schedule to carry this
rule into effect, would not the functions thus vested in such a board be
strictly administrative? While, of course, the cases are not exactly
parallel, yet the illustration suggests how closely administrative func-
tions press upon legislative power, and enforce the conviction that that
which partakes so largely of mere administration should not hastily be
declare) an unconstitutional delegation of legislative power. .

The reasonableness of a rate changes with the changed condition of
circumstances. That which would be fair and reasonable to-day, six
months or a year hence may be either too high or too low, Tbe
legislature convenes only at stated periods—in this State once in two
years, Justice will be more likely done if this power of fixing rates is
vested in a body of continual session than if left with one meeting
only at stated and long intervals. Such a power can change rates at
any time, and thus meet the changing conditions of circumstances.
While, of course, the argument from inconvenience can not be pushed
too far, yet it is certainly a matter of inquiry whether in the increas-
ing complexity of our civilization, our social and business relations,
the power of the legislature to give increased extent to administrative
functions must not be recognized.

In the recent case of State v. Railroad Commission (37 Northwestern
Reports, 782) the supreme court of Minnesota considered this question
and, sustained a similar enactment. See also the case of State v.
Railroad Company (35 Northwestern Reports, 118, and 36 Northwest-
ern Reports, 308) decided by the supreme court of Nebraska. In the
case of Tilley v. Savannah Railroad Company (5 Federal Reports, 641)
Mr. Justice Wood of the Supreme Court of the United States, sitting on
the circuit, also considered the question in a carefully prepared opinion,
and sustained a similar enactment. See also other cases cited in the
epinion of the supreme court of Minnesota, supra.

The case of Butterfield v. Stranahan, which has been so fre-
quently alluded to in the course of this discussion, appears to me
to be conclusive on this point. An act of Congress prohibited
the importation of tea inferior in purity and quality to the
standard prescribed by a board and approved by the Secretary
of the Treasury. The act was attacked on the ground that it
delegated legislative powers to the Secretary of the Treasury ;
that Congress had adopted no standard of the purity of the tea,
and that it delegated to the discretion of the Secretary of the
Treasury this power. But the Supreme Court upheld the law
and declared that—

Congress legislated on the subject as far as was reasonably practica-
ble and from the necessity of the case was compelled to leave to the ex-
ecutive officials the duty of bringing about the result pointed out by the
statute. To deny the power of Congress to delegate such a duty would,
in effect, amount to but declaring that the plenary power vested in Con-
gress to regulate foreign commerce could not be efficaciously exerted.

6734
21

The Supreme Court of the United States has frequently de-
cided that the States have the power, either through constitu-
tional ordinance or legislative act, to delegate this authority
to the commissions which the various States have established.
When the States sought to confer that power upon those com-
missions, it was at once earnestly contended that such act on
the part of the State government or the legislatures of the
States was a delegation of legislative functions to another body
in violation of the Constitution. But the supreme courts of the
States and the Supreme Court of the United States have. repeat- .
edly and uniformly declared that where State legislatures have
enacted that rates must be reasonable and just the execution
of this law may be constitutionally confided to an administrative
body. Such, I understand, is the decision in the case of Stone
et al. v. Farmers’ Loan and Trust Company (116 U. S., 3870). in
which objection was made to the act 6f the State of Mississippi
on the ground that it conferred both legislative and judicial
powers upon its commission.

The same doctrine was announced in the case of Reagan v.
Farmers’ Loan and Trust Co. (154 U. S., 360), in which case
Judge Brewer said:

Passing from the question of jurisdiction to the act itself, there can
be no doubt of the general power of the State to regulate the fares and
freights which may be charged and received by railroads or other
carriers, and that this regulation may be carried on by means of a
commission. Such a commission is merely an administrative board
created by the State for carrying into effect the will of the State as ex-
pressed by its legislature.

These cases affirm the right of State governments to confer
such power upon State commissions. It may seem, then, that
if the States have this power, Congress, exercising the su-
preme and exclusive power over interstate traffic, power as
conclusive and exclusive as that of the State, would have the
same power. But it is claimed that the States derive their
power by reason of their sovereignty, and that Congress derives
its power over the subject-matter by reason of the commerce
clause of the Constitution. However that may be, the power to
regulate commerce is a governmental power lodged in Congress
by the Constitution, and the method of exercising that power is
as full and complete as that enjoyed by the States, and unless
there be some limitation, prohibition, or restriction placed upon
the Congress its authority would seem to be complete.

Fixing of rates is a method of regulating commerce, for com-
merce, in its broadest signification, as declared by Chief Justice
Marshall, is the right to prescribe the rules which gyvern com-
merce. To fix the rates is one of the rules as set down in the
ease of Ames v. Union Pacific (64 Fed. Rep., 165) wherein
Justice Brewer said:

But within the scope of the word “regulation ’”’ as commonly used is
embraced the idea of fixing the compensation which the owners of rail-
road properties shall receive for the use thereof.

In the Maximum Rate case, which has been so repeatedly
referred to, Justice Brewer declared, in determining the extent
of the power that had been conferred upon the Commission,
that—

There were three obvious and dissimilar courses open for considera-
tion. Congress might itself prescribe the rates, or it might c’ imit to
some subordinate tribunal that duty, or it might leave with .ue com-

6734
22

panies the right to fix rates, subject to regulations and restrictions,
as well as to that rule which is as old as the existence of common car-
riers, to wit, that rates must be reasonable.

Here it seems that the Supreme Court distinctly stated that
the right to confer the rate-making power upon the Commission
existed. The language of the court in this decision clearly inti-
mates that the power could be granted by Congress to the Com-
mission, but that it had not been granted in definite terms;
that—
the power itself is so vast and comprehensive, so largely affecting the
rights of carrier and shipper, as well as indirectly all commercial trans-
actions, the language by which the power is given has been so often
used and was so familiar to the legislative mind and is capable of such
definite and exact statement, that no just rule of construction would
tolerate a grant of such power by mere implication.

The court said that the fact that it was a debatable ques-
tion was “very persuasive” that Congress had not vested the
power in the Commission to fix rates. This very expression, that
because it was a debatable question and had been debated was
“very persuasive,” is a clear suggestion that Congress could
within its constitutional powers confer authority upon the Com-
mission to fix rates for the future. In this case the powers of
the Commission were the subject-matter of discussion and con-
troversy, and in dealing with the subject it is searcely to be
supposed that the Supreme Court would lightly or loosely use
such expressions as we find in this decision.

It is further contended that Congress has no power to endow
the Commission with the authority given to it under the bill,
for. the reason that Article I, Section IX, of the Constitution,
declares that—

No preference shall be given by any regulation of commerce or revenue
to the ports of one State over those of another.

This article of the Constitution was clearly intended to pro-
hibit the giving of preference by Congress to vessels coming to
and departing from the different poits of the country. The
convention at that time was dealing with conditions then exist-
ing,, and it is evident that the purpose was to secure uniformity
in port charges of the commerce of the various ports of the
eountry, which had not been the case before the adoption of the
Constitution. Under the Confederation there had been great
lack of uniformity, and this resulted in the conference at
Annapolis in 1786 to consider—

The trade of the United States, to examine the relative situation in
the trade of the States, to consider how far a uniform system in their
commercial relations may be nécessary to the common interest and their
permanent harmony.

From the Annapolis conference came the call for the Phila-
delphia convention of 1787, which framed the Constitution.

Should this bill become a law, by which the power is conferred
upon the Commission to substitute a reasonable rate for any un-
reasonable rate, it would in no manner come in conflict with this
provision of the Constitution. To authorize the Commission to
fix a reasonable rate does not necessarily impose upon that body
the duty to adopt such regulation of commerce as would give
preference to one port over another. The law would be valid
and constitutional, and it must be presumed that the Commis-
sion in all of its proceedings will act within the limits placed
upon it by the Constitution and the law. The act creating the
Commission and conferring upon that body the power to do a

6734
23

lawful act certainly would not come under the condemnation
of the constitutional provision. If the Commission exceeded its
powers and acted beyond the scope of the authority conferred
upon it by the law, and by such act brought itself within the
prohibitory provision of the Constitution, then such act of the
Commission would be declared illegal when questioned. ‘That
is, the regulation prescribed by the Commission might be unlaw-
ful, not, however, by reason of the power which was conferred
upon the Commission, but rather by reason of the Commission
exceeding the authority given to it.

If we admit for the sake of argument that Congress has the
power to confer upon this Commission authority to fix fair and
reasonable rates in lieu of a rate condemned as unreasonable
and unjust, such an act would be constitutional, but if the Com-
mission exceeded the powers conferred upon it and substituted
an unlawful and confiscatory rate in lieu of the condemned rate,
such an act on the part of the Commission would be declared
by the courts illegal, not because the law was unconstitutional,
but because the Commission had transcended the law. So, like-
wise, if the Commission should in the regulation of commerce
give one port preference over another, which it had no consti-
tutional power to do, this particular act of the Commission
would be declared illegal and void. The question of constitu-
tionality, therefore, it seems, would relate rather to the act of
the Commission than to the law creating the Commission and
giving it constitutional powers.

Admitting, for the sake of argument, that this article of the
Constitution could be invoked, it does not occur to me that the
exercise of the authority to regulate rates would in any way
be controlled or limited by this provision of the Constitution,
for it is evident it could be claimed, on the other hand, that the
same rate from any given point to all ports would obviously favor
the most distant ports, while, on the other hand, to establish uni-
form mileage rate would in many instances result in the pref-
erence of one port over another. This is all the more appar-
ent in view of the fact that numerous ports have from time to
time been established in the interior and have thus created a
variety of circumstances and conditions not contemplated by the
framers of the Constitution. Not only in these instances would
the question of distance enter, but it would be necessary in
each case to consider what adjustment of the rates would place
the different “ ports” on a plane of relative equality. Differ-
entials have long been applied without their constitutionality
being questioned, those existing between New York, Philadel-
phia, and Baltimore are conspicuous examples of this fact.

It is a fact that railroads do give preferences to one port
over another in the adjustment of their rates, and it would be
an extraordinary condition that these corporations, the creatures
of the Jaw, can do what their creators can not do and which it
can not prevent them from doing. If this article of the Con-
stitution can be so construed as to prevent Congress from regulat-
ing the charges of the railroads because of incidental preferences
which such regulation might give one port over another, and the
railroads which are the creatures of the State can give these
preferences and Congress can not prevent it, then the argument
leads to the conclusion that while Congress is prohibited from
giving these preferences, yet the railroads can do what Congress

6734
24

can not do and Congress is helpless to prevent them from so doing.
In other words, the railroads can violate the spirit of the Con-
stitution by giving port preferentials, and Congress, because it
is prohibited from giving such preferences, can not prevent the
railroads from doing it. If all of these contentions be true,
then the creature has outgrown the creator. If Congress can
not regulate the charges of the railroad in interstate commerce ;
if it can not establish a general rule for the standard of charges
and leave to a commission of its own creation the application
of such a rule or standard, and if it can not itself establish the
charges or rates which may incidentally give a preference to one
port over another, and can not prevent the railroads from giving
these port preferentials, then indeed has the servant become tle
master and the creature of sovereignty become stronger than
the sovereign itself.

Mr. President, the so-called “court review” proposition has
been much discussed in the consideration of this bill. We
hav® heard much of the “broad review” and the “limited
review,” and the wide divergence of opinion among Senators on
this subject seems to preclude the possibility of reaching a
common ground upon which a majority at least can stand.

I do not like the expression “court review.” I think the
term is misleading, and does not fully convey the idea involved
in the controversy. However, I shall use it for the purpose of
the present discussion.

Those who advocate the “limited review,” as it is called,
would confine the rights of the railroads to attack the orders of
the Commission fixing a rate only when such a rate operates
a confiscation of their property or the taking of the same with-
out just compensation. That is, the railroads can question
through the courts the rate-made order of the Commission
only in so far as such order impinges their constitutional rights
of property as guaranteed under the fifth amendment.

Those who favor the ‘“ broad review ” contend that the courts
should be open to the railroads for the assertion and vindication
of whatever rights they may have, whether such rights spring
directly from the Constitution or from the law.

I shall try to show further on that this contention amounts
almost to a distinction without a difference. Again there are
those who believe that the present measure affords all the
rights to the railroads which the “broad review” advocates
seek, while, on the other hand, there are those who contend that
no such power is accorded the roads under this bill, but that
the courts are only open to the roads for the assertion of con-
stitutional rights. However this may be, all will agree that
such doubt or ambiguity in the measure ought to be removed,
and the bill should state specifically its objects and purposes.

It must be remembered that we are making the law, and we
can and should make the law free from doubt and question as
to its intent and meaning.

No one has ever for a moment contended that Congress has
the power to destroy or impair any right guaranteed to a party
under the Constitution nor that the Cemmission in the exer-
cise of its delegated authority can violate any of these rights.
Nor can a party enjoying these rights be denied the protection
of the courts in asserting them. There may be a difference
between the rate which the Commission establishes as a just
and reasonable rate and a rate which would afford a just com-

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25

pensation. Should there be such difference found in the Commis-
sion-made rate then the courts must be limited in their inquiry
to the just compensation accorded under the Constitution and
not to the reasonableness and justness of the rate prescribed
by the law.

To me there is little or no difference between what we term
a legal right and a constitutional right. If the law confers
upon any party any special or general right, it seems to me
that such right is as sacred and entitled to as much protection
through the courts as a right which is derived directly from
the Constitution, and the courts ought to be opened for the
assertion and protection of that right, as wide in one instance
as in the other.

I am not going to discuss any of the refinements of the law
on this proposition. I am not going to discuss whether the rate
of the Commission is a law-made rate or a Congressional-made
rate or not, or whether the Commission is substituted for Con-
gress, and its rate therefore entitled to as much consideration
as a rate made by Congress. While this in theory may be cor-
rect, yet, as a matter of fact, I know that the Commission
may abuse the authority granted to it and may unreasonably
exercise the powers confided to it.

The present law prescribes that the rate substituted by the
Commission must be a just and reasonable rate, and it strikes
me that the railroads are entitled to the full protection of that
law. Tremendous power is conferred upon the Commission by
this bill, and vast and comprehensive interests affecting the peo-
ple and the railroads are confided to its administration. The
standard of just and reasonable rates established by Congress
is in the interest of the people and the roads, and that standard
is the guide, and the only guide, which the Commission can
follow.

While I have every faith and confidence in the work of that
Commission, and while I believe that body, selected with special
reference to the peculiar work intrusted to its charge, ought
to be, and probably will be, better qualified to carry out and
execute the will of Congress than the courts, yet at the same
time I can but feel that the power confided to this Commission
may be abused or may be unreasonably exercised, and that some
check or limitations should be placed upon it.

Mr. President, I am intuitively opposed to conferring upon
any body of men, or any board or commission, the absolute aad
unrestricted right of finally deciding upon the property rights
of any individual or any person, legal or natural. I have an
idea that courts and courts alone are established for that pur-
pose, and unless there be some overwhelming and paramount
renson to the contrary I want to see the final adjudication of
all rights left in the hands of the courts. It does not seem to
me fair, just, or wise that the tremendous power we are giving
to this Commission by which billions of vested rights may be
affected, should be placed entirely beyond the power of the
courts.

I again repeat my confidence in the Commission; in its
work, and in the honesty of its purpose. I admit that the
question committed to it is largely a business question pre-
senting factors in its settlement which are not of a judi-
cial character; that the fixing of rates addresses itself to
the legislative or administrative mind rather than the judicial

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26

mind, and the Commission may act upon such facts as could
not be properly brought before the courts as proof or evidence.
Yet, at the same time, we are bound to admit that the orders
fixing the rates affect directly property rights and property in-
terests, and the Commission in the exercise of its complex and
difficult duties may honestly, but grieviously, err, or even abuse
the powers delegated to it.

Mr. President, I believe that the railroads are entitled to the
full protection of the law, and when the law declares that rates
shall be just and reasonable they are entitled to all the benefits
of the law; and if the Commission, or any other tribuna)
charged with the duty of executing and administering the same,
violates its provisions, then I believe a remedy ought to be left
to the injured party to seek redress through the courts. I do
not mean by this to confer any rate-making power upon the
courts, nor do I wish to confer any rights upon the roads other
than those the law gives them. But whatever rights they may
have, I want the courts open for a judicial determination of the
same.

Mr. President, the records of Congress will show that every
bill bearing upon this subject up to this one has contained some
provision authorizing a judicial investigation or review of the
orders of the Commission in some shape or form, and, if I am not
mistaken, the only one that limited the review of the question of
confiscatory rates was the one introduced by the distinguished
senior Senator from Texas. In addition to this, Mr. President,
the State laws creating and establishing State railroad commis-
sions contain similar provisions for review on the part of the
courts. ‘This is what I understood the President of the United
States to advocate when he used the following language:

While I am of the opinion that it would be undesirable, if it were
not impracticable, primarily to clothe the Commission with general au-
thority to fix railroad rates, I do believe that, as a fair security to the
shippers, the Commission should be vested with the power, when a given
rate has been challenged and after full hearing found to be unreason-
able, to decide, subject to judicial review, what shall be a reasonable
rate t6 take its place, the ruling of the Commission to take effect im-
mediately and to obtain until reversed by a court of review.

The distinguished chairman of the Interstate Commerce Com-
mission, in an address reprinted in the Annals of the American
Academy of Political and Social Science for November, 1905,
upon the same subject stated:

When the Commission has investigated and decided, when it has
promulgated such an order as it may be authorized to make, its duty
in the premises should be fully discharged and ended. Subject to such
judicial review as will protect against the abuse or unreasonable exer-
cise of delegated authority, the lawful determinations of the regulating
tribunal, unless restrained or set aside by the courts, should take effect
and be obligatory substantially the same as legislative enactment.

I stated, Mr. President, that the distinction between the ad-
voctes of the “broad” and the “limited” review was, in my
opinion, a distinction almost without a difference.

The cases decided by the Supreme Court of the United States
on this subject have arisen in the States, involving a construc-
tion of the fourteenth amendment, which declares that no one
shall be deprived “ of life, liberty, or property without due proc-
ess of law,” but, in my judgment, an entirely different question
will be presented when the constitutional rights of the roads will
be submitted for judicial determination under this bill. Their
rights will not be determined by the fourteenth, but by the

GT34
27

fifth amendment, which not only declares that no person shall
be “deprived of life, liberty, or property without due process
of law,” but further provides “nor shall private property be
taken for public use without just compensation.”

The Supreme Court in the decision of the Nebraska Freight
Rate case, involving the discussion of a just and reasonable rate,
quoted with approval the language used in the Turnpike case
(164 U. S.), which reads as follows:

The utmost that any corporation operating a public highway can
rightfully demand at the hands of the legislature, when exercising its
general powers, is that it receive what, under all the circumstances,
is such compensation for the use of its property as will be just both
to it and the public.

I believe, as a practical question, when the railroads com-
plain of the orders of the Commission on the ground that such
orders violate the guarantees of property under the fifth amend-
ment, the courts will hold that just and reasonable rates is the
equivalent of a just compensation, and that just compensation
will entitle the roads to just and reasonable rates.

As the Supreme Court in the cases appealed from the States
upon questions involving the violation of the fourteenth amend-
ment has necessarily been compelled to investigate all the facts
bearing upon that particular question in order to reach a ju-
dicial determinetion of the issue, so, when the railroads invoke
the protection of the fifth amendment, the court, extending its
inquiry to the question of just compensation, must necessarily
investigate all of the facts, and its decision will harmonize as
far as possible the constitutional guarantee and the provisions
of the act of Congress.

Mr. President, while I am willing that the order of the Com-
mission substituting another rate for a rate condemned may be
the subject of judicial determination, yet I am unwilling, if
it can possibly be prevented, to have such order of the Commis-
sion suspended by temporary injunction.

Force and effect ought to be given to such order, and the
same should remain in operation and effect. It must be re-
membered that in granting temporary restraint by interlocu-
tory injunctien courts of equity in no manner anticipate tbe
ultimate determination of the rights involved. They merely
recognize that a sufficient case has been made out to warrant
the preservation of the property or right in issue in statu quo
until a hearing on the merits can be had, without expressing or
without having the means of forming a final opinion of such
rights.

I am opposed to the use of this writ in anticipation of the
ultimate determination of the issues involved in the case, be-
cause I believe its use will be resorted to in every instance
where the roads are dissatisfied with the decision of the Com-
mission, and thus the work of that body will be practically an-
nulled.

Conceding the power of Congress to pass this regulation, the
inquiry naturally follows, Is such a policy on the part of the
Government a wise, just, and safe course to pursue? I believe,
Mr. President, that I realize fully the gravity and importance
of this legislation, and the more I study and reflect upon the
enormous powers we are confiding to this Commission, the
magnitude of the vital issues involved in this delegation of
power, and the consequences which may flow from its exercise,
the more I feel the responsibility of my duties. The laws now

6734
28

upon the statutes, it is claimed by many, provide against the un-
reasonable rates, against unjust discriminations, rebates, favor-
itism, and other malpractices. That may be true; yet, Mr. Presi-
dent, it is equally true that there are no efficient and adequate
remedies, and. the object of this measure is to provide a safe,
certain, and conservative remedy. Let us, therefore, examine
into some of the principal changes which this bill makes in the
present law and what additional powers it confers upon the In-
terstate Commerce Commission; second, if the railroad manage-
ment, and the part that such management plays in the business
activities and the industrial and economic conditions and devel-
opment of the country, demand or warrant such a measure.

The bill under consideration is built and constructed on what
is known as the Cullom Act of 1887. This proposed measure is
intended to add to and strengthen that law without in any man-
ner affecting its substantive provisions or in changing any of its
fundamental principles. It makes the present law more com-
prehensive, bringing under its provisions refrigerating and ele-
vating charges, private-car lines and terminal facilities, and
extending to the Commission jurisdiction thereof. The pro-
posed bill also prescribes the manner in which railroad accounts
shall be kept, the particular accounts to be kept, and that they
shall be open at all times to the inspection or examination of
the Commission or its authorized agents. With these additions
to the law the fundamental or organic principles of the present
law are practically unchanged, except as to the right or the
power given to the Commission, after due hearing and investiga-
tion, to substitute a rate or charge for an unreasonable rate or
charge by it condemned. The line of demarcation between the
old law and the present bill is clear and well defined. Un-
der the old law complaints were heard, findings and orders
were issued after investigation, and unreasonable rates were
denounced, but the Commission of itself was without power or
authority to give effect to its orders, and the law failed to do so.
These powers of the Commission have been repeatedly recog-
nized by the highest judicial tribunal of the land, and no one
doubts the constitutionality of the act. The present bill dif-
fers in so far as the powers of the Commission are concerned
only in this particular: It authorizes the Commission after in-
vestigating a challenged rate and after denouncing that rate as
unreasonable, to prescribe what will be a just, reasonable, and
fairly remunerative rate, to be thereafter observed as a max-
intum rate to be charged; and when said rate is so fixed the law
provides that such order of the Commission shall go into effect
thirty days after notice to the carrier and that it shall remain
in effect unless suspended or modified by the Commission, or
suspended or set aside by a court of competent jurisdiction.

I have thus analytically defined the changes which this bill
proposes to make in the present law. Ought these changes to
be made? Every fair-minded man concedes that the law ought
to be amended so as to bring within the jurisdiction of the Com-
mission and the regulative power of that body the private-car
system, elevating and refrigerating charges and terminal lines
and private sidings, and supervision over the bookmaking of
these corporations; but all the weight of the opposition is lev-
eled against the power conferred upon the Commission by the
fifteenth section of this bill.

6734
29

A government such as ours, reaching out and ramifying in
so vast a domain of activities, must necessarily carry on many
of its functions by and through subordinate tribunals. In fact,
all the agencies of government act within the sphere of their
constitutional or legislative limitation. In the division of the
powers of government, many of the most important functions
are committed either to constitutional or legislative tribunals
or instrumentalities. The district and circuit courts, with all of
their great and far-reaching powers, are the creatures of the
legislative will. The Postal Department of the Government.
with its vast and multiplying duties, is established by the legis-
lative department of the Government. The administration and
execution of the tariff laws are confided largely to a board of
appraisers, while all of the immense public domain of the coun-
try is committed to the administration of one of the Departments
of the Government. While these instances might be multi-
plied, I mention them simply to show that the most important
functions of the Government touching the rights of persons and
properéy have been confided to agencies provided and created
by Congress. But while it is true that the duties and powers
conferred upon this Commission are far-reaching and of vast
importance, yet I am unwilling to admit that this Government,
which in the past has dealt satisfactorily with some of the
greatest and most intricate problems that ever confronted a na-
tion, is incompetent or unable to solve this great question hon-
estly, intelligently, and for the best interests of all. And while
4 am willing to 2dmit that tremendous power is lodged in the
Commission by the bill, yet that same power is to-day exercised
by the railroad corporations, and while there may be some dan-
ger of its abuse by the Commission, yet I submit there is a
greater danger of its abuse by the officials and employees of
tliese corporations.

Addressing myself to the second proposition, as to whether
the industrial conditions of the country justify and require
such legislation, I will say that it is my judgment that we have
reached the epoch in the history of the industrial and eco-
nomic development of this country, in which the railroads have
played and are still playing such a prominent if not dominating
part, that such legislation is absolutely necessary.

The last official reports show that there were 214,478
miles of trackage in this country, not including second or third
tracks and sidings, and that the carriers’ earnings for the fiscal
year ending June 30, 1905, amounted to the enormous sum of
$2,073,177,325. These figures show that about one-tenth of the
entire wealth of the country, with its more than eighty millions
of people, is owned and controlled by the railroads; that their
annual income exceeds by threefold the entire revenue of the
Federal Government from all sources; that their army of em-
ployees, amounting to 1,300,000, is greater than any army that
ever went into the field. This immense wealth is rapidly con-
solidating into one vast, compact, and irresistible power. The
various steps by which this consolidation has been so rapidly
crystallizing is generally known and recognized. According to
Moody’s Truth about the Trusts, published in 1904, the first
group, with details of lines embraced, the mileage and capitali-
zation included, is the Vanderbilt or New York Central group,
with 21,880 miles of lines and an aggregate capitalization of

6734
30

$1,169,196,132, and controlling 132 subcompanies or subsidiary
corporations ; second, the Pennsylvania Railroad group, covering
19,300 miles, with $1,822,402,235 of capital and controlling 280
subcompanies or subsidiary corporations; third, the Morgau
group, with 47,206 miles of lines and $2,265,116,350 of capital,
and controlling 225 subcompanies or subsidiary corporations ;
fourth, the Gould-Rockefeller group, with 28,157 miles of lines
and $1,368,877,540 of capital; fifth, the Harriman-Kuhn-Loeb
group, with 22,943 miles of lines and $1,321.243,711 of capital,
containing 85 subsidiary companies, and, sixth, the Moore or
Rock Island group, with 25,092 miles of lines and $1,070,250,9239
of capital, operating 91 subcompanies.

These six groups, with $9,017,016,907 of capital, control 165,586
miles of the total] railroad mileage of the United States. The
boards of transportation directing these six groups have already
practically parceled out the whole territory of the country
among themselves, and establish and fix the rate of transporta-
tion as any one of the respective boards of managers may see
fit to dictate, or else the whole tariff or charges may be regu-
lated as if by one general board. The passion for consolidation
and centralization, like every other governing influence, feeds
upon its own appetite. Already the railroads of the country
are classified in the official returns of the Government as “ oper-
ating roads ” and “ subsidiary roads,” or those lines that operate
by sufferance of the larger systems and derive their incomes
from rentals or kindred sources.

It would be unnatural if the conditions were other, and the
men who dominate these systems would be more than human
if they failed to seek all the wealth and power that they can pos-
sibly acquire. It is the old struggle that has been made through-
out the ages, since the first man oppressed his brother—a pas-
sion that in a modified form is typified in the Old World insti-
tutions to-day, and against which these United States were
intended as a protest. Events within the past few years have
shown us more clearly than ever before that this Government,
modeled with the primary view of securing individual freedom,
must stand between the citizen on the one hand and these vast
interests of consolidated wealth that dominate our individual
life on the other, and that no other power than that of the Gov-
ernment can reach the abuses from which the people are asking
for relief.

The tremendous mileage of our great railways is now domi-
nated, owned, or opcrated by half a dozen systems, and these
great lines are interwoven by community of interest until com-
petition has practieally disappeared and disappeared forever.
I say disappeared forever, for it is idle to expect, futile to en-
deavor, and perhaps senseless to desire a return to the old
system of small competing lines. These new conditions bring
new problems, but the advantages to be derived and that are
apparent in the operation of the wholesale method of transporta-
tion should not cause us to lose sight of the insidious tendencies
to monopoly and oppression.

One of the great dangers to the public incident to these gi-
gantic combinations is that the absorption and assimilation of
new lines is almost universally attended by reckless inflation
of capitalization or bonded indebtedness. I know that it 1s
contended that this is a matter of no possible interest to the

6734
31

public; that corporations are private affairs which the owners
may operate as they please; that with reasonable rates it can
be of no concern to the public or to the Government whether
the stock of the road is $100,000,000 or $600,000,000. Yet, when
subjected to a final analysis, it will readily be perceived that
the inevitable result of this overcapitalization is increased
taxation in the way of additional freight charges.

Take the case of the Northern Securities Company, which
attempted to create a monopoly of all the northwestern trans-
continental lines of the country. In the course of his argu-
ment before the Supreme Court, which resulted in the frustra-
tion of that gigantic project, the distinguished Senator from
Pennsylvania, then the Attorney-General of the United States,
whose able and conspicuous services in the performance of his
high duties entitle him to the gratitude of the country, in speak-
ing of this method of financial manipulation, said:

Of this common stock, as early as February, 1897, Mr. Hill and
Lord Mount Stephens had acquired 258,341 shares at $16 per share,
or $25,834,000 of par value for $4,133,456. Some idea of the com-
mercial value of the monopoly of transportation to the participants
may be had when it is considered that this stock, which cost $1 er
share in 1897, was put into the Securities Company in 1901 at $115
per share, netting the owners $25,000;000.

But the most striking example of this class of high finance
that has come to light was developed and referred to by Com-
missioner Clements in his testimony before the Interstate
Commerce Committee of the Senate last summer, when he said:

But I have a little matter that I want to call to your attention, which
was disclosed in the proceedings two or three years ago. The railroad
commission of Kentucky presented a complaint before the Commission
which called for an investigation of the acquisition of the Louisville
and Nashville Railroad by Mr. Gates. That came out, at least, in the
investigation. It appears that Mr. Gates, a very active man, had gotten
hold of a majority of the stock of the Louisville and Nashville Rail-
road Company, which had previously been held and controlled by the
Belmonts in the interest of others whom they represented, and it dis-
turbed some gentlemen in New York very much to think that Mr. Gates
should be turned loose as a railroad man in the South, running the
Louisville and Nashville road. The testimony shows that Mr. Gates
had begun to buy this stock of the Louisville and Nashville Railroad
at about 110, and he paid as high as 130. It was said that he paid on
an average of about 125 for it. It was running along at about 110 be-
fore he commenced.

When it was ascertained that he had a majority of the stock, Mr.
Morgan was able to get Mr. Schw&b to go, at 1 or 2 o’clock at night,
to his hotel and wake him up to know upon what terms he could
get an option upon that or buy it, and they found Mr. Gates and got
him to give an option, by which he agreed to take 150 for all majority
of the stock. They took the option and handled it, and Mr. Morgan
called up the president of the Atlantic Coast Line and suggested the
situation to him, and the outcome was that the Atlantic Coast Line
agreed to take it at 150, and to do so issued $35,000,000 in new konds,
$8,500,000 in new stock, to the former stockholders—to the then stock-
holders—and $5,000,000 of stock further. That resulted in an in-
crease of the bonds and stocks of the Atlantic Coast Line, and that in-
crease of about $50,000,000 in order to enable the Atlantic Coast Line
to take the control of the Louisville and Nashville Railroad out of the
hands of Mr. Gates. Mr. J. Pierpont Morgan expressed it in this way
in his testimony:

“]T don’t wish to impugn any man’s ability, but I did not consider
Mr. Gates a proper person to manage the Louisville and Nashville Rail-
road.”

Mr. Gates was perhaps an active man, and he might indulge in what
would be called among the railroad brethren ‘unreasonable and rough
competition.” I suppose that is what it meant. He was not wanted
in that family of railroad men. And therefore the net outcome was
that the Atlantic Coast Line was saddled with about $50,000,000 more
of capitalization in order to get Mr. Gates out of the way. The prop-

OT44
32

erty did not have another nail driven in it, or another cross-tie, or any
more rolling stock, or any stock of any sort in addition, but when you
talk about the railroad rates of the Atlantic Coast Line, and the in-
crease of 2 cents on lumber which the Atlantic Coast Line made, along
with others, the Commission, or Congress, or the country want to con-
sider that $50,000,000 of capitalization, as well as that part of the
capitalization of these railroads in the hands of the widows and the
orphans who have put their little savings into these securities. And
when you consider these $50,000,000 worth of bonds, of capitalization,
you want to consider that the bonds become a fixed charge. Interest
on them must be paid.

Now, imagine an unreasonable rate being attacked on the
ground of any of these instances of stock watering and inflation
of values and a, reduction being ordered. Is there any doubt the
first defense would be that the Commission rates were confis-
eatory, and not furnishing a fair return on the capitalization,
bona fide and watered, besides interest on its bonded debt?

But, Mr. President, there is a far greater danger in these
concentrations than the mere monopoly of the American trans-
portation system. The great producing agencies of this country
are rapidly consolidating into corporate monopolies, the success
of which is to a greater or less extent dependent upon the
distributing systems of the country. In the formation of these
gigantic industrial enterprises the movement of their products
is a factor of such overshadowing importance that transporta-
tion is the first feature considered. Thus the captains of
industry and the railroad magnates are not long in striking
hands or arriving at a community of interest, the one partici-
pating in the holdings of the other, and each being represented
on the directorates of the other. Rate manipulations naturally
follow, their purpose being to wipe out competition. They are
the most efficacious remedy known for dealing with troublesome
rivals, and their application is swift and certain. But, in the
very nature of the case, it is only a question of time in the
evolution of the system, after third parties in the form of small
and independent shippers have been eliminated and all compe-
tition has been destroyed, when a union between the producing
corporations and transportation systems of the country will
follow.-

Already the anthracite coal mines are cornered and the
bituminous fields are going the same way; oil is tied up in
almost every State, while the amalgamation of iron beds and
copper mines is merrily going on.

Consolidations have followed consolidations until the whole
power of the enormous distributing instrumentalities is absorbed
by a few boards controlled and dominated by a few men. Is it
safe,,Mr. President, for this Government, dedicated by the
fathers to the equal protection of all, to permit this vast
power, imposing annually by way of transportation tariffs over
$2,000,000,000 of burden upon the body of the people, to remain
in the hands of these boards, without limitation, control, or
restriction? I think not. The power is too vast, the tempta-
tions to abuse too great, and the abuse too certain.

Mr. President,

“Tt is excellent
To have a giant’s strength; but it is tyrannous
To use it like a giant.”

Without entering into an analysis of that well-worn statement,
the question still arises, Does anything with a giant’s power
use it other than as a giant? Would a giant’s power ever:

6734
33

develop but by the use that makes it a giant’s power? In-
conceivable is the theory that the power of all the great railroad.
interests in the United States, concentrated in six or seven
systems, shall be used other than as a giant would use it, or
that it would have been possible for that power to have been so
concentrated if the tyranny implied by a giant’s strength had
not been applied to it? Aside and apart from the question of
preferential rates, extortionate tolls, rebates, discriminations
and maladmjnistration, and leaving these as though they were
subjects still unsuggested, it is inconceivable that such a power
so concentrated can be other than a menace to the security and
tranquillity of the great business interests of the country. It is
well said that no house is big enough for two masters, and cer-
tainly no government is big enough for two rulers, and that is
what our government permits when it elects the legislative
branch and coincidentzlly submits the great subject of trans-
portation to a separate power.

The control of the means of transportation and the possession
of the routes of trade will continue to be what they have been
since the dawn of civilization—the gates of commerce and the
doors of wealth. When these doors and gates are swung and
closed on the hinges of personal gain and private advancement
the public interests must and will be subordinated. to private
aggrandizement.

The wealth and power of the railroads are almost as vast as
the territory they cover. This enormous power, through com-
binations and affiliations, is controlled by a body of men smaller
than would be considered efficient to manage one single depart-
ment of the Government. The »vydvancement and development of
the industrial and economic life of the nation is intrusted to
these boards, self-appointed, responsible to no one, and with no
spring of action but that of private gain. This Government is
founded upon the principle that power shall not be confided in
too few hands. The fathers of our country revolted from a des-
potism that had grown oppressive; the red blood of heroes was
shed that the public and not the private good should be the
object of effort, and to-day the wisdom and reward of this effort
is demonstrated in the distribution of power in our Government.
These railroad directors are men of passions and weaknesses
like the rest of humanity. Start they may with the assumption
that they are appointed to benefit mankind, and that they are
intrusted with the charge to lead their nation to the pinnacle of
power, but they would be more than human if their all but
omniscient power should not be diverted occasionally to a baser
object and a tyrannous use.

J have no wish or inclination to blame or unduly criticise these
railroad directors. For their success and marvelous achieve-
ments many of them deserve praise, yet it must be admitted that
they are moved by the same passions and desires that influence
other men, and in my opinion no coterie of men in the United
States or any other country actuated by private interests is
unselfish and strong enough to be intrusted with such prac-
tically unlimited power over the fortunes and destinies of their
fellow-men. Power does not by any means confer upon human
beings a proportionate consecration in its use, and it is not
in our present state of civilization a safe proposition to permit
any man, or any number of men, to control and use without

67343
34

restraint such power as these boards now enjoy. It could not
-be done safely in our Government, nor can it be intrusted to
that “imperium in imperio” which has sprung up in this coun-
try and in which the inner power has grown to such proportions
that the circumscribing power of the Government is weakened.
I have not said, nor shall I say, that the railroad corpora-
tions have any malign object in centralizing, concentrating, and
exploiting their influence. I do not believe they have. I am
convinced that they have no object more sinister than the ac-
cumulation of vast wealth, but in the expression of that desire
they have, it can not be denied, exercised a tyranny in this country
at times that has been almost ferocious. That any power grown
to such proportions, with such unlimited field of action, with such
titantic strength, with such momentum as it has gained through
the passing years of prosperity, should be permitted to exist, un-
restrained and uncontrolled, is opposed to the very genius of our
institutions. Where a government works in fetters, or must
stand aside, for the exercise of a power that it can neither limit
nor control, such a government must necessarily grow weaker
and weaker as the power which it fails to control grows stronger
and stronger. In the rule of quasi-public institutions the rail-
roads have called forth, it is true, the activity which has stimu-
lated individual exertions and national development, but in their
far more influential character, as an aggregation of capital,
labor, and brains for the purpose of gaining wealth, they have
substituted their own activity for that of individuals and gov-
ernments.

That evils formidable to human freedom and individual
effort are the natural effect of the concentration of such power
in a few hands must become a conviction with anyone who
understands the frailty of man or who has read the history
of nations. We are told that the rights of property are sacred.
So they are. The right of the small shipper is as sacred as
that of the greatest trust or the most inflated corporation.
We do not want to be deceived by bulk, by bigness, by over-
towering immensity. The sacred right of property, this divin-
ity of wealth which we all worship, is as inherent in the dollar
of the poor as in the millions of the rich or the billions of
the corporations. If it has the disadvantage of traveling singly
rather than in flocks, of being pitted alone against its enemies
instead of fighting with the herd, it becomes us all the more
to offer it the protection of a government that has for its
religion the equality of the rights of all men. It is not easy
to define property, not easier than to tell what abstract jus-
tice and equity and right are. Where one man’s rights are
infringed by the activities of another must always be a line
vague and varying, but it would seem reasonably obvious that
the concentration of the commerce of the country into six or
seven systems, with powers to make and unmake fortunes, to
create and destroy industry, to fix the price of necessaries of
life, and withal to be responsible not even to the Government
of the country, is a contradiction of the Constitution.

It has beén given to but a few inspired individuals to use
power with moderation and altruism. There is something in
the composition of man that 'is born of woman that makes
power a firebrand in his hard. Evil as are the effects of great
wealth on some natures, its tangibility and computability act

6734
35

generally as constraints or exercise a moderating effect on its
use. Not so with power. The temptation to use it is constant.
The amusement of testing and watching its effect becomes a
passion. The desire to exercise it, the impatience of its limi-
tations, becomes a frenzy. Its subtlety, its complexity, its
mutability are the spurs which stimulate it. It grows by what
it feeds upon, and its appetite knows no bounds or restraint.
Each effect it produces acts as a link in an infinite series of
possibilities. Begun as a controllable influence, it ends by tak-
ing possession of every faculty of its possessor.

Here is where lurks the danger in this centralized power.
It will wax in strength and increase as the years go by, for
surrendering nothing, jealously guarding each new power as
acquired, powerful to resent interference, and hasty to visit
condign punishment on all who seek to curb or control it, it
will soon become a menace to the free and untrammeled opera-
tion of the Government itself, and, in the language of Presi-
dent Garfield—
the State legislatures of the Union, in creating these vast corporations,
have evoked a power greater than the legislatures themselves.

Mr. President, the people know that national and State boun-
ties went into the building of the roads; they know that the
wealth of the country has contributed to the success of the rail-
roads, as the railroads have aided in the development of the
wealth of the country; they know the railroads, having grown
to power, feel safe in whatever wrong or injustice they may
practice, and they feel and they know that there is no relief from
the extortionate demands and unjust impositions of these roads
other than that which the Government will afford. They know
that to a certain extent these corporations are governmental
agencies exercising in part governmental functions, and to that
extent are subject to governmental control, and they appeal to
this Congress to so contro] and regulate them that the tariffs
and schedules of charges which they may establish shall be sub-
ject to governmental revision. They are asking no further
protection of this Republic than the monarchies of the Old
World extend to their subjects.

No civilized government in the world permits this class of
corporations, engaged in a public service and to that extent
public servants, the unrestricted right to fix and establish the
rates which the people shall pay before they can move their
produce. In England, France, Germany, Austria, Russia, and,
in fact, all over Europe the government either owns these public
utilities or through some boards, tribunals, or other agencies
control and regulate the carriers in their transportation charges.

And while it has been contended that Government contrdl of
the public carriers in the continental countries has resulted in
a higher rate of charges, yet I have such an abiding faith in
our institutions and in the strength and fairness of our Govern-
ment that I am led to believe the governmental control of these
vast corporate agencies will in the end lead to the greatest
good to the greatest number.

6734

O
RAILWAY RATE LEGISLATION.

SPEECH

or

HON. J. B. FORAKER,

OF OHIO,

IN THE

SENATE OF THE UNITED STATES,

WrbpnespAy, Fepruary 28, 1906.

WASHINGTON.

1906.
6583
SPEECH

or

HON. J. B. FORAKER,

Wednesday, February 28, 1906.

REGULATION OF RAILROAD RATES.

Mr. FORAKER. Mr. President, I ask that what is commonly
known as the ‘“ railroad rate bill” be laid before the Senate.

The VICE-PRESIDENT. The bill will be read by its title.

The Secretary. A bill (H. R. 12987) to amend an act entitled
“An act to regulate commerce,” approved February 4, 1887, and
all acts amendatory thereof, and to enlarge the powers of the
Interstate Commerce Commission.

Mr. FORAKER. Mr. President, this proposed rate legisla-
tion raises some of the most important questions we have had
to deal with since the civil war. It is so contrary to the spirit
of our institutions and of such drastic and revolutionary char-
acter that, if not in its immediate effect, at least as a prece-
dent, the consequences are likely to be mest unusual and far-
reaching. In view of these facts I make no apology for taking
the time of the Senate to speak at length upon the subject,
although upon this occasion I shall confine myself chiefly to the
legal questions arising. I do not speak for anybody else, only
for myself.

It may be helpful, as a sort of preface, to briefly sketch the
development of our railroad system, indicate the present situa-
tion, and make some general observations that have no refer-
ence to any particular bill or any particular plan that has been
proposed, but which have application to the general proposition
to confer the rate-making power on the Interstate Commerce
Commission.

Speaking in this way, railroad building in this country
commenced about 18380. Its beginning was like that which
we are now witnessing as to interurban electric railroads.
At the beginning all railroad companies were organized wader
the State laws, and, as a rule, to build only short intra-
State lines. The principal cities were first connected. The
less important connections followed. Branches, spurs, and
lateral lines came later. In that eariy period the different
railroads were so separate and distinct in their organization
and operation, and considered themselves such competitors of
each other, that they resisted all suggestions of cooperation or
of common use of tracks and cars. They went so far, in some
instances, as to construct their tracks of different gauge, for the
purpose, among others, of making it impossible for the cars of
one line to pass over the tracks of any cther line, In that day
there were no through routes for either passengers or freight. To
travel by rail from St. Louis, Chicago, Detroit, Cincinnati, Colum-
bus, or Cleveland to New York involved repeated changes of cars.

The railroad business of the country continued upon these
lines of separability and individual corporate action witb but

6583 8
4

very little, if any, consolidation until the civil war, when the
necessity for the prompt transportation over long distances of
troops and supplies demonstrated the advisability and necessity
of through lines and harmonious systems with accompanying
cooperation in management. Then commenced in a general way
the wiser policy of connecting lines and operating them in har-
mony and for the better accommodation of their patrons,
Finally there came, as an authority and encouragement for this
new policy, the Act of Congress of June 15, 1866, which provided:

That every railroad company in the United States whose road is oper-
ated by steam, its successors and assigns, be, and is hereby, authorized
to carry upon and over its road, boats, bridges, and ferries all pas-
sengers, troops, Government supplies, mails, freight, and property on
their way from one State to another, and to receive compensation
therefor, and to connect with roads of other States so as to form con-
tinuous lines for the transportation of the same to the place of destina-
tion. (R.S., sec. 5258.)

Under the protection and impetus given by this legal sanction
the policy of cooperation rapidly developed, and although the
period following the civil war was one of declining values until
the resumption of specie payments, the construction of railroads
rapidly increased, particularly in the Western States, into which
the tides of population were pouring. During this period there
was not only a constantly increasing demand for united and
cooperative and interdependent relations, which led to the ex-
penditure of many millions of dollars to reconstruct roads
according to a standard gauge and reequip them to correspond,
but there was also a universal demand for new roads and new
lines of roads. New settlements brought new demands, and the
rapid growth of population, towns, cities, and industries gave
promise of such increasing and widespread prosperity that rail-
road building was in many instances unduly stimulated. In con-
sequence, roads were built not only where there was immediate
necessity, with fairly remunerative returns upon capital in-
vested, but they were in many instances improvidently or prema-
turely built, and as a result there were in such instances for
years less than fair returns, while in many cases there were no
returns, but only losses for the investors. This rapid construc-
tion, spreading over the whole country, in all directions, but
much of it unremunerative, led to the fiercest competition. Each
read struggled not only to develop business on its own lines, but,
by reducing rates, to carry the products of its own patrons to
the most distant markets possible, invading new territory wher-
ever they could. This brought about a conflict of interest in
both the origination of business and in the finding of markets
for that business. Roads that were built prematurely, or built
improvidently, seeking for business sufficient to pay operating”
expenses and fixed charges, resorted to every method that com-
petition could suggest to control patronage. In this behalf not
only low long-distance rates but secret rebates, preferences, and
discriminations of almost every character were resorted to.
Many roads failed to get sufficient business and passed into the
hands of receivers and were reorganized, some of them repeatedly.

The situation became so unsatisfactory that finally Congress
passed the Interstate Commerce Act of February, 1887. That
law, reenforced by a number of amendatory and supplementary
statutes, has been in force ever since. The Interstate Commerce
Commission, by it provided, has rendered much valuable serv-
ice. Through the operation of these statutes, under the admin-
istration of this board, many of the evils originally complained

4583
5

of leading to the enactment of the statutes have been remedicd.
It is commonly conceded that the railroad situation in the
United States is better to-day, measured by the efficiency of
its service, the cost of that service, and the treatment cf ship-
pers and passengers in the rendition of that service, than it has
ever been before, notwithstanding there are many evils remaine
ing that should be in some suitable manner provided against.

In the meanwhile the railroad business of the country has
grown to enormous proportions. From the last annual report
of the Interstate Commerce Commission it appears that the
total railroad-track mileage amounts to about 212,000 miles;
that the equipment of the same amounts to 46,743 locomotives,
1,798,561 cars, and that on account of these properties there
have been issued in the aggregate almost $14,000,000,000 of
bonds and stocks, which are held almost altogether in this
country, the owners consisting of thousands of individuals, in
addition to savings banks, trust companies, insurance companies,
and other kinds of institutions whose stockholders, numbering
into the millions, are thus interested in these securities. 1t
further appears from this report of the Interstate Commerce
Commission that there are about 1,300,000 individuals, officers,
agents, and employees on the pay rolls of these companies, to
whom these railroads pay out annually in salaries and wages
about $800,000,000. It is further shown by this report that
these roads carried the equivalent last year of more than two
billion passengers the distance of one mile, and that the freight
was the equivalent of the carriage for one mile of 174,522,089,577
tons; that the passengers were carried at the rate of about two
cents per mile, and the freight at the average rate of .78 of a
cent per ton mile; that the gross earnings aggregated almost
$2,000,000,000; while their operating expenses amounted in
round figures to $1,338,000,000; that the net earnings amounted
in round figures to $636,000,000.

These figures show the enormous, almost incomprehensible
aggregate of values invested in railroad properties, and the
tremendous, far-reaching character of the business of these
earriers; the great number of persons immediately employed
in connection therewith, and that there are millions of people not
immediately connected with the railroads who are interested in
their prosperity as holders of their securities and otherwise.

It is not to be wondered at that the upbuilding of such
great interests should Lave been attended with many abuses
and evil practices. It would be strange if it had not been.
Rather the wonder is that these abuses and evil practices have
not been greater than they have been. It would be strange,
judeed, if there were not now, notwithstanding the improve-
ments in the railroad situation, evil practices and abuses still
remaining for which a remedy should be provided.

These evils are generally speaking of three classes—excessive
rates, rebates, and discriminations.

EXCESSIVE RATES.

Of these, excessive rates are the least serious. Taking the
whole country over the general average for the transportation of
freight per ton per mile is less than it is in any other country.
There has been some advance Quring the last fire years, owing
largely to the increased cost of Inbor and general operating
expenses, but the average cost at this time is shown by the last
report of the Interstate Commission to be, as we have scen,

6583
6

only 0.78 of a cent per ton mile, which is less than one-third of
what it was twenty-five years ago and materially less than it is
in any other country of the world. While all this is true there
are, nevertheless, some instances, perhaps many in the aggre-
gate, where rates in and of themselves are excessive, and yet,
comparatively, these are but few and unimportant. This is

-shown by the testimony of all who have spoken on the subject.

The Interstate Commerce Commissioners in their annual reports
have repeatedly stated in effect what they said in their report
for 1893, that “extortionate charges are seldom the subject of
complaint ” and that ‘rates as a whole are low enough.”

Mr. Glements, a member of the Interstate Commerce Commis-
sion, testified before the Senate Committee on Interstate Com-
merce, page 2237, volume +, “The Commission has repeatedly
asserted, and, I think, established by its official statistics, that,
taken as a whole, the American rates are reasonably low, par-
ticularly upon the bulk of low-grade raw materials.”

Mr. Fifer, another member of the Commission, testified before
the Interstate Commerce Committee of the Senate, at page 3349,
as follows: “I want to add in closing that I do not believe, ex-
cept in some instances where I have stated, that the railrcad

-rates throughout this country are excessively high at all. I

have never believed that, and neither do I believe thére would
be, or ought to be, any great disturbance of these rates, what-
ever powers the Commission might be invested with.”

On this subject President Roosevelt said in his remarks to the
railroad employees who called upon him at the White House in
November, 1905, to protest against this proposed legislation. on
the ground that they feared it might prejudice them by putting
their wages in jeopardy: “ There has been comparatively little
complaint to me of the railroad rates being, as a whole, too
high.”

Numerous other witnesses might be cited to this same general
effect, but it is sufficient to say that all witnesses—shippers,
railroad men, and others—without regard to whether they fa-
vored the proposition to confer the rate-making power on the
Interstate Commerce Commission or were opposed, testified in
substantial concurrence with the quotations made.

Nevertheless there should be some prompt and effective rem-
edy provided by the law against excessive rates to whatever ex-
tent they may be indulged in and wherever they may be found.

REBATES.

A more serious class of evils, because more prejudicial in
their consequences and results, are rebates. They are granted
under many forms and guises, and include not only money pay-
ments, but all kinds of discriminations between shippers, such
as undue allowances for terminal charges, elevator charges,
refrigerator charges, icing charges, and private cars, false
weights, improper classification, under billing, and many others
too numerous to mention. The practice of giving rebates was a
result of sharp competition between roads for business. At one
time almost, if not quite, every road in the country indulged in
the practice. Shippers who secured such preferences had an
unjust advantage over their competitors, and the railroads
that granted them suffered in the loss of revenues. The strong-
est and most prosperous railroads, although, like the others,
granting these rebates, were always, as a rule, anxious to put a
stop to the practice. In that behalf many traflic agreements

6583
7

and arrangements, of one kind and another, were entered into,
including many others that were knédwn as pooling arrange-
ments. All these arrangements and agreements proved ineffec-
tual to a greater or less extent. The pooling arrangements were
more nearly observed than any others, but they were unfor-
tunately named, and because they prevented, in some measure
at least, free and active competition they were always unpopu-
lar. In consequence they were prohibited by the interstate-
commerce act of 1887. Subsequent to that statute traffic agree-
ments and arrangements were chiefly relied upon. They were
in effect simply agreements between competing roads as to what
were regarded as reasonable schedules of rates, coupled with
the further agreement to maintain the same.

But the Supreme Court of the United States in what is known
as the Trans-Missouri case, reported in volume 166, page 290,
U. S. Reports, and the Joint Traffic case, reported in 171 U. i.
Reports, 576, held that these traflic arrangements were in vio-
lation of the Sherman anti-trust law, which, until that liti-
gation was commenced, was not generally understood to apply
to railroads; they being fully regulated, as it was thought, by
the Interstate Commerce Act. The prohibition against pooling
and the invalidity, as established by these decisions, of traflic
agreements and arrangements left the roads without any ade-
quate remedy against the practice of rebates, which each
road felt compelled, in justice to itself, to indulge in because
its competitor did; the weak roads to get business, the strong
roads to hold it. Very largely on this account the tremendous
consolidations of railroad properties resulted which have oc-
curred during the last five or six years. These consolidations
have been made until practically the entire railroad system
of the United States has been brought under the control of some
six or seven general systems, such as the Pennsylvania, the
Vanderbilts, the Rock Island, ete. The effect of these consoli-
dations upon rebates and discriminations as to persons and
places was no doubt to restrict them somewhat, but the practices
continued to such an extent, and with such consequent dis-
satisfaction on the part of shippers and railroads alike, that
the Congress, to provide an efficient remedy against them
enacted, February 19, 1993, what is known as the Elkins law.

THE ELKINS LAW.

The general scope, character, purpose, and salutary effect of
this law are set forth fully by the Interstate Commerce Cominis-
sion, in its Seventeenth Annual Report, dated December 15, 1903,
from which I quote as follows:

Its provisions are mainly designed to prevent or more effectually
reach those infractions of law, like the payment of rebates and kindred
practices, which are classed as misdemeanors.

In the first place, the recent amendment makes the railway corpora-
tion itself liable to prosecution in all cases where its officers and agents
are liable under the former law. Such officess and agents continue to
be liable as heretofore, but this liability is naw extended to the cor-
poration which they represent. ‘This change in the law corrects a
defect which bas always been a source of embarressinent to the Con-
mission, as has been explained in previeus reporis, Lecause it gave
immunity to the principal and bencficiary of a guilty transaction. As
a practical matter, it is believed that much Lenelit will resnit trom the
fact that preceedings can now be taken against the corporation.

The amended law has abolished the penalty of imprisonment, and
the only punishment now provided is the imposition of fines. As the
corporation can rot be imprisoned or ctherwise punished for misde-
meanors than by money penalties, it wus deemed expedient that no
greater punishment be visited upon the offending officer or agent.
The various arguments in favor of this change have been statel in

6583

 

 
8

former reports and need not here be repeated. Whether the good
results claimed by its advocates will be realized is by no means cer-
tain, but the present plan should doubtless be continued until its
utility is further tested.

% * * & * * *

Without further reference to the changes effected by this amendatory
legislation the Commission feels warranted in saying that its beneficial
bearing became evident from the time of its passage. It has proved
a wise and salutary enactment. It has corrected serious defects in
the original law and greatly aided the attainment of sonie of the pur-
poses for which that law was enacted. No one familiar with railway
conditions can expect that rate cutting and other secret devices will
immediately and wholly disappear, but there is basis for a confident
belief that such offenses are no longer characteristic of railway _opera-
tions. That they haye greatly diminished is beyond doubt, and their
recurrence to the extent formerly known is altogether unlikely. In-
deed, it is believed that never before in the railroad history of this
country have tariff rates been so well or so generally observed as they
are at the present time.

* * * * ae * *

In its present form the law appears to be about all that can be pro-
vided against rate cuting in the way of prohibitive and punitive leg-
islation. Unless further experience discloses defects not now perceived,
we do not anticipate the need of further amendments of the same char-
acter and designed to accomplish the same purpose.

In its Nineteenth Annual Report, under date of December 14,
1905, the Interstate Commerce Comimission, at page 13, said:

REBATES AND THE ELKINS LAW.

In our annual report for 1903 we endeavored to explain the changes
in the regulating statute effected by the Elkins law, so called, which
was approved in the previous February, and made some favorable
comments upon its operation. A similar opinion was expressed in the
report made a year ago. Further experience, however, compels us to
modify in some degree the hopeful expectations then entertained. Not
only have various devices for evading the law leen brought into use,
but the actual payment of rebates as such has been here and_ there
resumed. Instances of this kind have been establisbed by convincing
proof, on which prosecutions have been commenced and are now
pending. More frequently the unjust preference is brought about by
methods which may escape the penalties of the law, but which plainly
operate to defeat its purpose, This does not imply any want of satis-
faction with the act of 1903, which we regard as a most admirable
measure, nor any belief that there is a general return to former
practices, for the fact is undoubtedly otherwise; but it does mean that
this type of evil has by no means disappeared and that it is liable to
increase unless effectively restrained.

They might have added that all that was necessary to ‘“‘ effect-
ively restrain” that “‘type of evil” was to enforce the law;
and that the enforcement ef the law was in the hands of them-
selves and the Department of Justice under the general control
of the President, and that the law against murder, burglary,
robbery, arson, and similar crimes is as good as man has been
able to devise, but that nevertheless we still occasionally hear
of the commission of these offenses.

But there is further testimony as to the character of the
Elkins law.

Speaking on the subject of the Elkins law and rebates, Mr.
E. P. Bacon, in his statement before the Senate Interstate Com-
merce Committee, said, January 16, 1905, page 16, et seq., vol. 1,
Interstate Commerce Committee Hearings:

I consider that the difficulty of discrimination between individual
shippers is fully met by the Elkins Act of 1903. I do not see how the
English language can prohibit that in any clearer terms than is done
vy that act, nor do I_see how any means of enforcing that prohibition
beyond what is provided in that act can be formulated.

I wish to say, further, that while the Elkins Act of 1903 went as far,
it seems to me, as it is possible to go, yet it remains with the Commis-
sion on its part, and the Department of Justice on its part, to enforce

the provisions of that act. If they are thoroughly enforced, the evils
of rebates will be effectually remedied.

6583
9

I really regard rebates, however, as having been fully provided for
by the Elkins Act of 1903, and with the addition of some machinery I
believe that the practice of paying rebates can be wholly prevented.

Mr. Bacon further testified on this subject, page 1764, vol. 3,
as follows:

The suppression of rebates is only one of the evils that have been
aimed at by the commercial organizations. That evil has been con-

sidered by the associations as having been effectually remedied by the
passage of the Elkins Act of 1903.

8. H. Cowan, esq., one of the leading and one of the ablest of
all the adyocates of the proposition to confer the rate-making
power on the Interstate Commerce Commission, said, on the
same subject in his testimony before the Senate Interstate Com-
merce Committee, at page 112, vol. 1:

Fortunately, rebates have stopped. It was a fortunate thing that
they did, because it was made the means of discriminations between

individuals where the neighbor can engage in the purchase and sale of
articles because he gets lower rates.

Governor Cummins of Iowa said on this subject in his testi-
mony before the Interstate Commerce Committee of the Senate,
at page 2052-3, Vol. 3—

I do not think rebates and discriminations will ever disappear wholly,
and I say frankly that I do not believe they will ever disappear so long
as there is the element of competition. In business you may find some
way of awarding favors, but I do not know of any way in which you
can make the law more perfect on that point than it is now.

Commissioner Clements, of the Interstate Commerce Commis-
sicn, said in lis testimony befcre the Interstate Commerce Com-
mittee, page 3238, Vol. 4, speaking of the Elkins Act:

* * * The Elkins Act is an act against all forbidden discrimina-
tions. * * * We have said that it has had a tremendous effect in
the diminution of these abuses. * I have not a donbt in the

world that the practice has been mieaets diminished since the [Elkins
Act was passed.

Commissioner Knapp, chairman of the Interstate Commerce
Commission, said in his testimony at page 3306, Vol. 4:
Now, if I might add one word as to the Elkins bill. A more effective

and complete measure for its purpose has not come within my observa-
tion. It is invaluable.

Commissioner Prouty, of the Interstate Commerce Commis-
sion, testified, at page 2911, vol. 4:

* * * YT think that the payment of rebates, as such, practically
ceased when the Elkins bill went into effect, and it has only been re-
sumed in aggravated instances, where apparently there could not be
anything else done.

Numerous other citations might be made of similar statements
from those who have been in such relation to railroad transpor-
tation as to enjoy special opportunities for knowing the nature
and effect of the Elkins law as measured by its practical opera-
tion. In fact, all such witnesses who spoke on the subject testi-
fied to practically the same effect. This testimony, therefore,
warrants the statement that the Elkins law has proven a most
efficient measure for good, and that since its passage the prac-
tice of giving rebates and allowing discriminations among ship-
pers has been largely discontinued, and that in so far as there
are still violations of the statute of that character they can be
broken up altogether by a mere enforcement of its provisions.

There has been no serious attempt to enforce this law to pre-
yent discriminations as to localities, but a glance at its pro-
visions will suffice to show that it is as broad, direct, explicit,
and efficient to remedy that kind of an evil, wherever it may
exist, as it has been found to be as to personal discriminations.

6583
10

That the law has not been tested in this respect is not due to any
fault of the law, but because no one has seen fit to invoke it.

This law has been upheld by the Supreme Court; first, in the
case of the Missouri Pacific Railway Company v. United States,
189 U. S., 274, which was a case of alleged discrimination
against a locality, commenced before the passage of the act.
The court held that the proceedings there under consideration
could be maintained under that statute and remanded the case
for further proceeding.

It has been again upheld and its efficiency has been again
strikingly demonstrated by the decision of the Supreme Court
rendered only a few days ago in the Chesapeake and Ohio and
New Haven coal case, where shipments at less than the pub-
lished rates, under the guise of delivering coal that the Chesa-
peake and Ohio had sold to the New Haven, was enjoined imme-
diately on the filing of the biil of complaint, the parties to that
important controversy thus getting full relief almost from the
yery moment when they instituted their proceedings therefor.

All this was virtually admitted by the House Committee when
they said in their report that no further legislation was neces-
sary as to classification or relative rates, and that—

The law of to-day would be fairly satisfactory to all shippers if the
spirit of fairness required by it had controlled the conduct of the car-
riers and the necessity for the proposed legislation is the result of and
is made necessary by the misconduct of parties who are now most
clamorous against additional restraint. If the carriers had in good
faith accepted existing statutes and obeyed them there would have
been no necessity for increasing the powers of the Commission or the
enactment of new coercive measures.

It would have been nearer the truth if the committee had
said that the law we now have is practically sufficient, if prop-
erly enforced, and that the fault, giving rise to conditions that
are supposed to call for additional legislation, is not with the
existing law, but with the officials who have not enforced it.

Such was the general situation when, in December, 1904, a
demand arose for legislation giving the rate-making power to
the Interstate Commerce Commission.

This demand had no place in the discussions of the political
campaign of that year. It was not heard of until after the
election.

Jt had heen set forth a number of times in a general way in
Democratic platforms, but it never commanded any serious
attention until the President mentioned it in his annual
message.

His popularity was so great and he so thoroughly commanded
the confidence of all classes of people, that there was an imme-
diate and very general acceptance of his recommendation.

This found expression in the Esch-Townsend bill, which
passed the House at the last session almost unanimously, but
failed to receive favorable consideration in the Senate.

The President renewed his recommendation in his last an-
nual message, and the House has now, with even greater
unanimity, passed the Hepburn bill.

HEPBURN BILL.

This bill increases the powers of the Commission in many
respects, but I shall call attention to only its most important
provisions of this character.

it makes the order cf the Commission condemning a rate
effective and thereby disposes of that rate, and then authorizes

6583
il

the Commission to name a new rate and put it into operation in
place of the condemned rate.

It authorizes the Commission to compel disagreeing rail!-
roads that have nothing in common except a physical connection
to operate jointly as through routes on such rates and terms as
it may impose.

It dispenses with jury trials in an important class of actions
to recover money by providing a procedure that makes such
trials impossible.

It imposes such extreme, unreasonable, and burdensome pen-
alties as to probably invalidate the measure in that respect.
It does not provide for a proper review by the courts of the
orders of the Commission, but seeks to exclude the same.

There are other provisions that merit attention, but these
raise all the questions I care to discuss at this time.

There is a common agreement that, although the railroad situ-
ation is vastly improved as compared with what it was only a
few years ago, there are still, as there probably always will be,
many evils to remedy, and to that end there should be some kind
of appropriate legislation.

The principal difference of opinion is as to whether to accom-
plist this common purpose the legislation to be enacted should
be of an amendatory character, such as to work out these reme-
dies in the courts, where ordinary controversies are settled, or
should be such as to confer the rate-making power to be exer-
cised in the way provided by this bill on the Interstate Com-
merce Commission.

I believe in the court plan, as contradistinguished from the
rate-making plan, not alone because it is, as I shall endeavor to
show, much simpler, much more expeditious, much more efficient,
and without expense to the shipper, but because, in addition to
all that, it avoids all legal and constitutional questions, while
the rate-making plan as set forth in this bill encounters a num-
ber of such questions that are of the most serious character, and
soine of them, in my judgment, fatal.

HAS CONGRESS THE POWER TO MAKE RATES?

In the first place, there arises at the very beginning of this
controversy a most serious question as to the power of Congress
to fix rates at all.

I know it has been assumed throughout all this discussion,
as it has been in framing this bill, that we have that power and
that it is unquestioned, and I know that there are many expres-
sions to be found in the opinions of the Supreme Court of the
United States that indicate a similar assumption on the part of
that court, but nevertheless, the fact remains that the court has
never yet passed on that question, and there are many eminent
lawyers who are of the opinion that the court will hold, when it
does decide that question, that Congress does not have that power.

Their reasoning seems to me to be sound, and the effect of it
absclutely fatal to this entire scheme of legislation.

I am confirmed in this opinion by what the Supreme Court
said in the Northern Securities case (193 U. S., 843), where,
after discussing the nature of the combination there under con-
sideration and the evil consequences thereof, Mr. Justice Harlan,
speaking for the court, said:

Will it be said that Congress can meet such emergencies by prescribing

the rates by which interstate carriers shall be governed in the trans-
portation of freight and passengers? If Congress has the power to fix

6583
12

such rates—and upon that question we express no opinion—it does not
choose to exercise its power in that way or to that extent.

This statement, apparently not necessary to the disposition
of that case, is, at least, an announcement to the legal profes-
sion that the question of the power of Congress to fix rates in
the exercise of its power to regulate commerce is an open one,
upon which the court will hear argument whenever that question
may be presented. If it be an open question for the Supreme
Court, so, too, is it an open question for the Senate, and no mere
assumption should be allowed to dispose of it. We can not
dispose of it by ignoring it. It must be argued in the courts,
and I shall, therefore, discuss it now, at the beginning, where
it properly belongs.

CONGRESS HAS NO POWER WITIT RESPECT TO INTERSTATE COMMERCE
EXCEPT THAT WHICH IS CONFERRED BY THE COMMERCE CLAUSE OF
THE CONSTITUTION ‘TO REGULATE COMMERCE WITIL FOREIGN NATIONS,
AND AMONG THE SEVERAL STATES, AND WITH THE INDIAN TRIBES,”’

AND TO ENACT ALL LEGISLATION NECESSARY TO GIVE EFFECT TO THIS
POWER.

The controlling questions arising upon the construction of
this clause are, first, what is ‘“ commerce,” and, second, what is
included in the power “ to regulate?”

It was stated in 9 Wheaton, 229— ‘

Commerce, in its simpliest signification, means an exchange of goods;
but in the advancement of society, labor, transportation, intelligence,
care, and various mediums of exchange become commodities and enter
into commerce; the subject, the vehicle, the agent, and their various
operations become the objects of commercial regulations.

Mr. Justice Curtis said in Cooley v. The Board of Wardens, 12
Howard, 316:

The power to regulate navigation is the power to prescribe rules in
conformity with which navigation must be carried on. Jt extends to
the persons who conduct it as well as to the instruments used.

Mr. Justice Field said in Ferry Company v. Pennsylvania, 114
United States, 203:

Commerce among the States consists of intercourse and _ traffic
between their citizens, and includes the transportation of persons and
property and the navigation of public waters for that purpose, as well
as the purchase, sale, and exchange of commodities. The power to
regulate that commerce with foreign nations, vested in Congress, is. the
power to prescribe the rules by which it shall be governed. *

The power embraces within its control all the ET abate by
which that commerce may be carried on.

Numerous other cases to the same effect might be cited.

This power to regulate commerce is, therefore, as to interstate
commerce, a power to regulate railroads, because they are a
facility for the transportation of passengers and freight, and
this general power necessarily includes the power to regulate
ail cars or vehicles that may be used, together with all appliances,
agencies, equipments, and conveniences that may be employed in
the transportation of persons and property. It also embraces
trains, crews, the conductors, brakemen, switchmen, engineers,
firemen, train dispatchers, freight, and passenger depots.

In maritime commerce with foreign nations this power to
regulate extends to and regulates the vessels employed, the
officers and crews navigating such vessels, the places and con-
veniences for embarkation and landing, appliances and equip-
ment for the protection, safety, and comfort of passengers, and
she protection and safety of property on board, including the sig-
nals and rules to be observed by the carrier or his employees and
servants in navigation, and others of like character and purpose.

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18

These definitions of “commerce” are broad and numerous,
but broad and numerous as they are no one has ever yet named
the price at which the carrier should sell his service of trans-
portation as included within the term. Apparently until re-
cently it has not occurred to any one to contend that the charge
for this service is either an article or an instrument or a facility
of commerce falling within the power of Congress to regulate
The rernson is plain. No one has included it because it is not
commerce nor the subject of commerce,

It is an elementary proposition that the law, whether statu-
tory or constitutional, is what the framers of it intended it
should be, if that intention can be ascertained and be not in
conflict with the language employed, and that it never is what,
in the nature of things, it could not have been intended to be.

What, then, was the intent of the framers of the Constitution
when they put the commerce clause into that instrument?

I shall not stop to gather this intent from the debates of the
convention, from contemporaneous history, or from the restric-
tions imposed by the Constitution upon the exercise of this
power, all of which show that rate making was not within the
mind of the framers of the Constitution, but shall confine my-
self to adjudicated cases and reccgnized rules of construction.

In Gibbons v. Ogden (9 Wheat., 194) it was held, Chief Justice
Marshall delivering the opinion of the court, that the word
“commerce” as here used “is a unit, every part of which is
included by the term.” He further said in that opinion:

If this be the admitted meaning of the word in its application to
foreign nations, it must carry the same meaning throughout the sen-
tence and remain a unit, unless there be some plain intelligible cause
which alters it. * * * It is the power to regulate; that is, to
prescribe the rule by which commerce is to be governed.

In that same case Mr. Justice Johnson, concurring, at page
228, says:

The power to regulate foreign commerce is given in the same words,
and in the same breath, as it were, with that over the commerce of
the States. * * * But the language which grants power as to one
description of commerce grants it as to all.

In Brown v. Huston (114 U.S8., 630), the court said:

The power to regulate commerce among the several States is granted
to Congress in terms as absolute as is the power to regulate commerce
with foreign nations.

In the case of Bowman v. Chicago, ete., Railway Company
(125 U. S., p. 482), the Supreme Court said:

The power conferred upon Congress to regulate commerce among the
States is, indeed, contained in the same clause of the Constitution
which confers upon it power to regulate commerce with foreign nations.
The grant is conceived in the same terms and the two powers are
undoubtedly of the same class and character and equally extensive.

In the case of Crutcher v. Kentucky (141 U. S., 47), the court
said, pp. 57-58:

It has frequently been laid down by this court that the power of
Congress over interstate commerce is as absolute as it is over for-
eign commerce. * * * And the same thing is exactiy true with
regard to interstate comnferce as it is with regard to foreign com-
merce. No difference is perceivable between the two.

Mr. Justice Field said in Pittsburg, ete., v. Bates (156 U. S.,
587):

The power to regulate commerce among the several States was
granted to Congress in terms as absolute as is the power to regulat
commerce with foreign nations.

6583
14

These authorities and others that might be cited establish
the proposition that the power conferred upon the Congress as
to interstate commerce is precisely the same as the power con-
ferred upon Congress as to foreign commerce; neither more nor
less.

This power, being identical in both cases, can not include the
power to fix rates to be charged for transportation in the one
unless also in the other. During the whole period of our
country’s existence no one down to this moment has ever
claimed, or even suggested, either at the bar or on the bench,
that it was the intention of the framers of the Constitution to
confer on Congress by the commerce clause power to fix rates
of compensation for the carriage of passengers or freight in
foreign commerce. This is not alone, because the fixing of the
carrier’s compensation is not an article of commerce to be
transported, not an element in the conduct of commerce that
affects one way or another the question of safety or conven-
jence in transportation of either life or property, but also be-
cause, aside from all questions about treaties and international
relations generally, it would be utterly impracticable to exer-
cise such a power with respect to international commerce. To-
day but little of it is carried in ships of American registry.
Less was carried when the Constitution was framed. Then as
now the great bulk of international commerce was carried in
ships and transports over which we could not have, if we so
desired, any control whatever, except only while the same might
be in our ports or within our jurisdiction. Whatever we might
be able to do as to American ships we could not fix rates for
foreign ships. The mere suggestion of the situation as to for-
eign commerce, how it is carried on, and the impossibility of in-
telligent action in prescribing rates of charges is enough to show
that such an exercise of power was not and could not have been
contemplated by the framers of the Constitution when they con-
ferred on Congress the power to regulate foreign commerce.

But if this power was not conferred as to foreign commerce
neither was it as to interstate commerce.

POWER OF THE STATES.

The assumption that Congress has the power to fix rates as a
part of the power to regulate commerce is largely due to the
fact, no doubt, that the States undeniably have this power. But
the one does not follow from the cther. The cases are whclly
different. The States are complete sovereignties, except only as
they have delegated their powers to the Federal Government.
Among the powers they have reserved is the power to grant
franchises to be a corporation. It is in this proprietary power
to create corporations and give them authority to conduct a des-
ignated public business, such as that of a common carrier, that
the power is included to prescribe as one of the terms and condi-
ticns of such franchises that the State shall have authority to
fix rates and prescribe any terms and conditions it may see fit
to impose. This power is unquestioned, because the corporation
is the creation of the State. It gets its every right and privi-
lege from the State and must, therefore, accept its life and its
powers and rights and privileges, subject to such conditions as
the State may see fit to impose.

The Federal Government has this power also with respect to the
corporations that it creates, and it has exercised it with respect
to the railroad corporations it has chartered; but it does not

6583
15

dcrivé this power from the commerce clause of the Constitution,

which is a distinct and substantive power in and of itself, but

from its general sovereign powers to promote the public welfare,
establish post-roads, and provide for the national defense.

The advocates of rate-making legislation cite decisions of the
Supreme Court to the effect that the power to regulate commerce
conferred upon Congress by the commerce clause is a complete
plenary power. This is true, but the complete power spoken of
by the court is the power to regulate. The question remains
whether or not within this complete power to regulate is in-
cluded the power to fix rates of compensation for a carrier to
charge for the service he is to render; and for the reason that
it is not necessary to the execution of the power “ to regulate,”
which goes properly no further than may be necessary to insure
eomfort, safety, and uniformity of regulations in the transporta-
tion of passengers and property, and because, in the nature of
things, such a power can not be exercised and never could be
exercised with respect to foreign commerce, it never could have
Leen the intention of the frame's of the Constitution that any
such power should be conferred.

This goes not leave us at the mercy of the carriers.

IN OTHER WORDS, IF IT BE MELD THAT THE CONGRCOSS IAS NO POWER TO
FIX RATES, IT DOES NOT FOLLOW THAT THERE IS NO POWER IN THs
COVERNMENYT TO CONTROL CILARGES TO BE MADE FuR THE TRANSPORTA-
TION OF INTERSTATE COMMERCE,

It dees not so follow, because all carriers of interstate com-
merece, like all other public utilities, are required, in the absence
of any statutory provision, simply because of the common-law
rule, to charge only reasonable and just rates, and to abstain
from the practice of unreasonable discriminations between indi-
vidual shippers and between independent localities. This rule
of the commen law has been universally recognized in this coun-
try, and has always been enforced in courts of equity when their
jurisdiction in such cases has been invoked. If, therefore, there
were no legislation on the subject, any shipper who might be
charged an excessive rate could either pay and recover back in an
action at law, in a law court of proper jurisdiction, or, to avoid
a inultiplicity of suits, he could exhibit his bill ef complaint in
a court of equity and secure relief by injunction. hese propo-
sitions are elementary and do not need a citation of authorities
for their support, but the books are full of cases in point.

In the case of Scofield rv. Railroad Co. (48 O.S8., 571), in a most
elaborate and carefully prepared opinion, the court reviews the
leading cases on the subject: and grants relief by injunction
against a discrimination in rates. The discrimination in this
case consisted in giving lower rates to the complainant’s com-
petitor on the ground that this competitor was entitled to it by
reason of the larger shipments it was making,

In the case of C. & O. R. Co. v. The People ex rel., etc. (67
Ill., 11), the court says:

Another perfectly well-settled rule of the common law in regard
to common carriers is that they shall not exercise any unjust and in-
jurious discrimination between individuals in their rates of toll.

The supreme court of New Hampshire in McDuffee v. Rail-
road (57 N. H., 447), says at page 451:

The common and equal right is to reasonable transportation serv-
ice for a reasonable compensation.

In Railway Co. v. People (56 Ill, 365), the court said:

The carrier is under obligation to receive and carry goods for all
persons alike without injurious discrimination as to terms.

6583
16

In Chicago, ete, R. R. Co. v. Minnesota (134 U. S., 418, 458),
the court said:

The question of the reasonableness of a rate of charge for trans-
portation by a railroad company involving, as it does, the element of
reasonableness both as regards the company and as regards the public,
is eminently a question for judicial investigation, requiring due process
of law for its determination.

In Reagan v. Farmers’ Loan and Trust Co. (164 U. 8.), at
page 397, Mr. Justice Brewer, speaking for the court, says:

* * * Tt has always been recognized that, if a carrier attempted
to charge a shipper an unreasonable sum, the courts had jurisdiction
to inquire into that matter and to award to the shipper any amount
exacted from him in excess of a reasonable rate; and also in a reverse
ease to render judgment in favor of the carrier for the amount found
to be a reasonable charge. The province of the courts is not changed,
nor the limit of judicial inquiry altered, because the legislature instead
of the carrier prescribes the rates.

In the case of St. Louis and San Francisco Railway v. Gill
(156 U. 8., 659), the court say:

Mr. Justice Miller, in his concurring opinion, said (in the case of
Chiaego Railway Company v. Minnesota, 134 U. S., 460): “ * * *
Until the judiciary has been appealed to to declare the regulation made,
whether by the legislature or by the Commission, voidable for unrea-
sonableness, the tariff of rates so fixed is the Jaw of the land and must
be submittel to both by the carrier and the parties with whom he deals ;
that the proper, if not the only, mode of judicial relief against the
tariff of rates established by the legislature or by its commission is by
a bill in chancery asserting its unreasonable character and its conflict
with the Constitution of the United States, and asking a decree of the
court forbidding the corporation from exacting such fare as excessive,
or establishing its rights to collect the rates as being within the limits
of just compensation for the service rendered.”

At page GGG of the above-cited case of Railway Company v.
Gill (156 U.S.) the court say, again citing Mr. Justice Miller:

That the remedy for a tariff alleged to be unreasonable should be
sought in a bill in equity or some equivalent proceeding, wherein the
rights of the public, as weil as of those of the company complaining, can
be protected.

Numerous other citations might be made to show, as these do,
that at common law, without any legislation, carriers are bound
to transport for all who apply and that they are bound to
charge only reasonable and just rates; and that they are not
allowed to discriminate between shippers, commodities, or places,
and that if they violate any of these duties they are Hable for
damages, in an action at law, at the suit of the aggrieved party;
or he may, to avoid a multiplicity of suits, go into a court of
equity and enjoin the carrier from such illegal charges or
practices.

The framers of the Constitution did not, therefore, when they
conferred on Congress the power to regulate interstate com-
merce without coupling with it the power to fix rates, leave ship-
pers and travelers at the mercy of the carriers as to rates of
charges, discriminations, or other wrongful practices, but, on
the contrary, provided for them complete remedies in the system
of courts for which they made provision.

BUT IF IT SHOULD BE THAT I AM MISTAKEN IN CLAIMING THAT TrIR
POWER TO FIX RATES IS NOT COMPREHENDED WITIIIN THE POWER TO
REGULATE INTERSTATH COMMERCE, AND IT BE ASSUMED THAT CONGRESS
IlAS THY POWER TO FIX THE COMPENSATION OF A CARRIER FOR THE
TRANSPORTATION HE SELLS, THEN IIE FURTHER QUESTION ARISES,
HOW SHALL CONGRESS EXERCISD THAt POWER?

Manifestly it is utterly impossible for Congress by statute to
fix all the rates for interstate commerce. It must resort to some
plan under which it can avail itself of the help of some kind of

6583

   
17

board, commission, tribunal, or agency. But when it undertakes

to do this it must take heed lest it undertake to do it in such a

way as to delegate legislative authority and thus make its effort

unconstitutional and unavailing, for it will be conceded that it is
unconstitutional for Congress to delegate legislative power.

The chief provision of the Hepburn bill is that if after hear-
jug a complaint the Commission—

be of opinion that any rates are unjust or unreasonable, or unjustly

discriminatory, or unduly preferential or prejudicial,

it shall have power—

io determine and prescribe what will, in its judgment, be the just and

reasonable and fairly remunerative rate or rates * to be there-

after observed in such case as the maximum to be chaeoell: *

and to make an order that the carrier shall cease and desist’ from ih

violation * * ¥* and shall not thereafter publish, demand, or col-

lect any rate * * * in excess of the maximum rate * % * "80

prescribed. Such order shall go into effect thirty days after notice to

the carrier.

THE FIRST QUESTION RAISED BY THIS PROVISION IS WHETHER OR NOT ALL
THREE OF THE POWERS OF GOVERNMENT, LEGISLATIVE, JUDICIAL, AND
EXECUTIVE, CAN BE CENTERED AND COMMINGLED IN A POLITICAL BOARD,
CLAIMED TO BE ADMINISTRATIVE IN ITS CHARACTER,

This proposed legislation is radically different in this respect
from the interstate-commerce act. By that act the Interstate
Commerce Commission was empowered to hear complaints as to
unreasonable rates, and if upon such hearing it concluded that
the rates challenged were unreasonable, it could condemn them
and order the railroad to desist from further charging the
same; but the Commission had no power to enforce this order,
and if the railroad refused to comply with it the only remedy
was for the Commission to sue the road in court upon the order,
to secure there, by judicial decree, its enforcement.

The hearing of the complaint and the making of a finding and
order with respect to a rate were to that extent in the nature
of a judicial procedure, but it was not judicial in fact, becanse
the Commission had no authority or power to give effect to itz
order when it made one. The net result cf what it was author-
ized to do was, to employ the language used in the Minnesota
statute hereinafter quoted, to make a recommendation, for that
is all its action amounted to. If the road did not see fit to
accept the conclusion of the Commission, resort must be had to
the courts, where alone judicial power could be exercised.

I mention this with particularity to show that the very able
lawyers who, as members of the House of Representatives and
the Senate, framed the interstate-commerce act of 1887, care-
fully avoided conferring on the Interstate Commerce Commis-
sion any kind of power except only executive power, for they
stopped short of giving it judicial power by refusing to it au-
thority and power to execute its orders and decrees, and they
earefully refrained, as the Supreme Court held, from conferring
upon it the legislative power of making a new rate to be sub-
stituted for a condemned rate. They gave only the one kind of
power, because they were familiar with the rule, and by their
action showed their respect for it, that two kinds of power,
much Jess three kinds of power, could not be conferred on what
they clearly intended should be in legal effect, as well as in
practice, only a purely executive or administrative board. This
Hepburn bill, however, gives to the Commission the additional
power of executing its judgment of condemnation of a rate,
which makes the power purely judicial, and then in addition

     
18

gives to the Commission the power to substitute a new rate for
the one it has condemned and put out of existence, which is ‘a
purely legislative act. ;

In addition to these two new powers, judicial and legislative,
never heretofore by any act conferred on the Interstate Com-
merce Commission, it is allowed by this Hepburn bill to retain
all the executive power with which it was originally invested,
with much more power of that character added.

That the bill is unconstitutional, because of this commingling
of all these powers, appears beyond question.

Ours is a constitutional government. It is a fundamental
proposition embodied in our organic law that there shall be
three separate, independent, and coordinate departments of
government, and that there shall not be any commingling of these
powers in any one authority. It is, therefore, in contravention
of our constitution to confer judicial powers upon the legisla-
tive department or to confer legislative powers upon the judicial
department or to confer either of these powers upon the execu-
tive department.

Mr. Moody, the Attorney-General, in an opinion given to the
chairman of the Senate Interstate Commerce Committee, under
date of May 5, 1905, calls attention to the proposition, at page
12 of ‘his opinion, in the following language:

A case arising under the laws of Kansas signally illustrates the prin-
ciple that the nature of legislative and judicial powers is such that
they can not be joined together and vested in the same body consist-
ently with the theory which underlies the Constitution of the United
States and those of many, if not all, the States.

Where the question arises it makes no difference whether the
attempt of the iegislature is to confer legislative power upon the
judiciary cr judicial power upon the legislature. The sole ques-
tion is whether there is power to confer more than one of the
powers upon the same body; to commingle them. If it be at-
tempted, the effort is a nullity, because in conflict with the
theory which underlies the crganic law of cur institutions.

In Wilbourn v. Thompson (1038 U. 8., 190) the Supreme Court
said:

It is believed to be one of the chief merits of the American system of
written constituticnal law that all the powers intrusted to govern-
ment, whether State or natienal, are divided into the three grand
departments—the executive, the legislative, and the judicial. That the
functions appropriate to each of these branches of government shall be
vested in a separate body of public servants, and that the perfection of
the system requires that the lines which separate and divide these
departments shall be broadly and clearly defined. It is also essential to
the successful working of this system that the persons intrusted with
power in any one of these branches shall not be permitted to encroach
upon the powers confided to the others, but that each shall by the law
of its creation be limited to the exercise of the powers appropriate to its
own department and no other.

The wisdom of this constitutional provision for the separa-
tion of these coordinate powers of government is strikingly
manifested by the jumble attempted in this instance. The propo-
sition would be alarming if its utter unconstitutionality were not
as apparent as is its unreasonableness. It involves the general
supervision by a political voard, appointed by the President, of a
business so tremendeus as to be practically incomprehensible,
and so complicated and difficult in its character as to be almost
beyond the power of human intellect to master it, with author-
ity to change rates with the stroke of a pen, affecting revenues
to the extent of millions of doliars, and to make new regulations

6583
19

of every character affecting the operation of more than 200,000
miles of railways, and affecting also, because of their relation to
the railroads and their dependence upon them, almost every
other kind of important business conducted throughout the
length and breadth of the country; and in this behalf this
board, to the judgment of which these vast interests are to be
subjected, is authorized to be legislator, prosecutor, judge, jury,
and marshal, all combined. In all the legislation of more than a
century no such proposition has ever before been successfully
presented to the American Congress. It would be an absolute dis-
aster to the country if it should be successfully presented now,
were it not that it is impossible for such a measure to receive
the sanction of the courts, not alone because of the bad results
which would follow from this particular legislation, but also
because if such a commingling of power can be sustained as to
legislation of this vastly important character it will be a prec-
edent of such commanding force that it will be idle to ever
hereafter in connection with legislation talk about three inde-
pendent and coordinate departments of government, the powers
of which are not to be blended and merged. It will be a fitting
time, when we vote on this bill, to demonstrate that there are
still three departments of government and that they are still,
as our fathers intended, separate and independent as well as
coordinate.

A SECOND QUESTION, EQUALLY FATAL TO THIS LEGISLATION, AT ONC

ARISES—WHETHER THE PROVISION QUOTED AMOUNTS, IF SUSTAINED,
TO A DELEGATION OF LEGISLATIVE POWER,

The power conferred is “ to determine and prescribe what will,
in its judgment, be the just and reasonable and fairly remuner-
ative rate * * *” and then by proper order put it into
operation.

“Just. and reasonable and fairly remunerative” are indefi-
nite terms.

Different minds might, and most probably would, reach widely
different conclusions as to what they required in almost any
given case. All any commission could do would be to act accord-
ing to its best judgment, and that is just what the bill recognizes
and requires, for its requirement is “ to determine and prescribe
what will, in its judgment, be” the proper rate, ete.

The effect of this provision can not be avoided by a juggle of
words intended to show that the Commission does not fix any
specific rate and put it into operation, but only that it names a
rate which, “in its judgment,” is a reasonable and just rate, and
thereupon the law operates to give that judgment effect as a
maximum rate, for the fact remains that it is the judgment of
the Commission and not the judgment of Congress that pre-
scribes the rate, and according to the best authorities that is
fatal to the measure.

In Dowling et al. v. Insurance Company, 92 Wisconsin, page
63, a statute was held invalid because in the opinion of the court
if ‘delegated legislative power.

The court adopted the rule laid down by Judge Ranney in
1st Ohio State, that the—
true distinction is between the delegation of power to make the law,
which necessarily involves a discretion as to what it shall be, ana@
conferring authority or discretion as to its execution, to be exercised

under and in pursuance of the law. The first can not be done; to the
latter no valid objection can Le made.

6583
20

The statute under consideration in this Wisconsin case pro-
vided that the insurance commissioner should—
prepare, approve, and adopt and print the form in blank of a contract
or policy of fire insurance, together with such provisions, agreements,
or conditions as may be indorsed thereon or added thereto and form
a part of such policy and contract, and such form shall, as near as
the same can be made applicable, conform to the type and form of the
New York standard fire insurance policy, so called and known.

The court held that this was a delegation of legislative power,
and that it was therefore unconstitutional and void.

In discussing the question the court said, at page 71:

The act, in our judgment, wholly fails to provide definitely and
clearly what the standard policy should contain, so that it would be
put in use as a uniform policy required to take the place of all others,
without the determination of the insurance commissioner in respect
to matters involving the exercise of a legislative discretion that could
not be delegated, and without which the act could not possibly be put
in use as an act in conformity to which all fire insurance policies were
required to be issued.

It will be noted that the statute, approximately at least, gave
a standard by which the insurance commissioner was to he gov-
erned in preparing the form of policy to be adopted, for it pro-
vided that it should—
as near as the same can be made applicable, conform to the type and
form of the New York standard fire-insurance policy.

The court say upon this point:

Evidently the conformity to ‘‘type and form” of the New York
standard policy had reference to the form of that policy as embracing
the substance of the provisions of the contract, and as to the size and
kind of type to be used in printing the policy to be adopted. Tad the
commissioner wholly declined to prepare, approve, and adopt any forin
whatever, it would not have been pessible to have carried into effect so
imperfect or uncertain an enactment, cr to transact business under it.
Within the lines indicated, a discretion was reposed in the commis-
sioner as to the form of the policy which embodied the substance of
the contract, and which was to have the sanction and force of law.
The effect clearly was to transfer to him bodily the legislative power
of the State on that subject. Within the limits prescribed he was to
prepare just such a pelicy or contract as, in his judgment and discre-
tion, would meet the legal exigencies of the case, and no one could
certainly predict what the result of his action might be.

In the case of The State ex rel. Adams v. Burdge and
others (95 Wis., p. 890), the question before the court was
whether or not a statute which undertook to authorize the
State board of health, a purely administrative body, to make
such regulations “as may in its judgment be necessary for the
protection of the pecple” from contagious diseases, and give the
power to designate what disexses “ are dangerous or contagious
to the public health,” was obnoxious to the objection that it was
a delegation of legislative power, and therefore unconstitutional
and void, and the court held that it was,

The statute under consideraticn in this case authorized the
board of health to make such regulations “as may, in its judg-
ment, be necessary for the protection of the people” frem con-
tagious diseases, and gave them power to designate what dis-
eases were contagious or dangerous to the public health. The
court held that this statute was an unwarranted delegation cf
legislative power.

The court in this case again cites the rule laid down by Judge
Ranney as drawing the true distinction between statutes that
delegate legislative power and those which do not, and held the
statute invalid because on its face it intrusted to the board of
health the exercise of its judgment and discretion, which be-
longed only to the legislature.

6583
21

In the case of Clark rv. Field (143 U. S., 649), and again in
the case of Buttfield v. Stranahan (192 U. S., 470)—the tea
case—the Supreme Court sustained the statutes there under
consideration enacted by Congress, which were attacked on the
ground that they delegated legislative power, not by holding
that it was competent for the Congress to delegate legislative
power, but by so construing the statutes as to show that they
did not delegate legislative power; that what the President was
authorized to do under the McKinley tariff law was not legis-
lative, but purely administrative, and what the board of experts
and the Secretary of the Treasury were required to do, which
was under consideration in the tea case, was likewise admin-
istrative and not legislative. é

The Supreme Court in these cases, recognizing and announcing
the rule that legislative power can not be delegated, found that
the provisions of the statutes under consideration were such that
no legislative discretion was left with the President in the one
ease or with the board of experts or the Secretary of the Treas-
ury in the other.

In answer we are told by the advocates of this bill of the
statutes under which the Postmaster-General and the Secretary
of the Interior are invested with authority to decide various
questions arising in théir respective Departments, according to
their judgment and discretion, which have no application what-
ever to the question under consideration, for the obvious reason
that in all those instances the Government is dealing with its
own and has a right to do so on its own terms and conditions.

So, too, they have cited as an authority for them what Chief
Justice Waite said in the Munn case (94 U. 8.), as follows:

With the fifth amendment in force, Congress, in 1820, conferred
power upon the city of Washington to regulate the rates of wharfage
at private wharves, the sweeping of chimneys, and to fix the rates of
fees therefor, and the weight and quality of bread; and in 1848 to
make all necessary regulations respecting hackney carriage and the
rates of fare of the same, and the rates of hauling by cartmen, wag-
oners, carmen, and draymen, and the rates of commission of auction-
eer's.

And so on, at length.

In citing this as an authority they overlook the fact that the
conferring by the legislature of a State upon a municipality of
such powers of local government as are enumerated in the stat-
ute quoted is an exception to the general rule as to the delega-
tion of legislative authority. Cooley’s Constitutional Limita-
tions, sixth edition, page 226, says:

* * * The legislature can not delegate its power to make laws3
but fundamental as this maxim is, it is so qualified by the customs of
race and by other maxims which regard local government, ibat the
right of the legislature, in the entire absence of authorization or pro-
hibition, to create town and other inferior municipal organizations, and
to confer upon them the powers of local government, and especially of
local taxation and the police regulation usual with such corporations,
would always pass unchallenged. ‘The legislature in these cases is not
regarded as delegating its authority, because the regulation of such
local affairs as are commonly left to local boards and ollicers is not
understood to belong properly to the State.

Congress sustains the same relation to the city of Washington
that a State does to the municipalities within its borders.

The essence of all these decisions is given in the case of Field
v. Clark, page 693, where, as stating the true rule, they quote
Judge Ranney, as the Wisconsin cases did, as follows:

6583

 
22

The true distinction is between the delegation of power to make the
law, which necessarily involves a discretion as to what it shall be, and
conferring authority or discretion as to its execution, to be exercised
under and in pursuance of the law. The first can not be done; to the
latter no valid objection can be made.

I repeat this quotation to emphasize it.

This rule indicates the distinction running through aH the
well-considered cases on the subject of the delegation of legisla-
tive power. According to this rule the test is whether or not
the party on whom the authority is conferred is intrusted with
any discretion to make the law; if so, the statute is unconsti-
tutional. If, on the other hand, no discretion be conferred, but
only an administrative duty be enjoined, the statute is valid.
Discretion may be allowed as to its execution, but none as to
what the law shall be.

Applying this rule we see what must be the character of the
legislation enacted by Congress conferring the rate-making
power on the Interstate Commerce Commission, or any other
tribunal, to make it valid, namely, that no discretion to make
rates, according to its opinion or judgment, can be conferred,
but standards or guides and tests must be prescribed to govern
the action of the Commission. ‘To illustrate, Congress may pre-
scribe that rates shall not exceed so much per mile per pas-
senger, or so much per ton per mile for freight, or that on roads
making a net earning of so much per mile rates shall not ex-
ceed a maximum named, while on roads making less or greater
earnings that maximum shall be varied to correspond. In such
instances, with such standards by which to be governed, the
action of the board of commissioners or the tribunal or agency
selected will be purely administrative, because it will have
nothing to Go in order to arrive at the rate to be fixed beyond
making a calculation and working out results and then naming
them.

It has been contended that the Supreme Court of the United
States Las sustained State statutory provisions that did not con-
form to this rule authorizing State commissions to make rates
within the States; and it is further pointed out in support of
the right of Congress to confer the rate-making power on the
Interstate Commerce Commission, that the Supreme Court in
the Maximum Rate case, and in other cases, indulged in ex-
pression which indicate, although that question was not before
the court, that it would sustain such legislation as is now pro-
posed if it should be enacted.

It is true that the Supreme Court has upheld statutes enacted
by the States conferring this power on State commissions or
commissioners, and it is true that the Supreme Court did in-
dulge in the Maximum Rate case, and perhaps in other cases,
in the character of expressions referred to, but it is also true
that the precise question now presented was not presented to
the court in any of these cases. And it is also true that the
Supreme Court of the United States has never yet upheld a
State statute conferring power to make rates on a railroad
commission or commissioner as to that particular point which
did net make the power so conferred purely administrative in
eharacter, or which was not enacted by virtue of a constitutional
provision that authorized such legislation.

rhe leading cases relied upen are what are known as the
Granger cases, reported in 94th U. S., the Stone case, the Reagan
ease, the Minnesota case, and the Maximum Rate case.
6583
23

The first of the Granger cases was that of Munn v. The Stite
of Illinois, 94 U. 8., 118. The question involved in that case
was whether or not the legislature of Illinois could fix maxi-
mum rates of elevator charges. In that case the legislature had
provided that the maximum charge for the storage and handling
of grain, etc., should be 2 cents per bushel for the first thirty
days, and additional specified charges for longer periods of time.

There was no question in this case as to the power of the
legislature to delegate legislative authority.

The next case is that of the Chicago, Burlington and Quincy
Railroad Company v. The State of Iowa, reported at page 155,
94th U. S. This case arose under “An act to establish reasona-
ble maximum rates of charges for the transportation of freight
and passengers on the different roads of Iowa,” approved March
28, 1874.

A number of questions were involved in the case, but the par-

ticular question under consideration was not and could not have
been one of them. The statute is found at page 61, Laws of
Iowa, 1874, but the nature of the statute is set forth at page
165 of the opinion of the court, which was delivered by Mr.
Chief Justice Waite, as follows:
_ The statute divides the railroads of the State into classes, accord-
ing to business, and establishes a maximum of rates for each of the
classes. It operates uniformly on each class and this is all the Con-
stitution requires.

From this statement it appears that the commission provided
for by the statute had only the administrative duty to perform
of ascertaining to which class a particular railroad belonged
and then applying the rates provided for that class. The classi-
fication was on the basis of net earnings, and maximum rates
were named by the statute for each class on all articles shipped.

All this appears more fully from the following provisions of
the statute:

All railroads in this State shall be classified according to the gross
amount of their respective annual earnings within the State, per mile,
for the preceding year, as follows: Class ‘‘A’’ shall include all rail-
roads whose gross annual earnings, per mile, shall be four thousand
dollars ($4,000) or more. Class “ B” shall include all railroads whose
gross annual earnings, per mile, shall be three thousand dollars
($3,000) or any sum in excess thereof less than four thousand dol-
Jars ($4,000). Class ‘‘C” shall include all railroads whose_ gross
oo per mile, shall be less than three thousand dollars

Sec. 2. All railroad corporations, according to their classifications
as herein prescribed, shall be limited to compensation per mile for the
transportation of any person, with ordinary baggage not exceeding
one hundred pounds in weight, as follows: Class “A” three cents;
class “‘B,” three and one-half cents; class “C,”’ four cents: Provided,
That no such corporation shall charge, demand, or receive any greater
compensation per mile for the transportation of children twelve years
of age or under, than the half rates above prescribed: And provided
also, A charge of ten cents may be added to the fare of any passenger,
when the same is paid upon the cars, if a ticket might have been
procured within a reasonable time before the departure of the train.

Src. 3. The tariff rates established in the following schedule shall
be considered the basis on which to compute the compensation for
transporting freights, goods, merchandise, or property over any line
of railroads within this State:

6583
24

 

 

 

  

 

 

 

 

 

 

 

 

 

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26

Then follow 14 similar pages of this schedule of tariff rates
showing the cost of transportation according to the table given,
up to a distance of 376 miles. And then follow many pages, all
a part of the statute, on which are set forth a basis for com-
puting the tariff charges on every kind of an article that the
legislature could think of as likely to be transported by railroad
carriers in the State of Iowa, of which the following is a sam-
ple:

CLASSIFICATION OF FREIGHTS.

Src. 5. The following classification of freights, explanatory of the
preceding schedules, shall be taken and held to be the classification in
force in this State under the provision[s] of this act:

EXPLANATION OF CIIARACTERS.

The class as given opposite each article, 1, 2, 3, 4, stands for first,
second, third, and fourth classes, respectively ; 14 for once and a half
first class, and D 1 for double first class.

Articles not enumerated will be classed with similar articles.

 

 
 

GE id etn aeanao anion a eo a nea Seneeua D1
25 carboys, or over. 1
OB DIONEE iis an amare ele na 4
Agricultural implements in carloads Class A
Less than carloads as follows:
Fanning mills, sulky horserakes, and similar light and bulky
Machines 52-672 e ee ee ee oo eee ee eee D1
Cultivators, corn planters, harrows, shovel plows, and shear-
Ng cm a ChiNe sa ns ee ee i ee 14
Iron cultivators, wooden horserakes, reapers, mowers, har-
vesting machines, plows, seed drills, and feed cutters____ 1

Cultivators, corn planters, shovel plows, and fanning mills,
when knocked down and taken apart_____-_-__-____------_

Sulky borserakes, knocked down and teeth taken out_

Tron corn Shellers — ue 32 ooo en eke oe eee eo seoe

Threshers, one, at half-car rate.

Plows, knocked down and boxed__-----------------------

 

  
 
 
 
 
 
 
 
 
  

Alcohol, 10 barrels or mo

Alcohol, 20: barrels:Or OVeresao2siccceeSsesseues

Ale, 20. barrels or OVer_2 22-2 sao

Ale, les8 than 20 barrels______-__-_------_-__-__ ee

Ale; in lass, .packed= 222-225-2225 -boee ecole ee

AI SDICG vost Soe eee ete ee

Almonds; in’ sacks=.-2-2=-- 252-222-225

Almonds, in barrels or boxes____-__---_

ANIM 2 So Se= oo a eee ewe chee eee ees

Ammunition, fixed. (See Government supplies.)

ANCIMONY; (CRN e nooks ao ee ee ee eee oes

ANVINS oo see ae,

Apple butter or sauce

Apples, dried

Apples, dried, 50 barrels or over.

Apples, green, in bulk in carloads, same as potatoes.

Apples, green, 40 barrels or more______--________________

Apples, green, less than 40 barrels_____-__-___---------___-

ap in carloads of 120 barrels or more; carload, flour
rates.

Ashes, pot, pearl, and soda

Ash boilers or kettles, large and heavy_

Asphaltum. 2.222522... 2

ARS. S254. —

Ax handles, boxed_____

Ax handles, in bundles_

AIG: -STONSC. 42. ee oo eae

Axle grease, 50 cases or over

Axle, iron

Axle, wooden -_---_._

Bacon, loose or in bags_

Bacon, loose, carloads __

Bacon, packed -__-_____

Bagging ~-_-__________

Bugs, in ‘Dalesor bundles2- 22-42 ss co eee e cc Sone eee Ss

Baking Powders «csccnccnmoesacacecseGessesceoacousans

6583

 

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27

Baking powders, 100 boxes or more___________--__-_-----~
Balance wheels, 8 feet or less in diameter_
Bandboxes: sss acsseseconssnsesuecseceecdse eu.
Bandboxes, boxed
Barilla .2-s2scosossne tee sake eS eee bee
Bark Mmils-.2- scssecesseeee ss sebedoe sos ses =
Bark; tannevs’ 2522-5004
Baik, tanners’, in carloads_
Barley, pearl ----_-__--___
Barrels, empty, in
Barrels, empty_----------_
Beer barrels__
Half barrels__
Quarter barrels —
Wiehe: Wtrelba— 2-222 2c eee ee el =
Baskets 222-5 .-c sssceetceSsc sea ae lees eee ee
Baskets: carloads... a ee eee
Bath brick P

Bath tubs_
Batting —--
Bay. VMs = sae aa ak ee ee ee eee
Beans, J00y oo sae eee eee, ais
Beans, diy? Carload: 22525 -e2c ee a ee SES
Benn, (CRSTOR kee a he ek
Beans, castor: Carload.<-. 22.655 2) oa eee
Bedcords,; in bundles... 2. 5.242522 22) 2 oe ac ek
Bed springs, in bundles_ =
Bedsteads, rough___________ os
Bedsteads, finished in pieces_ as
Beef; carloads <<. 22-25524-5 uses aes =
Beef, packed.--__
Beet) dried, 1008e 222532 saah sae eben eee oe assess
Beehives: ots cea towe ee certo ean de eee sete et ee eeeeee
Beer; carloads. 2. 2-225222che0enno2 8 os dae oe Seles
Beer, same as ale.

Beeswax

 

 

   
   
 
 
 
 

 

  
 
 
 
 
 

Belting, rubber or leather
Benzine, same as coal oil.
Benzole, same as coal oil.
Berries, except: Cranberries. 22-2228 soe ve net Ses hoe
Bird cages, boxed________
Bitters, in glass, boxed_
100 boxes or over__-_------------
Black lead, in barrels or boxes___-.__------------------
lacking SNC 23 2.22. 2 Sa ee
Bleaching salts: or powders_2 22 -~=.s2--4s24sse25eesen
BlNnkCts: St te este wee ote er Lae aoa
Ble VITO peewee ereniee se bse bao ouceil oes
Blinds: socsececsos ae eee eo ee eee ee
BONS) Sake oce ss ea See Se ee a
Goats, when tat «ir required... 24a
IBOUGE AMES -ncne. Sas ee ec eR BU See a
Boilers; 30: feet-long Of overs. 222 ae oa eee ese eS
hess than 30 feet acu abo see seh ee ese nese es ees
Boiler felting 2) s22 22252 t te se oie a oe ee nee ee eas
Boller plates: 2---. 25-2224 2522525 =
Bonnets;. boxed =
Books -2s2=25- 0582 o Leche keee ore =
Boots and shoes, boxed and strapped__
Boots and shoes, not strapped_____---__-_--------------
Boots-and shoes in. trunks 2.2. = saan seeeeasoseee sells
Borax. consvsse seca =
Bottles, in boxes_
Pottles,, in. casks. 2-- .2222222-22 25525,
BONGS) OUINtY, 2224.2 SSeS ee ee Ss
Boxes, empty, -CuvlOad. soca ose ch eas eee eee
Bran. (See Mill stuffs.)
Brass, in sheets, rods, and rivels
Brass vessels.2-s5.c-seees-leeksens
Brass castings _----_-
Brass, scrap —~-------
Bread! seen eet es
Bread, in carloads____
Bileke soto. .c 52 eho soe eee ee Soe ee ee

 
     
  
  
 
  
  
   
   

 

  

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Class C

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BONNE He Re RR eI, BRR ROO be Re
rarer

Class A

ots

PARR IIT
Brick, common, in carloads... ssseencec tee eee cess Class C
TBP GKy—" Tl Cate oe ay kn ee eee ee St
Brick, fire, in carloads_ =e Class C
Brick for stove linings,. loose._...-.---+s—----.-------1=<—
Brick for stove linings, in boxes or barrels___-_-__~ Sh
Brimstone, in boxes or kegs_-_-_--------------- es
Brimstone, in barrels or hogsheads--__-__-_------~_- =
Brittania. “Ware: ac s22- seco s ass =
Broom corn, in bales_--_------------ 3
Carloads ws... ceceasaereseeesless es
Broom-corn presses__.--------------- —
Broom-corn seed ~-_-------
Brooms, in bales or bundles______--_-----------_--
Broom: bangles: 22.2. st2sssen sche pS se eee eS
Broom handles, carloads__
Brushes, loose ~-_-_----
Brushes, packed in boxe
Buckets ~-_----
Butttal: CaséS:sas-c252sss2eesos.2ssee sees eesesaes
Burning fluid
Burr blocks 222 22-2--2522i2-4--2 22-522 3e see ee eas
Butchers’ blocks
Butter, in crocks
Butter, in kegs or boxes_-_--
Butter, 10,000 pounds or over
Cabinet ware. (See Furniture.)
Cabinet: Organs: .c-.-.2-ssenecooacse ses e ees ees
Caissons —------
Cable chains ~---~-
Camphene, in wood_
@andlles:;: =-2sesesne5seecn—Ssescsssaeuse
Candles, 2,000 pounds or more_
@unvas senna ssa senee aes
Canvas, roofing ~----~----~-----------------------
Canes ~~
Cane mills _-__---------- oe

‘ More might be quoted from this statute to advantage, but the
quotations made are sufficient to show its character and tbat
the duties of the officials charged with the execution of the law
were purely administrative, involving no discretion whatever.

The next case of this series was that of Peik v. The Chicago
and Northwestern Railroad Company, reported at page 164, 94th
U.S.

The nature of the statute under which this case arose is
shown at page 166, where occurs the following:

Chapter 278 classifics railroads in the State, fixes the limit of fares
for the ae of any person, classifies freights and the maxi-
mum rates therefor, and prescribes certain penalties and forfeitures
for receiving any greater rate or compensation for carrying freight or
passengers than the act provides. 1t appoints railroad commissioners
and prescribes their duties and powers.

The full text of the statute on this point is as follows:

Section 1. All railroads in the State of Wisconsin are hereby divided
into three classes, to be known as Class A, Class B, and Class C. Class
A shall inelude all railroads or parts of railroads in the State of Wis-
consin now owned, operated, managed or leased either by the Milwaukee
and St. Paul Railway Company, the Chicago and Northwestern Rail-
way Company, 6dr the Western Union Railway Company. Class B shall
include all railroads or parts of railroads owned, operated, managed,
or leased by the Wisconsin Central Railway Company, the Green Bay
and Minnesota Railway Company, or the West Wisconsin Railway Com-
pany. Class C shall include all other railroads or parts of railroads in
said State. ye eh

Sec. 2. Any individual, company, or corporation owning, operating,
managing, or leasing any railroad or part of a railroad in the several!
classifications, as herein prescribed, shall be limited to a compensation
per mile for the transportation of any person with ordinary baggage
not exceeding 100 pounds in weight, as follows: Class A, 3 cents;
Class B, 33 cents; Class C, 4 cents: Provided, That no such individual,
company, or corporation shall charge, demand, or receive any greater
compensation per mile for the transportation of children of the age of

6583

a

 

 
   
 
 
  
 
  
 
 
  
  
 
  
 
  
 
 

bet he et ee

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Class A
D

 

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NEN RWE ANH WHEL REE eR

 
29

12 years or under than one-half of the rate above prescribed: And
provided further, That the rates for transportation herein prescribed
may be reduced, as hereinafter provided.

See. 3. All freights hereafter transported upon any railroad or part
of a railroad in this State are hereby divided into four general classes,
to be designated as first, second, third, and fourth classes, and into
seven special classes, to be designated as Class D, I, F, G, H, I, and J.
Class D shall comprise all grain in carloads; Class E shall comprise
flour in lots of 50 barrels or more, and lime in lots of 24 barrels or
more; Class I’ shall comprise salt in lots of 60 barrels or more, and
cement, water lime, and stucco in lots of 24 barrels or more; Class G@
shall comprise lumber, lath, and shingles in carloads; Class H shall
comprise live stock in carloads; Class I shall comprise agricultural
implements, furniture, and wagons; Class J shall comprise coal, brick,
sand, stone, and heavy fourth-class articles in carloads; and in addi-
tion to the several articles in the said special classes shall be added other
articles as _and in the manner hereinafter prescribed, except into
Classes D, E, G, and II; and all articles not above enumerated are (ox)
subsequently set into said classes, as hereinafter provided, shall be
placed in and belong to the four general classes, to be classified by the
railroad commissioners hereinafter provided _to be appointed, as said
articles were classified by the Milwaukee and St. Paul Railway, which
classification went into effect on the 15th day of June, 1872.

These quotations are sufficient to show that the Wisconsin
statute was, so far as the principle is concerned, modeled after
the Iowa statute.

In legal effect they were identical in character, and no ques-
tion as to the delegation of legislative power was involved in
either case, for the legislature had in both instances denied the
use of judgment or discretion, and provided a rule which left
nothing to be done to ascertain what the rate should be which
the Commission was to prescribe, except only to ascertain to
what class the road belonged, which was a purely administrative
matter. Having ascertained to what class the rcad belonged,
it remained only to apply the rate prescribed by the statute.

In the case of the Railway Co. v. Minnesota (134 U. S., 418),
the statute under consideration is printed in the margin of the
report of the case and the general nature of it is sufficiently
shown by the following provisions:

Paragraph (e), section 7, page 423, 184th U. S., reads as
follows:

That in case the Commission shall at any time find that any part of
the tariffs of rates, fares, charges, or classifications so filed and pub-
lished, as hereinbefore provided, are in any respect unequal or unrea-
‘sonable, it shall have the power and is hereby authorized and directed
to compel any common carrier to change the same and adopt such rate,
fare, charge, or classification as said Commission shall declare to be
equal and reasonable. To which end the Commission shall, in writing,
inform such common carrier in what respect such tariffs of rates,
fares, charges, or classifications are unequal and unreasonable, and
shall recommend what tariffs shall be substituted therefor.

(f) makes it the duty of the common carrier to publish the
rates so recommended and to put them in operation, and the
railroad failing to do so, then the Commission shall do so.

(g) provides that—
if any common carrier shall refuse or neglect to carry out such recom-
mendation made and published by such Commission, such common car-
rier shall be subject to a writ of mandamus, to be issued by any judge
of the Supreme Court, or of any of the district courts of this State,
upon application of the Commission to compel compliance with the
requirements of this section and with the recommendation of the
Commision, and failure to comply with the requirements of said writ
of mandamus shall be punishable as and for contempt, and the said
Commission, as complainants, may also apply to any judge for a writ
of injunction against such common carrier from receiving or trang-
porting property or passengers within this State until such common
carrier shall have complied with the reyuirements of this section and
the recommendation of said Commission, ete.

Go83
30

In other words, the authority of the Commission was, to
recommend new rates to be substituted for condemned rates,
but it had no power to put such rates into operation except
by an appeal to the courts for a mandamus or injunction.

The case of Stone v. The Farmers’ Loan and Trust Company
(116 U. §., 307), arose under a statute which created a railroad
comission and empowered it in certain contingencies to es-
tablish, determine, and revise railroad rates and charges, but
that statute undertook to make the work of the commission
adininistrative, and perhaps did so, for the language it employed
was “in revising or establishing any and every tariff of charges,
it shall be the duty of said commission to take into consideration
the nature of the services to be performed and the entire busi-
ness of such railroad, together with its earnings from the pas-
senger and other traffic, and so revise such tariffs as to allow a
fair and just return on the value of such railroad, its appur-
tenances, and equipments.”

But whether this language was sufficient to make the work
of the commission merely administrative is immaterial so fav
as the decision of the Supreme Court in that case is concerned,
for, assuming that the question was involved in the case, it
was not expressly passed on by the Supreme Court of the
United States.

The question upon which that case was mainly argued and
disposed of was as to whether or not the statute under con-
sideration was in conflict with the charter rights of the railroad
company. The supreme court of Mississippi held that it was
not, and the Supreme Court of the United States affirmed that
opinion, confining itself in its opinion almost exclusively to the
discussion of that question. But the Supreme Court of the
United States was careful to say in upholding the statute in the
last paragraph of the sylNabus: ‘‘ The provisions of the statute
of Mississippi of March 11, 1884, creating a railroad commis-
sion, are not so inconsistent and uncertain as to necessarily
render the entire act void on its face.”

Both the supreme court of Mississippi and the Supreme Court
of the United States called attention in their opinions .to the
fact that the statute had not yet gone into operation, and that
there might arise questions under it when put into operation
that they would not undertake to decide in advance. What all
this may have meant we can only conjecture, but it is fair to
assume that the very able lawyers who were familiar with that
decision, and who framed the constitution of Mississippi, adopted.
in 1890, deemed it necessary, in order to make such legislation
yalid beyond question, to provide as they did in that constitu-
tion for the creation of a commission, and the conferring upon
it by the legislature of the powers which under the statute it
was authorized to exercise.

This provision of the constitution of Mississippi is as follows:

SrcTIon 186. The legislature shall pass laws to prevent abuses, un-
just discrimination, and extortion in all charges of express, telephone,
sleeping-car, telegraph, and railroad companies, and shall enact laws
for the supervision of railroads, express, telephone, telegraph, sleeping-
car companies, and other common carriers in this State, by commission
or otherwise, and shall provide adequate penalties to the extent, if nec-
essary for that purpose, of forfeiture of their franchises.

Very similar comments can be made as to the Reagan case, re-
ported in 154 U. S., 862.

6583
31

The case was not disposed of upon a question of delegation of
legislative power, but aside from that fact the constitution had
been so amended as to authorize the creation of the commission
and the exercise by it of the power involved, and for that reason
the question, as here presented, could not arise.

The following is the amendment referred to:

CONSTITUTION OF TEXAS,

Amendment of 1890: The legislature shall pass laws to regulate rail-
road freight and passenger tariffs, to correct abuses, and prevent unjust
discrimination and extortion in the rates of freight and passenger
tariffs on the different railroads in this State, and enforce the same by
adequate penalties, and to (the) further accomplishment of these ob-
jects and purposes may provide and establish all requisite means and
oo in this State with such powers as may be deemed adequate and
advisable.

In recognition of the fact that general power to make rates
ean not be conferred on commissions, the different States have
been in recent years amending their constitutions so as to give
such authority.

The States of California, Illinois, Kentucky, Louisiana, Missis-
sippi, North Dakota, Pennsylvania, South Carolina, Texas, Vir-
ginia, and Washington have carefully provided in their consti-
tutions that railroad commissions shall be in some cases, and
may be in others, created with power to fix rates and prescribe
regulations governing railroads operating within their respec-
tive territories, or that the legislature may prescribe maximum
rates and provide for the enforcement of them, and establish
regulations and enforce obedience to them by commissions or
such other means or agencies as the legislature may see tit to
prescribe,

In some States this has not been done, bit no case has yet
come to the Supreme Court of the United States involving the
right of a State commission to fix rates for roads within the
State where such duty has not been made adininistrative, as in
Iowa and Wisconsin, or where the statute has not been, like that
jin Minnesota, where it only authorized the commission to ree-
ommend rates; or where the commission has not been provided
for by the constitution of the State, and where it has not been
provided by the constitution that such commission when created
should exercise the power involved. .

When it is remembered that the States, except only as to the
powers by them delegated, are complete sovereignties, and when
it is remembered that they have complete sovereign power as to
rates and railroads witbin their borders, there can not be any
question of the right of the State, acting through its legislature,
when all legislative power is conferred upon the legislature, or
acting through commissions, where the constitution provides for
the creation of a commission and for the exercise by it of legis-
lative power, as in the States of Mississippi, Texas, Louisiana,
Virginia, and other States, to make rates, and to prescribe regu-
lations, and to do, generally speaking, all the things they have
been authorized in such States to do; but the case is wholly
different as to the Federal Government, which has no power,
except that which is delegated and such as is necessary to be
exercised to give effect to that which is delegated.

The Constitution of the United States expressly provides that
all legislative power shall be vested in Congress, and it further
provides that the Congress shall have vower to regulate inter-
state commerce. There is here no division of legislative power,

6583
32

nor is there any authority to the Congress to delegate to any
commission, board, or tribunal, or agency any part of its legisla-
tive power. The legislative power conferred upon Congress can
not, therefore, be exercised by any authority except only the
Congress itself, and the only question remaining is whether or
not the conferring of the power to make rates upon a commis-
sion or tribunal is a delegation of that power, and that question
must ke determined by the terms of the statute conferring the
power. If Congress has the power to fix rates, a commission
can be created and it can be utilized in the fixing of rates. But
it can be utilized only under some such statute as those enacted
by the legislatures of lowa and Wisconsin, when, in 1873 and
1874, they passed their respective statutes, classifying the rail-
roads according to earnings, and providing that the officials
chosen to execute them should, by computation, taking the classi-
fication as a basis, determine what statutory rates should apply.
That was administrative.

The Congress could also utilize the Commission in the fixing
of rates if it should see fit to resort to the policy of a mileage
basis. But for the Congress to simply declare what is already
the law, for it is only declaratory of the rule at common law,
that rates shall be reasonable and just, and then create a com-
mnission and empower that commission to say what in its judg-
ment a rate shall be, is, most clearly, to confer legislative power,
because the rate to be fixed is the law to be enacted, and that
is to be determined by the discretion of the Commission instead
of the discretion of the Congress. And not only is it a delega-
tion of legislative power, but it is a delegation of all the power
the Congress has on the subject, for Congress can not constitu-
tionally make a rate that is not a reasonable and just rate. If
extortionate the courts would enjoin at the suit of the shipper,
and if confiscatory they would enjoin at the suit of the carrier—
in both cases on the ground that property was being taken with-
out due process of law.

BUT IF THIS BILL BE ENACTED AND BE UPHELD, NOTWITHSTANDING
THESE OBJECTIONS, THEN ANOTHER SERIOUS LEGAL QUESTION ARISES.
BY THB SIXTH PARAGRAPH OF THE NINTH SECTION OF ARTICLE I OF THE
CONSTITUTION IT IS PROVIDED THAT “ NO PREFERENCE SHALL BE GIVEN
BY ANY REGULATION OF COMMERCD OR REVENUE TO THE PORTS OF ONB
STATE OVER THOSE OF ANOTHER, * * *”

For many years what are known as differentials have been
allowed as between the important Atlantic coast ports of entry.
Taking New York as the standard, a differential has been
allowed in favor of Philadelphia of 2 cents per hundred weight
on all freight for export carried by the railroads to that port,
while a differential of 3 cents has been allowed as compared
with New York in favor of Baltimore and Newport News, while
the same rate_is allowed to Boston for export, although the
domestic rate ranges from 7 cents, first class, to 2 cents on sixth
elass, domestic. Still larger differentials have been and are
allowed in favor of the ports of New Orleans and Galveston.
The fixing of rates being in the hands of the carriers, they have
been at liberty to make these differentials by agreement. They
had their origin in an endeavor to express, in the differentials
agreed upon, the disadvantages of the respective ports of entry
as compared with New York. These disadvantages consisted
not only of differences in the length of haul, but also differences
in the adequacy of the harbors and in the extent to which the

6583
33

respective ports were furnished with shipping facilities and
accommodation for ocean carriage. These differentials were the
subject of agreement not only on the part of the railroads,
but also on the part of the cities named, acting through their
respective boards of trade, chambers of commerce, and other
commercial bodies and organizations.

These differentials were from the beginning the subject of
much dispute and controversy, and much study and labor have
been devoted to their equitable adjustment.

As early as January, 1882, Hon. Allen G. Thurman, Hon.
BE. B. Washburn, and Hon. Thomas M. Cooley were selected by
the Trunk Line roads to act as an advisory commission to hear
evidence, fully investigate, and make a report as to what differ-
entials should be allowed as between the cities of New York,
Boston, Philadelphia, and Baltimore upon freight carried east-
wardly from Chicago and common points to these ports and
from these ports to Chicago and other western points. They
mede a very thorough investigation, and wrote a very compre-
hensive report, which is found at page 1243, volume 2, of the
Hearings of the Senate Interstate Commerce Committee. Their
conclusion is found at page 1268, and I quote from it as follows

It only remains for us to state that no evidence has been offered
before us that the existing differentials are unjust, or that they oper-
ate to the prejudice of either of the Atlantic seaboard cities. Dif-
ferential rates have come into existence under the operation of com-
petitive forces; they bear the same relation to relative distance and
relative cost of service; they recognize, as we think, the relative ad-
vantages of the several seaports, and they are subordinate to the great
principle which co ee the carriers ot property competing between
the same points and offering equal facilities to their customers to

ee same rates. We therefore can not advise their being dis-
urbed.

This commission is known as the Thurman Commission. It
simply approved and affirmed the differentials already estab-
lished. These differentials as to these Atlantic seaboard cities
were continued until the year 1904, practically without change,
although there were some changes in conditions that caused
much dissatisfaction with them. Finally this dissatisfaction
was expressed by the commercial organizations of Boston, New
York, Philadelphia, and Baltimore in an application to the
Interstate Commerce Commission “asking that it examine the
whole subject of differential rates to and from these four cities,
and determine whether the present differentials should be abol-
ished, or, if retained, modified.” In response to this application
the Commission undertook the work as requested. They made
a thorough examination of the whole subject, heard the state-
ments of witnesses, arguments of counsel, and wrote an elaho-
rate report and opinion, published as “ No. 746, In the Matter
of Differential Freight Rates to and from North Atlantic Ports,
Decided April 27, 1905.” Their conclusicn is found at page 650
of their report and opinion. To state it in a word, they slightly
modified the differentials and continued them. In reaching this
conclusion they say, at page 62:

* * * a fair differential is one which would give to, these several
ports the traffic to which they are entitled * New York
urges that its facilities upon the ocean must not ba ‘pleonel with,
while Baltimore and Philadelphia assert with equal positiveness that
they must not be deprived of their advantages upon the land * #*

The ideal condition would be the establishment of such rates that
enterprise at either port in the way of improvement in service or
facilities might e rewarded by increased business and that there might

6583:

 
34

exist that healthy struggle of locality against locality which is the
pest security for proper commercial development. This is justly de-
manded by the interests of the communities involved.

In disposing of this question the interests of the carriers which
serve these communities should be none the less kept in view. If, again,
it can be properly done, these rates should be so adjusted that this
competitive traflic will be fairly distributed between the different lines
of railway which serve these ports. Each one of these four cities is
reached by two or more great railway systems. The prosperity of these
cities and systems can not be separated. ‘he ability of a railroad to
adequately discharge its duty for a reasonable charge depends upon the
pusiness which it can obtain, and no one of these systems should be
deprived of its fair portion of this enormous export traffic. The pur-
pose of these differentials from the first has been to distribute this
business between the different carriers, and we said in our former report
that this was not improper unless the means used were improper.

It should be noted that this discussion is confined entirely to the four
ports, Boston, New_York, Philadelphia, and Baltimore. While others
are directly affected by these differentials, they have not been repre-
sented upon this hearing, and are not considered, except in so far as it
may be necessary to keep in mind the effect of our conclusions here
upon conditions elsewhere. -

No fact has been more persistently urged upon our attention than
the location of Baltimore and Philadelphia, as compared with New York
and Boston, in point of distance. Baltimore is 111 miles, and Philadel-
phia 90 miles, nearer than New York to Chicago. The greater part of
the traffic to which these differentials apply does not originate at Chi-
cago, but we have seen that Chicago may be taken as a representative
point of origin without injustice to New York. This difference in dis-
tance, if there were no competitive conditions, would justify a lower
rate to Philadelphia, and a still lower rate to Baltimore.

These differentials have undoubtedly been established in the past with
a view almost entirely to their influence upon the movement of export
business.

* * 4 Ed * * * *

This traffic, in point of fact, originates at a great number of interior
points, and reaches numerous foreign destinations, but we may assume,
for the purpose of illustration, that it all comes from Chicago and all
goes to Liverpool. It is apparent that it may be transported between
these points by any of the four ports in question. The distance by rail
is somewhat shorter to Baltimore and Philadelphia than to Boston and
New York. Upoa the other hand, the water distance is somewhat less
from Boston and New York than from Philadelphia and Baltimore.
The entire through, distance does not greatly vary. In other words,
this traflic is fairly competitive, and rates ought, therefore, to be so
adjusted that rival routes can fairly compete for it.

Apply for a moment the rule suggested by Baltimore and Philadelphia
to the movement of this traffic. The domestic rate to Baltimore is 3
cents lower and to Philadelphia 2 cents lower than to New York. The
domestic rate to Boston is 2 cents higher than to New York upon low-
grade freight, and considerably more upon the higher classes. Now,
what would be the result if carriers were compelled to charge their
domestic rates upon export traffic? Plainly it would shut up the port
of Boston. This fact has been obvious from the first, and it has always
been conceded that export rail rates to Boston might be lower than
domestic rates and not higher than export rates to New York. * * #*

Yhe real question is, on what basis shall rates be equalized through
the various ports? New York and Boston insist that the through rates
should be made the same in amount by all the ports. The through
rate is made by adding together the inland-rail rate from the interior
to the port of export and the water rate from the port of export to
the foreign destination. These localities contend that if the water
rate from a given port is higher, the rail rate to that port may be cor-
respondingly lower, but only sufficiently lower to make the through rate
the same. They further ‘contend that water rates are in fact substan-
tially the same from Baltimore and Philadelphia as from Boston and
New York, and that therefore the inland-rail rates to those ports
should also be the same. Baltimore and Philadelphia urge that there
are certain advantages at New York and Boston in the water route
which upon the same through rate would attract traffic to those ports
at their expense, and they urge that these advantages shall also be
equalized so that not the through rate but the advantages of trans-
portation through the several ports shall be made equal. * * To
accomplish this result Boston is allowed to charge a lower export rate
than its domestic rate. New York is also permitted, in some instances,

6583
385

to apply a lower differential to export than is fixed for domestic traffic.
Now, when New York is allowed to reduce this differential on export
traffic there is taken away from Laltimore a part of its natural ad-
vantages for the benefit of New York in order that New York may com-
pete for this traffic. But just as Baltimore has an advantage in dis-
tance, so New York has certain advantages in ocean facilities. If, now,
Baltimore is required to sacrifice its superiority upon the land for the
benefit of New York, why should not New York be required to give up
some qrontien of its superiority on the water for the benefit of Balti-
more

We do not wish to be understood: as saying that this principle should
be extended to the making of rail rates between competing lines. It
May be that in such case the rate by every line should be the same,
and that each line should sustain whatever disability it has. If in
ihis case it were possible to definitely establish the same through
rate by all these ports, if it ever had been possible to do so, the ad-
visability of such an adjustment would deserve serious ccnsideration.
It is, however, impossible to apply that rule in fact. The ocean rate
from every port is continually fluctuating and is seldom the same for
two days in succession. It even varies from hour to hour. The rate
may be higher from Baltimore to-day and from New York to-morrow.
It can not, therefore, be determined what inland differential would
produce equal rates through all the ports.

In view of the fact that Baltimore and Philadelphia have natural
advantages in location, that Boston and New York have certain natural
advantages in the way of ocean facilities, that it is impossible to make
and maintain the same rate through all the ports, we think the true
inquiry in adjusting this differential is, what will equalize the advan-
tages of transportation through these various ports. What part of the
advantage which Baltimore and Philadelphia enjoy on the score of the
inland haul shall they be allowed to retain to compensate them for
their disadvantage in the water haul.
dee important factor in determining the route is undoubtedly

e rate.

It was said in testimony * * * that a difference of from one-
fourth to one-eighth of a cent a bushel will determine the port by
which grain shall be exported. Other traffic is not equally sensitive,
but it must follow with respect to this low-grade freight that the
through rate by all lines should be substantially the same. There
are, however, other considerations. The item of insurance, quicker
and more reliable service, more frequent sailings, the ability to reach a
greater number of ports, superior banking facilities, and better storage
facilities all influence the movement of this traffic, and in all these
respects New York is superior to its competitors. ‘I'he elements
which enter into the problem are so various and so complex that it is
manifestly impossible by any @ priori process of reasoning to determine
what inland differential will equalize all these advantages and dis-
advantages.

From the quotations made, and others that might be made, it
is clearly shown that the purpose of these differentials is to
measure as nearly as may be the respective advantages and dis-
advantages of the ports of entry named; and what is true as to
New York, Boston, Philadelphia, and Baltimore is equally true
as to Newport News, New Orleans, Galveston, and other ports
of entry, and the purpose of these differentials has no relation,
except indirectly and incidentally, to railroad rates, but have
reference solely and directly to their effect on the respective
ports of entry.

Railroads are not restrained by any law or constitutional pro-
vision from making agreements of this character. That they
are of the highest importance not only to the ports with respect
to which they are made, but to the whcle country, is universally
conceded. Without these differentials there would he a natural
tendency to concentrate exports at the port having the best
harbor and shipping facilities, provided it could be substantially
as easily reached by rail from the interior. The differentials
are, therefore, essential to the maintenance of the system of
diffusion and distribution that is now in force as to our export
traffic, and which is of such vast importance not only to the

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railronds and these different cities, but to the whole country.
But to maintain these differentials means that cities are not to
hare the benefit of their natural advantages, for they are to be
offset or overcome by the differences in rates that are agreed
upon. In other words, Philadelphia and Baltimore are to he
preferred as ports of entry, to the extent of the differentials
agreed upon, to New York, and Boston is to be preferred to the
extent that she shall have a lower export rate from the inland
than her domestic rate, and enough lower to put her on an
equality with New York; and this purpose of these differeutials
is to give the cities they favor a direct preference as to export
business to the amount of their respective differentials for the
express purpose of putting them on an equality with New York.
To withdraw these differentials would be, as the. Commission
say, to close up the port of Boston. The same remark might
be made in such a contingency as to New Orleans and Galveston,
to which ports a growing volume of exports has been diverted
because of the equality of opportunity for such business secured
to them by the differentials they enjoy.

The entire history and purpose of these differentials show
that they are not indirect nor incidental preferences for the
ports they favor, but that they are direct and intentional for
the express purpose of overcoming the results of natural ad-
vantages and natural competition. Preferences are their prin-
cipal purpose, not an incident. The cities themselves recognize
this, for it was the cities and not the railroads that asked for
the recent hearing before the Interstate Commerce Commis-
sioners, sitting as arbitrators, when they had occasion to deliver
the opinion from which I have quoted.

Now, as to the application of all this. If Congress under-
take to exercise its power to regulate interstate commerce, it
must exercise that power subject to all the restrictions and
limitations imposed upon it by the Constitution. It must, there-
fore, avoid, in the exercise of this power to regulate, coming in
eonflict with any other constitutional provision that has applica-
tion to it.

In the case of Pennsylvania v. The Wheeling and Belmont
Bridge Co., 18 Howard’s Reports, 421, the Supreme Court held
that the incidental results of the construction of the bridge at
Wheeling, by which interstate commerce on the Ohio River was
affected, did not constitute a violation of the constitutional pro-
vision above quoted that ‘“‘ No preference shall be given by any
regulation of commerce or revenue to the ports of one State
over those of another,’ for the reason that the prohibition ap-
plied only to cases of direct preferences. The suggestion of the
Attorney-General that these differentials, which have direct ref-
erence to the export trade, and, therefore, to the respective
points they favor, would be merely incidental to the execution
of a law requiring reasonable, just, and impartial rates, is re-
futed by the facts; and the further suggestion that if the con-
trary rule be adopted the law now in force must be held to be
in violation of this provision does not help the matter. It does
not help the matter because under the statute now in force
there is no restriction upon the rate-making power, except only
that rates in and of themselves, without reference to ports of
entry, shall be reasonable and just, and no question of unreason-
ableness or discrimination has been or can be raised under the
law as it now stands.

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But, recurring to the original suggestion, it is not an argument
to say that differentials would be only a legitimate incident to
the making of reasonable, just, and impartial rates. That is
mere assertion. Besides it conflicts with one of the great pur-
poses of those seeking the kind of legislation that has been pro-
posed, to secure to each locality its own particular rightful ad-
vantages of location, and thus avoid the preferring in the mak-
ing of rates of one locality to the prejudice of another. ‘That,
with discrimination between individual shippers, is the very
essence of this entire movement. Unless that purpose be accoin-
plished there will be widespread and positive disappointment
among the advocates of such legislation. They commonly de-
nounce the present practice by which localities are denied what
they term their rightful advantages, and are put on an equality
with other localities that are at a disadvantage as compared
with them, as directly and unjustly and grossly discriminatory.
The advocates of rate legislation know this and yet they have
earefully omitted every provision from the Hepburn bill that has
been proposed that would apply to this evil—if it be an evil, as
they loudly proclaim.

It seeks thus to avoid the question by entirely ignoring differ-
entials in connection with its expressed purposes. This is open
confession that Congress has no power, acting directly by com-
mission or otherwise, to observe these differentials in the making
or fixing of rates. Thus the authors of that bill acknowledge
that the whole system of differentials is founded on a purpose to
give direct preference to the ports respectively favored at the
expense of other ports, and, therefore, if Gone by Congress, in
contravention of the constitutional provision under considera-
tion.

But the bill does not escape the trouble by ignoring it. It
ig rather only another case of the ostrich hiding its head in the
sand. If the Commission is to make rates to be substituted for
challenged rates that it condemns, the question will at once arise
and will have to be met, for with respect to these differentials
there is most acute dissatisfaction, and in the very nature of
things it must be expected that this dissatisfaction will promptly
manifest itself. In such contingency the Commission must act.
What its action must of necessity be appzars from its opinion
already quoted from. It says:

* * * When New York is allowed to reduce this differential on
export traffic there is taken away from Baltimore a part of its natural
advantages for the benefit of New York, in order that New York may
compete for this traffic. re

If this be true, as it is, so, too, is the converse of the propo-
sition equally true. To deny the differential “plainly would
shut up the port of Boston.” :

“We have endeavored,” they say, “to find some fundamental prin-
ciple by the application of which this dispute might be laid at rest,
but entirely without success. * * * There is no just principle
which would compel this company (the Pennsylvania), against its will,
to apply at New York the same rate as at Philadelphia when the cost

of rendering that service is distinctly greater. It might as a matter
of competition see fit to do so, but it could not in justice be compelled to.”

Again they say:

If in this case it were possible to definitely establish the same
through. rate by all these ports, if it ever had been possible to do so,
the advisability of such an adjustment would deserve serious consider-
ation. It is, however, impossible to apply that rule in fact.

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From these quotations it appears that the Commission clearly
understands that the sole purpose of the differentials is to
interfere with and affect the results of natural competition, thus
directly and intentionally aiding one city to the corresponding
prejudice of others. This is something carriers, unrestrained
by law, are at liberty to do, and something that is of great
advantage to the whole country, but which the Congress is
expressly prohibited from doing, because it shall give no prefer-
ence whatever as between the ports of different States.

But if we invest the Interstate Commerce Commission with
the power to make rates it must exercise that power subject to
this prohibition of the Constitution that there shall be no prefer-
ence for the ports of one State over those of another. The
whole system of differentials must in consequence be abandoned.
As a result each city will then be entitled to its natural ad-
vantages, not only of location but of railroad and shipping
facilities and every other kind of advantage it may possess. As
a practical result New York will at onee have over Boston,
Philadelphia, Baltimore, Newport News, and all the other com-
peting ports of entry, respectively, the advantages measured by
their respective differentials.

The great importance of the observance of this rule is shown
by the following statement of the Commission as above quoted.
The Commission says:

The most important factor in determining the route is undoubtedly
the rate. * * * A difference of from one-fourth to one-eighth of a
cent per bushel will determine the port by which the grain shall be
exported.

AS a consequence, not only would the port of Boston be
closed up, but all the other ports would be at least most seri-
ously affected. ‘The general business that could Le taken as
well to one port as another under present conditions would then
concentrate at the most favored port.

This is not disputed, and can not be, certainly not by the
Commission itself, for its own language supports the contention.
This is made more plain by Commissioner Clements, who, in his
dissenting opinion, speaking to another point, says:

* * * The facts disclosed do not, in my judgment, justify the
conclusions reached, for the reason that I believe they do violence to
the great principle of competition, which the Congress and the Su-
preme Court have so jealously and consistently nourished as one of the
fundamental rights of the people. In declaring as between competing
lines and competing ports what differentials shall govern, assuming
that they will govern, we hamper competition, and by this regulation of
distribution effect in reality'a division of territory, a division of traffic,
and a division of earnings, which in substance and effect tend to defeat,
not only the purpose of the antitrust act against the restraint of trade,
but the pooling provision of the Interstate Commerce act, with the en-
forcement of which the Commission is charged.

It follows that the effect of conferring the rate-making power
on the Commission will be, in the event of a differential rate
being challenged, to raise a question that can not be decided
except against the continuance of these differential rates, and,
as a consequence, the whole system of differentials as to ports
of entry will have to be abandoned. What the effect of this
will be can better be imagined than described. That it means
disruption of existing conditions with attendant confusion and
dissatisfaction so great that it can not well be exaggerated, no
one who is informed can doubt.

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39

THROUGH ROUTES AND JOINT RATES.

The Interstate Commerce Act of February 4, 1887, provided
for the supervision by the Interstate Commerce Commission of
through routes and joint rates, but the provision of that act with
respect to through routes and joint rates applied by its terms
only to the common carriers “ subject to the provisions of the
act.”

The provisions of that act applied to common carriers “en-
gaged in the transportation of passengers or property wholly by
railroad, or partly by railroad and partly by water when both
are used, under a common control, management, or arrangement,
for a continuous carriage or shipment, from one State or terri-
tory of the United States, or the District of Columbia, to any
other State or Territory of the United States,” ete.

In other words, the provisions of that act as to through routes
and joint rates were limited in their application to carriers en-
gaged in transportation wholly by railread and transportation
partly by railroads and partly by water, which carriers were
“under a common control, management, or arrangement for a
continuous carriage or shipment,” ete, The provisions of the
statute applied when the carriers, if they were separately
owned and entirely distinct from and independent of each other,
themselves established a through route and made an agreement
as to the terms and conditions upon which freight and passen-
gers should be transported over it. There was no attempt to
compel carriers that could not so agree, or, for any reason, would
not so agree, to submit to tLe establishment of through routes
and joint rates, and the apportionment of the same by the Inter-
state Commerce Commission.

But the first section of the Hepburn bill amends the first sec-
tion of the interstate commerce act of 1887 so as to make it read
in this particular as follows:

That the provisions of this act shall apply to any common carrier or
carriers engaged in the transportation of passengers or property
wholly by railroad (or partly by railroad and partly by water when
both are used under a common control, management, or arrangement for
a continuous carriage or shipment) from one State or Territory of the
United States to another, etc.

The effect of this amendment is to make all its provisions
applicable to all railroads without regard to whether they are
under a common control, management, or arrangenient or not,
and to routes made up partly of rail and partly of water trans-
portation only in a certain contingency, namely, when, as under
the old statute, they are subject to a common control, manage-
ment, or arrangement.

The first comment that this provision excites is that there is
no uniformity in the operation of the statute upon common car-
riers engaged in interstate commerce, for it applies in the one
case to all railroads without regard to whether there is a com-
mon control, management, or arrangement, while as to routes
made up of railroad and water transportation the statute ap-
plies only when those conditions exist. This is emphasized by
the fact that all through water routes for interstate transporta-
tion are excluded from the provisions of the statute, such as
from Chicago to Cleveland by lake, or from Cincinnati to New
Orleans by river, or from Maine to Florida, or New York to
Charleston or Savannah, in the coastwise trade, and many other
routes of similar character that might be mentioned. They

6583
40

are exempted from the act, notwithstanding rebates and dis-
criminations may be granted and practiced with respect to such
shipments as well as with respect to shipments over the routes
and by the carriers mentioned in the statutes, and just as
harmful in their results as when granted by tbe railroads.

But the question of uniformity aimed at by the commerce
clause of the Constitution in the regulation of interstate com-
merce, under the provisions of this act, thus indicated, sinks
into unimportance, serious as it may be, by comparison with
what follows. By one of the provisions of the first section it is
imade the legal duty of railroads that are not under “a com-
mon control, or a common management, or a common arrdange-
ment,” to “establish through routes and just and reasonable
rates applicable thereto.”

Through routes are desirable, and as a rule they are now
everywhere established and being operated by agreement of the
railrcads, but there are some instances where through routes
have not been established and for the reason that the reads
have been unable to agree among themselves as to the appor-
tionment of rates or the other terms and conditions under which
there should be a mutual use of their tracks.

To meet such cases the second paragraph of section 15 of the
interstate-commerce act is to be amended by section 4 of the
Hepburn Act, so as to read as follows:

The Commission may also, after hearing on a complaint, establish
through routes and joint rates as the maximum to be charged and pre-
scribe the division of such rates as hereinbefore provided, and the terms
and conditions under which such through routes shall be operated, when
that may be necessary to give effect to any provision of this act and
the carriers complained of have refused or neglected to voluntarily estab-
lish such through routes and joint rates, provided no reasonable or
satisfactory through route exists.

The provision, by reason of the amendment of section 1, al-
ready pointed out, applies to all railroads without regard to
whether they have any interest in common or not, and by the
terms of this clause the provision applies when the “ carriers
complained of have refused or neglected to voluntarily establish
such through routes and joint rates.” In other words, it is
proposed by this provision of the Hepburn bill to compel inde-
pendent railroads that have no relation to each other, except
possibly a physical connection, to enter into an agreement for an
exchange of business and to pass all their cars over the lines of
each other upon such joint rates as the Commission may estab-
lish and upon such apportionment of the same as the Commis-
sion may determine and upon such other “ terms and conditions
as the Commission may prescribe.” The effect of this provision
is to compel railroads that are unable to agree to submit in all
such cases to whatever arrangement the Commission may see fit
to prescribe.

To illustrate, suppose a railroad originating in Ohio or some
other State, building eastward and desiring a trunk line into
New York should tap the Pennsylvania road at Pittsburg or
some other place and demand an agreement as to through rates
on terms the Pennsylvania could not and would not accept. It
might well be that the Pennsylvania, an old and expensive road,
especially on account of her terminals in the great cities of the
“ast, and particularly in New York, where they have cost hun-
dreds of millions of dollars, would demand, as only fair and

6583
41

equitable, a greater proportion of the joint through rate than
the connecting road would be willing or able to allow. There-
upen this road would make its complaint to the Commission ard
the Commission on hearing would say, ‘It is made the duty «et
connecting roads to make through routes and joint rates. It is
so provided in the first section of the Hepburn Act. You have
neglected or refused to come to an agreement. We therefore
make one for you. Whether your business is such on your own
lines as to enable you to accommodate the cars and trains of the
connecting road or not, we compel you to accept the same and
pass them over your lines, and we fix the joint rate and your
share of it at so much and the other terms and conditions nec-
essary to be observed for this mutual interchange of business in
the operation of the two roads are as follows.” They order
accordingly, and that is the end of it if this provision be
constitutional.

What is thus done in the one case may be done in two, or a
dozen, or a score, or a hundred other cases as to that same road
if it is unable to agree with connecting lines seeking to use its
tracks for through business. Thus it will come to pass that
connecting lines wanting to have through trunk lines will see
that it is unnecessary to go to the trouble and expense of build-
ing them, because they can appropriate, to the extent necessary,
the Pennsylvania, or the Baltimore and Ohio, or the New York
Central, or, going westward, the Union Pacific, or Southern
Pacific, or Northern Pacific, or any other trunk line.

What it is thus proposed to do can be done, and done legiti-
mately, but it can not be done in the way provided in this bill.
What this bill thus provides for is a taking of private property
for public use, and although that property, if you take again
the Pennsylvania road for illustration, is already subject to

“a public use, it may be put to an additional public use, namely,

a use by the connecting carrier or carriers to the extent indi-
eated, but private property taken for a public use, although it
may be a railroad already devoted to public use,.can not be
taken without making just compensation. The ascertainment
of what is just compensation in such a case is like the ascer-
tainment of what is just compensation in any other case, a
purely judicial function that can not be exercised by a board,
but only by the courts. In determining what is just compensa-
tion in such a case not only must rates of fare and the appor-
tionment of the same be considered, but the franchises and
every other element of value that may be taken or affected must
be taken into the account.

\ Congress has no power to dispossess the courts of their juris-
diction to fix this compensation, neither can Congress prescribe
a rule by which the compensation shall be ascertained. All this
is settled in the case of Monongahela Navigation Co. v. The
United States (148 U. S., p. 312).

I read as follows from page 327:

By this legislation Congress seems to have assumed the right to
determine what shall be a measure of compensation. But this is a
judicial and not a legislative question. The Nerielafane may determine
what private property is needed for public purposes—that is a ques-
tion of a political and legislative character; but when the taking has
been ordered, then the question of compensation is judicial. It does
not rest with the public—taking the property, through Congress or the
legislature. its representative—to say what compensation shall be paid,
or even what shall be the rule of compensation. The Constitution

6583
42

has declared that just compensation shall be paid, and the ascertain-
ment of that is a judicial inquiry. In Charles River Bridge +. Warren
Bridge (11 Pet., 420, 571) Mr. Justice McLean, in his opinion, referring
to a provision for compensation, found in the charter of the Warren
Bridge, uses this language: ‘They (the legislature) provide that the
gew company shall pay annually to the college, in behalf of the old
one, one hundred pounds. By this provision it appears that the legis-
lature has undertaken to do what a jury of the conntry only could
constitutionally do—assess the amount of compensation to which the
complainants are entitled.” See also the following authorities : Com-
monwealth v. Pittsburg and Connellsville Railroad (58 Penn. St., 26,
50); Penn. Railroad v. Baltimore and Ohio Railroad, 60 Maryland, 263;
Isom v. Mississippi Central Railroad (36 Mississippi, 300).

In the last of these cases, and on page 815, will be found these ob-
servations of the court: “The right of the legislature of the State, by
law, to apply the property of the citizen to the public use, and then to
constitute itself the judge in its own case, to determine what is the
‘just compensation’ it ought to pay therefor, or how much benefit it
has conferred upon the citizen by thus taking his property without his
consent, or to extinguish any part of such ‘compensation’ by prospec-
tive conjectural advantage, cr in any manner interfere with the just
powers and province of courts and juries in administering right and jus-
tice, can not for a moment be admitted or tolerated under our Constitu-
tion. If anything can be clear and undeniable, upon principles of
natural justice or constitutional law, it seems that this must be so.”

We are not, therefore, concluded by the declaration in the act that
the franchise to collect tolls is not to be considered in estimating the
sum to be paid for the property.

The case is precisely in point. The Monongahela Navigation
Company was a company incorporated under the laws of Penn-
sylvania for a public service, and the Congress undertook in
authorizing its condemnation for another public use to prescribe
the rule that should be followed in ascertaining and fixing just
compensation and undertook to eliminate from such compensa-
tion the franchise that belonged to the corporation. The Su-
preme Court held, as we have seen, that this could not be done.
Every question passed on in the Monongahela case would arise
the very moment the Commission would undertake to establish
a through route and to fix the joint rates and other terms and
conditions upon which the through route so established should
be operated, and there is no room for doubt as to how the
courts would decide. }

TIIE BILL ELIMINATES JURIES IN CASES WHERE THE PARTIES ARE EN-
TITLED TO TILEM.

Section 5 of the Hepburn bill purports to amend section 16 of
the Interstate Commerce Act as amended March 2, 1889. It
would be more correct to have provided that what is set out
in section 5 should be a substitute for section 16, because of
the great dissimilarity not only in language but also in legal
effect between section 16, as it now stands, of the interstate
commerce act and the section as it will read if amended as pro-
posed. Section 16 of the interstate commerce act as amended
March. 2, 1889, authorizes the Commission, or any party inter-
ested in any order the Commission has made under the provi-
sions of that act, to apply by petition to the circuit court of the
United States, sitting in equity, to enforce such order on com-
plaint that the same is being violated, and the ccurt may, in
ordering compliance, make also an order for the payment by the
earrier of such sum of money not exceeding $500 per day for
each day that the carrier shall fail to obey its order of injunc-
tion er other process. ‘This is in the nature of a fine for con-
tempt, and therefore clearly within the power of the court to
impose.

6583
43

Controversies requiring a trial by jury are especially ex-
empted from the operation of this provision of the existing
statute.

As to controversies requiring a trial by jury a special pro-
vision is made whereby that constitutional right is carefully
protected and preserved to each and every party to such pro-
ceeding.

Section 5 of the Hepburn bill amends this section so as to
eliminate trial by jury altogether. The provision of this amend-
ment is that if ‘the Commission shall determine that any party
eomplainant is entitled to an award of damages, * * * the
Commission shall make an order directing the carrier to pay
the complainant the sum to which he is entitled on or before
a day named.” That is simple, straightforward, and easily un-
derstood, but without precedent in legal proceedings.

Yhe amendment further provides, referring to these awards,
that “If a carrier does not comply with an order for the pay-
ment of money within the time limit in such order, the com-
plainant * * * may file in the circuit court of the United
States for the district in which he resides * * * a petition
setting forth briefly the causes for which he claims damages,
and the order of the Commission in the premises. Such suit
shall proceed in all respects Hike other civil suits for damages,
except that on the trial of such suit the findings and order of
the Commission shall be prima-facie evidence of the faets therein
stated, and except that the petitioner shall not be liable for
costs in the circuit court, nor for costs at any subsequent
stage of the proceedings, unless they accrue upon his appeal.
If the petitioner shall finally prevail he shall be allowed a
reasonable attorney’s fee, to be taxed and collected as a part
of the costs of the suit * * * In such suits all parties in
whose favor the Commission may have made an award for
damages by a single order may be joined as plaintiffs, and all
of the carriers parties to such an order awarding such damages
may be joined as defendants, and such suit may be maintained
by such joint plaintiffs and against such joint defendants in
any district where any one of such joint plaintiffs could main-
tain such suit against any one of such joint defendants; * * *
In case of such joint suit recovery, if any, may be by
judgment in favor of any one of such plaintiffs, against the
defendant found to be liable to such plaintiff.”

It can not be claimed for the framers of this provision that
they overlooked the fact that under the seventh amendment to
the Constitution, in any action brought to recover money. if the
amount involved be more than $20, the parties are entitled to a
trial by jury, for the provision of law now in force, which they
were amending, was framed with careful reference to that fact
and so as to preserve that right. It would seem, therefore,
that they have intentionally framed this section in plain dis-
regard of that constitutional provision, for surely the character
of action provided for is one in which a jury trial must he
allowed if the amount involved be large enough to meet the
constitutional requirement in that respect, and either party to
the action may so demand a jury. This provision would there-
fore be unconstitutional if these contemplated actions for which
provision is thus made involved only one complainant and one
defendant, but the section expressly provides that “in such

6583
44

suits all parties in whose favor the Commission may have made
an award for damages by a single order may be joined as
plaintiffs and all of the carriers parties to such order award-
ing such damages may be joined as defendants, and such suit
mity be maintained by such joint plaintiffs and against such
joint defendants,” ete.

This provision is of such character that it is not unreasonable
to suppose that whenever such an order is made there are likely
to be a number in most cases, perhaps, a great number of ship-
pers in whose favor an award is made, and this award may be
made under this order not against one carrier alone, but against
a number of carriers. The statute by this provision clearly con-
templates that there may be numerous parties in whose favor
such an award may be made, and that each order making such
awards may run against a number of carriers.

In the nature of things the awards thus allowed by the Com-
mission would not be the same to each shipper or the same
against each carrier. All men do not necessarily ship the same
commodities or the same amounts of a particular commodity.
One man ships one kind of freight and another something else.
The damages for which the award provided by this section is to
be made will vary in amount. Perhaps no two shippers out of
twenty, fifty or one hundred will receive an award exactly equal
in amount to that of any other shipper provided for in the award.
Under the same order, as the statute contemplates, one man’s
award may be against one particular carrier, and another man’s
award against another particular carrier, and so on indefinitely.
Each man's award will, however, be his own individual claim,
in his separate and individual right, as against the carrier or
earriers named in the order. In other words, each individual
shipper who is named in such an award will have a separate
and independent right of action against the carrier or carriers
damaging him, as named in the order.

Assuming now that an award order has been made, and that
the carriers refuse to pay, and a suit is brought. There may be
in the case 10, 20, 50, or even 100, or perhaps more complainants
in whose favor these varying but separate and independent
awards are made by the order, and there may be two, a half
dozen, or even a dozen carriers named as defendants. Mani-
festly a jury trial would be impracticable and impossible in
such a case. Perhaps that is the reason why the framers of
this bill eliminated that Constitutional requirement by making
no provision for its observance, but that does not change the
fact that the bill in this particular is a grotesque absurdity. to
enact which would discredit the intelligence of the Congress.

PENALTIES.

There are many other provisions of this bill that might be
justly and severely criticised, but I have called attention to
enough to warrant the conclusion that if it should be passed
there will be many orders made affecting the rights of car-
riers, especially under section 15, as this act proposes to amend
it, of the interstate commerce act, which seeks to empower the
Interstate Commerce Commission to change rates and establish
through routes, which the carriers will desire to litigate.

What the Commission regarded as a slight and reasonable
change of rates in the Maximum Rate Case amounted to a
difference in revenue to the railroads of $3,000,000 per annum.

6583
45

The change in rates made by the Commission in the Dressed
Meats and Packing House Products case amounted during a few
months, for which a cemputation was made, to a difference in
revenue to the railroads of almost $2,000.000, and so it is likely
to be in every change of rates that the Commission may make
that there will be, aside from al! other considerations, a large
amount of money involved, to the surrender of which the car-
riers may feel they have no right to submit without an appeal
to the courts, but in no such case can they appeal to the court
under the provisions of the bill as it passed the House without
subjecting themselves to the following provision as to penalties:

Any carrier, any officer, representative, or agent of a carrier, or any
receiver, trustee, lessee, or agent of either of them, who knowingly
fails or neglects to obey, any order made under the provisions of section
fifteen of this act, shall forfeit to the United States the sum of five
thousand dollars for each offense. Every distinct violation shall be
a separate offense, and in case of a continuing violation each day shall
be deemed a separate offense.

If an order be made that a carrier shall charge only a certain
rate for the transportation of a certain article between given
points, every charge of a different rate for such transportation
will be a separate offense. There may be, therefore, many
offenses for each day that the order is not observed. There will
surely be as many as there are shipments charged for at a rate
other than that fixed by the Commission. And there will be as
many more as there are officers, agents, ete., of the carrier
participating in the offense. Upon this theory the result to the
railroad would be as many penalties of $5,000 each as there were
shipments at rates other than those prescribed by the Commis-
sion, increased by the number of officers, agents, etc., participat-
ing in the offense. There might be ten or twenty or a hundred
of these offenses, or even thousands, in a single day. On top of
all this, in case of a continuing violation, there is to be for each
day an additional $5,000. It has been claimed that the entire
penalty in case of a continuing violation is to be only $5,000 a
day. The language employed does not admit of this construc-
tion. But assuming that this construction is correct, then the
penalty prescribed would be $5,000 per day, or at the rate of
$150,000 per month.

It is fair to presume that any such litigation as a carrier
would be required to resort to for protection against an order
it might deem unreasonable and unjust would extend over a
period of months if not years. During all such period this
penalty would be piling up against it, to be paid by it in the
event of a final decision upholding the order of the Commission,
for while the court might have power to suspend the payments
of these penalties thus imposed from day to day during the
litigation, it would not have power to grant relief from the
cumulative obligation in the event it should be decided that
the railroad had without just cause contested the validity of
the Commission’s order, for in that event the restraining order
would have been wrongfully issued. When it is considered that
this penalty is to run against the carrier and against every
officer, agent, or employee of the carrier who knowingly fails or
neglects to obey any such order it is apparent that the penalties
thus prescribed are of such extreme, cumulative, and burden-
some character as to deter a carrier from resorting to the

6583
46

courts, except only where either the case is entirely clear as
to its final outcome or the consequences of an obeyance of the
order are of such bankrupting character as to make it impos-
sible, with due regard for the rights of its creditors and stock-
holders, for it to submit.

In the case of Cotting v. Kansas City Stock Yards Co., 183
U. S., 79, the court, although finding it unnecessary to decide the
point, took occasion to discuss the effect of cumulative and bur-
densome penalties upon the rights of parties to appeal to the
courts. At page 100, Mr. Justice Brewer said, after speaking of
the character of penalties under consideration in that case:

In this feature of the case we are brought face to face with a ques-
tion which legislation of other States is presenting. Do the laws
secure to an individual an equal protection when he is allowed to
come into court and make his claim or defense subject to the condition
that upon a failure to make good that claim or defense the penalty for
such failure either appropriates all his property or subjects him to
extravagant and unreasonable loss? Let us make some illustrations to
suggest the scope of this thought. ¥

Suppose a law were passed that if any laboring man should bring or
defend an action and fail in his claim or defense, either in whole or in
part, he should in the one instance forfeit to the defendant half of
the amount of his claim, and in the other be punished by a fine equal
to half of the recovery against him, and that such a law, by its terms,
applied only to laboring men, would there be the slightest hesitation in
holding that the laborer was denied the equal protection of the laws?
The mere fact that the courts are open to hear his claim of defense is
not sufficient if upon him and upon him alone there is visited a sub-
stantial penalty for a failure to make good his entire claim or defense.
Take another illustration: Suppose a statute that every corporation
failing to establish its entire claim, or make good its entire defense,
should, as a penalty therefor, forfeit its corporate franchise, and that
no penalty of any kind, except the matter of costs was attached to like
failures of other litigants, could it be said that the corporations re-
ceived the equal protection of the laws? Take still another illustra-
tion: Suppose a law which, while opening the doors of the courts to all
litigants, provided that a failure of any plaintiff or defendant to make
good his entire claim or entire defense should subject him to a forfeiture
of all his property or to some other great penalty; then, even if, as all
litigants were treated alike, it could be said that there was equal pro-
tectign of the laws, would not such burden upon all be adjudged a
denial of due process of law?

Of course, these are extreme illustrations, and they serve only to
illustrate the proposition that a statute (although in terms opening the
doors of the courts to a particular yee) which places upon him as
a penalty for a failure to make good his claim or defense a burden so
great as to practically intimidate him from asserting that which he
believes to be his rights is, when no such penalty is inflicted upon
others, tantamount to a denial of equal protection of the laws. It may
be said that these illustrations are not pertinent because they are of
civil actions, whereas this statute makes certain conduct by the Stock
Yards Company a criminal offense, and simply imposes punishment for
such offense; that it is within the competency of the legislature to pre-
scribe the penalties for all offenses, either those existing at common
law or those created by statute; and, further, that although the pen-
alties herein imposed may be large, yet obedience to a statute like this
can only be secured by large penalties; for otherwise the company, be-
ing wealthy and powerful, might defiantly disregard its mandates, trust-
ing to the manifold chances of litigation to prevent any serious loss
from disobedience. A penalty of a dollar on a large corporation, whose
assets amount to millions, would not be very deterrent from disobedi-
ence. It is doubtless true that the State may impose penalties such
as will tend to compel obedience to its mandates by all, individuals or
corporations, and if extreme and cumulative penalties are imposed only
after there has been a final determination of the validity of the statute,
the question would be very different from that here presented. But
when the legislature, in an effort to prevent any inquiry of the validity
of a particular statute, so burdens any challenge thereof in the courts
that the party affected is necessarily constrained to submit rather than
take the chances of the penalties imposed, then it becomes a serious
aoe whether the party is not deprived of the equal protection of
the laws.

6583
47

This language, so employed by Mr. Justice Brewer, might
well have been uttered with special reference to this penalty
provision of the Hepburn bill. The penalty is large; it is cumu-
lative; itis burdensome. No railroad can afford to run the risk
of it, except only in desperate cases that compel a choice between
evils, and manifestly the provision was made, to quote the lan-
guage of Mr. Justice Brewer, “in an effort to prevent any in-
quiry of the validity of this particular statute.” Such a provi-
sion is wholly different from one imposing a burdensome and
cumulative penalty for the continuing violation of a statute after
its validity has been upheld in the courts. If this provision is
to remain in the bill in the form in which it is expressed, it
should be amended by the addition cf a proviso that in the event
cf an appeal to the courts there should be an absolute suspension
of the penalties during the full period that any order of such
suspension may be in force while the litigation is in progress;
otherwise the courts will no doubt hold it invalid.

THE BILL DOES NOT PROVIDE FOR ANY PROPER REVIEW BY THE COURTS.

Many other objections and imperfections might be pointed
out, but enough have been mentioned to show why the framers
of this bill should seek by the terms of it to prohibit a full re-
view by the courts of the orders and proceedings of the Com-
mission, except only as to whether they have been “ regularly
made,” which means nothing more than a review of the ques-
tion in any given case, whether an order of the Commission con-
demning a rate and fixing another to take its place has been
made in conformity with the proceedings and requirements of
the statute, not whether the rate condemned was or the rate sub-
stituted is reasonable or just or fairly remunerative as the bill
allows and requires.

The points mentioned are sufficient, however, to show that if
by any possibility this bill should be both passed and upheld by
the courts, the powers conferred by it upon the Commission are
so vast that there is a special reason in that fact alone for sub-
jecting the exercise of them to the most careful scrutiny and
review by the judicial department of the Government, not only
on behalf of the railroads, but also on behalf of the shippers.

Fortunately some of the most important of the questions to
which attention has been called can not be withheld from the
courts. But the power to review the question as to whether a
rate condemned cr arate made by the Commission in a given case
is reasonable is, unfortunately, not one of these. The making
of a rate is a legislative act, and legislative discretion of the
Commission in determining what is a reasonable rate can not
be interfered with by the courts in the absence of special
statutory authority, unless the rate be fixed so high that it is
extortionate to the shipper, or so low that it is confiscatory as to
the carrier. There is some room for a difference of opinion, be-
cause of some of the expressions of the courts in some of the
eases as to what will be regarded as extortion on the one hand,
or confiscation on the other, but none as to the general rule.

But between extortion on the one hand, and confiscation ou
the other, there is, in most cases, a considerable latitude within
which the action of the Commission, without special statutory
provision for review of it by the courts, would be final and con-
clusive.

6583
48

In a given case a dollar might be a point at which a rate
would become extortionate, and 60 cents a point at which it
would become confiscatory. A rate anywhere between these
figures would be, in a legal sense, reasonable, and beyond the
power of the courts, without special statutory provision, to review
it, because it expressed the legislative will. If the rate were
fixed at 90 cents it might yield a net revenue to the carrier of 6
per cent; if fixed at SO cents a net revenue of 4 per cent; if
fixed at 70 cents a net revenue of 2 per cent; if fixed at 60 cents
no revenue at all.

Even 6 per cent might be, under certain circumstances, an
unreasonably low return for the carrier. Much more might this
be true as to 4 per cent or 2 per cent, and yet as the bill is
framed the courts are denied jurisdiction to review all such
questions, and in this denial there is strong probability, if not
absolute certainty, that great and irreparable wrong may be
done.

But this denial extends also to the action of the Commission in
condemning the original rate, which is a purely judicial function,
and without which precedent judicial action the legislative ac-
tion of fixing a new rate can not be had. Whatever may be said
as to the propriety of investing the court with jurisdiction to re-
view the legislative act of fixing a new rate, it is difficult to per-
ceive how there can be any difference of opinion as to the
propriety of the courts haying power to review the judicial act
of denouncing and setting aside the old rate. But the bill denies
this power by the restriction of the review to the question of
“veeularity,’” for the Federal courts, unlike the courts of the
States, are net courts of general jurisdiction, but courts that
have only the power and jurisdiction conferred by the Constitu-
tion, and such additional power and jurisdiction as may be ex-
pressly conferred by statute.

This same denial extends to orders as to rules and regulations
of every character that the Commission may prescribe, and the
same kind of objection to such restriction may be made.

Why should this jurisdiction be withheld from the courts?
Wlio distrusts them? Only violators of the law have ever had
occasion to fear the justice they administer.

They have been from the beginning of the common law the
sure bulwark of the liberties and rights of the Anglo-Saxon
race.

Unmoved hy passion, prejudice, or public clamor, they have
ever been the conservative, steadying, reassuring factor in
American Government.

Why should the advocates of this measure, affecting as it does
the highest interests of the American people, seek to exclude
them from their appropriate participation in the determination
of the great questions that such legislation is sure to precipi-
tate? That there is this unwillingness to allow the courts an
unrestricted review is enough not only to excite distrust of this
mneasure, but to condemn it.

All this is intensified by the fact that in the law as it now
stands there is a complete provision for this review, as well as
for the protection of the right of trial by jury.

Section 16 of the interstate commerce act, as it now stands,
proyides that whenever any common carrier shall fail to obey

6583
49

any “lawful” order of the Commission, “not founded upon
a controversy requiring a trial by jury,” it shall be lawful for
the Commission, or any person interested, to apply to the court
to enforce such order, and the court shall have power to hear
and determine the matter “ speedily as a court of equity” * * *
“in such manner as to do justice in the premises; and to this
end such court shall have power * * * to make all such in-
quiries as the court may think needful to enable it to form a
just judgment, * * * and if it be made to appear to such
court * * * that the lawful order * * * drawn in question
las been violated or disobeyed, it shall be lawful for the court
to enforce it,” ete.

Aside from all legal questions involved, there is just ground
for questioning the wisdom of conferring upon a statutory
board appointed by the President, such autocratic powers as
this bill confers upon the Commission with respect to such tre-
mendously important interests. But it becomes alarming when
it is seriously proposed in the form of a bill that has already,
with practical unanimity, passed one House of Congress, to
exclude from review and supervision and control by the courts
the exercise of that power, except only to the extent of in-
quiring and determining whether or not the proceedings under
the statute have been regular. Thoughtful men may well take
fright when they recall that these powers are to be given to a
commission to be thus exercised without supervision or con-
trol, which, according to the decisions of the Supreme Court of
the United States, has erroneously decided almost every im-
portant case upon which it has passed judgment during the
whole period of the nineteen years of its existence.

To the long list of such reversals another was added on last
Monday, when the Supreme Court reversed the Interstate Com-
merce Commission in the Fruit Growers’ case. That case strik-
ingly illustrates both the unwisdom and the injustice of con-
ferring upon the Interstate Commerce Commission powers that
are not to be supervised by the courts.

The question in the case was whether the shipper or the ini-
tial road should determine the routing of fruit shipped from
California to eastern cities.

The testimony showed conclusively—in fact, there was no con-
tention to the contrary—that the shipper insisted upon routing
bis fruit shipments so that he might secure rebates from the
eastern connections of the initial California road.

These rebates were of large amounts, aggregating, for the next
four years preceding 1900, to one of the complainants alone
$175,000.

The roads took the routing into their own hands to break up
this practice of rebating, and the Interstate Commerce Commis-
sion held against the right of the roads to do this. The elfect of
their decision, if allowed to stand, was to restore the wholesale
practice that had previously been indulged in of granting re-
bates, or the encouragement of the most serious complaint that
has ever been made against the railroads. If the Supreme
Court had not had power to review and reverse, that decision
would have stood, to the great detriment of all the interests in-
volved and to the constant encouragement of a violation of the
interstate-commerce act.

6583——4
50

-But, passing all that by, there is no necessity for any such
legislation.

Under the Elkins Law, if enforced, all kinds of rebates and
discriminations as to both persons and places can be broken up
and prohibited as nearly as any kind of offense against the law
can be suppressed; but, if it were otherwise, this law would not
help matters, but only make them worse.

It does not profess to deal with rebates or to prevent carriers
engaging in other kinds of business, and has not one line in it
that affords any remedy whatever against these, the greatest
and most serious and most complained-of evils of all that have
been mentioned.

It does not undertake to meet the demand, whether well or ill
founded, for uniform classification; neither does it undertake to
deal with the ‘‘ relation of rates” or discrimination as to local-
ities.

The House Committee on Interstate and Foreign Commerce in
its report on this bill said with respect to it:

This bill does not attempt to give power to the Commission to read-

just classifications of freight.
= * co * * * *

As but little complaint has been made to the committee concerning
classification, it was not deemed wise at this time to suggest new legis-
lation upon that subject. So, too, with the question of the relation of
rates, The committee has not deemed it wise at this time to suggest
new legislation to change existing law upon that subject. It is one of
very great importance—interesting, however, as a rule—to certain par-
ticnlar communities rather than to the public at large. It involves
conflicts between towns and cities rather than the public generally, and
it relates more to the building up of certain local interests of a lecal
nature rather than to the interests of the people of the whole country.
Therefore we thought best not to hamper or hinder the subjects of the
bill by adding to them those other less urgent considerations.

In this heartless way are dismissed the appeals for relief
that have been coming up to the American Congress for the last
twelye months from hundreds of places which, like Cincinnati,
have been claiming that they are unjustly discriminated
against.

No wonder the committee felt constrained in concluding its
report to say that— ‘

No member of the Committee on Interstate and Foreign Commerce
believes that the provisions of this bill will be satisfactory to all per-
sons who may be affected by it, nor that it will be satisfactory even
to those who desire legislation upon the lines of the bill.

And yet this bill, thus confessedly unsatisfactory to every
member of the House committee and probably to every member
of the House of Representatives, passed the House without
amendment, because, as the newspapers announced, “ the order
had gone forth” that, while there might be debate, no amend-
ment—no matter how necessary it might appear—should be al-
lowed. _ The biN came to the Senate, and, so far as the com-
mittee is concerned, there has been a repetition of that experi-
ence. No matter what may be its defects and no matter what
this, that, or the other Senator may think, not an “i” shall be
dotted nor a “t” shall be crossed of all this important meas-
ure. To even suggest that the bill is filled with unconstitu-
tional provisions or that it will prove impracticable in opera-
tion is heralded as a species of treason and disloyalty—to whom
or to what nobody knows. The whole proceeding is without a
precedent in my experience as a member of this body and prob-

6583

 
51

ably without a precedent in the history of the nation. If we
are to abdicate our functions and permit such an imperfect, ill-
advised, and ill-considered bill to become a law, discredit will
attach and disappointment will follow, not only to “ those who
desire such legislation,’ as the House committee suggested, but
to all the people of the whole country.

It will prove thus disappointing because if it does not fail and
perish in the courts, experience will shortly demonstrate the
utter impracticability of satisfactory rate making by a commnis-
sion.

Approximate successes in small areas, if there are any such
precedents, Go not afford a safe guide for the vast field pre-
sented by the whole country, embracing every section and pre-
senting every possible complication and difficulty that can be
involved in railroad operation.

These roads with their innumerable ramifications spread over
the whole country, penetrating every section, crossing and re-
erossing each other at all important points, and wherever they
cross or come in contact, and in some cases where they are thou-
sands of miles apart or even run in opposite directions, they are
in sharp competition with each other.

As a result of it all rates are adjusted with such nicety that
the gross revenues of the roads are so closely calculated to meet
interest, dividend, and operating expenses that a reduction of
1 mill on the cost of transnorting a ton of freight per mile
would so reduce the aggregate as to make it impossible for the
roads to pay one dollar of dividends on their stock; and a
further reduction of 14 mills per ton per mile would make it
impossible to pay one dollar of intrest on their bonded
obligations.

We should hesitate to disturb such conditions.

The answer made to this suggestion is that the Commission
will have so little rate-making power that no harm can result
from its exercise. If there be but little, then there must be but
little necessity. But the difficulty seems to lie in the fact, not
fully and properly appreciated, that rates are so interwoven and
interdependent that it is impossible to disturb one without affect-
ing many, and that since there will be no mode of relief afforded
under this bill except through maximum rate making, if we give
such an invitation for them as this bill amounts to, there are
likely to be the most serious disturbances resulting from the
exercise of this power. It matters not that the Commission, as
it has been contended, will consider only one rate at a time. If
it should make a change in that rate all other rates in any man-
ner dependent upon it would have to be correspondingly changed.

A change of rates on the products of the cotton mills of New
England to Chicago and western points would necessitate a
corresponding change of rates on the products of the cotton
mills of the South to the same points, for they are all adjusted
with reference to each other.

A change in the rates on coal and iron from Pennsylvania
and West Virginia to northern and western points would neces-
sitate corresponding changes on coal and iron from all points
in the South to the same markets.

A change of rates on lumber from Michigan and the North-
west to the prairies of Nebraska and other States would necessi-
tute a corresponding change not only in the rates from the

6583
52

lumber States of the South, but also on lumber from the far
distant Pacific coast States.

A change in the rates on cotton from Memphis over the short
haul across the country to the cotton mills of Georgia and the
Carolinas would necessitate a corresponding change in the rates
on cotton over the long haul from Memphis north and east,
through Cincinnati, to the cotton mills of New England. Other-
wise the roads that carry for the cotton mills of New England
would lose their cotton business to the roads that carry to the
cotton mills of the South, or lose it to the Mississippi River and
the roads that compete with that highway to New Orleans and
the other ports of the South.

Ocean transportation in the coastwise trade compels low rates
over the Atlantic Coast Line to the principal points of the
South. This compels the Seaboard Air Line, which parallels, to
give like low rates or lose its business to the Coast Line; and
the Southern Railway must meet this competition or lose its
business to its competitors, and so on indefinitely. In other
words, the rates over all these roads from these great cities of
the North to all these great cities of the South are dependent
one upon the other, and all are governed by water transporta-
tion and the conditions of nature, which constitute a power
greater than the railroads, greater than the Congress, greater
than any earthly power.

To touch the rates on any one of these lines is to touch the
rates on all of them.

To touch the rate on any one commodity on any one of these
lines is to touch the rates for that commodity over all these
lines.

To touch the export rates over the lines from the Missouri
and Mississippi valleys to New York and other North Atlantic
ports is to touch the rates from the same points of origination
over the lines to New Orleans and Galveston and other Southern
ports, for they all have carefully adjusted relations to each
other.

“The opening of new mines, the building of new factories, the
starting of new furnaces and mills and shops, the building of
new roads, the location and development of new settlements and
towns and cities, the constant fluctuations of the markets at
home and abroad, peace and war, droughts and floods, long and

short crops, famine, pestilence, and the plague, all, whether
occurring in Europe, Asia, Africa, South or North America,
affect supplies, influence markets, and control the prices of
transportation.”

Illustrations and suggestions might be multiplied indefinitely,
but enough has been said to show that it is idle to talk about
the “restricted” exercise of the power of rate making, which
it is proposed to confer on the Commission. No such thing is
possible. It is as broad as the dependence of rates on each
other and as difficult as the laws and forces of trade and com-
merce, and broader by far and more difficult than it is possible
for any commission to deal with.

This work is done to-day by thousands of expert rate makers
scattered throughout the country, familiar by long experience
wita the business, familiar with local conditions, and familiar
with the requirements of changes in conditions as from time to
time they suddenly come to pass. They may not be doing their

6583
53

work perfectly. Nobody claims they are. No human effort
can be perfect, but they are doing this work better than it is
possible for any commission to do it that we may create. All
these considerations impel me irresistibly to the conclusion,
irrevocable in the absence of new light, that it will be a serious
mistake to enact this measure.

Many other objections might be urged, but time and strength
forbid pursuing the subject further for the present, so I hasten
to conclude.

What, then, are we to do? The answer is plain. We can ac-
complish everything desired by simply amending the Elkins law
so as to broaden and strengthen it and make it more available.

This is easily done. An amendment making such provisios
will be offered at the preper time. I shall try to find opportu-
nity to speak upon it then at such length as may be necessary
to fully explain it. For the present it is enough to say that the
purpose of this amendment will be not only to preserve the bene-
fits of this salutary law, but to make them available, for every
kind of case that can possibly arise, to the humblest shipper
in all the land. This may be done by extending the provisions
of the third section of the Elkins law to excessive rates, and by
making it specifically applicable to every kind of rebates and
discriminations as to both persons and places, and by making
it the duty of the Interstate Commerce Commission not to act
as judges, and legislators, and prosecutors, and sheriffs, but to
address themselves to the purely executive duties of hearing
complaints, exercising their powers of conciliation, and, where
these powers fail and they find there is probable cause, sending
the case at once, through the Attorney-General, to the proper
court for immediate proceeding, in the name of the Government,
for the benefit of all parties interested, without expense to the
shipper.

The great difficulty shippers have had in the enforcement of
their rights against the railroads has been that no shipper single
handed and alone can, as a rule, afford to resort to the law with
a railroad for his antagonist. The disadvantage is too great
on many accounts, and particularly because the shipper is
likely to be subjected to an expense he should not be required
to bear; but if he can invoke the protection of the courts in the
name of the Government, and without expense to himself, he
will not fear to assert his rights, and if the railroad knows that
it is charging him an unjust rate, or subjecting him to an
unlawful discrimination, and that if it does not desist from
such practice it will be called to account in the courts, where
it will have the Government for prosecutor, it will in most
if not in all cases make haste to agree with him.

I regret that it has seemed necessary for me to so long de-
tain the Senate. There is much more I would say if it were
not that I fear I would overtax your patience. I reserve all
that for some future opportunity, and content myself for this
oceasion with the addition of a word somewhat personal.

It is not either easy or agreeable to differ with the Presi-
dent. He is the head for the time being, not only of the nation,
but also of the political party of which I am proud to be a mem-
ber. I believe that the welfare of the nation is most beneficially
affected and promoted by the supremacy of Republican policies,
and on this account think every man who believes in the policies

6583
54

of that party should do all in his power to secure harmony of
purpose and unity of action among its members with respect to
national affairs. In this behalf he should be willing to make
concessions in minor matters; but when questions arise of such
commanding importance as those now under consideration it is
the duty of every man who has an official responsibility to dis-
charge with respect to them to make careful investigation and
then act in accordance with the convictions he may reach as a
result. To the best of my ability I have done that.

I dislike exceedingly, as every other public man does, to be
arraigned before the country by unfriendly critics as prompted
by unworthy motives in the attitude assumed, and to suffer in
consequence in the esteem of the people. It is far pleasanter
to go with the tide of public sentiment and enjoy the benefits
of harmonious relations with coworkers in the public service
and have the acclaim instead of the disapprobation of constitu-
ents; but no man who allows himself to be controlled against his
judgment, by considerations of this character, can do his duty,
or maintain his self-respect, or be entitled to retain the respect
and confidence of his colleagues and constituents. If we enact
this measure and it proves disappointing, as I believe it will,
the people will not hear us to say in our defense that we
legislated in response to their demands. They expect their
representatives, especially in this body, with respect to ques-
tions of this character, to act intelligently, patriotically, and
in accordance with their judgment and their oath of office which
binds them to disregard public clamor and legislate for the pub-
life welfare as they see and understand it. We owe it to our-
selves, as well as our constituents, to meet this just expectation.

6583

O
 
REGULATION OF RAILROAD RATES.

SPR EG A

OF

HON. ROBERT J. GAMBLE,

OF SOUTH DAKOTA,

IN THE

SENATE OF THE UNITED STATES,
Fripay, APRIL 6, 1906.

(Vy
4a
af

WASHINGTON.

1906,
6¢81
Regulation of Railroad Rates.
SPEECH

or
HON. ROBERT J. GAMBLE,
OF SOUTH DAKOTA,
IN THE SENATE OF THE UNITED STATES,
Friday, April 6, 1906.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled *‘An act to regulate commerce,” approved Febru-
ary 4, 1887, and all acts amendatory thereof, and to enlarge the powers
of the Interstate Commerce Commission—

Mr. GAMBLE said:

Mr. PrResipentT: It is not my purpose to detain the Senate
with an extended discussion of the questions raised by the pend-
ing bill. The issues involved have already been most ably and
exhaustively discussed. I trust I may not seem too pre-
sumptucus in asking the indulgence of the Senate, or in the
observations I may make upon this most important subject.

In the discussion so far, it appears to be coneeded that abuses
have existed and do exist in railway management, and that an
intelligent and honest effort should be made looking to their
correction. Differences, however, do exist as to the remefies
proposed and the manner under constitutional limitations in
which these evils may be lawfully and most effectively reached.

That the Government possesses the plenary power, and that it
can in some manner lawfully exercise it, it seems to me is be-
yond dispute. The form and manner of its exercise under the
Constitution can, it occurs to me, be solved by the wisdom of
this Congress along the lines proposed by the pending measure.
The issue has been raised, and its wise and just solution is
pressed upon this Congress. ‘The interest of the people is so
centered and insistent for the correction of the abuses com-
plained of, an answer should be given by the enactment of a law
at this session of Congress that will be responsive to the demand
and that will effectively reach and to the fullest extent remove
the evils that admittedly exist. No demand is made here for
radical action or to make an unjust and unreasonable assault
upon vested interests or property rights. It is to place in the
concrete form of law, and to invoke only the lawful exercise of
those powers inherent in every government for the protection of
its citizens engaged in whatever calling, to give each an equal
opportunity, and for the upbuilding and conservation of indi-
vidual interests and communities as well as for the whole people
of the entire nation.

6681 3
4

The necessity for the proposed legislation is urgent and is
demanded by the highest consideration of every public inter-
est in behalf of the producing as well as the consuming classes
of our population. Every interest of our people is dependent
upon and interwoven with the problem of transportation. In
this day and age every individual is affected by it. Every com-
munity is within its reach, and its transportation facilities and
the rates charged make for its upbuilding or its undoing. The
just and proper control and regulation of these great agencies
of our business and commercial life means the giving of equal
opportunity to the individual as well as to the community, with
proper regard in the latter case to natural and commercial ad-
vantages.

The proposed legislation, with its honest observance by the
earriers, would, I believe, produce substantial and wholesome
results to our entire business and commercial interests and
would promote in a large degree the uniform prosperity and
well-being of the nation. The enormous powers possessed by
these great corporations, and the great public agencies they
subserve, affecting practically the market value of all products
of whatever character and the values and interests of every
locality and individual, make it of the highest importance to
every interest of the people and of the nation that the power
of the Federal Government should be recognized in effective
regulation and control, so that these great instrumentalities for
our commercial and material development may in the highest
degree serve the purpose of their creation. While fair treat-
nent and exact justice are sought for the people the same con-
sideration should be accorded the carriers.

All recognize the vast interests involved, and of its interre-
lation with the whole fabric of our business and commercial
life. A proposition that has to deal directly with the property
rights of such vast magnitude and the correlated interests of
the whole people of our entire country has had and will have the
most serious consideration for its wise and just solution. A
wrong done the transportation companies would have a direct,
immediate, and like result upon the business interests of the
country.

Their interests are so vast and their annual transactions
so great they almost pass the limit of our comprehension. Of
the railway mileage of the world, 550,000 miles, we possess
220,000, or two-fifths of the total. The gross earnings the past
year amounted to $2,100,000,000, There are engaged in the
railway service 1,300,000 employees. The wages paid those
engaged in the railway service for the year 1904 were $817,-
598,810. The total valuation of the railways amounts to
$11,250,000,000. The dividends declared and paid the past year
were $230,000,000. The number of passengers carried by the
railways for the year ending June 30, 1904, was 715,000,000, and
they transported 1,309,000.000 tons of freight.

We are bewildered almost by the recital of these general
statements. Aside, however, from their magnitude, how mani-
fold and infinite are their transactions with the millions of in-
dividuals they serve and the communities they reach.

The railways have been most important factors in our eco-
nomic and material development. The marvelous development
of our interior, not accessible to water communication, has been

66381
5

made possible by the projection of the great arteries of com-
merce with infinite interlacing reaching from ocean to ocean.
In many cases they preceded the settler. They extended into
new and vast areas of our domain and made possible the rapid
and marvelous growth of our material wealth, the acquisitior
to our strength as a people and to our integrity as a nation.
With very much truth it has been said that—

Without the railroads three-fourths of the immense territory of the
United States, situated too far from the sea and having insufticient
communication by rivers or lakes, would be still almost deserts and
would not play in the economic life of the world a more important
part than Siberia did before being lifted from her isolation by the
Trans-Siberian Railroad.

The States as well as the Federal Government have been most
generous in their treatment of the railway corporations in the
powers conferred through their charters as well as by direct
grants. The control of these corporations both by the States
and the General Government has, as a rule, been extremely lax.
In the very nature of things, under the great stimulus of our
marvelous development and with the concentration of such vast
capital in the construction of railways and of the rivalry and
competition thus engendered, abuses would develop seriously
effecting the public welfare.

Many of the States sought to correct the evils, but State laws
could only have application to a very limited amount of traffic,
and it was found, if an efficient remedy was to be applied, re-
course must be had through the Federal Government. The pop-
ular demand was so strong for the correction of the evils com-
plained of that it finally resulted in the enactment of the inter-
state-commerce act of 1887. That this law has been productive
of much good to the business and commercial world is not denied.
It asserted the power of control by the Federal Government, that
was a long step in advance. The position then taken by Con-
gress, when that act was under consideration, was as vigorously
and persistently resisted by the railways as the measure we
now have before us. Dire results were prophesied then as now
as to the effect of the proposed law on the interests of the rail-
ways and the business world.

The Interstate Commerce Commission construed the act of
1887 as granting to the Commission the power to fix rates for
the future. The Commission exercised the power under the act.
That construction, or the exercise of the power thereunder by
the Commission, was not questioned by the railways for over
ten years. As sustaining this, I quote the following from the
annual report of the Commission for the year 1897:

The Commission exercised this power in a case commenced in the
second month after its organization and continued to exercise it for a
period of more than ten years, during which time no member of the
Commission ever officially questioned the existence of such authority or
failed to join in its exercise. As already stated, the authority of the
Commission to modify and reduce an established rate and to enforce
a reasonable rate for the future was not questioned in the answer of the
defendant in the Atlantic Rate case, decided March 30, T896, nor had it
ever been denied in any answers made in more than four hundred pre-
viously commenced, many of them alleging unreasonable and unjust
charges, and praying the Commission to enforce a reduction and lower
the rates in the future.

Notwithstanding this legislation, and the power exercised
under it by the Commission in fixing rates, and the explicit
declaration by the Supreme Court of the United States that

6881
6
although the power was not conferred in the act yet Congress
had power to exercise it, either directly or through a Commis-
sion, no dire results have befallen the railways, but instead it
has been the era of their most marvelous prosperity and develop-
ment, the like of which no other country or time can compare.

Mr. President, I do not have any misgivings as to the effect of
the proposed legislation on railway property or railway interests.
It has been apparent to anyone at all conversant with the
conditions existing for the past year and upward that Congress
would take cognizance of the question and that legislation along
the lines proposed in the pending bill would be enacted. Not-
withstanding this railway securities have in no way been de-
pressed, nor have investments been discouraged therein. At
no time in the history of the Government has there been greater
confidence in these properties. Unusual investments have been
made in betterments, in extensions, and.in general railroad devel-
opment. The literature published and sent broadcast by the rail-
way interests to resist any and all legislation upon the subject
has been appalling. The fears expressed and prophesies made
as to the harmful effect. of the proposed legislation does not
seem to impress itself, so far, upon either the investments or the
properties, or to discourage further development and extensions.

The demand for relief from the abuses complained of and
which are sought to be corrected by this bill has been most
insistent for many years. The need for correction has been
admitted in this discussion. The declaration of the President
in his annual message to Congress in 1904 very clearly stated
the issue, as follows :

While I am of the opinion that at present it would be undesirable, if
it were not impracticable, finally to clothe the Commission with the
general authority to fix railroad rates, I do helieve that, as a fair
security to shippers, the Commission should be vested with the. power,
where a given rate has been challenged and after full hearing found to.
be unreasonable, to decide, subject to judicial review, what shall be a
reasonable rate to take its place, the ruling of the Commission to take
effect immediately, and to obtain unless and until it is reversed by the
court of review.

It-is upon this question the issue has heen concentrated, both
here and by the people. If relief is to be secured, it seems to
me it can only come along the lines suggested and in the manner
proposed by the pending bill. The issue was again stated and
the necessities therefor were fully set out in the President’s
message of December last. By his decisive stand on this most
absorbing question he has focused the attention of the whole
country. No other subject so absorbs public attention at this
hour,

In his message of 1905 the President again recommended con-
ferring the power upon a competent administrative body to
decide upon a case being brought before it, and after a full.
hearing if the rate then in force was found to be unreasonable
and unjust “to prescribe the limit of rate beyond which it shall.
not be lawful to go--the ‘maximum reasonable rate,’ as it is com-
monly called—this decision to go into effect within a reasonable
time and. to obtain from thence onward, subject to review by the
courts.”

It is-seen the President,.both in the message of 1904 as well
as in his message of 1905, took the position that the decisions
inade by the Commission should be subject to review by the
courts. .

6681
7

No other construction, it seems to me, can he predicated upon
the provisions of the pending bill. Differences, however, are
entertained as to the extent to which the courts may be appealed
to under its provisions,

It is asserted, however, with great force that the evils com-
plained of can be corrected and the relief secured through the
courts as already constituted with supplemental legislation in
aid of the Elkins law. ‘his in itself is an admission of the
necessity for additional legislation and that the laws now in
force are ineffectual to reach existing conditions.

The courts now are and have been open to litigants. But it
must be conceded that the remedy is practically ineffective and
largely abortive. The parties to the contest are unequil. The
facts are largely in the possession of the railway company.
Too often the shipper is practically at the mercy of the carrier.
He hesitates to initiate a contest, fearing as a result the burdens
upon him may be made more onerous. The amount involved as
to the particular complaint may not be large, and he hesitates
to enter into a contest that often concerns the community as
well as himself, and he alone assume the responsibilities. ‘The
preferences given to a competitor may in itself be sufficient to
overcome him and he is practically helpless. The delays inci-
dent to the litigation as a rule are xo great that the relief, if se-
cured, might be valueless under changed conditions.

That power is vested, and should he vested, somewhere in our
governmental machinery to correct abuses and to control these
great agencies of our commercial and business interests for the
benefit of the whole people must be conceded. That the courts
have proved ineffectual and must, it occurs to me, under any
scheme, be ineffectual to reach and correct the evils with that
promptness and efficiency the very nature of the relief sought
demands can not be answered. I do not make this as a charge
against the integrity or competency of our courts. The charac-
ter of the investigations to be made, the multiplicity of related
facts to be considered, and with the time taken and the delays
incident to court procedure make it, in the very nature of the
case, impossible to secure the relief desired with that dispatch
and promptness the business and interests demand.

The Constitution vests in the legislative department of the
Federal Government the power to regulate commerce between
the States:

The Congress shall have power * * * to regulate commerce

with foreign nations and among the several States and with the Indian
tribes. (Sec. 8. Art. I.)

The power thus granted to Congress to regulate commerce
carries with it the power to prescribe the rule by which it shall
be governed and the conditions upon which it shall be con-
ducted. This rule has at different times been declared by the
Supreme Court of the United States.

This power to regulate applies to the subject of commerce as
well as to the instrumentalities of commerce. It applies not
alone to its regulation in these respects, but to the compensation
for the service rendered. In the case of Philadelphia Steam-
ship Company v. Pennsylvania (122 U. S., 838) it was held:

The very object of engaging in transportation is to receive pay for it.
If the regulation of the transportation belongs to the power of Congress
to regulate commerce, the regulation of fares and freights receivable
for such transpcrtation must equally belong to that power.

6681
8

The principle contended for was asserted and established by
the courts of England more than a century ago. Chief Justice
Waite, in the case of Munn v. Illinois (94 U. S., 113), gives a
most interesting statement as to the rule under the common law
and the development of the principle in that country both
through legislation and the courts. He quotes a very sug-
gestive preamble from a statute passed as long ago as the third
year of the reign of William and Mary, as follows:

And whereas divers wagoners and other carriers, by combination
amongst themselves, have raised the prices of carriage of goods in
many places to excessive rates to the great injury of the trade: Be it
therefore enacted, ete.

Legislation to correct the evils complained of appears from
the recital of the facts to have been necessary even at that time,
and the principle was sustained by the courts of England. The
principles laid down by the Chief Justice in the above case
were of the utmost importance, and the assertion of the power
of public control over the subject-matter involved by that great
court, though at that time divided, has since been acquiesced
in and followed. It was held in this case:

1. Under the powers inherent in every sovereignty a govern-
ment may regulate the conduct of its citizens toward each other,
and, when necessary for the public good, the manner in which
each shall use his own property.

2. It has, in the exercise of these powers, been customary
in England from time immemorial and in this country from
its first colonization to regulate ferries, common carriers, hack-
men, bakers, millers, wharfingers, innkeepers, etc., and, in so
doing. to fix a maximum of charge to be made for services
rendered, accommodations, and articles sold.

3. Down to the time of the adoption ef the fourteenth amend-
ment of the Constitution of the United States it was not supposed
that statutes regulating the use, or even the price of the use, of
- private property necessarily deprived an owner of his prop-
erty without due process of law. Under some circumstances
they may, but not under all. The amendment does not change
the law in this particular; it simply prevents States from doing
that which will operate as such deprivation.

4. When the owner of property devotes it to a use in which
the public has an interest, he, in effect, grants to the public an
interest in such use, and must to the extent of that submit to
be controlled by the public for the common good as long as
he maintains the use. He may withdraw this grant by discon-
tinuing the use.

Following the above, and decided at the same term, is the
case of the Chicago, Burlington and Quincy Railroad Company
v. Iowa (94 U. S., 155), in which it was held that—

Railroads are carriers for hire. Engaged in a public employment
affecting the public interest, they are, unless protected by their char-
ters, subject to legislative control as to their rates of fares and freight.

The same doctrine was reasserted in the case of Peil v. Rail-
way Co. (94 U. S., at 178). The court said:

Where property has been clothed with a public interest the legisla-
ture may fix a limit to that which shall in law be reasonable for its use,
This limit binds the courts as well as the people. If it has been im-
properly fixed, the legislature, not the courts, must be appealed to for
the change.

The foregoing cases had relation to the power of State legis-
latures in the fixing of rates of fare and freight within the

6681
9

State. That Congress has the same power to deal with the sub-
ject, under the Constitution—with interstate rates—as State leg-
islatures have within their limitation seems to me beyond dis-
pute. This position has been repeatedly sustained by the
Supreme Court of the United States.

The power to fix rates must be conceded to be a legislative
function, and that power, under the Constitution, is vested in
Congress. To deny the power is practically to admit that cor-
perations of this class are a law unto themselves upon the ques-
tion of rate making and that the people are without any sub-
stantial.remedy. Resort to the courts, as I have before stated,
I believe is ineffectual, and it has been demonstrated to be such
by experience.

It has heen repeatedly held by the Supreme Court of the
United States that the legislature may declare the rule of law
that rates must be just, fairly remunerative. or otherwise, and
authorize an administrative body or commission to fix and
establish the rates or practice in conformity to the rule so
established. In the case of Reagan vr. Farmers’ Loan and Trust
Co. (154 U. 8., at 393) the court states:

There can be no doubt of the general power of a State to regulate
the fares and freight which may be charged and received by railroad
or other earriers, and that this regulation can le carried on by means
of a commission. Such a commission is merely an administrative board
created hy the State for carrying into effect the will of the titate as
expressed by its legislature.

The rule was still more clearly announced in the case of Com-
meree Commission 7. C. N. O. and T. P. Rwy. Co. (167 U. S., at
494). wherein the power of Congress as to the fixing of rates,
directly or through a commission, is fully declared by the court.
Mr. Justice Brewer, speaking for the court, said:

_ There were three obvious and dissimilar courses open for considera-

tien: Congress might itself prescrite the rates, or it might commii to
some subordinate tribunal this duty, or it might leave the companies
the right to fix rates, subject to regulations and restrictions, as well as
to that rule, which is as oid as the existence of common law. to wit,
that rates must be reasonable. * * * Administrative control over
raifroads through boards or commissions was no new thing. It had
been resorted to in England and in many of the States of the Union.
In England, while control had been given in respect to discrimination
and undue preferences, no power had heen given to prescribe @ tariff
of rates. In this country the practice had been varying.

In the same case it was held by the court that it was a judi-
eial act to inquire whether the rates which had been charged
and collected were reasonable. On the other hand, it was a leg-
islative act to prescribe rates which should be charged in the
future. This same doctrine has been repeatedly asserted by the
Supreme Ccurt of the United States and by many of the su-
preme courts of the different States.

Nor shal] any person * * * tbe deprived of life, literty, or prop-
erty without dve process cf law; nor shall private property be (aken for
public use without just compensation. (Fifth amendment to the Con-
stitution.)

This amendment limits the power of Congress in the exercise
of the right conferred by the Constitution. When this power is
exceeded the courts can intervene and protect the rights that are
sought to he invaded. These rights. being guaranteed and jvro-
tected by the Constitution, can not be disregarded hy the leg-
islative branch of the Federal Government. Nor do I believe
could this power be withdrawn from the courts by any legis-
lative device. Rights under the amendment are constitutional
guaranties, and no act of the legislative branch of the Govern-

6681
10

ment could deprive the court of jurisdicion in which any ques-
tion might be properly raised thereunder.

Nor shall any State deprive any person of life, liberty, or property
without due process of law; nor deny to any person within its jurisdic-
tion the equal protection of the laws. (Fourteenth amendment to the
Constitution.)

This amendment places the limitation upon the State legisla-
tures, and in case of its invasion jurisdiction attaches to the
courts of the United States. Under the Constitution the judicial
power of the United States is vested in a Supreme Court and in
such inferior courts as the Congress may from time to time or-
dain and establish. While the latter courts exist and possess
the powers conferred upon them by Congress under the Consti-
tution, the guaranty given and the protection accorded by this
amendment can not, in my judgment, be limited nor abridged by
legislation. They would be open, I believe, to litigants without
further amendment to the proposed bill for the protection of
those rights guaranteed to them under these constitutional pro-
visions.

For my part, Mr. President. I am anxious that in the proposed
legislation the remedy provided to correct the evils complained
of shall be efficient, speedy, and effective. If every order issued
by the Commission is to be subject to judicial review and its en-
forcement suspended until the subject-matter is finally disposed
of through the courts, with the delays incident thereto, I fear
the legislation will be most disappointing. It will fail to satisfy
the commercial and business interests of the country that have
heen most insistent for relief. I would be entirely willing,
however, that the matter should be put beyond cayil or ques-
tion, and that an explicit provision should be engrafted in the
bill conferring affirmative jurisdiction on the courts to hear and
determine whether the order or decision complained of was
beyond the authority of the Commission or in violation of the
rights of the carriers secured by the Constitution. This would
relieve the bill from the doubts suggested as to its constitution-
ality in this regard, and the jurisdiction, which is conceded by
the friends of the bill to be implied from its provisions, would
then be affirmatively recognized in specific terms.

No one desires legislation that will not stand the test of
judicial interpretation. The legislation sought is of vast con-
sequence and reaches most important interests. Every impor-
tant feature of its provisions has had and should have the
utmost consideration. The law may not, and probably will not,
accomplish all we expect. If possible it must be enacted in
that form most certain to demonstrate its efficiency.

There is no disposition to be unjust to the carriers. They
have rights guaranteed them the same as to individuals by the
Constitution and by the law. The rights of the shippers and
of the public should have the same consideration. There is no
suggestion in the bill. and especially with the amendment pro-
posed, of the denial of any right to either person or property
of the fullest constitutional protection. Resort to the courts,
even without amendment, is recognized by the provisions of
the bill. To deny the right of judicial review upon those
grounds guaranteed by the Constitution would be held to be an
attempt to take property without just compensation, and cer-
tainly if exercised would amount to the taking of property
without due process of law. ‘

6681
11

In the case of Chicago, Milwaukee and St. Paul Railway
Company rv. Minnesota (184 U. S.. 418), wherein the constirue-
tion of an act of that State in which the railway commission
was authorized to fix rates of charges and that they should be
final and conclusive as to their reasonablenes, and should not be
open to judicial inquiry as to their reasonableness, the court.
said:

This being the construction of the statute by which we are bound in
considering the present case, we are of the opinion that, so construed,
it conflicts with the Constitution of the United States in the particulars
complained of by the railroad company. It deprives the company of
its right to a judicial investigation by due process of law, under
the forms and with the machinery provided by the wisdom of successive
ages for the investigation judicially of the truth of a matter in con-
troversy, and substitutes therefor, as an absolute finality, the action of
a railroad commission which, in view of the powers conceded to it by
the State court, can not be regarded as clothed with judicial functions
or possessing the machinery of a court of justice.

This decision has been frequently referred to in this debate.
To my mind, with any fair construction of the provisions of
the pending bill, the principle laid down therein, which no one
questions, can not have application. As the bill comes to us
from the House the right of the carrier to apply to the courts
is expressly recognized. With the amendment suggested juris-
diction would be affirmatively extended. With the rights of
the carrier thus secured, and having an opportunity to go into
the courts to test the lawfulness of the order or decision of the
Commission, or as to whether its constitutional rights had been
invaded, no claim could be made that the action of the Com-
mission must be accepted as “an absolute finality,’ or that the
rights of the carrier under the Constitution lad not been pre-
served.

Even if it were attempted, Congress could not deprive the
courts of jurisdiction ct thore rights guaranteed by the Consti-
tution. If I understand the position taken by the friends of
this measure, the abeve contention: is not disputed. Under the
provisions of the bill jurisdiction of the courts is recognized,
and that parties aggrieved by any decision or order of the Com-
mission, at least within the constitutional protection, may seek
redress therein, and hence its validity could be impeached for
the foregoing reasons.

In my judgment there should be safeguards provided in the
bill requiring notice to be given to the Commission and other
parties in interest, and an opportunity for a full hearing had
before any injunction order should be granted suspending a de-
cision or order of the Commission. Constitutional guaranties in
every way must be recognized, and the interests of the public,
the shipper, and the carrier alike be protected. No other dispo-
sition has been manifested so far in this debate.

The question before us; Mr. President, is neither new nor un-
usual, Most of the States of the Union have invoked the same
power in the fixing of rates and fares, and have exercised it
through a commission, as is proposed: in this bill. These laws
and the manner of their exercise have been sustained by the
highest courts of the respective States and by the Supreme
Court of the United: States.

It is not proposed, as it has been so persistently asserted by
those conducting the campaign in opposition to this legislation,
to give to the Commission power to fix any and all rates at

6681
12

their discretion, or to alter or reform, upon their own motion,
any or all practices of the carriers.

It is the duty of the Commission, and it shall have power, whenever,
after full hearing upon a complaint made as provided by this act, it
shall be of the opinion that any of the rates or charges or any regula-
tions or practices are unjust or unreasonable or unjustly discriminatory
or unduly preferential or prejudicial, to determine and prescribe what
will, in its judgment, be a just and reasonable and fairly remunerative
rate or rates * * * to be thereafter observed in such case as the
maximum to be charged * * * and to make an order that the car-
rier shall cease and desist from such violation. * * * Such order
shall go into effect thirty days after notice to the carrier.

It is not proposed to give to the Commission power to initiate
rates. This is left with the carrier, as it should be. The bill
leaves the carriers free to manage their affairs as heretofore,
looking to the development of their business, the protection of
their property, the increase of business, and to control their
great interests with the same freedom they heretofore have had,
and shall be restrained only from doing those things that in
good conscience and public morals they should not do even with-
out the necessity of statutory prohibition.

With the law enacted and the right asserted, and the con-
sciousness and knowledge by the carriers of this power of effect-
ive control and regulation, I believe many of the complaints
now existing will be removed by the carriers themselves. I
trust they may largely disappear upon the initiation of the rail-
ways themselves.

Private car lines, industrial roads, terminal facilities of what-
ever character, refrigerator charges and the like must and
should be covered by the provisions of this bill. From their
management and control great abuses have arisen and against
which most serious complaints have been made. The facts dis-
closed in many instances, where investigations have been made,
show most flagrant exactions and practices imposed upon
shippers.

It is claimed that under existing law railway abuses have
largely disappeared, and there is no necessity for further legis-
lation. Railway rates have been greatly reduced in this country
from what they were in years past. For many years there was
a gradual downward tendency so that as a general proposition
there is no general complaint against excessive or relatively
high rates throughout the country as a whole. In this respect
passenger and freight rates bear a most favorable comparison
with those of any other country. In comparison with European
countries the distances are greater and the advantages in this
respect are in our favor. It is admitted, however, that for the
past. few_years rates have been on the increase. This is also
shown from the reports of the Interstate Commerce Commission.
It was asserted a few days since by the distinguished Senator
from Minnesota [Mr. NeLson], if the same rule were applied in
the keeping of accounts for all commodities actually carried by
the railways, that freight rates in Prussia are lower than the
average rates in this country.

It can hardly be claimed that we have yet reached the ideal
state as to this most important feature of railroad management,
and that no readjustments or modifications are necessary.

z Although much has been accomplished by the Elkins Act on

che subject of rebates, it can not be claimed tbat this evil has

been eradicated. With the fuller powers given to the Commis-
6681
138

sion in this bill, and with the enlarged jurisdiction extended
over all related instrumentalities connected with transportation,
I believe it will have a most wholesome effect and will
strengthen the present law looking to the correction of this evil.

Discriminations are still practiced and no claim is made that
they do not prevail. The injustice done both communities and
shippers in this respect goes alnost unchallenged. To correct
there evils, and that parties and communities may have some
effective forum wherein they may be heard for the adjustment
and arbitrament of their claims is not only reasonable but just.

It must be assumed, Mr. President, the Commission will seek
to deal justly with individuals and communities as well as with
the carriers. That there should be some tribunal before which
their rights may be properly and equitably adjusted with full
regard to the interests of all parties concerned seems self-
evident. The carrier is not justified in assuming the position
of sole arbiter over these questions of such vast moment to com-
munities as well as individuals and have regard alone to its
own interests. The Government is warranted, as it is its duty,
in the ereation of an impartial tribunal before which all inter-
ests May be represented and that exact justice may be admin-
istered and all interests protected.

I am not disposed to inveigh against railroads or corporate
or vested rights. They, however, are the servants of the public.
They owe their creation and their power to the State. They
should serve the people with due regard to the interests and
welfare of the public, and in good faith carry out the purposes
of their creation. They owe the public fair and just treatment.
This should be conceded. The proposed legislation asks for
nothing more.

With the amount of invested capital engaged in transporta-
tion, with its dominant influence in financial as well as in
political affairs, with the great interests it serves and its re-
lation to our commercial and economic development, and the
dependence of our whole people upon a proper, fair, and just
service, legislation along the lines proposed by the pending Dill,
asserting a proper and effective governmental control and
regulation, iseemphasized and justified by the highest motives
for our national well-being and of patriotism.

The immense mileage of the railways may practically be
divided into eight extensive systems. These systems control
substantially 70 per cent of the entire railway mileage of the
country and 75 per cent of the traffic. Many of these systems,
and the controlling influences therein, are predominant in others.
It occurs to me, Mr. Vresident, the Government should assert
itself and meet the issues ‘these vast responsibilities suggest.
This is the forum where it is to be debated and decided. I
have confidence in the wisdom and the patriotism of Congress
and that it will meet the expectations of the country with a
disposition of the question in the interest of the whole people.

I am strongly persuaded, unless the substantial questions
raised by the pending bill are met and solved, and solved fairly,
with full recognition of the rights and obligations of every in-
terest and of the people as a whole in the proper regulation and
control of railways, we will very soon be confronted with xcri-
ous problems so far untried in our governmental experience.
If the people can not assert and secure and effectively maintain

6681
14

governmental regulation and control, they will be disposed to
enter upon, possess, and manage in their own right, under gov-
ernmental proprietorship, these great agencies of commercial
and business necessities.

With such a movement I do not and could not sympathize.
Legislation along the lines proposed by the pending meusure,
I believe, is the only effective agency to arrest and prevent the
development and growth of such a stupendous proposal,

Mr. President, I believe Congress, and especially this Sen-
ate, is conscious of the vast responsibilities imposed upon it in
the enactment of this measure. Outside of and independent
of the evils to be corrected, the interests conserved or the reime-
dies proposed, it means the assertion of and the maintenance
of those principles underlying the foundations of the Govern-
ment, that establish justice, secure liberty to persons and to
property, insure peace and orderly development, and the pro-
motion of the general welfare of the whole people.

6681

O
RAILROAD RATE BILL.

SPEECH

OF

Hon. WILLIAM P. HEPBURN,

OF IOWA,

IN THE

HOUSE OF ‘REPRESENTATIVES,

Wednesday, February 7, 1906.

WASHINGTON.

1906.
6573
SPEECH

HON. WILLIAM P. HEPBURN.

The House being in the Committee of the Whole House on the state
of the Union and having under consideration the bill (1. R. 12987) to
amend an act entitled ‘An act to regulate commerce,” approved Febru-
ary 4, 1887, and all acts amendatory thereof, and to enlarge the powers
of the Interstate Commerce Commission—

Mr. HEPBURN said: f :

Mr. CHAIRMAN: I do not desire to occupy even the time that
might be allotted to me under the existing orders of the House.
I would be glad, indeed, if it were possible to conclude this mat-
ter to-night; and I am hopeful that there will be sufficient time
after I have concluded my remarks to read this bill, pass upon
the proposed amendments, and carry the bill to its final passage
before adjournment. [Applause.]

Mi. Chairman, I want at the outset to make my acknowledg-
ments to my colleagues on the committee and to some other
gentlemen for kindly expressions they have indulged in personal
to myself. I feel very grateful for all of these expressions,
and I am not less grateful, among others, to the gentleman from
Pennsylvania for the nomination that he gave to me to a high
office, because of the fact that I know that there are constitutional
provisions which would make me ineligible to that appointment.
[Laughter.] My gratitude is none the less profound.

Myr. Chairman, I regret somewhat that some gentlemen partici-
pating in this debate should have used the occasion for the pur-
pose of exploiting political organizations or taking the credit
to themselves and to organizations that they are connected
with for the present state of legislation upon this great ques-
tion. This is a matter that ought to rise higher than party,
at least higher than partisan politics. It ought to engage the
attention of men because of other motives than that of promot-
ing this organization or the other. I do not choose to follow
any of those who bave spoken on these lines further than to
suggest that the law that we have was written by Republican
bands and pressed through Congress by the arguments and
efforts of members of the Republican organization. I want to
remind them that the amendments to that law adopted two
years later were written by a distinguished Republican, and
{t was Republican zeal that secured them as part of the law of
the land. I want to remind gentlemen that the act of 1890—
the Sherman Act—was written by a distinguished Republican
Senator; and, further, I want to remind gentlemen that the
act of 1903—the Elkins Act—was the work of a distinguished

6573 3

 

 
4

Republican member of the Senate; and that if there have been
shortcomings in the way of declarations in national platforms
upon the part of the Republican party, there has been no failure
when work was to be done and things were to be accomplished.
[Loud applause on the Republican side.]

Mr. Chairman, I remember twenty years ago, about this time,
when the first act—the act of 1887—was being discussed in
this House. I remember with what zeal that measure was
attacked as destructive to the great interests of the country,
revolutionary in character, full of socialism. It was a measure
that was to introduce then, as now, European methods in place
of American, and was in the direction of an experiment that
would be fatal to the great commercial institutions of the coun-
try, and it was amidst denunciations of that character, prophe-
cies of that doleful nature, that the legislation was had and that
the bill became law. What one of those prophecies in the full-
ness of time do we now recognize as facts? Not one.

Then, Mr. Chairman, the railway mileage of the United States
was 137,000 miles, now 220,000; then the gross earnings of
the railways were $931,000,000, now 4%2,100,000,000; then the
cost per ton per mile was 1.17, now 0.74; then the dividend
on stocks was only 1.81 per cent, now 3.03 per cent; then the
gross earnings per mile were $6,861, now $9,301; then, in 1887,
61,600,000,000 of tons of freight were carried 1 mile. In 1893,
171,000,000,600 of tons of freight were carried 1 mile. In 1886,
45 railroads, with a mileage of 7,887 miles and stocks and
bonds aggregating $374,060,000, were sold under foreclosure
proceedings. In 1894, 13 railroads, with a mileage of 534 miles
and stocks and bonds of $28,000,000, were sold under foreclosure.
Under this legislation the facts show that this great industry
has prospered beyond compare. Nowhere else in all the world
is there such a state of prosperity, notwithstanding the fact of
this governmental supervision and notwithstanding the dolor-
ous fears of the gentlemen who indulged in jeremiads twenty
years ago—so like the speech of my friend from Massachusetts
the other day—his speech was full of shadows; no sunlight
anywhere in all the horizon of his sentences. I have stated
what I have in order that he may be consoled and that hope
again may spring in his bosom and that he may believe that
even New England may prosper under this legislation. [Ap-
plause. ]

Mr. Chairman, this is a great question. Any proposition of
law that involves an interest so great as the railway interests of
the United States ought to be regarded with solicitude by those
who are charged with responsibility in that behalf.

One-twelfth of all the wealth in the United States is in-
volved in greater or less degree in this bill. The earnings of
the railways are so colossal that two billions and one hundred
millions mark the amount of this great interest in one year.
Our whole wealth production is but ten times more than that.
Think how colossal this is. But the aggregate of investments,
the aggregate of annual earnings, does not mark fairly the im-
portance of this subject to the American people. Think how de-
pendent we are for our prosperity, for the comforts of life even,
upon the common carriers of the land. Think of the infinitude
of the transactions between the carriers and those they serve—
millions and millions of transactions,

6573
5

And yet, Mr. Chairman, the gentleman from Massachusetts
{Mr. McCartxL] announced the astonishing doctrine that with all
these varied and yarying interests, with all of these interests,
the people can not separate themselves from—they ean not sep-
arate their connection with the railways—yet in all of these
multiplied transactions there shall be no practical arbiter, no
one to settle disputes except one of the parties in interest.

Mr. McCALL. If the gentleman will permit me, and the
courts.

Mr. HEPBURN. I am going to speak of that. And the
courts! Ah, yes, the courts. But we have had the courts dur-
ing all these years, and I am not like the gentleman from New
York, disposed to decry the power, or honor, or necessity for
preserving respect for the courts. [Applause.] I recognize
they are a necessary agency in the preservation of everything
that is dear to the American citizen, and I reprobate, at least,
the good taste of any gentleman who undertakes to disparage
them in the minds of the people. [Applause.]

I tell you, Mr. Chairman, that whenever that evil day comes,
should it ever come, when the people of the United States feel
that in the courts they can not hope for justice, that in the
courts they can not find an agency that will protect them in
their rights and punish their offenders—wheneyver that day
comes, and that other spirit ‘of righting oneself ’”’—-when that
evil spirit takes possession of the public mind, there is an end to
our institutions and to our boasted liberty. [Applause.]

The gentleman from Massachusetts says the remedies by
eourts are ample. Experience teaches that they are not. Not
because of the fault of the courts, but because of the peculiar
character of the transactions involved and because of the dis-
parity in individual power of the contestants in the courts.

Mr. COCKRAN. Mr. Chairman, I am sure the gentleman
wants to be fair. I would like to know how the statement of
the gentleman differs in the slightest degree from the statement
that I made. I have not criticised the courts any more than
has the gentleman from Iowa [Mr. Herppurn].

Mr. HEPBURN. The remarks of the gentleman from New
York seemed to me, if not intended for the purpose, had the re-
sult of inflaming one man’s mind against the courts, because
that man was taught that, being poor, he lacked the power and
could not have that efficient justice, that quick disposal of his
business that another man with wealth behind him and station
to aid him could have, and it was that spirit that I found in
the gentleman’s language that seemed to me ought not to pass
unrebuked.

Mr. COCKRAN. Mr. Chairman, I would like to ask the gen-
tleman how his statement now differs from mine. It is undis-
puted that the one person whose imprisonment I took occasion
to mention—and I do not at all criticise the justice of that
decision—was committed to jail for violation of an injunction,
while others, although pronounced guilty of a crime by the deci-
sion of that same court, had not been actually incarcerated or
even prosecuted.

Mr. HEPBURN. If I misunderstcod the character and -pur-
pose of the gentleman’s remarks, I am sorry.

Mr. COCKRAN. Well, I want to congratulate the committee
on this contribution to the discussion, as I understand the gen-

6573
6

tleman now corroborates me by stating that, so far as the courts
are concerned, they are inadequate, and therefore a more eflfi-
cient agency to effect a remedy must be established.

Mr. HEPBURN. With that portion of the gentleman’s re-
marks I am in entire accord. I was about saying that the
courts had proved inadequate because of these reasons: The
subject of the controversy in all of the cases that I can conceive
is an involved one to the plaintiff; the knowledge and infor-
mation that would enable the plaintiff to maintain his action
for an overcharge are not in his possession. He could not give
that expert testimony as to all the elements that would enter
into the composition of a just and reasonable charge or an over-
charge, while a knowledge of all these facts are in the hands
of his adversary, and therefore he could not recover.

That is one of the difficulties, not with the courts, but because
of the peculiarities of the subject of controversy. The courts
have not been adequate and therefore some other means had to
be substituted. With what abhorence would we look upon a
proposition, if gentlemen should make it, with reference to con-
troversies other than of this class that were certain to rise and
be numerous in the community, providing that one of the par-
ties alone should determine the rightfulness of the controversy ;
and yet that is what is involved in all of these multitudes of pos-
sible disputes between carrier and shipper. It is the carrier
that fixes the rate. He imposes upon the other party the
necessity of accepting his rate. There is no escape from it.
He may pay the charge and then the common law, says the
gentleman from Maine [Mr. Lirrrrrirtp], gives him a remedy
and allows him to recover for the overcharge. Ah, how barren
is that remedy, and while it is a known fact that the cases
where such suits might be instituted are counted by millions,
none is ever brought because-of the expense, because of the
delay, because of the inability to secure the proof whereby a
judgment is within the limits of possibility. Therefore it is
futile to talk about the courts as they are constituted furnishing
that remedy that ought to be somewhere existent. Now, what
do we do by this bill? The gentlemen who oppose it have dis-
cussed it as though it conferred upon the railway commission
the power to establish schedules and rates. They have, I think,
sometimes purposely set up this bogy for the purpose of com-
bating it. No one has proposed that. The jurisdiction of the
Commission is limited, as is its power limited, by this law.
They can not at pleasure establish a rate. Before their juris-
diction attaches it must be ascertained: that a wrong has been
done, an overcharge has been made, a wrong in an extravagant,
unreasonable rate, because the law to-day and the common law
provide that the carriers’ charge shall be just and reasonable.
That is the limit to which he is permjtted to go in fixing his
tariff of schedules. .

Now, under the operation of this bill, if it should become a
law, it is necessary for some one to allege a violation of the
statute—that a crime, in other words, has been done—because
the overcharge is a crime, as well as being prohibited, and
remedies furnished civilly by the courts: He has committed a
crime. What then? Investigation follows, and if it is ascer-
tained that the carrier is in violation of the law, then the juris-
diction of the Commission attaches, and it is permitted to do:

6573
7

what? Fix a rate? Oh, no; oh, no. It is permitted to estab-
lish a just, reasonable, and fairly remunerative rate tbat shall
be the maximum rate that the carrier shall charge. That is all.
Can you think of any legislative effort in the direction of con-
trol more conservative than this? IT irst, the carrier must be ir
the wrong—the carrier must be a criminal. His criminality
must be ascertained. When it is ascertained by a dispassionate
Commission then a rate within limitations, fair and certain
and well defined, may be established as the maximum that the
earrier may charge, leaving the feature of flexibility still re-
maining in the rate, and permitting the carrier to charge that
lower sum that the exigencies of business or the activities of
competition may make it prudent and wise for him to adopt.
One gentleman complains of this bill because the words “ un-
reasonable” or ‘‘ reasonable” have no accurate judicial deter-
mination. There are some words, I think, that can not be
defined, and yet we use them every day, and the courts use
them. Would it be possible for the four critics of this bill to
define the word “fraud?” (Is it probable that any two of them
would agree as to the legal definition of the word “fraud?”
And yet the courts have been industriously at work upon that
for-centuries, trying to find out what constitutes fraud. There
is no definition that would be satisfactory to any lawyer that
ever read a law book. There are proximations, and yet you
will find after the study of the most carefully prepared defini-
tions that in your own experience you have had cases that do
not come within that definition.

I could not define the word “reasonable” in a way satis-
factory to myself. I doubt whether any gentleman could do
that, but he could in a series of cases, exercising his best dis-
cretion, looking at all the facts that may be brought to bear
upon a given case, arrive at a conclusion that will be in har-
mony with the demands of justice and will be right in all of its
bearings upon all of the parties. It is a very difficult thing, a
very difficult thing, to use words of our English language that
are not susceptible of varying interpretations. My friend on
my right, the gentleman from Ohio [Mr. GRosvENoR], was exer-
cised the other day because there was not sufficient definiteness
in the language used. I do not know that I see before me one
individual whom I believe can write an English sentence of
twenty words that I can not give more than one meaning to.
It is an exceedingly difficult thing to use the English language
in such way that ingenious carping can not find fault with it.
My friend here undoubtedly has heard the story of the little girl
who at her prayers in the morning said, ‘ Good-by, God; we are
going to move to Missouri?” [Laughter.] Her wicked brother,
who happened to overhear her, and who was jubilant at the idea
of the journey, used the very same sentence, but he said,
“Good! By God, we are going to move to Missouri!” [Re-
newed laughter and applause. ]

In view of this great difficulty of using the English language
so as to convey a given idea with absolute certainty I thought
that some of the comments of my distinguished friend a day or
two ago reached the dignity only of carping criticism. [Ap-
plause.] The gentleman from New York [Mr. Suuzer] last
night indulged in a character of comment I thought not differ-
ing greatly from that of the gentleman from Ohio. [Laughter

6573
8

and applause.] But there was something at least interesting
in the remarks made by the gentleman from New York.
[Laughter.] They tended to give to the membership of this
House a more exalted idea of the aggregate of manliness which
was on our roll. Patriotism of a rare character was illustrated
by what he said. It is seldom that you find a man so patriotic
and so self-abnegating that he will refuse the princely income of
$25,000 a year and content himself with the beggarly stipend of
20 per cent of that in order that he may do good to all man-
kind. [Laughter and applause. ]

Do good! ’ Not here; ah, no pent-up Utica like this meets the
exalted aspirations of the gentleman from New York. He
stands on a pedestal of his greatness, either above or below the
Statue of Liberty, I do not know which [laughter], proclaim-
ing to all the world, “ Come ye that are heavy laden, and I will
give you rest.” [Laughter and applause.] And yet, Mr. Chair-
man, when the gentleman attempts to be practical I am not sure
that he reaches the high-sounding phrases of his declaration of
greatness. He told us this bill was lacking in great essentials—
that it did not include in its provisions a class of instrumentali-
ties of commerce that it was wicked and criminal to omit. He
told us that this bill did not provide dire and certain punish-
ments behind the bars of the penitentiary where the criminal
classes—those whom gentlemen here will agree are violating
the provisions of this law or engaged in conduct now that if
continued after the proposed law would become criminal—
where those people should be incarcerated, and that it was
because of these two defects that the law was fundamentally
and radically deficient. He told us with much elation that he
had prepared a bill—No. 8414. Those figures impressed them-
selves upon my memory, and I never will forget them [ap-
plause] as the file number of a bill embodying all wisdom upon
this subject and a proposition that would give to the country
what the country wants and give to all of the rich clients of
my friends that which they do not want. I sent for the bill,
and, lo! here it is. He told us that a dozen lines alone would
furnish the legislation that was to bring about the cure for all
of our difficulties, and here is the bill—8414. [Laughter and
applause.] Make a mental picture of it, gentlemen. Write it
upon the tablets of your memory, so that no time, no circum-
stance, no conditions of horror or joy shall ever permit you to
lose that mental impression. 8414! [Laughter and applause.]
And yet, gentlemen, the class of instrumentalities that is
omitted from the committee’s bill is omitted from this one.
[Laughter.] The gentleman had never thought of it, probably,
until he got upon his feet. [Laughter.] I say that in order
that I may be kind to him. [Laughter.]

But here is the provision, gentlemen. Here is the provision
of bill No. 8414 on the subject of punishments. The gentleman
wanted Rockefeller and all those gentlemen he named behind
the bars, so that he could enjoy the sight of them as prison
convicts.

That any person, association, or corporation violating any of the
provisions of this act shall be deemed guilty of a misdemeanor—

[Laughter. ]

The penitentiary is suspended.” [Laughter and applause.]

6573
9

And on conviction thereof shall be punished in the manner provided
by the act approved February 19, 1903, entitled “An act to further
regulate interstate commerce.”

You may recollect, gentlemen, that the act of 1903 repealed
the prison penalty of the interstate-commerce act. [Laughter
and applause.] I am not quite certain in my mind

Mr. SULZER. Mr. Chairman

The CHAIRMAN. Does the gentleman yield to the gentle-
man from New York?

Mr. HEPBURN. I yield for a question only.

Mr. SULZER. My question is this: If I made an error in re-
“gard to the extent of the punishment, why did not the gentle-
man from Iowa, as chairman of the committee, in the interest
of the people, amend my bill and make the punishment fit the
crime?

Mr. HEPBURN. There is no trouble about answering that
question at all, sir. We had an act passed in 1887 that pro-
vided vigorous, severe prison penalties for the violation of
many provisions of the interstate-commerce act.

Up to 1903, sixteen years, no conviction had been had under
that act. It was said here upon this floor and elsewhere that
the reason was obvious—that the men who knew the facts by
which convictions before juries could be made possible were
all of them railroad men. They were the men familiar with
conditions, familiar with facts, the only ones whose testimony
would be adequate to secure convictions, and that there was
that esprit du corps among them that they would not testify
where it meant going to prison on the part of their fellows
and that if the punishment were by fine largely increased con-
victions could be had. ‘This Congress-—and I think the gentle-
man from New York [Mr. SuLzer| voted for it——

Mr. SULZER. The gentleman is in error. I voted against
it, knowing what the consequences would be.

Mr. HEPBURN. All right. I am willing to adniit that he
thinks he did. [Laughter.]

Mr. SULZER. The Recorp will show that I voted against it.

Mr. HEPBURN. I may be wrong, but I will look it up.
[ Laughter. j

Mr. SULZER. The gentleman better look it up, and had
better look up some other things, too.

Mr. HEPBURN. Mr. Chairman, this bill does not do the
things that many gentleman said it would do, and yet I believe
that it will do all that is recommended to be done in the an-
nual messages of the President. The committee tried to do
no more than that. A year ago we did. At that time the
Committee on Interstate and Foreign Commerce presented to
this House a bill that met the approval of the membership
largely, except the gentleman from Massachusetts [Mr. Me-
CALL], and he seemed to think that he might derive some conso-
lation from the broad statement that not more than two Mem-
bers of this House that voted for that bill would now repeat
that vote. I think he was in error. I for one would vote for
that bill if that were the pending bill. While I do not believe
that its provisions are as safe as this one, yet I think that that
was so much better than having no legislation at all that %
would cheerfully give it my vote, and I believe that every mem-
ber of the committee of which I am a member would so act.

6573

 

 
10

[Applause.] It was not perfect—no more than this bill. TI
have no doubt that future legislation will improve upon the
measure that we now propose, but it is the best that we can
give you. We have harmonized all the differences that stood
in the way of an unanimous report.

I do not think the bill is exactly in accord with the views of
any one member of the committee, not more than two at all
events, but each one has been willing to yield something. Some-
thing always has to be done in this way. I understand that my
friend on the right [Mr. Grosvenor] was made unhappy in his
remarks the other day by the thought of a preternatural una-
nimity on the part of the committee. We were trying to get
legislation. We were trying to secure a result that we believed
would do good, and therefore it was that the minority of the
committee waived much of their preference and the majority
waived much that they would have preferred would be in the
bill or omitted from the bill, and we secured that which we have.

Mr. UNDERWOOD rose.

The CHAIRMAN. Will the gentleman from Iowa [Mr. Hep-
BURN] yield to the gentleman from Alabama [Mr. UNDERWOOD] ?

Mr. HEPBURN. Certainly.

Mr. UNDERWOOD. Will the gentleman allow me to ask him
a question for information?

Mr. HEPBURN. Yes, sir.

Mr. UNDERWOOD. I desire to ask the gentleman, as chair-
man of the committee, for my information, and I am sure the
House would like to have it, whether he claims that the bill as
now reported will enable the Interstate Commerce Commission
to regulate express companies?

Mr. HEPBURN. I do not.

Mr. UNDERWOOD. They are not included in the terms of
the bill, then?

Mr. HEPBURN. I would say not.

Mr. UNDERWOOD. Now, I will ask the gentleman another
question: Do the terms of the bill include the regulation of
Pullman cars?

Mr. HEPBURN. I would say not.

Mr. UNDERWOOD. Then, may I ask the gentleman to state
to the House why the committee, in its wisdom, saw fit to leave
the regulation of those two companies out of the bill?

Mr. HEPBURN. I will. state that the committee, as I
said a little while ago, confined its recommendations solely to
the recommendations made by the President of the United
States. That is the reason. We wanted to put no more into
the bill than would meet the demands of the public that had
been crystallized upon two or three propositions by the challenge
in the President’s message to the attention of the whole Amer-
ican people.

Mr. SHEMRLEY rose.

The CHAIRMAN. Does the gentleman from Jowa yield to
the gentleman from Kentucky [Mv. SHERLEY]?

Mr. HEPBURN. I do.

Mr. SHERLEY. Mr. Chairman, I would like to ask the gen-
tleman whether, in his opinion, this bill provides for the review
of the action of the Commissicn by the courts in any other sense
than they can always review the constitutionality of any act?

Mr. IEPBURN. I have no doubt, Mr. Chairman, that what-
ever rights now exist to review the action of the Commission

6573
11

exist under this bill. There have been no changes whatever in
the court procedure or court plans; no curtailment of the power
of the court, no effort in that direction, and whatever power the
courts to-day have they will have and they must have under
this bill.

Mr. SHERLEY. If the gentleman will permit another ques-
tion—I am sure that he realizes that I am asking it for no other
purpose than that of obtaining information. You are con-
ferring a new power, a power after a rate is set aside to fix a
rate, 2 maximum rate, that shall be observed by the railroads.
I would like to know whether, in your judgment, the court, in
reviewing that order, can pass upon the reasonableness of that
rate or can only pass upon the question of whether it is so low
as to confiscate the property.

Mr. HEPBURN. I have no hesitation in saying that, in my
judgment, the court will have the power to determine, first,
whether the Commission had jurisdiction of the subject-matter ;
whether it had the power to act at all. That would be de-
pendent upon the question of whether an unjust or an unreason-
able rate was condemned, and whenever it passed upon that
they would then seek to know whether the Commission had
acted within the scope of its authority. It is authorized to fix
a just, a reasonable, and fairly compensatory rate. That is to
be the maximum, and the court would inquire—and it would be
a legitimate subject of inquiry—as to whether the Commission
had confined itself within the limitations that the law had
thrown around it.

Mr. SHERLEY. Has the gentleman considered the matter
in connection with the view frequently expressed by the courts,
that a legislative act can not be reviewed except in regard to its
constitutionality ?

Mr. HEPBURN. Another question is possibly presented here,
as to whether or not the Commission has jurisdiction to act;
and then, second, whether or not it has exceeded the authority
that was conferred.

Mr. SHERLBEY. The gentleman, of course, recognizes the dis-
tinction——

Mr. HEPBURN. I do not care to argue this matter further.
I have stated my views in regard to it. The gentleman will
not understand me as being disrespectful, but simply wanting
to proceed.

That is the view I take of this matter. I do not believe that
we can take from the courts their power to inquire whether
or not a citizen was being bereft of one of his constitutional
prerogatives or rights. You must remember, gentlemen, that
the courts are a coordinate branch of this Government; that
the courts in their sphere are the equals of the legislative
branch or the executive branch. You must remember, further,
that our action may not be final. We may assume to exercise
authority. There is a power, the Supreme Court, that passes
upon that, and we, in that respect, are not supreme. The
Executive finds that the Supreme Court is above him. It will
pass upon the constitutionality of an act of the President; but
who passes upon the declaration as to the power of the Supreme
Court? They have the final word. When did you hear of any
court assenting to a proposition that curtails and puts a limita-
tion upon its jurisdiction?

6573
12

Mr. SULLIVAN of Massachusetts. Mr. Chairman

The CHAIRMAN. Does the gentleman yield to the gentleman
from Massachusetts?

Mr. HEPBURN. Yes, sir.

Mr. SULLIVAN of Massachusetts. I submit a question to the
gentleman which I hope he will- answer in order to bring out
what I am trying to learn as a matter of information about
the terms of this bill upon which the court will have to act, and
that is whether “ unreasonably low ” and “ confiscatory ” are, in
your opinion, synonymous terms?

Mr. HEPBURN. If I were a judge, I would say that they
were synonymous terms.

Mr. SULLIVAN of Massachusetts. Then, in your opinion, the
court, under this bill, if it becomes law, will have the right
to enjoin a rate fixed by the Commission if it is unreasonably
low, but yet does not amount to confiscation?

Mr. HEPBURN. I think there is no doubt about that. I
think if there was any doubt about it at all the words “ fairly
remunerative ” would remove the doubt.

Mr. SULLIVAN of Massachusetts. Then, if I may ask the
gentleman’s attention to one more question

Mr. HEPBURN. I yield to the gentleman.

Mr. SULLIVAN of Massachusetts. Then in any case where
the Commission fixed a rate as a reasonable rate the carrier
would have the right to ask the court to enjoin the rate, and
that court would have the right to enjoin it if it found that it
reduced the profit of the railroad in that particular below a
fair reurn upon the capital invested.

Mr. HEPBURN. I do not know just what view the courts
may take as to the elements that would be considered when they
were construing or ascertaining what was a reasonable rate.
They may wonderfully vary; they are infinite in number. It is
a difficult proposition, I take it, but I do not understand that it
would be wise for us to refuse to impose the duty when it must
some time be determined by somebody because of the difficulties
involved.

Mr. SULLIVAN of Massachusetts. In view of the opinion
as expressed by the gentleman from Iowa, would he be willing,
in order to set the matter completely at rest, to accept an
amendment to this bill which would give the carrier a right to
ask to have a rate enjoined on the ground that it was unreason-
ably low?

Mr. UWEPBURN. I should object to any amendment.

Mr. COCKRAN. Will the gentleman allow a question?

Mr. HEPBURN. Certainly.

Mr. COCKRAN. Would it be possible to deprive the courts
of power to enjoin the operation of an order which forced a
earricr to transact business at a rate that would not yield a
fairly remunerative return?

Mr. HEPBURN. I do not think we could take that power
away from the courts. 7

Mr. COCKRAN. I agree with the gentleman, and therefore
a no necessity for embodying a provision to that effect in

e bill.

Mr. HEPBURN. Mr. Chairman, I was a little surprised at
the selfish candor exhibited by the gentleman from Maine [ Mr.
LITTLEFIELD] in his opposition to this bill. We are apt to be

6573

 

 
13 .

candid when the expressions of candor are complimentary to us.
We are not apt to be quite so candid when there is selfishness
embraced in the expression. The gentleman from Maine is fear-
ful, apparently, that the extraordinarily unjust and unfair rate
on cotton that the people of his ecemmunity are now receiving
may not be continued to them in case the Commission is in-
yested with the power to adjust rates.

Mr. Chairman, I scarcely thought that there was any situa-
tion that would justly alarm the gentleman until I investigated
the matter slightly, and I found that in the Southern States,
in their cotton mills twenty-five years ago, there was invested
but S21.600,.000. Now there is invested in the same region
82P5,060,CU0, In 1880 the spindles in the South were but
667,000. Last year there were 9,205,000 cotton spindles used
in the South. Twenty-five years ago they used 225,000 bales
of cotton. Last year they used 2,163,000 bales.

Now, if this grand progress had been made under the dis-
advantages that the gentleman from Maine says the Southern
cotton spinner now suffers, what will be the strides of prog-
ress, what will be the wonderful growth in manufactures, what
will be the beneficent results that will come to that people
when fairness is secured, and when their rivals are not built
up at their expense by unjust and wicked discrimination? [.Ap-
plause. ]

Mr. Chairman, with reference to the differences of opinion
that have prevailed in regard to some features of the bill, I
do not now care to say anything, but we were agreed in regard to
two fundamental propositions: One was the investment of the
Interstate Commerce Commission with the measure of power,
the full measure of power, that the President in his message
said he thought they ought to have. That we have done.
Then to include by changes enlargement of the definition of the
word “railroad” and ‘“ transportation,” to bring in all of those
auxiliaries, or aids, or instrumentalities through which so many
frauds and wrongs in the nature of rebates and discrimina-
tions have occurred. We believe that we have done that,
These we regard as the two essential things. The other
changes or provisions that there are in this bill are simply
changes of existing law, so as to make more easy, more cer-
tain, the administration of the power that the Commission now
has. We have disposed, we think, successfully of wrongs that
are accomplished through what is known as the “midnight
tariff,” those sudden changes prearranged for, whereby one
man would have large discriminations in his favor, and after
he had benefited thereby, the rate going back to the old sched-
ule, and things move on placidly, notwithstanding that it is a
legally recognized cut in the rate.

We have disposed of that by insisting that changes should
not be made without thirty days’ notice, and yet, recognizing
the fact that there might be an emergency when a notice less
than that should be sufficient, we have provided in the bill that
the Commission might, in a proper case, alter that rule and so
arrange that the schedules may be filed and become operative
with less than that notice.

We have modified somewhat that section of the statute that
sought to give a wronged shipper the power to be righted
through the Commission and through the courts.

6573

 
14

Heretofore practically that part of the law has been inopera-
tive. We have now, we think, somewhat smoothed the machin-
ery, so that when damages have been awarded hy the Commis-
sion the complainant may, by simpler processes in the courts,
recover judgment.

Mr. HOGG. Mr. Chairman, will the gentleman permit an in-
terruption?

The CILIAIRMAN. Does the gentleman yield?

Mr. HEPBURN. Certainly.

Mr. HOGG. Is it the understanding of the committee that
this Commission is a judicial tribunal?

Mr. HEPBURN. Well, I know the gentleman from Colorado
to be a profound lawyer—constitutional, statutory, common law,
and otherwise—and I shall remand that inquiry to him.
[ Laughter. ]

Mr. HOGG. Let me ask the gentleman another question.

Mr. HEPBURN. Oh, Mr. Chairman, I do not care to answer
questions of that kind. We have changed somewhat the require-
ments with regard to the filing of schedules, so that greater cer-
tainty may be had. We have relieved the Commission from the
necessity of making a full statement of its findings of fact in
certain classes of cases. which has been a burdensome labor, of
which complaint is made, and so far as we could learn no ade-
quate result followed it. Therefore we have proposed to modify
that. We have given to the Commission the power to investi-
gate more fully, more completely, the financial affairs of the
different railways, compelling fuller, more complete, more fre-
quent reports to be made to them. We have given them the
authority, if they see fit to exercise it, of prescribing a system
of bookkeeping, uniform in its character, to apply to all carriers,
prescribing the kinds ef accounts that shall be kept and pro-
hibiting the keeping of others, making it impossible, it is
thought, for a carrier to use any portion of its revenues for pur-
poses of rebates or improper compensation to shippers that will
escape the vigilant eye of the Commission. We propose that the
Commission should consist of seven members and the compensa-
tion should be $10,000 a year and the term of office seven. years.
These are the changes that have been made in existing law.

Mr. Chairman, I am very grateful for the attention that the
House has given me. I regard this question as one of great
importance. I think it is the most important single question
that we now have to deal with. I do not believe that we will
be able by this legislation or any other to prevent rebates in
some instances being given, to prevent preferences being shown
to some locality, to some person, or to some character of traffic.
but it will aid toward minifying a number of wrongs; it will
give greater contentment to all the people in the belief that
they are not being made the puppet and the football of carriers.
I would be glad if certain other enactments might have been a
part of this bill, but I contented myself in omitting them with
the hope that we could unite upon this measure in the committee
with unanimity and secure its passage through this House with-
out amendment, believing that in other places there might be a
moral effect from that action that would aid in the completion
of the legislation. My friend on my right, the gentleman from
Chio [Alv. GrosveNor], has one proposition that I do not hesi-

6573
15

tate to say that as an original proposition I would be glad to
favor, but as an addendum to this bill—as one of those proposi-
tions that I know will secure dissent somewhere and create
opposition against the bill—I shall resist as best I can its being
projected into this measure. I thank the members of the com-
mittee. [Prolonged applause. ]

6573

O
RAILWAY RATE REGULATION.

SPHECH

or

HON. PHILANDER C. KNOX,

OF PENNSYLVANIA,

IN THE

SENATE OF THE UNITED STATES,

Wednesday, March 28, 1906.

®

WASHINGTON.

1906.
6652
SPEECH
ie

HON. PHILANDER C. KNOX.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled ‘An act to regulate commerce,” approved Ieb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the pow-
ers of the Interstate Commerce Commission—

Mr. KNOX said:

Mr. PRESIDENT: The necessity for a detailed consideration
of many of the serious and important legal propositions upon
which the bill under consideration rests has been obviated by
the lucid and masterful presentation of the views of Senators
who have preceded me in this debate. I shall endeavor, there-
fore, in what I have to say, to avoid repetition of wnat has
been so ably discussed, except so far as bare allusion to some of
the great questions is necessary in the substructure of the
theory I entertain as to the policy and constitutionality of the
great measure we are now considering. I agree with the Sena-
tors who bave contended, first, that the power to fix railroad
tolls for transportation is a legislative power, and that when
the legislature has laid down a rule for the establishment of
rates the application of such rule to specitic cases is a matter
of administration which may be delegated to a commission;
and, second, that the power to investigate the reasonableness
of a proposed rate, and to fix a rate for future observance, is
a nonjudicial power which can not be conferred upon courts
exercising the judicial power of the United States.

The authorities cited by Senators fully sustain these proposi-
tions. Their soundness is essential to the validity of the pro-
posed legislation, and the present question is whether the
reported bill in its essential features is securely predicated
upon these principles, is otherwise innocuous when submitted
to constitutional tests, and whether it properly supplements the
existing laws.

Upon the threshold of this inquiry I think it will be instruct-
ive to take a general view of the purposes of the law which
ereated the Interstate Commerce Commission and the powers
and duties the Commission now possesses and performs.

In the case of the Interstate Conmerce Commission v. Cin-
cinnati, etc., Rwy. Co. (167 U. 8., 506) the court said:

The Interstate Commerce Commission is charged with the duty of
secing that there is no discrimination between individual shippers, and
that nothing is done by rcbate or any other device to give preference to
one as against another; that no undue preferences are given to one
place or places or individual or class of individuals, but that in all
things that equality of right, which is the great purpose of the inter-
state-commerce act, shall be secured to all shippers.

To these ends the Commission now has, inter alia, the fcllow-
ing powers:
Virst. The power to investigate matters complained of in such
a manner and by such means as it shall deem proper.
6652 5

.
4

The Commission is to keep itself thoroughly informed as to all_the
operations.of every common carrier in the United States engaged in
interstate commerce; and arhenercr in the course of its investigations
it discovers abuses which affect the public commercial interests inju-
riously, its duty is at once to have such abuses suppressed. and, if
need be, to call in the strong arm of the Government, through its ap-
painted courts, to enforce the provisions of the law. (United States v.

issouvi Pacific Railway Co., 65 PF. R., 909.)

Second, The powcr to require by subpoena the attendanec
and testimony of witnesses from any place in the United States,
and the production of all books, papers, tariffs, contracts, agree-
ments, and documents relating to any matter under investiga-
tion, and in case of disobedience of the subpcena, to invoke the
aid of the United States courts.

This power is conferred in section 12 of the act as amended
(25 Stat., 859), and includes the affirmed constitutionality of
the law requiring the participant in a criminal transaction to
testify in regard thereto, such enforced testimony having the
effect, however, of giving the witness complete imimunity. (See.
12 as amended, 26 Stat., 745; and act of Feb. 11, 1898, 27 Stat.,
443.)

‘Third. The power to inquire into the management of the
business of all common carriers subject to the provisions of the
interstate-commerce act, to keep itself informed as to the man-
ner and method in which the same is being conducted, and to
obtain from the carriers full and complete informution to enable
it, the Commission, to perform its duties. (Sec. 12 as amended,
25 Stat., 858.)

Fourth. The power to prescribe the mcasure of publicity to be
given to joint rates, fares, and charges, to make public proposed
advances or reductions in joint rates, fares, and charges, and
to determine and prescribe the form of schedules as to rates,
etc., to be kept open for public inspection. (Sec. 6 as amended,
25 Stat., 856, 857.)

Fifth. Jo require annual reports from carriers, to fix the
time ‘and prescribe the manner in which such report shall be
made, and to require specific ansicers to all questions upon
which the Commission may need information. (Sec. 20, 24
Stnt., 886.) This section also authorizes the Commission to
prescribe @ uniform system of keeping accounts, to be observed
by the carriers.

Sixth. To conduct its proceedings in such manner as will best
conduce to the proper dispatch of business, and to make or
amend such general rules or orders as may be requisite in pro-
aay before the Commission. (Sec. 17 as amended, 25 Stat.,

Seventh. Z'o dircct common carriers to cease and desist from
violations of the interstate-commerce Jaiv and to make repara-
oe a the injury found to have been done. (Sec. 15, 24 Stat.,

Highth. 7'o0 apply to the circuit court in a summary way for
an enforcement of its orders (sec. 16 as amended, 25 Stat.. 859) 5
and the Commission is directed to execute and enforce the pro-
visions of the act (sec. 12 as amended, 25 Stat., 858), not, Low-
ever, by attempting to enforce its own decrees and orders, but by
ealling upon the district attorneys for their enforcement.
(United States +. Mo. Pac. Rwy. Co., 65 F. B., 999),

The powers, Mr. President, which I have enumerated I have
expressed either in the language of the statutes or in the lan-
guage of the Supreme Court construing the statutes.

6652
5

Very broadly speaking, Mr. President. it will be observed from
this rough review of its powers that the Commission possesses
abundant power to seek and discover deviations from the great
purpose of the act to secure equality of right for all, but it
wholly lacks power to enforce its orders and decrees, and that
its orders and decrees do not have the force of law until made
so by judicial decree.

The President in his annual message to the third session of
the Fifty-eighth Congress called attention of the Congress to
the advisability of expanding the powers of the Interstate Com-
merce Commission, and again in his message to the present Con-
gress, in these words:

It is not my province to indicate the exact terms of the Jaw which
should be enacted; but I call the attention of the Congress to certain
existing conditions with. which it is desirable to deal. In my judgment
the most important provision which such law should contain is that
conferring upon some competent administrative body the power to
decide, upon the case being brought before it, whether a given rate pre-
scribed by a railroad is reasonable and just, and if it is found to be
unreasonable and unjust, then, after full investigation of the complaint,
to prescribe the limit of rate beyond which it shall not be lawful to
go—the maximum reasonable rate, as it is commonly called—this de-
cision to go into effect within a reasonable time and to obtain from
thence onward, subject to review by the courts.

This suggestion was no surprise to me, as I regarded it the
next logical step to be taken in the development of the execu-
tive and legislative policy which had been already manifested
in proceedings to enforce existing laws and the new legislation
of the Fifty-seventh Congress regulating commerce among the
States.

This Executive recommendation made it incumbent upon
every Member of Congress to give such attention to the subject
as would enable him to intelligently determine whether his
judgment approved the suggestion of increased power to the
Commission, and, if so, the extent to which it should be con-
ferred and how, if at all, its exercise should be supervised.

After giving the subject serious consideration I ventured to
publicly express, the opinion that the proposition that the Na-
tional Government should exercise supervisory control over the
tax upon transportation became almost self-evident from the
time that the railroads began, through various devices, to con-
eentrate this taxing power in the hands of a few men: that
the Government’s efforts to check this concentration of power
under the provisions of existing laws should be supplemented
by legislation which will prevent the abuse of the power of
taxing the movement of persons and property under any form
of concentration or under any circumstances whatever, and that
a short and simple law would reach the root of the trouble.
That it should provide that the tolls collected by common ear-
riers and the practices pursued by them shculd be just, fair,
and reasonable.

That the Commission should have the power, if it finds the
complaint well founded, to declare what shall be a just, fairly
remunerative, and reasonable rate or practice to be charged or
followed in place of the one declared to be unreasonable.

That this order of the Commission should take effect within
such reasonable time as shall be prescribed by the Commission
in the order, and should be final, subject only to attack for
unlawfulness in the Federal courts, where it would have to
stand or fall upon its merits, and that such an act, with suita-

6652

 
6

ble provision for the regulation of joint rates and rates upon
traffic of internation.l carriers, would go to the full extent of,
and no further than, the recommendations made by the Presi-
dent. :

Subsequently these tentative suggestions were elaborated in a
rill which I introduced, and to the provisions of which I shall
refer as an expression of my views upon the general subject.
The bill to which I refer, in my judgment, comprehends and
deals with the mischiefs for which we are seeking a remedy
more effectually than any measure yet brought to the attention
of Congress. It is broader and more comprehensive in its scope
because it is as broad and comprehensive as the regulative power
ef Congress under the Constitution. Its provisions include the
class of carriers which it describes, engaged in any commerce to
which the regulative power of Congress extends under the Con-
stitution, and to all the facilities and instrumentalities con-
nected therewith to which the regulative power of Congress
extends, whether they are owned or provided by the carrier or
not. It provides for just, reasonable, and nondiscriminating
charges and services in transportation, or in connection there-
with, from the instant of time that goods are separated from the
body of the property of the State from which they are to be
transported and pass the line which marks the beginning of
Congressional authority, and covers as well the receiving, deliv-
ering, storage, or handling of goods before actual transit begins,
the transit itself and all charges and expenses and practices
relating to or incident to the delivery of such goods in the State
to which they are consigned, up until the instant of time when
they pass out of the regulative power of Congress into the body
of the property of the State where they are delivered and are no
longer subject to national control.

The theory upon which this bill was drawn is that general
words in a statute which are sufficiently comprehensive to cover
the eyil aimed at, in whatever form it may possibly appear,
makes better and more effective legislation than specific prohibi-
tion of the evil in the forms in whieh it has appeared. The
recent decision of the Supreme Court in the Chesapeake and
Ohio Railroad coal cases construing the general words of pro-
hibition against discrimination in the Elkins Act, and the deci-
sion in the Northern Securities case construing the general
words of prohibition in the Sherman Act, confirm the wisdom
of this method of legislation.

The bill follows the recommendations contained in the Presi-
dent’s message and clearly provides that the Interstate Com-
merce Commission shall have power after full hearing upon
complaint to set aside any rate, practice, or regulation found
by it to be unjust, unreasonable, or discriminatory, and to sub-
stitute in its place one that is just, reasonable, and fairly re-
munerative, which by the terms of the bill then, upon a date
fixed by the Commission, becomes the maximum rate to be
charged or the practice to be observed by the carrier. In its
provision as to the establishment of through routes where none
exist, and the establishment of joint rates when carriers fail
to agree upon the same, and as to penalties and appeals, the
employment of special agents or examiners with power to ad-
minister onths, there is yery little essential difference between
its provisions and the provisions of the bill under considera-

6652
7

tion, and I shall not now stop to point out those differences or
to contend that they are more perfectly and efficiently pro-
vided for.

After calling attention to its tenth section, which is designed
to contro] the movement of traffic over railroads operating in
part in a foreign country, in order to compel obedience to the
orders of the Commission, I shall come at once to the fifth sec-
tion, which provides for what has been popularly termed a
court review, the omission of which in the Hepburn bill consti-
tutes the main feature of difference between the two measures.

It is obvious that a law conferring the tremendous power
which it is proposed by all the bills under consideration to con-
fer upon the Commission, to substitute one rate or practice
for another, must be drawn upon one of two theories: Upon
the theory that the order of the Commission shall be final and
not reviewable by the courts or upon the theory that it shall
be reviewable by the courts. I haveno hesitation in saying, upon
the authority of the cases which have already been submitted
to the Senate by the distinguished Senators who haye partici-
pated in this debate, that a bill drawn upon the theory that
the orders of the Commission shall be final and unassailable in
the courts would be unconstitutional.

In Covington, ete, Turnpike Company v. Sandford (164 U. S.,
592) the court said:

It is now settled that corporations are persons within the meaning
of the constitutional provision forbidding the deprivation of property
without due process of law, as well as a denial of the equal protection
of the laws.

And in Chicago, Milwaukee, ete, Railway v. Tompkins (176
U. S., 172) the court said:

When we recall that, as estimated, over ten thousand millions of
dollars are invested in railroad property, the proposition that such a
vast amount of property is beyond the protecting clauses of the Con-
stitution, that the owners may be deprived of it by the arbitrary
enactment of any legislature, State, or nation, without any right of
appeal to the courts, is one which can not for a moment be tolerated.

In Chicago, Milwaukee and St. Paul Railway Company v.
Minnesota (134 U. S., 458) the court said:

If the company is deprived of charging reasonable rates for the use
of its property, and such deprivation takes place in the absence of an
investigation by judicial machinery, it is deprived of the lawful use of
its property, and thus, in substance and effect of the property itself,
without due process of law and in violation of the Constitution of the
United States; and in so far as it is thus deprived, while other persons
are permitted to receive reasonable profits upon their invested capital,
the company is deprived of the equal protection of the laws.

The question of the reasonableness of a rate of charge for transpor-
tation by a railroad company, involving as it does the element of reason-
ableness both as regards the company and as regards the public, is
eminently a question for judicial investigation, requiring due process
of law for its determination.

From the decisions of the Supreme Court it will be seen that
railroads have a constitutional right to just compensation for
services rendered, and that by direct act of legislation, or indi-
rectly through an administrative body, as through the Interstate
Commerce Commission, they can not be deprived of this right.
That they are entitled to their day in court, and that an act
which prevents a judicial review or determination of the ques-
tion of the reasonableness of an order of the Commission would
deprive the carriers of this constitutional right, and would,
therefore, be unconstitutiona

6652
8

Being thus cenyinced of the unconstitutionality of a law de-
signed to make the orders of the Commission final and not sub-
ject to court review, it seemed to me to be proper nnd rational,
if not esxcntial, that the act should provide for that review and
throw about it such constitutional restrictions and terms as
would prevent unnecessary and frivelous appeals to the courts
to defeat the end ef this remedial legislation, and this I under-
took to do in the fifth section of the bill. That section provides
that the orders of the Commission, except orders for the pay-
ment of money, which fer obvious reasons must be excluded,
shall take effect at a date to be fixed by the Commission, and
shall continue in effect for a pericd of time fixed by the Comunis-
sion, not exceeding two years, unless the Commission itself shall
set therm aside or they shall be set aside by a court in a suit to
test their lawfulness. The method of testing their lawfulness is
then prescribed. The right is given to any party to the proceed-
ings, whether it be a municipality, an agricultural association,
a mercantile association, a shipper, a carrier, or the owner of
some instrumentality necessury or incident to the transportation,
who is affected by the decision of the Commission as to the rate
and practice covered by the complaint, or by its order prescribing
a different rate or practice, and alleging either or both to be in
violation of its or his rights, to institute a suit in equity in the
circuit court ofthe United States to have such questions deter-
niined.

I desire to draw special attention to the fact that the question
that can be submitted to the determination of the court‘is solely
the question as to whether the order violates the rights of the
party who institutes the proceedings. There is no attempt to
define what those rights are. There is no attempt to expand
or to contract them. It is the heritage of evéry English-speak-
ing man, or association of men, to have his rights determincd
in a court. It is for the court to decide what those rights are.
An attempt to specify what right shall be determined by the
court might he fatal to the constitutienality of the legislation.
If the specification should not include all his rights, he would
be shorn of a constitutional privilege. Should it undertake to
enumerate rights which he could not establish, it would be
meaningless and unintelligent legislation.

Mr. DANIEL. Mr. President

The VICE-PRESIDENT. Does the Senator from Pennsyl-
vania yield to the Senator from Virginia?

Mr. DANIEL. I should like to ask the Senator a question, if
it will not interrupt him.

Mr. KNOX. I would rather proceed with my remarks if the
Senator will be kind enough to defer his question until later on.

Mr. DANIEL. Very well.

Mr. KNOX. If his rights are determined solely by the Con-
stitution, that instrument would be the measure employed in
their determination. If he has rights vested upon some other
foundation, a limitation placed upon him to have nothing but
his constitutional rights determined, would be a fatal objection.

It seems to me to be wise, both as an indication of legislative
intention that the orders of the Commission were not to be in-
considerately disturbed, as well as a provision of protection, to
the public, to provide against the suspension of the Commission’s
orders by interlocutory decrees, without requiring a cash deposit

6652

 
9

or a bond to secure to the parties entitled to repayment, the dif-
ference between the Comiission’s rate and the railroad rate if
the Commission’s rate were sustained ; and to that end the proviso
of the fifth section has been inserted, which carries in its terms
a direction to the court to regulate the practice of the parties
pending the litigation, in order to make these rights of repay-
ment certain and effective. I do not share the oft-expressed
opinion that the courts, even in the absence of such a provision,
would lightly deal with the orders of the Commission.

The disposition among Federal judges to grant preliminary
injunctions without hearing and for trifling reasons is one I
have not observed in my experience, and while I accept, of
ceurse, as true the statements made by Senators as to their
own experience and observation, I think the situation pre-
sented to a court in an application to set aside an order of the
Commission made under authority of law would be essentially
different from the one presented in ordinary litigation between
man and man. It must be remembered that the Commission
would be exercising a power delegated to it by Congress; that
its findings would have the prima facie force of an act of Con-
gress, not to be suspended, disturbed, or modified, except upon
that quantum of prcof necessary to overthrow the findings of a
master in chancery or the verdict of a jury. I should be
amazed, if this power is given to the Commission, to find any
circuit court take any view other thin the one I have expressed.
Section 14 of the act to regulate commerce expressly provides
that the Commission’s findings shall be deemed prima facie evi-
dence as to cach fact found in all judicial proceedings. ~

While thus far I have done little more than indicate my atti-
tude toward this legislation and a preference for the bill I have
introduced as a comprehensive measure, and one most likely to
prevent discrimination or preferences between individuals by
devices worked out through the accesscries to commercial inter-
course, and to secure “in all things that equality of right which
is the great purpose of the interstate commerce act,” and, as
well, most likely to escape the construction, so frequently en-
countered in courts, that the particular evil complained of was
not covered by the terms of the law, yet I have referred to it
here so much in detail solely with the hope that as a contribu-
tion to the general fund it might be of use in adjusting the bill
which has been reported to the requirements of the situation.

Up to this time, after having referred to the movement and
policy which has logically led to legislation such as is gener-
ally proposed in the reported bill, I have undertaken to show
in a general way the purposes for which the Interstate Com-
merce Commission was originally created, the powers which it
possesses to effectuate those purposes, and in what direction,
in my judgment, those powers shculd be expanded in order to
establish a workable and understandable code of commercial
regulation and a type of a bill adapted to the situation. I have
contended that a law authorizing the Commission to set aside
rates and practices upon complaint, and to substitute others in
their stead, must proceed either upon the theory of the Com-
mission’s action being final, or upon the theory that it must be
subjected to review in the courts. I have, using the bill I in-
troduced as a text, spoken in soine detail of its provisions and
pointed out that it was drawn upon the constitutional theory
of subjecting the orders of the Commission to a court review.

6652
10

I shall now take up the pending bill and endeavor to ascer-
tain from its provisious whether or not it contemplates such re-
view, and if a review by the courts was contemplated by its
proponents, whether they have succeeded in providing for or
preventing one. and whether or not to make that bill constitu-
tional such a review is necessary.

I have no words but words of praise for the distinguished
Senators who have given their time and great abilities in the
work of preparation of this preposed great remedial law. I am
in hearty syiupathy with the purposes with which they were
inspired, but I am sincerely convinced that the bill as it now
stands utterly fails to accomplish their beneficent purposes, and,
indeed, wholly defeats them.

That the sponsors for this measure conscientiously believed
that they had prepared a bill providing unrestricted and un-
limited power in the courts, quoting its language in the venue
clause, page 17, lines 10 to 14, “to enjoin, set aside, annul, or
suspend any order or requirement of the Commission,” is indis-
putable because of their statements to that effect. Mr. HeEp-
BURN, in Closing the debate in the House (Recorp, p. 2651), re-
plying to a question of Mr. SuLrtivan of Massachusetts, stated
there was no doubt of the power of the court to review the
reasonableness of a rate fixed by the Commission. I quote
from the Rrecorp:

Mr. Sutnivan of Massachusetts. Then, in your opinion, the court,
under this bill, if it becomes law, will have the right to enjoin a rate
fixed by the Commission if it is unreasonably low but yet does not
amount to confiscation?

Mr. Hepburn. I think there is no doubt about that.

The junior Senator from Minnesota [Mr. Cuarp] is, I under-
stand, in complete accord with Mr. Hrepsurn upon this point,
and I understand, also, that the junior Senator from Iowa [Mr.
DoLiiver] takes the same position.

Mr. DOLLIVER. Mr. President

The VICE-PRESIDENT. Does the Senator from Pennsyl-
vania yield to the Senator from Iowa?

Mr. DOLLIVER. If it will not interrupt the Senator——

Mr. KNOX. It will not interrupt me.

Mr. DOLLIVER. I feel impelled to disclaim entertaining
that view if it is interpreted as I understand the Senator from
Pennsylvania interprets it. The Supreme Court have decided
in the Maximum Rate cases that an unfair and unjust rate is
an essential deprivation of the carrier's property. I have no
doubt they would review the order from that standpoint if the
question were presented under the pending bill, but I do not go
to the extreme of saying that the court would review the rea-
sonableness of the rate with the view of substituting its discre-
tion for the discretion confided by this bill to the Commission
to determine the question whether a disputed rate is just and
reasonable.

Mr. KNOX. The Senator from Iowa has stated very much
more clearly than I have myself been able so far to state ex-
actly what I understand to be his position.

If this is a correct construction of the bill, it is obvious that,
so far as court review is concerned, the only point of difference
between these gentlemen and myself is that I stand for a re-
stricted power of the court to set aside the Commission’s order
while they propose an unrestricted power to that end.

6652

 
11

I have ventured the opinion heretofore that I regarded the
bill under consideration unconstitutional. I now repeat that
epinion, and for the following reasons:

First. It does not provide any method for challenging the
unlawfulness of the orders of the Commission in a direct pro-
ceeding against the Commission.

Second. It prohibits parties affected and aggrieved by the
Comniission’s orders from defending proceedings to enforce
them upon the ground of their unlawfulness.

Third. It so heavily penalizes the disobedience of the Com-
mission’s orders as to make any attempt to secure a judicial
hearing in any form of proceeding impracticable. These rea-
sons combined manifest such an intention to exclude inquiry
into the lawfulness of the acts of the Commission as to bring
the measure within the principle decided in the case of the
Chicago, etc, Ry. v. Minnesota (134 U. 8.), namely, that where
the statute deprives the carrier “of its right to a judicial inves-
tigation, by due process of law, under the forms and with the
machinery provided by the wisdom of successive ages for the
investigation judicially of the truth of a matter in controversy
it conflicts with the Constitution of the United States.”

It is not possible to find in the bill a single word confer-
ring jurisdiction upon any court to entertain a suit of any party
aggrieved by any order of the Commission. Although the Com-
mission is given power to sue in several cases, in no case is it
made subject to suit. It may sue to enforce its order, but the
parties bound by the order can only deny the fact that the
order was regularly made.

How can a Commission administering a law of Congress be
sued without the consent of Congress? What interest has it
in an order after it is made? How can a case or controversy
exist between it and a carrier after it has performed its duties
under the act? If it is replied that it is the Commission's
duty to enforce its orders by proceedings in court, my answer
is that it is not a duty under the terms of the bill, but a dis-
cretion, and in such proceedings it is but a nominal party.
Indeed, it is not necessary for it to be a party at all, as the right
to enforce the order is expressly given to the Commission, or
any party injured through its disobedience, and the bill ex-
pressly provides that the merits of the order can not be tried
in such proceedings.

The fact is that under the bill the orders of the Commission
can only get into court in two ways. One I have just indicated,
in which the carrier can not defend. The other is by a suit
by the United States to collect penalties for disobedience of the
orders. Both are by preceedings against the carrier. In no
way can the order be brought into court by proceedings against
the Commission.

It is clearly the purpose of the hill to preclude in proceedings
by the United States to collect penalties any consideration by
the courts of the validity of the order of the Commission, and
indeed it would be a curious consequence if an order made by
the Commission could be practically annulled in a proceeding
by the United States against the carrier to enforce the penalty
to which neither the Commission nor the party who made the
complaint was a party. But apart from this consideration, it is
evident that a carrier could not afford to take the chances in-

6652
12

cident to testing the Commission’s order in a proceeding to
collect these penalties because of the extent to which it would
be penalized if its contention should not be sustained by the
courts.

The bill confers no right of review whatever upon the initi-
ative of the carrier. It seems to assume the existence of some
right in the carrier to institute a proceeding in the courts for
the suspension or setting aside of the Commission’s order, for
in section 16 it is provided that the Commission’s order shall
take effect thirty days after service of notice thereof upon the
earriers affected thereby “unless such orders shall have been
suspended or modified by the Conunission, or suspended or set
aside by the order or decree of a court of competent jurisdic-
tion.”

Is it not clear that in the absence of a grant of power to the
courts to review the Conimission’s order in a proceeding brought
to have it set aside, the courts, under the peculiar frame of this
bill, which imposes no duty upon the Commission or anyone to
enforce the order, could not entertain a suit brought for that
purpose? Unless and until the Commission should itself move
for the enforcement of the order, the carrier by failing to com-
ply therewith would not have a standing in equity to set it
aside. And when the Commission does move for the enforce-
ment of the order the bill prohibits a defense upon the ground
of its unlawfulness.

The sole ground upon which a claim to relief at the hands of
a court of equity could rest would seein to be that the continued
existence of the order was a menace to the carrier because of
the penalties that might be recoverable for its failure to comply
therewith. But how coulda court of equity interfere merely to
relieve the carrier from an action to recover penalties or to
restrain the United States from prosecuting such an action?

The difficulties in the way of any procedure at the instance of
the carrier, intended to get rid of the effect of any order of the
Commission (unless such procedure is specially authorized),
will be apparent when we consider what relief the courts could
afford, supposing that some ground for equitable relief could be
found.

A proceeding to restrain the Commission from proceeding to
enforce compliance with its order would be of no avail, if the
Commission should answer that it did not propose so to proceed.

A proceeding to restrain the United States from bringing an
action to recover the penalties could not be sustained.

Nor could a proceeding be sustained the only purpose of which
was to secure a declaration upon the part of the court that the
Commission had reached a wrong conclusion, and that conse-
quently its order was an unlawful one. There could not be
coupled with any such declaration any coercive or effective
order which could compel the Commission to annul or modify
its order. And if this could not be brought about, resort could
not be had to a court of equity merely for the purpose of se-
curing a declaration by it that an order made by an adminis-
trative body was unlawful, to be coupled with or followed by
no action relieving the carrier from the effects of such order.

In all the cases in which relief has been granted to carriers
against orders of commissions some ordcr acas possible restrain-
ing or cnjoining some action upon the part of the commission
achose order had been attacked.

6652
13

In the case of Scuthern Pacifie Company v. Board of Railroad
Commissioners (75 Fed. Rep., 286) it was contended upon the part
of the board that 2 certain order it had made reducing rates
could not be enjoined, because the beard had no further office or
duty to perform in respect to the subject-matter of the order.
In dealing with this contention Judge (now Justice) McKenna
said:

The grain schedule was served and the twenty days prescribed by
statute afier which the rates should go into effact had not expired
when the Lill was filed. Were there yet any acts or duties to be per-
formed by the board? It is very clear that if there was nothing left
to be performed—if the rates hud become the law to be enforced by
othcr officers than the counimissioncrs—there was nothing to be ci-
joiued in a suit against the commissioners.

And in the case of L. & N. Railroad Co. 7. McChord (103 Fed.
Rep., 216) the circuit court of the United States for the district
ot Kentucky enjoined a board of State commissioners from act-
ing under a statute of Kentucky, because in the opinion of the
court no opportunity was affsrded to any railroad company
alfected by an order cf the commissioners to have the same re-
yeiwed by the courts. In this case the circuit court wes unable
to find any warrant for the contention that after its order had
been promulgated the commission had any further duty to per-
form, and its conclusion as to the effect of this was thus stated:

It is indeed manifest from the entire scope and plan of the enactment,
and ity operation upon mere isolated cases only, that it was the purpose
to exclude all inquiry upon that subject aiter the commission had
acted, and to enforce by rigorous and extravagant penalties the rates
thus fixed, however reasonably and earnestly the railroads might desire
to promptly have the question of the justness of those rates finally
determined by a judicial inquiry. Upon the principles so often and so
emphatically announced by the Supreme Court, this purpose thus
plainly written in the legislation must be fatal to its validity.

The Supreme Court set aside the injunction thus granted
(McChord v. L. and N. Railroad Company ef al., 183 U. §S.
483) not because it differed from the circuit court as to the inva-
lidity of the act construed as the circuit court had construed
it—on this point no opinion was expressed, but because it held
that action on the part of the commissioners was necessary for
the enforcement of any order made ly them, and consequently
that an opportunity would be afforded to initiate proceedings: to
enjoin such orders.

The result of these considerations—

To quote from the court’s opinion—
is that the duty of enforcing its rates rests on the commission, and
that none of the consequences alleged to be threatened can he set up
as the basis of equity interposition before the rates are fixed at all.

Unless the order itself could be got rid of, how could a mere
declaration of a court of equity that it was unlawful be
availed of by the carrier in an action brought by the United
States to recover penalties claimed to be incurred because of the
nonobserrance of the Commission’s order? The declaration that
it was unlawful would have been madein a proceeding to which
the United States was not a party, and if for any reason the
Attorney-General did not consider that he should ke governed
thereby, he could have the question of the lawfulness of the Com-
mission’s order determined in a proceeding to collect the penal-
ties, in which he could be heard and in which a court of law
might, as it certainly could, reach a conclusion in favor of tka
lawfulness of the Commission’s order, in direct opposition to the
declaration of a court of equity.

0652

 
14

The conclusion seems inevitable that, unless some special
method of procedure is provided for in the act which will afford
to a carrier the right to have an order of the Commission effect-
ively reviewed and dealt with by the courts, no effective remedy
is available.

Unless the courts are empowered, in a proceeding brought
with this object in view by the carrier, to suspend, set aside, or
modify an order of the Commission, the carrier is practically
without remedy, for it can not be otherwise relieved from the
coercive effect upon it of the danger that, after all and in the
last analysis, the lawfulness of the Commission’s order (if this
question can be raised at all) will have to be determined in an
action brought by the United States to recover the penalties
imposed by the act—a danger which, considering the amount
that may be recovered, it can not afford to incur.

Keven, therefore, if the lawfulness of the Commission’s order
eould be raised in a proceeding brought by the United States
to collect these penalties, the remedy thus afforded to the carrier
would be utterly inadequate. It would be such a remedy as
that adverted to in the opinion of Mr. Justice Brewer in the
ease of Cotting v. Kansas City Stock Yards Company (183 U. §.,
-79).

It is doubtless true—

Said Mr. Justice Brewer in that case— :
that the State may impose penalties such as will tend to compel obe-
dience to its mandates by all, individuals or corporations, and if ex-
treme and cumulative penalties are imposed only after there has been a
final determination of the validity of the statute, the question would
be very different from that here presented. But when the legislature,
in an effort to prevent any inquiry of the validity of a particular
statute, so burdens any challenge thereof in the courts that the party
affected is necessarily constrained to submit rather than take the

chances of the penalties imposed, then it becomes a serious question
whether the party is not deprived of the equal protection of the laws.

But, as already pointed out, no inquiry into the lawfulness of
the Commission's orders would be possible in actions for the
penalties imposed by the bill.

That the bill as it now stands is not oniy unfair, in respect to
the question of review, but is also unconstitutional, seems to be
clear. The dgcision of the Supreme Court in the case of Chicago,
Milwaukee and St. Paul Railway Company v. Minnesota (134
U. S., p. 418) would seem to settle this.

In that case the railway commission of Minnesota, acting
under a statute of that State, after a hearing upon complaint
and answer, found that a certain rate should be thereafter
charged, which rate the Chicago, Milwaukee and St. Paul Rail-
way Company, the carrier affected by such order, declined to
put in force. Thereupon the commission, following the pro-
cedure which the act authorized, applied for a mandamus to
compel the railway company to publish the rate which it had
prescribed. The railway company set up in its return to the
alternative writ that the rate which it had had in force was a
reasonable, fair, and just rate and that the rate which it had
been directed by the commission to promulgate was not a
reasonable or fair or just rate and that the establishment of
this rate by the commission amounted to a taking of the rail-
way company’s property without due process of law.

The Supreme Court of the United States, in passing upon the
questions involved, held, in the first place, that it was con-

6652
15

cluded by the construction put upon the statute by the supreme
court of Minnesota, and that consequently it must assume that
it was the intention of the statyte (provided the commission
proceeded in the manner pointed out therein) to make the
rates, which it directed should be enforced, as the Supreme
Court put it in its opinion, “not simply advisory, nor merely
prima facie equal and reasonable, but final and conclusive as to
what are equal and reasonable charges; that the law neither
contemplated nor allowed any issue to be made or inquiry to
be had as to their equality or reasonableness in fact; that under
the statute the rates published by the commission are the only
cnes that are lawful, and therefore in contemplation of law the
only ones that are equal and reasonable, and that in a proceed-
ing for mandamus under the statute there is no fact to traverse
except the violation of law in not complying with the recom-
mendations of the commission.”

Accepting this as the effect which it was bound to give the
statute, the court held that so construed it was in conflict with
the Constitution of the United States.

This being the construction—

Said Mr. Justice Blatchford, delivering the opinion of the
court—

of the statute by which we are bound in considering the present case,
we are of opinion that, so construed, it conflicts with the Constitution
of the United States in the particulars complained of by the railroad
company. It deprives the company of its right to a judicial investiga-
tion, by due process of law, under the forms and with the machinery
provided by the wisdom of successive ages for the investigation judi-
cially of the truth of a matter in controversy, and substitutes therefor,
as an absolute finality, the action of a railroad commission which, in
view of the powers conceded to it by the State court, can not be re-
garded as clothed with judicial functions or possessing the machinery
of a court of justice.

In the opinion reference is made to the fact that the statute
permitted the commission to promulgate a rate in place of one
found by it to be unreasonable without having first accorded
the carrier an opportunity to be heard; but this fact could have
no controlling effect upon the decision, because the commission
had, in the case of the rate at issue, promulgated it after hear-
ing the carrier’s side of the case.

In the concurring opinion delivered by Mr. Justice Miller it
appears very clearly that he was governed in reaching his con-
clusion by what he regarded as the unlawfulness of the attempt
made to deprive the carrier of any review of the commissicn’s
order by the courts. This is apparent from the following ex-
tract from his opinion:

I do not agree that it was necessary to the validity of the action of
the commission that previous notice should have been given to all
common carriers interested in the rates to be established, nor to any
particular one of them, any more than it would have been necessary,
which I think is not, for the legislature to have given such notice if
it had established such rates by legislative enactment. :

But when the question becomes a judicial one and the validity, and
justice of these rates are to be established or rejected by the Jjudg-
ment of a court, it is necessary that the railroad corporations inter-
ested in the fare to be considered should have notice and have a right
to be heard on the question relating to such fare, which I have pointed
out is a judicial question. For the refusal of the supreme court of
Minnesota to receive evidence on this subject I think the cause ought
to be reversed, on the ground that this is a denial of due process of
law in a proceeding which takes the property of the company, and if
this is a just construction of the statute of Minnesota it is for that
reason void.

6052
16

Mr. President, I ask Senators to make especial note of the fact
that this question was raised in a proceeding to enforce the
commission’s order, and a denial of the right to defend on the
merits was held to invalidat@ the law. The right to defend on
the merits in such a case is expressly withheld in the bill we are
considering.

While the courts have upheld acts of Congress conferring final
power upon administrative officers, they have refused to do so
when the orders of such officers affected rights secured or recog-
nized by the Constitution.

Thus in Wong Wing v. United States (163 U. S., 228) the
Supreme Court while recognizing its previous decisions as to the
conclusive effect of decisions of the officers charged with the
duty of enforcing the Chinese exclusion acts, refused to extend
the doctrine of these cases to an order of such officer committing
one adjudged by him to have been guilty ofa violation of the act
to prison for a period of sixty days, although such order was
authorized by the provisions of the act.

After referring to previous decisions of the court in which it
had been determined that the deportation of aliens not entitled
to be in the country did not constitute a deprivation of life,
liberty, or property, Mr. Justice Shiras, who delivered the opin-
ion of the court, said:

No limits can be put by the courts upon the power of Congress to pro-
tect, by summary methods, the country from the advent of aliens whose
race or habits render them undesirable as citizens, or to expel such if
they have already found their way into our land and unlawfully remain
therein. But to declare unlawful residence within the country to be
an infamous crime, punishable by deprivation of liberty and property,
would be to pass out of the sphere of constitutional legislation, unless
provision were made that the fact of guilt should be first established by
a judicial trial. 1t is not consistent with the theory of cur Government
that the legislature should, after having defined an offense as an
infamous crime, find the fact of guilt and adjudge the punishment by
one of its own agents.

While the right of Congress to confer upon the Secretary of
War* final discretion as to approval of bridges over navigable
streams has not been successfully challenged, when the question
has arisen as to the finality of an order made by him pursuant
to authority conferred upon him by Congress, requiring the
remoyal or alteration: of bridges upon the ground that they had
become an obstruction to navigation, the courts have held that
his decisions were subject to judicial review.

See United States v. Bridge Company (45 Fed. Rep., 178);
United States v. Rider (50 Fed. Rep., 406).

In United States v. City of Moline (82 Fed. Rep., 592) Judge
Grosscup thus dealt with the question of the authority of ad-
ministrative bodies. He said:

In this case two questions alone arise: First. Is the bridge an ob-
struction to navigation? Second. Is it there by any such legal right
that the Government may not interfere with it in the respect desig-
nated without just compensation? ‘The first question is purely admin-
istrative, and is one that Congress can certainly delegate to the Sec-
retary of War. A thousand questions of equal moment to the parties
interested, and of equal difficulty, are necessarily delezated to the
great Departments of the Government every month. In the very
nature of things Congress can not dispose of them. A Government of
the size of this, operated upon such a conception would be clogged im-
mediately. The second question is, undoubtedly, judicial, and for that
very reason is not subject, constitutionally, to the decision of Con-
gress any more than of the Secretary of War. If the bridge be there
by legal right—if it be a franchise or property that can not be taken
except after just compensation—Congress is powerless, either by

6652
17

special or general acts, to touch it. In the face of such property right
Congress is as helpless as the War Department. In the end such
right, whether it be attacked by special act of Congress or by some
action of the War Department, will, through some “channel, find an
appeal to the judiciary. This right ‘of appeal to the judiciary in all
questions in their nature judicial is preserved in the sections of the
statute under discussion. ‘The Secretary of War bas no power to carry
out his decisions respecting these obstructions except through a court.
Any question, whether law or fact, essentially judicial, may be raised
under these’ informations. A court of the ‘United’ States stands
always, by the clear provisions of the act, between the decision of the
Secretary and its execution. There is, therefore, in the act no dele-
gation of judicial power to the Secretary that is not open to review
in the courts. I hold, therefore, that the act, so far as it is applicable
to the case in hand, is constitutional and valid, and the motion to
quash will be overruled.

The motion to quash, which Judge Grosscup overruled, was
made upon the ground that the decision of the Secretary of
War that the bridge in question amounted to a nuisance was,
under the acts of Congress, a final determination of the matter,
and that such decision was not open consequently to question
or review in the courts. Because of his conclusion that this
was not the case, Judge Grosscup refused to quash the infor-
mation.

The principle is thus concisely stated in Murray’s Lessce v,
Hoboken Co. (18 Howard, 284) :

To avoid misconstruction upon so grave a subject, we think it
proper to state that we do not consider Congress can either withdraw
from judicial cognizance any matter which, from its nature, is the
subject of a suit at the common law, or in equity, or admiralty; nor,
on the other hand, can it bring under the judicial power a matter
which, from its nature, is not a subject for judicial determination.
At the same time there are matters, invelving public rights, which
may be presented in such form that the judicial power is capable of
acting on them, and which are susceptible of judicial detcrmination,
but which Congress may or may not bring within the cognizance of
the courts of the United States, as it may deem pr oper.

Mr. NEWLANDS. Mr. President

The VICE-PRESIDENT. Does the Senator from Pennsyl-
vania vield to the Senator from Nevada?

Mr. KNOX. Certainly.

Mr. NEWLANDS. I understood the Senator from Pennsyl-
yania a few moments ago to say that the right of the carrier
to go into court and defend itself against the action of the Com-
mission is expressly denied by the proposed act.

Mr. KNOX. The Senator misunderstood me, then. I said
that the right of the carrier to defend, in a proceeding begun
by the Commission to enforce its orders, is expressly denied by
the proposed act. ;

Mr. NEWLANDS. Will the Senator kindly refer to that pro-
vision of the proposed statute? .

Mr. KNOX. If the Senator will permit me to finish my re-
marks, I shall be very glad to do so.

Mr. NEWLANDS. Certainly. I do not wish to interrupt the
Senator.

Mr. KNOX. I can indicate where the Senator can lay his
hand on it. It is that provision of the statute which gives the
Commission, or any person affected by an order of the Commis-
sion, the right to go into any circuit court of the United States
and by mandamus or otherwise secure the enforcement of the
order. But in such proceedings the right of the carrier or other

6652 2

 

 
18

person who is made defendant in the proceedings is limited to
the question as to whether or not the order was regularly made,
and not as to its lawfulness.

Mr. NEWLANDS. What section is it?

Mr. KNOX. Section 15, I believe.

Whatever the intentions of the framers of this bill may have
been, they have succeeded in producing a measure which permits
an administrative body to make orders affecting property rights,
gives no right to the owners of the property to test their lawful-
ness in the courts in‘a direct proceeding, denies the right to
challenge their lawfulness in proceedings to enforce them, and
penalizes the owner of the property in the sum of $5,000 a day
if it secks a supposed remedy outside of the provisions of the
bill by challenging either its constitutionality or the lawfulness
of the acts performed under its provisions.

The conclusion to which I am irresistibly led for the reasons
and upon the authority I have given is that such a measure is
unconstitutional.

Mr. President, as Congress is now dealing for the first time
with the proposition to confer upon its Commission the power
to examine and readjust rates, it is instructive to obserye the
manner in which some of the States have dealt with the question
of court review, as applied to the acts of their own State rail-
road commissions exercising similar powers. With the view
of ascertaining to what extent such provisions are incorporated
in the laws of these States, and also of learning the nature
of such provisions, I recently caused to be prepared a statement
showing the provisions in their statutes with regard to the
review of the orders of State railroad commissions; and
believing that this information would prove of value in the
determination of the similar question now before this body, I
presented the memorandum to the Senate, and it was made a
Senate document. :

That statement refers to the statutes of 16 States. It is, of
course, impracticable for me to refer at Jength to each of these
statutory provisions, but they have been summarized as follows:

In all the right of court review is affirmed, in some more com-
prehensively granted than in others, but in none wholly ignored.
In Alabama the courts may examine into the reasonableness
and justice of a commission’s order, and appeal may be carried
up to the supreme court of the State. The Arkansas statute al-
lows the justice of the railroad tariff to be passed upon judi-
cially. While the Florida law vests the railroad commission
with judicial powers, it also provides that appeals “by either
party” from judgments, orders, and decrees of inferior courts
shall be to the same extent that appeals lie “in similar cases
and suits brought under any other law of the State.” Indiana
provides for an appeal by “a dissatisfied company or party” to
its highest tribunal. Kansas has a similar provision, and
there, too, the courts may inquire whether the rate prescribed
by the commission is “ reasonable and just.” Parties in interest
may carry their case up to the supreme court of Louisiana
“without regard to the amount involved.”

In Minnesota the right of appeal to the supreme court is elab-
orately provided for. Mississippi also guards the right, and

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19

declares that in trials of cases “ brought for a violation of any
tariff of charges as fixed by the commission, it may be shown in
defense that such tariff so fixed was unreasonable and unjust
to the carrier.” Missouri gives the reviewing court, if it holds
and decides that the challenged order of the railroad commis-
sion was not lawful, the power and right, ‘“ without reference
to the regularity or legality of the proceedings of said board
or of the order thereof,” to proceed “to make such order as
the said board should have made.” Here is a “court review ”
with a vengeance! North Carolina allows appeals to be car-
ried to its supreme court. So do North Dakota and South
Dakota. Texas also grants to either party dissatisfied with
the commission’s order the benefit of judicial review practi-
cally unrestricted. Virginia, to expedite decision, has enacted
that all appeals from the commission “shall lie to the supreme
court of appeals only.” Washington permits any railroad or
express company “affected” by an order of the railroad com-
mission to test its lawfulness in the superior court. In the
Wisconsin law it is set forth that dissatisfied parties may
begin an action in the circuit court of the State to vacate the
order of the commission, which is made the defendant, and the
court may pass upon the lawfulness or reasonableness of the
commission’s requirement.

It will be seen from this outline, and more particularly from
the document above referred to, known as Senate Document No.
247, of the present session, that the legislatures of these States
have deemed it necessary to incorporate in their statutes spe-
cific provisions for review, or to provide for defense against the
enforcement of orders which are deemed by the carriers to be
unjust or unreasonable.

Now, Mr. President, if such provisions are necessary in the
legislation of States possessing complete original sovereig?
power over the subject, hampered by no limitations except such
as are contained in their own constitutions and imposed by the
fourteenth amendment of the Constitution of the United States,
a fortiori, they are necessary in an act of Congress which rests
upon the delegated power of commercial regulation.

I can not but think there is some difference in the plenitude
of the respective powers of the State and nation arising not
only out of the source of the power but out of the difference of
the relations of the two soyereignties to the subject upon which
the power operates.

The right of a railroad to establish public highways and to
take tolls for the transportation of persons and property is a
right derived from the States who delegate to private enter-
prise a public function. The right of a State to exercise free
control over the operations of a railroad and the charges for its
service grows out of its dominion over an institution it has
created to perform a function of the State.

The right of Congress is found in the constitutional power to
regulate commerce among the States, which the great Chief
Justice said:
eenetee right to prescribe the rule by which commerce shall be gov-

The purpose of these observations is not to throw doubt upow
the power of Congress to confer upon the Commission tsv

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20

powers proposed in this bill—of this I have no doubt—hbut to
confirm the view that in dealing with the subject greater cau-
tion should be ébservyed in guarding the rights of those upon
whom its provisions are intended to operate, because of the dif-
ference in the radical relations of the States and the nation to
the subject and to emphasize the suggestion that it would be
unwise to omit in national legislation that which seemed neces-
sary in State legislation. :

It could be contended, if it were admitted that Congress could
not establish a schedule of rates, that Congress could lawfully
enact the main proposition of this bill. I do not believe that
an act to regulate rates, to secure their reasonableness and uni-
formity, necessarily depends upon Congressional power to ces-
tablish rates; it could safely rest upon the power to prescribe
a rule to govern rates when established. Congress’s power to
regulate the construction of a bridge across a navigable stream
does not depend upon its power to build the bridge.

Is there not a difference between establishing rates and
establishing a rule that they shall be reasonable and nondis-
criminatory? The power to regulate commerce includes the
power to remove restrictions upon commerce; and unreasonable,
extortionate, and discriminating rates and practices amount to
a restriction, an obstacle, an obstruction.

The decision in the Northern Securities case is precisely put
upon the ground that Congress has power to prescribe the rule
ot freedom of competition and that the incidental interference
with corporations created by a State in the enforcement of the
rule does not suggest an attempt to assume control over them
for any other purpose. The court said in that case:

The means employed in respect of the combinations forbidden by the
antitrust act, and which Congress deemed germane to the end to be
accomplished, was to prescribe as @ rule for interstate and international
commerce (not for domestic commerce) that it should not be vexed by
combinations, conspiracies, or monopolies which restrain commerce by
destroying or restricting competition, ete.

Similar provisions for a judicial review, or for judicial inves-
tigation of complaints, are also to be found in nearly all of the
bills upon the subject of rate regulation that have been intro-
duced during the present session of Congress, to wit:

H. R. 296, introduced by Mr. Ricuarpson of Alabama, De-
cember 4, 1905, provides (sec. 4) for a review by the circuit
court.

H. R. 469, introduced by Mr. Hearst December 4, 1905, pro-
vides (secs. 9 and 10) for a court of interstate commerce, which
shall have exclusive jurisdiction to review all orders of the
Interstate Commerce Commission, and that any party ag-
grieved may file a petition for review, such review to include
the justness, reasonableness, and lawfulness of the order.

H. R. 4425, introduced by Mr. Townsexp December 6, 1905,
provides (sec. 7) for review by the circuit court.

H. R. 8414, introduced by Mr. Sutzer December 15, 1903, pro-
vides for judicial review (p. 2, lines 20 to 25).

H.R. $999, introduced by Mr. Orcorr December 18, 1905, pro-
vides for a judicial review (p. 3, lines 3 to 10).

H. R. 10098, introduced by Mr. Hoge January 4, 1906, provides
for a court of transportation, which shall inquire into and
determine complaints presented by a commission termed the
transportation commission (p. 8).

6652
21

H. R. 10099, introduced by Mr. Hersurn January 4, 1906, pro-
vides, on page 15, for the determination by the circuit court of
the lawfulness of an order, upon complaint for its enforcement,
and on page 16 distinctly recognizes and refers to an assumed
right of the carrier “to enjoin, set aside, annul, or suspend any
order or requirement of the Commission.”

H.R. 12220, introduced by Mr. McCaLi January 17, 1906, pro-
vides (p. 1, lines 11 to 13) for a judicial investigation of com-
plaints made to the Commission and for an appeal in all cases
to the Supreme Court (p. 3, lines 2 to +).

H.R. 12312, introduced by Mr. Davey January 18, 1906, pro-
vides for 2 review in the circuit court by any carrier or other
party aggrieved (p. 11, lines 19 to 23).

S. 285, introduced by Mr. Foraker December 6, 1905, provides
(p. 3) for a judicial review in the circuit court upon an action
for enforcement of an order, and for the right of appeal there-
from to the Supreme Court (p. 4, lines 10 and 11).

S. 2261, introduced by Mr. DoLttiver December 19, 1905, pro-
vides for the judicial determination of the lawfulness of an
order, upon an action for its enforcement (p. 15, lines 10-15).

S. 2686, introduced by Mr. Cutsperson January 8, 1906, pro-
vides for judicial review where rate prescribed by Comuission
is confiscatory (p. 2, lines 5 to 10).

8. 4382, introduced by Mr. Etxins February 18, 1906, provides
for judicial review by the circuit court, section 3.

S. 4649, which I introduced February 22, 1906, provides for
review, section 5.

Of the remainder, practically all contemplate and refer to,
although they do not expressly provide for, a judicial review.

H. R. 278, introduced by Mr. CanpLER December 4, 1905, con-
templates and refers to a judicial review (sec. 7).

. R. 184, introduced by Mr. Russet December 4, 1905, con-
templates and refers to a judicial review (sec. 7).

H. R. 5966, introduced by Mr. Abamson December 11, 1905,
clearly contemplates and refers to a judicial review, but does
not expressly provide for one (secs. 4 and 9).

H. I. 11488, introduced by Mr. Hersurn January 11, 1906,
contemplates and rcfers to, but does not provide for, a judicial
review (p. 10, lines 1 to 8, and p. 16, lines 5 to 7).

H. R. 12987, introduced by Mr. Hepsurn February 8, 1906,
contemplates and refers to, but does not provide for, a judicial
review (p. 14, lines 22 to 25, and p. 17, lines 10 to 13).

I am aware of but one bill (S. 1378, introduced by the Sen-
ator from South Carolina [Mr. TILLMAN]) which grants the
Commission the power to fix rates, and which fails to provide
erpressly either for a judicial review or investigation, or to
recognize a power assumed to exist in the Federal courts to
review the orders of the Commission; and in that one instance
it was stated at the time the bill was introduced that the reason
it was not included was because the right of review already
existed. What the Senator said was, I quote from the Rrcorp,
page 248: 3

Mr. GaLuincrr. I want to ask the Senator if I correctly understand
his proposition as embraced in the bill to mean that the Interstate
Commerce Commission shall be given the power to fix rates and that

there shall be no appeal to the courts permitted—that it shall be
absolute?

6652
22

Mr. TILuMAN. Ob, no: the Supreme Court has declared—and the
Senator is familiar with the decision—that under the Constitution
Congress has no such powcr, and it is not worth while for us to say in a
vill that ace are going to give that powcr, because tie court would pay
no attention to it and would declare such a bill unconstitutional.

If this is correct; if there exists a practical unanimity in the
desires and views of those who have given sufficient thought and
study to this matter to be willing to express their views in the
form of a bill; if all these Senators and Representatives be-
lieve cither that a provision for review is essential or desirable,
or take the ground that that right already exists in the courts,
ox that it should be included in the bill, what can possibly be the
objection to definitely stating that right in the bill?

One thing I want to settle absolutely and to make clear be-
yond the possibility of a doubt: There exists in the minds of a
large number of people throughout the United States the idea
that the pending bill oppeses a judicial review, and that those
who are attempting to amend the bill by the insertion of a pro-
vision for review are endeavoring to force something into the
bill that is foreign to its purposes. Such a view is erroneous. I
do not mean that the bill effectually provides for a review, but
that it makes distinct reference to such review, and assumes
that such right exists,

That bill provides, page 11, lines 5 to 9, as follows:

Such order shall go into effect thirty days after notice to the carrier
and sball remain in force and be observed by the carrier, unless the
same shall be suspended or modified or set aside by the Commission
or be suspended or set aside by a court of competent jurisdiction.

And on page 14, lines 20 to 25:

And the orders of the Commission shall take effect at the end of
thirty days after notice thereof to the carriers directed to obey the
same, unless such orders shall have been suspended or modified by the
Commission or suspended or set aside by the order or decree of a court
of competent jurisdiction.

And on page 17, lines 10 to 14:

The venue of suits brought in any of the circuit courts of the United
States to enjoin, sect aside, annul, or suspend uny order or require-
ment of the Commission shall be in the district where the carrier
against whom such order or requirement may have been made has its
principal operating oftice.

Now if these expressions ‘‘ suspended or set aside by a court of
competent jurisdiction; ” “suspended or set aside by the order
or decree of a court of competent jurisdiction,” and “the venue
of suits brought in any circuit court of the United States to
enjoin, set aside, annul, or suspend any order or requirement of
the Commission ” do not refer to and contemplate a review, what
do they mean?

One of two things is certain, either the bill does or it does not
provide for a review. If it does not provide for review, and if
those in favor of the bill as it now stands do not contemplate or
desire a review, then, in all fairness, these provisions should be
stricken from the bill.

The fact is, however, as I have already shown, that the friends
of the bill as it now stands claim, not that it does not contem-
plate a review, but that the bill either sufficiently provides for 2
review, or recognizes a right claimed to exist independently of
the bill. On the other hand, while not differing from them in
the object sought to be accomplished, I claim that the bill does

6652
23

not effectively provide for a review, and that it is essential in
view of its other provisions that such a right should be dis-
tinctly given in the bill. But for the seriousness of the situa-
tion the matter would be most ludicrous. Both sides agree that
the right should exist; one holds that it is in the bill or exists
independently ; the other that it is not in the bill, but should be;
and yet the former, for some mysterious and unaccountable
reason, objects to an amendment which would place the matter
beyond doubt.

When we consider that the people are asking for prompt, de-
cisive, and effective action; that the present bill distinctly con-
templates a review ; that its constitutionality is seriously threat-
ened by failure to provide for such review if the other features
are to stand; that precedents of State legislation are in favor
of a review; that all the bills presented in either House provide
for or recognize a review; that this bill itself as presented in
both Touses, and as originally prepared by the Interstate Com-
merce Commission, contained a provision for review, and that
the President in his message speaks of the orders being subject
to review—when we consider all these facts, the action of those
who are willing to imperil the validity and effectiveness of this
law by not explicitly providing for a review for no valid reason
whatever is to me incon:prehensible.

It is not my purpose, Mr. President, to discuss at length the
proposition involved in the amendinent proposed by the junior
Senator from Texas | Mr. Barrey], which raises the question of
the power-of Congress to prevent the circuit courts of the United
States from exercising what I deem to be an inherent function of
a court of equity, namely, the power to grant an injunction, pre-
liminary or final, to suspend an order of the Interstate Commerce
Commission in a case where it is alleged and established to the
satisfaction of the court that the order takes the property of a
carrier or person without allowing just compensation for its
use. An extended discussion of this question after the able
argument of the Senator from Wisconsin [Mr. Spooner] would
be superfluous.

I am constrained, however, to say that. in arriving at a cor-
rect solution of this question, it is necessary to have constantly
in mind the distinction between the judicial power of the United
States and the jurisdiction of the I’cderal courts, as prescribed
by the Constitution and laws of the United States.

The Constitution prescribes that the judicial power of the
United States shail be vested in one Supreme Court and in such
inferior courts as the Congress may from time to time ordain
and establish (Art. III, sec. 1) ; and in the next paragraph—

The judicial powcr of the United States shall ertend to all cases
in law and equity arising under this Constitution, the laws of the
United States, and treaties made, or which shall be made, under their
authority; to all cases affecting amlassadors, other public ministers,
and consuls.

It will be observed that in the first case the Constitution says
where this power shall be vested and in the next to what cases
it shall extend, but it in no way attempts to define the power
further than to indicate the three well-known branches through
which it operates--law, equity, and admiralty. These three
divisions or features of judicial power were not created by the
Constitution, but were well understood and existed long before

6652
24

the Constitution was thought of. Thus the framers of that
instrument merely adopted the system of jurisprudence then in
existence and in use among English-speaking people, and pre-
scribed that the judicial system of the new nation should be
founded upon the same principles of administrative justice.

It is also necessary to bear in mind the fact that the judicial
power is one of the three coordinate powers of the Government
of the United States, equal and in no material respect subordi-
nate to either of the others. Indeed, in some respects it may be
said to be the superior of the others, for it may pass upon the
validity of their acts. Congress did not create this power. It
exists wholly independently of that body ; but while this is true,
Congress has an office to perform in connection with it. This
office is to create and establish the inferior Federal courts and
to distribute or apply the judicial power to them. And right
here is the vital part of the controversy. By the creation of
these inferior courts Congress does net also create the power
with which they are to be clothed. Congress merely applies the
power already created by the Constitution. If it were other-
wise, and Congress not only created the courts but the judicial
power as well, then it would undoubtedly be true that Congress
could likewise deprive the courts of this power by taking away
one or more of their essential and inherent subordinate powers,
such as the right to issue the writ of injunction. But that is
not the case. The judicial power exists inherently by virtue
of the Constitution, which instrument likewise created Congress
and prescribed that it should establish the courts through which
the judicial power should operate.

The office of Congress is therefore to distrivute and not to
create these powers. This power of distribution is a step lower
down in the scale than the power to create. The first is the
creation of the judicial power itself. That was accomplished
by the Constitution. The next step was the distribution of
these powers to the Supreme Court and to the dead machinery of
the lower courts. And the third and next lower step is the map-
ping out of the jurisdiction of the court—that is, the prescrib-
ing of the particular objects or cases upon which this judicial
power shall operate, which latter in very large measure was also
outlined in the Constitution.

The judicial power, therefore, and the forms through which
it operates, is a very different matter from a creation of the
courts through which the power shall operate and the pre-
scribing of the particular cases upon which it shall operate.

It is not necessary to consider the history of the origin and
development of the chancery as a court distinct from the com-
mon-luw courts. It is sufficient to state that the whole frame-
work and structure of equity jurisprudence was built up and
made possible because of this inherent equity power, the power
of injunction, and now it is suggested to limit and control this
power.

If Congress can interfere and lop off this highly essential
branch of equity jurisprudence, it is easy to see that it can
destroy the whole system or at least its efficacy. Such an
attempt upon the part of Congress would clearly be an encrouch-
ment upon another and a coordinate branch of the Government,
and it is a matter of highest satisfaction to know that in the

6652
25

system of nicely adjusted checks and balances which safeguard
this Government the judicial power is not helpless, but may
assert its own proper position and functions by declaring such
an encroachment unconstitutional. That the Supreme Court
would do so can hardly be doubted.

In volume 16, Cyclopedia of Law and Procedure, page 30,
occurs the following:

When, however, equity jurisdiction is confered over a particular sub-
ject, such jurisdiction includes with respect to that subject all ihe
powers of courts of chancery.

“All of the poiwcrs of courts of chancery,” not some of them.
All of them. The power of injunction is the most vital of them
all. How can a court of equity exercise all of its powers if its
most yital power is taken away?

And again in Beach on Modern Equity Jurisprudence, section

5:
The jurisdiction in equity has in many instances been modified in
one way or another by modern statutes; but these statutes have ordi-
narily dealt with matters of practice or with matters which are not
elementary ; and the changes have not affectcd the fundamental prin-
ciples of equity. Legislation affecting such changes is subject to vari-
ous constitutional limitations. The most important of these is the
provision preserving the right to trial by jury, which can not be
abridged by the extension of equity jurisdiction. And, on the othe
hand, it is said that the right to have equity controversies dealt wit.
by equitable methods is as sacred as the right of trial by jury.

And in Bispham’s Bquity, sixth edition, page 2:

In the Federal courts the limits of equitable jurisdiction are to be
ascertained by reference to the boundaries within which the powers of
the English court of chancery were exercised.

The power of injunction, as we have seen, is the very power to
which the English court of chancery is indebted for its exist-
ence. Measured by this standard, how can Congress claim the
power to take it away? ;

One of the best statements of the Jaw upon this subject is to
be found in Bates on Federal Equity Precedure:

Sec. 525. These constitutional and statutory provisions have had the
effect to vest in the several courts of the United States, in cases over
which they have jurisdiction, respectively, full and complete equity
power and jurisdiction, as that jurisdiction was known, defined, distin-
guished, and administered in England at the time of the adoption of the
Irederal Constitution, embracing, among other powers, the power to
grant injunctions, etc.

Sec. 526. Full and complete chancery jurisdiction is conferred on the
courts of the United States, in the classes of cases of which they have
cognizance, with the limitation that suits in equity shall not be sus-
tained by them where plain, adequate, and complete remedy may be
had at law. The rules of the High Court of Chancery of England have
been adopted by the courts of the United States. 4nd there is no
other limitation to the ewercise of a chancery jurisdiction by these
courts in the classes of cases committed to them by the Constitution
and laws of the United States. * * * Whe usages of the High
Court of Chancery in Lngland, whenever the jurisdiction is exercised,
govern the proceed uys. The remedies in equity in the courts of the
United States are tie same, and are to be granted and administered
according to the principles, usages, and remedies in equity in [Eagland
at the time our Government was established; and where, under the
Enylish chancery system, relief by injunction can be given, the same or
similar relief may be given by the courts of the United States.

In the Monongahela Navigation Co. v. United States, 148
U. &., 825, the Supreme Court quoted with approval the follow-
ing language taken from the case of Isom v. Mississippi Central
Qailroad, 386 Miss., $15:

6652
26

The right of the legislature of the State, by law, to apply the prop-
erty of the citizen to the public use, and then to constitute itself the
judge in its own case, to determine what is the ‘ just compensation
it ought to pay therefor, or how much benefit it has conferred upon the
citizen by thus taking his property without his consent, or to extin-
guish any part of such ‘compensation’? by prospective conjectural
advantage, or in any manner to interfere with the just powcrs and
province of courts and juries in administering right and justice, can not
for a moment be admitted or tolerated under our Constitution. If any-
thing can be clear and undeniable, upon principles of natural justice or
constitutional law, it seems that this must be so.

Mr. President, a correct solution of the question mooted is to
be arrived at only by keeping in mind the. fundamental differ-
ence between the jurisdiction of a court and the judicial poiwer
which operates and extends over the matters of which it has
jurisdiction, which power is itself the life of the court. The
creator and life giver of the whole judicial system is the Con-
stitution, and not Congress.

Congress maps out the jurisdiction of the court by stating
upon and to what particular objects this judicial power shall
extend and operate, but here its office ends. All of the deci-
sions cited to support the proposition that Congress may take
from a court of equity the power to do equity extend no further
than to the jurisdiction of the courts. Of this Congress un-
doubtedly has complete control, subject to the limitations im-
posed by the Constitution. What, then, does jurisdiction mean?
Nothing more than the right to speak. Congress can clearly
say when the judicial power operating through the circuit courts
shall speak, but not how it shall speak.

Congress may say through what tribunals the judicial power
shall operate, but it can neither limit nor eliminate an essen-
tial function of that power when vested. That would be an
encroachment by the legislative upon the judicial branch of
the Government, an encroachment full of danger to the stability
of the Government.

In fhe case of Brown v. Kalamazoo Circuit Judge (75 Mich.,
283, 28+) the court said:

It is within the power of a legislature to change the formalities of
legal procedure, but it is not competent to make such changes as to
impair the enforcement of rights.

The functions of judges in equity cases in dealing with them is as
well settled a part of the judicial power and as necessary to its ad-
ministration as the functions of juries in common-law cases. Our
constitutions are framed to protect all rights. When they vest judi-
cial power, they do so in accordance with all of its essentials, and when
they vest it in any court they vest it as efficient for the protection of
rights, and not subject to be distorted or made inadeguate. The
right to have equity controversies dealt with by equitable methods is
as sacred as the right of trial by jury.

I consider the question raised by the junior Senator from
Texas an important one, for the reason that in it, in my judg-
ment, centers the main point of debatable difference in regard
to the pending bill. I can not but think that it will be very
generally conceded that the bill must be amended so as to pro-
vide explicitly for some form of judicial review. The question
this leaves for serious discussion is as to whether the amend-
ment shall be so framed as to deny to the courts the power to
suspend an order of the Commission pending its review. With
regard to that proposition I can only say that it is not a ques-
tion of what the Senate may desire to do, but of what it law-

6652
27

fully can do; and I believe it has been shown that such a
provision is impracticable because it is unconstitutional.

A provision for notice and heartng before granting an injunc-
tion can easily be provided without the risk of infringing upon
chancery powers or constitutional rights by requiring the appli-
cation for an injunction to be made in a suit against the Com-
mission to be begun before the day fixed for the order to go
into effect. This would be before there had been any actual
taking of the carrier's property, and therefore a provision for
ample notice and hearing would not be subject to the objection
that irreparable injury might ensue pending the hearing, as no
injury could be sustained until the order became effective.

Mr. President, men of our inheritances repel summary and
arbitrary methods, and none the less if these proceed from
acknowledged power, accompanied by the mere empty profes-
sions and forms of law. Judicial review of every substantial
controversy affecting persons and property is a right. This
right was painfully won from tyrannies of the past, and is
established now beyond the power of any present tyrannies to
destroy, in whatever guise they may come, and even if mas-
querading in the name of the people. This right is to have the
rights of the parties in every controversy determined by the
courts. Why, then, should there be any doubt on that point in
this bill; why should the relative provisions not be clear and
explicit? Is it because the friends of this bill doubt the charac-
ter or capacity of the courts? I have heard that doubt sug-
gested in and out of this Chamber, and I now take leave to raixe
my voice in protest against the shallow and dangerous notion.
Is the relation of the courts to government by the pesple for-
gotten? The courts are an integral and vital part of our Gov-
ernment, and it would be a sad day for American civilization if
their function were degraded or weakened. They are the bal-
ance wheel and check in our system between contending passions
and policies. This is not idle rhetoric.

It is the sober truth that the courts are the guardians of our
rights and liberties. It is high time that the. people should
remember this and should soberly reflect upon the current here-
sies. It is high time that public sentiment and conviction
should loyally support the judicial power, recognize the patriot-
ism and goed faith of the courts, and maintain their authority
and independence. If the derogatory ideas which I have
heard relaie to State courts, I can not challenge those who are
better informed than I as to particular States, but, speaking for
my own State, I indignantly repudiate that idea, and as to the
Federal tribunals, I assert without fear of contradiction that to
their honor, capacity, and just judgments any human controversy
may be safely intrusted. If now and then some unworthy
judge constitutes an exception that contrast only accentuates
the general record of high personnel, character, and ability.

Mr. President, this great subject should be discussed and con-
sidered in a spirit of sincerity and courage, far removed from
political expediency, or levity, or passion. It is a question
affecting the entire country and every section. It concerns
vitally great aggregates of the people and each individual citi-
zen. It touches at all points the interests of capital and the
interests of labor. It is a question of constitutionality, of fum-

6652
28

damental rights, of law. It is therefore a question which
peculiarly concerns the lawyers of this Chamber. It would be
a reproach to all of us if we should fail in our patriotic duty to
give to the study of this question the best that is in us—to bring
to bear in candor and honesty all our powers of mind and con-
science. But it would be a peculiar reproach to those of us
who are lawyers if for lack of intellectual integrity, for want of
courage, because of expediency—for any reason short of abso-
lute conviction—we should urge this bill, or, sitting silent, should
supinely permit it to become law although believing it to be
unconstitutional or illegal and unjust on any ground.

Mr. President, the sense of this responsibility weighs upon
me, and has guided me in all that I have thought or said or done
in this matter. I trust I do not need here or anywhere to give
assurances as to the spirit and motives actuating my publie con-
duct. But it is fitting for me to say in closing my remarks that
my course on this important subject of debate before the people
of the United States reflects the deliberate judgment of my mind
on the legal questions and the deep conviction of my conscience
as to my patriotic duty.

$652

O
THE REGULATION OF RAILWAY RATES AND SERVICES—RELATION
OF GOVERNMENT TO COMMERCE AND TRANSPORTATION.

 

 

SPEECH

HON. ROBERT M. LA FOLLETTE,

OF WISCONSIN,
IN THE SENATE OF THE UNITED STATES,
Apri 19, 20, anv 23, 1906.

 

 

The vital interest of organized society in commerce and the public
* nature of transportation imposes upon government the duty to maintain
a control over transportation as a public service.
* * * * * + *

It is the duty of government to require the carrier to render adequate
services upon reasonable terms and upon equal terms.

* * * * * * *

In order to regulate rates and services government must possess
powers of correction and control coextensive with the public-service
corporations’ power of abuse.

* * * * * * *

The Hepburn-Dolliver bill will not solve the transportation problem.
Unless greatly strengthened it will not meet the expectations of the
country. It will not dispose of the question.

* * * * * * *

I would not be unfair. The bill is not bad in its provisions, but
weak because of its omissions. I do not believe that the bill is framed
to meet the demand of ‘special interests.”” Nor has any broad con-
sideration of public interest dominated its construction. It has neither
ill intent nor high purpose. Expediency seems to have been the con-
trolling factor in framing it.

* * * * * * *

On the day it is known that only the smallest possible measure of
relief has been granted, the movement will begin arew all over the
country for a larger concession to public right. ‘That movement will
not stop until it is completely successful. The only basis upon which it
ean be settled finally in a free country is a control of the public-service
corporations, broad enough, strong enough, and strict enough to insure
justice and equality to all American citizens. *

* * * * * * *

If a railroad corporation has bonded its property for an amount that
exceeds its fair value, or if its capitalization is largely fictitious, it can
not impose upon the public the burden of such increased rates as ma
be required for ae pron upon such excessive valuation or ficti-
tious capitalization. (United States Supreme Court.)

* * * * * * *

If a corporation can not maintain such a highway and earn diyi-
dends for stockholders, it is a misfortune for it and them, which the
Constitution does not require to be remedied by imposing unjust bur-
dens upon the public. (United States Supreme Court.)

* * * * * * *

We hold that the basis of all calculation as to the reasonableness of
rates to be charged by a corporation maintaining a highway under
legislative sanction must be the fair value of the property being used by
it for the convenience of the public. (United States Supreme Court.)

* * * * * * *

This great issue between the public and the railroads can be juggled
with no longer. It can not be settled by legislation which palliates the
wrong. It must be settled by getting the true value or fair value of
railway property. If there is to be an end of antagonism and dissen-
sion between the people and the transportation companies it can be
found, sir, in no other way.

* * * * * * *

The ascertainment of the value of the railroads is the very corner
stone of any great and enduring service which this legislation is to
accomplish for the people of this country.

67
SPEECH

HON. ROBERT M. LA FOLLETTE.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled “An act to regulate commerce,” approved Feb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. LA FOLLETTE said:

Mr. PrEesipent: The opponents of the regulation of railway
rates and services have skillfully conducted this debate almost
from the beginning upon constitutional grounds. This has pre-
vented the Senate from giving consideration to the provisions of
the bill and the abuses which call for correction.

For many days the discussion has been confined to a con-
sideration of the court procedure to test the orders of the Inter-
state Commerce Commission. The importance of this branch
of the subject will depend entirely upon the character of the
orders which the Commission is authorized to make.. The im-
portance of any order issued will depend upon the power con-
ferred and the duties imposed by law upon the Commission.
The authority of the Commission may be so limited that the
procedure for the enforcement of its orders will be relatively of
little public importance.

The scope of the bill will determine the importance of all
orders and all court review. For these reasons, at the beginning
of what I shall say to-day, I would bring the discussion back to
the broadest consideration of the subject with which this bill
proposes to deal.

THE RELATION OF GOVERNMENT TO COMMERCD AND TRANSPORTATION.

The commerce of a country is a measure of its material power.
It is the product of all the labor and capital of the country—
on the farms, in the mines, and factories, and shops, and every
field of material production.

The labor and capital of a country employed in production
upon a basis attaining to the upbuilding of any community is
everywhere absolutely dependent on transportation.

The founders of this Government understood that commerce
is vital to organized society; that the development of the
country depends upon the ready exchange of commodities be-
tween its different communities and sections. And so they
ordained that commerce should be free between the States.

The founders of the Government and those who followed
them understood that transportation is properly a function of
government, and so they built highways, and turnpikes, and dug
canals, and improved rivers and harbors, and finally built State
railroads and aided in the building of interstate railroads.
These highways by land and water were paid for wholly or in
part out of the public treasury and the public domain.

6758 3
4

The vital interest of organized society in commerce and the
public nature of transportation imposes upon government the
duty to maintain a control over transportation as a public
service. Hence upon the broadest ground of public policy,
wholly apart from any power to control, dependent upon charter
grants, government must exercise, as a sovereign right, abso-
lute authority over all persons and all property engaged in
transportation.

The public character of the transportation service and the
inherent right in sovereignty to exercise control over it, im-
poses upon the Government the obligation to require the com-
mon carrier to render the service upon reasonable terms and
upon equal terms. For the Government to fail in this duty,
for it to turn over to railroad corporations the uncontrolled
right to dictate the terms of service and its character, is to
abandon a function of government and place the common car-
rier in the control of the commerce of the country. To permit
the railroads to control the commerce of the country is, in the
final analysis, to permit the railroads to control the country.

I maintain, then, that the authority of government to con-
trol transportation, both as to the character of the service and
the rate of the service, is inherent as a right of sovereignty and
that the obligation rests upon government to exercise this
power.

I shall undertake now to show that the adjudicated cases
fully sustain this contention.

OBVIOUSLY UNSOUND CONSTITUTIONAL ARGUMENTS.

The history of the effort of the States and of the United
States to regulate commerce, like other questions of great mo-
ment when there is conflict of views, is associated with the
struggle over the constitutionality of each advance step that
has been taken.

In the framing of a great piece of legislation it is impossible
to overestimate the importance of all sincere effort to insure
its constitutionality and to make it conform to the decisions of
the Supreme Court. But there is a distinction in such legal
discussion that should be kept clearly in mind. There is
always the effort of the friends of a measure to insure its
standing the test of the courts, and there is sometimes a de-
termined effort of opponents to defeat it by attacking its con-
stitutionality.

The measure before us has been described as “ drastic” and
“revolutionary ;” as “contrary to the spirit of our institu-
tions ;” as “raising some of the most important questions with
which we have had to deal since the civil war.” It has been
suggested that it owes its origin to “public clamor,” and that
it never commanded any serious attention until the President
mentioned it in his message. Yet it is quite significant that
the fight against the bill has been over constitutional questions.
No Senator has taken the floor of the Senate in open opposition
to the regulation of railroad transportation.

In the discussion of constitutional questions well-wrought-out
theories have been substituted for the settled conclusions of
law, as declared in the great body of decisions rendered on
‘these questions since the adoption of the Constitution. Argu-
ments have been made in opposition to this legislation that have
been rejected again and again by the Supreme Court, and de-
clared not to be the law in a long line of undisturbed decisions.

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5

It has been contended that rate making was not in the mind
of the framers of the Constitution, and therefore the Constitu-
tion can have no application to it, in direct contradiction of
the decision in the Dartmouth College case, where it was held,
and has never been successfully controverted since, that—

The case being within the words of the law must be within its opera-
tion likewise.

By the new standard now sought to be set up, the four-
teenth amendment would apply only to negroes, since they were
the only persons in mind when the amendment was framed.
Likewise, the fifth amendment would not apply to corporations,
since only natural persons were meant, as frequently asserted
by the courts. The stress placed upon the argument that com-
mon earriers could not charge unreasonable rates at common
law would, if carried to its logical conclusion, prove that all
the progressive legislation, State and Federal, for the con-
trol of transportation was entirely unnecessary and could as
well be wiped off the statute books.

The argument on the clause, “No preference shall be given
by any regulation of commerce or revenue to the ports of
one State over those of another,” assumes, in direct opposition
to repeated decisions, that the Commission must adopt a rate
of so much per ton per mile as a reasonable rate.

Moreover, the discussion of this provision of the Constitution
presumes that the railreads are conducting their business in
direct violation of the intent and spirit of this clause of the
Constitution. The moral obligation of the Government to exer-
cise its power to prevent such violation is entirely ignored.

Taking the construction of the Constitution contended for by
those who make this argument, is there not, then, an obliga-
tion on the part of the Federal Government, under any rational
interpretation of the true meaning and spirit of this delegation
of power, not only to give no preference, but to see that no
preference is given? The States surrender all their commerce
and all their power of regulation over it to the General Gov-
ernment, subject to the stipulation that in the exercise of that
power no preference should be given to any power. Ought not
the Government to protect the commerce of the States which
have lost the right to protect it themselves? Ought not the
Government to see to it that the transportation companies,
over which the States have no control, which the Government
alone can regulate, shall not do the very thing which the States
expressly stipulated should not be done by the Government?

If the Federal Government permits a third party, subject to
control by no one but the Federal Government, to do the very
thing which it was expressly forbidden to do, is it not, in fact,
doing the forbidden thing itself? Is it not, in effect, a violation
of the spirit of this very provision of the Constitution for the
Federal Government to allow the railway companies to give
preference to the ports of one State over another by parceling
out its commerce to suit themselves?

The contention that the power to regulate interstate com-
merce is identical with the power to regulate foreign commerce;
that most of our foreign commerce is carried in foreign ships;
that we can not regulate foreign ships; therefore we can not
regulate nor prescribe the rates of railroads doing business in
the United States, these and many other like arguments heard
in this debate demonstrate the spirit of much of the constitu-

6758
6

tional discussion and opposition to the control of railway rates.
Evidently the concluding paragraph of Mr. Justice Marshall’s
great opinion in Gibbon v. Ogden is as significant to-day as
when delivered years ago:

Powerful and ingenious minds * * * may, by a course of well-
digested and metaphysical reasoning * * “* explain away the Con-
stitution of our country and leave it a magnificent structure, indeed,
to look at, but totally unfit for use. This may so entangle and perplex
the understanding as to obscure pu les which were before thought
quite plain, and induce doubts where, if the mind were to pursue its
own course, none would be perceived.

POWER OF UNITED STATES OVER INTERSTATE COMMERCE SAME AS POWDR
OF STATES OVER STATH COMMERCE.

In the long conflict between the States and the corporations
the railroads have resisted, step by step, the inevitable con-
clusion of law that the State can fix the rates of transportation.

What the railroad corporations most dread in this contest
to-day is that Congress shall assert the same right for the
National Government to fix the rate for interstate commerce
that the States exercise over State traffic. If it is admitted that
Congress has the same power over interstate commerce that the
States have over State commerce, there is no ground for fur-
ther litigation. Such an admission would sweep away all op-
portunity for long legal controversy. It would settle the issue.

The Senator from Ohio [Mr. ForaKxrr] says:

The assumption that Congress has the power to fix rates as a part
of the power to regulate commerce is largely due to the fact, no doubt,
that the States undeniably have this power.

It follows that his contention that Congress has not the power
to fix rates fails absolutely if the power of the United States
Government over interstate commerce is the same as the power
of State governments over State commerce.

The Senator from Pennsylvania [Mr. Knox] speaks of “ dif-
ference in radical relation of the States and of the nation to
the subject of rate making.”

It becomes very important to definitely determine, if pos-
sible,, whether the power of the United States over interstate
commerce is the same as the power of a State over State com-
merce.

In the case of Gibbon v. Ogden Mr. Justice Johnson, cited by
the Senator from Ohio as authority for his position, said (p.
225) :

The ‘\ power to regulate commerce” here meant to be granted, was
that power to regulate commerce which previously existed in the States.
But what was that power? The States were, unquestionably, supreme;

and each possessed that power over commerce, which is acknowledged
to reside in every sovereign State.

And again (same page) :

The history of the times will, therefore, sustain the opinion, that the
grant of power over commerce, if intended to be commensurate with the
evils existing, and the purpose of remedying those evils, could be only
commensurate with the power of the States over the subject.

Chief Justice Marshall said, in his opinion of this case (p.
195) :

The completely internal commerce of a State, then, may be considered
as reserved for the State itself.

Plainly implying that all other power was conferred upon
Congress, the sovereign power which existed in Parliament, and
6758
7

the federation passed to the National Government. Nor does
he stop with this plain inference. He expressly states (p. 195):
If, as has always been understood, the sovereignty of Congress,
though limited to specified objects, is plenary as _to those objects, the
power over commerce with foreign nations and among the several
States is vested in Congress as absolutely as it would be in a single
government, having in its constitution the same restrictions on the
exercise of the power as are found in the Constitution of the United
States. The wisdom and the discretion of Congress, their identity
with the people, and the influence which their constituents possess at
elections are, in this, as in many other instances, as that, for example,
of declaring war, the sole restraints on which they have relied to se-
cure them from its abuse. They are the restraints on which the
people must often rely, solely, in all representative governments.

In McCulloch v. Maryland (4 Wheaton, p. 405) Chief Justice
Marshall says:

If any one proposition could command the universal consent of man-
kind, we might expect it would be this—that the Government of the
peers though limited in its powers, is supreme within its sphere of
action.

And further (p. 410):

In America the powers of sovereignty are divided between the Gov-
ernment of the Union and those of the States. They are each sovereign
with respect to the objects committed to it, and neither sovereign with
respect to the objects committed to the other.

In Brown v. Maryland (12 Wheaton, 446) he said:

Those who felt the injury arising from this state of things, and those
who were capable of estimating the influence of commerce on the prop-
erty of nations perceived the necessity of giving the control over this
important subject to a single government. * * * It is not, there-
fore, a matter of surprise that the grant should be as extensive as the
mischief, and should comprehend all foreign commerce and all commerce
among the States.

These basic principles upon which the authority of our Gov-
ernment rests, have all been cited again and again by our Su-
preme Court, whenever questions involving the right of Con-
gress to regulate commerce have arisen.

Justice Harlan, in the Northern Securities case, after quot-
ing the principle laid down by Justice Marshall in Gibbon v.
Ogden, saying it had never been modified by subsequent deci-
sion, inquires (p. 341) whether there is any escape from the
conclusion that—

The power of Congress over interstate and international commerce is
as full and complete as is the power of any State over its domestic
commerce.

Justice White, in his dissenting opinion in this same case,
Says (p. 339): .

It can not be denied that the sum of all just governmental power was
enjoyed by the States and the people before the Constitution of the
United States was formed. None of the power was abridged by that
instrument, except as restrained by constitutional safeguards, and hence
none was lost by the adoption of the Constitution. The Constitution,
whilst distributing the preexisting authority, preserved it all.

He says further in this case:

The right of Congress to regulate to the fullest extent, to fix the
rate to be charged for the movement of interstate commerce, and to
exert any power that flows from the Constitution is conceded.

So much has been said of a parenthetical remark by Mr.
Justice Harlan in the Northern Securities case, that I feel war-
ranted in taking time for an explanation which I believe an
analysis of the opinion in the case will fully justify. In the
first place the conclusion drawn from the interpolated sentence
is contrary, not only to the citation just made, but to the whole

6758
8

tenor of Justice Harlan’s reasoning on the power of Congress to
regulate. ;

While widely differing as to other legal questions involved,
Justices Harlan and White agree perfectly as to the funda-
mental power of Congress.

Mr. Justice Harlan argues that if a State may strike at com-
binations in restraint of trade within its exclusive jurisdiction,
Congress has the power to protect interstate commerce against
such combinations. Mr. Justice White no less emphatically as-
serts that the right of Congress is conceded to regulate to the
fullest extent, to fix the rate to be charged for the movement of
interstate commerce, and to exert every power that flows from
the authority of the Constitution.

But on the other points in the case the two learned judges
widely differ. If, instead of reading in cold type, their contend-
ing opinions, we imagine ourselves in the consultation room, we
get new light on an apparent discrepancy. Justice Harlan
says—I quote from his opinion:

Indeed, if the contentions of the defendants are sound, why may not
all the railway companies in the United States that are engaged under
State charters in interstate and international commerce enter into a
combination as the one here in question, and by the device of a hold-
ing corporation obtain the absolute control throughout the entire coun-
try of rates for passengers and freight beyond the power of Congress to
protect the public against their exactions? The argument in behalf of
the defendants necessarily leads to such results, and places Congress,
although invested by the people of the United States with full authority
to regulate interstate and international commerce, in a condition of
utter helplessness, so far as the protection of the public against such
combinations is concerned,

Justice White replies—I quote from his opinion:

With the full power of the States over corporations created by them
and with their authority in respect to local legislation and with power
in Congress over interstate commerce, carried to its fullest degree, I can
not conceive that if these powers admittedly possessed by both be fully
exerted, a remedy can not be provided fully adequate to suppress evils
which may arise from combinations deemed to be injurious. This must
be true, unless it be concluded that by the effect of the mere distribu-
tion of power made by the Constitution partial impotency of govern-
mental authority has resulted.

Obviously meaning that the fixing of the rates would suppress.
the evils complained of in the discussion,
Justice Harlan answers—quoting again from his opinion:

_ Will it be said that Congress can meet such emergencies by prescrib-
ing the rates by which interstate carriers shall be governed in the
transportation of freight and passengers? If Congress has the power
to fix such rates—and upon that question we express no opinion—it
does not choose to express its power in that way or to that extent. It
has, all will agree, a large discretion as to the means to be employed in
the exercise of any power granted to it. For the present it has deter-
mined to go no further than to protect the freedom of commerce among
the States and with foreign States by declaring illegal all contracts,
combinations, conspiracies, or monopolies in restraint of such com-
merce, and make it a public offense to violate the rule thus prescribed.
How much further it may go we do not now say. We need only at this
time consider whether it has exceeded its power in enacting the statute
here in question.

Taken in connection with the context, it is in accordance with
the spirit, the reasoning, and the language of the great opinion
to interpret the parenthetical remark to mean that if Congress
has the power to fix such rates—as it undoubtedly has, but the
question not being in issue we express no opinion—it does not
choose to exercise its power in that way or to that extent.
This view is sustained by—

6758
9

How much further it may go we do not now say. We need only at
this time consider whether it has exceeded its powers in enacting this
power here in question.

While it has no relevancy to the legal merits of the case, it
may be worth while to notice in passing that Justice Harlan at
another point makes a similar parenthetical remark in the
course of his argument. On page 351 he says:

But if nothing more can be said than that Congress has erred—and
the court must not be understood as saying that it has or has not
erred—the remedy for the error and the attendant mischief is the
selection of new Senators and Representatives, who, by legislation, will
make such changes in existing statutes as may be demanded by their
constituents and be consistent with law.

On page 337 he says:

Undoubtedly there are those who think that the general business in-
terests and prosperity of the country will be best promoted if the rule
of competition is not applied. But there are others who believe that
such a rule is more necessary in these days of enormous wealth than it
ever was in any former period of history.

One almost feels warranted in believing the court did not
think Congress had erred in spite of the parenthetical reserva-
tion. No more do I believe he thought or meant to say that the
power of Congress to fix rates was an open question.

RIGHT TO FIX RATES NOT DEPPNDENT ON FRANCHISE.

It is true that the States have emphasized the franchise as
warrant and justification for the regulation of rates.

But the Supreme Court of the United States has decided that
the right to regulate does not originate in the right to charter,
but rests upon the broad principle that when property is de-
voted to public use it is subject to control in the public interest.
Chief Justice Waite, in Munn v. Illinois (94 U. S. 118), after a
thorough review of English and American authorities, settled be-
yond controversy that property devoted to public service was
from the nature of the business subject to Government control.

In Chicago, Burlington and Quincy Railway Company v. Iowa
(94 U. S., p. 161) Chief Justice Waite directly and explicitly
applies the rule laid down in Munn v. Illinois to railroad rate
regulation:

Railroad companies are carriers for hire. They are therefore en-
gaged in a public employment affecting the public interest, and under
the decision in Munn v. Illinois (supra, p. 113) subject to legislative
control as to their rates of fare and freight, unless protected by their
charters.

In Piek v. Chicago (94 U. S., p. 176) :

In Munn v. Illinois (supra, p. 113) and Chicago, Burlington and
Quincy Railway Company v. Iowa (supra, p. 155) we decided that the
State may limit the amount of charges by railroad companies for fares
and freights, unless restrained by some contract in the charter.

The power of Congress, therefore, to fix rates of fare and
freight extends to all interstate commerce. It is not limited to
the railroad it has incorporated. On the other hand, the only
possible legal escape from regulation is in the case of roads that
may have secured specific exemption from regulation under
charters granted by the Government. The Supreme Court of
the United States has decided that Congress has the same power
over interstate commerce that the States have over State com-
merce. It has decided that the States can fix rates through a
commission. What the States can do in regulating State traf-
fic Congress can do in regulating interstate traffic.

6758
10

The right to fix the rate is not, as has been assumed in this
discussion, an extension of the power to regulate commerce. It
is included in, and inseparable from, the power to insure rea-
sonable rates. It is the means to an end. A rate is compensa-
tion for service. There is no difference in principle in fixing a
maximum, a minimum, or an absolute rate. The fixing of the
rate is but a corollary to the power to insure reasonable rates.

SUPREME COURT DECISIONS PRESHRVE FUNDAMENTAL RIGHTS OF

GOVERNMENT.

Corporate interests have little reason to expect aid and com-
fort from the Supreme Court. The opinion by Mr. Justice White
in the Coal case, delivered in February, that by Mr. Justice Har-
lan in the Chicago Corporation cases, in March, and the opinion
by Mr. Justice Brewer in the Michigan Tax case, rendered within
a few days, are opportune illustrations of the conservation by the
Supreme Court of the inherent rights of the people against the
encroachment of corporate power. To the great honor of the
court and to the preservation of Government, this final tribunal
remains as unsullied and ideal to-day as when created by the
Constitution. The great interests have not hesitated to corrupt
legislation and propose its attorneys for judicial appointment,
but its taint has never reached the Supreme Court of the United
States.

Our system of courts is complicated. Decisions are numer-
ous. The wisest men differ; sometimes err. Language can
not be used so perfectly that misunderstanding may not arise as
to its meaning. Even when principles of law have been well
established there always remain isolated cases that can be cited
to’ prove conflict of authority.

But, as has been ably shown in this debate, the long line of
authoritative decisions by our Supreme Court in epoch-making
eases, arising out of rate regulation for the past thirty-odd
years, have been consistent and unwavering in the application
of fundamental principles for the preservation of which our
Government was founded.

More progress has been made through the court decisions
than-by specific legislation. The overbalancing control of State
and national legislatures by public-service corporations has
often resulted in weak laws. But the Supreme Court, in de-
ciding questions arising under these laws, has settled important
constitutional rights. The decisions furnish a solid basis upon
which to legislate at this time.

The people have no need to fear the final judgment of the
Supreme Court. Indeed, they have every reason to seek the
final adjudication of questions involving public rights by our
highest court. Again and again it has interposed the strong
arm of the law between the people and the unlawful encroach-
ment of corporate power.

When in the early seventies the struggle between the States
‘and the railroads culminated in the so-called “ Granger” legis-
lation, it was the courts that rebuked the corporations for tram-
pling on the rights of the people, and in language never to be
forgotten illuminated this whole question. They showed that
the great movement was not, as the Senator from Massachusetts
{Mr. LopcE] has described this legislation to be—the result of
“public clamor” nor “sporadic excitement’”—but that it was
an uprising against abuse of power, and was based upon fun-
damental rights.

6758
11

In the Attorney-General v. The Railroad Companies (35 Wis-
consin, 580), Chief Justice Ryan said:

We listened to a great deal of denunciation of chapter 273 which, we
think, was misapplied. We do not mean to say that the act is not
open to criticism. We only say that such criticlsm is unfounded. It
was said that its provisions which have been noticed were not within
the scope of the legislative function; as if every compilation of stat-
utes, everywhere, in all time, did not contain provisions limiting and
regulating tolls; as if the very franchise altered were not a rebuke to
such clamor. It was repeated, with a singular confusion of ideas and
a singular perversion of terms, that the provisions of the chapter
amount to an act of confiscation; a well-defined term in the law, sig-
nifying the appropriation by the State, to itself, for its own use, as
upon forfeiture, the whole thing confiscated. It was denounced as
an act of communism. We thank God that communism is a foreign
abomination without recognition or sympathy here. The people of
Wisconsin are too intelligent, too staid, too just, too busy, too pros-
perous for any such horror of doctrine; for any leaning toward confis-
eation or communism. And these wild terms are as applicable toa
statute limiting the rates of toll on railroads as the term “ murder’”’ is
to the surgeon's wholesome use of the knife to save life, not to take it.
Such objections do not rise to the dignity of argument. They belong to
that order of grumbling against legal duty and legal liability which
would rail the seal from off the bond.

And again, referring to the claim that the legislation was the
result of passion, he said, if there be anger—

It is rather of the nature of parental anger against those spoiled
children of legislation, as our statute books abundantly show them _to
be, who, after some quarter of a century of legislative favors, lavishly
showered upon them, unwisely mutiny against the first serious legis-
lative restraint they have met.

In 1876 Chief Justice Waite, in Munn »v. Illinois and the
Granger cases, made secure to the people the fundamental prin-
ciple that “when property is devoted to public use it is subject
to public regulation.”

The spirit in which the courts administered the responsibility

laid upon them in these cases is well expressed by Justice Waite
in the closing words of his decision:
__In passing upon the case we have not been unmindful of the vast
importance of the questions involved. This and cases of a kindred
character were argued before us more than a year ago by most eminent
counsel, and in a manner worthy of their well-earned reputations. We
have kept the cases long under advisemeat in order that their decision
might be the result of our mature deliberation.

From the decision of those cases to the present time the trend
of the interpretation, and of the application of the law by the
courts of last resort to the multitude of cases that have arisen,
has been a distinct gain for popular rights.

“BROAD ” COURT REVIEW.

It should be remembered that effort to limit the jurisdiction
of the courts within the constitutional right to limit is not an
expression of distrust of the final adjudication of corporation
questions by the Supreme Court.

The appointment of judges of the inferior courts upon the
recommendation of United States Senators as a part of the
ordinary official patronage is bad in principle, and one which
has not been without occasional bad results. Where judges have
been identified with corporate interests previous to their appoint-
ment upon the bench there is danger of bias in judgment, even
though motives may not be questioned. With the great awaken-
ing to the dangers that threaten representative government
through corporate influence, there undoubtedly exists some un-
easiness as to whether even the sacred tribunals of justice have

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12

entirely escaped the entangling net of the “ system ” from which
the nation is struggling to free itself.

Nevertheless, it is not the fear of the direct or indirect cor-
ruption of the courts that constitutes the primary motive back
of this effort to limit the jurisdiction of the courts. It is fear
of the abuse of the right of litigation.

It is common knowledge that whenever any legislation affects
railroad interests—no matter how just and righteous it may
be—they convert the machinery of the law into an instrument
to defeat the purpose of the law.

Mr. President, I hope I am not prejudiced against any inter-
ests involved in legislation. The first duty of a legislator is to
free his judgment from bias. I trust that long contention with
the forces this legislation aims to control has not warped my
standard. The organized wealth of this country is aggressive.
It is unscrupulous. No power other than that of the Govern-
ment can cope with it. I believe the existence of government—
real, representative government for the people—is at stake.
The sovereign right conferred on Congress to regulate commerce
is the vantage ground in the struggle. ,

No matter how great the burden, how grievous the wrong, no
State can go outside its boundaries to exercise the sovereign
right to protect its citizens from tyranny of transportation com-
panies. Even within their own boundaries the States are seri-
ously handicapped by the constitutional limitations respecting
State and interstate commerce, as everyone well knows who
has attempted to do anything with the State problem.

The great bulk of commerce is interstate. The National Gov-
ernment has the exclusive power to regulate interstate com-
merce. It has the responsibility that goes with the power.
Shall Congress use it freely, courageously, or timidly, cring-
ingly, ineffectively?

The Supreme Court has decided that the Constitution fixes
a limitation upon the power of Congress to establith rates.
The fifth amendment provides that private property shall not
be taken for public use without just compensation. The consti-
tutionality of the orders of the Commission can always be
tested on this ground, regardless of any express provision in the
law to that effect.

Legally, it is as needless to provide that carriers may appeal to
the courts to test the constitutionality of a law affecting their
interests as it would be to add that provisicn to each and every

_ law that passes Congress. The question of providing a so-
called “broad court review” has resolved itself into one of
public policy. Shall Congress expressly or impliedly extend
to the carriers greater privileges of litigation than the Constitu-
tion guarantees them, or shall Congress limit their opportunity
of litigation in so far as the Constitution permits?,

Why should Congress provide that the railroads shall have
the right to appeal from the rate established by the Commission
on any other than constitutional grounds? Is not the provision
that their property shall not be taken without just compensation
sufficient protection? Does any man fear the precedent? Is it
not the same test that the private citizen must abide when the
railroad, by the authority conferred on it by the State, takes
his home, without regard to its precious associations, and
awards him only just compensation?

6758
18

Does any man fear that limiting railroad companies to their
constitutional rights will work them any wrong? Consider that
Congress might itself fix a schedule of rates and prescribe
specific regulations. What does it do instead? It creates a
Commission. The Interstate Commerce Commission is ap-
pointed by the President. It is confirmed by the Senate. It is
charged with great responsibility and great power. It must be
assumed that the President in appointing, and the Senate in
confirming, will exercise great care. Their selection will be
made with the same singleness of purpose with which the Su-
preme Court of the United States is chosen. Integrity, ability,
fitness will be the consideration.

The members of the Commission, by the terms of the act, give
all their time exclusively to the study of this single complex
problem. They acquire expert knowledge. They reach definite
well-grounded conclusions as to what constitutes reasonable
rates and just practices in transportation. They are as conscien-
tious as any court would be in the discharge of the duties as-
signed. Their judgment when finally reached is as deliberate,
unbiased, and disinterested as that of any court. It is their
duty to insure reasonable and just transportation rates to the
public and to prevent unfair and discriminatory charges. That
would be the duty of the court likewise. But the Commission
presumably has a very much broader knowledge and deeper
insight into the determining facts than any court could acquire
in the course of a brief trial.

The Commission and the courts should complement each
other. The Commission is the tribunal of the facts; the courts
of the law. The Commission must always have consideration of
the law in its application to facts. The courts must, of course,
consider facts in the application of the law; but it is in the
public interest that the judgment of the Commission on the facts
should be final where possible.

There should be no unnecessary complexity in the solution
of a great problem. There should be intelligent and economic
division of work. The courts review the laws made by Con-
gress to test their constitutionality. The Supreme Court has
repeatedly said it does not pass upon the wisdom of laws.

The Commission may err. The judgment of the wisest, most
conscientious, and most expert man is not always infallible.
The conclusions of the court are not always infallible. But
we must abide by them. For generations of time the judgment
of juries as to facts has been accepted as final. How much
more reliable the judgment of expert commissioners of the
same high character and standing as the court. When the
plain citizen must abide the verdict of the jury as to the facts,
an it be seriously contended that the corporations should be
accorded the privilege of having the facts adjudged by an ex-
pert commission tried over again in the courts? Is not their
constitutional right a sufficient guaranty that they will not
suffer serious wrong?

Does any man honestly believe the corporations are clamoring
for a broad review in the interest of justice? Would they care
for the privilege except as it gives opportunity for the endless
delays of litigation that tend to defeat substantial justice?

PRELIMINARY INJUNCTION.

Within the past ten days the Senator from Texas [Mr. BAILEY]

has made an argument that will be memorable in history. It is
6758
14

generally conceded that the adoption of his proposed amendment
is no longer a constitutional question. It is now before the
Senate as a question of public policy.

The acceptance of this amendment and the rejection of the
proposition of a broad court review have the same sound basis.

The common-law right to preliminary injunction was to pre-
vent ‘irreparable injury.” The creation of a commission of
this high order to investigate the subject and decide upon rates
with the same deliberate judgment exercised by a court, pre-
cludes the necessity of this procedure.

There is much less danger of railroad companies suffering
from the decisions of the Commission than of the shippers being
wronged by the action of the court that grants the prelim-
inary injunction. The order of the Commission is reached after
full consideration of all the facts; that of the court for pre-
liminary injunction is the judgment of one judge upon affidavit
by an interested party.

I would not, in dealing with corporations, establish any prece-
dent that might not be safely applied to protect the property
rights of any citizen. But I would not be more careful, more
cautious, more timid in dealing with corporations than in
dealing with individuals. It has seemed to me that some who
have spoken for this legislation have been too much on the
defensive. They have been more eloquent and enthusiastic
over their anxiety to defend the corporate interests from all
harm than over their desire to frame a law that will bring
railroad corporations back to their plain duties as common car-
riers, and protect the people from the existing intolerable
abuses in transportation.

Prohibiting the use of preliminary injunction will enhance
the value of this legislation beyond all computation. The
operation of the law will be simplified and justice promoted.

To cut out this much-abused process will not confer auto-
cratic power upon the Commission. Indeed, it will not in any-
wise affect the power of the Commission. It will put upon the
railroad companies the burden of hastening instead of delaying
the final judgment of the court if they are sincerely seeking to
secure justice.

Mr. President. I pause in my remarks to say this. I can not
be wholly indifferent to the fact that Senators by their absence
at this time indicate their want of interest in what I may have
to say upon this subject. The public is interested. Unless this
important question is rightly settled seats now temporarily va-
cant may be permanently vacated by those who have the right
to occupy them at this time. [Applause in the galleries. ]

Mr. KEAN. Mr. President, I rise to a question of order.

Mr. LA FOLLETTE. I do not ask to have Senators called
back here who feel no interest in what I have to say. I know
that the country will take interest in the discussion that I shall
make of the defects in this proposed legislation.

The PRESIDING OFFICER (Mr. Lone in the chair). The
Senator from Wisconsin will suspend.

Mr. KEAN. I rise to a question of order.

The PRESIDING OFFICER. The Senator from New Jersey
will state his question of order.

Mr. KEAN. I ask that the rules of the Senate be enforced,
and that the galleries be cleared.

6758
15

The PRESIDING OFFICER. The Presiding Officer will ad-
monish the occupants of the galleries, that it is contrary to the
rules of the Senate to express approval or disapproval of any
remarks that may be made, and upon a recurrence of it the gal-
leries will be ordered cleared.

HISTORY OF THE MOVEMBENT.

Mr. LA FOLLETTE. Partisan politics should have no place
in our discussion of this measure. It should influence no man’s
action. The question with which we are dealing goes too deeply
into the life of the people of this country and the integrity of
their Government to permit a single page of the record we are
making to be stained with party strife for party advantage.

‘Lhat this bill is before Congress to-day goes to the credit of
no party, no platform, no man. It is here because the subject
with which it purports to deal can no longer be suppressed.
The principle back of this bill is not new. It was written in
the Constitution in the beginning and asserted as a legislative
power by four States in the upper Mississippi Valley more than
thirty years ago. It is here to-day in the fullness of a genera-
tion of lusty growth, demanding not partial, but complete rec-
ognition,

Let us not mistake. This is no spasm of sentiment, no angry
protest fired by agitation. It is the mature judgment of an
enlightened public opinion, ripened by long experience and
patient investigation. More than a score of years have passed
since it became the settled conviction of the country—shippers,
consumers, and producers alike—that the Federal Government
had the absolute right and owed it as a duty to the public to
regulate and control transportation charges on interstate com-
merce.

GRANGER STATE LEGISLATION.

Wisconsin, Illinois, Iowa, and Minnesota had led the way.
The legislation of that period, known in the decisions and in
history as the ‘“‘ Granger legislation,” has suffered unjust criti-
cism from that day to this. It was denounced as radical and
revolutionary; as certain to demoralize business, drive out
capital, stop all railroad construction, and arrest all develop-
ment within the limits of these four States. Determined to
prevent the spread of that legislation to other States, the press
and periodicals were enlisted, economic writers employed, sta-
tistical bureaus organized, and all the agencies which the car-
riers of the country could command were set in motion to that
end.

The literature of that time teems with startling accounts of
“Railroad construction at a standstill,” the “‘ Collapse of rail-
road business,” the ‘ Spoliation and ruination of railroad prop-
erty,” the “ Checking of all development in the Granger States.”
In that period the railroads were almost wholly in command of
the statistics essential to an intelligent discussion of the ques-
tion. They falsified the figures and imposed upon the public.
It is not strange that economic writers of reputation, accepting
the data of that heated time, should have been misled.

It is due to the pioneers of that movement and pertinent to
this discussion that the misstatements of fact which have stood
for thirty years should be corrected.

The Granger legislation was a rational and conservative pro-
test, in statutory form, against an arbitrary, unjust, and op-

6758
16

pressive control of transportation and transportation charges by
common carriers.

Mr. A. B. Stickney, president of the Chicago and Great West-
ern Railroad, in his work on “ The Railway Problem,” written
with an intimate knowledge of the conditions leading up to the
Granger legislation, says of the methods employed by these cor-
porations:

The companies at first denied that they were common carriers or
subject to the duties or restrictions imposed upon such carriers by the
common law. * * * The managers claimed the right to charge
such rates * * * as they deemed for the best interests of their re-
spective companies regardless of their reasonableness or equality.
They claimed and exercised the right to grant monopolies in business
to favored individuals and firms * * * by exercise of their powers
to discriminate in regard to rates and combinations. * * * They
assumed the right to dictate to communities in what market town they
would sell their produce and buy their supplies. Thus a community
located 40 miles distant from St. Paul and 400 miles distant from Chi-
cago was compelled to trade in Chicago, so as to give the railway the
long haul, and in order to enforce this dictation they did not hesitate
to make the rate for 40 miles as much or more than for 400 miles.
* * * They believed they had the right so to make their schedule
of rates, as to determine which of the villages on their line should be-
come centers of trade beyond their local territory. * * * They
also varied their schedules in such a way that they discriminated in
regard to rates between individual merchants, manufacturers, miners,
and other business men, so as practically to determine which should
become prosperous and wealthy, and which should not.

As I shall have occasion to show later, the railroads of the
country, excepting where partially restrained by law, have
continued to the present time the identical wrongs and the
same abuse of power which they practised upon the people in
Wisconsin, Illinois, Iowa, and Minnesota, set forth in the quota-
tion from President Stickney.

The Granger statutes, so long and violently condemned, were
imperfect with respect to some of the provisions for their
enforcement, but they were correct in asserting the principle
of government control, and were reasonable in their terms,
in so far as the railroads were concerned.

The Wisconsin law was enacted in 1874 and repealed in 1876,
and Granger laws were enacted—Minnesota in 1871, Illinois in
1873, and Iowa in 1874. By the beginning of 1875 it may be
assumed that the effect of these Granger statutes would be
fairly felt in all of the Granger States. Michigan, Indiana,
Missouri, and Nebraska are four States more nearly similar in
development, character of industry, and population than any
other States with which comparison could be instituted. These
four last-named States were not affected by the so-called
Granger legislation.

It is possible, therefore, by comparison, to ascertain the effect
of the railroad legislation upon the four Granger States. I
have also worked out a like comparison with the Middle At-
lantic States, namely, New York, New Jersey, Pennsylvania,
Delaware, Maryland, and West Virginia, in one group; the
Southern States—Kentucky, North Carolina, South Carolina,
Georgia, Florida, Alabama, and Mississippi—in another group;
and, finally, broadened the entire comparison to and including
the railway mileage of all the States in the Union. I was thus
able to test the results of the Granger legislation upon the
railroads of the Granger States, by comparing railroad devel-
opment and railroad receipts between the Granger States and
the four adjoining States, between the Granger States and the

6758
17

Middle Atlantic States named, between the Granger States and
the Southern States named, and likewise a comparison of the
progress of railroad building and railroad receipts in the four
Granger States as compared with the country at large.

I submit a table showing the railway mileage for the years
1871 to 1880:

 

 

States. 1871. | 1873. | 1875. | 1880.
‘Wisconsin, Illinois, Iowa, and Minnesota-.-..- 12,401 | 14,627 | 15,515 | 19,428
Michigan, Indiana, Missouri,and Nebraska...| 9,168 | 10,932 | 11,381 | 14,396
Middle Atlantic States -_......--.-----------.-- 12,030 | 13,643 | 14,455 | 15,949
Southern States. 12,977 | 13,287 | 14,908
‘United States)... 02... .cscacincsccecenoesaceeesce 60,298 | 70,278 | 74,096 | 93,671

 

 

 

 

 

 

Taking the railroad mileage for 1873, the year immediately
preceding the legislation, and comparing it with the railroad
mileage in 1875, by which time the effect of the Granger laws
should have become clearly manifest, we find that railroad
construction increased for the four Granger States 6.1 per cent;
the four adjoining States, 4.1 per cent; the Atlantic States, 5.9
per cent; the Southern States, 2.4 per cent, and the United
States, as a whole, 5.5 per cent.

It will therefore be seen that the Granger legislation did not
stop railroad construction in the four Granger States. Indeed,
they not only held their own, but increased their railroad mile-
age over their immediate neighbors, and the other groups with
which comparison is made, as well as the country at large.
Let us test the matter further.

The following table shows the gross earnings for the years
1871 to 1880:

 

States. 1871. 1873. 1875. 1880.

 

‘Wisconsin, Illinois, and Iowa -.|$54,994,114 ($70,027,777 |$69, 621,065 | $86, 954, 346
Michigan, Indiana, and Mis-

 

 

 

BOUL. 2-255 reset casei eeeeecis 44, 433,246 | 59, 106,865 | 54,731,069 | 79,038,920
Middle Atlantic States --- 147, 130, 494 /194, 052, 302 175, 677,418 | 199,003,718
Southern States 41,772,102 | 53, 696,409 | 50,399,227 | 48,317, 754
United States... sanedevven< 408, 329, 208 |526, 419, 935 |503, 065,505 | 615, 401, 931

 

 

 

I found it impossible to include Minnesota and Nebraska in
this comparison, for the reason that I could not procure com-
plete data of the railway earnings of those States for the period
named. For this reason, excepting those two States—Minne-
sota from the group of Granger States and Nebraska from the
group of adjoining States—carrying out the same comparisons
with the several groups of States included in the calculations
with respect to railway mileage, I found that the gross earnings
decreased in the Granger States from 1873 to and including
1875 one-half of 1 per cent; in the adjoining States, 74 per cent;
in the Middle States the gross earnings decreased 94 per cent;
in the Southern States, 64 per cent; in the whole country, 4.4
per cent. It is shown, therefore, that during this period of
general decline in the gross receipts of the railways the earnings
in the Granger States were less affected than adjoining States
or in the other groups and suffered vastly less than the country
at large.

6758——2
18

The comparison of net earnings is equally significant. In the
Granger States from 1873 to 1875 there was a substantial in-
crease in the net earnings. In the adjoining States there was a
decline in the net earnings amounting to 3 per cent. It there-
fore appears that the railroads of the Granger States were able
to withstand not only the “ dire effects’ of the Granger legisla-
tion, but the depression which began with the panic in the
money and stock markets in 1873 and spread to every operation
in finance and commerce, continuing until the end of 1878.

I have submitted in this connection but a small portion of
the results of an investigation of this subject, every fact of
which makes the demonstration stronger, that the Granger legis-
lation neither retarded railway construction nor diminished
railway receipts; that it did not demoralize business or stay
industrial development anywhere within its jurisdiction. The
hue and cry raised by the railroads in advance, and continued
after the statutes were enacted, accompanied with threats and
warning, served in some measure the purpose of the railroad
companies.

Within two years they secured control of the Wisconsin legis-
lature and repealed the Granger statute in that State. For
twenty-eight years thereafter they were powerful enough in the
legislature of Wisconsin to defeat the enactment of any law for
the regulation of railway rates within that State. The Minne-
sota statute was likewise repealed. Illinois maintained her
hold upon the legislation secured, and succeeded in strengthen-
ing it in some measure. In Iowa the struggle was protracted
until 1888, when she enacted a new and in many respects a
most excellent statute, under which rates were established by
a commission which, at the time, were fair to the railroads and
just to the people.

I shall have occasion later to refer to these States as bearing
upon the proposition to invest a Federal commission with full
power to ascertain and enforce reasonable rates.

FRDERAL LEGISLATION.

I come now to the consideration of Federal legislation. It
was inevitable that the conditions which invoked State au-
thority in regulation of State commerce should seek to secure
the exercise of Government authority in the regulation of inter-
state commerce; and it was to be expected that the section of
the country which had first proclaimed the right to control com-
mon carriers through State legislation should furnish the men
to first assert that right in Federal legislation.

March 26, 1874, the House of Representatives passed a bill
introduced by Mr. McCrary, of Iowa, which marks the begin-
ning of positive legislative action upon the broad question of
railway rate regulation. :

It has been asserted in this debate that the first bill ever
introduced in Congress upon that subject was introduced by
Mr. Charles Sumner. As no copy of that bill can be found in
the files of Congress, and as the title is somewhat misleading,
it is quite natural that that statement should have been made.
An investigation of contemporary publications, however, dis-
closes the fact that the Sumner bill had reference solely to the
transportation of troops and did not deal at all with the ques-
tion under consideration by Congress at the present time.

6758
19

The McCrary bill, considering the early date of its adoption
in the House—thirteen years before the final passage of the
interstate-commerce act—was a very comprehensive measure
and merits some attention in this connection. Referring only
to the main provisions respecting the regulation of rates: It
provided that no interstate carrier should receive more than
a fair and reasonable rate of compensation for any transpor-
tation service. It proposed to create a board of railroad
commissioners of nine members. The commissioners were em-
powered to investigate thoroughly freight and passenger
charges, and the reasonableness thereof, and prepare schedules
of reasonable ‘maximum rates, and to change and revise the
same “so often as circumstances may require.” Penalties were
provided for charging more than reasonable rates, and it was
made the duty of the Commission to bring suit, upon ascertain-
ing facts warranting such action, for the enforcement of said
penalties. If upon trial of said suit it should appear that the
defendant had charged more than provided for in such schedules,
it was provided that—

In that case such defendant shall be deemed and held guilty of ex-
tortion and liable therefor, unless such defendant shall show affirma-
tively that the rate charged * * * was nevertheless fair and
reasonable.

The bill was so amended pending its consideration by the
House as to make its penalties apply to discriminations as
well as to unreasonable and extortionate rates. The McCrary
bill did not pass the Senate.

From the passage of the McCrary bill by the House, March
25, 1874, neither branch of Congress passed any measure until
1878, when the House passed the Reagan bill. In the meantime
the system of discriminations between persons, localities, and
commodities, which were of secondary consideration when the
McCrary bill was passed, had grown so aggravated in charac-
ter as to become of primary interest by 1878. This is reflected
in the new bills introduced from 1874 to 1878. It doubtless ac-
counts mainly for the fact that the Reagan bill of this date was
designed to prevent discriminations. The Reagan bill passed
the House, but it did not pass the Senate.

Two years before the Reagan bill of 1878 passed the House,
the Supreme Court had decided the Granger cases and the
Munn case, and had settled great principles lying at the foun-
dation of this important subject. Its decisions pointed the way
for Congress. Yet no legislation was enacted until 1887, when
the interstate-commerce law was finally passed.

The act of 1887 declared unreasonable rates unlawful, and
imposed penalties for discriminations as to persons, places, and
commodities. The report made by the Committee on Interstate
Commerce presenting the bill to the Senate. states the evils
which the bill was intended to remedy, and among them enu-
merated the following:

oo local rates are unreasonably high as compared with through
rates,

That both local rates and through rates are unreasonably high at
noncompeting points, either from the absence of competition or in
consequence of pooling agreements thut restrict its operation.

That rates are established without apparent regard to the services
performed, and are based largely on what the traffic will bear.

That the stock and bonded indebtedness of the roads largely exceed
the actual cost of their construction or their present value, and that

unreasonable rates are charged in the effort to pay dividends on wa-
tered stock and interest on bonds improperly issued.

6758
\ 20

The report from which the foregoing is extracted is volum!|-
nous and is one of the important contributions to the literature
of this subject.

RAILROADS AND TRUSTS.

Mr. President, I have sketched briefly the main facts in the
development and history of legislation in relation to the trans-
portation problem down to the date of the enactment of the
interstate-commerce law in 1887. During this period—from
1870 to 1887—many events of great moment transpired with
respect to the commerce and the industries of the country.
The failure of Congress to give heed to the manifest relation
of trust organization to transportation throughout the early
period; the failure of Congress to broaden and strengthen the
law of 1887 when its weakness became apparent, making it rep-
resent the full constitutional power of the Federal Government ;
the failure of Congress to repair even its fatal defects when
plainly pointed out by the Supreme Court and the Commission,
makes the mortifying recital of the next period in this history.

Contemporaneous with the history of thirty years’ struggle
for rate regulation is the history of the insidious growth of
trusts and a single legislative attempt to cope with the resulting
evils independent of railroad legislation.

There was a trust investigation in 1875-76 that revealed a
suggestion of the truth with respect to the criminal compact
between Standard Oil and the railroads. It was shown that
John D. Rockefeller and his associates, aided by alliance with
the transportation lines running through the oil regions, were
crushing opposition and laying the foundation for the most
powerful monopoly in the world.

The testimony of the Congressional committee of 1876, the
Hepburn committee of 1879, the Senate committee of 1885, the
House committees of 1888 and 1893, all demonstrated the evil
nature of the alliance of the railroads with Standard Oil, with
the beef, and with the coal combine. From 80 to 100 bills
were introduced in Congress, but they did not get beyond the
committees to which they were referred. Driven to cover and
the exercise of greater caution by the partial exposure of their
criminal methods, reorganizations were effected by the growing
monopolies, names were changed, and public indignation was
quieted.

But by 1890 it had become apparent that powerful influences
were at work in the business world: destroying equality of op-
portunity. Markets and prices were disturbed and established
business enterprises forced out of the field. The public began
to understand that combinations were forming, that trust
organizations were being effected in many lines of production,
and that these organizations were suppressing competition. -

The current literature of that time makes interesting read-.
ing to-day. It was charged on the one hand that the trust was
the offspring of the tariff. It was declared upon the other that
the trust was a progressive business evolution, a legitimate
effort to cheapen production. Two great national campaigns
were waged mainly upon the issue that the tariff was the
mother of trust and combination.

In the meantime a national statute had been enacted which
was aimed at the trust and combination as an independent
conspiracy. The lesson of the Standard Oil, the beef, and coal

6758
21

alliance with transportation seemed well-nigh forgotten. The
Sherman Act was the work of a statesman and would have
aided greatly if its violations had been vigorously prosecuted.
But it was made apparent very early that the root of the evil
can not be reached by striking at the trusts alone. It is the
railroads in combination with the trusts that constitutes the
great problem. ;

FAILURD OF INTERSTATE-COMMERCE LAW.

In May, 1897, the Supreme Court in the Maximum Rate case
decided that it was not the intent of the interstate-commerce
law to invest the Commission with authority to enforce its
determination with respect to rates. This reduced the Com-
mission merely to a body authorized to hear complaints, take
testimony, and make recommendations. The legislative intent
as determined by the court is not questioned. The fact re-
mains, however, that many who participated in the legislation—
the Commission, the railroads, and the public—understood that
authority to supervise rates and to issue orders and decrees
with respect to what a rate should be was conferred upon the
Commission at the time the law was enacted.

This statement is of value at this time only as bearing upon
the scope of the authority to be conferred upon the Commission
by this Congress, the intent of which, it is hoped, will be made
so clear as to leave nothing to require construction.

The first Interstate Commerce Commission, Judge Thomas M.
Cooley, chairman, construed the law as giving to it supervision
over rates and authority to issue orders as to what a rate
should be. The first case decided after the Commission organ-
ized, the Walla Walla Grain case, in the decision of which Judge
Cooley participated, placed this construction upon the law.
During the entire time that he continued as a member of the
Commission and long thereafter the Commission construed the
law in like manner as to all cases raising that issue.

The Commission in its annual report for 1897 thus states the
fact with respect to the exercise of this supposed power:

The Commission exercised this power in a case commenced in the
second month after its organization and continued to exercise it for a
period of more than ten years, during which time no member of the
Commission ever officially questioned the existence of such authority or
failed to join in its exercise.

It was so accepted by the railroads, and for years the ques-
tion was not even raised. That the interstate-commerce act
for a time exerted a wholesome influence upon carriers and
shippers and, inga measure, checked the upbuilding of monopoly
through discri ations the public was certainly led to believe.
There was a show of compliance with the law following its
enactment. But it soon became apparent that the practices
prohibited by the law were being resumed. Passes were issued
to favored individuals, rebates were again granted, substitu-
tions for rebates were resorted to, and discriminations practiced
{n various ways.

RECOMMENDATIONS OF 1897.

In its report for 1897, after reviewing the result of this deci-
sion and those which had preceded it, each one further reducing
its efficiency, the Commission presented the unfortunate situa-
tion as follows:

There is to-day, and there can be under the law as now interpreted,

no effective regulation of interstate carriers. If there is to be under
this act it must be amended. From the best considerations we have

6758
22

been able to give the subject, we believe that the most essential features

of such an act must be those previously enacted. A tribunal which

regulates the common carriers by railroad of interstate traffic, which

can stand for justice and fairness between these carriers and the

people, must have the power to fix a maximum rate, to fix in certain

juatances a minimum rate, and its orders when made must mean some-
ng.

After carefully reviewing the decision of the court which
denied to the.Commission the right to continue in the exercise
of the powers of regulation theretofore exercised, the Commis-
sion made careful and specific recommendations in its report
for 1897 for the amendment of the act. It was recommended
that the act be so amended as to empower the Commission to
call in question any rate or charge, and issue an order upon the
carrier, either upon its own motion or upon a complaint being
made to the Commission to appear and “to show cause why
said rate shall not be held to be unreasonable or otherwise in
violation of law,’”’ and on such order and notification to the car-
rier to have a “full hearing.” The amendment as proposed
goes on to provide what I shall read.

I beg the attention of Senators here to what I shall now
quote. It is the specific recommendation of this Commission
as to what it is necessary for Congress to do if we are so to
amend the law of 1887 as to regulate railway rates and prac-
tices. I read from the report of the Comission for 1897:

If the Commission is of the Seiotee that the rates, fares, or charges
as filed and published, or the classification, facilities, and regulations
published in connection therewith are unreasonable or otherwise in
violation of law, it shall determine what are and shall be reasonable
and otherwise lawful rates and fares, charges, classifications * * *
and shall prescribe the same and shall order the carriers to file and
publish schedules in accordance with such decision.

And such orders were to be enforcible under the penalties,
provided in section 16 of the act. And it was further proposed
to be provided that on full hearing the Commission could make
any further reduction in such rates.

It was further proposed to amend the act in section 15, to
provide that if, after a full hearing—

It is determined that any carrier is in violation of the provisions of
this act, the Commission shall make an order directing such carrier to
cease and desist from such further violation, and shall prescribe in such
order the thing which the carrier is required to do or not to do for the
future to bring itself into conformity with the provisions of this act;
and in so doing it shall have power—

i. To fic a maximum rate covering the entire cost of the service;

b) To fix both a maximum and a minimum rate when that may be

necessary to prevent discrimination under the third section; * * *
) To make changes in classification ;

e) To so-amend the rules and regulations under gwyhich the traffic

moves as to bring them into conformity with the provisions of this act.

These are the recommendations of the Commission in 1897,
ten years after it was established. With a decade of experience
the Commission well understood what powers were vitally
essential to an effective administration of the law. The au-
thority to do these specific things they declared to be neces-
sary if there was to be a regulation of railway rates and rail-
way services,

This was, indeed, an urgent appeal. It seems well-nigh In-
credible that it should have failed to meet approval in either
branch of the National Legislature.

COMMISSION’S RECOMMENDATIONS AUTHORITATIVE,

Mr. President, the Interstate Commerce Commission has, I be-

lieve, ever since that body was first organized, been composed
6758
23

of men distinguished for their ability, learning, and special fit-
ness. Without exception they have been men of the highest
character. I believe that they have been fearless and impartial
in the discharge of official obligation. They are the appointees
of Democratic and Republican Administrations. The Senate has
consented to and approved their selection. The task of the
Commission has been from the beginning a most arduous one.
Dealing with great and complex interests, it constitutes a
branch of the official service which enjoys the esteem and con-
fidence of the American public. Bringing to the charge of
official duty a varied training and experience, concentrating
every faculty of thoroughly disciplined minds upon the questions
involved in the regulation of interstate commerce of this great
nation, it could not fail to become easily the highest authority
in the special field of its employment.

Mr. [resident, the gifted and distinguished Senator from
Texas, in support of his amendment to take from inferior
courts the right to suspend by preliminary injunction the rates
fixed by the Commission, urged that the expert knowledge of
the Commissioners, acquired by constant application to all of
the problems of transportation, made their judgment with re-
spect to the reasonableness of the rates superior to that of the
court. I think all who heard him were compelled to agree with
that contention. ~

That which is true of the Commission’s ability to judge
wisely with respect to rates in the trial of a particular case is
equally true with respect to all of the duties which they are
constantly called upon to discharge. But, Mr. President, above
all things is it true that the Commissioners are best able to
judge wisely with respect to the law itself which they are called
upon to administer. They go patiently through with every case,
from the filing of the complaint to the final judgment rendered
upon the record, and must consider well the law with respect to
its every phase. They must study every section and sentence of
the statute day after day and year after year; they hear it dis-
cussed and dissected and expounded by the able lawyers for the
complainant and by the learned counsel of the greatest railroad
corporations in the world. ‘

Of all men they, ought to be the ones best able to submit rec-
ommendations to Congress with respect to changes in the law;
if it is defective, to point out the defects; if its faults can be
remedied, to suggest the remedy. Their recommendations are
without prejudice or bias. We can take them as we would the
unanimous opinion of the judges of the Supreme Bench with re-
gard to the faults and weaknesses and injustice of any law
which the court is called upon to construe. Indeed the Commis-
sion has this advantage: Any court must hear many cases and
pass upon different statutes; the Commission deals every day
with the same law-and with its relation to the same subject.

For these reasons the statesmen who framed the interstate-
commerce law in 1887 provided:

That the Commission shall, on or before the 1st day of December
{n each year, make a report, which shall be transmitted to Congress,
copies of which shall be distributed as are other reports transmitted
to Congress. This report shall contain such information ‘and data
collected by the Commission as may be considered of value to the

determination of questions connected with the regulation of Com-
merce—

6758
24

'
Now, mark what follows !—

together with such recommendations as to additional legislation relat-
ing thereto as the Commission may deem necessary.

Congress therefore laid its commands upon the Commission to
recommend legislation, the need for which should become appar-
ent to them in administering the duties of their office.

RECOMMENDATIONS IGNORED.

Mr. President, I now call the attention of the Senate to the
fact that these important recommendations have,been urged
again and again, and that they have been ignored by Congress
year after year.

Congress having failed to act upon the recommendation of
the Commission in 1897, to correct the defects of the law as
shown by the Maximum Rate Case, the Commission again
urged action upon those same recommendations in the report
for 1898, saying:

There is now no power, in the judgment of the Commission or in

the judgment of the court, to restrain a railroad company from demand-
ing and receiving unreasonable and unjust charges.

They said further:

The power of establishing or fixing reasonable rates in advance is
the only practical legal remedy for extortion and unreasonable and
unjust charges.

In this report reference is made to the report of the previous.
year in the following language:

We have not only set forth in general terms the necessity for
amending the law, but have formulated and proposed the specific
amendments which appear to us positively essential. With the renewal
of these recommendations, no duty of the Commission in this regard
remains undischarged.

Congress having failed to act upon this recommendation, the
Commission, in its report for 1899, said:

Every consideration of private justice and public welfare demands
that railway rates shall be reasonable, uniform to all shippers, and
equitable between all communities. Until needful legislation is sup-
plied that demand must remain unsatisfied.

Reference is made in this report to the recommendations
previously made, the many indorsements of them received from
agricultural, manufacturing, and commercial interests through-
out the country, to which the Commission adds:

It is sufficient to say that the existing situation and developments
of the past year render more imperative than ever before the necessity
for speedy and suitable legislation. We therefore renew the recom-
mendations heretofore made and earnestly urge their early considera-
tion and adoption.

Congress having failed to act upon this recommendation, the
Commission in its report for 1900 said:

The requests of the Commission for needful amendments have been
supported by petitions and memorials from agricultural, manufactur-
ing, and commercial interests throughout the country, yet not a line of
the statute has been changed, and none of the burdensome conditions
which called for relief have been removed or modified.

They ‘say further in this report:

With reference to further legislation, the Commission has little to
suggest, and nothing new to propose. * * * Recommendations,
both general and specific, have been repeatedly made. ‘he views

6758
25

heretofore officially expressed are believed to be justified alike by ex-
pene and reflection. They are confirmed by later and current ob-
servation.

Congress having failed to act upon this recommendation, in
1901 the Commission, in its report, urges again the amend-
ments previously recommended, and adds:

The reasons for urging these amendments have been carefully ex-
plained, and repetition of the arguments at this time can hardly be ex-
pected. * * * Knowledge of the present conditions and tendencies
increases rather than lessens the necessity of legislative action upon
the lines already indicated, and in such other directions as will fur-
nish an adequate and reasonable statute for the regulation of com-
merce among the several States.

Congress having failed to act upon this recommendation in
1902, after discussing the defects in the law, the Commission in
its report for that year said:

The fullest power of correction is placed in the Congress and the
exercise of that power is demanded by: the highest consideration of
public welfare. * * * If the representations already made do not
induce favorable action, it is certainly not the fault of the Commission.
* * * A sense of the wrongs and injustice which can not be pre-
vented in the present state of the law, as well as the duty enjoined
by the act itself, impels the Commission to reaffirm its recommenda-
tions, for the reasons so often and so fully set forth in previous re-
ports, and before the Congressional committees.

Mr. President, it is worth while to pause here and note the
warning that appeared in this recommendation of the Inter-
state Commerce Commission to the Congress and to the coun-
try, that the railroads were combining and the situation was
growing more and more serious.

Moreover, in view of the rapid disappearance of railway competition,
and the maintenance of rates established by combination, attended as
they are by substantial advance in the charges on many articles of
household necessity, the Commission regards this matter as increasingly
grave, and desires to emphasize its conviction that the safeguards re-
quired for the protection of the public will not be provided until the
regulating statute is thoroughly revised.

Still Congress failed to act upon these recommendations. It
passed the Elkins law to provide against departures from the
published rate. But it did nothing to give the Commission
power to protect the commerce of the country against repidly
advancing rates.

At the beginning of the next session, in December, 1903,
after referring to the Elkins law (passed February 19 preced-
ing) at some length in its report, the Commission says:

It (the Elkins law) has added nothing whatever to the power of
the Commission to correct a tariff rate which is unreasonably high or
which operates with discriminating effect. It greatly aids the ob-
servance of tariff charges, but it affords no remedy for those who
are injured by such charges, either when they are excessive or when
they are inequitably adjusted. If the tariffs, published and filed as
the law directs, are enforced against the ponper alike, the authority
of the Commission to require such tariffs to be changed remains just
as ineffectual as it was before this legislation was enacted. This is
the point to which the attention of Congress has been repeatedly
ealled. This is the defect in the regulating statute which demands
correction. In previous reports this question has been frequently and
fully discussed. We have commented at length upon the weakness
and inadequacy of the law as its provisions have been construed by
the courts. We have carefully pointed out the amendments which
we deem essential, and explained in detail the reasons for our recom-
mendations. We are unable to add anything of value to the presen-
tation heretofore made. Our duty in this regard has been performed.

6758
26

Attention is again called to the recommendations previously
made, and these are reaffirmed. The need of this legislation
is said to be all the more imperative as an indirect result of
the Elkins law. The Commission says:

The effect of that legislation in many cases was to bring about an
increase of railroad charges.

Again in 1904 the Commission reiterated its recommenda-
tions and renewed its warning; the previous discussions of
the “weakness and inadequacy” of the interstate-commerce
law are again recalled, and former “ urgent recommendations ”
are once more cited to the attention of Congress. The enormous
advances in freight rates as set forth in the reports for 1902
and 1903 are again cited as additional considerations calling
for the enactment of these oft-repeated recommendations.

Congress having failed to act upon these recommendations,
at the beginning of the present session in 1905, the Commission
said, with respect to the granting of power to fix future rates:

We deem it unnecessary to discuss this question in the present re-
port further than to reaffirm the facts heretofore expressed.

Mr. President, I have quoted from nine annual reports made
by this Commission, each clear and explicit in its terms; each
portraying the fatal weaknesses of the law; each strongly ap-
pealing for amendment to cure the defects. These nine reports
have been issued since the decision of the Supreme Court ren-
dered the Commission absolutely powerless to restrain a rail-
way company from demanding and receiving unreasonable and
unjust charges. These reports came from a body of men, each
of whom the Senate had joined in selecting to administer the
law and to recommend needed amendments from time to time.
Until a few days ago I never understood why Congress had
failed to act upon the important recommendations and the
urgent appeals made year after year by the Commission for
the repair of this broken-down statute. But it has been made
plain at last. It was disclosed during the debate upon the 22d
of March, when the Senator from Nevada [Mr. Nrwianps] pro-
pounded the following question to the Senator from Massachu-
setts [Mr. Loner]:

Mr. Newwanps. I wish to ask the Senator [Mr. LopGn] whether he
bears in mind the fact that the original interstate-commerce act calls
upon the Interstate Commerce Commission to make recommendations
to Congress from time to time in regard to legislation?

Mr. Lopecr. I had forgotten that they were called upon to make rec-
ommendations to Congress.

Here we have at last a possible explanation for the failure
of Congress through all these years to legislate some vitality
into the interstate-commerce act. Congress, like the Senator
from Massachusetts, must have forgotten that the law required
the Commission to make recommendations. It must have for-
gotten the existence of the Commission. Is it strange that with
nine years of failure on the part of Congress to respond to
these recommendations the Commission should, through maga-
zines, the press, and the platform, address itself from time to
oe i the public in an effort to awaken Congress from its deep
sleep?

But, sir, even if Senators, and indeed the entire Congress
had forgotten that the Commission was required to make recom-
mendations, even though it had forgotten its recommendations,
and the very existence of the Commission, there were other rea-
sons why it should have taken action upon this subject.

6758
27

Soon after the decision of 1897, petitions, memorials, and reso-
lutions, urging Congress to amend the interstate-commerce law
and clothe the Commission with power to regulate rates, came
pouring in upon the Congress from agricultural, manufacturing,
and commercial interests throughout the country. State legisla-
tures from every section of the country solemnly memoralized
Congress upon the subject.

THD PRESIDENT URGES CONGRDSS TO ACT.

The President of the United States had not forgotten that it
was the duty of the Interstate Commerce Commission to recom-
mend legislation. He had not forgotten the purpose of the act
of 1887, and in his message to the Congress in December, 1901—
away back four years ago—he said:

The cardinal provisions of that act were that railway rates should
be just and reasonable and that all shippers, localities, and commodi-
ties should be accorded equal treatment.

He had evidently read and reflected upon the important
recommendations made year after year by the Commission, for
in this same message he said:

This act should be amended. The cen is a public servant. Its
rates should be just to and open to all shipper: like. The Govern-
ment should see to it, that within its jurisdiction, this is so, and
should provide a speedy, inexpensive, and effective remedy to that end.

He waited three years for the Congress to act, and then in
his message in December, 1904, after a general discussion of the
subject, he said:

In my judgment the most important legislative act now needed, as
regards the regulation of corporations, is this act to confer upon the
Interstate Commerce Commission the power to revise rates and regula-
tions, the revised rate to at ouce go into effect and stay in effect unless
and until the court of review reverses it.

Another year passed by. No law was enacted enlarging the
authority of the Commission and conferring upon it power to
revise rates and regulations. At the beginning of the present
session, December, 1905, the President again reminded Con-
gress of its duty to the public. He presented the relation of the
railway problem to the control of transportation, and reiterated
the urgency for prompt action in the following words:

As I said in my message of December 6 last, the immediate and most
pressing need, so far as legislation is concerned, is the enactment into
law of some scheme to secure to the agents of the Government such
supervision of the rates charged by the railroads of the country, en-
gaged in interstate traffic, and shall summarily and effectively prevent
the imposition of unjust and unreasonable rates. It must include put-
ting a complete stop to rehates in every shape and form.

Mr. President, I believe that the recommendations of the
Interstate Commerce Commission should have the greatest
weight with Congress, and should be followed in framing a law,
unless there are controlling reasons for their rejection.

I believe that the failure to enact into law the recommenda-
tions of the Commission made and repeated year after year for
a long decade has cost the American people hundreds of mil-
lions of dollars in excessive transportation charges, and hun-
dreds of millions of dollars in the increased cost of trust-made
articles, the monopoly element of which the railroads have con-
ferred upon the trusts. This increased burden has fallen with
the greatest weight upon the humbler homes, where the in-
creased expense of living has made havoc with the savings of
the family.

6758
28

I believe that the recommendations of the Commission en-
acted into law, together with legislation logically corollary, fol-
lowed by an appropriation of the money necessary to vigorous
enforcement, would have preserved industrial independence for
this generation of men.

INDUSTRIAL CONSOLIDATION.

What are the industrial conditions with which the nation is
confronted to-day? What are the results of the failure of Con-
gress to act in accordance with its power and its obligation?
Great evils grow out of small beginnings. The railroads began
by despising their common-law obligations to treat all shippers
alike. They despised small traffic transactions. They were
bound to have tonnage, more tonnage, bigger tonnage. They
openly bought tonnage with rebates. They preferred to trans-
act business with a few large shippers. They drove out the
small dealers with advancing rates, forced them into retirement
and turned their business over to the trusts.

To this end they were ready to defy State\and Federal au-
thority. They recognized one law, a law of their own making—
the law of combination. Denied the right to pool by the inter-
state-commerce acfithey made traffic agreements to nullify the
statute. Denied the right to make traffic agreements by the
courts they nullified the decisions by combinations. They ab-
sorbed the small companies. They gathered their roads into
trunk lines, the trunk lines into systems, the systems into great
groups.

In order to convey some idea of the enormous combinations
which have been formed in the railway world and of the unlim-
ited power thereby centered in the hands of a few individuals,
the following statement is submitted. The figures in this case
are mostly taken from Moody’s Manual of Railroads, a recog-
nized authority : f

The sie great groups.

 

 

  

 

 

Number * igs
Mileage | Capitaliza-
Classification. Of TOBGE | lof each | tion of each
braced. | 8TOUP- group,
“Vanderbilt group -.........-------+-++----- 132 | 21,888 | $1, 169, 132, 182
Pennsylvania group.....--...-------------- 280 19,300 | 1,822, 402, 235
Morgan-Hill group..........----.---------- 225 47,206 | 2,265, 116, 359
Gould-Rockefeller group ------------------ 109 28,157 | 1,368,877, 540
Moore-Leeds group -..--.----.------------- 91 25,092 | 1,059, 250, 939
Harriman-Kuehn-Loeb group-...---.-----. 85 22,943 | 1,321,243, 711
TRG doccasins Marea unin mancsonna ouecmena 922 | 164,586 | 9,006, 086, 916
Allied'systems see snsqsaseeesecesadeoe ieee 250 18,721 380, 277,
Total under control --.......----.-.-- 1,172 178,307 | 9,386, 363, 916

 

 

 

 

We have here nearly 90 per cent of the vital railway mileage
of the country controlled by six sets of financiers, with an
identity of interest which at will signifies practically a single
control. No one can be so blind as not to see the purpose and
the certain result of this consolidation. The country has been
partitioned and apportioned among these great groups. Hach
group dominates in its own territory. With agreements as to
classifications, rates, and divisions of traffic, the railway busi-
ness ceased to be a competitive business. It has become a mon-

6758
29

opoly in fact, controlling the course and destination of trans-
portation and its tolls and charges on all interstate commerce
and on all State commerce excepting where interfered with by
State control.

The transportation companies built up the great industrial
trusts through transportation agreements. Their identification
now became more pronounced. They became partners in in-
terest. The railroads acquired ownership in the trusts. The
trusts acquired ownership in the railroads. Coal, oil, iron,
steel, shipping, telegraph, express, gas, beef, food products,
and, indeed, the whole field of industrial production came
rapidly into combination and unity of interest. They did not
stop here. Banking, insurance, in fact the whole commercial
system, was centralized. Less than one hundred men officered,
controlled, and directed throughout the entire field. The iden-
tity of ownership could be seen in the appearance and reap-
apearance of the same names, some in one group, some in
another, massing and knitting together its vast organization.
This was the inevitable result of turning over the highways to
the common carriers unrestrained. Combination was bound to
breed dts own kind.

Are special instances required to sustain this conclusion? Is
it necessary to review the history of the Standard Oil, coal,
iron, beef, the grain, and elevator combines, each represented
in railroad ownership? The records of courts, Congressional,
and legislative investigation furnish abundant and enduring
testimony of their crimes against the American people. They
stand out against the dark background of thirty years of rail-
road history a menace and a reproach to government. They
are but types of a whole army of railroad-made and railroad-
fostered trusts.

Because of recent disclosures the sugar trust is of interest
at this time, and furnishes a conspicuous example, illustrating
the relation of the trust to railroad transportation.

Mr. John Moody, of New York City, recognized as an au-
thority by those trading in trust and railroad stocks and secu-
rities, two years ago classified the trusts of the country as
follows: The greater industrial trusts, the lesser industrial
trusts, the franchise trusts, and the great railway groups.

The greater and lesser industrial trusts, comprising the most
important industrial trusts in the United States, two years
ago numbered 318 separate trust organizations, representing the
consolidation of 5,288 plants or manufacturing establishments,
with a total stock and bond issue of $7,246,342,533. These con-
solidations dominate practically every fie!d of industrial enter-
prise in the United States, from the manufacture of railroad
locomotives and pressed-steel cars to matches and chewing
gum. Of the greater industrial trusts, all have been organized
or reorganized since April 1, 1890. With the exception of the
sugar trust, all were incorporated in the State of New Jersey.

The sugar trust was incorporated in its present form in 1901.
It bas acquired ownership or control of 55 corporations,
representing 70 to 90 per cent of the entire sugar-refining in-
dustry of this country. The element of monopoly in this or-
ganization is very powerful, consisting of tariff benefits and
practical control of the sources of raw material. It is capital-
ized at $145,000,000. Although this is vastly more than the

6758
30

investment represented, its virtual control of the market enables
the trust to earn dividends averaging about 12 per cent on.its
capitalization. For fifteen years since it was organized the
sugar trust has paid dividends ranging from 7 to 123 per cent.
The dividends actually earned during these years have been
much higher than this, but the management have latterly
adopted the policy of paying directly as dividends a modest 7
per cent. This course was prompted by the fear that the
public patience would not endure the high prices on sugar nec-
essary to pay the extravagant dividends which are actually
being exacted from consumers upon the millions of dollars of
watered stock in the trust.

Protected by the tariff from competition with foreign re-
fineries the sugar trust is placed in a position of immense
commercial advantage. With the aid of the transportation
lines it is invested with an absolute monopoly, enabling it to
control the prices upon this article of daily use in every home
and tax every table at will.

On the 7th of February, 1906, Congressman WILLIAM R.
Hearst submitted to the Department of Justice of the Federal
Government sworn complaints charging a compact between the
sugar trust and officers of the Pennsylvania, New York Cen-
tral, the Delaware, Lacawanna and Western, the Philadelphia
and Reading, the New York, New Haven and Hartford and
several other railroad companies. Mr. Hearst has placed
in the hands of the Attorney-General such an array of facts in
support of his complaints that the Government has asked for
the indictment of the head of the sugar trust and some of the
most prominent railroad officials controlling nearly all of the
trunk lines east of the Mississippi River.

In the case of the United States v. Armour & Co. et al.,
lately tried before Judge Humphrey at Chicago, Attorney-Gen-
eral Moody, in the course of his argument, said:

Not long ago the enterprise of the proprietor of one of the New York
papers discovered much information which tended to show that all the
great trunk lines running out of New York City had been practicing
diserimination in the form of rebates to the American Sugar Refining
Company. With what I believe was rare self-denial and a high sense
of public duty that evidence was offered to the Department of Justice.
Out of it charges have grown against the railroads and against the
sugar company, and they are now under consideration by the grand
jury. I express no opinion whether the charges are true or false,
there are ways of deciding that question when the time shail come.
These rebates, amounting in the aggregate to hundreds of thousands of
dollars, have been often given to the sugar company to aid it in its
fight with the farmers who are conducting the struggling industry of
producing sugar from beets. When the sugar company wanted to
overcome the competition of the farmer, wanted to lay such stress upon
him that he would give up the contest in despair and dispose of his
property to the monopoly, it went to the railroads and borrowed a
club by which it clubbed the farmer to death.

Let it not be supposed for one moment that the payment of
rebates imposes any burden upon the railroad company. What-
ever sums of money are necessary to enable the sugar trust to
maintain its advantage over competitors and to aid in paying
extravagant dividends costs the railroad company nothing. It
is all taken out of the consumers and enough more with it to
swell railroad surplus and pay profits on its inflated capitaliza-
tion as well. For proof of this turn to the rate schedules of
the railroad companies, and it will be found that they have in-

6758
31

creased transportation charges upon this article of prime neces-
sity more than five and one-half million dollars since 1897.

Again and again the Interstate Commerce Commission, in
their reports to Congress, called attention in unmistakable lan-
guage to existing conditions and their helplessness under the
law as construed by the court.

I quote the following from the report of the Commission of
1899 :

It is a matter of common knowledge that vast schemes of railway
control are now in process of consummation and that competition of
rival lines is to be restrained by these combinations. * * * If the
plans already foreshadowed are brought to effective results and others
of similar scope are carried to execution, there will be a vast centrali-
zation of railroad properties, with all the power involved in such far-
reaching combinations yet uncontrolled by any public authority which
can be efficiently exerted. The restraints of competition upon_exces-
sive and unjust rates in this way are avoided, and whatever evils may
result will be remediless under existing laws.

In its report for 1900 the Commission says:

One of the striking features of recent times in the industrial world
has been the tendency to combine for the purpose of limiting or elimi-
nating competition. In no branch of industry probably is the induce-
ment to promote combinations of this sort greater nor the advantage
to be hoped for from them more certain than in railway operations.
x * * “We should, however, hardly discharge our duty in a report
to Congress upon the railway operations of this country if we did not
call attention to these combinations and the effect which they are
likely to produce.

* In January, 1901, the Commission said in its report to Con-
gvess :

More instructive than any argument are the results of an investi-
gation just made at Chicago into the movement of packing-house prod-
ucts, a more detailed account of which hereafter appears. The facts
developed upon that investigation, and upon a previous investigation
into the movement of grain and grain products, which is also referred
to later, are of such a character that no thoughtful person can con-
template them with indifference. That the leading traffic officials of
many of the principal railway lines, men occupying high positions and
charged with the most important duties, should deliberately violate
the statute law of the land, and in some cases agree with each other to
do so; that it should be thought by them necessary to destroy vouch-
ers and to so manipulate bookkeeping as to obliterate evidence of the
transactions; that hundreds of thousands of dollars should be paid
in unlawful rebates to a few great packing houses; that the business
of railroad transportation, the most important but one in the coun-
try to-day, paying the highest salaries and holding out to young men
the greatest inducements, should to such an extent be conducted in
open disregard of law, must be surprising and offensive to all right-
‘minded persons. Equally startling at least is the fact that the own-
ers of these packing houses, men whose names are known throughout
the commercial world, should seemingly be eager to augment their

ains with the enormous amounts of these rebates which they receive
n plain defiance of a Federal statute. These facts carry. their own
comment, and nothing said by us can add to their significance.

* * * * * *

*
The effect is to give these large packers an enormous advantage
over their small competitors. * ™“ * Already these competitors
have, in the main, ceased to exist.
We find in these disclosures a pregnant illustration of the manner
in which secret concessions are tending to build up great trusts and
monopolies at the expense of the small, independent operator.

In 1902 the Commission said in its report to Congress:

The tendency to combine continues to be the most significant feature
of railway development. The facts in this regard are matters of
common knowledge, and little is gained by the mention of particular
instances. * * * A law which might have answered the purpose
when competition was relied upon to secure reasonable rates is dem-
onstrably inadequate when that competition is displaced by the most
far-reaching and powerful combinations. So great a change in condi-
tions calls for corresponding change in the regulating statute.

6758
32

THH HEPBURN-DOLLIVER BILL.

And so, Mr. President, after all these years of legislative de-
lay demoralizing private business and imposing grievous bur-
dens upon the country, we are at last offered the Hepburn-Dol-
liver bill. Does it meet the requirements of the country’s com-
merce? Does it promise a remedy? Let us examine its provi-
sions,

Mr. President, this bill will not solve the transportation prob-
lem. Unless greatly strengthened, it will not meet the expecta-
tions of the country. It will not dispose of the question.

Why should we temporize? Why should we approach this
subject on tiptoe, with apology to special interests and apos-
trophe to property rights? Honest wealth needs no guaranty
of security in this country. Property rightfully acquired does
not beget fear—it fosters independence, confidence, courage.
Property which is the fruit of plunder feels insecure. It is
timid. It is quick to cry for help. It is ever proclaiming the
sacredness of vested rights. The thief can have no vested
rights in stolen property. I resent the assumption that the
great wealth of this country is only safe when the millionaires
are on guard. Property rights are not the special charge of the
owners of great fortune. Even the poor may be relied upon to
protect property. They have so little—the little they possess
is so precious—that they are easily enlisted to defend the rights
of property. =

No one here need offer himself as a martyr to protect the
property of railway corporations against the results of popular
elamor. Property rights are safe. The ample power of the
Constitution is the everlasting bulwark of property rights. We
ean do nothing if we would to put the property of any corpora-
tion in the slightest jeopardy. We shall do well indeed if we
prevent the railway company from wronging the citizen. If
we will use aJl the power we have under the Constitution, we
may compel the carrier to desist from acts which encroach upon
the rights of the citizen and community. We shall not be able
to do more than that. We ought to be willing to do that much.

Thirty years of experience, thirty years of struggle for legis-
lation, thirty years of judicial decision plead with us, and yet
we make no advance. The committees of Congress spend a
decade listening to appeals, filing away petitions, taking testi-
mony, hearing arguments, traveling over the same ground ses-
sion after session. In the meantime individuals are wronged
by extortionate rates and their business handed over to monop-
olies enjoying the favor of the railroads. Towns and cities,
with natural advantages and locations to make them commercial
centers, are discriminated against to build up great markets
and railway terminals at the end of the long haul.

Men have grown gray in this protracted struggle to free the
commercial highways from tyranny and bring the railroads of
the country back to their legitimate business as common ecar-
riers. Weary and heartsore they accept this bill, not because
it is fair and just and goes to the core of the trouble, but, as
they declare, ‘“‘ Because it is all we can get now. It is as far
as Congress will go.”

I think it is demonstrated that every man charged with any
official responsibility with respect to this legislation owes it as
a public duty to go to the limit of constitutional power in cloth-

6758
33

ing the Government with authority to regulate railway rates
and railway services.

Mr. President, the bill before the Senate does not measure the
importance of the subject to which it relates. The junior Sena-
tor from Iowa, whose share in the framing of this bill author-
izes him to speak for its scope, directed attention in his
eloquent address to “the three conspicuous propositions with
which this measure is concerned.”

First. Broadening the meaning of the word “tr ansportation ag
to include independent car lines and refrigerator companies ‘‘ by
requiring that every charge incident to the service shall be
reckoned as a part of the public rate.”

Second. By authorizing the Commission “ where complaint is
made that a rate is unreasonable or unduly preferential to re-
quire the carrier to observe as a maximum in such a case the
rate which, in its judgment, is in conformity with law.”

Third. Requiring ‘a detailed report of the business of the rail-
ways compelling common carriers engaged in interstate com-
merce to conform their systems of accounts to the regulations
made by the Commission and to keep them open to reasonable
inspection under public authority.”

Excepting, then, as this bill provides for the new device of
the private car and refrigerator companies, it goes no further
than to patch up the rents made by judicial decision and clarify
and strengthen the section relating to the keeping of railway
accounts, and reporting thereon. Hence it may be said that this
bill is a measure to correct the blunders of 1887.

Sir, it took thirteen long years of persistent and earnest effort
to enact the statute of 1887. It is nine years since judicial
decision took from that statute every element of protection
which it had afforded the commerce of the country. The Dill
before us offers no more in fact—indeed less than did the Mc-
Crary bill, the first measure which passed the House of Repre-
sentatives for the regulation of interstate commerce in 1874.

We have made some progress: We better comprehend now the
consequences of handing over the commerce of the country to the
control of railway corporations than we did then. It is for this
reason, I repeat, that this bill does not measure the importance
of the subject to which it relates. The lesson which we have
learned in the last generation of time is that the control of
transportation is the control of commerce; that the control of
commerce is the control of the commercial and industrial life
of the American people; that the control of the commercial and
industrial life of the American people is the control of their com-
mercial and industrial freedom; that the control of their com-
mercial, and industrial freedom is the control of their political
freedom; that this question, in its final analysis, goes to the
integrity of our free institutions.

I do not disparage this bill in its present form. I credit it
with everything it can accomplish. It is fair to say that it will
aid directly and indirectly to equalize rates; that it will afford
opportunity for associations and municipal organizations repre-
senting communities where rates are higher than more favored
localities to apply, on that ground, for relief. This will, in a
limited way, result in some reductions. I say in a limited way,
because only the larger, wealthier, more enterprising and ag-
gressive communities will be represented by active organiza-

6758——3
34

tions with the courage and the means to make a fight against
the railroads for better rates. It will be further limited by the
fundamental defect in the plan which provides no way of ascer-
taining the reasonable rate, but only the comparatively reason-
able rate, as I shall presently show.

But beyond this the larger shippers will derive the principal
benefit from the bill if it is enacted in its present form. As a
class they are mainly interested in equal rates for all shippers
within the zone of competition. They are quite indifferent as
to the amount of the rate, because in the end they do not pay it.
While their complaints would undoubtedly result in some inci-
dental reductions, they will not be filed with the Commission
primarily for that purpose.

I protest that this is not a bill for the great body of the
American people who constitute the consumers of the country.
They do not buy freight of the railway companies at all. It
has been suggested that the railroads have good cause to resent
the designation of their charges as taxes upon the people. But
they are taxes.

There are just and unjust taxes. Any excessive charges for
the transportation of the necessaries of life should be as care-
fully guarded against as unjust taxes for sustaining government.
The Government is as truly obligated to protect the people
from unjust freight charges as it is from unjust taxes to sus-
tain the Government. Consumers do not deal directly with the
earrier, and yet they pay practically all of the fifteen hundred
millions collected by the railway companies annually for carry-
ing the freight of the country. They pay this freight when they
buy coal, lumber, clothing, and other supplies of the local dealer
and merchant. The consumer does not know how much of the
cost is a freight charge. He does know that prices are steadily
advancing. He feels the increasing burden. He is certain that
some one is wronging him. He believes that the railroads are
directly responsible for a part of it and indirectly responsible
for all of it. He wants relief. What does this bill do for him?

He can not make complaint in his own behalf. He has not
the detailed knowledge upon which to base such complaint,
The items of overcharge, if he could specify them, are small,
but in the aggregate they are important to him. He could not
afford to institute proceedings for reduction if he were able to
formulate the specific allegations of a complaint.

If the legislation enacted at this session is to go no further
than an endeavor to secure equal rates and not reasonable rates,
then it ought to be so framed that there is some one upon whom
rests an official obligation to act for the helpless consumer, for
the millions who pay the freight. We should at least make an
effort to secure equal rates for them until such time as we may
secure reasonable rates for all.

So long as the Commission, under the law of 1887, exercised
the power of enforcing orders with respect to rates, which the
railroads and the public understood the law conferred upon
them, they issued and enforced such orders on investigations
instituted upon complaints filed with them, and likewise upon
investigations instituted upon their own motion. One of the
most important cases ever decided by the Commission, resulting
in a reduction of rates upon foodstuffs, was upon an investiga-
tion prosecuted by the Commission upon its own motion.

6758 ,
35

This bill limits the Commission’s authority to make a deter-
mination and issue an order to cases upon complaint.

Section 18 of the law of 1887 authorizes the Commission to
institute an inquiry upon its own motion. This bill allows that
to stand, but in section 15, as proposed to be amended by this
bill, it does not authorize the Commission to make a determina-
tion and issue an order upon an investigation which it has
conducted upon its own motion under authority of section 13.
If it is wise to continue the authority of the Commission to
make investigation, why is it deemed advisable to withhold
from it the power to remedy any wrong disclosed by such
investigation?

Mr. DOLLIVER. Mr. President——

The VICE-PRESIDENT. Dces the Senator from Wisconsin
yield to the Senator from Iowa?

Mr. LA FOLLETTE. Certainly.

Mr. DOLLIVER. Consultation with the members of the In-
terstate Commerce Commission has led me to believe that with
their power of investigating general rate conditions throughout
the country, if they discover an abuse they will be under no
inconvenience whatever under the provisions of section 15 in
founding a proper complaint.

Mr. LA FOLLETTE. Mr. President, I noticed in the discus-
sion in the House of Representatives that the member from
one of the Maine districts raised that question and objected
that there were provisions in this bill which might be so con-
strued as to allow the Commission to issue an order upon the
investigation which it had made on its own motion under sec-
tion 18. I observed that a member of the House committee
which framed the bill promptly declared that such construction
could not be given to it.

Mr. DOLLIVER. I think the Senator from Wisconsin will
agree with me that if we can secure an adjudication of every
complaint that may be filed, we will have gone a long way
toward curing, or at least securing jurisdiction of, most railroad
abuses.

Mr. LA FOLLETTE. I am sorry to disagree with my friend,
the Senator from Iowa. I think we shall have gone only a
very little way. Under the provisions of this bill I do not think
we will go to the heart of this problem at all. I believe I shall
be able to make this very clear, if Senators have the patience
to hear me to the end.

If consumers are to be greatly benefited by securing even
relatively reasonable rates, it would seem very clear that either
the Commission should be authorized to act upon its own mo-
tion or the Government should provide some agency authorized
to make preliminary investigation into the wrongs suffered by
the consumers, file complaints, and prosecute the same before
the Commission. Some communities and rural sections might,
thus aided, secure at least a moiety of relief.

The whole history of this struggle for legislation, reaching
back more than a score of years, reveals the fact that those
who are strong through the power of organization and wealth
fare the best.

Mr. President, it is on this broad ground of a just protection
of public interest that the proposed bill seems to me narrow
and far below the level demanded by experienced and en-

6758
36

lightened public judgment. It is only designed to be amenda-
tory of the law passed twenty years ago. In some respects it
is less effective than the original law was believed to be by
those who enacted it—by the public and railroad companies as
well.

I will say, however, that in its amendments to section 20, with
respect to the publicity of railroad accounts, I entirely and un-
reservedly commend it. It cgntains excellent provisions for the
inspecting of railway accounts and for greater publicity concern-
ing them. But, excepting as to private car companies and a
limited provision with respect to relative rates and orders, it
ignores the lessons of experience and fails to recognize the
existing commercial and industrial conditions. It stands and
“marks time” on the oki camp ground of twenty years ago.

Sir, the bill takes little heed of the recommendations of the
Interstate Commerce Commission to be found recorded in their
annual reports to Congress. These recommendations are the
result of nearly twenty years of accumulated wisdom in testing
the law through administration. They should constitute the
most valuable contribution to an intelligent solution of the great
problem with which we have to deal.

RECOMMENDATION OF COMMISSION FOR LEGISLATION NOT PROVIDED FOR
IN THE PENDING BILL.

I will present some of the more important recommendations
for which this bill fails to make provision. I indulge the hope
that the imperfections of the bill will be cured by amendment
before it passes the Senate.

1. VALUATION OF RAILWAY PROPERTY.

The interstate-commerce law declares all unreasonable rates
unlawful. The Supreme Court declares reasonable rates to be
such rates as shall afford just compensation to the carrier for
the services performed. The Supreme Court has likewise held
that “just compensation” is a fair return on the fair value
of the railroad property.

The Commission has declared that—

No, tribunal upon which the duty may be imposed, whether legislative,
administrative, or judicial, can pass a satisfactory judgment upon the
reasonableness Qf railway rates without taking into account the value
of railroad property.

In its report for 1903 the Commission recommended Congress
to authorize such a valuation to be made, and made an elaborate
argument in support of such recommendation.

No such legislation has been enacted by Congress.

This bill makes no provision authorizing the Commission to
ascertain the value of railroad property.

I shall endeavor to discuss this most important branch of the
subject with some thoroughness before I conclude.

2. THE POWER TO REVISE AND FIX RATES, FARES, AND CHARGES.

The Commission has recommended year after year that it is
necessary to the protection of the public that authority be con-
ferred upon the Commission, acting either upon its own motion
or upon complaint, to issue, and to enforce an order changing
any rates, fares, or charges alleged to be unreasonable or
otherwise unlawful after due notice and full hearing, upon
a determination by the Commission that the rates, fares, and
charges are unreasonable or otherwise unlawful.

The Commission informed Congress that these powers are
“positively essential; ” that until conferred upon the Commis-

6758
37

sion its “best efforts at regulation must be feeble and disap-
pointing ;” that “ knowledge of present conditions and tendencies
increases rather than lessens the necessity for legislative action
upon the lines indicated.”

The pending bill does not confer upon the Commission the
broad powers to revise rates, fares, and charges upon its own
motion, or to fiw absolute rates, fares, and charges under any
circumstances ghatever.

3. THD RELATION OF RATES,

For years extended discussions have been presented to Con-
gress showing the necessity of considering the relation of rates
in determining with respect to specific complaints. The reports
are full of cases showing how vital this consideration is in the
administration of justice.

The Commission has presented with great clearness and
power its recommendations that this authority should be :re-
posed in the Commission. Indeed, it is difficult to see how it
can proceed to discharge the duties of its high office and dis-
pense any measure of justice under the limitations of the pro-
posed bill, which confers no power upon the Commission to
issue orders upon its own motion, unless Congress shall vest it
with full authority to pass upon the relation of rates.

This bill makes no provision granting such authority to the
Commission.

4, THE CONTROL OF CLASSIFICATION,

The foundation of all rate making lies in classification.
Sweeping changes are effected by a single order in classifica-
tion, which the railroads make from time to time. The Com-
mission has brought to the attention of Congress the fact that
“many advances have been brought about by changes in classi-
fications.”

Changing the classification of an article of freight changes
all the rates under which that article shall be shipped through-
out the country. It is wholesale rate making. By comparison
the powers proposed by this bill to be conferred on the Com-
mission are only powers of retail rate revision to be exercised
only on complaint and on the basis of comparisons with other
rates fixed by the railroads.

The Commission has repeatedly recommended that when
classifications are filed which the Commission find on investi-
gation and full hearing to be unreasonable, it shall determine
what shall be a reasonable classification and prescribe the same,
and shall order the carrier or carriers to file and publish, on
or before a certain day, schedules in accordance with the de-
cision of the Commission, subject to right of review thereon;
that when such classification shall be so established it shall not
be departed from without the consent of the Commission upon
application of the carrier after due notice and full hearing.

This bill makes no provision conferring such authority upon
the Commission.

5. THE POWER TO FIX A MINIMUM RATE.

During the ten years that the Commission exercised their
supposed power with respect to rates they found that great in-
justice resulted in many cases because the railroad companies
would readjust rates for competing towns to a common market,
so as-to defeat the orders of the Commission in securing to a

6758
38

city or community a reasonable opportunity to compete in such
common market.

This defect in the law was many times reported to Congress
by the Commission and numerous cases cited in support of a
recommendation that the Commission be given authority to fix
a minimum rate. i

This vill makes no provision to correct the law in this im-
portant respect. s

6. LONG AND SHORT HAUL DISCRIMINATIONS IGNORED.

The long and short haul clause of the act of 1887 was designed
to prevent a common form of most oppressive and unwarranted
discriminations between places. The court has decided that this
clause does not apply when the conditions are not alike at both
points between which the discriminations exist. In practice
there are no points at which conditions dre alike. It lies in the
power of the roads to make the conditions dissimilar whenever
it suits their purposes. As a result this provision is without
effect, and there is no authority in the Commission to prevent
any such unwarranted discriminations. Such discriminations
prevail generally throughout all sections of the country.

Under the basing-point system a rate to a given point is com-
puted by adding to the rate from the point of origin to the
basing point the local rate from the basing point to the point of
destination, or an arbitrary amount or a percentage of the rate
to the basing point. This is done for points between the point
of origin and the basing point, thus making the rate to such
points higher than the rate to the basing point beyond. For
example, rates on some commodities from New York to Salt
Lake are more than twice as high as to San Francisco, a thou-
sand miles farther and over the same line. From New Orleans
to Charlotte, N. C., the rates are twice as high as to Virginia
cities twice as far distant, the Virginia traffic passing through
Charlotte. Most absurd discriminations of this sort prevail
against Danville, Va. Shippers in western Wisconsin wishing
to ship grain and live stock to Chicago are actually forced, to
get the best rates, to ship west to St. Paul and then reship to
Chicago, the return shipment passing through the town from
which it started.

The Commission has called attention to the defect in the law
which permits these unwarranted discriminations. It has rec-
ommended that it be given the power to determine what condi-
tions are dissimilar and what discriminations are warranted.

The proposed bill ignores these recommendations and the ne-
cessity of their enactment into law. It does worse than that; it
reenacts the bad provisions of the old law.

7. THE TRICK OF WITHHOLDING TESTIMONY.

It is a fact that railway companies have withheld important
testimony upon the hearings before the Commission; that they
have subsequently offered the testimony on the trial before the
court, and have thereby succeeded in reversing and discrediting
the Commission and in delaying the administration of justice;
that this practice has been so prevalent as,to call forth rebuke
upon the railroad companies from the Supreme Court.

The Commission has reported these facts to Congress and rec-
ommended that legislation be enacted to correct this abuse.

This bill makes no provision to prevent the continuance of this
wrongful practice on the part of the railway companies.

6758
39

8. IMPRISONMENT FOR VIOLATIONS OF LAW.

The Commission advised against exempting railroad officers
and agents from imprisonment for violating the law. The rail-
roads advised Congress to amend the law and grant immunity
from imprisonment. Congress adopted the recommendations of
the railroads and passed the Elkins law, exempting railroad
officers and agents from imprisonment for violations.

In its report ‘the Commission calls attention to violations of
the Elkins law, and states that such violations are “liable to
increase unless effectively restrained.”

This dill contains no provision restoring the penalty of im-
prisonment and offers no remedy to “ effectively restrain” such
violations.

9. THH KILLED AND INJURED EMPLOYHES AND PASSENGERS.

For the fiscal year ending June 30, 1905, the railroads killed
and injured 10,617 passengers and 48,487 employees. The list of
killed and injured of both passengers and employees has steadily
increased from year to year. The record is an appalling one.

We annually kill relatively three times and injure twenty-five
times as many railway employees, and kill relatively six and
one-half times and injure twenty-nine times as many passen-
gers as do the Prussian railroads.

Day after day we place those who are dearer to us than life
in the safekeeping of the men who run the railroad trains of
the country. Patient, courteous, watchful, braye—there are no
stronger, finer types of character and courage in American life.
Out on the “iron trail” these men grimly meet death, day and
night, to save the trainload of humanity in their charge. The
gruesome list of fatalities reveals the startling fact that more
than one engineer out of every four dies upon his engine, his
hand gripping throttle and lever.

For seven years the trainmen of America have maintained a
representative here to plead for legislation, giving a little meas-
ure of justice to their families, when the dark hour comes, for
which they ever wait with dread anxiety. For seven years
their bills have died in the committee rooms of Congress.

The Interstate Commerce Commission has each year urged
legislation to reduce the long and increasing roll of this awful
slaughter of employees and passengers.

This bill makes no provision for the adoption of the block
system, or other well approved safety appliances, or for any
other progressive legislation, for the preservation of life.

OTHER CHANGES DEMANDED BY EXPERIENCE AND PUBLIC INTHREST—
THH INIQUITY OF THE FREE PASS.

The interstate-commerce law prohibited discriminations and
made the issue and use of railroad passes unlawful. The law
was weak and inefficient. It was evaded for a time and then
openly violated. This vicious and insidious form of 'influenc-
ing public sentiment and official action has been widely preva-
lent for years. A prominent and experienced railroad auditor
has stated that 10 per cent of all railroad travel in this country
is upon free transportation. Those who pay to ride must bear
the burden of this free transportation, amounting to over
$50,000,000 annually.

The free pass is furnished to public officers to influence offi-
cial action. It may be accepted innocently, but, consciously or

6758
40

unconsciously, it colors judgment and ultimately and finally con-
trols action.

No legislative body can act impartially upon any measure
involving contention between the railroads and the public when
such legislators accept and use free transportation furnished
by the railway companies.

The late Collis P. Huntington spoke out of an abundant ex-
perience when he said of an official who was looking after legis-
lation at the national capital that the gentleman had “ many
advantages with his railroads running out from Washington in
almost every direction, on which he gives free passes to every-
one whom he thinks can help him ever so little.”

Mr. Paul Morton says: “ Passes are given for many reasons,
almost all of which are bad.”

President Stickney, of the Chicago Great Western Railroad,
said, in an address given in 1905 in this city, speaking of
the provision of the interstate-commerce law against the use of
free passes, that ‘“‘ Congressmen and Presidents, with rare ex-
ceptions, have ignored its provisions.”

Whatever individual opinion may be entertained by Senators
and Representatives upon this subject, the odium of violating
laws which Congress has enacted ought in itself be sufficient to
pass and enforce the most drastic legislation which can be
framed, making it an offense punishable by imprisonment for
anyone, be he public official or private citizen, to accept or use
free transportation in any form.

EXPRESS COMPANIES NOT INCLUDED.

Every consideration that demands government regulation of
the services and rates of railroad corporations demands the
same regulation of the services and rates of express companies.

The bill should be amended as to clearly include express com-
panies. The hearings before the Interstate Commerce Commit-
tee clearly established that there is just ground of complaint of
these companies and need of effective regulations both as to serv-
ices rendered and the rates charged.

“ PAIRLY REMUNERATIVE.”

The common carrier is entitled to make a just compensation.
Just compensation is defined by the courts to be that compensa-
tion which will afford the carrier a fair return upon a fair value
of its property. Again and again it has been held that a rate
which does not afford just compensation is not a just and reason-
able rate. The phrase “ just and reasonable” has a clear and
well defined meaning in the law. It measures what the public
must pay. It measures all that the carrier is entitled to receive.

But the pending bill introduces a new qualifying term by
which the carrier’s rate is to be measured. The words “fairly
remunerative ” are added. What office are they to serve? For
what purpose are they introduced? Are they to add something
to the rate? If that is the purpose, they should be stricken from
the bill. The carrier is entitled to nothing more than a just and
reasonable rate. If the words “and fairly remunerative” are
not designed to increase the rate, then they serve no purpose
and should go out. These words introduce another element over
which there will be controversy in the courts. The words will
require judicial construction. For every reason they should be
omitted.

6758
41

Mr. DOLLIVER. Mr. President——

The VICH-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Iowa?

Mr. LA FOLLETTE. Certainly.

Mr. DOLLIVER. Mr. President, I wish to say that those
words were suggested to the Senate Interstate Commerce Com-
mittee by the Interstate Commerce Commission in the bill which
they framed and forwarded to us. For myself I think I ought
to say that they are after mature deliberation omitted from
the bill which I had the honor to introduce.

Mr. LA FOLLETTE. I am glad to learn that the Senator
is not personally in favor of incorporating into the bill the
added words.

Mr. President, perhaps I ought to say, with reference to the
recommendation of the Interstate Commerce Commission at
this session of Congress, as indicated and limited by the draft
of a bill which was printed as coming from them, that I con-
cede freely that it omits many of the recommendations which
they have made year after year for a decade as being vital to
the protection of the interstate commerce of this country.

I know that back of that change and other changes in their
recommendations there is a world of significance. Since 1897
they have submitted their reports to Congress, always urging
the same legislation as vitally necessary. They have appeared
personally before the committees of Congress, arguing and
pleading to have their recommendations enacted into law. If
at last they have been driven to believe that they must take
this bill or nothing, that they must take but a little fraction of
that which is really essential to protect the people of this coun-
try against extortion and abuse, it does not annul, contradict,
or overturn the recommendations which they have incorporated
year after year for ten long years in their reports and urged
in person upon the committees at every opportunity. I could
say much more with respect to this matter. It is not neces-
sary to do so at this time.

Attention is called to other changes that seem worthy of con-
sideration when the bill is taken up in detail.

The bill, in extending the time for notice of changes in rates,
provides that the carrier making such notice shall give ‘“ pub-
lic notice.” The word “public” would seem indefinite. Pro-
vision for notice to the Commission is not provided. In ex-
tending the time for notice of changes in rates in joint tariffs
“public” is omitted and notice to the Commission is provided.
It would seem that in both cases public notice and notice to
the Commission should be required and the manner of public
notice specified.

To empower the Commission to issue orders after full hear-
ing and investigation upon its own motion, the words “ upon
complaint ” should be omitted in the amendment to section 15.
The scope ef such orders should include all classifications and
regulations affecting rates and services.

Likewise the Commission should be empowered, when any
rate or classification has been found unreasonable or unjust, to
substitute maximum, minimum, or absolute rates, or to substi-
tute such other classification or regulation as shall be necessary
to secure just rates and regulation in conformity with the re-
quirements of the law.

6758
42

In the amendment proposed to section 16 it provided that
when “upon such hearing as the court may determine to be
necessary, it appears that the order was regularly made and
duly served,” the court shall enforce obedience to such order.
This provision may be construed as limiting the court to con-
sideration of the regularity of making and serving the order,
and to exclude consideration of the question whether the order
is confiscatory. Any doubt with respect to this provision can be
remedied by inserting after the word “served” the words “ and
not in violation of any of the constitutional rights of the car-
rier.”

In addition to the specific enumerations in the bill, the report
should show separately the receipts from and the operating
expenses for interstate and State traffic. The report should
show, in such detail as the Commission may direct, the amount
and character of the freight and passenger traffic, and the hours
of labor of all employees, and to what degree certain classes
of employees are required to be on duty continuously for such
length of time as may jeopardize the public safety.

Friday, April 20, 1906.

Mr. LA FOLLETTE. Mr. President, when I concluded, late
in the session yesterday, I was discussing certain features of
this bill which seemed to me very defective, and I wish briefly
at the outset this morning to review the propositions covered in
what I said yesterday.

I had considered what I conceived to be unsound constitu-
tional arguments. I had discussed what seemed to me to be
unsound propositions which would limit the right of Government
to base its control of transportation upon franchises issued by
the sovereign power. I had discussed the broad court review
and preliminary injunction. I had called attention to the
history of the movement which culminated in the passage of
the act of 1887. I presented for consideration the weakness
and lack of vitality of that statute, and the urgent need of its
amendment.

Following that, Mr. President, I traced briefly the develop-
ment of industrial combination in this country and showed,
as I believe logically, its relation to transportation. I think it
was made plain that all of the industrial and commercial cen-
tralization of this country is closely related to the transporta-
tion problem. I submitted the recommendations and argu-
ments of the Interstate Commerce Commission which it had
presented to Congress session after session to secure legisla-
tion to control transportation charges and regulate service, to
the end that industrial .and commercial monopoly should no
longer be fostered by especially favored transportation rates
and regulations. I believe it was made clear that the country
had suffered greatly because Congress had failed to respond to
the recommendations made by the Interstate Commerce Com-
mission with respect to the constantly increasing power of mo-
nopoly through railway concessions and privileges.

And then, Mr. President, coming down to what we are try-
‘ing to do here to-day, I had begun to suggest the particular

6758
43

respects in which the pending bill fails to meet the recom-
mendations of the Commission and the urgent needs of the com-
mercial and industrial interests of the country.

I called attention to the fact that the Commission had recom-
mended the valuation of railroad properties, and that this bill
does not provide for it; that they had recommended the power
to revise and fix rates and fares and charges upon their own
motion, and that this bill does not provide for it; that they
had recommended and had cited many cases showing the abso-
lute necessity of conferring upon the Commission power to con-
trol the relation of rates, and that this bill does not provide for
it; that they had made plain to the Congress and to the country
the importance of giving the Commission authority over classi-
fication, and that this bill does not provide for it; that they
had cited innumerable instances where it was important to the
administration of justice with respect to the commerce of the
eountry that they should have authority to fix minimum rates
or an absolute rate, and that this bill does not provide for it;
that they had pointed out the ability of the railroads of this
country to nullify that section of the statute of 1887 with respect
to the long and short haul clause, and that this bill does not
in the least strengthen it.

Mr. President, in the course of this discussion the Commission
has been much criticised because so many of its decisions have
been reversed in the courts. The true reason for these re-
versals may be found in the annual reports of the Commission
to Congress. Attention has again and again been directed to the
fact that the railroad companies withheld testimony upon the
trial of the case before the Commission and then introduced it
when it came to a trial of the case before the court, Upon this
new evidence the court often reversed the Commission. The
railroads were. thus enabled to embarrass the Commission and
delay the administration of justice under this law. These re-
versals have often been cited on the floor of both Houses of
Congress as showing the incompetence of the Commission.
Yet the reports of the Commission to Congress have recom-
mended that the law be so amended as to prevent this practice.
This bill does not contain any such amendment.

Then, Mr. President, I called attention to the fact that the
Interstate Commerce Commission had questioned whether great
injury would not result from so amending the law that no
imprisonment should be imposed as a penalty for its violation ;
but that the railroad companies had for years pleaded before
the committees here in Congress that imprisonment as a pun-
ishment for violation of the law might be abrogated. The
Commission, in its reports and before the committees of Con-
gress, gave admonition and warning that such amendment
would in all human probability result in opening the doors
‘ wide for violation of the law. But Congress heeded the insist-
ence of the railroad companies that imprisonment for viola-
tion of law should be abrogated, and the Elkins law was passed.

Mr. FORAKER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Ohio?

Mr. LA FOLLETTE. I do, sir.

Mr. FORAKER. I understand the Senator from Wisconsin
to be saying that the provision of law abrogating imprison-

6758
44

ment for violation of the interstate-commerce act was contrary
to the recommendation of the Interstate Commerce Commis-
sion. Am I correct?

Mr. LA FOLLETT. I say this: After long years of pleading
with the Committees on Interstate Commerce of both Houses,
the Interstate Commerce Commission has been pushed from
position to position with respect to its recommendations.

Mr. FORAKER. Mr. President——

Mr. LA FOLLETTE. Wait a moment. I say that finally,
after warning Congress that the abrogation of punishment by
imprisonment would, in its judgment, be a dangerous thing, the
Commission finally said if, in the opinion of Congress, it is
deemed advisable—I am not quoting the exact words of the
Commission, of course—we yield that point. I say that means
this, and this only: The Commission has been pushed by the
attitude of the committees of Congress from pillar to post, and
that finally, in its extremis, it was ready to accept almost any
legislation which it could get, provided it contained some pro-
visions that would tighten up and make more stringent certain
of the sections with respect to violations of the law.

Mr. FORAKER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield further to the Senator from Ohio?

Mr. LA FOLLETTE. Ido. .

Mr. FORAKER. The Senator well said that he was not
quoting the exact language of the Interstate Commerce Com-
mission in what he has just now set forth. The fact is, as any-
one can ascertain by reference to the official reports of the
Interstate Commerce Commission, that repeatedly prior to the
act of Febryary, 1903, known as the “ Blkins law,” the Commis-
sion recommended that the law be so changed as to do away
with imprisonment for offenses against it. In their seventeenth
annual report, which was the first report after that law had
been enacted, they dwell upon that and call attention to the
fact that the change in the law was in accordance with their
recommendation, made repeatedly on their own motion, without
any desire on the part of anybody, so far as I am aware, that
they should make it, and they speak of that provision of the
law as one of its exceptionally good features.

Now, I do not want to interrupt the Senator from Wisconsin
while he is in the midst of his argument——

Mr. LA FOLLETTE. It is all right. d :

Mr. FORAKER. But if he will allow me to do so, for I am
sure he does not want to misrepresent the attitude of the Com-
mission on that subject——

Mr. LA FOLLETTE. Oh, no.

Mr. FORAKER. I will ask that the Secretary read what
the Commission said about the Elkins law in their report of
December 15, 1903. :

Mr. LA FOLLETTE. I think I incorporate that a little bit
later in what I have to say.

Mr. FORAKER. If the Senator objects to this——

Mr. LA FOLLETTE. And I do not care to have it injected
into the speech at this point.

Mr. FORAKER. Well, I should not think the Senator would
eare to have incorporated in his speech what the Commission
have set forth.

6758
45

Mr. LA FOLLETTE. Let me say to the Senator from Ohio
that I am willing to have embraced in the Recorp here every-
thing that bears pertinently upon this discussion. I shrink
from nothing that hews to the line, sir.

Mr. FORAKER. Of course the Senator does not, but if the
Senator does not desire to have the whole of this incorporated.
will he object——

Mr. LA FOLLETTE. I do not know how much the Senator
proposes to send up. He says if I object to the whole of it.
If he proposes to send up the whole volume which he has in
his hand, I do object to having it injected into the middle of my
speech.

Mr. FORAKER. I am asking the Senator whether he has
any objection to my reading from the official report of the Inter-
state Commerce Commission what they say upon that particular
charge that he has been dwelling upon?

Mr. LA FOLLETTE. I call particular attention in what I
have prepared to say here, to exactly what the Interstate Com-
merce Commission has recommended with respect to that propo-
sition. Therefore I choose to have it come in regular order and
in its proper relation to this whole subject.

The VICE-PRESIDENT. The Senator from Wisconsin ob-
jects to the reading of the report.

Mr. FORAKER. I do not want to read all of the report. I
would not trespass unduly on the Senator from Wisconsin; but
he has made a very important statement, and if he will allow me
to read a paragraph he will perhaps desire to change the state-
ment he has made, if I correctly understood him.

Mr. LA FOLLETTH. No; I would not. I am familiar with
everything the Senator would read. There is nothing on this
subject in the reports of the Interstate Commerce Commission
with which I am not entirely familiar. Let me say that, and
then I will proceed to address myself to this question.

Mr. FORAKER. I am glad to know somebody who is en-
tirely familiar with everything that the Commission has said
on this subject.

Mr. LA FOLLETTE. The Senator from Ohio will have
ample opportunity, if he desires——

Mr. FORAKER. Yes; I will have.

Mr. LA FOLLETTE. To challenge anything I may wish to
say here. He will have ample opportunity to do it in his own
time. I do not mean by that to cut off any reasonable interrup-
tion.

Mr. FORAKER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield further to the Senator from Ohio?

Mr. LA FOLLETTE. I do not just at this time.

The VICE-PRESIDENT. The Senator frim Wisconsin de-
clines to yield.

Mr. FORAKER. Will the Senator allow me to read one
paragraph? ‘

Mr. LA FOLLETTE. Oh, yes.

Mr. FORAKER. That is all I want.

Mr. LA FOLLETTE. I will consent to that.

Mr. FORAKER. I should think the Senator would not object
to that.

Mr. President, the Commission, in the course of their dis-
cussion of the Elkins law, the whole of which, notwithstanding

6758
46

the Senator’s familiarity with it, I commend to him for reread-
ing say this:

The amended law has abolished the penalty of imprisonment, and
the only punishment now provided is the imposition of fines. As the
corporation can not be imprisoned or otherwise punished for misde-
meanors than by money penalties, it was deemed expedient that no
greater punishment be visited upon the offending officer or agent. The
various arguments in favor of this change have been stated in former
reports and need not here be repeated. Whether the good results.
claimed by its advocates will be realized is by no means certain, but
the present en should doubtless be continued until its utility is
further tested.

And so they go on at considerable length, showing, as refer-
ence to their former reports shows, that they have been on
their own motion repeatedly recommending that identical legis-
lation before ever it was enacted by Congress.

Mr. LA FOLLETTE. Mr. President, I deny that the report
read by the Senator or any of the reports of the Interstate
Commerce Commission recommend the abolition of imprison-
ment as a penalty for violation of the law. I assert that they
have always maintained in their reports to Congress, notwith-
standing the insistence of the railroad companies that it should
be done, they doubted that it would be the means of bringing
into court offenders against the law, which the railroad com-
panies always professed to believe, in trying insidiously to
get the committees of Congress to incorporate into the law the
provision that punishment by imprisonment should be abro-
gated. The arguments referred to in previous reports are the
arguments of the railroads, not the arguments of the Commis-
sion. I furthermore assert that in the last report made by the
Interstate Commerce Commission, the report for 1905, they say
that whatever they have said heretofore in commendation
of the Elkins law they now desire to qualify. I am not quot-
ing their language, but its import. Oh, I know, Mr. President,
that it will be possible for the Senator from Ohio [Mr. For-
AKER]—and he has already done so—as it will be possible for
other Senators here to quote the Interstate Commerce Com-
mission in approval of the Elkins law. I know it will be pos-
siblé to quote Mr. Bacon, from my own State, and Mr. Cowan,
of Texas.

Mr. President, I am impelled by the interruption to say that
the records of Congress show that for nine years the Interstate
Commerce Commission has cooled its heels around the cor-
ridors and about the doors of the committee rooms of Con-
gress. Cowan, of Texas; Bacon, of Wisconsin; Call, of Cali-
fornia—any number of men have been here pleading for
legislation that would relieve the commerce of the country from
the oppression under which it suffers.

And when finally this committee or the committees of Con-
gress reported favorably the Elkins law, it occasioned a good
deal of rejoicing among those men. It is possible to quote
from Bacon and Call and Cowan and the Interstate Commerce
Commission in commendation of the Efkinslaw. Thatistrue; I
concede that. The stir of life in the recesses of the committee
room having charge of this legislation, of which the report of
that measure gave evidence, was a great encouragement to
these gentlemen, who had waited about here and had made their
arguments, who had shown that the industries of this country
were being oppressed, who had shown that the commerce of the

6758 ‘
47

country was languishing under the burdens impcsed upon it
by the railroads.

I say it was natural, Mr. President, that they snould give
some manifestations of joy that there had finally issued from
the committees of Congress having charge of this subject of
legislation evidences of life and interest. They had waited for
nine or ten years, and they said many things at that time, the
Commission said some things in their reports, which a careful
reading of subsequent reports will show they are now seeking
in a measure to qualify or retract. Take the very last report
of the Commission, that for 1905, which is just laid on the
desks of Senators. I do not quote its exact language, but it
says, in substance, that many of the commendations heretofore
given now have to be qualified. The Commission are coming
to understand that the Elkins law did not do what they be-
lieved and hoped it would do; that it did not stop the payment
of rebates; that it did not prevent the granting of privileges.

Mr. President, let me say that an investigation made while I
had the honor to be governor of Wisconsin with respect to the
effect of the Elkins law resulted in some important and star-
tling disclosures.

In Wisconsin since 1854 the railroads, under a law which
they succeeded in passing through the Wisconsin legislature,
have paid taxes based upon their own report to the State of the
amount of their gross earnings. You can see very readily that
this law would give the railroad companies of that State the op-
portunity to determine for themselves the amount of their taxes.
If they chose to report their gross earnings at a sum Jess than
they actually were for the business of the State, they could
correspondingly reduce their taxes.

Strongly suspecting that this was being done, by special mes-
sage I urged the legislature of the State to authorize investi-
gations into the books and accounts of the railroad companies
doing business in Wisconsin to find out whether they were re-
porting the full amount of their earnings. That was during the
session of the legislature of 1903. That was just about the time
of the passage of the Hlkins law, which was approved on the
19th of February, 1903.

The legislature passed the law providing for such an investi-
gation, and under it there were installed by the State, in the
principal offices of the railroad companies doing business in
Wisconsin, experts to examine their books, and determine
whether they were reporting their full earnings to the State of
Wisconsin. Of course that took the cover off completely.

Now, Mr. President, it was disclosed by this investigation that
the railroads had withheld, in reporting for taxation their gross
earnings on Wisconsin business, over a period of six years, more
than ten and one-half million dollars; and of this amount more
than $7,000,000 were deductions for rebates paid in violation of
the interstate-commerce act and the Elkins law. Of this
amount, $6,180,000 was rebates on freight and $972,000 was re-
bates on passenger traffic. —

This investigation was begun on October 1, 1903, and contin-
ued through that year and through the year 1904. The Elkins
law went into effect on the 19th of February, 1903. The amount
of rebates shown by this investigation to have been paid by
one of the leading roads, on Wisconsin business alone, month:

6758
48

by month through the year 1903, was, in round numbers, as

follows:

WANUVALY Sees ee ee ee eet ee eee
February
Mareh 222 ewe oe oa ee ee eee
ADT): eon = 8 ke eee ete ae Sek A ie eee eo Re

July —--_
August __
September
October —_

December _____ ee ek ene ee NS Se ORE ee 2,032

Mr. President, notwithstanding that the Elkins law went into
effect February 19, more rebates were paid in February than in
January, and mere were paid in March than in January, and in
July nearly three times as much was paid in rebates as in Jan-
uary; and the rebates only began to diminish, not in obedience
to the Elkins law, but in recognition of the fact that there were
experts from Wisconsin looking into their books. From the be-
ginning of the investigation, October 1, the rebates were very
perceptibly reduced.

Furthermore, Mr. President, the investigation showed that one
of the leading roads paid more in rebates in 19083 than it had
paid in 1902; while the other leading road doubled its rebates in
1903, paying that year $200,000 more rebates than in the year
before the Elkins law was passed.

So I say, Mr. President, we have there in that one State
indubitable evidence, admitting contradiction from no man,
of the failure of the Elkins law as a restriction on the payment
of rebates or the granting of privileges.

I agree with what I contend is at least the strong intimation
of the Interstate Commerce Commission, that taking away all
authority to administer punishment by imprisonment is mani-
festly one of the reasons why the railroad companies have
violated the Elkins law with impunity.

So I say, Mr. President, that the Interstate Commerce Com-
mission does well in modifying its former indorsement of the
Elkins law. Study their reports carefully and you will see
that they are getting away from the unqualified approval which
they gave it the first two years after its enactment. The time
will come when they will be obliged to confess that they were
mistaken in everything they said in approval of it—very nearly,
not entirely; there are good provisions in it; but so far as
stopping rebates is concerned it hag failed.

The demonstration made by the investigation of the rail-
roads doing business in Wisconsin was that the rebates in-
creased after the Elkins law was passed. The penalty of im-
prisonment had been taken away. That is what was the mat-
ter. That is what the railroads insisted upon before the com-
mittees of Congress, and that is what, if you will read with
fairness the recommendations of the Interstate Commerce Com-
mission, the Commission had urged should not be done. But
that is what the committees finally did, and as the result of it
you have, as shown by the investigation of the railroad com-
panies’ books with respect to business done in Wisconsin, an
increase of the payment of rebates under the Elkins law; and
I, have reason, as a result of that investigation, to assert my

6758

 
49

belief that the payment of rebates has increased under the
Elkins law rather than diminished. I believe that ultimately
an investigation of that subject will drive every man whose
mind is open to honest conviction to that conclusion.

Mr. President, I started out at the opening of my remarks to
recapitulate what I had said yesterday in order to get back to
a point of beginning for to-day. So I must not give way to the
call which every one of these questions and issues makes upon
me to digress into the field of discussion of this great question
which in every phase is as broad as the country, and which
goes deeply and vitally into the interests and lives of all the
people.

Mr. President, I find here upon my desk one of the passages
in the last report of the Commission, issued December 14, 1905,
for which I sought a few moments ago in my notes. It reads
as follows:

In our annual report for 1903 we endeavored to explain the changes
in the regulating statute effected by the Elkins law, so called, which
was approved in the previous February, and made some favorable com-
ments upon its operation. A similar opinion was expressed in the
report made a year ago. Further experience, however, compels us to
modify in some degree the hopeful expectations then entertained. Not
only have various devices for evading the law been brought into use.
but the actual payment of rebates as such has been here and there
resumed.

Mr. FORAKER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Ohio?

Mr. LA FOLLETTE. I do, sir.

Mr. FORAKER. Will the Senator read the whole of that
paragraph?

Mr. LA FOLLETTEH. Well, I do not know how extended
it is

Mr. FORAKER. The next two or three sentences.

Mr. LA FOLLETTE. It may go clear through the report.

Mr. FORAKER. No; there are only two or three other sen-
tences. If the Senator will allow me, I will read them.

Mr. LA FOLLETTE. I will read them.

Mr. FORAKER. I have them before me.

Mr. LA FOLLETTE. I will say to the Senator from Ohio I
will read them.

Instances of this kind have been established by convincing proof, on
which prosecutions have been commenced and are now pending. More
frequently the unjust preference is bronght about by methods which
may escape the penalties of the law, but which plainly operate to de-
feat its purpose. This does not imply any want of satisfaction with
the act of 1903, which we regard as a most admirable measure, nor
any belief that there is a general return to former practices, for the
fact is undoubtedly otherwise; but it does mean that this type of
evil has by no means disappeared and that it is liable to Increase unless
effectively restrained.

Let me say to the distinguished Senator from Ohio that when
the Interstate Commerce Commission have had the opportunity
to investigate the books of the railroad companies as freely and
thoroughly as we have in Wisconsin with respect to Wisconsin
business they will not put any reservations upon their language
as they did there.

Mr. FORAKER. Mr. President——- ‘

Mr. LA FOLLETTE. They will easily be driven to the posi-
tion that the violations of law under the Elkins Act with re-
spect to discriminations have not been checked or stopped at

6758——_4

 
50

all. Indeed, Mr. President, as shown by the patient and care-
ful investigation made by the experts of Wisconsin they in-
creased under the Elkins law. And let me say this

Mr. FORAKER. Mr. President—— .

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Ohio?

Mr. FORAKER. Will the Senator allow me to ask him one
question before he gets away from that subject?

Mr. LA FOLLETTE. Oh, certainly. But I will not get away
from it; I like it.

Mr. FORAKER. Would the Senator expect evil practices to
cease without an enforcement of the law? The law by itself
being simply put on the statute books could not, of course, break.
up anything.

Mr. LA FOLLETTEH. Yes, Mr. President; I would expect
the eminent gentlemen who are running the railroads of this
country to obey a law passed by Congress which makes an act
of theirs criminal before they have been called to the bar of the
court to answer in a criminal proceeding.

I remember a few days ago in the discussion here that the
Senator from Ohio rose in his place and said to some one—I do
not remember who it was—that the railroad officials of this
country are not criminals. I say to the Senator that the rec-
ords, so far as they have been exposed, show that the railroad
officials of this country are, with rare exceptions, criminals un-
der the statute.

Now, I mean what I say. I see Senators on that side smile;
but let me say to you, gentlemen, that when in Wisconsin we
summoned the railroad companies into court to answer for hav-
ing juggled the reports of their annual gross earnings, which
they were required by law to make under oath to the State
official, when they appeared before the court and the testimony
of the State was but partly offered, when the arguments over
certain law propositions had been concluded, those officials—
and they are just as honorable as the officials of any railroad
companies in the United States—came into court and stipu-
lated that they had violated the law, and went to the supreme
court on a question of the statute, as to whether or not, to state
it specifically, their report to the State officer and its accept-
ance by that officer, even if the report was a violation of the
statute, had not bound the State. That is what they did.. They
confessed a violation of the statute; they confessed having
under oath reported their gross earnings short of the true
amount as required by the statute; and they are just as honor-
able as the railroad officials of any State in this Union.

Mr. President, before I concluded yesterday I called the at-
tention of the Senate to the list of killed and injured in this
country—railway employees and passengers—and I presented
the facts to show that such accidents are many times more
numerous here than in Prussia, where the railroads are operated
in the interest of the public welfare; and I ask, on that ground,
consideration for an amendment which I shall offer before this
Se ee disposed of to preyent this needless destruction of life and
imb.

I also called attention, Mr. President, to certain other defects
where amendments, it seems to me, are required in the pending
bill, if it is to be within constitutional limitation and if it is to

6758

 
51

be made effective for the protection of the commerce of this
country.

I do not reflect upon any of the gentlemen who have prepared
this bill, but I desire to ask members of the Senate who would
see a measure framed that shall in all its provisions be guarded
with respect to constitutional violations to scan every line and
section of it.

And now I come, sir, to a more extended discussion of cer-
tain powers which should be conferred upon the Interstate Com-
merce Commission.

BROAD POWERS DEMANDED.

Reason and experience alike compel the conclusion that any
supervisicn or regulation of railway rates or services, to be of
material benefit to the public and adequate protection from
Tailway abuses, must be the fullest and most complete regula-
tion. It must not stop with conferring authority to prevent
only a part of the evils of which there is complaint. It must
meet and satisfy all just complaints. It must anticipate those
devices of the future which would seek to circumvent and de-
feat its purpose. Unless it does these things, it will be found
in the hour of need that it is too weak to prevent even those
abuses against which it is directed.

To attain these ends, broad powers must be conferred upon
the Commission. It must be assumed that the Commission in
its exercise of these powers will not exceed that which is wise
and necessary in the public interest. The Commission is ac-
countable in the event of any such excess or abuse of power
to the courts and to the public.

To accomplish these results the system of regulation must be
right in principle; it must rest on the broad foundation that the
Government shall possess powers of correction coextensive with
the railway corporation’s powers of abuse. Whenever the rail-
road makes, in respect to its service, any rates, classification, or
regulation whatsoever which are unjust or unreasonable as com-
pared with any other rate or regulation or which are of them-
selves unreasonable or excessive, or does any other thing or pur-
sues any policy at variance with the public interest and the gen-
eral welfare, then the Government should have and exercise
the power to set aside and prohibit such injustice or abuse and
institute and enforce in lieu thereof’ any other rate, classifica-
tion, regulation, thing, or policy that will best subserve the
general welfare.

Whatever powers are conferred, their exercise should not in
any manner be made solely to depend upon the complaints of
any individual or class of citizens. In the benefits of this legis-
lation all are entitled to share. The welfare of all the people
as consumers should he the supreme consideration. of the Govern-
ment. It should be the chief concern of the Commission.

I am driven to protest against the attitude in which the pro-
posed bill approaches the subject of railway regulation. The
bill has been heralded to Congress and to the public as a meas-
ure to increase the powers of the Interstate Commerce Commis-
sion and to confer upon the Commission the authority and the
power to enforce the provisions of the interstate-commerce act
that all rates shall be just and reasonable. In fact, the bill, if
passed in its present form, will not so increase the powers of

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52

the Commission. The provisions which should be in this bill
to that end are made conspicuous by reason of their omission.

Even this bill, with its powers limited to a provision for
publicity and for equalizing relatively unfair rates on complaint
only, meets with formidable opposition in this Senate. Senators
have contended in debate, day after day, that even these powers
should not become effective without providing that every order
of the Commission should in every item and particular be com-
pletely retried and reheard, de novo, in the courts.

If we view this attitude with the utmost consideration and
respect for its exponents, the best we can say of it is that it
expresses profound distrust of any system of Government regu-
lation of railroads. The logical conclusion of such a position is
that it is unsafe to confer upon the Commission the powers that
are vital and essential to any system of regulation in the public
interest that will reach and correct unreasonable and unjust
rates. The distrust that results in the omission of vital and
essential powers from the bill differs only in degree from the
distrust that would prevent any powers conferred from becom-
ing effective.

The effort that seeks to prevent the real exercise of any ad-
ditional power has at least the merit of consistency with the
attitude of distrust, to which it is a response. If the Commis-
sion can not safely be intrusted with the power to regulate
rates with respect to their reasonableness, it can not safely be
intrusted with the power to determine the relation of rates of
which it may receive complaints. If we apprehend that the
Commission will not exercise a given power wisely and in good
faith, that power should not be conferred, whether it be great
or little. Any legislation which does not proceed upon the basis
that it is a wise, just, and safe exercise of legislative power
can not achieve any enduring good. Without these supporting
considerations, such legislation can be urged only on grounds
of political expediency. But let no man be misled by the ex-
pectation that any half-way measure will serve even the end of
political expediency. The public will not accept from its serv-
ants any compromise of the full discharge of their official obli-
gation. It experienced one great disappointment in railway
legislation, which failed to enact that which was demanded by
the conditions and that which it was supposed to enact. It
will not require another ten years to discover the deficiencies
in this legislation. They will be recognized at once.

THE RELATION OF RATES,

That powers to regulate the relation of rates and to determine
rates for the future, if conferred, would not be exercised by’ the
Commission wisely and in good faith, is suggested on every
hand. The magnitude of such power is urged against intrust-
ing it to the Commission. The Senator from Iowa (Mr. Dot-
LiveR] indorses the decision of the court in the Maximum Rate
case, not only as a correct interpretation of the language of the
statute, but also because that decision, in his opinion, stopped
the Commission from the further exercise of the great and
dangerous powers—

To bring into judgment a scor rving differ i
of the eouTiaty, ae = hundred rea ee maceas te Ge one ae

and to balance their claims and pass sente i
fapareete p nce upon their commercial]

6758
53

No one can dispute with the Senator the magnitude of this far-
reaching power. But is this power of any less magnitude or
capable of any more dangerous application when exercised by
railroads than if exercised by the Commission? He says
further :

We are not, therefore, attempting to restore the power which the
Commission lost by that decision. No careful student of this problem
would do that if he could, and no Congress, in my opinion, will ever
enact a law to take the development of widely separated regions, the
interests of competing markets, the growth of rival seaports contend.
ing for the prizes of the ocean, out of the hands of the railways, which
have grown up with them, and the natural laws of business which have
created them, and stake their worldly prospects on the decision of any
earthly tribunal, even if its salary were raised to correspond with the
size of such a job.

Just what distinction can be made between the exercise of
this power by the railroads and its exercise by a Government
commission? It is clear that such a commission would be an
“earthly tribunal.” Are we to conclude that there is some--
thing more than earthly about railroad managers; that they,
perhaps, exercise these enormous powers by some divine right
and interpret the “laws of business” under the guidance of
divine inspiration?

I submit that we can not progress in this legislation on any
other basis than on the assumption that the powers proposed to
be conferred will be exercised honestly and in good faith. At
the worst those intrusted with the exercise of these powers will
be agents of the Government and accountable to the Govern-
ment, to the public, and to the courts for any misuse of their
power. A private railway management is accountable to no
one. All the outrages chargeable against any form of manage-
ment or possible to commit in the conduct of the transportation
business of the country have been repeatedly and constantly
perpetrated by our free and unregulated railway managements
without accountability and with scarcely even so much as any
attempt at concealment. The experience of the American pub-
lic in its efforts to secure fair treatment at the hands of the
railroads has been a record of the most bitter disappointment.
It is inconceivable that on this record there should be an appeal
to the people against Government regulation on the ground that
such regulation might be administered in subservience to selfish
ends and not in the interest of the general welfare.

There is nothing in the record of railway domination of the
industrial development of this country which should deter us
from taking that domination “out of the hands of the rail-
ways.” On the contrary there is much to demand such action.
The mainspring of the railway policy that decides which
centers shall succeed and which shall fail, is the selfish interest
of the carrier. ‘It has no concern in the promotion of commerce
in the public interest. The social economy of serving a given
territory from the center which would serve it best and
cheapest, the economy of the multiplication of convenient
centers of trade and industry, of the building up of many small
cities well distributed over the country, is wholly disregarded.
It does not suit the schemes of the traffic managers. Their
aim is the long haul, the big tonnage, the large revenues, and
the dividend. To these considerations all else is sacrificed.

In the interest of this policy the bulk of the country’s com-
merce is centralized for distribution at four points across the

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54

continent, the Atlantic coast, the head of the Great Lakes,
the Missouri River, and the Pacific coast. The railroads are
fighting every interior center between the Atlantic coast and the
head of the Great Lakes; every center between the Great Lakes
and the Missouri River; every center between the Missouri
River and the Pacific coast. Only where water competition
enters to restrain the rapacity of carriers is there peace or feel-
ing of security. From the Southeast to the Northwest the com-
plaints come; and from the Northeast to the Southwest. In
every locality it is the most important industries and lines of
trade that are attacked and are suffering.

A few of these oppressed interior localities have laid their
grievances before the committees of Congress. They are merely
types of scores of communities similarly situated. These, how-
ever, are important of themselves, and of vast significance.
For the most part they are cities of considerable size, and rep-
resent large sections of country. These cities are distributed
from the Atlantic coast to the Pacific. There is Danville, in
Virginia; Atlanta, in Georgia; Nashville, in Tennessee; St.
Louis, in the Mississippi Valley; Denver, on the Great Plains;
and Spokane, in the Far West. They simply represent types.

The smaller places do not complain so much—not because
they do not suffer; they suffer most, as a matter of fact—but
because they are without commercial organization and without
recourse in their industrial plight.

The complaints of sbippers and representative citizens he-
fore the committees of Congress showed in detail the nature of
the discriminations between localities. It covers discrimina-
tions in all the various forms between persons and commodities.
It shows the enormous advances in freight rates. It sets forth
the abandonment by the railways of an enormous traffic to
irresponsible private corporations, freight line, refrigerator car,
and express companies, and the discrimination and oppression
practiced by those corporations.

I have prepared a brief review of this evidence in a condensed
and related form, which I shall append to my remarks, and, if
it is necessary in order to obtain that privilege, I suspend now
and ask it. I have condensed the testimony taken before the
committees, and I portray in some seventy-four typewritten pages
the iniquities under which the commerce of the country suffers
because it has been given over to the domination of the cor-
porations. It is an array of fact that refutes utterly the claim
made in this debate that the railways should be permitted to
coutrol rates, regulations, and the destination of our commerce.
I ask leave, sir, to print that as an appendix to my remarks.
(Appendix A.)

The VICE-PRESIDENT. Without objection, ‘leave is granted.

Mr. LA FOLLETTE. It will be convenient as a reference for
those who are interested in these facts and conditions.

Mr. President, I think perhaps I ought to say that it is my
personal belief that not only the junior Senator from Iowa [Mr.
Do.uiver}], but many other Senators, when they come, as they
will come, because of their interest in this important subject, to
consider every phase of it, as bearing on the welfare of the peo-
ple of this country, will be found standing for that which the
interests of this country demand.

I recall, in the course of the eloquent and able address de-
livered early in the debate by the Senator from Iowa, the state-

6758
55

ment, which may have escaped others, but which I noted, that
his opinions with respect to this question, though perhaps it
was more particularly with respect to the Commission itself,
had undergone somewhat of a change in the lest year or so. I
am sure that he approaches this question to-day with an open
mind.

When any man who cares for his country comes to realize
the true significance of the control of commerce upon the
development of all industry, the location of markets, the build-
ing of cities, the density of popul:tion, the tremendous influ-
ence upon the economic and social life of the people, with all
its consequence to this generation and the generations to come,
he will be shocked that it should all be left in the hands of the
traffic managers of railroads. The control of commerce—its
regulation, its rates, its distribution and destination—go to
the upbuilding of the State, the nation. It must be controlled
unselfishly, controlled with the highest patriotism, upon a
broad, national policy. :

When this idea is once grasped, when it once possesses the
American people, does the Senate believe, does anyone believe
that they will permit the destiny of this nation to be controlled
by a board of managers of consolidated railways?

Sir, I say to the Senate here to-day that nothing, absolutely
nothing, can prevent the ultimate government ownership of the
railroads of this country except a strict government control
of the railroads of the country. [Manifestations of applause
in the galleries. ]

The VICE-PRESIDENT. The Senator from Wisconsin will
suspend while the Chair warns the occupants of the galleries
against further violation of the rules of the Senate, which for-
bid applause or demonstrations in the galleries. The Senator
from Wisconsin will proceed.

Mr. LA FOLLETTE. I next invite attention to the argu-
ments and misstatements which have been made in this debate
with respect to the regulation of railroads abroad.

FOREIGN RESULTS MISSTATED.

For the purpose of limiting the scope of legislation and the
powers to be conferred upon the Commission, faults and fail-
ures in government regulation abroad have been alleged in the
course of this debate. The argument is scarcely a legitimate
one, unless all of the conditions are known and presented, so
that just comparison may be instituted. However, since it has
been made so prominent a feature of the discussion by the Sen-
ator from Massachusetts [Mr. Lopcr], it demands consideration.
I regret, Mr. President, that I ain not honored with the pres-
ence of the Senator from Massachusetts [Mr. LopeEr].

Much the same arguments to the same effect were used with
reference to several foreign countries. All were offered as ex-
amples of the dire effects of government regulation which is
strong enough to regulate. It will be entirely fair, therefore,
to test his conclusion by examination of any one of the typical
eountries cited by him to sustain his contention.

As an example, the Prussian system may well be considered.
In Prussia governmental regulation of railways has gone to
the extreme of government ownership and operation. It is
contended by those opposed to effective government regulation
that all the evils resulting from government interference are
found intensified in the German system. Another reason why

6758
56

these representations of the Prussian system may very properly
be made the test of all the foreign comparisons introduced into
this discussion is the availability in the case of Prussia of
abundant reliable information showing the actual conditions
existing. .

The chief criticisms preferred against the Prussian, as well as
other foreign systems, are: First, that the administration of
the railways and the making of rates are perverted to serve
the political ends of the officials having charge; second, that
the rates are adjusted on an inflexible, arbitrary basis, which
is prohibitive for important commodities and long distances ;
third, that the system does not subserve the general interest
and the needs of commerce.

The assertion that under the Prussian system the rate-mak-
ing powers of the Government are exercised in subservience
to political ends and not honestly in the public interest may be
dismissed with the briefest consideration. It is probably suf-
ficient to say that no satisfactory evidence warranting such
a conclusion has been thus far offered. It is manifestly im-
proper for us, strangers to all the facts and conditions, to here
pass judgment condemning the acts and motives of public offi-
cials highly esteemed in their own country.

I stop a moment, Mr. President, to read a few lines from @
contribution made to the Journal of Political Economics in
February, 1906, by B. H. Meyer. B. H. Meyer was.a professor
in the Wisconsin University. He was at the head of the trans-
portation department of the department of economics of that
university. He had been offered, Mr. President, I may say, at
a very much higher salary, a like position in two different lead-
ing universities of the East. He declined these offers because
of his devotion to the State in which he was born. He had
been offered the editorship of one of the leading railway publi-
cations of the country at a salary amounting to three times
that which he received from the University of Wisconsin. He
declined it. He consented to accept, at my hands, an appoint-
ment upon the railway commission of Wisconsin, established
under the law of 1905, because he saw an opportunity to serve
in a public way the State which had given him birth, which had
educated him, and which had helped to make him one of the
foremost authorities upon the transportation problem in the
world to-day.

And let me say, Mr. President, that Professor Meyer returned
to take his position upon the Wisconsin railway commission
from a trip abroad, in which he made a study of this great
question in foreign countries.

With respect to the political phase of railroad regulation in
Prussia, I wish to read from Professor Meyer the following.
Speaking of the conflict of politics in railway regulation in this
country as compared and contrasted with the conflict of politics.
in Prussian regulation under government ownership, he says:

In the invidious American sense of the word, the Prussian railways
are most emphatically not in politics. There are no paid lobbyists,
no subsidized newspapers, no partisan publication bureaus, no “ rake
offs.” have been able to discover only one instance of dishonesty
and faithlessness, and that was a case of a subordinate employee
who had appropriated railway scrap to his own uses. The case was
tried only a few months ago. The man was sentenced to the peni-
tentiary for a term of five years. :

Who will venture to say what would happen if the books of the
American railway companies were to be subjected to the tests of the

6758
57

Prussian, with the same consequences In the courts? In all the testi-
mony taken before the Senate Committee on Interstate Commerce I do
not remember having seen a single statement something like this:

Question. “ Mr, , does your road discriminate ?”’

Answer. “No, sir.”

Question. ‘ Mr. , do you pay rebates?”

Answer. “No. And I wish to say to you, Senators, that if you de-
sire to convince yourselves of the truth of my statements, I cordially
invite you to appoint expert accountants to investigate the books of my
company.”

There is quite a difference apparently, Mr. President, between
the conditions existing with respect to political bias in Prussia
and in this country.

The statement that the basis of railway rates established
under government administration in Prussia is arbitrary and
inflexible and not adjusted to meet the legitimate require-
ments of commerce is not borne out by an examination of the
facts. The Senator from Massachusetts [Mr. Loner], in
describing the Prussian rate system, dismisses some sixty
special and commodity tariffs with little more than the passing
statement that “government rate making in Prussia has re-
sulted in giving discriminations to this traffic.” If by discrim-
ination we mean the unequal treatment of different commodi-
ties and places, basing this inequality upon a careful study
and analysis of the concrete economic conditions under which
the traffic is conducted, it is true that more than 80 per cent of
the Prussian traffic is carried at discriminating rates. But
this is not the sense in which “discrimination” is used in de-
scribing American abuses in railway management. If the Ger-
man use of “discrimination” is made the test, every rate and
every classification which departs from a yardstick rule of
making classification and rates is a discrimination.

It is interesting to note in passing that the opponents of
government regulation of rates have based many of their argu-
ments on the contention that under such regulation these dis-
criminations would be impossible.

The following is a summary of the special and commodity
tariffs in force on the Prussian state railways and the per cent
of the total traffic which in 1902 moved under the tariffs in each
class, respectively :

 

 

 

Per cent.
Special tariffs 1, 2, and 3 24.3
Commodity tariffs, 5 to 10 tons____-__--__-_-_--~--------~------- 5
Commodity tariffs, 10 tons and over_____________--_--_--_--__ 64, 2

The remainder of the traffic is handled under the general-
class tariffs.

The development of the commodity tariffs is shown by the
fact that the traffic moved under them increased from 45.5 per
cent in 1890-91 to 64.2 per cent in 1902.

This goes to show that the system is not inflexible, but that
it develops with the needs of the country’s commerce.

Among the important commodity tariffs is the raw-materials
tariff, which embraces, among other things, timber, stone, pot-
ash, bituminous coal, coke, briquettes.

You see how the Government in Prussia considers everything
pertaining to the development of particular sections of the
country that have it within them industrially to build up
specific industries. While the rates under those commodity
tariffs vary with the distance, as they undeniably should,
the rate is not simply a mileage rate. The scale varies for
different commodities; for the same commodities for different

6758
°

58

distances and in different sections and in different direc-
tions. Among the many commodity tariffs made up in like
manner are the following: Wood, iron pyrites, zinc ore, chicory
root, potash, stone, salt, artificial manures (4 tariffs), road-
building materials, stones (10 tariffs), coal, coke, briquettes,
and coal ashes (5 tariffs), iron ore and iron-ore slags—which
are used for agricultural manures—(8 tariffs), slate, alcohol (6
tariffs), grain and mill products (2 tariffs), slate, alcohol, kero-
sene, petroleum, and naphtha. There are also distinct scales
for export shipments of grain, potatoes, starch, fabrics, iron and
steel articles, glass goods, iron, vitriol, etc., as well as import
tariffs on cotton and similar raw materials. Bésides those
special tariffs as above, there are special scales in the tariffs
for commerce into the German Levant and East Africa.

Under the policy of the Prussian railway ministry in respect
to tariffs on raw materials and other commodities of importance
in industrial development and general welfare of the country,
this traffic has been developed with signal success. The fol-
lowing figures, taken from the official publications, show the
enormous increase in the railway traffic in a number of such
commodities from 1885 to 1903: < :

er cent.

Iron ore
Bituminous coal, coke
TOO Th oe cocaanbnun adden ponccarncaneeaaareeeenm
Mine timber, lintels
HNONICC. aoe 2S eee ee ee eet eee tre ey
Cut timber 5
Rough stone, brick... 2.2=-<-=2csssconescececce
Paper and pulp board_
Burnt lime-__--__
Artificial manures 2
Mill and milling fabrics

Refined sugar.
Cement
Potatoes
Beets (sugar)
Pottery
Pig iron =e esc
Glass, glassware
CeHulose and celluloid__

These figures show how they have built up great industries
and developed special lines of traffic under strict government
regulation in Prussia. .

It is to the further credit of the Prussian management that
those increases in traffic were brought about with constantly
decreasing charges and constantly increasing revenues to the
state, and without any of that harrowing economic labor such
as has been represented by some investigators of this subject.

It becomes of interest to consider the manner in which such
adjustments and reductions are brought about under the Prus-
sian system. Bear in mind, in the meantime, the familiar
forces and inducements which, in this country, secure from the
railways special concessions, commodity rates, and rebates, in
the interests of big and influential shippers, and tariff conces-
sions to favored localities.

It has been stated by the Senator from Massachusetts [Mr.
Loner] of the Prussian commodity rates that—

These reductions can not be governed by economic reasons, but are
in the main brought about by the pressure of political and industrial
interests, and there must be, and indeed there is, a constant struggle

between these interests to secure for each its share of the favors of
low rates.

6758

 

 

 

 

 

 

 

 

 

 

 

 

 

 
59

When it is asserted that “these reductions can not be gov-
erned by economic reasons,” I beg to ask upon what other
reasons do they rest? The proceedings of the various bodies
which have to do with the making of such rates show that it is
at the economic reasons which govern these changes.
Other reasons may occasionally enter, but if there is one factor
which above all others determines these reductions, it is the
economic factor. Various economic forces struggle for control
there as they do here. In the United States this struggle is fre-
quently a one-sided one. When parties are unequal in strength,
the railroad invariably decides in favor of the stronger party,
irrespective of the justice in the controversy. In Germany, the
Government, on the basis of wise and carefully formulated
legislation, decides the rules under which this struggle shall
take place.

Practically all reductions represented in the Prussian special
and commodity tariffs are the result of a well-established, sys-
tematic procedure, in which all interests are fairly and fully
and publicly heard. This system, after being tried in Prussia,
has come to be adopted in most continental states.

Mr. President, I stop a moment to ask the attention of the
Senate again to what Professor Meyer, to whom I am under
special obligations with respect to this phase of the discussion,
says, as a result of his investigation. The character of the
investigations of complaints, the openness and publicity. on
all contested matters before government officials in Prussia, is
in striking contrast to the methods employed by the railway
officials controlling transportation in America. Professor Meyer
states that there are conflicts there between different industrial
centers and interests as there are here. He says:

Such a conflict of interests exists in Prussia. It exists also in the
United States. In Prussia all these conflicts take place in the full
light of publicity. .The proceedings of councils and committees and
the legislature reveal every phase of every railway rate question which
is brought forward.

In Prussia every interest, no matter how small, has an opportunity
of being heard publicly on every railway question which affects it,
and the decision is made public and known to all. In the United
States only the strong and importunate ones are sure of consideration.
There are no public deliberations, ‘There is no public decision. Little
or nothing may become known to those who would profit by such
knowledge. *

The Prussian state railways are divided for administrative
purposes into 21 groups or managements. In the territory
of each of these managements there are public, semiofficial
boards, in which the chambers of commerce, the chiefs of the
various mercantile corporations and unions of manufacturers
or producers, and the unions or lodges of agricultural, forest,
and other extractive industries’ have their representatives.
These boards, constituted as indicated, cooperate with the
local railway managements in each district in determining the
needs of commerce. They meet at stated periods, and on motion
of the persons in interest may be called together at any time as
need arises. Their deliberations pass ultimately to the central
railway council for the state. In this way changes and ad-
justments are brought about in a public manner, all interests
being heard fully, and reforms are worked out in such a manner
as not to injure the general interest of the state and to give
each interest represented in the various districts its proper
weight and the rates and classifications called for by its eco-

6758
60

nomic needs. One of the results of this deliberate method of
arriving at and determining changes in rates and regulations
is that the rates so established are never afterwards raised, and
stability, which is so important a factor in business relations, is
thereby secured.

As going to show the high esteem in which the German
method of rate adjustment is held by impartial and well-in-
formed authorities, I quote the following from the London
Statist:

The German Government, true to its tendency, is never weary of ac-
celerating their progress by assisting trade in every way possible. In
Prussia, for example, the railways are all state property, and they are
worked, not to bring in the most revenue possible but to promote trade
to the utmost. ; .

Moreover, traders are encouranged and assisted in forming all kinds
of societies calculated to promote their interests, and the Government
continually consults representatives of the different trades. Over and
above this, the Government is always ready to use its great influence,
not only to open up new markets but likewise to acquire markets for
its traders.

Recently there have been two authoritative studies of our
railway system by representatives of the German Government.
In reporting one of these, Mr. G. Franke (Archiv fiir Hisen-
bahnwesen) makes a most instructive comparison of American
and German methods of rate adjustment from the German
standpoint.

Mr. Franke is a Prussian governmental official of long experi-
ence, having had charge in the technical affairs of railway ad-
ministration.

I shall quote a few paragraphs from Mr. Franke’s report,
because, aS I remember it, the Senator from Massachusetts.
particularly arraigned the Prussian system as having demon-
strated that a large government control is a most harmful thing
for the industrial development of the country. Mr. Franke
came to this country and made a study of our institutions, of
our commercial and industrial development, of our railroad
systems, and he contrasted them with those of Prussia. He
says, in part: 4

We Germans nowadays especially arrange all our tariffs and make
changes in them exclusively to further general economic needs of all
the people by reductions. In a very subsidiary degree we give effect
to considerations of revenue. i

Of course where you leave it to the railroads the first consid-
eration is revenue—dividends, surplus.

* * * Per contra, in American considerations of getting the utmost
for the railways is the fundamental basis of rate making. * * *
Rates are never made to serve the general interest of all the people.
They obtain consideration only indirectly or covertly in so far as it an-
swers the purpose of filling the strong bow of the railways, as, for exam-
ple, in cases where a railway makes a rate to hold tonnage or to help some

city or a certain market or is forced to meet competition of certain
products in the world’s markets.

In respect to the interests of shippers he says:

This one-sided view of regarding the railways as private enterprises
can not permit the shippers to have as a right a voice in the determi-
nation of rates as is the case in Germany. In the case of mammoth
industries this is provided for by the community of interest of the great
financiers. Eacept for this identity of control there is no regard paid
to the interests of the shippers at large. In consequence thereof there
is continually a bitter conflict of interests going on between the tarift
policy of the railways and the needs of commerce, industry, and agri-
culture. The general impression received from interviews with ship-
pers, a study of the pleadings and decisions of the Interstate Com-

6758
61

merce Commission, and reading the testimony and reports of the Con-
gressional committees lead one to the conclusion that the great indus-
trial combinations are of course well satisfied with the railway rate, but
that the great mass of shippers whose livelihood is dependent on the
proper adjustment of a railway rate are utterly dissatisfied and often
greatly embittered at their position. From this conclusion it will be
seen that it is unfair, as is sometimes done in Germany, to take a few
rates for iron ore, coal, or some other crude materials of the great
industrial combinations and place in contrast thereto our rates and to
draw conclusions from these paper rates, quite apart from the fact
that a great number of them have no real significance because of the
union of the railway and industrial interests in a@ common purse.

As, for instance, the Chesapeake and Ohio Railway Company
in coal as reported in an important decision handed down by the
Supreme Court only a few days ago.

The greed for profits and the disregard of public interest
which characterize American railway management is well re-
flected in the lack of proper provision for the safety of passen-
gers and employees. The chief cause of this condition of affairs
is the greed of American railways for profits, which keeps them
from employing enough men to properly discharge their duties
and the utter insufficiency, as compared with the German
standard, of the number of persons employed to guard against
accidents.

This is indeed a serious arraignment of our let-alone policy
in contrast with absolute government control. I follow it up
with some very important and significant facts.

The latest German report on our railways, just published a
few weeks ago by Hoff & Schwabach—the Librarian of Con-
gress was kind enough at my request to cable for some copies
of the work, which arrived several days ago and may be con-
sulted by those interested in pursuing this investigation.

In this report by Hoff & Schwabach, it is computed that
if the American railways were as carefully guarded as the
German we would have employed for that purpose 636,000
men, whereas we actually have less than 50,000, or less than
8 per cent of that number. It is further pointed out that
our railways employ relatively fewer men in the maintenance
of way and structures. These conditions, taken in connection
with the lack of safety devices and our exposed and unguarded
grade crossings, result in many unnecessary accidents. It, is
computed in this report that, relatively, the railways of the
United States kill six and one-half times as many and injure
twenty-nine times as many passengers as the Prussian railways,
while the proportionate number of employees killed is more than
three times, and the injured twenty-five times as great on the
railways in the United States as in Prussia.

Both of these German reports point out that all rate compari-
sons between the two countries on the ton-mile basis are entirely
misleading. The Hoff & Schwabach report says in this connec-
tion:

The conditions in America are fundamentally different from ours
and make unrestricted comparisons regarding the level of rates im-
possible.

When due allowances are made for differences arising from
capitalization, mail and express service, companies’ freight, etc.,
it is the conclusion of the authors that the Prussian passenger
rates are less than one-half of the rates on our roads, and the
freight rates are also considerably lower.

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62

The Senator from South Carolina [Mr. TiLttMAN] directed
the attention of the Senate and the country to that fact on the
very day the Senator from Massachusetts [Mr. LopcEr] con-
cluded his address. The Senator from South Carolina, who is
in charge of this bill, and who is alert in the public interest,
rose promptly and presented a newspaper dispatch which re-
ferred to the contents of this volume, and noted the fact that
when the #ecessary corrections are made to secure a legitimate
basis for comparison of rates between America and Prussia
they enjoy the lower rates and fares.

Professor Meyer, of the Wisconsin railway commission, to
whom I have before alluded, who has made a very careful
study of transportation matters here and abroad and is an
authority on this subject, says of these comparisons that “ no
such careful comparisons have ever before been made.”

The report expresses astonishment at some of the peculiar
and mistaken views current here regarding German railways.
One of these mentioned was the idea expressed to them by an
American railway official that German railways are controlled
in matters of policy and rates by political considerations.

This American railway official seems to entertain the same
views respecting this subject as the Senator from Massachu-
setts.

After diligent and unprejudiced study of American conditions
these German investigators say:

The descriptions in the preceding chapters will bear testimony to the
fact that we earnestly endeavored to acquaint ourselves with the _con-
ditions of the railways in the United States without prejudice. With
full recognition of the arrangements and services of the railways in
the United States, their great work in the development of the country,
we found nothing surprisingly grand or overwhelming; there may be
found there as everywhere in the cultured world for the observing
well-informed traveler, that which is better and that which is less good
than what we have.

In Mr. Franke’s article is made a detailed study of the many

factors and conditions which invalidate comparisons of rates
on the ton-mile basis as a criterion of the relative reasonable-
ness of transportation charges in the two countries. Insomuch
as it has been sought by such comparison to make it appear that
our rates are reasonable it may be well to enumerate briefly
some of these differences as given by Mr. Franke. He says:
_ it is well tu state at the outset that it is impossible to arrive at re-
liable average freight rates for German and American railways. This is
due to the difference of the fundamental basis on which the rates are
established. All the more so as in the United States, the rates vary ex-
traordinarily for the various species of freights, depending on th« kind
of traffic, whether local or through traffic, and still more dependent
on the tharacter of the railway. For this reason typical freights re-
duced to units of haul can not be established for separate classes of
freight.

Among the reasons given by Mr. Franke why the “ statistical
average income per ton per mile is not adapted for bases of
comparison” are the following:

(a) The average ton-mile rate on American railways is un-
duly depressed by the large proportion of transportation wasted
by circuitous routing. The final report of the Industrial Com-
mission gives examples of such circuitous routing by which 60
per cent—formerly as high as 250 per cent—of the transporta-
tion necessary is wasted. :

(b) In the traffic statistics of the United States, companies’
freight is included. This increases the tonnage without cor-

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63

respondingly increasing the revenues. This is not done in the
German reports.

(c) The German statistics embrace large revenues from a
comparatively small tonnage of high rate freight which is
handled by the railroads there, but in this country is handled by
express, fast freight, and private car lines companies, and the
earnings of which is not included in the reported railroad rey-
enues.

(d) The average length of haul for freight traffic in Germany
on all Government roads regarded as a system is 78 miles (125
kilometers). In the United States, on all railways regarded as
a system, the length of haul is about three times as great or
(1901) 252 miles. It is a well-understood principle that the
average rate per mile decreases with the length of the haul.

(e) The statistical average on American roads does not rep-
resent the average of what the people have to pay, but a “ lower
rate than the public ever get.” It is the average of the high
rates charged the general public and the special rates to favored
shippers after the rebates are deducted. The German average
represents the rates that all the people pay.

In addition to the foregoing enumerated factors there are
many other considerations that invalidate comparisons of rates
per ton per mile and which are not taken into account in the
railroad arguments. Foremost of which is the fundamental
difference in the character of the traffic handled by railways
here and in Europe. The proportion of ton-miles of cheap,
bulky, heavy traffic, such commodities as soft coal and iron
ore, carried by our roads is much greater, relatively, than
abroad. While the quantity of this class of traffic has been
greatly increased on the Prussian railways owing to the policy
of low rates to the points having no water transportation,
the proportion of such traffic is very much less than in this
country, where coal alone constitutes about one-third of the
total tonnage. In the countries of Continental Europe, where
for centuries have been maintained extensive systems of river
improvements and canals, the bulk of such traffic is carried by
water because that is the cheapest known transportation. The
omission of this great volume of the low-grade traffic from rail-
road tonnage of Germany obviously invalidates the average
gross revenue per ton per mile as a basis of comparison of
rates of the two countries.

The Senator from Massachusetts makes repeated reference
to the fact that a large volume of the freight traffic of con-
tinental countries is carried by waterways. He refers to this
fact as evidence of the failure in Government management or
control of the railways. He says the commerce of these
countries is driven to the waterways. The fact is that the
waterways carried the freight traffic of these countries for
centuries before the advent of railways. It would be just as
pertinent to suggest that the inefficiency of the railways of this
country or their mismanagement had driven commerce to the
Great Lakes.

It would be a peculiar economic policy, indeed, which would
seek to supplant in either country these magnificent waterways
as carriers of heavy traffic with railroad transportation at
far greater cost to the community. Especially so in Europe,
where those waterways are the work of centuries and repre-
sent untold expenditures. The development of this class of

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traffic by the railways of Prussia has been mainly in an effort
to supplement the water transportation, particularly to points
not well supplied in this respect. When it is remembered that
the waterways are maintained for the use of commerce, it
must be conceded that the dissemination of industry and the
development of this commerce at interior points is greatly to
the credit of Prussian railway management, in so far as it has
been done at all. I have already shown how greatly this char-
acter of traffic has been developed by the Prussian railways.

While the Senator from Massachusetts recognizes that in all
Buropean countries a vast part of the bulky traffic is carried
by waterways, he makes no allowance for this fact in his state-
ments of average railroad freight rates. The figures which
he offers for the foreign countries in comparison with ours rep-
resent entirely different traffic and entirely different services.
To use the English statistics of railways, for instance, which
the Senator himself says are not to any considerable extent re-
liable, in comparison with our statistics is only to draw unwar-
ranted conclusions. The authority which he quoted, Mr. Ack-
worth, in a contribution to the Journal of the Royal Statistical
Society a few years ago, affirmed that comparative statistics in
which English statistics of railways are a basis of comparison
are practically worthless. Here, too, the Senator omits all con-
sideration of the vast differences in the character of the serv-
ice in the two countries, the much shorter haul in England;
that the English freight rate includes cartage and storage, and,
finally, he ignores entirely the effect of the peculiar geographical
situation of England. It has an area of only about 50,000 square
iniles, or less than the area of North Carolina, nearly completely
surrounded by sea, so that, according to parliamentary testi-
mony, perhaps three-fifths of all the shipping points within Eng-
land are subject to influence of water transportation which
naturally appropriates a large portion of the cheap, heavy
traffic. Fundamental differences of this kind are ignored by
the Senator throughout his argument and his comparfsons with
foreign countries.

Surely, in the face of all these fundamental differences in the
traffic conditions, all of which tend to show that the comparisons
are wrong and to discredit the conclusions sought to be deduced
therefrom, no one will contend that such arguments prove that
government regulation is a failure in Germany, nor elsewhere,
where the arguments are based on like disregard of funda-
mental conditions.

With our widely different institutions, our complex system of
State and National Government, our marvelously rapid growth
and development, the intense struggle for wealth and industrial
centralization which has recently taken place in this country,
the control of transportation in the United States is distinc-
tively an American problem.

Investigation into foreign systems of management may offer
comparisons of value, but it will not afford a basis for solution
of the questions confronting us. 5

There is one very important lesson to be learned from the
most casual review of the European countries. The line of
difference ‘as to policy is between government ownership and
the strictest government control. None of the progressive coun-
tries of Europe adopts the let-alone policy. No authority on the
subject contends that the public interest should be left at the

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65

mercy of the selfish control of private corporations. In view
of the protection afforded by foreign countries to the people
from the monopoly of transportation, the mild, inadequate power
conferred on the Commission by this bill seems hardly to the
credit of our boasted free institutions. In view of our in-
dustrial condition, that this legislation should fail to express the
full power of our Government, of our Congress, as the measure
of relief, is the best evidence that the public good is not the
governing consideration, and is outweighed by the very in-
fluences with which the Government should cope.

I do not believe government ownership either the necessary or
the best solution of the transportation problem as it exists in the
United States to-day. But, as I trust I have made clear, for
my whole argument is based on that premise, I believe thag¢
the Government of the United States is bound to exercise all
the power of a sovereign nation to the end that the regulation
and control of its commerce shall be just and equitable, not
only to shippers, but to the whole public. It is bound to see
to it that the country is not handed over to monopoly and to
selfish interests.

VALUATION OF RAILWAY PROPERTY NECESSARY AS A BASIS FOR ESTAB-
LISHING RUASONABLE RATES.

Mr. President, I now ask the Senate to consider more fully a
recommendation of the Commission, to which I made brief
reference yesterday.

This recommendation lies at the very foundation of any sys-
tem of government regulation, which is to secure just and rea-
sonable rates. Unless this recommendation be adopted, and
the bill amended in conformity with it, the Senate and the
country might as well understand that the railroads are to be
permitted to continue to advance rates without let or hindrance.

Mr. DOLLIVER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Iowa?

Mr. LA FOLLETTE. I do, sir.

Mr. DOLLIVER. I call the attention of the Senator to the
fact that it is one of the purposes of section 15 of the pending
bill to deal with rates that are unreasonably high.

Mr. LA FOLLETTE. Yes.

Mr. DOLLIVER. I know of no reason why the Interstate
Commerce Commission may not consider whether a rate com-
plained of is excessive, and deal with it on that basis.

I further desire to call the Senator’s attention to the fact that
the Committee on Interstate Commerce requested the Interstate
Commerce Commission to send here a bill representing their
matured convictions of what legislation ought to be had at this
time, and that in the bill which they sent here the provisions
for the valuation of all the railroads of the country did not ap-
pear, a circumstance which led me at least to think that the
Commission, dealing with rates complained of as unreasonably
high, if given the authority to reduce them would without
further legislation be able to take into account the very ques-
tion to which my friend refers.

Mr. LA FOLLETTE. I am aware, as I suggested yesterday,
Mr. President, that the Commission submitted a bill to the
committees of Congress, as stated by the Senator from Iowa;
but when you lay that bill side by side with the recommenda-
tions which“they submitted in 1897, which they reaffirmed in

6758——5
66

1898, which they declared imperative in 1899, which they said
were necessary to the protection of commerce in 1900, which
they safd were essential in 1901, and 1902, and 1903, and 1904,
and 1905—when anyone compares that bill with all of those
recommendations it can only mean that, unable to get what is
necessary to a regulation of commerce, they are finally con-
strained to ask for what they think they can get.

Mr. President, L said yesterday that gentlemen who have
been here for years supporting the recommendations of the
Commission have not hesitated to say that they accept this
bill because it is the best they can get; that they hope it is.
the entering wedge, and that it would ultimately lead on to
legislation which would meet the demands of the country. I
gim not permitted to report what has been said to me by others,
but I may properly say this: That it is a fair inference, from a
comparison of the reports of the Interstate Commerce Com-
mission with the bill which they submitted to the committees:
of this Congress, that the bill so submitted goes only as far as
the Commission thought the committees and Congress would
permit the legislation to go at present. They were appar-
ently not far wrong, because the bill, as they originally sub-
mitted it, was pretty badly trimmed up before it got out of
the House Committee on Interstate Commerce.

Mr. DOLLIVER. Now, Mr. President-——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Iowa?

Mr. LA FOLLETTE. I do, sir.

Mr. DOLLIVER. Without undertaking to debate with the
Senator from Wisconsin, I feel considerable interest in this
bill, and I confess that I approached the subject in the present
Congress from the standpoint of one who desired to have some-
thing done rather than from the standpoint of representing all
my own views and opinions in respect to these propositions.

Mr. LA FOLLETTE. Well, Mr. President, when having
“something done” means turning back the clock twenty years.
when you reflect that in the last ten or fifteen years the indus-
trial life of the people of the United States has been wholly
changed, producer and consumer are oppressed, that the door
of opportunity stands open no longer to individual enterprise,
I say that legislation which only goes as far as the legislation
of 1887 was understood to go (except as it embraces the private
car companies and grants larger power with respect to pub-
licity) is not “something” which the people of this country are
entitled to have “done” at this time. I very much fear that
simply getting a little “something done” is perhaps delaying
for another ten years getting that which will liberate the in-
dustries and commerce of this country.

Now, Mr. President, I had started out to say, when inter-
rupted, that the only restraint which will be interposed under
the law, as proposed to be amended by this bill, will be that they
will be required to keep the rates reasonably level. The rate
line may be high, but it must be relatively just and equal.

And I think I will make it clear to the Senate that, under the
bill as it stands to-day, rates can not be brought to the reason-
able rate level, but only to the equal rate level—that is, the
railway may impose any burden it pleases, provided the burden
be reasonably distributed, the rates relatively equal.

6758
67

There is a vast difference between reasonable rates and equal
rates.

Mr. DOLLIVER. Why does my friend from Wisconsin ig-
nore the fact that the bill is also framed for the purpose of
‘preventing excesstve rates?

Mr. LA FOLLETTE. Let me ask my good friend from Iowa
to be patient with me a little. I know it takes me quite a good
while to make my points clear; I am inclined to be discursive;
I know that; but if you will just hear me for a little while I
believe I will make it plain to you that under this bill you can
not get reasonable rates.

I know that there is a provision in it that says the Commis-
sion shall, upon a complaint being made, ascertain whether the
rates are just or reasonable, but I purpose to show the Senate
that it does not do that, and I was proceeding to say that there
is a vast difference between reasonable rates and equal rates.

This bill is framed to enable the Commission to determine
and enforce equal rates. It makes no provision for determining
and enforcing reasonable rates.

Mr. President, what are just and reasonable rates? The
Supreme Court has defined just and reasonable rates to be such
rates as afford “ just compensation.” The railroad is entitled to
“just compensation; ” it is entitled to no more.

It was held in Smythe v. Ames (169 U. S., 546) :

The utmost that any corporation operating a public highway can
rightfuJy demand at the hands of the legislature when exerting its
general power is that it receives what, under all the circumstances, is
such compensation for the use of its property as will be just both to it
and to the public.

How shall this “ just compensation” be ascertained? In the
ease of St. Louis and Santa Fe Railway Company v. Gill (156
U. S., 649) the court said:

The effect on the entire line of railroad is the correct test of the
reasonableness of rates of fare which are attacked as taking of prop-
erty without ‘‘ just compensation ’”’ or due process of law.

The Supreme Court gave us, in the case of Smythe v. Ames
(supra) a very clear indication of the course to be pursued on
the part of Government in determining reasonable rates. Mark
the language:

If a railroad corporation has bonded its property for an amount that
exceeds its fair value, or if its capitalization is largely fictitious, it
Inay not impose upon the public the burden of such increased rates as
may be required for the purpose of realizing profits upon such exces-
sive valuation or fictitious capitalization.

* * * * ” * *

If a corporation can not maintain such a highway and earn divi-
dends for stockholders, it is a misfortune foy it and them, which the
Constitution does not require to be remedied by imposing unjust bur-
dens upon the public.

* * * oa cd * *

We hold that the basis of all calculations as to the reasonable-
ness of rates to be charged by a corporation maintaining a highway
under legislative sanction must be the fair value of the property being
used by it for the convenience of the public. And, in order to ascer-
tain the value, the original cost of construction, the amount expended
in Perri y improvements, the amount and market yalue of its bonds
and stocks, the present as compared with the original cost of construc-
tion, the probable earning capacity of the property under particular
rates prescribed by statute, and the sum required to meet operating
expenses are all matters for consideration, and are to be given such
weight as may be just and right in each case. We do not say that
there may not be other matters to be regarded in estimating the value ’
of the property.

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68

The court does not attempt to fix the limits of the investiga-
tion which must be made in each case. To deal justly between
the railroads and the public the Commission will necessarily
take into account every fact and circumstance which is entitled
to consideration in fixing just and reasonable rates for the road
under investigation.

This, then, is the law which has been laid down by the Su-
preme Court. This is the test which will be applied whenever
the Commission makes rates and the railroads resist their en-
forcement. The corporation will deny that they are lawful
rates; that they are reasonable rates; that they will afford
them just compensation for the services rendered. The Com-
mission must meet proof with proof. Otherwise the railroad
company will overwhelm it in court and set aside the rates pre-
scribed. Manifestly the Commission must be prepared to prove
the fair value of the property of the railroad, its receipts from
all sources, the sum required to meet operating expenses, and
the probable earnings under the rates prescribed.

The interstate-commerce law declares unreasonable rates un-
lawful. The Supreme Court held that it provided no way to
enforce the orders of the Commission. This bill makes provi-
sion for enforcing the orders of the Commission with respect to
reasonable rates, but it does not provide for ascertaining what
are reasonable rates.

It authorizes the Interstate Ccmmerce Commission to make
an investigation upon complaint that rates are unreasonable,
but when the Commission shall have exhausted all its power
under the law as proposed to be amended by this bill, it will
still be unable to determine whether the rates complained of are
reasonable or unreasonable, except as compared with other
existing rates, fixed by the railroads—the reasonableness of
which are known only to the’ railroad company itself. Here
the bill stops. It provides no specific method by which it is
made the plain duty of the Commission to ascertain the rea-
sonableness of rates based upon all the facts by which its deter-
mination will be tested by the court.

I contend, therefore, that preliminary to ascertaining the law-
ful rate—that is, the reasonable rate—the Commission must,
as a basis for its work, know the value of the property of the
corporation in question, its cost of operation, and all of the
facts necessary to enable it to form a just judgment with re-
spect to what shall constitute a reasonable profit on the invest-
ment. Without this the Commission can have no lawful stand-
ards with which to compare challenged rates. Without this the
Commission is inevitably driven, in any case of complaint, to in-
stitute comparisons with other rates fixed by the railroads, hav-
ing no knowledge whatever with respect to the reasonableness of
the rate so selected for comparison. Neither the interstate com-
merce statute nor this proposed amendment makes any provision
whatever under which the Commission is required to master
the facts and secure the material for a foundation upon which
to erect a standard of lawful or just and reasonable rates. If
the statute is to provide no means of ascertaining the reason-
able rate, then it were worse than folly to declare an unreason-
able rate unlawful. No one will contend that the law of 1887, as
amended by the acts of 1889 and 1891, confers specific authority
upon the Commission and imposes upon it the duty to ascer-

6758
69

tain the value of railroad property in accordance with the rule
‘laid down in Smythe v. Ames and other cases.

Mr. DOLLIVER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Iowa?

Mr. LA FOLLETTEH. I do.

Mr. DOLLIVER. I must confess that my honored friend
from Wisconsin, while he has relieved himself from the charge
of being discursive, is very far from being conclusive.

Mr. LA FOLLETTE. Well, I have not got through yet by a
good deal. [Laughter.]

Mr. DOLLIVER. The Senator paid, in the early part of his
speech, a fine tribute to the Interstate Commerce Commission
as to their exercise of the powers conferred upon them by the
act of 1887, and has referred to several cases in which the In-
terstate Commerce Commission has actually reduced rates be-
cause they were unreasonable. Now, so far as my knowledge
and investigations of this problem go, I do not see how much
power the Interstate Commerce Commission would have to es-
tablish a standard after they knew the value of the railroad
property.

Mr. LA FOLLETTE. I am going to try to make that clear
before I get through.

Mr. DOLLIVER. Because all parties agree that in dealing
with individual rates we have no method of determining their
relation to the cost of the railroads or the total earning of the
railroads, certainly no method as to value; and I know of no
reason, if you charge the Interstate Commerce Commission with
the business of finding out whether a rate is just and reasonable,
why they may not go into all these questions just as fully as a
court could go into them in passing upon them.

Mr. BAILEY. Mr. President—

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Texas?

Mr. LA FOLLETTE. I do.

Mr. BAILEY. Mr. President, it seems to me that if the rail-
road commission were first furnished with accurate and reliable
information as to the value of the entire railroad, then, meas-
uring all the rates by that, it would be very easy by compar-
ison to determine the value of any particular service or any
single rate. If it is not possible to determine the reasonable-
ness of any particular rate or whether any particular rate.
affords a just compensation, then this bill might as well never
have been written, because it authorizes the Commission to do
that. If it authorizes and empowers the Commission to per-
form an impossibility, it seems to me it needs correction along
the line which the Senator from Wisconsin [Mr. La FOLLETTE]
is now indicating.

Mr. LA FOLLETTE. Mr. President, the Senator from Texas
[Mr. BarLtey] has anticipated much that I should have said in
reply to the Senator from Iowa [Mr. Dottiver]. I think—l
venture to say so again—that before we get through with this
proposition it will be made plain that the bill is defective
in this particular. It is certain that the Commission—I had
just said this when I was interrupted, and I will have to go
back and take up the thread of my argument.

Mr. BEVERIDGE. Mr. President——

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70

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Indiana?

Mr. LA FOLLETTE. Yes; I do.

Mr. BEVERIDGE. Does the Senator propose an amendment
to the bill to remedy this defect which he alleges is in the bill?

Mr. LA FOLLETTE. I shall offer an amendment. I hope if
any better amendment can be drawn, that some other Senator
will offer one, but I shall offer an amendment to meet this
particular fault in the bill and I hope such an amendment will
be adopted. I believe the Senator from Iowa [Mr. DOLLIVER]
desires to see this bill a strong and effective measure. If it is
made plain to him that sach an amendment will add strength
and efficiency to this bill, I am very certain he will give it his
strong support. ;

Mr. DOLLIVER. Mr. President, I certainly sympathize with
the notion of the Senator from Wisconsin that the Interstate
Commerce Commission in passing upon what rates are just and
reasonable will be governed by the considerations, in part at
least, to which he has referred. For myself I do not doubt
that in determining such a question they would deal with it
exactly along the line suggested by the decision of the Supreme
Court to which the Senator has referred.

Mr. LA FOLLETTE. Yes; Mr. President, but I think I
shall be able to make it clear that they can not deal with it in
that way without additional legislation. I shall prove to the
Senate that the Commission appealed to Congress to give them
the legislation under which they could make this valuation of
the railroads as necessary to a proper basis of rate making
under the decisions. :

I have to resume the thread of my discourse. I had said
that no one will contend that the law of 1887, as amended by
the acts of 1889 and 1891, confers specific authority upon the
Commission and imposes upon it the duty to ascertain the value
of railroad property in accordance with the rule laid down in
Smythe v. Ames and other cases.

The law of 1887 and the amendments proposed by this bill
will invest the Commission with power to require of the rail-
roads a full report with respect to the valuation of their prop-
erty. But, Mr. President, that is not sufficient. The Govern-
ment must not be compelled to accept the railroad company’s
statement of the value of its property, and stop with that. In
addition to the railroad company’s valuation the Government
must be authorized to make a thorough and complete valuation.
There is at the present time no law under which the Govern-
ment can do that work. .

It is certain, I say, that the Commission has never construed
the law of 1887 as giving them authority to make a valuation
of railroad property; and I say furthermore that Congress has
never so construed the law, because Congress has never yet
made an appropriation which would enable the Commission to
proceed to do that thing. It is equally certain that the pending
bill contains no specific provision granting such authority and
imposing such a duty upon the Commission.

No one will argue that such an important duty should be left
to doubtful construction or to be implied from other powers or
obligations.

The bill should be so amended as to’ make it the duty of the
Conunission to proceed with this work of valuation, and Con-

6758
val

gress should make the necessary appropriation to carry it for-
ward promptly. It should not be left optional as to whether
this work shall be done or when it shall be done. There must
be no obscurity or uncertainty about it. The broadest power
should be granted. The employment of engineers, accountants,
experts, practical and experienced men in every department
of railroad engineering, construction, operation, and accounting
should be authorized. The appropriation of whatever sum is
necessary to inaugurate and vigorously prosecute this under-
taking should be made at this session, and if it be required, it
should be made mandatory on the Commission to act at once.

I shall offer an amendment to the pending bill, drawn with a
view of giving the Commission full authority and imposing upon
it the duty of ascertaining the value of the railway property of
the United States, and reporting the progress upon the work at
the beginning of each regular session of Congress. If we are
desirous of giving the public assurance that Congress has taken
hold of this subject with sincerity of purpose, that an intelli-
gent, economic basis is to be established for thoroughly and
justly dealing with the great interests involved, we shall em-
body such a provision in this law.

In its report for 1903 the Commission recommends additional
legislation to enable the actual value of railroad property to be
ascertained. It says:

Among the subjects which deserve the attention of Congress is the
need of a trustworthy valuation of railway property.

After devoting several pages to a presentation of the reasons
which make it imperative to secure this information and the
necessity of additional legislation to this end the discussion
closes with the following:

A large number of questions incident to the valuation of railway
properties suggest themselves in addition to those which have been
mentioned. This report can not, however, enter into further detail.
Sufficient has been said to indicate the importance of an authoritative
determination of railway values. It is respectfully recommended that
Congress take this matter under advisement with a view to such legis-
lative action as may be deemed appropriate.

Respecting the vital importance of ascertaining the reason-
ableness of rates the Commission in the report of 1903 says:

To determine what are just and reasonable rates for public carriage
is a governmental function of the highest utility. This is the central
idea of regulation and the special field of its usefulness.

Oh, Mr. President, in the passing of a bill now to correct
the errors of twenty years ago, surely we should not leave out
the central idea of regulation.

Respecting the vital importance of ascertaining the value of
railway property as the first step in determining the reason-
ableness of rates, the Commission says further, in the same
report:

No tribunal upon which the duty may be imposed, whether legisla-
tive, administrative, or judicial, can pass a satisfactory judgment upon
the reasonableness of railway rates without taking into account the
value of railway property. :

The recent convention of State railway commissioners in this
city favored the valuation of the railway property of the coun-
try. The Washington Post of April 5 says:

The resolution offered Tuesday by Commissioner B. H. Meyer, of
Wisconsin, declaring it to be the sense of the association that the
Congress of the United States should authorize and direct the _Inter-
state Commerce Commission or some other department of the Federal

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Government to ascertain the inventory value of all railways in the
United States, and to fiz a valuation on the railway property of each
State separately, was adopted unanimously.

Now, I come to the point to which my friend from Iowa di-
rected attention in one of his questions.

I do not claim that the Commission will be able to determine
with mathematical exactness the cost of the service in shipping
a single article carried with a mass of other freight. The
traffic manager can not do that. But I contend that the Com-
mission can ascertain the fair value of the property of the rail-
roads; the cost of the maintenance and operation; the fair
profit, interest, or return which it is entitled to receive, and the
full amount which it does receive. I contend tbat unon this
as a basis, giving due consideration to all other material circum-
stances, the Commission can determine reasonable rates that
will afford the carrier “ just compensation ” for the services per-
formed, and that with this knowledge the Commission would
be able to form a just judgment—I do not say a mathematically
exact determination of the cost, but a just judgment—with re-
spect to a reasonable rate for a single shipment.

I contend that the Commission can in no other way determine
a reasonable rate—a rate that is reasonable to the consumer,
the man who pays the freight, that it can in no other way de-
termine rates that are certain, if resisted by the railroad, to be
sustained by the court.

I go further. I contend that it is the only way in which a
fair approximation to justice can possibly be approached. The
Government must deal fairly by the railroad, the shipper, the
producer, and the consumer. This can not be done by a “ first-
come-first-served,” ‘“ catch-as-catch-can” method of attacking a
rate here and a rate there, giving a benefit to this man, an ad-
vantage to that community, while the railroad is free to recoup
by advancing its rates on some other man or some other com-
modity. Awarding a complainant a rate adjudged to be reason-
able, because it more nearly agrees with a rate which the car-
rier has established for some one else, is giving the complainant
relative justice instead of real justice.

Mr. President, what is to be the result of this “ hit-and-miss ”
method when you come to apply it in practice? Place in the
hands of the Commission the power to enforce its orders, but
withhold from them the authority and the means to get the
actual value of railroad property, and by so doing the just basis
for real instead of apparently reasonable rates, and what is
almost certain to follow? The railroads must realize that every
relatively low rate will at once become the basis by comparison
for a complaint to reduce any rate which it can be judged ought
to be equally low. They will for self-protection speedily advance
the relatively low rates, in order to take away the standards
which would be seized upon as a cause for complaint and a
pe for the judgment of the Commission in ordering a reduc-

ion. *

Indeed, so far as the shipper is concerned, this would be
quite as satisfactory as an order of the Commission lowering
his rate to the level of his more-favored competitor. It is of no
concern to the shipper that he secure an absolutely reasonable
rate. All he cares for is a relatively reasonable rate. He wants
a rate equal to his competitor. He is quite as well satisfied if

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this be secured through raising his competitor’s rate. as by
lowering his own rate to the level of the competitor. Once invest
the Commission with power to equalize rates and the com-
plaining shipper will not find it necessary to apply to the Com-
mission for equal rates. He will complain to the railroad com-
pany as less expensive and more expeditious. He will cite the
fact that a competitor has an advantage in rates. The railroad,
knowing that if the Commission is appealed to it may adjust the
difference by lowering the higher rate, will promptly adjust it by
advancing the rate of the competitor. What will the competitor
do with this advanced rate? Excepting upon such articles as
have a fixed and unvarying price in the trade, the competitor
will simply add the increased freight charge to the price and
Bass it on to the jobber. The jobber will add it to the price to
be paid by the retail merchant. The retail merchant will hand
it over to the consumer as an added charge to his purchase. As
the consumer can not pass it on, he must pay it himself.

If this bill is to have far-reaching results—if it is to protect
the consumer as well as the shipper—then the foundation must
be laid for ascertaining the reasonable rate; that is, on the rate
which in and of itself is reasonable. The system of government
regulation which is to have a just regard for the consumer must
not be based on the relatively reasonable rate.

The ascertainment of the value of the railroads is the very
corner stone of any great and enduring service which this legis-
lation is to accomplish for the people of. this country.

STATH VALUATIONS OF RAILROAD PROPERTY.

It can not be said in answer to this demand for a valuation
of railway property that such’ a valuation is impossible or
impracticable. In three notable instances such valuations of
railway property have been made by States. In these cases
every item of material and labor entering into the cost of the
roadways and rolling stock of the roads have been enumerated
and appraised. These valuations cover every mile of road
within the States of Michigan, Wisconsin, and Texas. Obvi-
ously, a work that can be undertaken and accomplished by a
State for all the lines within its boundaries can be accom-
plished by the Federal Government for the whole country.
Furthermore, any work that is undertaken along this line in
the future will have a great advantage in the knowledge
obtained from the previous experience of these several States.

MICHIGAN AND WISCONSIN VALUATIONS.

The valuations of Michigan and Wisconsin were made for the
purpose of assessment of ad valorem taxes. In each case the
determination of physical values and nonphysical values were
made separately. In each case the State had the benefit, in
arriving at its valuation, of the cooperation of the railway com-
panies themselves. In the Wisconsin valuation the initial ap-
praisement was made by the roads, the State merely making
such valuations and determinations as were necessary to verify
and correct the valuations as made by the companies.

In the Wisconsin valuation the expense to the railroads was
probably less than $11 per mile on the average. The Chicago
and Northwestern Company spent an average of about $10.60 per
mile on 1,784 miles of line. The average expense to the State
for all lines did not exceed $7 per mile. It is safe, therefore, to

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predict that the total cost to both the Government and the roads
of making such a valuation for the whole country, will not ex-
ceed $20 per mile, or for the entire mileage of the country con-
siderably less than a total of $5,000,000. This amount, taken in
consideration with the magnitude of the public interests depend-
ing on such valuation, is not a large sum. Its expenditure ought
not to be in any degree a bar to the prosecution of so great and
so necessary a public work.

The results of these valuations are an indication of what
would be the results of a like valuation of the railway property
of the country. So far as I have been informed there has been
no protest against these valuations on the part of the railroads,
except to contend that the valuations were too high. In the
ease of the Wisconsin valuation the values placed on the prop-
erty by the roads were, in nearly every instance, increased by
the board of assessment, and in some cases considerably in-
creased. .

I believe anyone who has ridden over the lines of Wisconsin
or of Michigan will say that upon the average they are the
equal of the lines of the country. I know that the two principal
roads of Wisconsin, in the matter of curves and double track
and ballast and equipment and everything that enters into rail-
road values, are tke equals of the great trunk lines of this
country.

The final determination of the average present value, per mile
of line, by the States of Wisconsin and Michigan was as follows:

MICHIGAN, 1900.

 

7,813.27 miles, value per mile____- Sxecsseceeketeeesse ses le, $21,396
WISCONSIN, 1903. 7
6,656.88 miles, value per mile. 25,501
MICHIGAN AND WISCONSIN.
14,470.15 miles, value per mile_________---_-_____________. 23,231

It is interesting to compare with the results of the Wisconsin
valuation the average capitalized value per mile for a few of
the leading companies.

The average value as determined by the company for the
Saint Paul lines in the State (1,691 miles) was $26,340 per
mile, and as finally fixed by the State, $30,004. The capitaliza-
tion amounted at the same time to $33,321 per mile.

The company’s valuation of the Omaha lines (737 miles) was
$26,639 per mile, and the State placed it finally at $27,464. At
the same time the floating capitalization was equal to $44,649 on
the entire line (1,521 miles).

The average value of the Chicago and Northwestern road in
Wisconsin (1,784 miles) as appraised by the railroad engineers
was $25,382; as finally determined by the board of assessors,
$29,063. The average capital per mile of this road for the year
ending June 30, 1904 (which practically coincides with the time
of the appraisement), was $32,180.

The Wisconsin Central appraised its property, three-fourths
(723 miles) of which is in Wisconsin, at an average of $19,930
per mile. This valuation was increased by the State board to
$22,711 per mile. The capitalization of this road per mile was
$58,275, or about three times as much as its own valuation and
over 250 per cent of its value, as determined by the State board.

To the appraised values of the railway property, there were

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added for taxation certain amounts to cover franchises, and the
value of the property as an organized, going concern. But these
additions would not properly -be considered in determining a
valuation for fixing rates.

Mr. NEWLANDS. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Nevada?

Mr. LA FOLLETTE. Certainly.

Mr. NEWLANDS. I wish to ask whether the valuation was
made for taxation or for the purpose of regulating rates.

Mr. LA FOLLETTE. It was made for taxation. I shall
later call attention to the basis of the capitalization per mile
upon which the railroads have assessed rates to the people of
Wisconsin for the last twenty-eight or twenty-nine years.

Mr. NEWLANDS. I wish to ask the Senator whether he
contends that the franchise should be valued as a part of the
property of the corporation for purposes of»-taxation and should
not be considered in the determination of rates. Did I under-
stand him so to contend?

Mr. LA FOLLETTE. As I shall presently show, there is
a broad distinction upon economic principle to be made between
the valuation of property for taxation and the valuation of the
property of a public carrier for fixing rates.

Mr. NEWLANDS. And that one might include the value of
the franchise and the other not?

Mr. LA FOLLETTEH. Yes, sir. Of course I will say in reply
that it might be contended by a corporation that they ought to
be allowed something for the franchise where they have “ paid
something to get it.”

I recall one notable instance, the case of a street car company
in Phikadelphia, I believe, where the common council was about
to vote the franchise to the street car company “for nothing.”
A protest went up from the citizens, and finally Mr. Wana-
maker, I believe, wrote out his check for two and a half million
dollars and sent it to the common council, saying, “ Do not give
this franchise away to the corporation. It is worth a good
deal to the public. Make the corporation pay for it. I am not a
railroad man and am not in the street-car business, but as an
earnest of my belief that public franchises are worth something
and‘ought to be paid for when they are secured by public-
service corporations I tender my check for two and a half mil-
lion dollars,” I think it was. ‘Give me the franchise. I can
turn it over to some corporation and make a good commercial
transaction out of it.”

I believe history records that the common council sent him
back his check; did not sell him the franchise, but voted it to
the public-service corporation “ for nothing,” at least, so far as
is known. There might be cases, of course——

Mr. NEWLANDS. I do not believe for a moment that the
value of the franchise ought to be considered in determining
rates; but I am at a loss to know how it can be that it is not
to be regarded as of value in the determination of rates and yet
can be assessed for purposes of taxation. It strikes me that the
true rule and the just rule would be to exclude it from consid-
eration in the determination of both rates and taxes.

Mr. LA FOLLETTE. I shall hope to recur to this subject
again before I conclude my argument. For the present, if

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agreeable to the Senate, I will proceed for a little time, and
then I shall ask that I may be permitted to discontinue for the
day and continue my remarks on Monday.

It is a curious fact in railway conditions that the roads
having the least value often have the greatest capitalizations.
Capitalization merely reflects the policy of a particular manage-
ment, or, more correctly, the series of managements through
whose hands the road may have passed. It is quite apparent
from these few Wisconsin examples that capitalization has no
relation whatever to true value or investment.

It can not be objected that the foregoing valuations of railway
property, embracing only the cost of the physical property, is
not a sufficient basis for determining the value of the property
on which the roads would be entitled to earn a profit. It may
be cited that certain nonpbysical elements of railway value
should be added in determining the valuation on which profits
are to be allowed, just as such additions were made to the
physical valuations in Michigan and Wisconsin to determine a
basis for taxation. A moment’s reflection and consideration of
the nature of these elements of nonphysical value will show
that this contention is unsound.

General property is taxed, on the ad valorem basis, according
to an assessment on its market value. It is obvious, therefore,
that in order to tax railroad property on the same basis as
general property a determination of all the factors entering into
its commercial value must be had. It is perfectly clear that cer-
tain nonphysical elements, such as franchise and earning power,
enter into this commercial value, and in determining a valuation
for purposes of taxation an allowance for these elements is
entirely proper.

But in determining a value on which profits are to be allowed
this is not the case. The determination of these nonphysical
values for the Michigan valuation was made by Mr. H. C.
Adams, of Michigan University, and statistician of the Inter-
state Commerce Commission. The bases of this valuation have
been made public. While the method of this determination is
somewhat involved, it is based in the final analysis on the
amount of the net earnings which the carrier is earning over
and above 4 per cent on the value of the physical property. In
other words, the nonphysical value of railroad property is, in
the last analysis, the value of its power to charge excessive
rates for transportation. It is quite obvious that this value
can not properly be included in a valuation made as a basis for
determining reasonable rates.

Furthermore, a consideration of all the elements on which a
nonphysical value can be based, as enumerated by Mr. Adams in
his work, does not reveal any element entering into such valua-
tion which is in any sense an investment on which the carrier
has a right to demand a profit.

TEXAS RAILWAY VALUATION,

The valuation of railway property by the State of Texas
possesses a particular interest because its primary purpose was
the regulation of railroad capitalization and charges. The con-
stitution of the State of Texas, as well as particular statutory
enactments, prohibit fictitious railway capitalization. The rail-
road commission law of that State provides that the commis-
sion shall “ascertain, and in writing report to the secretary of

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state, the value of each railroad in this State, including all its
franchises, appurtenances, and property.”

The Hon. John H. Reagan, chairman of the railroad com-
mission of Texas, testifying before the industrial commission,
described the work of the commission in valuing the Texas rail-
roads. The investigations of the commission as to the cost of
the many items entering into the roads was most thorough and
comprehensive. Liberal allowances were made to cover the cost
of procuring franchises and defraying the expenses of engineer-
ing, as well as to cover interest on the investment during the
time of construction. When the valuation was finally deter-
mined, it was noticed to the several companies and forty days’
time given in which such valuation might be contested. Said
Mr. Reagan:

We have done this in every case of valuation, and not one of our
valuations of all the railroads of Texas has been contested. By our
plan of valuation, if contested, we could ask what item in it was com-
plained of, and from cur files show the proof on which it was based.

Under this valuation the value of all the railroads of Texas
constructed prior to 1893 had been, at the time of Mr. Reagan’s
testimony, finally determined by the commission. The average
value per mile of all these roads was $15,759. The aggregate
value of all the roads so valued amounted on the 30th of June,
1899, to $141,157,176. The aggregate capitalization of the rail-
road companies, stocks and bonds, was $362,953,383, or more
than two and one-half times the actual value. (This excessive
capitalization was created prior to the passage of the stock and
bond law, 1893.)

I say the actual value, because when these companies were
served with a notice that this valuation of a little over $15,000
a mile had been fixed for each mile of their road in that State,
and when they knew that that valuation was to be made the
basis of the rates which they were to be permitted to collect
on the traffic of that State, they never appeared to contest the
valuation. So it may be accepted, it seems to me, as an admis-
sion on the part of the railroads that up to that time it was a
fair valuation of their property within the State of Texas.

Since the date of this valuation considerable improvements
have been made on the old lines. A liberal estimate of the cost
of these improvements, by the engineer of the commission, is
from $4,000 to $8,000 per mile. ‘'Chese roads are fairly repre-
sentative as to, cost for railroads generally in the Southwest.
And it is safe to say that the average actual cost of all the
roads in that section did not exceed $25,000 per mile, and in fact
was probably very much less.

In valuing new roads at the present time the policy of the
commission is a very liberal one, so that the present valuation
is almost without exception in excess of the actual cost of the
road.' A new road recently valued comprises 300 miles of one
of the principal lines of the International and Great Northern
Railroad Company. This piece of railroad is in every respect
modern, and the grade has been reduced to the maximum of
three-tenths of 1 per cent, and the road will carry the heaviest
equipment. With heavy grading and the usual number of
bridges and .culverts, the actual cost of constructing and equip-
ping this road with the best modern equipment was from $25,000
to $27,000 per mile.

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Will it be said that this policy of ascertaining the physical
value of all railway property of the United States will be too
expensive? Governments, like individuals, may be penny wise
and pound foolish. The Senate voted at this session to spend
$2,600,000 a year for ship subsidies. Shall we hesitate to pro-
vide all that ig necessary to place the regulation of railways on
a solid foundation, and to lift the great burden of extortionate
charge from the consumer. /

In the creation of a railroad commission and tax commis-
gion in Wisconsin, and in the effort to compel the railroads to
pay their proportionate taxes, there was the constant objectfon
of the expense. But the results have already saved thousends.
of dollars where one has been expended. And what has been
already saved is small in comparison with what will follow from
the exercise of the power of the State vested in a commission to
protect the citizens of Wisconsin from overcharges and favor-
itism to persons and places.

Mr. President, in concluding upon this branch of the subject
I will venture to say that the question will never be settled in
this country until it is settled upon a basis of the fair valuation
of the railroad property of the country. I believe that we
should start now and start right in clothing this Comission
with full authority to ascertain this basis for establishing rea-
sonable rates.

I will now yield the floor with the hope that I may conclude
my remarks on Monday.

Monday, April 23, 1906.

Mr. LA FOLLETTE. Mr. President, when I surrendered the
floor on Friday afternoon I had brought the discussion up:
to the point of a consideration of existing rates. I think I
had shown that rates which are really reasonable rates can
not be established and enforced without first ascertaining the
true value of the property of the railroads as a basis for fixing
the reasonable rates which will yield a fair return upon the
property of the railroad company.

I now propose to show, sir, that railway rates in this country
are at the present time excessive.

I know it is urged on all sides that rates are reasonable;
that no reductions of importance will be necessary under any
law which we may enact; that the important consideration for
this body is to frame legislation that will insure equality of
rates rather than reasonable rates; that no reductions of
importance being required, there will be no necessity for a pro-
vision in this bill for the valuation of railway property and
no necessity of expending the money and the labor necessary to
secure that valuation.

The President has been quoted as saying in at least one public
address that “ there has been comparatively little complaint to
me of the railroad rates being actually too high.” Members
of the Commission have been quoted as saying that complaint
is made against unequal rather than against unreasonable
rates, and Senators upon both sides of this debate have repeat-
edly declared that there is little complaint as to unreasonable
rates, but that the chief complaint is against discrimination.

6758 ,
79

Granting this, it establishes nothing except the wide prevalence
of complaint as to unjust discrimination. It does not seem to
have occurred to anybody that this proves nothing with re-
spect to the reasonableness of existing rates.

Can anyone fail to see that there is small chance for the pub-
lic to know whether rates are reasonable or extortionate? The
whole matter is in the hands of the carriers. They have the
facts upon which to predicate any approach to exact knowledge.
If anyone knows the actual value of their property, they
know it. They know the actual cost of operation, and they
make the rate without check or hindrance. Is there any
reason to suppose that they do not charge all the traffic will
bear?

We have complaints on all sides of discriminations in viola-
tion of law and at the risk of heavy penalties. The railroads
can make rates unreasonably high without fear of any punish-
ment. Is it to be believed that they are guilty of violating
the law against discrimination by rebates and otherwise,
risking all the penalties it imposes, and that they fail to
charge all the traffic can bear when there is not the slightest
danger of punishment for so doing?

Ah, but why, then, is it that we have complaint of discrim-
ination in almost every community, and no complaints of
unreasonably high charges? It seems to me that the rea-
son is so obvious as scarcely to require statement. There is
a standard of comparison in one case. There is none in the
other. Complaint is made of discriminations because the rate
paid in one instance can be compared with the rate paid in
another. There is some basis for comparison, and strong
incentive for complaint. But what standard have we for
comparison by which to test the question whether rates are
too high? What information has the shipper, the producer,
the consumer, upon which to base complaint? He does not know
what profit the carrier is making. All of the facts essential to
form a judgment and lodge a complaint are beyond his reach..
Because he formulates no complaint, prosecutes no action,
proves neither that he is satisfied nor that he is without cause
for complaint.

Give the public some criterion, based upon the rules laid
down by the Supreme Court, then it will know whether
its rate is just and reasonable, then it will be prepared to re-
sist wrong. Make it the bounden duty of this Commission,
arm it with full authority, furnish it ample assistance and
money necessary to ascertain the actual value of railroad prop-
erty, the actual cost of operation, and all the facts upon which
to base a standard of reasonable rates. If complaints do not
follow, it will then mean something when the President, the
Commission, or anybody else says that there are “few com-
plaints with respect to high rates.”

But, Mr. President, I venture to say that rates are unreason-
ably high, and that if the opportunity is ever presented to ascer-
tain the value of railroad property, it will result in markedly
reducing transportation charges generally throughout the coun-
try. Before offering the direct evidence that rates have enor-
mously advanced throughout the country in the last few years
I wish to offer some significant testimony, dating from the
Granger legislation.

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Illinois established a warehouse and railway commission with
authority to fix maximum rates in 1873. The commission ap-
pointed under this law established and has maintained a sched-
ule of transportation charges. Iowa, in 1888, enacted a law
creating a commission authorized to make rates. This commis-
sion promulgated a complete schedule of railway charges for
that State. No effort has ever been made ¢0 amend this legisla-
tion, and the railway companies have acquiesced in the rates
established by the commission. Under the law the carriers
could haye gone into court in Illinois or Towa, attacked and set
aside the rates fixed by these two commissions, if it had been
possible for them to make it appear that such rates were un-
reasonable and that they did not afford just compensation for
the services rendered. That the rates established by this com-
mission have stood unchallenged by the railroad companies in
both States through all the years, must be taken as an admission
on the part of the railroads that the rates are not open to com-
plaint on their part.

Wisconsin lies immediately north of Illinois and east of Iowa.
In 1874 a law was enacted in Wisconsim fixing maximum rates
and creating a commission authorized to make changes in the
same from time to time. Two years later the railroads secured
control of the legislature and repealed that law. From that
time until 1905, or for a period of twenty-nine years, these cor-
porations have been powerful enough to defeat all legislation to
regulate transportation charges in that State. We have, there-
fore, an opportunity to compare rates in Wisconsin, where the
railroads have controlled for twenty-nine years, with rates in
Illinois and Iowa, where they have been controlled and estab-
lished by State authority. This comparison offers, therefore,
I submit, a most excellent test as to whether railroad companies
may be trusted, when left without supervision and control, to
make rates with due regard to the public interests.

The two principal railroads in Wisconsin are the Chicago and
Northwestern and the Chicago, Milwaukee and St. Paul. These
railway lines likewise run through the States of Illinois and
Iowa. With a view to instituting comparison between the rail-
road-made rates of Wisconsin and the State-made rates of Illi-
nois and Iowa I arranged all the stations on the St. Paul road
and all the stations on the Northwestern road in Wisconsin in
tables, showing the number of miles to each station from the
principal market. From the published schedules of the railroad
companies I obtained and placed in the tables opposite the name
of each station the cost of shipping in and out every class and
kind of freight, whether in carload lots or less than carload
lots, including commodity rates, between each station and its
principal market within the State. I then placed side by side
with the Wisconsin rates, Iowa rates, fixed by the Iowa commis-
sion, for the shipment, in like manner of an equal quantity of
the same kind of freight the same distance in that State. The
rates for a like number of stations in Illinois equally distant
from market in each case with the Iowa and Wisconsin sta-
tions were next obtained and incorporated into the table.

I was then in a position to ascertain the exact difference be-
tween the so-called ‘reasonable rates ”’ established for Wiscon-
sin by the railroads without State regulation with the reason-

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able rates established under State control in Iowa and Illinois.
The comparison thus worked out clearly demonstrated that the
railroad companies were exacting from the people of Wisconsin
from 20 to nearly 70 per cent higher rates than they received in
Iowa and Illinois for a like and equal service. I may add that
the rates in Illinois have been considerably reduced by the com-
mission of that State since these comparisons were made, as is
shown by the following telegram recently received in response to
an inquiry which I addressed to Governor Deneen :

SPRINGFIELD, ILL., April 1, 1906.
«Hon. R. M. La FOuLerre,
Washington, D. C.:

Twenty per cent reduction was made on first five classes on Decem-
ber 5, 1905, went into effect on January 1, 1906. No railroad has
appealed. to the courts against it. Commission has under considera-
ee auesiier as to whether reduction should be made in remaining five
ee CuHarues §. DENEEN.

So Senators will see that in view of the reduction recently
made in the Illinois rates, as stated by Governor Deneen, it is
clearly manifest that the Illinois rates, with which I instituted
comparison, in 1903, were themselves above the reasonable rate
level. Furthermore, it should be borne in mind that the Iowa
rates were instituted as maximum reasonable rates in 1888, and
since that time there has been no substantial reduction. But
there have been enormous increases in the traffic and in the car-
rying efficiency of the roads which naturally result from the in-
dustrial development of a great and rapidly growing State like
Jowa. Asa consequence of these changes, the cost of handling the
traffic has decreased, and rates that yielded a fair profit in 1888
yielded more than a fair profit in 1903, when I used these rates
as a standard of comparison to test the reasonableness of rates
in Wisconsin. Notwithstanding the fact, Mr. President, that
the Illinois and Iowa rates were without doubt higher than a
reasonable standard, the Wisconsin rates, over which there was
no State control, were higher than tle Illinois and Iowa rates
by 20 to 70 per cent.

Whether the rates in Iowa and Illinois are reasonable in
themselves is known only to the railroad companies in those
States. Neither the commission of Iowa nor the commission of
Illinois ascertained the value of the railroad property of their
respective States, thus establishing a basis upon which to fix
rates reasonable per se. As before stated, that they are, on the
whole, considerably above the reasonable rate line, may be
safely assumed; otherwise the railroads would have brought
action to set them aside as not offering just compensation for
the services performed.

I have cited these comparisons because they prove conclusively
that it is never safe to assume that the railroads uncontrolled ,
make reasonable rates.

It might have been possible to furnish proof that the rail-
road-made rates df Wisconsin were unreasonably high without
going into the other States for comparison. But few States
in the Union are more richly endowed than Wisconsin with
magnificent water powers. With her splendid waterways well
distributed over the State, ber wealth of raw material for di-
versified manufacturing near at hand, her factories would natu-
rally be so located as to utilize the free power furnished by
nature.

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But with the defeat of all effort to reestablish State control
of railway rates, the only check upon excessive transportation
charges for the whole Commonwealth is that afforded by the
water transportation of -the Great Lakes system. Nineteen of
the seventy-two counties of Wisconsin border upon Lakes Michi-
gan and Superior. For three hundred miles along her lake
shore many splendid natural harbors offer water communication
with the outside markets. Along the lake shore, through these
nineteen counties, the railroad rates have always responded to
water competition, and rule much lower than rates in the
interior of the State. It is a significant fact that more than
seventy per cent of the capital invested in manufacturing in
Wisconsin is located in the nineteen counties situated on Lakes
Michigan and Superior. Except for the fact that water trans-
portation influences to their advantage freight charges by rail,
these nineteen counties afford no better location for manufactur-
ing plants than most of the other counties of the State, whére are
located the abundant supplies of raw materials and magnificent
water powers. Indeed, many excellent water powers have been
abandoned and hundreds left undeveloped because the high
freight rates in the interior have forced nearly three-quarters of
the manufacturing into a little more than one-fourth of the lake
shore counties of the State.

Mr. President, there is no warrant for the belief that people
of the country are, upon the whole, enjoying reasonable rates.
This view has been skillfully engrafted upon the credulous
public. But, sir, the known facts demonstrate its falsity. The
Supreme Court has determined that the carrier is entitled to a
fair profit, based upon a fair valuation of his property. Is
this the basis upon which the railroads fix their charges to-day?
By no means.

No one will deny that, at the outset, they bond and stock
their properties away in excess of a fair value. Then they tax
transportation to pay a “fair return” on this inflated value.
From that time forward, as rapidly as the traffic can possibly
bear the burden, additional stocks and bonds are issued with-
out additional investment, and transportation is further taxed
to pay a “fair return” upon this added inflation. Again and
again this process is repeated. It is an endless-chain system.

I again offer a specific illustration furnished by recent history
in Wisconsin of the imposition of excessive charges for transpor-
tation by railroads. It happened that while the State was mak-
ing an effort to ascertain the fair value of railway property, for
the purpose of enforcing the just taxation of such property, it
was at the same time prosecuting an investigation of transporta-
tion charges and railway earnings as a basis for legislation to
regulate rates.

The average annual net earnings for the Chicago and North-
western Railway Company on its Wisconsin traffic, as stated in
its official report to the State, amounted to $3,919 per mile. ‘The
net earnings thus amount to a 6 per cent income on $65,317
per mile. In other words, the people of Wisconsin were paying
freight charges which netted the Northiwestern Railway Com-
pany 6 per cent on $65,317 a mile. The State board of assess-
ment, authorized by statute to ascertain the value of the rail-
road property of the State as a basis for taxation, notified
the Northwestern Railway Company to submit the valuation of
its property to such board. This it did.

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The fair valuation of the property of the Northwestern Rail-
way Company in Wisconsin was thus shown by the corporation
to amount to $25,882 per iiile.

The average net earnings for the St. Paul Railway Company
in Wisconsin for the same period amounts to 6 per cent on
$62,633 per mile. Wisconsin traffic was therefore charged at
a rate high enough to produce a net income upon $62,633 per
mile. This company, when called upon by the board of assess-
ment to furnish the true value of its property for taxation,
submitted such statement, by which the road proved the value
of its property in the State to be $26,340 per mile.

Mr. President, nothing could be more conclusive as evidence
of the fact that railroads are charging the people rates high
enough to pay interest and dividends on more than twice the
fair value of their property.

TRANSPORTATION CHARGES ADVANCING.

With the carriers free from any governmental supervision of
their charges, and with all restraints of competition eliminated
by combination, the natural and inevitable result is the advance
of transportation charges to the public. The experience of the
past few years shows how unwise it is, in the absence of these
positive restraints, to rely upon the railroads to interpret the
“laws of business” in the interests of the country and the in-
dustrial development of the communities which they serve.

Mr. BEVERIDGE. Mr. President.

The VICH-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Indiana?

Mr. BEVERIDGE. Will the Senator from Wisconsin permit
me to ask him a question?

Mr. LA FOLLETTEH. Yes.

Mr. BEVERIDGE. Were these railroads actually capitalized
up to sixty-two or sixty-five thousand dollars a mile?

Mr. LA FOLLETTE. No, they were not in this particular in-
stance—that is, two were not—but they were capitalized some
thousands of dollars per mile more than they gave as their true
value. Another road in Wisconsin was capitalized at nearly
the sum mentioned. I simply used that illustration in this con-
nection to show to the Senate and the country, taking these two
leading roads of Wisconsin, that it is never safe to trust the
railroads to fix reasonable rates.

Mr. BEVERIDGEH. I understand that point. But the point to
which my mind was going was that made by the Senator imme-
diately preceding this, to wit, that here there had been the issu-
ance by a railroad company of stocks and bonds beyond anything
that justified it, as the Senator said, and then the assessment of
rates to pay dividends upon that overcapitalization.

Mr. LA FOLLETTE. Yes.

Mr. BEVERIDGE. Assuming that to be true, has the Senator
thought out any remedy for it? That is to say, suppose a rail-
road company has issued stock far beyond what it should have
issued, far beyond the value of the road; that those stocks are
bought by the innocent public, by innocent holders, and are held
by them as an investment, and that in order to pay dividends
upon those stocks the railroad charges what the Senator claims
are excessive rates. Has the Senator thought out any renedy
for that situation?

Mr. LA FOLLETTE. I think as I progress in this discussion
it will be apparent to my friend, the Senator from Indiana, what

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the real remedy is so far as all the people of this country are
concerned. j

Mr. BEVERIDGE. I did not mean to anticipate the Senator.

Mr. LA FOLLETTE. No; I understand.

Mr. BEVERIDGE. I think every person who has given any
attention at all to the question of overcapitalization and the
assessment of charges to pay dividends upon the overcapitali-
zation has been confronted at the very outset by the difficulty
which is presented by the fact that the securities are held by an
innocent public on the one hand, and on the other hand the
innocent public are paying the overcharges. I thought perhaps
the Senator had thought out a remedy for that.

Mr. LA FOLLETTE. I think, if I may anticipate in just a
sentence what I intend to say a little more fully later on, the
Supreme Court has suggested an answer to the question of my
distinguished friend from Indiana, and that is this: If a rail-
road line has bad issued bonds and stocks away in excess of the
investment of the fair value of the property, the public can not
justly be taxed to pay dividends upon stock and interest upon
bonds thus issued. In other words, the old rule that puts
every man when he makes a purchase upon his inquiry as to
the value of the property he purchases requires that the man
buying stocks and bonds shall know whether there is back of
those stocks and bonds in which he invests his money that value
which is specified on their face.

Mr. BEVERIDGE. If the Senator will permit me further,
it would strike me right here that in the matter of fixing railway
rates would come the question of just compensation, or even of
confiscation.

Mr. TILLMAN. We are interested in this discussion, and
I suggest that the Senator from Indiana raise his voice a little.

Mr. BEVERIDGE. I will.

Mr. TILLMAN. And that he change his position so that his
voice will be sidewise to us instead of his back being to us.
We should like to hear what he is saying.

Mr. BEVERIDGE. I was addressing the Senator from Wis-
consin. However, I will try to comply with the suggestion
of the Senator from South Carolina.

Suppose that here is the overcapitalization to which the Sen-
ator refers, and rates are based upon it in order to pay
dividends upon that capitalization. This overcapitalization
has been absorbed by the innocent purchasing public. Upon the
theory that the railroads should charge rates which would pay
a fair return upon the actual just value of the road no divi-
dends whatever would be paid upon the overcapitalization.
Therefore, when such rates were fixed, the road would at once
say “this is the taking of property without just compensation.”
That is the point to which I wish to direct the Senator’s attention.

Mr. LA FOLLETTE. In response to that question the Su-
preme Court would say, as it has said heretoforg, that it is not
required of the public to pay dividends and interest on water, no
matter who owns it, but that it shall pay dividends and interest
on the fair value of the property, and nothing more. The Su-
preme Court has said that if any railroad company has issued
stock and bonds in excess of the fair value of its property it must
suffer, and those who hold the stock and bonds must suffer the
consequences of such action; that it is unjust to impose that bur-

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den upon the public. If railroad companies are to be permitted
to issue stocks and bonds without limit, if there is to be no
restriction whatever, and none has been imposed except in the
State of Texas, so far as I am advised——

Mr. DOLLIVER. And Massachusetts.

Mr. LA FOLLETTE. Massachusetts; yes. There is State
regulation in Massachusetts, but with these exceptions the di-
rectors of a railroad company may, without any limitation
whatever, burden the public with transportation charges to pay
interest and dividends, not upon capital invested in the business
of transportation, but upon any figure they choose to put upon
the paper certificates they issue.

Mr. MALLORY. May I ask the Senator from Wisconsin a
question?

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Florida?

Mr. LA FOLLETTE. I do.

Mr. MALLORY. I understood the Senator, a while ago, to re-
fer to the case of a reduction of 20 per cent in the rates on cer-
tain classes of freight in Illinois. Was that contested?

Mr. LA FOLLETTE. No; and J am informed by Governor
Deneen that there has been no intimation on the part of the
railroad companies that they would go into court and contest
this further reduction of rates in Illinois.

Mr. NEWLANDS. Mr. President.

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Nevada?

Mr. LA FOLLETTE. Certainly.

Mr. NEWLANDS. In considering the question as to the at-
titude of innocent purchasers of overcapitalized stocks to this
question, does not the fact that thus far Congress has been
absolutely apathetic and indifferent as to legislation upon this
subject, and whilst it has had the power, has never yet taken
steps to check overcapitalization, prevent us from legislating in
such a way as to deprive these innocent purchasers of over-
capitalized stock of revenue upon their investment?

In this connection let me suggest to the Senator further, that
the Supreme Court, in laying down the rule which shall govern
regulating bodies in the determination of rates, has announced
that the right of the corporation is to have a fair return upon
a fair valuation of its property. But in treating of the ques-
tion of valuation the Supreme Court has indicated, in Smyth +.
Ames, that the Commission can take into consideration not only
the mere cost of reproduction, but can also take into considera-
tion the amount of stocks and bonds issued,-and can alsu take
into consideration the income received by the corporation from
the existing rates. It indicates that these things ought to be
considered, and that many other things might be considered in
reaching a valuation.

Will the Senator bear with me a moment longer? I think
this is a very important question, and I am quite in sympathy
with his general view. I believe we should have a valuation
of the railways, and I believe the railroad companies should be
confined in the future to a fixed percentage upon that valua-
tion; and I believe if we can only have a fair valuation now,
even if it includes these excessive issues, even if it is a valna-
tion based upon excessive rates, if we can have a starting point

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now and protect ourselves against overcapitalization In the
future, we will do a great service to the entire country. .

But we should bear in mind, upon this question of capitaliza-
tion, that the total capitalization of all the roads in the coun-
try, in bonds and stocks, is about six billions and a half in
bonds and six billions and a half in stock, and that that is ap-
proximately in bonds per mile a little over $30,000 and in stock
per mile a little over $30,000. If the valuation in all of the
States is based upon the cost of reproduction, it means that the
value of all the roads of the country will be put at just about
the amount of the existing bonds, namely, six billions and a half,
and then, if we should allow the roads a fair rate of interest
upon the $6,000,000,000, sufficient to pay the interest upon
the bonds, there would be hardly anything, perhaps nothing,
left to the stockholders. Can we contemplate the entire ob-
literation of 6,000,000,000 of stock throughout the entire
country, and turn over these roads to the bondholders, and
would not the readjustments created by a destruction of those
great values be more serious in consequences than the reduc-
tion of rates would be a benefaction to the country?

There is just another suggestion, and that is when these rail-
roads were started, what rate of interest would we have al-
lowed had we limited the return by law? Probably 10 per
cent, as we did in the case of the Union Pacific Railroad.

Now, 10 per cent upon $6,000,000,000, the actual cost of re-
producing these roads, would yield just $600,000,000 net, and
that is the amount that all the railroads now realize, after the
payment,of operating expenses and taxes. It would be entirely
fair to value these roads at the absolute cost of reproduction,
if we allow them the rates of interest prevailing at the time
the enterprises were inaugurated, and if that were 10 per cent,
it would yield these companies $600,000,000 annually, just as
it does now, and 10 per cent paid upon $6,000,000,000 of valua-
tion would immediately make the market value about $12,000,-
000,000, which is approximately the present capitalization in
bonds and stocks of all the railroads of the country.

The value of all these securities is based upon the prevailing
rates of interest. To-day if a share of stock, representing $100
par value, receives dividends at the rate of 10 per cent it imme-
diately doubles in its market value to $200, whereas thirty
years ago 10 per cent would simply have held the stock at par.

I will state that I have put in an amendment for the valua-
tion of roads, and I believe in it, for the cost of reproduction is
a factor in the determination of rates. Yet the Interstate Com-
merce Commission, it seems to me, following this rule laid
down in Smyth v. Ames, should have some regard to the actual
value of bonds and stocks and should have regard to the high
rates of interest prevailing when these enterprises were inaug-
urated and should value the roads at approximately the market
value of the stocks and bonds and, taking that as a basis, fix
the future rate of interest so low—say, 4 or 5 per cent—as to
give the entire country the benefit of the gradual reduction of
rates resulting from the large increase in the business which is
certain to occur. .

Mr. LA FOLLETTE. Mr. President, I will endeavor to re-
eall the question my friend the Senator from Nevada pro-
pounded at the beginning of his remarks, which bears upon the

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rights of the ‘innocent purchaser.” I will say, with reference
to that question, I know of no reason, sir, why a different rule
should be applied to the man who purchases railway stocks or
railway bonds than the rule which is applied to every man who
makes a purchase of any kind of property in this country. Any
man who purchases other kinds of property, if he goes into
court to contend that he has paid more than that property is
worth, is confronted with the rule of law that he who buys
must inquire as to the value of the property he buys.

Railway stocks and bonds are purchased for the purposes of
speculation quite largely. There is always the element of specu-
lation in the investment which induces the purchaser to take
some chances. Is there any reason why the men who invest
in railway stocks should have applied to them and to their in-
vestments a different rule than the man who purchases a farm
or a horse or any other piece of property? That would cer-
tainly be very unjust.

I say, therefore, that those who hold railway stocks and bonds
in the United States to-day hold them under the rule of law
which requires them to know that they have invested their
money in property which is worth the purchase price.

Mr. MONEY. Will the Senator permit me to interrupt him?

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Mississippi?

Mr. LA FOLLETTE. I do, sir.

Mr. MONEY. Sympathizing entirely with the Senator from
Wisconsin, I should like to ask him a question right at this
point. Has Congress or the legislature any authority to make
any inquiry into the value of the road except for the purpose of
one of two things—one to fix the rate of taxation and the other
to fix the rate of tariff for carriage? If Congress should under-
take to investigate that subject with any view whatever of
protecting the investor in railway stocks and bonds and in-
vestments in their property, has Congress any authority what-
ever to do it?

Mr. LA FOLLETTE. Most assuredly not. And no govern-
ment has either the legal or the moral right to impose upon its
people the payment of transportation charges upon any other
basis than that suggested by the interrogatory of the Senator
from Mississippi—the fair value of the property of the carrier.

When the opposition raise the question of the confiscation
of watered stocks and bonds, I remind them that every dollar
taken from the people who pay the freight which goes to pay
interest and dividends on overcapitalization, is taking exactly
that much more than “ just compensation” for the transporta-
tion service, and is a confiscation of the money—that is, the
property—of the people, the innocent public who are thus over-
taxed on transportation.

I now remember that I did not answer one question asked
by the Senator from Nevada [Mr. NEwLanps]. He asks, If
Congress has heretofore. neglected its duty in respect to this
matter, are we not committed to policies which have been pur-
sued by other Congresses? That is, if Congress in the past has
failed in its duty to the public, are we not, therefore, bound to
continue to impose burdens on the generations to come? Are
we not bound to follow the bad precedent of violation of public
trust? I say no, sir; most positively no.

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We have a duty-——

Mr. NEWLANDS. Mr. President——

Mr. LA FOLLETTE. I beg the Senator’s pardon. We have
a duty to perform, a present duty. We should faithfully exe-
cute the public trust for those who have commissioned us to
protect their interests without respect to the violations of obli-
gation of which any preceding Congress may have been guilty.

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Nevada?

Mr. LA FOLLETTE. I do, sir.

Mr. NEWLANDS. The Senator from Wisconsin has misap-
prehended me if he thinks I claim that we are committed at all
to the policy which has hitherto prevailed. My query was as
to values built up in this country in the market on an income
of these railroads permitted by Congress when it had the regu-
lating power, and those values now in the hands of innocent
purchasers, people who had nothing whatever to do with the
overcapitalization, whether that does not constitute a considera-
tion which would prevent us from taking action that would
absolutely obliterate the $6,000,000,000 of value in this country
so held.

Mr. MONEY. They are not values.

Mr. LA FOLLETTE. I will simply say in answer, as sug-
gested by the Senator from Mississippi, that they are not values,
and that the people who made the purchases were bound to
know whether they were buying water or buying property of
value.

Mr. NEWLANDS. Yes; but the Senator.

Mr. LA FOLLETTE. I am very anxious to conclude to-day,
if I can.

Mr. NEWLANDS. I will take only a second.

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield further to the Senator from Nevada?

Mr. LA FOLLETTE. I do, sir.

Mr. NEWLANDS. I am not talking now about the par value
of the overcapitalized stock, but the market values, and the
Senator must recollect that these values are built up and based
on the revenues of the companies; that the companies enjoy
their revenue from rates, and that these rates have been fixed
by these common carriers with the sanction or permission or
as the result of the inaction of Congress. We gave them the
right, in the first place, to fix their own rates and placed no
restriction upon their charges, and we never yet have exer-
cised the absolute power of fixing rates. So the rates were
rates fixed under the law and the income had its basis upon
lawful rates, even though they might have been excessive, and
the present market value is based on such income.

Mr. LA FOLLETTE. Mr. President, the income did not have
its basis upon lawful rates. An unreasonable or excessive rate
has always been an unlawful rate. Without any action upon
the part of Congress, every unreasonable rate at common law
was an unlawful rate. Because these corporations may have
been able to prevent Congress, derelict in its duty, from enact-
ing legislation which would protect the public against extortion,
are we forever to continue giving sanction and approval to the
great wrong? I say, Mr. President, that the market value of the
water in securities represents the power to charge extortionate
rates to the public, and nothing more. There can be no “ inno-

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cent purchaser” of a share in the proceeds of this unjust and
unlawful extortion.

No, sir. If we undertake to follow such a precedent as that
I venture to suggest to my friend that there will come a Senate
and a House of Representatives commissioned directly from the
people who will better represent the public interest.

Mr. President, I was just saying when interrupted that the
experience of the past few years shows how unwise it is in the
absence of these positive restraints to rely upon the railroads
to interpret the ‘laws of business” in the interest of the
country and the industrial development of the communities
which they serve.

The menace of combination of carriers has been called to the
attention of Congress by the Interstate Commerce Commission
from the beginning. The advances in rates were predicted, and
when they were made they were announced by the Commission.
The report of the Commission for 1900 contained the following
warning:

It is idle to say that freight rates can not be advanced. During
the past year they have been, by concerted action upon a vast volume
of traffic, advanced in every part of the country. It is equally idle to
say that they will not be advanced. It is both human nature and
the lesson of history that unlimited power induces misuse of that
power.

Again, in its report to Congress in 1903, the Commission said:

One of the most significant things in recent railway operation is the
steady advance of the cost of transportation of freight by rail. A
few years ago the impression was general that freight rates could
not, and would not, be advanced. Railway traffic officials frequently
affirmed this in testimony. When the Commission had under consid-
eration certain consolidations of railway property, the eminent gentle-
man who brought them about stated, under oath, that the purpose
was not to advance, but rather to reduce rates. Recent history belies
these predictions.

This statement was followed in the report by specific state-
ments of these advances in rates. It was pointed out that in a
few instances class rates had been advanced so as to be higher
than ever before in the history of the Commission. To quote
the Commission:

The rates upon those commodities that constitute the bulk of inter-
state traffic have been advanced in nearly all sections. Coal rates have
almost without exception been increased. ‘The same is true of iron
schedules. Rates upon grain and its products, lumber, live stock and
its products are generally higher to-day than four years ago.

Advances had been effected by the advance of hundreds of
important commodities in the classification and also by the clas-
sification and also by the classification of traffic formerly given
reduced commodity rates.

In the evidence taken before the committees of Congress there
is a great body of complaint against such advances in rates. In
all this complaint there is the underlying idea that the rates are
advanced to the point of unreasonableness. Of course the com-
plainant is not in a position to prove that rates are in fact un-
reasonable because Congress has never provided for a valuation
of railway property. When that is done these people will
demonstrate that their rates are unjustly high. The conditions
represented, however, merit the consideration of those who have
not yet heard any complaint of rates unreasonable per se.
These complaints represent, among others, the great agricul-
tural interests of the Central States, the great cattle interests

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of the West, the great lumber interests of the South, and the
great paramount interest of the whole consuming public.

The advances in rates are in force in every section of the
country. They are in force on nearly every important article of
freight shipment. Many of them were put in force through ad-
vances of articles in the classifications. Of the three classifica-
tions covering the country one shows 572 commodities so
advanced another 531, and the third 240. In addition to these
adyances there were very great advances in commodity rates on
several important articles of shipment, such as iron and steel,
soft coal, and lumber. Besides these advances in rates the pub-
lic burden has been increased by the greatly increased cost of
transportation by private-car and refrigerator companies.

Among the commodities advanced in the official classification,
hay was advanced from sixth to fifth class. The representative
of the National Hay Association declared that this advance
made the rates on hay prohibitive for long distances, and in
effect practically excluded the hay crop of the North Central
States from the Eastern markets. The change in the classifica-
tion advanced the rate on hay, Chicago to New York, for in-
stance, $1 per ton. The average advance is estimated by the
Interstate Commerce Commission at 80 cents, which, applied
to the annual tonnage effected, equals a total annual advance of
$2,434,000, or a total to the date of the statement of about
$10,000,000, and if continued to the present time $15,000,000.
This is the result of only one of the 572 advances in one
classification.

Another commodity similarly advanced in classification is
sugar. The people have paid out, because of this advance, from
$5.000,000 to $6,000,000 more than they would have paid if the
advance bad not been made.

Of course, this advance does not make much difference in
the homes where incomes are large and luxury prevails. But,
Mr. President, the additional burden falls with great weight
upon the little homes, for a few dollars, more or less, is a
matter of great importance in the strict economy which is
necessary to the very existence of the home life.

The most vigorous complaint before the Congressional com-
mittees against advances and overcharges in freight rates was
that made by the live-stock associations.

I suppose, Mr. President, it was vigorous because the live-
stock associations represent large interests and are able to pre-
sent their cases strongly and fight them out before the Congres-
sional committees and the Interstate Commerce Commission.

These excessive rates for the transportation of live stock
vitally affect the prosperity of the whole agricultural West.
The agriculture of nearly all of this whole section derives the
largest part of its money income from the sale of live stock.
Live stock is the most valuable single finished product of the
whole agricultural industry. It constitutes about 12 per cent
of the total tonnage of the traffic of the western roads.

This great interest has spent thousands of dollars in prose-
cuting its complaints before the Interstate Commerce Commis-
sion and in trying to get relief from the oppression of the
railroads. The complaints show advances in the rates for ship-
ment of cattle to northwestern feeding grounds from $55 per

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ear to $100 per car—advances on which the railroads have
extorted not less than $3,000,000. They present the advances
by the addition of a terminal charge of $2 per car for delivery
at the Union Stock Yards at Chicago—an extortion amounting
through the years to over $6,000,000. The complaints further
show that the rates to markets have been advanced from 44
cents to 93 cents per 100 pounds, or from 12 per cent to 31 per
cent, and that the rates in force are higher than they have ever
been in twenty years, or since the filing of tariffs and the
establishment of the Interstate Commerce Commission give us
a record upon which to base accurate statement of specific rate
changes.

The cattlemen complained that all these rates are ‘“ unjust,
unreasonable, and unlawful.” They supported their complaints
with comparisons of these rates with the maximum reasonable
rates established by the State of Texas, and showed that the
interstate rates for like services were 37 to 41 per cent in ex-
cess of the rates fixed in Texas.

Further, the cattlemen complained that these increases in the
rates had been accompanied by marked deterioration in the
service, causing great losses to the shippers.

When these complaints of the cattlemen were presented to the
railway managers, they answered, with supreme assurance:
“Oh, we expected them to complain.” They did complain. The
complaints have been prosecuted at great expense of time and
labor. At great trouble and expense these complaints of “ un-
just, unreasonable, and unlawful” rates have been laid before
Congress.

In February, 1903, an advance was ordered by the roads of
2 cents per 100 pounds, or $8 per car, in all rates on southern
pine lumber from all southern producing points from Georgia
to Texas, inclusive, to all markets north of the Ohio River, to
all points in the Middle and Eastern States—to practically all
outside markets to which the lumber is shipped. This advance
20,000,000 tons. On this io the total increased charge
amounts to $8,000,000 annually, and if figured from the time the
advance was made to the present time this advance amounts to
not less than $25,000,000.

Not only is there complaint of this advance in the rates to
northern markets, but in the lumber districts of the South there
is the most vigorous complaint of the unreasonableness of the
rates for the distribution of lumber locally. Comparison is
made with the State rates of Texas to emphasize the necessity
of a law to prevent unreasonable rates on interstate traffic,
but this complaint, like that of the cattle raisers, will not be
satisfied by simply giving them relatively equal rates. They
are entitled to real justice, not merely relative justice.

These are only a few of the many advances in rates of which
we find complaint in the hearings. The Interstate Commerce
Commission reported advances of 10 cents per ton on soft coal
and amounting on the traffic affected to $10,000,000 annually.
Advances on iron and steel articles were estimated by the Com-
mission to amount to $4,000,000 per year.

Mr. President, I shall next consider one of the defenses
which the railroads make when charged with having greatly
advanced their rates.

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92

INCREASE IN TON-MILE REVENUE,

Notwithstanding that specific advances have in recent years
been made in the rates on many important commodities, and gen-
eral advances have been made through classifications, it is con-
tended that the average freight revenue per ton-mile shows
that rates have been reduced. Senators well understand that
the per ton-mile rate means the average revenue from hauling
a ton of freight 1 mile. This contention is suported with
comparisons of the rates per ton per mile for various years. so
selected as to support that claim. While it is true that the
ton-mile rate shows a decrease from many years ago, since the
year 1899, which marks the inauguration of the great period of
combination and the elimination of competition, the ton-mile
rate, even, shows a constant upward tendency year after year.

For these years the statistical reports of the Interstate Com-
merce Commission show the following average revenue per ton-
mile:

 

 

 

 

 

Cents.

1899 0. 724
1900) ces c ecco e ae caaanee ent eees Soc eseeweseeseemecseeencs 729
1901 em. 4 0
bd

1903 fas
1904 - 780

 

The increase, now, mark you, from year to year on each ton-
mile is not large, but the aggregate increase when applied to
the total traffic which it affects is enormous. The increse
from 1899 to 1904 amounts to 0.56 of a mill per ton-mile. This
increase, on the traffic of 1904 (175 billion ton-miles), equals a
hundred million dollars. This is the amount the public paid
in additional freight charges on the traffic of that year alone
more than they would have paid had the rate of 1899 not been
advanced.

But the increase in freight rates is only partly measured by
the increase in the ton-mile revenue. The revenues are the prod-
uct of the rates and the traffic. Both of these quantities are
variable. The rates, as we have seen, have been advanced to in-
crease the average revenue per ton per mile. The traffic, on the
other hand, has undergone certain changes which tended to de-
crease the revenue per ton per mile. If there had been no ad-
vance in rates, the changes in traffic conditions would have
lowered the per ton-mile revenue. Thus the tendency of
traffic changes has been to offset and conceal the effect of the
increases in rates on the revenue per ton per mile. The net
result of these changes in the traffic conditions from earlier
years to 1904 is that a ton-mile of traffic represents a less valu-
able service in 1904. In other words, the public in buying this
unit amount of traffic in 1904 get less for the price paid. The
principal traffic changes producing this effect are that the ton-
mile of transportation service in 1904 represents, as compared
with former years, (1) a greater proportion of low-grade, cheap
traffic; (2) a greater proportion of long-haul traffic; (3) a
ag proportion of carload (as against less than carload)
raffic.

INCRHASED TRAFFIC AND ECONOMY.

The foregoing enormous advances in rates have been made in
the face of every known force in transportation conditions
which tend naturally to reductions in rates. The density of

6758
93

traffic has increased enormously. The average length of haul
has increased. The efficiency of road and equipment to handle
traffic economically has been vastly increased. The public has
every right to demand lower rates as the traffic increases and
industrial development brings about greater efficiency and econ-
omy in the cost of performing transportation services. The com-
mon carrier is in any case entitled to only such profits as will
yield a fair return on the fair value of the property employed.

How the rates have been advanced I have already shown.
Now, I wish to present a few facts to show why the rates
should have been reduced.

It is a fundamental principle in the laws of transportation
cost that the average cost per ton per mile varies inversely with
the number of ton-miles hauled. Or to state it more plainly,
if less exactly, that the greater the amount of traffic hauled
the less the cost of hauling each ton-mile. It does not cost
twice as much to haul a carload of 20,000 pounds as to haul
a carload of 10,000 pounds; it does not cost twice as much-to
haul a carload 100 miles as to haul it 50 miles. Based on this
fact, every test applicable demands a lower cost, and therefore
lower rates in 1904 than in 1897. :

The most significant factor in determining the ton-mile cost is
the average number of tons of freight hauled in each train.
You can haul a train of thirty loaded cars 100 miles at very
much less cost per car than you can haul a train of ten cars
the same distance. That must be very apparent to everyone.
Mr. Woodlock, in his book “The Anatomy of a Railroad Report,”
analyzing the cost per ton per mile, concludes that the train
load is the supreme factor in the determination of ton-mile
cost; that it is the test of economical railroading, and that it
“determines a larger proportion of the ton-mile cost than all
other factors put together.”

The number of trains run directly affects about 60 per cent of
all operating expenses. The larger the train load the fewer
trains will be required to handle a given amount of traffic.
Hence it may be said, roughly speaking, that 60 per cent of the
average cost per ton-mile is reduced in direct proportion as the
number of tons hauled in each train load is increased. There
are other minor factors, such as tons per car, tons per locomo-
tive, etc., which affect the ton-mile cost in a less degree, but
when all such factors have a common tendency, the effect of
each factor augments the force of all the factors in combination.

The statistical reports of the Interstate Commerce Com-
mission show that the average numer of tons of freight carried
per train load in 1897 was 204 tons, and in 1904, 307 tons, or
an increase of 50 per cent, and representing the relative decrease
in the cost of handling the traffic per ton per mile. In like
manner, the average number of tons hauled per each freight
car in operation increased 27 per cent, and per each locomotive
33 per cent.

Perhaps the force of these changes in traffic conditions ag
tending to reduce the cost per ton per mile will be more readily
appreciated if stated conversely. Given 1,000,000 tons of freight
to be moved in 1897 and 1904, the changes in traffic density and
other conditions effect the following savings in the amount of
equipment necessary and services required:

6758
94

 

 

 

 

Savings in 1904.
1897. 1904. | Num- Per
ber. cent.
Services.

Train loads 4,902 8, 257 1, 645 50.5
Train men.-. 218 194 24 12.3
Equipment. .

Cars required -__...----------e-- eee a ieod 1,647 | 1,292 855 27.5
LOCOMOLIVES :25- sae teweweesensteneceeweceass 27.5 20.6 6.9 33.2

 

 

 

 

 

Further consideration of freight traffic conditions only serve
to emphasize the showing made by the above figures. The total
number of tons of freight carried increased 76.6 per cent; the
number of tons carried 1 mile—the total number of absolute
units of traffic—the increase during the seven-year period, 83.4
per cent. The traffic density, i. e., the number of tons carried
1 mile per mile of line, shows the remarkable increase of 60
per cent, and in the face of all the conditions the best argument
the roads have to offer in defense of the charges is the state-
ment that their average revenue per ton-mile has been reduced
from 7.98 mills in 1897 to 7.80 in 1904, a reduction of 0.18 mill,
or 2.26 per cent.

In respect to passenger traffic it is sufficient to point out that
the same tendencies, only slightly less in degree, are true, as in
the case of freight traffic. As an offset to this, the average rate
per passenger per mile shows a reduction of 0.8 of 1 per cent.
The figures are given in detail in the following table:

Increase in traffic—A percentage conclusion based upon the increase in
the volume of traffic and the efficiency of the road to handle the traffic.

 

 

 

 
 
  

 

 
 
  

In-
Item. 1897. 1904. Grease:
Average number of tons carried: fy
ePer freight train load. 204 307 ae 50.50
Per freight car__-.... 607 774 27.51
Per freight locomoti 36, 362 48, 463 83. 28
Per employee. . 901 1,011 12. 22
Per trainman.. 596 5, 160 12. 27
Number of freight c 1, 221, 730 1,692, 194 38.51
Tons carried _.... sere 741, 705, 946 1, 309, 899, 165 76, 61
Tons carried 1 mile ......_.._.. --| 93, 189, 022, 225 | 174,582, 089,577 83.44
Tons carried 1 mile per mile of line. 519, 079 829,476 59. 80
Average number of passengers ;
carried:
Per T6168 22s .02 cewacetatoons 37 46 25.15
Per passenger car __.-- — 14, 556 17, 997 23. 64
Per passenger locomotive - 48, 861 63, 582 30.13
Number of passenger cars-_- 33, 626 39° 752 18.22
Passengers carried... _... =| 489, 445,198 715, 419, 682 46.17
Passengers carried 1 mile_-_.....-.... 12, 256, 939, 647 | 21,923, 213, 536 78.86
Passengers carried 1 mile per mile
Of HN: 2s sccctnctesewsstesscmdecee 66, 874 104, 198 55.81

 

 

 

 

INCREASED COST—WAGES.

It is claimed by railroad representatives that the economies
effected by changes in traffic conditions have been in part offset
by advances in the cost of materials and wages during the
period covered. Advances in the cost of the materials can not

6758
. 95

be determined in the present state of public information as to
railway expenditures.

My authority for that statement is the reports of the Inter-
state Commerce Commission, in which they state that they
have been unable to obtain from the railroad companies under
the present Jaw such information as to permit them to place
before the public the exact conditions with respect to operating
expenses.

The railway reports of the Interstate Commerce Commission
purport to give the amounts expended for labor employed in
railway operation, and from such reports it appears that the
total amount paid as wages and salaries by railroads in-
ereased from $465,601,581 in 1897 to $817,598,810 in 1904,
or about 75 per cent. Railroad representatives frequently cite
this statement as going to show an enormous increase in the
wages paid to railway employees, and without further explana-
tion allowing it to be inferred that it represents a large increase
in the rate of wages. The fact is that the increase in this total
reported expenditure for wages and salaries is less than the
proportion of increase in the total traffic handled, and the in-
crease in the average wage per employee is less than the in-
crease in the average traffic per employee.

If the total compensation and the number of employees re-
ported for the two years, respectively, be a reliable basis for com-
putation, the average yearly earning per employee in 1897 was
$565.28. and in 1904 $630.80, or an increase of about 11.5 per
cent. But, according to the reports, the increase for the same
period in the average amount of traffic handled per employee is
12.2 per cent. Therefore any advance in the rate of wages paid
was more than offset by the increased service per employee.

While it is true that a higher rate of increase is reported in
the average daily wages for some classes of employees, in other
classes the rate of increase is very much less than the above
figure. Thus, in four classes, aggregating about 250,000 em-
ployees, the increase is less than 5 per cent, and on only a few
classes does the increase exceed 15 per cent. It would appear,
therefore, that the above computed average increase in yearly
earnings substantially agrees with the increase in the daily
wages as reported, and, further, that the increase in the rate
of wages on either basis is not greater than the increase in the
average traffic handled per employee.

Compensation for services—Statistics of inerease in wages and salaries .

paid by railroads, from the statistics of the Interstate Comnerce
Commission, years ending June 30, 1897 and 1904.

Total compensation reported:
1897

 

 

 

 

 

 

 

465, 601, 581

1904 817, 598, 810
Increase:

Amount $351, 997, 229

Per cent 75. 61

Average amount of compensation reported to each em-
ployee:

1897 565. 28

1904 630. 80
Increase :

Amount $65. 52

Per cent 11.5

 

8758
96

Comparative summary of average daily compensation of railway em-
ployees for the years ending June 80, 1897, and June 380, 1904.

 

 

 

   
   
 
 
  
   

Average daily Number
compensa- Increase. of employ-
Class. tion. ees in each
class in

1897. | 1904. |Amount.|Per cent. 1904.
General officers $9.54 | $11.61 $2.07 20.8 5,165
Other officers. -. 5.12 6.07 95 18.6 5, 375
General oftice cl 2.18 2.22 04 1.8 46, 037
Station agents--.... 1.73 1.93 20 11.6 34, 918
Other station men.. 1,62 1.69 07 4.3 120, 002
Enginemen -....--.--.-- 3.65 4.10 45 12.3 52, 451
Firemen ---.. 2.05 2.35 30 14.3 54, O04
Conductors _..---- 3.07 3.50 43 14.0 39, 645
Other trainmen -- 1.90 2.27 37 19.5 106, 734
Machinists--..-.-. 2.23 2.61 89 17.0 46, 272

Carpenters --- 2.01 2.26 ~25 12.4 53,
Other shopmen.-. 1.71 1.91 20 11.7 159, 472

Section foremen-- 1.70 1.78 08 4,7 7,
Other trackmen.........- 1.16 1,33 lt 14.6 289, 044
Switch tenders, etc.-..... -| 1.72 1.77 05 2.9 46, 262
Telegraph operators, etc. ------ 1.90 2.15 -25 13.2 425
Employees—account floating 2
equipment __.-..--....-------- , 1.86 2.17 31 16.7 %, 495
All others and laborers ....-.-.- 1.64 1.82 18 11.0 160, 565
Mo tall. aescsievenstts scGal now dS ieee seule cece ace | See sd 1,296, 121

 

 

 

 

 

 

From the foregoing consideration it is evident that the aver-
age rate of wages paid was not increased from 1897 to 1904
more than 12 per cent. Surely this is true if the increase in
offycers’ salaries is not included. The apparent increase in the
average amount of traffic handled per employee was 12 per cent;
the real increase in the amount of traffic handled per employee
was much greater than 12 per cent. This fact is made evident
by the following considerations:

1. The average traffic per employee is computed by dividing
the total traffic by the total number of employees.

2. If the number of employees reported be greater than the
number actually employed in railway operation, this computed
average traffic handled per employee will be proportionately
understated.

3. The total number of employees reported for 1904 greatly
exceeds the nwmber actually employed in handling the traffic,
because there are included in the number so reported thousands
-of employees engaged in the construction of betterments and
additions to the property, but charged to operating erpenses.

While there were probably some employees engaged in the
construction of betterments charged to operating in 1897, the
number was very small, as compared with 1904. It is chiefly
in times of great prosperity that railway improvements are made
out of earnings and charged to operating expenses. Later I
shall give instances of millions of expenditures made in this
manner in the last few years.

In addition to this well-known fact, there is evidence in the
railway reports indicating a large increase in the numbers of
employees engaged in improvements and charged to operating
expenses.

Railway employees whose compensation is charged to operat-
ing expenses are classified, exclusive of general administrative
employees, under the following departments: Maintenance of

6758
7

‘Way and Structures; Maintenance of Equipment; Conducting
‘Transportation.

With the great increase in the volume of traffic, we should
expect a considerable increase in the number of persons required
in the conduct of transportation. There would also be an
increase in the number of persons required to maintain the
‘condition and efficiency of way and equipment, though these
departments would be less directly affected by the increase in
traffic than would the transportation department. On the other
hand, employees engaged on improvements charged to operating
expenses would naturally be reported in the maintenance
department. If the number of employees improperly charged
in this manner was large enough it might result in a greater
increase in the number employed in the maintenance depart-
ments. This is precisely what the reports show.

The number of persons employed in conducting transportation
increased as a consequence of increased traffic only 50 per cent.
But the number of employees in maintenance departments
increased 67 per cent, as a result not only of increased traffic,
but on account of improvements and betterments made. Of
course, this increase affects the increase in the total number of
employees and results in an improper reduction in the average
traffic per employee.

Assume that the increase in the number of employees properly
chargeable to maintenance should be as great as the increase
in conducting transportation—say 50 per cent. Then all over
5O per cent are improperly charged, and should be deducted.
When figured out, this difference amounts to nearly 70,000 em-
ployees. And it is evident that at least this number of the em-
ployees charged as engaged in operating the railways are actu-
ally engaged on improvements and additions to the property.

If this correction and reduction be made in the number of
employees reported, and a new computation made of the average
traffic per employee, the result shows that the average traffic
per employee, in 1904, instead of being 1.011 tons, was, at
least 1,067 tons, or an increase over the average for 1897 of
18.4 per cent—an increase in the traffic handled per employee
more than one-half greater than the increase in the rate of
wages per employee. In the face of this fact it is idle for rail-
way representatives to contend that the increases that have been
made in wages in any degree justify the advances in freight
charges. Whatever the amount of such increases in wages may
have been, it is a perfectly safe conclusion that they have been
entirely provided for by the increase in the traffic handled.

Persons employed, classified by department of service, 1897-1904.

 

 

 

Total cll
Department of service. SEP lOyees:

1897. 1904.
Generaladministration 2... 2.222020. 22 20002 cavewsneneseswsee 31,871 48,746
Maintenance Of Way -<<csseesceeescescsseesexsseesecensse sees 244, 873 415,721
Maintenance of equipment ......-.------------.------------ -| 160,667 261,819
Total maintenance ..........---- 22-2 --- nnn ene ee eee 405, 540 677,540
Conducting transportation -.....-.....---------- +--+ eee eee 378, 361 566, 798

Unclassified

 

 

6758——_7

, »
98
6
OVERCAPITALIZATION.

Mr. President, the railroad is entitled to “ just compensation ’”
for its public services.

Reasonable rates are held to be such rates as afford * just.
compensation.”

The Supreme Court has determined that reasonable rates.
affording “just compensation” are such rates as pay a fair
return on a fair value of railway property.

We shall settle nothing then, respecting reasonable rates and.
just compensation until we ascertain the fair value of the rail-~
road property of the country.

The railroads are capitalized at $13,213,124,679 (1904).

The public believes that this capitalization grossly exceeds
the fair value of the property; that it has been wrongfully
“watered” and inflated; and that the producers and consum-
ers of the country are unjustly taxed on transportation to pay
an income upon a false and fradulent valuation. The railroads
deny this claim. That makes a sharp and conflicting issue
between the public and the railroads.

I shall, therefore, present in this connection evidence of the
over capitalization, inflation, and “ watering” of many of the
railroad properties of the country. I shall go into the subject,
fully enough to impeach the standing capitalization of the rail-
road property of the country. I shall present such an array of
facts as shall enforce the public demand for an accurate valua-
tion of the railroad property of the country.

The falsity of any representation which speaks of railway
capitalization as “railway investment” becomes readily ap-
parent when a few instances are cited to show the nature and
source of capitalization of some of our leading railroads. Only
a few days ago the case of the Wilmington and Delton, a North
Carolina railroad was cited here. This road was originally
capitalized on such a basis that its stock afterwards sold at $40
per share. The earnings were forced up, however, and when the
road became important it was merged into the Atlantic Coast
Line and $400 of new stock issued for every $100 of the old
stock, which had in past years been selling at $40 per share.

Probably everyone is familiar with the history of the making
of millions of Erie stock by Daniel Drew, the treasurer of the
road, to pay a gambling debt. He had sold short to Vander-
bilt, who was trying to get entire control of the road, and when
Drew found that Vanderbilt had cornered all the stock in
sight he got a printing press and made enough more Brie stock
to satisfy his obligation. And this generation is asked to fix
transportation charges high enough to pay interest and divi-
dends on railroad securities created in this manner.

An examination of financial newspaper files will show regu-
larly, advertisements of reorganization committees announcing
about as follows:

The reorganization committee will issue $1,000 of new 6 per cent
bonds ; $1,000 of 6 per cent preferred stock, and $1,000 of new common
stock in exchange for each $1,000 of 6 per cent old bonds.

Some interesting evidence on this question was given before
the Cullom committee in 1886. Mr. O’Donnell, of the New
York State Railroad Commission, called attention to the wa-
tered capitalization of the Erie Railroad in the following
language:

6758
99

They increased their capital one year over $30,000,000, and the rea-
son they gave was that they had to lay down steel rails. In the ver-
egies oe the newspapers at that time they spelled steel rails

Mr. H. V. Poor, the author of *‘ Poor’s Manual” of railroads,
in his statement before the Cullom committee, 1886, pointed out
that the most of this fictitious capitalization has been issued in
defiance of law and in violation of charter provisions. He says,
in part:

The reasons for such provisions are- obvious. Railroads have vir-
tually the power of taxing the people. * * * ‘The object of such
provisions is to limit this power of taxation to a fair return on the
eapital actually invested. The common way in which such a wholesome
provision of the law is avoided is by contracts for construction in which
the promoters of the railroad to be built are really the contractors, re-
ceiving a gross amount of stocks and bonds, twice or thrice greater, per-
haps, than the cash cost of the road.

As illustrations of such fictitious capitalization Mr, Poor cited
the Pacific roads chartered by Congress. In the act chartering
the several companies it was provided that the share capital
should be subscribed for bona fide, and that the full nominal
value of the same should be paid in in cash.

A Congressional investigation of the Union Pacific showed
that the stock of the company was issued chiefly to the directors
of the road under a contract for construction without consid-
eration. The committee reported to the House that tHe issue
of this stock in violation of law justified the abrogation of the
company’s charter. It was not abrogated.

The Northern Pacific Company, under like charter restric-
tions, divided the whole nominal amount of $100,000,000 of its
capital stock among the promoters of the enterprise, little or
nothing being paid thereon, before any considerable expenditure
was made on the road.

The Central Pacific was likewise constructed by its promoters,
and the greater part of the stock issued went to them as a
gratuity.

The water in the Erie was described by Mr. Poor as the dif-
ference between the par value of $55,000,000 of bonds ($1,000
each) and the price, $350 each, at which they were sold, or in
all about $36.300,000.

The New York Central secured a special act of the New York
legislature which allowed some $48,000,000 of water to be added
to the capitalization of that property, in violation of statutory
and chartegz provisions. The promoters of the New York, West
Shore and Buffalo Railroad divided the $40,000,000 capital stock
of that company as a part merely of their profits to be received
under a construction contract.

The greater part of the share capital, $50,000,000, of the New
York, Chicago and St. Louis Railroad was issued in like manner
as a profit to the promoters.

Says Mr. Poor:

Another mode of issuing ‘“‘ water’ was that adopted by the Hast
Tennessee, Virginia and Georgia Company, which, without the payment
of any considerable sum into the treasury, increased its share capital
from $1,900,000 to $44,000,000, the occasion of the increase being the
purchase of or consolidation with some other line.

Previously, in his Manual for 1884, Mr. Poor had given care-
ful“attention to this question, and as a result of his investiga-
tions stated that the true investment in our railroads did not
exceed the amount of the bonded indebtedness. In a subse-

6758
100

quent estimate, before the Cullom committee, Mr. Poor some-
what reduced the proportion of the fictitious capitalization in
the foregoing statement, but he was particular to state that in
this later estimate no allowance was made for the enormous
amount of water in the bonds.

In the course of his statement Mr. Poor quoted Mr. Charles
Francis Adams, writing in 1869 of the capitalization of the
Union Pacific Railroad. The statement is all the more interest-
ing in that Mr. Adams later, and at the time of Mr. Poor’s
statement, was president of the road. Mr. Adams said:

The line from Chicago to New York represents now but $60,000 to
the mile, as the result of many years of inflation, while the line between
Omaha and San Francisco begins life with a cost of $115,000 per mile.
It would be safe to say that this road cost considerably less than one-
half of this sum. The difference is the price paid for every vicious
element of railroad construction and management. Costly construc-
tion, entailing future taxation on freight; tens of millions of fictitious
capital; a road built on the sale of its bonds and with the aid of sub-
sidies; every element of real outlay recklessly exaggerated, and the
whole of it some future day to make itself felt as a burden on the trade
which it is to create.

By exacting earnings from the public on the basis of this ficti-
tious capitalization, Mr. Poor says:

The Union Pacific and the Central Pacific together divided or car-
ried to the credit of profit and loss over $100,000,000 over and above a
fair return upon the capital invested in them. The water in the New
York Central equaled $45,000,000 or thereabouts. Upon this sum divi-
dends at the rate of 8 per cent were paid for fifteen years, the water
and the dividends on the same equaling over $100,000,000.

Mr. Thurber, a New York wholesaler, who testified before the
Cullom committee, criticised Mr. Poor’s estimate of railroad fic-
titious capital in this language:

I know there are so many instances where that is so very much short
of the mark that it is absurd. I, think he said the New York Central
was about half water. Whyfthe New York Central had been watered
three times DEE to 1867-68," and at that time they doubled it. They
put forty-seven millions of water into the New York Central and Hud-
son River Railroad in 1867-68, and they paid 8 per cent dividends on
that forty-seven millions until last year (1885). I think last year they
paid 6 per cent.

Mr. Thurber submitted as an example of “ how excessive capi-
talization operates as a mortgage upon the industry of the coun-
try”? a computation of the amount of these dividends, with
interest, over the period of fifteen years, which aggregated over
$100,000,000.

In the statement of Mr. Simon Sterne, who testified before
the Cullom committee as the representative of the Board of
Trade and Transportation of New York, we obtain some inter-
esting information as to the manner in which these stock issues
and some other questionable items find their way into the con-
struction accounts of the railways.

I shall presently show how the whole system of railway ac-
counting has been built up with a view of concealing these
transactions and of concealing the earnings of the railways from
year to year up to the present time. Sir, I should not care to
trespass upon the time of the Senate to present the facts of the
false and fraudulent capitalization of the railroads of these
earlier years, except that the villainous system still survives.
The methods of Gould, and Fiske, and Vanderbilt, and Hunting-
ton are the methods of Morgan, and Rockefeller, and Hill, and
ee It is the same old game. The stakes are bigger
101

now. The system of accounts and the other details are much
more adroit and clever.

As an example, Mr. Sterne cites the expenditure one year by
the Erie of $700,000 as a corruption fund and for legal erpenses,
which was carried to the “ india-rubber account”? and charged
to the cost of construction. After the capital of the New York
Central was doubled in 1869 they had a stock account, ‘‘ which,”
says Mr. Sterne, “was out of all harmony with their construc-
tion account, and, for ten years following, every year varying,
from 3 to 8 per cent of this water was artificially carried into
the construction account. and the capital account balanced.
* * * In the same way the balances were forced in the Erie
Railway Company when Mr. Gould took $40,000,000 of stock of
the Erie Railway Company, out of its books, and sold it on the
street, and appropriated the money to his own wse, and there
was not a dollar’s worth of construction to represent it; and
when reorganization took place the balance of the Erie Railway
Company was forced to meet that violence done to the stock
account.”

Is it to be supposed that the people of this country will con-
sent to be taxed to the end of time upon capitalization of that
sort?

In the’ final reporé of the Industrial Commission, is cited
the purchase of the Chicago and Alton Railway, in 1899. The
road had been capitalized at $30,000,000. The purchasing syn-
dicate issued in the purchase a total capitalization of $94,000,000.

Another case cited is that of the St. Paul and Manitoba Com-
pany (Great Northern Company, Lessor). ‘The property of this
company had previously been bought at foreclosure at $3,600,000,
and some years later the capitalization reached $84,550,000. In
the Great Northern rate case of the Minnesota commission, the
Minnesota court made an appraisal of this property to determine
the reasonableness of rates, and held that the cost of reproduc-
tion of all property of the company at that time, 1896, could
not exceed $44,000,000.

The Interstate Commerce Commission, in its decision in the
Danville case. said of the $120,000,000 of common stock of the
Southern Railway:

This common stock was issued as a part of a reorganization scheme,
under which the Southern Railway Company came into existence.
It does not appear that the persons to whom this stock was originally
issued ever paid one dcllar in actual value for it. It simply appears
that the stock is outstanding.

In like manner, the capital of the Atlantic Coast Line was
increased $50,000,000 without any additional investment, inerely
to enable Mr. Morgan to get the control of the Louisville and
Nashville from Mr. Gates, whom he considered not a ‘“ proper
person ” to control the destinies of that road.

Mr. James J. Hill testified, in an investigation of the Northern
Securities merger by the Interstate Commerce Commission,
that in the purchase of $108,000,000 of Burlington stock by the
Great Northern and Northern Pacific Companies, $216,000,000
new 4 per cent bonds were issued and that the purchasing com-
panies which guaranteed the interest on these bonds, intended
to make the property earn not only enough to puy 4 per cent on
this doubled capitalization, but a dividend on the old stock as
well. Mr. Hill further testified that in the merger there were
issued on the capital of the Northern Pacific $22,500,000, and on

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102

that of the Great Northern $39,500,000, or a total of $62,000,000
of securities in excess of the old capital.

In the recapitalization of the Rock Island $75,000,000 Rock
Island stock was converted into $75,000,000 of bonds and
$137,000,000 new stock.

Current financial journals are discussing a proposed new issue
of one hundred million dollars of New York Central stock.

The Senator from South Carolina presented here a few days
ago a letter from a competent engineer estimating the cost of
railway construction. As a basis for this estimate, the rail-
roads of Massachusetts were selected, because of the more effi-
cient railway regulation of that State, and because the condi-
tions there require relatively large investment for equipment.

After making most liberal allowances for equipment and
architectural work, and adding to the average standard costs of
construction, the engineer arrived at an average cost per mile
of $25,200, which, he said: ‘I have no doubt substantially ex-
ceeds the true costs of railways.” On the same mileage the
roads of the State are capitalized at $52,000 per mile—‘ 513
per cent water, probably more.”

The writer gives as his conclusion, after thirty-four years of
experience and investigation, “that, outside of Massachusetts,”
* * * “the equipment rarely costs as much as $5,000 per
mile, and we are liberal in putting the cash cost of construction
and equipment of all roads at an average of $20,000 per mile,”
making about five billion six hundred million dollars for the
investment in all the roads of the country, in 1903, and leaving
the seven billion additional capital to represent water. Every
example of extraordinary cost of construction that may be cited
is more than offset by hundreds of miles of railway which have
been built at a cost much less than $17,500 per mile..

To quote directly from the language of Engineer Marks on the
cost of construction—

You may, and probably will, have many instances of extraordinary
cost of construction brought to prove to you the higher cost of our
railways. Many of these instances are both unwise and unnecessary
expenditures.

Do not forget that for every such case there are hundreds of miles of
railway which honestly have not cost $17,500 per mile to construct and
equip; on the contrary, very much less.

The most comprehensive statement of the fictitious capitaliza-
tion of the American railroads, and the most extensive inves-
tigation of this question of “ water,” are probably embodied in
the work of Mr. Van Oss, of London, entitled, “American Rail-
roads as Investments,” published in 1893. While the infor-
mation here presented is for the benefit of investors primarily.
the facts are equally valuable for our purpose. The conclu-
sions are all the more reliable in consideration of the fact that
they are offered largely in commendation of our railway se-
curities as investments, and are not open to such criticism of
radicalism as are usually made, by railway interests, in answer
to statements of this kind. I wish to say that Mr. Van Oss is
an investment banker of London. He is late editor of the In-
vestor’s Chronicle. He published, in 1892, ‘American Railroads
as Investments ;” in 1893, ‘American Railways and British In-
vestors ;” in 1896, ‘“‘A Decade of Finance.” He has written and
still writes articles for various leading reviews on the subject of
finance and investments. The added fact that Mr. Van Oss’s
work is used extensively in the Final Report of the Industrial

6758
103

‘Commission, gives it a certain authoritative standing, and war-
rants the extended consideration which I wish to give certain
statements and conclusions and the adoption of its final results
as the basis for computing an estimate of the actual investment
represented by present railway capital.

Mr. Van Oss classifies the different ways of inflating capital
of American railways as follows:

1. By fraudulent issues of bonds and shares as a downright
Swindle or for speculative purposes.

2. By paying too much for construction.

8.’ By purchasing property at excessive prices.

4. By buying superfluous competing lines.

‘5. By selling bonds and shares at a discount.

6. By declaring stock dividends.

As an example of stock issued for speculative purposes the
history of the Erie Railroad is cited. The capital of this road
was increased between 1868 and 1872 “from $17,000,000 to
$78,000,000, mainly to manipulate Wall Street.” And Presi-
dent Watson, “a few years later, doubled the funded debt, it is
said, also chiefly for his own benefit.”

As an illustration of the construction company frauds, the
incident of the South Pennsylvania Railroad is given. This
road was started by Vanderbilt to compete with the Pennsyl-
vania, and it was, says Mr. Van Oss,
prove to have cost actually $6,500,000, and a responsible contractor

ad offered to build it at that price. Yet a construction company,
scomposed of Vanderbilt’s clerks, received $15,000,000 to complete it, and
the syndicate of capitalists which supplied this money got $40,000,000
‘In bonds and shares, so that for every dollar of actual cost over $6 of
bonds and shares were issued.

In the same manner, though not in the same proportion, the thing
was worked all over the Union. * * * ‘The builders of the Central
Pacific, for instance, commenced with the modest sum of $159,000, and,
taking this as a nucleus, they completed the road, gathering a capitali-
zation of $139,000,000. * * * The Government commission on Pa-
cific Railroads in its report to Congress says that $58,000,000 would
have been a very good price for the railway.

Of the extent to which was carried the practice of selling to
railway companies property of officers and directors at excessive
prices, in stocks and bonds, Mr. Van Oss says:

Until twelve or fifteen years ago the majority of purchases of aux-
iliary concerns used to be permeated with fraud.

Parallel lines of railway were built to force their purchase
at excessive prices, as a sort of blackmail, backed by the threat
of competition. Such purchases added great amounts to the
capitalization, but little or nothing to the earning power of the
‘properties. Thus Vanderbilt was forced to lease the West Shore
and buy the Nickle Plate, and the Pennsylvania, in turn, had
to come to Vanderbilt’s terms to preserve its monopoly from
competition of the South Pennsylvania.

To secure capital it was a common practice to allow liberal
‘discounts on bonds, “ and shares were frequently given into the
‘pargain. * * * The railroads would have. outgrown the
payments of excessive rates for money if their affairs had other-
wise been conducted with honesty and integrity.” But they
were not. Hence, “shares not being much sought after, it mat-
tered little to the promoter whether he gave shares into the
bargain or not.” The majority of companies realized nothing
for the shares they issued in their early days. The Missouri,
Kansas and Texas Railway Company, for instance, gave

6758
104

$21,400,000 in shares to a construction company, in addition to
the payment made in bonds. The New York Central, Erie,
Reading, St. Paul, Chicago and Northwestern—in short, almost
every railway company received nothing for the earlier issue
of its ordinary shares. * * * Instances are given of ficti-
tious capital resulting from the payment of stock dividends, as
follows:

In December, 1868, the New York Central distributed a stock
dividend of 80 per cent, and eleven months later, when con-
solidation with the Hudson River Railroad followed, a further
stock dividend of 27 per cent was declared, while the Hudson
River shareholders received one of 85 per cent.

The Reading paid a script dividend of 10 per cent in 1846, one
of 12 per cent in 1847, while between 1871 and 1876, upon a
eapital of $32,200,000, more than half water, $15,700,000 was
paid in dividends, mostly scrip.

The Erie made still larger payments of stock dividends; the
Chicago, Burlington and Quincy in 1888 paid 20 per cent, and the
Santa Fe in 1881 paid 50 per cent.

The practice—
declares Mr. Van Oss—
may be said to have been general, and is still resorted to in numerous.
cases.

The aggregate amount of water in the five hundred million
capitalization of the Central, Erie, and Reading companies is.
variously estimated from $200,000,000 to $300,000,000.

Poor’s Manual for 1884 points out that the increase of capital-
ization of American railways for the three years ending Decem-
ber 30, 1883, was $2,093,000,000, or $70,000 per each mile of new
road. Mr. Poor said:

The cost of the mileage construction certainly did not exceed $30,000
per mile. The whole increase of the share capital and a portion of the
funded debt was in excess of the cost of construction.

Referring to this statement of Mr. Poor, Mr. Van Oss says:

Some writers even go so far as to allege that the estimate of Mr.
Poor, whom they deem a spokesman of the railways, is moderate and
conservative, and the fictitious capital is said by some, among others
by Mr. Hudson, to amount perhaps to fully two-thirds of the total
capitalization.

Some sound reasons are given by Mr. Van Oss why this view
is not improbable.

As a result of his investigation of American railway history
and capitalization, Mr. Van Oss arrives at two important con-
clusions: First, that the average amount originally received in
actual value for American railway bonds probably did not
exceed 67 per cent. Second, that the original investor in Amer-
ican railway stocks certainly paid not more, on the average,.
than 10 per cent of their face value, and probably less.

If an estimate of the actual investment on American railroads.
is computed on the basis of these final percentages given by Mr.
Van Oss on the capitalization of 1904 as reported by the Inter-
state Commerce Commission, we get the following result:

Stock, 10 per cent of $6,339,899,329_____________ $633, 989, 932

Bonds, 67 per cent of $6,873,225,350_____.______ 4, 605, 060, 984
Total investment represented by $13,213,-

124,679, total capital____._____________ 5, 239, 050, 916

or, in round numbers____--_.___________-_____ 5, 000, 000, 000°

6758
105

The remaining $8,000,000,000 odd are entirely fictitious capi-
talization, and can not be considered in discussion of railway
earnings. This gross estimate of cost equals $23,500 per mile
of line and exceeds the average true value per mile of all the
railroads of Michigan, Wisconsin, and Texas, as actually de-
termined, and is substantially as high as the value placed on
the roads of Massachusetts in the engineer’s estimates before
quoted.

Now, Mr. President, if I am not overtaxing the patience of
Senators, I wish to call attention to the methods by which these
great and excessive earnings are concealed by the railroad com-
panies of the country.

BETTERMENTS AND SURPLUS OUT OF PROFITS.

To understand the inadequacy of any dividend statement as
an index to railway profits, it is only necessary to give attention
to a few simple elementary facts. The railroads themselves
report annually millions of net earnings in excess of the
amounts distributed to bond and stock holders. Enormous sums
are every year carried to surplus and devoted to additions, bet-
terments, and improvements out of profits. A tabulation, show-
ing such expenditures for additions to property out of profits,
as stated in recent reports of some thirty-two of our leading rail-
ways, is hereto appended. [Appendix B.]

I need not pause to say that it is wholly wrong to tax trans-
portation of the people of this country high enough to enable the
railroad companies to pile up a great surplus and to make out of
their profits improvements and investments for which they
should provide with new capital. In other words, they make the
public furnish the new capital, and then make them pay interest
and dividends upon it. Among the roads included, the Balti-
more and Ohio, from 1899 to 1905, spent out of profits over
$19,000,000 for improvements; the Delaware, Lackawanna and
Western, 1901-1904, over $13,000,000; the Erie, 1902-1905, over
$5,000,000; the New York Central, 1899-1904, over $9,000,000 ;
the Pennsylvania, 1899-1904, over $50,000,000; the Chicago and
Northwestern Railway, 1900-1905, over $26,000,000; the St.
Paul, 1900-1905, nearly $10,000,000; the Omaha, 1899-1905, over
$16,000,000; the Santa Fe, 1896-1904, $30,000,000; the Great
Northern, 1898-1905, nearly $16,000,000; the Northern Pacific,
1899-1905, about $20,000,000, and the Union Pacific, 1900-1905,
over $13,000,000.

Every one of these cases represents excessive taxation of trans-
portation, which, under the Supreme Court decisions, is unlaw-
ful. The railroad companies of the country have a right to tax
transportation—and I remind the Senate of it again—only
enough to pay operating expenses and give them a fair interest
or return on the fair value of their property. This is the limit
of their lawful profits, and again I remind the Senate that they
take out of the people, the producers and consumers of this
country, besides their legitimate profits, enough additional and
unlawful profits to enable them to accumulate a great surplus.
Out of this surplus they make extensive improvements and in-
vestments, for which they should pay their own money. Then
they “capitalize” these investments and improvements so
wrongfully accumulated out of the profits on excessive rates,
and, in turn, make this the basis for charging still higher rates.
How much longer is the public to wait for Congress to act,

6758
106

while this process of capitalizing extortionate rates goes on?
Is it to be expected that the country will patiently accept a
bill that does not pretend to touch the source of this infamous
wrong?

It is true that these enormous profits do not go to the owners
of railway securities directly as interest or dividends, but
usually it is the practice of railway companies to capitalize
these improvements, and to favor the stockholders in the dis-
tribution of the new stock. These improvements add to the
earning power of the roads. No further justification is offered
by railway magnates for the issue of new capital than that the
traffic and the earning power—that is, the traffic and the rates
chargeable—can be made to pay interest and dividends on such
capital. This was the justification offered by Mr. Hill for the
$216,000,000 new railway capital issued in the so-called “ pur-
chase” of the Burlington by the Great Northern and Northern
Pacific companies. Nothing is omitted to be done in the in-
terest of railway promoters for the want of a pretext. An ex-
ample is the case of the Chicago and Northwestern road. This
road for several years has been making extensive improvements
out of profits. From 1900 to 1905, inclusive, it has made such
improvements to the amount of $26,500,000. In 1903, $36,000,000
of common stock was issued to buy the “ franchises,” etc., of the
Fremont, Elkhorn and Missouri Valley Railroad Company, of
which company the Northwestern already owned all the stock;
in other words, the complete title to the road, franchises, and
all, excepting such mortgages as were a lien on the property.

When such stock is sold to stockholders of the company issu-
ing it, usually it is sold at about half its value in the market.
The favored purchasers may then turn around and sell it to
“investors ” at the market price. The investors, in turn, expect
the value of the new stock to be maintained by the payment
of dividends to be earned by charging the public as much as
the traffic will bear.

The relation between return on railway securities and the
rates charged is very clearly set forth in the London Statist.
In an article in June, 1904, urging advantages of American rail-
way securities, the following language is used:

In_recent years there have been few new railroads constructed, and
the density of traffic has grown very rapidly. Hence rates have been
restored (i. e., to the basis enforced preceding the competitive period

of previous years) and with but unimportant exceptions have been firmly
maintained. These conditions, moreover, appear likely to be permanent.

TRUE RAILROAD PROFITS NOT KNOWN.

It is a common practice with our railroads in their financial
reports, by improper charges to operating expenses, to grossly
understate their net earning. Nowhere is there any public in-
formation that will furnish a basis for a true determination of
the true profits of railroads. Respecting this situation, the In-
terstate Commerce Commission, in its report for 1903, has the
following statement:

In order to determing whether railroad charges are reasonable or
unreasonable, it is neceSsary to know what measure of profit the car-
rier is deriving from the rate imposed and what amount of money is
received and in what way it is expended. It makes a wide difference
whether the revenues of the carrier are used up in necessary cost of
operation or are employed in adding to the permanent value of its
property.

6758
107

Of the reports furnished by the carriers, the Commission
adds:

If carriers do not make report or fail to make full report no penalty
is provided. As a result certain railways have habitually refused to
state what permanent improvements are charged to operating expenses.
Others, while professing to distinguish, evidently do not. The result
is that the net earnings given in our statistical report do not show the
actual net earnings of our railways as a whole, and this is especially
eo ee the last few years, during which most improvements have been

This criticism is true generally of all figures and reports fur-
nished by the railroads.

Notwithstanding all the economies resulting from changes in
traffic conditions, the ratio of operating erpenses to gross earn-
ings has been maintained in the reports. In 1897 the operating
ratio stood at 67.06 per cent, and in 1904 at 67.79. The manner
in which this is accomplished is indicated in the notations to
Mr. Floyd W. Mundy’s Investor’s Manual for 1906, ‘“‘ The Earn-
ing Power of Railroads.” In these notes you will read of the
Delaware and Hudson: “ For years a large amount” expended
for improvements has been charged to operating expenses ; of the
Northern Central Railway Company that: “ Operating expenses
have for years been liberally charged for betterments;” of the
Pennsylvania that: “ Operating expenses have for years been
heavily charged for improvements;” of the Southern Pacific
that from 1905 operating expenses were charged with the cost
of renewing with heavy steel rails twenty-seven hundred miles
of line; and you will read that the Michigan Central “ has for
years adjusted its expenses to its earnings,” i. e., charged better-
ments to operating expenses to whatever amount was necessary °
to maintain a constant operating ratio.

Sometimes partial statements of such improper charges to
operating expenses are given in footnotes in reports to 'stock-
holders. Financial writers, who make a study of these mat-
ters upon careful analysis of such reports, are able to estimate
partly the amount of such charges. In Mr. Mundy’s manual,
“The Harning Power of Railways,” for 1906 are given in notes
at the back of the book such statements for a number of com-
panies. Some of these instances are set down in the following
table:

Table showing instances of expenditures for improvements and additions
to property charged to operating expenses.
(Mundy, “ Earning Power of Railroads,” notes.]

 

Name. Years. | Amounts.

 

Central. Vermont Railway .cscsis.csaroccensneneresenenss 1899-1905 | $1,398, 236
Maine Central Railway --.....-.--.------ 90
New York, New Haven and Hartford Railroad - -| 1901-1908 7,697,340

   
  
  

Delaware, Lackawanna and Western. -...-. 1902-1904 4, 826, 366
Erie Railroad... swsseeewse 1900-1902 38, 588, 437
Lehigh Valley ..-...- 2-0. +-.s-e<2e2- 1902 1, 676, 974

90:
New York Central and Hudson River 1902-1904 8,553, 970
Ann Arbor Railroad ._----.----------- 1893-1904 2,766, 236
Lake Shore and Michigan Southern 1902-1904 | 16,084,973
Louisville and Nashville. -.....-...-- ‘i 1895-1905 | 12,913,557
Nashville, Chattanooga and St. Louis ...--------.------ 1900-1905 8,741, 401

 

 

 

In England the practice of charging betterments to operating
expenses, which prevails here, is unknown. English financial

6758
108

writers find it necessary for the information of foreign investors
to correct the reported net earnings of the American railways by
the addition thereto of the amount of such improper charge against
operating. In analyzing the profits of a few of our leading rail-
ways, the London Statist, in 1904, had a tabulation showing
net earnings corrected in this manner. Such corrections made
in the reported net earnings of nine roads for the year 1903
amounted to $21,263,000 ‘on a total reported net earning of
$135,367,000. The correction on these nine roads taken together
amounted to 16 per cent of the total net earnings reported. The
details are set forth in the following table:

London Statist corrections of reported net earnings of nine American
railways for the fiscal year 1903.

[Statist, London, 1904.]

 

 

    
   

 

 

 

a Add a ig aes
et income,| ment out- et income
Company. 1902-3. '|lays charged] corrected.
to expenses.
Chicago, Milwaukee and St. Paul....| $18,045,000 $2, 333, 000 $20, 378, 000
DOn Verses joccdse sk aeeee eee = 6, 885, 000 120, 000 7,005, 000
Great Northern... ---| 22,651,000 1, 443,000 24,004, 000
Lake Shore @ _...--.-.---------- ---| 10,554,000 6, 315, 000 16, 669, 000
Louisville and Nashville ._...- -| 12,601,000 2, 006, 000 14, 601,000
The New York Central---_----- -| 29,419, 000 3, 256, 000 32, 675, 000
Reading. --.. z -| 15,946,000 2,196, 000 18, 142, 000
Southern -- .-| 13,763,000 2,500, 000 16, 263, 000
Wabash o.22.-seceeucesieoescieeses _ 5, 793, 000 1, 100,000 6, 893, 000
Titel acoccnuxsadenrsnsstyea wsseen 185, 367, 000 21, 263, 000 156, 630, 000

 

 

«Year ending Dec. 31, 1903.
PRESENT RAILWAY PROFITS GROSSLY BXCESSIVE.

It becomes desirable in this discussion to estimate, as best we
may, in some measure the amount to which railway charges are,
on the whole, excessive. If railway interests have any com-
plaint to make against any such estimates as are offered, it
should be remembered that it is the railways themselves who,
by their practice of manipulating railway accounts and statis-
tics and by their issues of billions of watered capital, make it
necessary that this discussion proceed upon the unsatisfactory
basis of mere general estimates instead of exact knowledge
which the public has a right to have. These are public-service
corporations. If it be true that the public should pay trans-
portation charges to yield a fair profit on a fair value, then the
public is entitled to know not only the value of railway prop-
erty, but the exact cost of operation and every other fact per-
taining to the conduct of the business which in every way bears
upon the cost or the character of the service.

Transportation and transportation charges affect the daily
life of every man who must support a family in this country.
The head of the household is the freight payer in the United
States. From the time he begins to have any responsibility
in the maintenance of a family he must pay freight on every
single article that enters into the economy of the household or
the material life of the family.

I do not expect that an estimate of the actual investment in
railways, as computed on the basis of Mr. Van Oss's investiga-
tions will pass without criticism. But the comprehensive and
thorough character of the investigations certainly entitle his con-
clusions to respectful consideration. I believe that they are fair

6758
109

and conservative. In any computation of reasonable railway
profits, based upon this estimated value, it should be kept in
mind that no deduction is made for that part of the value of our
railway which was donated by the public.

Mr. President, when so much sympathy is expressed for
“innocent purchasers” of watered stocks and bonds, I think it
is worth while for the Senate, for the Congress, and for the
country to consider the vast amounts of money that have been
given by private donation, by State appropriation through mu-
nicipal bonds, by State donation through land grants, and by
lavish donations through land grants made by the Federal Gov-
ernment. These enormous contributions by the innocent public
add another argument demanding that the interests of the gen-
eral public shall be the first and paramount consideration in
this legislation.

The total amount of such donations is variously estimated as
high as $2,000,00U0,000, Furthermore, any computation of rail-
way profits must, for want of better information, accept as a
basis of railway profits the net earnings as reported by the com-
pany. Such net earnings are very much understated, probably
to the extent of 15 per cent of the total net earnings reported.

If there is a disposition to contend that railway capital issued
subsequent to Mr. Van Oss’s report represents a larger propor-
tion of actual investment than determined by him at that time,
I ask that the above facts be given consideration. It is not
admitted that later issues of capital represent more real invest-
ment; but if this be so, the error in our conclusions which this
may tend to produce will be fully offset by the inclusion of the
enormous amounts of railway value which have been literally
given by the public, and the acceptance of the understated net
earnings of the railways as a basis of computing their profits.
Finally, I wish to call attention to the fact that an estimate of
$5,000,000,000 as the actual value of American railways is
equal to $23,500 per mile on the mileage of 1904. This is more
than the average value per mile for all the roads, the value of
which has been actually determined by the States of Michigan,
Wisconsin, and Texas. With a knowledge of the roads of Mich-
igan and Wisconsin, I do not hesitate fo say that they fairly
represent the average cost of the roads of the country.

The total net earnings of the railways of this country as re-
ported for 1904 amounted to $685,205,467. This net earning
equals an annual return of 13.7 per cent on a total investment
of $5,000,000,000. Money is seeking investment to-day where
the security is adequate for a return of 4 per cent and even
less. I believe that under an efficient Government control
there would be no place where honest investment would be
more secure than in the railroad development of this country.

If 4 per cent is a fair rate of earning, the railroads of this
country are charging annually at least $485,000,000 more for
transportation than is a fair return upon their investment and
a just compensation for the services rendered. This amount is
nearly 25 per cent of their total gross charges. It amounts to
$6.06 per capita for every inhabitant of the country, or $38.50
for each family.

If 5 per cent is a fair rate, the roads are charging annually
at least $435,000,000 more than is fair and reasonable, or an
amount equal to 22.7 per cent of their total gross charges—
$5.43 per capita, or over $25 per family.

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If 6 per cent is a fair rate, the carriers are exacting annually -
at least $385,000,000 more than is fairly reasonable, or nearly
20 per cent of their total gross charges. In other words, on
this rate of profit the gross charges are practically 25 per cent
in excess of just and reasonable charges. This excess amounts
to $4.81 per capita, and $22.60 for each head of the family.

If the carriers are entitled to earn 8 per cent, they are now
overcharging by at least $285,000,000 annually. This is an
annual tax upon the people over and above any possible fair
or reasonable charge for the service rendered amounting to
over $3.65 per capita, or about $17 for every head of a family
in the United States.

These rough estimates are not submitted as final statements,
but are subject to revision in the light of additional informa-
tion, but no hesitancy is felt in expressing confidence that an
exact knowledge of the facts involved will require a revision of
these estimates to show a larger measure of extortion than is
here suggested. It is not the purpose of these figures to pre-
sent a neasure of this extortion so much as to make clear the
conditions which demand that a true and actual measure of
such extortion shall be determined, and finally to demand that
power be lodged in some competent and disinterested tribunal
to correct it.

PUBLIC AID TO RAILWAY CONSTRUCTION.

We sometimes hear it stated that the cost of reproduction of
railway property would not fully and fairly represent the ac-
tual investment. On the contrary, present values, as repre-
sented by the ccst of reproduction, or almost any other measure
by which the roads may be valued, would be more, by hundreds
of millions of dollars, than the actual investment in the prop-
erty on which the stocks and bonds were based. A large part
(estimated as high as two billions of dollars) of the actual
investment, which was about five billions, was not furnished by
the owners of the railroads, but was furnished by the public.
These donations were in the form of enormous land grants, of
State and Federal subsidies of cash and credit, rights of way,
cash bonuses by towns and counties, and subscriptions to the
capital stock. °

Frequently we hear it urged that railroad owners should be
allowed a profit on more than the actual investment, because of
the risk which they assume in constructing the road. The con-
tention is unsound, because in the majority of cases, the rail-
road builders did not assume this risk. In recent railway con-
struction there is practically no considerable risk. In the
earlier period of construction, and to a less degree in the later,
substantially all the risk involved was assumed by the commu-
nity in which the roads are built.

The amount of land granted by State and Federal govern-
ments in the aid of railways is expressed only by figures so
large as to be totally incomprehensible. In twenty years prior
to 1871 the Federal Government granted in aid of railway con-
struction 155,000,000 acres of land. Several States granted, in
addition to this amount, a sum sufficient to equal about 200,-
000,000 acres of land. While a considerable amount of the
Federal grants were forfeited, the railways have received from
this source about 100,000,000 acres, and will receive many mil-
lions more. The amount actually received from the State and

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National governments will aggregate an area equal to five States
the size of Pennsylvania.

In addition to these enormous land grants many millions of
dollars in national and State bonds were issued in the aid of
railway construction. The United States Government issued to
the Pacific road Federal bonds to the amount of $16,000 a mile
to the base of the Rocky Mountains and $48,000 to $32,000 per
mile through the mountains to the Pacific coast. This loan was
secured to the Government by a second mortgage on the road,
which was subject to a prior mortgage for a like amount per
mile. In this manner the Federal Government loaned to the
Union Pacific, the Central Pacific, the Western Pacific, the Kan-
sas Pacific, and two smaller companies about $65,000,000. This
does not include the interest on the bonds, which for years was
paid by the Government, and which was never fully repaid.

Several of the States made grants of many millions of dollars
in similar manner. The State of Missouri spent thirty-two
millions, of which it never recovered but six. Tennessee spent
thirty millions. Half of the States in the construction period
increased their bonded debts for the aid of railways. Among
the larger contributors were Illinois, Indiana, Michigan, Georgia,
Tennessee, North Carolina, South Carolina, Missouri, Virginia,
and Louisiana.

Counties and municipalities issued their bonds in like manner.
The census of 1870 shows that there were still outstanding in
county bonds issued in the aid of railway construction not less
than $185,000,000. In New York State alone county and mu-
nicipal aid amounted in 1870 to no less than thirty millions.
And in Illinois, in 1873, it was determined that there had been
spent $20,000,000 in this manner. This practice was common
throughout the country.

As a general rule, the programme in railway construction was
for the community to assume the first and greatest risk. In
his History of the Chicago, Milwaukee and St. Paul Railway
Company, John W. Cary, for thirty years general counsel of that
company, says of the projectors of the first line of that great
system:

There were many active, energetic men ready to engage in the work,
but without money.

"When these “active, energetic men” had secured.a charter;
when they had secured Federal, State, or municipal aid; when
the terminal city had loaned the company its credit in city
bonds; when right of way and depot grounds had been don:uted
to the company; when the towns along the right of way had
put up bonuses; when the farmers had made subscriptions to
the capital stock; when the success of the venture was prac-
tically assured, and sufficient security in the form of property
and privileges was gathered in the company, then these “ active,
energetic men” could go to the financial centers and sell the
mortgage bonds of the company. These bonds furnished enough
additional money to build the road—and usually many snug
fortunes besides, which on one pretext and another found their
way into the pockets of promoters, together with a goodly
nuinber of bonds. As a regular part of the high-finance methods
of railway construction, most ef these construction companies
went through foreclosure proceedings, and farmers and towns
subscribing to stock and municipalities that had made loans
on inferior mortgages found their securities worthless.

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As an example of these practices I offer a few instances, taken
from Mr. Cary’s History of the St. Paul Company. These in-
stances all relate to lines now within one company and lying
within a small district in the southeastern part of the State of
Wisconsin. The same territory is served by two other roads
with similar histories. And the conditions represented were
typical, not only for the entire system of these companies, but
generally for all railway construction in the country down to
very recent years. It still continues to some extent.

About the first step taken toward the construction of the Mil-
waukee and Mississippi Railroad, the first line of the St. Paul
system, was to induce the city of Milwaukee to issue bonds.

The Milwaukee and Fond du Lac Company began business by
securing the loan of the city’s (Milwaukee) credit of $114,000,
secured to the city by a second mortgage on the proposed line, to
be subject to a prior mortgage of $10,000 per mile.

The above company was consolidated with the Milwaukee,
Fond du Lac and Green Bay Railroad. The city of Milwaukee
loaned this company $200,000.

When the Fond du Lae and Green Bay Company had secured
its loan of Milwaukee city bonds and depot grounds, it in turn
consolidated with the La Crosse and Milwaukee Railroad
Company.

The Milwaukee and Watertown Railroad Company secured
similar aid from the city in the amount of $200,000.

The Milwaukee and Horicon Railway Company in like manner
secured $166,000.

The Milwaukee and Mississippi Railway Company in 1867
began the extension of its line west of Janesville. The funds
consisted of cash subscriptions to the stock, farm mortgages,
and Milwaukee city bonds. Of these bonds there were issued
for this company $300,000 on a second mortgage, and $250,000
for which the city received only common stock. On the subse-
quent foreclosure only $94,000 was received for the benefit of all
stockholders.

In 1852 the Racine, Janesville and Mississippi Railroad Com-
pany was organized, and started to raise money to build from
Racine to Janesville. Racine city issued bonds and subscribed
to the capital stock to the amount of $300,000. Janesville failed
to subscribe, so the charter was amended and the line changed
to go through Beloit, and Beloit issued bonds and subscribed for
$100,000 of stock. The town of Delavan subscribed for $25,000;
the town of Racine for $50,000. As laid out, the line proposed
to omit the towns of Burlington and Elkhorn, but upon their
subscription to the stock they were included. The little town
of Elkhorn paid $15,000 for the privilege of seeing the cars go by.

Mr. Cary says:

The farmers along the line of road subscribed to the capital stock to
quite an amount, and gave in payment of their subscriptions their
notes secured by mortgages on their farms.

As, on subsequent foreclosure sales, the amount realized was
Jess than the aggregate of the several mortgages the stock-
holders necessarily lost.

On its line constructed from Milwaukee to Portage, 96 miles,
the La Crosse and Milwaukee Railroad Company raised $1,100,-
000, or more than $11,000 per mile in farm mortgages alone.
The method by which these farm-mortgage subscriptions were
raised is described by Mr. Cary as follows:

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113

_ The Milwaukee and Mississippi Railroad had adopted the plan of rai{s-
ing funds by procuring farmers to subscribe to the capital stock of the
company, and mortgaging their farms as security for their notes given
for such subscriptions, and a considerable amount had, prior to the
construction of the La Crosse road been realized in that manner on the
Mississippi Railroad.

This mode of procedure became quite common with several of the
roads of Wisconsin, and it was adopted, among others, by the La Crosse
company, and prosecuted most vigorously and successfully so far as
obtaining mortgages from the farmers was concerned.

Deacon Clinton, who had been engaged on that branch of business on
the Mississippi road, was employed as a special director of the La
Crosse road, and devoted his entire time to the matter of procuring
subscriptions from the farmers on this plan.

Such mortgages were procured to some extent in Washington County,
very largely in Dodge County, and in.Columbia and other counties
along the line of the road.

In all, over $1,100,000 of this class of subscriptions were obtained
for the La Crosse company.

The modus operandi was for the farmer to subscribe to the stock,
give his note for the amount of the subscription, payable to the order
of tue company, secured by a mortgage on his farm, bearing from 8 to
10 per cent interest. The company then attached to said note and
mortgage its bond guaranteeing the payment of the note and mort-
gage, principal and interest, and in and by the terms of the bond
the note and mortgage were assigned to the holder, and such note,
mortgage, and bond were sold in the market together as one security,
‘and not separately, the note not indorsed. An agreement was also
given to the farmer by which the company agreed to pay the interest
on the note until it became due, in consideration of which the farmer
made an assignment of his prospective dividends on the stock so sub-
scribed for sufficient to pay said interest.

It is needless to say that this stock proved worthless and that the
farmers were compelled to pay their mortgages, and in very many cases
lost their farms. 7

CONCLUSION.

Sir, this extended review of the evidence of increasing rates
and vicious discrimination, of the methods of railroad building,
overceapitalization, and reckless speculation, demonstrates the
necessity of the valuation of railroad property as an indispensa-
ble basis for securing to the people of this country just and
reasonable rates. Before this bill becomes a law I trust that
the amendment which I shall offer, or some better one, will be
incorporated, making full and complete provision at an early
date for the true valuation of all the railroad property of the
United States.

I can not refrain from suggesting, Mr. President, that the
railroads of this country can no longer afford to oppose this
valuation. It is best for them that it should be known. They
contend that their railroads are worth the amount for which
they are capitalized. The public contends that the capitaliza-
tion is grossly in excess of the fair value and not a law-
ful basis for taxing transportation. This great issue between
the public and the railroads can be juggled with no longer.
It can not be settled by legislation which palliates the wrong.
It must be settled by getting the true value, the fair value of
railway property. If there is to be an end of antagonism and
dissension between the people and the transportation companies,
it can be found, sir, in no other way.

Mr. President, when it is remembered that the Interstate Com-
merce Commission is the, only tribunal that stands between the
railroads and the public; when it is considered that the power
conferred upon the Commission is the power of Congress itself ;
that the Commission really represents the Government of the
United States, and when we test the bill before us by the obliga-
tion of Congress to guard in full measure the public interest
with all the sovereign power of the Federal Government, does

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not the proposed law seem to. fall short of a just and compre-
hensive treatment of a great subject of legislation?

I would not be unfair. The bill is not bad in its pro-
visions, but weak because of its omissions. I do not believe
that the bill is framed to meet the demands of “special inter-
ests.” Nor has any broad consideration of public interest domi-
nated its construction.

It has neither ill intent nor high purpose. Expediency seems
to have been the controlling factor in framing it.

It seems a response to the impelling necessity for some legis—
lation.

It is probably just to the members of the committee who
joined in reporting this bill to the Senate to say that it is their:
measure of the willingness of Congress to legislate on the sub-
ject; that it is as strong a bill as they believe could pass the
Senate. But if this bill is not amended to meet the public need,
if it should pass without being strengthened and improved, so
as to make it a basis upon which to build substantially in the
future, then it may as well be understood now that it will not
quiet public interest nor prevent further demands. It will
become the issue of a new campaign, more certain, more definite,
and more specific than ever before.

This session of Congress will be but the ‘preliminary skir-
mish of the great contest to follow. On the day that it is
known that only the smallest possible measure of relief has
been granted the movement will begin anew all over the country
for a larger concession to public right. That movement will not
stop until it is completely sticcessful. The only basis upon
which it can be settled finally in a free country is a control of
the public-service corporations broad enough, strong enough,
and strict enough to insure justice and equality to all American
citizens.

Why pursue a shortsighted, temporizing course? Is it not
worse than folly to believe that a country like ours, with all its.
glorious traditions, will surrender in this war for industrial.
independence?

“Mr. President, the people of this generation have witnessed
a revolution which has changed the industrial and commercial
life of a nation. They haye seen the business system of a
century battered down, in violation of State and Federal
statutes, and another builded on its ruins.

They know exactly what has happened and why it has hap-
pened.

The farmer knows that there is no open, free competitive
market for anything he may produce upon his farm. He knows
that he must accept the prices arbitrarily fixed by the beef
trust and the elevator combination. He kpows that both of
these organizations have been given control of the markets by
the railroads.

The independent manufacturer knows that he no longer has
an open field and a fairly competitive chance to market his
product against the trust with its railroad interests.

The consumer knows that his prices are made for him by
those who control the avenues of trade and the highways of
commerce. The public has suffered much. It demands relief.

Mr. President, Senators in this discussion have avowed that
they were not to be influenced by popular clamor; that they
have no sympathy with bigotry that is blind to great railway

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enterprise and the value of the services which these corpora-
tions render to the public. It has been denounced as meddle-
some interference for anyone to question the right of the rail-
ways to fix the markets of this country and to control the
destination of its commerce. Public discussion in support of
this legislation is rebuked as ‘noisy declamation,” and we are
advised that public opinion should be scorned; that it is as
shifting as the sands of the sea.

It has been suggested by the Senator from Massachusetts
[Mr. LopeE] that we might safely, from time to time, adopt
“certain loose and general propositions” in the form of harm-
less resolutions, “which thunder in the index, and show that
we are properly aroused to the dangers arising from corpora-
tions generally and from railroads in particular, and which do
not commit us to any specific legislation.”

Sir, I respect public opinion. I do not fear it. I do not hold
it in contempt. The public judgment of this great country
forms slqwly. It is intelligent. No body of men in this coun-
try is superior to it. In a representative democracy the com-
mon judgment of the majority must find expression in the law
of the land. To deny this is to repudiate the principles upon
which representative democracy is founded.

It is not prejudice nor clamor which is pressing this subject
upon the attention of this body. It is a calm, well-considered
public judgment. It is born of conviction—not passion—and it
were wise for us to give it heed.

The public has reasoned out its case. For more than a gen-
eration of time it has wrought upon this great question with
heart and brain in its daily contact with the great railway cor-
porations. It has mastered all the facts. It is just. It is
honest. It is rational. It respects property rights. It well
knows that its own industrial and commercial prosperity would
suffer and decline if the railroads were wronged, their capital
impaired, their profits unjustly diminished.

But the public refuses longer to recognize this’subject as one
which the railroads alone have the right to pass upon. It de-
clines longer to approach it with awe. It no longer regards
the railroad schedule as a mystery. It understands the mean-
ing of rebates and “ concessions,’”’ the evasions through “ pur-
chasing agents” and false weights, the subterfuge of “ dam-
age claims,” the significance of “ switching charges,” “ midnight
tHriffs,’ “milling in transit,” “tap-line allowances,“ underbill-
ing,” and “demurrage charges.” It comprehends the device
known as the “industrial railway,” the ‘terminal railway,”
and all the tricks of inside companies, each levying tribute upon
the traffic. It is quite familiar with the favoritism given to
express companies, and knows exactly how producer and con-
sumer have been handed over by the railroads, to be plundered
by private car and refrigerator lines, in exchange for their
traffic.

The public has gone even deeper into the subject. It knows
that transportation is vital to organized, society; that it is a
function of government; that railway lines are the public high-
ways to market; that these highways are established under
the sanction of government; that the railway corporation dic-
tates the location of its right of way, lays its tracks over the
property of the citizen without his consent, and that he must
market the products of his capital and his labor over this high-

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way, if at all, on the terms fixed by the railway corpora-
tion. Or, to say it arrogantly and brutally, as did the presi-
dent of the Louisville and Nashville Railway Company in
his testimony before the Interstate Commerce Commission, that
the public can pay the charge which the railroad demands, “ or
it can walk.” In short, sir, the public has come to understand
that the railway corporation is a natural monopoly, which has
been created by act of government, and that under existing con-
ditions the public is completely at the mercy of this natural
monopoly.

Because it is a natural monopoly, because it is the creature of
government, it becomes the duty of government to see to it that
the railway company inflicts no wrong upon the public, to com-
pel it to do what is right, and to perform its office as a common
carrier,

Sir, it is much easier to stand with these great interests than
against them. This was true when Adam Smith wrote his
Wealth of Nations, and it is true in 1906. Writing of the strug-
gle with monopoly in the eighteenth century, he said:

The member of Parliament who supports every proposition for
strengthening monopoly is sure to acquire great reputation for under-
standing trade, and also great popularity and influence with an order
of men whose numbers and wealth render them of great importance.
If he opposes them, on the contrary, and still more, if he have author-
ity enough to thwart them, neither the most acknowledged probity, nor
the highest rank, nor the greatest public service, can protect him from
the most infamous abuse and detraction, from personal insults, nor
sometimes from real danger arising from the influence of furious and
disappointed monopolists.

At no time in the history of any nation has it been so difficult
to withstand these forces as it is right here in America to-day.
Their power is acknowledged in every community and manifest
in every lawmaking body. It is idle to ignore it. There exists
all over this country a distrust of Congress, a fear that monopo-
listic wealth holds the balance of power in legislation.

Mr. President, I contend here, as I have contended upon the
public platform in Wisconsin, and in other States, that the
history of the last thirty years of struggle for just and equitable
legislation demonstrates that the powerful combinations of or-
ganized wealth and special interests have had an overbalancing
contro] in State and national legislation.

For a generation the American people have watched the
growth of this power in legislation. They observe how vast
and far-reaching these modern business methods are in fact.
Against the natural laws of trade and commerce is set the ar-
bitrary will of a few masters of special privilege. The prin-
cipal transportation lines of the country are so operated as to
eliminate competition. Between railroads and other monopolies
controlling great natural resources and most of the necessaries
of life there exists a “community of interests” in all cases
and an identity of ownership in many. They have observed that
these great combinations are closely associated in business for
business reasons; that they are also closely associated in
politics for business reasons; that together they constitute a
complete system; that they encroach upon the public rights,
defeat legislation for the public good, and secure laws to pro-
mote private interests.

Is it to be marveled at that the American people have become
convinced that railroads and industrial trusts stand between
them and their representatives; that they have come to believe

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that the daily conviction of public officials for betrayal of pablic
trust in municipal, State, and national government is but a sug-
gestion of the potential influence of these great combinations
of wealth and power?

During this debate there has been auch talk about the coun-
try having “ hysteria.” Magazine writers and press correspond-
ents have been denounced, and there would seem to be an agree-
ment that they are to be pursued and discredited, lest they
lodge in the popular mind a wrongful estimate of the public
service.

Sir, it does not lie in the power of any or all of the maga-
zines of the country or of the press, great as it is, to de-
stroy, without justification, the confidence of the people in the
American Congress. Neither can any man on earth, whatever
his position or power, alter the settled conviction of the intelli-
gent citizenship of this country when it is grounded on fact
and experience. It rests solely with the United States Senate
to fix and maintain its own reputation for fidelity to public
trust. It will be judged by the record. It can not repose in
security upon its exalted position and the glorious heritage of
its traditions. It is worse than folly to feel, or to profess to
feel, indifferent with respect to public judgment. If public
confidence is wanting in Congress, it is not of hasty growth,
it is not the product of “ jaundiced journalism.” It is the result
of years of disappointment and defeat. It is the outgrowth of
a quarter of a century of keen, discriminating study of public
questions, public records, and the lives of public men.

In the Supreme Court, midway between the Senate and the
House, Mr. Justice Brewer has, for a quarter of a century, in-
vestigated, analyzed, and construed the legislative work of Con-
gress. A keen and critical observer of men and events, he can
speak with wisdom on the development and tendencies of the
day, and no man will dare to say that he speaks in passion or
with any ulterior purpose.

In an address on “ The ethical obligation of the lawyer as a
lawmaker,” before the Albany Law School, June 1, 1904, he
said:

No one can be blind to the fact that these mighty corporations are
holding out most tempting inducements to lawmakers to regard in their
lawmaking those interests rather than the welfare of the nation.

Senators and Representatives have owed their places to corporate
influence, and that influence has been exerted under an expectation, if
not an understanding, that as lawmakers the corporate interests shall
be subserved. * * *

The danger lies in the fact that they are so powerful and that the
pressure, of so much power upon the individual lawmaker tempts him
to forget the nation and remember the corporation. And the danger is
greater because it is insidious. é

There may be no written agreement. There may be, in fact, no agree-
ment at all, and yet, when the lawmaker understands that the power
exists which may make for his advancement or otherwise and that it
will be exerted according to the pliancy with which he yields to its
solicitations, it lifts the corporation into a position of constant danger
and menace to republican institutions.

For the first time in many years a great measure is before
this body for its final action. The subject with which it deals
goes t6 the very heart of the whole question. Out of railroad
combination with monopoly and its power over legislation comes
the perilous relation which Mr. Justice Brewer says “lifts the
corporation into a position of constant danger and menace to
republican institutions.”

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118

Sir, we have the opportunity: to meet the demands of the
hour, or we may weakly temporize while the storm continues to
gather.

On Plymouth Rock eighty-six years ago Daniel Webster, look-
ing with prophetic vision into the century beyond, uttered these
words, which fall upon this day and generation as a solemn
mandate:

As experience may show errors in our establishments we are bound
to correct them, and if any practices exist contrary to the principles of
justice and humanity within the reach of our laws or our influence, we
are inexcusable if we do not exert ourselves to restrain and abolish
them.

Mr. President, our responsibility is great; our duty is plain.
If a true spirit of independent, patriotic service controls Con-
gress, this bill will be reconstructed on the broad basis of pub-
lic intérest. ;

I thank Senators for their attention throughout this pro-
tracted address. [Applause in the galleries.]

The VICE-PRESIDENT. Manifestations of applause by the
occupants of the galleries are forbidden by the rules of the
Senate.

APPENDIX A,

Reviews of evidence submitted before committees of Congiess, 1902-1905,
showing condition of railway service and abuse of monopoly power by
common carriers—discriminations and overcharges.

The complaints made to the Interstate Commerce Commission and to
the committees of Congress have established three propositions.

First, discriminations are made by common carriers; second, trans-
portation charges have advanced; third, the railroads delegate to
others——-private-car, freight, and refrigerator lines—important func-
tions which should only be performed by Government or responsible
common carriers. These companies do with impunity that which if
done by common carriers would be criminal.

The evidence brought to light the many forms of discrimination which
are practiced. There were instances of discriminations against places,
against persons, and against commodities. There were discriminations
shown in the published tariff rates and in the commodity rates and
classifications. It was established that rebates, direct and indirect,
special concessions providing additional servece or regular service at
less than the published rates, were given to favored shippers. Manu-
facturer and jobber, producer and consumer complained. The com-
plaints were confined to no one section of the country. They came
from every section. Every section suffers in some particular and some
in every particular. .

DISCRIMINATIONS AGAINST LOCALITIES.

Probably the greatest amount of complaint made before the com-
mittees of Congress was of discriminations against localities. The
railroads, following the policy of centralizing trade and industry, so as
to give to them the greatest amount of transportation and the longest
haul of freight, established a system of discriminations designed to
ruin all centers or localities not so situated as to serve these ends and
to promote and build up those centers and localities which would sat-
isfy their requirements in these particulars. The public interest was
not considered. The social economy of serving a given territory from
the center which naturally would serve it best and cheapest was re-
jected as heresy. The railroad managers demand large tonnage, long
hauls, large gross revenues.

The railroads are fighting nearly every interior center between the
Atlantic coast and the head of the Great Lakes; every center between
the Great Lakes and the Missouri River, and every center between the
Missouri River and the Pacific coast. Only where water competition
enters to control the rapacity of carriers is there any peace or feeling
of security.

Interstate Commerce Commissioners testified that hundreds of com-
plaints against the railroads are received which are never heard of
because the complainant wants to know, before making the complaint
formal, whether the Commission can grant the relief and afford protec-

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119
‘tion from the wrath of the railroad. The railroad is a corporation
and may be without a soul and without sentiment, but it has a policy.
That policy spells ruin for any helpless enterprise or locality or indi-
vidual which shall attempt to interfere with its programme of selfish
aggrandizement.
DISCRIMINATION AGAINST CITY OF DANVILLE, VA.

This illustration of the city of Danville is possibly somewhat extra-
‘ordinary. But there are certainly many other equally aggravated
eases. The circumstances and conditions are typical of hundreds of
places all over the United States. The city of Danville officially sub-
mitted, through Judge Aiken, of that city, a petition passed by the
common council and the board of aldermen and signed by the city
officials. This petition sets forth the exact nature of the situation.
It is concise and to the-point. It is as follows:

DANVILLE, VA., April 15, 1905.
To the Senate and House of Representatives of the United States:

_ The petition of the city of Danville respectfully represents that it is
situated in the southern part of the State of Virginia, in Pittsylvania
County, on the Dan River, at a point on the Southern Railroad where
the different branches of that common carrier from Alexandria to the
north, Richmond to the northeast, Norfolk to the east, and the line
from the south and west unite, and has a population of 18,000 or
‘20,000 inhabitants, and numerous manufactories and mercantile enter-
prises, besides being a large market for the sale of leaf tobacco. That
its principal commercial rivals are the cities of Lynchburg and _ Rich-
mond, Va., the former 65 miles to the north, and the latter 140 miles to
the northeast of Danville.

Prior to the year 1886 petitioner enjoyed equal freight-rate advan-
tages with the said cities of Lynchburg and Richmond through the com-
petition of the railroad runnings north from Danville to Alexandria,
known_as the ‘‘ Virginia Midland Railroad,” but in that year the South-
ern Railroad Company purchased the Virginia Midland and deprived
Peruioner of the competing line and of its equal freight-rate advan-
ages.

That in the year 1890 petitioner, to obtain another competing line of
railroad, subscribed a large sum to the construction of a railroad from
Norfolk to Danville, which road was built, but after operation a few
years as-an independent line it was purchased by the said Southern
Railroad Company, and since said purchase the petitioner—the city
of Danville—has had no competing line of railroad, but in the matter
of freight and passenger rates has heen entirely subject to the will
and mercy of said Southern Railroad Company.

That the said Southern Railroad Company, and its connecting rail-
ways and steamship lines engaged in interstate commerce, have, by
an agreement between them, established in the State of Virginia cer-
‘tain favored points to which they deliver commodities transported
by them from the several States for less rate of transportation than
they demand and receive for the transportation of similar commodities
under similar conditions to other points in the State of Virginia, the
haul and distance to said other points being shorter than to the favored
points, by which the said lines of railway and steamship lines give
undue preference and advantage to the persons and localities at said
favored points. Two of these favored points are the said cities of
Lynchburg and Richmond; and petitioner, the city of Danville, and the
said two cities have been for many years active competitors for trade
in the same territory, and the territory from which petitioner, by
reason of its natural and superior location in the tobacco-growing
region of Virginia and North Carolina, has for more than one-half a
century drawn its patronage and trade support.

Petitioner states the said Southern Railroad and its waterway con-
nections between Norfolk and the various cities of New England and
the Middle States have established and put in force rates of transporta-
tion by which commodities and merchandise are transported by them
from said northern and eastern points by way of Norfolk and Pinners
Point through the city of Danville and delivered for less rates of
transportation than similar commodities and merchandise from the
same point over the same route are transported and delivered in the
city of Danville. . 3 : 4 |

To illustrate the excessive rate of discrimination against the city of
Danville, petitioner will state that the said carriers classify freight
for transportation, and on class 1, 2, 3, 4, 5, 6, class A, B, C, D, B, F,
and H, from Boston and Providence via Norfolk over the said rail-
road through Danville to Lynchburg, the long haul, the rate is, re-
spectively, 54, 47, 38, 25, 22, 18, 18, 22, 18, 22, 36, 25, 25, and 18
cents per 100 pounds. On the same classes from the same point to

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Danville, the short haul, the rate is 75, 63, 52, 38, 34, 29, 29, 32,
29, 27, 34, 56, 38, 71, and 26 cents per 100 pounds, making a dis-
crimination against Danville, in favor of Lynchburg, of 39, 34, 37,
52, 54, 61, 68, 45, 61, 50, 56, and 44 per cent on the respective classes.
From New York, Philadelphia, and Baltimore over the same route sub-
stantially the same rate of discrimination is made against Danville and.
in favor of Lynchburg on the different classes of freight. :

Corresponding rates of discrimination are also enforced against the
city of Danville and in favor of the cities of Lynchburg and Richmond
on all property transported by the said Southern Railroad and its con-
nections from points south and west of Virginia, the property being
carried by said railroad through the city of Danville, the short haul,
to the said favored cities, the long haul. Whenever merchandise
destined for Danville from points in the West and Northwest over car-
riers connecting with the said Southern Railroad at Lynchburg reaches.
Lynchburg, the said Southern Railroad takes advantage of the carry-
ing monopoly it has over property going to Danville and adds on most
unreasonable rates from Lynchburg to Danville. For example, the
rate on pork and bacon from Chicago to Lynchburg is 27 cents per
ewt.; to Danville, 40 cents per cwt. The Southern Railroad charges
13 cents per ewt. for hauling 65 miles that which other roads charge
27 cents for hauling over 1,000 miles. The rate on refined sirup from
Chicago to Lynchburg is 27 cents per cwt.; to Danville, 43 cents per
ewt. The Southern Railroad charges 16 cents per cwt. for hauling 65
miles for what other roads haul over 1,000 for 27 cents per cwt. A
carload of matches is shipped from Detroit to Lynchburg for 24% cents.
per cwt. Danville is charged 47$ cents per cwt. The Southern
Railroad charges 23 cents for hauling 65 miles what other roads haul
600 miles for 24 cents. On all other commodities, including grain,
flour, ship-stuff, and other staple necessities purchased by Danville mer-
chants in the West, as soon as they reach the Southern Railroad the
same unreasonable and oppressive rates of freight are enforced against
them. Thus it is shown that petitioner, the city of Danville, and its
inhabitants are hedged on every side by the discriminating and_un-
reasonable freight rates imposed by the said Soutbern Railroad Com-
pany, and are absolutely barred from the privilege of competing with
their commercial rivals for the trade of the public. | i

Petitioner further shows that several years ago it presented its peti-
tion_and complaint, setting forth in detail the wrongs herein stated, to
the Interstate Commerce Commission, and after a hearing upon evidence
the Commission decided that the rates put in force against the city of
Danville should cease, and at the same time prescribed what it consid-
ered a reasonable rate to Danville; but said Commission not having
power to enforce its order the said Southern Railroad did not obey it,
but, on the contrary, continued to demand and receive from petitioner
and its inhabitants the discriminating and unreasonable rates com-
plained of. Petitioner begs to refer to the record of the case of the city
of Danville against the Southern Railroad Company, recorded in the
eighth volume of the Interstate Commerce Cases, in support of the alle-
gations of the petition. And petitioner further avers that the rates in
force then are in force now against the city of Danville and its inhabit-
ants. The rate from Philadelphia, New York, and other northern mar-
_kets via Norfolk over the water and railway lines of the Southern
Railroad through Danville to Lynchburg, the long haul, on sugar is 21%
cents per cwt., while the rate over the same route to Danville, the short
haul, is 264 cents per cwt. On leather over the same route to Lynch-
burg the rate is 47 cents per cwt., and to Danville 64 cents per cwt.
On coffee over the same route to Lynchburg the rate is 25 cents per
ewt., and to Danville 36 cents per cwt. On hardware over the same
route to Lynchburg the rate is 47 cents per ecwt., and to Danville 62
cents per cwt.

That from New Orleans over the lines of the Southern Railroad
through Danville to Richmond and Lynchburg the rate on molasses is
26 cents, sugar 32 cents, coffee 40 cents, rice 32 cemts, and on the
same articles to Danville 37, 63, 43, and 51 cents.

That from Atlanta, Ga., the rate on furniture to Lynchburg is 34
cents per cwt., and to Danville 64 cents per cwt.

That on grain from Louisville and Cincinnati over the same line
through Danville to Lynchburg the rate is 12 cents per cwt., and to
Danville 21 cents per cwt.; on flour 12 cents per cwt. to Lynchburg
and 24 cents per cwt. to Danville; on meat and lard to Lynchburg 15
cents per cwt., and to Danville 27 cents; and that from every point in
the South and West and on all commodities the rate of discrimination
is of similar proportion against the city of Danville.

Besides the cities of Lynchburg and Richmond, with which Danville
has traded in competition for over fifty years, the said Southern Rail-
road a to discriminate against Danville in favor of two small
121

towns of not more than one-quarter of the population of Danville—the
towns of Martinsville, 40 miles to the west, and South Boston, 30 miles
to the east, where the Norfolk and Western Railroad competes with the
Southern—and said Southern Railroad is now transporting commodities
through Danville to both of those points at a less rate of freight than to
Danville. —

Petitioner in conclusion states that the wrongs and injuries com-
plained of, by which these favored cities, its nearest commercial rivals,
trading in the same territory to which Danville looks for frade, are
given an unjust advantage of the latter, have been going on for eighteen
years and until the consequence is becoming disastrous to Danville. - It
is depriving it of its trade, cutting down its population, increasing the
cost of living to its people, diminishing the value of its real estate, and
increasing the burden of taxation on its citizens in order to meet the
interest on its corporate debt and the expense of its municipal govern-
ment. Petitioner asserts that new business enterprises and capitalists
seeking investments will not come to the city of Danville on account of
the freight discrimination against it, and that extensive enterprises
have refused to come and have gone elsewhere for that reason,

Petitioner is advised that railroads are public highways, and the
fundamental characteristic of public highways is the right of all per-
sons to use them upon equal terms. For railroads to deny this equality
is a misuser of their franchises, and to permit them to build up one city
or community at the expense of another, or to oppress the inhabitants
of one community with burdens in order that favors may be bestowed
upon others, is, it is respectfully submitted, an indefensible act of
government.

This petitioner therefore prays that the interstate-commerce act
may be so amended as to prohibit such undue advantages as are given
the said favored cities over the city of Danville, and as to allow the
Interstate Commerce Commission not only. to decide what are discrimi-
nating and unreasonable rates on freight, but to prescribe and fix rates
and to enforce its orders and judgments when they are made.

And petitioner will ever pray, etc.

, City OF DANVILLE, Va.,
By E. L. Swain,
President of the Board of Aldermen of the
Council of the City of Danville.
. P. Hopnerr,
President of the Common Council of the City of Danville.

The introduction of this petition occasioned an interesting con-
troversy before the committees of the Senate. The Southern Railway
Company, so it is generally believed at Danville at least, procured the
appearance before the committees of six citizens of Danville, represent-
ing, as they declared, the ‘big business” interests of Danville. While
they did not deny the statements of discriminations as presented by
the petition and by Judge Aiken, they declared that Danville was not
suffering from these discriminations and that in their business they
found the rate satisfactory. This petition they declared was passed
at a secret meeting of the city council and represented a manufactured
sentiment.

The news of this stroke of railroad diplomacy, received at Danville,
aroused a storm of public indignation. A mass meeting was held the
following night, at which practically the entire citizenship of Danville,
excepting the ‘six gentlemen,’’ was represented. This mass meeting
unanimously denounced the action of these “big business repre-
sentatives”’ as ‘prejudicial and detrimental to the best interests of
the city and especially to its mercantile and commercial growth and
prosperity.”” They sent a representative of the city before the commit-
tee to expose the incentives of the six self-appointed representatives
and the malice of their misstatements. And it developed that in no
particular did these gentlemen correctly represent the conditions or
their effects. Moreover, it appeared that of these six men three were
directors in branch lines of the Southern Railway and also directors in
a cotton milling company, which was generally believed to receive spe-
cial rates on transportation from the Southern Railroad. One of these
three was also a merchant and generally believed to be favored in his
transportation service by the Southern Railway. A fourth member of
this delegation was a director in another cotton milling company,
which likewise received special rates, and also president of a bank
which had recently been given the Southern Railway’s account. The
fifth member was a manufacturer of furniture also receiving special
rates, and the sixth man was a politician, one of the two members in
we city council of thirty who voted against sending the petition to

ongress.

Mr. Withers, who appeared to represent the city and the mass meet-
ing, showed that, with reference to outgoing freights, which these

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entlemen had said were reasonable, leaf tobacco was the most vitally
mportant of this traffic, constituting about 45,000,000 pounds per
year. Much of this is consigned to Louisville, Ky., for manufacture.
The rate from Lynchburg and Richmond was 24 cents a 100 pounds,
while from Danville—66 to 140 miles Jess distance and over the same
line—the rate was 40 cents.

Being questioned by the committee with reference to the coal rates,
Mr. Withers declared that the discriminations on coal to Danville from
the various western fields were absolutely prohibitive except_from a
‘single source, over a single line—the Norfolk and Western. He said:
“We never see a pound of Chesapeake and Ohio coal * * * we
never see a pound of Southern Railroad coal. We are not permitted
to haul any of the Tennessee coal, the West Virginia coal, the Poca-
hontas, or from other western fields, and, further, the haul from Lynch-
purg to these fields is $1.60 per ton, while the haul to Danville is $2.30,
a discrimination of 70 cents for a 65-mile haul.” And he filed with
the committee the coal tariffs, which are full of these discriminations.

This example of Danville illustrates the situation. Danville is an
old offender. It refused to accept the yoke of the Southern Railway.
In three instances has it attempted by subsidizing competing lines to
Danville to break the power which the Southern Railway held over
that city. The aggregate municipal indebtedness incurred for this pur-
pose amounts to about $400,000 and constitutes over a third of the total
interest-bearing indebtedness of Danville. Each time a competing line
has been so built it has finally passed into the control, by lease or
ownership, of the Southern Railway. The city is to-day without any
benefit from these great expenditures, and it is appealing to Congress
for some protection from the reprisals of the Southern Railway.

DISCRIMINATIONS AGAINST THB CITY OF ATLANTA, GA.

Atlanta, like Danville, is situated advantageously for industrial and
commercial intercourse with a large surrounding territory—advan-
tageously in all respects except railroad transportation. Atlanta has
offended, It has complained. Its rates have been raised; its busi-
ness has been taken away and bestowed upon favored competitors.
It suffers most in competition with the coast city of Savannah,
which is protected by water competition; but it also complains of
discriminations as compared with other interior cities. Atlanta sub-
mits that the average distance to seventy-eight southeastern towns of
4,000 population is from— ’

Miles.
AUlENtan oso st ee tee srt ea a ee a eee to et 288
Savannah
Nashville

 
 

Birmingham

_ Despite the central location of Atlanta, the general and systematic
discrimination in freight tariffs precluded the development of the job-
bing and manufacturing business. An instance cited before the Com-
mission was the removal of the Pittsburg Plate Glass Company from
Atlanta to Savannah, taking with it a weekly pay roll of about $1,000
and 300 to 500 of the city’s population. The rate on glass from Pitts-
burg was 66 cents per 100 pounds to Atlanta, as against 31 cents to
Savannah. Because of this discrimination the company could ship to
Savannah and distribute its product into Atlanta territory at so much
eer i than from Atlanta that it was constrained to move
its plant.

As illustrating the discriminations against Atlanta jobbers, the rates
on boots and shoes from Boston to Atlanta and neighboring centers
were cited: Atlanta, $1.14; Augusta, $0.96; Charleston, $0.70; Jack-
sonville, $0.73; Knoxville, $1; Macon, $1.09; Memphis, $1; Mobile,
$0.75; New Orleans, $0.95, and Nashville, $0.91.

These discriminations are maintained in the face of the fact that
Atlanta handles about 50 per cent more boots and shoes than any one
of the other points. It is notable that these discriminations are not
so much in favor of any particular point, but particularly against the
city of Atlanta.

DISCRIMINATIONS AGAINST THE CITY OF ST. LOUIS.

The city of St. Louis, in many lines of its business, affords a remark-
able example of the policy of the railroads in limiting, so far as within
their power lies, the number of basic points or_commercial centers.
At the city of St. Louis there is the Merchants’ Bxchange, an organi-
zation with a membership of 1,790. It is said to be “the leading com.
mercial organization of the Mississippi Valley.” There is also the St.
Louis Manufacturing Association, embracing 250 of the principal manu-
facturing concerns of St. Louis. These two organizations appeared
through a common representative, Mr. William Kennett, before the

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committee of the Senate. Mr. Kennett presented the situation, show-
ing that the rates at St. Louis were in many respects unreasonable,
discriminatory, and unstable. He submitted a series of exhibits pre-
pared by_the St. Louis Traffic Bureau, setting forth this situation in
etail. The St. Louis Traffic Bureau is jointly supported by the Mer-
chants’ Exchange and the Business Men’s League of that city.

One of these exhibits, for instance, gives the rates on bags and bur-
lap, C. L. and L. C. L., from St. Louis and from New Orleans to forty-
three manufacturing centers and consuming ee distributed over
Illinois, Kentucky, Indiana, Ohio, Missouri, and Wisconsin. Through-
out this statement, when the great discrepancy in distance is taken
into account, there appear unwarranted discriminations in the rates
against St. Louis as compared with New Orleans. |

Examples of thes¢ rates on carload shipments are as follows:

To Cairo, Ill., from New Orleans, 555 miles, 13 cents per 100 pounds;
from St. Louis, 149 miles, 14% cents per 100 pounds.

To Hickman, Ky., from New Orleans, 521 miles, 13 cents per 100
pounds; from St. Louis, 214 miles, 18 cents es 100 pounds.

To Louisville, Ky., from New Orleans, 789 miles, 13 cents per 100
pounds; from St. Louis, 271 miles, 17 cents per 100 pounds.

To Cincinnati, Ohio, from New Orleans, 830 miles, 14 cents per 106
pounds; from St. Louis, 336 miles, 17 cents per 100 pounds.

To Milwaukee, Wis., from New Orleans, 997 miles, 17 cents per 100
pounds; from St. Louis, 365 miles, 20 cents per 100 pounds.

‘ Examples of these rates on less than carload shipments are as fol-
ows:

To Cairo, Ill., from New Orleans, 555 miles, 25 cents per 100 pounds,
from St. Louis, 149 miles, 19 cents per 100 pounds.

To Evansville, Ind., from New Orleans, 709 miles, 25 cents per 100
pounds; from St. Louis, 162 miles, 19 cents per 100 pounds.

To Cincinnati, Ohio, from New Orleans, 830 miles, 27% cents per
100 pounds; from St. Louis, 336 miles, 25 cents per 100 pounds.

To Lexington, Ky., from New Orleans, 748 miles, 274 cents per 100
pounds; from St. Louis, 376 miles, 3834 cents per 100 pounds.

Another exhibit sets forth that St. Louis is discriminated against in
neighboring southeastern cities as compared with Atlantic seaboard
and other interior points. Rates are quoted comparatively from St.
Louis and from Richmond, Lynchburg, and Norfolk, Va., to six lead-
ing business and commercial centers in Alabama and Georgia. This
exhibit embraces about 290 rates, and without notable exception thesa
rates uniformly indicate this situation of the discrimination against
the city of St. Louis as contended by Mr. Kennett. These rates ara
given on the six merchandise classes in each instance. I have com:
puted the average rate and the average discrimination on the several)
classes per 100 pounds of freight in a few typical instances.

For example, the distance from St. Louis to Florence, Ala., is 379
Miles, and from Cincinnati is 427 miles. The St. Louis rates average
63 cents higher per 100 pounds. Similarly the rates to Florence from
St. Louis average 14.8 cents higher than from Louisville, Ky., and 7%
cents higher than from Savannah, Ga.

To Birmingham, Ala., from St. Louis, 499 miles, these rates average
6% cents higher than from Cincinnati, 481 miles, and 15.8 cents higher
than from Savannah, 423 miles.

To Montgomery, Ala., the rates from St. Louis, 609 miles, average
64 cents higher than from Cincinnati, 577 miles, and 24% centy, higher
than from Richmond, Va., 754 miles.

To Atlanta, Ga., from St. Louis, 611 miles, the rates average 27
cents higher than from Richmond, Va., 555 miles.

To Macon, Ga., from St. Louis, 699 miles, the rates average 14.8
cents higher than from Cincinnati, 580 miles; and 14.8 cents higher
than from Louisville, 560 miles, and 26.2 cents higher than from Rich-
mond, 611 miles.

To Columbus, Ga., from St. Louis, 657 miles, the rates average 23.7
cents higher than from Richmond, Va., 676 miles.

Because the railroads fail to make a through tariff of reasonable
rates from St. Louis into the ‘‘ Cotton Belt” territory of Arkansas, it
is cheaper to ship goods—cotton piece goods, for instance—into Arkan-
sas on the local rate, and then to rebill 1o destination within the State
on the Arkansas State railroad commissioner’s tariff. For example,
the through rate from St. Louis to Fordyce, Ark., is $1.15 per 100

ounds. The rate from St. Louis to Pine Bluff, Ark., is 60 cents per

00 pounds, and the rate from Pine Bluff, Ark., to Fordyce, Ark., under
the State railroad commissioner’s tariff is 24 cents. The total of the
two local rates making 84 cents. This gives the excess representing
the unreasonableness of the through rate at 29 cents. A similar situ-
ation is shown to prevail with respect to some fifteen other points in
this territory.
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Another statement submits the rates from St. Louis, from Rich-
mond, Lynchburg, and Norfolk, Va., to the same points. The distance
from the Atlantic seaboard and other Virginia cities is about twice as
great as from St. Louis. The rates on less than carload shipments from
the Virginia cities range from 80 cents to 53 cents per 100 pounds,
while from St. Louis they range from $1.17 to 74 cents per 100 pounds,
Similar discriminations prevail on commodity rates. For instance, on
L. C. L. shipments of bagging the rate from the Virginia cities is 844
cents, and from St. Louis, one-half the distance, 74 cents per 100

ounds. On canned goods from the Virginia cities it is 70 cents, and
rom St. Louis 74 cents per 100 pounds; on roasted coffee from the
Virginia cities 63 cents, and from St. Louis 74 cents per 100 pounds.

Another statement shows comparatively the rates on wheat, corn,
and oats from St. Louis and from Kansas City to eighty or ninety con-
suming points in Arkansas and Louisiana. The Kansas City rates pre-
sented range all the way from 28 to 12 cents per 100 pounas. In every
instance the St. Louis rate is exactly 2 cents per 100 pounds bigher,
representing a discrimination of from 7.2 to 16.7 per cent against St.

- Louis in favor of the Missouri River points. This discrimination
amounts to 0.64 cent per bushel on oats, 1.12 cents on corn, and 1.2
cents on wheat. When grain men have testified that from one-sixteenth
to one-eighth of a cent per bushel on grain will determine where the
business will go, it is evident these discriminations are s fficient to
exclude St. Louis from competition in the distribution of grain to these
Arkansas and Louisiana points.

Similarly the roads discriminate against St. Louis in the rates on
grain from producing points as compared with the rates to Chicago
and New Orleans. This is done in many instances by refusing to
make a through tariff from producing points to St. Louis. The ac-
cepted reasonable differential from Kansas, Nebraska, Oklahoma, and
Indian Territory to Chicago, on account of the much greater distance, is
3 cents per 100 pounds over St. Louis. But the Santa Fe refuses to
make through tariffs from many points in these States to St. Louis.
The rates from these points therefore must be made up by combina-
tions of local rates. The totals of these locals to St. Louis in such
eases gives rates.on wheat 1, 2, 23, and even 8 cents per 100 pounds
higher than to Chicago, and 13%, 2, 3, 33, 4, and even 5 cents per 100
pounds higher on grain.

Another feature of the rate situation at St. Louis which occasioned
much serious complaint, is the instability of the differential main-
tained between the rates from St. Louis to neighboring and distant
markets and the rates from Kansas City and other Missouri River
points to the same markets. During a recent so-called ‘‘rate war,”
most violent fluctuations occurred in the relation between these rates
on grain, owing to discriminations and rate cutting in favor of Kan-
sas City, St. Joseph, Atchison, and Leavenworth, as against St. Louis.
Normally (that is for the greater part of the time) a reasonable dif-.
ferential is maintained favoring St. Louis to nearer points, but at
times, and without warning, these differentials are destroyed and some-
times even substituted by differentials favoring Missouri River. For
example, during the period in question, the normal differential of 4
cents per 100 pounds favoring St. Louis as against the Missouri River
in the rate to Memphis, which is only about 300 miles down the river
from St. Louis, was changed to a differential of 1 cent per 100 pounds
against St. Louis. To New Orleans the differential favoring St. Louis
of 7 ceyts per 100 pounds on grain for export was reduced to only 2
cents per 100 pounds. To Newport, Ark., as well as Hoxie, Walnut
Ridge and Nettleton, the favorable differential for St. Louis of 2 cents
was changed to an adverse differential of 4 cents. To New York,
Boston, Philadelphia, Baltimore, and Newport News the differential
favoring St, Louis of 8 cents per 100 pounds on grain was changed to
a differential against St. Louis of 3 cents per 100 pounds. And similar
fluctuations were complained of as compared with Omaha.

DISCRIMINATIONS AGAINST DENVER, COLO.

The city of Denver is another one of those intermediate points, sur-
rounded by a large consuming territory, which it could serve econom-
ically and to the mutual advantage of producer and consumer as a job-
bing center. But the railroads have decreed that it shall not be. They
have established distributing centers on the Missouri River, and ocean
transportation has established others on the Pacific coast. The dis-
criminations in the freight tariffs prohibit any extensive .jobbing busi-
ness between these extremes. Aside from purposes of favoratism to
Missouri River cities, this discrimination obviously subserves the rail-
road interests by preventing the development of adequate jobbing cen-
ters in the Denver section, and thereby perpetuating the long-haul traffic

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in the less than carload freight at high rates from the Missouri River
to all this territory.

It is the selfish interests of the railroads only that are considered.
The consumers want a convenient jobbing center; it is demanded by
the public interest generally. Naturally, Denver wants to do this
business and feels keenly the injustice which denies this privilege to
which its right is clear.

The Denver Chamber of Commerce and Board of Trade and the Den-
ver Freight Bureau, a shipper’s institution, united in sending Mr.
William A. Hover to Washington to lay the situation before the com-
mittee of the Senate. Mr. Hover submitted a most exhaustive state-
ment, setting forth in hundreds of illustrations and freight-rate com-
parisons the systematic discrimination which prohibits the commercial
development of the city of Denver.

Through all this extensive territory lying about Denver, extending
over Wyoming, Utah, New Mexico, and parts of Idaho and Montana,
there is no jobbing center of importance. The bulk of all merchandise
and supplies to all this territory must be shipped in by the retail dealer
from the head of the Lakes, Missouri River, or the Pacific coast, at
rates of freight ranging from $1 to $4 per 100 pounds. This con-
dition is maintained by the refusal of the carriers to make reason-
able rates to and from Denver, based on its relative nearness to the
sources of supply and its central location with reference to consuming

oints. Rates to Denver from eastern points are higher than to the

acific coast and as high as the rates to other interior points several
hundred miles farther west. The local rates fpom Denver to tributary
points are so high that, when added to the rdtes to Denver, the com-
bination is absolutely prohibitive of the distribution of traffic through
this center. As illustrations of this situation with reference to Colo-
pe consuming points, I take the following from Mr. Hover’s state-
ment :

‘““In making these comparisons I will in most cases, in order to save
time and a useless array of figures, speak in terms of first class.

“From Denver to Douglas the distance is 275 miles, from Omaha
to Douglas 584 miles, over a territory of about the same character and
at about the same cost of construction. The rate from Denver is
$1.11%4 per 100 pounds; from Omaha, $1.86. Adding to the Denver
rate the Colorado common-point rate of $1.25 makes the Denver com-
bination $2.364 to Douglas. The Denver rate to Douglas is built up as
follows: The Union Pacific and Colorado and Southern combine on a
rate to Orin Junction, distant from Denver 261 miles, of 80 cents. To
this is added a prohibitive local by the Fremont, Elkhorn and Missouri
Valley Road of 314 cents arbitrary from Orin Junction to Douglas, a
distance of 14 miles. :

“Mo Casper the Denver rate is $1.52, distance 328 miles; from
Omaha, $1.90, distance 637 miles. Combination via Denver, $2.77,
ce prohibitive local from Orin Junction of 72 cents for a 67-mile

aul.”

With reference to discriminations against Denver in the nearby
consuming territory of Wyoming, a similar situation is set forth.
Similar discriminations are also presented for those portions of Idaho,
which, because of the direct railway connections are in a measure
tributary to Denver, as a distributing center.

In the case of Utah gone a still more aggravated situation is
depicted. Mr. Hover sai

“Tt is in dealing with the Utah situation that we find the most ex-
treme instances of discrimination. Utah can more properly be con-
sidered Denver territory in competition with Missouri River points
than can localities in either Wyoming, Idaho, or Montana. The State
of Utah bounds Colorado on the west, and depends for transportation
of westbound commodities on two lines of railroad owned and con-
trolled by two of our great transcontinental systems—namely, the
Harriman system and the Gould system—by the former over the Union
Pacific from Omaha to Ogden, and by the latter over the Rio Grande
Western from Grand Junction, Colo., to Salt Lake City, the Rio
Grande Western being the outlet for both the Colorado Midland and
the Denver and Rio Grande at Grand Junction. From Denver, through
the medium of the two latter roads, we have direct connection with
Utah, and a certain percentage of the westbound tonnage consigned
to Utah points passes through Denver over one or the other of these
two lines. ‘Therefore Denver can justly claim the right of distribu-
tion into this territory on the same terms that are accorded Missouri
River towns, St. Louis, Chicago, and other eastern points. On the

resent basis of rates, however, Denver merchants can not even get
nto Utah on as favorable a hasis as the merchant located in San
Francisco who ships his goods through Denver to San Francisco and
back again to Salt Lake City, which fact I will later prove.

6758
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“The following are the competitive class rates to Utah common
points, consisting of Oyden, Salt Lake City, Spanish Fork, and in-
termediate points:

 

First. Second. | Third. |Fourth.| Fifth.

 

From Chicago and Duluth...
From Missouri River 1
From + an Francisco and California

common points .......--.--------.-- 1, 728 1.50] 1.274 1.07 - 88}
From Denver 1.85 1.60 1.36 1.15 96
Denver combination based upon the

Missouri River ........------------- 3.10 2.60 2.16 1.80 1.46

 

3. 10 .65 | $2.
“a | *2:00

5| g1.75| $1.45
2.30 0

1.43 1.18

 

 

 

 

 

 

“In other words, the Denver merchant is discriminated against in
favor of the merchant located on the Missouri River to the_ extent
of 80 cents, first class; 60 cents, second; 46 cents, third; 37 cents
fourth, and 28 cents, fifth, and this discrimination extends clear back
to Atlantic seaboard territory. Such commodities as we produce in
Denver are likewise discriminated against in favor of eastern cen-
ters. For instance, beer from our Denver breweries takes a 70-cent
commodity rate to Utah common points, and the same rate applies
from the Missouri River, notwithstanding that Denver is distant from
Omaha 572 miles and fyom Kansas City 640 miles. .On packing-house
products the rate fron! Denver is 73% cents, against $1.18 from the
Missouri River. Generally speaking, however, it is on the class rates
that the greatest discrimination exists. This difference against Denver
diverts practically all the business moving under class rates from
Denver to eastern centers. The situation as applied to Utah is par-
ticularly aggravated in view of the fact, as before recited, that San
Francisco merchants can ship through Denver, through Salt Lake City,
to San Francisco on a commodity rate and return the same goods to
Salt Lake City on the local rate, and for less than the same goods can
be unloaded in Denver and reshipped to Salt Lake City, notwithstanding
the fact that San Francisco is distant from and beyond Salt Lake City
826 miles, while Denver lies 627 miles to the east of that point. Te-
ferring to the above table of rates you will note that Denver pays $1.85
to Salt Lake City, a distance of 627 miles, against a return rate of
$1.724 from San Francisco and California common points to Salt Lake
City, a distance of 826 miles.

“TI will now proceed to show how the application of this combination
of rates will admit of the possibility, as above set forth; for instance,
a mixed car of drugs, patent medicines, chemicals, etc., takes a com-
modity rate from New York of $1.40 a carload to California common
points. This rate, combined with the local back of $1.72%, lays the
goods down in Salt Lake City for $3.1243. To Denver the same com-
modities take a water rate via Galveston of $2.33 per 100 pounds, or
an all-rail rate of $2.72 per 100 pounds. Adding to these rates the
local out of Denver to Salt Lake City of $1.85 brings the cost of these
commodities when shipped to and from Denver to $4.18, when the
water rate is taken advantage of, and $4.15 on the all-rail rate. I will
take the case of a wholesale boot and shoe dealer doing business in Den-
ver and in San Francisco; rubber boots and shoes take a commodity rate
from New York to San Francisco of $1.35 a carload. Adding to this
the local first class back to Salt Lake City of $1.72%, and the cost is to
the Salt Lake dealer $3.073. To Denver the wholesaler pays for his
good coming by way of the water line via Galveston $2.33, and if they
come by all rail $2.72. Adding to these figures the local of $1.85, it
will cost to lay them down in Salt Lake City $4.18 in the one instance,
and $4.57 in the other instance, as against the San Francisco rate of
$3.073. These comparisons can be multiplied almost indefinitely and
will apply to nearly every commodity handled by wholesalers located
at either point. The conditions as pertaining to Utah business are
more fully set forth, and comparisons more completely made in a table
which is marked ‘Exhibit G.’”

Similar discriminations are set forth in detail in the other exhibits
covering the rest of this Denver territory.

DISCRIMINATIONS AGAINST SPOKANE, WASH.

At Spokane a rate situation in many respects worse, if possible, than
at Denver is shown. Mr. Brooks Adams, who appeared before the
Senate committee on behalf of the Chamber of Commerce at Spokane,
presented a situation of grossest discrimination against Spokane as
compared with the coast cities 318 to 400 miles farther west. One

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127

reason for this discrimination is the competition which exists at coast
points with water transportation.

The rates on all supplies from eastern sources to Spokane are made
up by adding together the rates from the point of shipment to the
coast plus the local rates from the coast back to Spokane. ‘This makes
the cost of all commodities for consumption at Spokane much greater,
and the cost of living therefore much higher, than at the coast cities,
which receive supplies and material over the same lines and through
the city of Spokane. On class freight the amount of these discrimina-
tions per 100 pounds is as follows: First class, $1.48; second class,
$1.33; third class, $1.02; fourth class, 82 cents. On the carload
classes it ranges from 50 to 70 cents per 100 pounds; that is, it costs
the receiver of freight at Spokane this amount per 100 pounds more on
these several classes on all freight from points east of the mountains
than the cost of hauling the same freight through Spokane 400 miles
farther to the coast.

The carload traffic moves largely under commodity rates, and as
illustrations of the situation with regard to this traffic a table was
submitted showing these commodity rates, side by side, for Spokane
and the coast cities. This table embraces 83 commodity rates from
Boston, New York, Chicago, and the Missouri River points to Spokane
and to the coast cities, and covers carload shipments of 76 different
commodities. In every instance the rates to Spokane are very much
higher than to the coast cities about 400 miles farther west. A few
examples of these rates are as follows:

 

 

 

 
 
  
  

 

 

 

 

 

 

Rates per 100 | Excess for Spo-
pounds. kane.
Commodity. Amount
Coast. |Spokane.| per 100 |Per cent.
pounds.

Agricultural implements from New
ork and Boston--_-..----.---.---------- $1. 25 $1.75 $0.50 40
Building paper from New York-..--.-..- 75 1.29 54 72
Wrapping paper from New York--..... 1.20 2.00 80 a7
AgriculturalimplementsfromChicago..}| 1.25 1.65 -40 82.
Canned goods from Chicago --_......----- 95 1.35 40 42
Coffee from Chicago _ _. -90 1.38 48 53
Clothing from Chicago- 1.50 2.35 85 57
Dry goods, etc., from Ch s 1.00 1.85 85 85.
Cotton, duck, and denim from C -90 1.%5 85 94
Nails and wire from Chicago 65 1.10 45 69:
White lead from Chicago _-._-.--.-------- -80 1.21 41 61

Agricultural implements from Missouri
iVer POMtS! -2 5c. ccsacuss Soececmeceee 1.15 1.45 30 26

Average of 83 commodity rates to
Above POINts << sees2scs5essssctasss 1.231 1s i . 726) 59.

|

 

On ten important commodities selected at random from the table sub-
mitted to the Senate committee there is in every instance gross and
unwarranted discrimination against Spokane. On these ten commodi-
ties the rates to the coast cities range from 65 cents to $1.50 per 100
pounds, and to Spokane from, $1.10 to $2.35 per 100 pounds. The
excess in the rates for Spokane ranges from 30 cents to 85 cents per
100 pounds, and the per cent of excess against Spokane ranges from 26
to 94 per cent. On the whole 83 rates presented in Mr. Adams’ table
the average of the rates to the coast is $1.231, and to Spokane $1.957,
showing an average overcharge for Spokane of 72.6 cents per 100
pounds, or 59 per cent. That is, on the average carload shipment
under the commodity rates Spokane pays about 60 per cent more freight
charges than the coast cities are charged for 400 or 500 miles greater
service over the same line, a large proportion of the coast freight pass-
ing through Spokane en route.

It is not only as a eta and distributing point that Spokane
complains of discrimination in freight rates, but as a manufacturing
center as well. Manufacturing growth is prohibited, and that devel-
opment already attained is being undermined and destroyed by these
systematic discriminations and overcharges. The discriminations sub-
mitted—for instance the rates on iron and steel articles—are prohib-
itive of any industry in which these commodities enter as important
raw material. On most of this material the rates to Spokane from
the Pittsburg district are about $10 per ton more than to the coast.

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128

On plain castings from Chicago the Spokane rate exceeds the coast rate
by an amount equal to $14 per ton. An incident in this connection
was related by Mr. Adams in this language: hed

“Up until a little over a year ago the freight rate on pig iron from
Alabama to Spokane was $21.50 per ton, or $6.80 per ton more than
the coast rate from the same point. The only way local manufac-
turers were able to force a reduction of the rate was to buy the pi
iron in the foreign market, have it shipped as ballast to Portland, an
thence by rail to Spokane. By this arrangement they were enabled
to get their pig iron laid down in Spokane at a cost of $27.80 per ton,
against $30.80 per ton if shipped from Alabama. ‘The railroads seeing
that a reduction would have to be made to meet the so-called “ water
compettion, secretly made a rate of $13 per ton, the coast rate, which
rate was later published.”

Similarly, the sash and window manufacture as an extensive industry
at Spokane has been killed by the freight rate discrimination on window
glass from Pittsburg. The following is Mr. Adams’s statement:

“Tn the manufacture of sash the pine and cedar lumber of eastern,
Washington is much superior to the coast fir, yet, while there are five
factories engaged in the manufacture of sash in Spokane, they manu-
facture only for local trade, and there are two concerns in the city
which compete with the local factories and buy their sash from coast
factories. The rate on window glass from Pittsburg to Spokane is
$1.883 per 100 pounds. The rate to Portland, Seattle, and other coast
points is 90 cents, thus enabling the coast manufacturers to furnish the
finished product for the price of glass to the Spokane manufacturer.
The William Musser Lumber and Manufacturing Company, which
started in business here in 1902, would have invested $75,000 in a sash
factory and employed 50 hands, if it would have been possible to get a
90-cent rate on glass. The railroads also allow the coast manufacturers
to ship sash in mixed carloads with lumber, which takes the lumber rate,
hence enabling them to lay down manufactured sash in Spokane for
$1.10 freight charges against $1.3883, the rate charged for glass to
Spokane manufacturers. Every sash factory in Spokane would be forced
out of business if it were not for the steady local market demanding
special sizes, which are included in the regular millwork for new build-
ings. The wonderful building activity of Spokane in the past five years
made it possible for the mills to manufacture sash. As it is, the coast
manufacturers supply the local market for nearly all sash in regular
sizes.’

Discriminations in the rates agent the lumber industry at Spokane
are presented by Mr. Adams in the following comparisons:

“Mhe rate on lumber from Portland, Oreg., Seattle, Wash., and kin-
dred territory to Spokane, Wash., is 20 cents via the northern lines.

“The rate on lumber from Spokane, Wash., and kindred territory
to Portland, Oreg., Seattle, Wash., and like territory is 26 cents via
the northern lines.”

* * * * * * *

“The rate on lumber from Portland, Oreg., via the Northern Pacific,
to St. Paul, Minneapolis, and Duluth, Minn., is 40 cents.

“The rate on lumber from Spokane and kindred territory to the
same points, is 40 cents, although the haul is in no case less than 540
miles shorter and in some cases 625 miles, via the same line.”

* * * * * * *

“The rate on lumber, via the Great Northern, from Seattle and
oe territory to St. Paul, Minneapolis, and Duluth, Minn., is 40
cents.

‘““The rate on lumber from Spokane and kindred territory, via the
Great Northern, to St. Paul, Minneapolis, and Duluth is 40° cents, al-
though the haul is on an average of 400 miles shorter.” .

* * * * * * *

“The greatest distance lumber is hauled east from Portland, Oreg.
on a 20-cent rate is not less than 687 miles. ESE

“The greatest distance lumber is hauled east over the Northern
Pacific from Spokane on a 21-cent rate is 385 miles, and this rate is
made by various combinations which do not include all articles manu-
factured from lumber included in the regular classification.”

* * * x * * *
“The greatest distance lumber is hauled east from Seattl
Groat Noxthern, ts. 348 miles on a 20-cent rate. os Vi Cs
e greates stance lumber is hauled east from Spokan
Great Northern, on a 20-cent rate is 216 miles.” eee en ene
S§ an illustration of a manufacturing industry being driven awa:
from Spokane by the freight-rate discriminations, atten ft had been an
tablished and was doing an extensive business from Spokane, the ex-
6758
129

perience of the Pacific Coast Pipe Company was submitted by Mr.
Adams in the following statement :

“The Pacific Coast Pipe Company started to manufacture wired
wooden pipe in the spring of 1900. The company owns patents on the
machinery it uses, and started with four hands. There was at that
time but one factory of this kind on the north Pacific coast, located at
Seattle. The rate on manufactured pipe from Seattle to Spokane was
46 cents per 100 pounds C. L. plus the local rate from Spokane to all
points east. This rate was entirely satisfactory and enabled the
Spokane factory within a little over three years after beginning opera-
tions to increase its plant to 50 hands, with an investment of $50,000.
The Seattle factory, backed by the big lumber firms on the coast, finding
a serious competitor in the Spokane field, got the railroads to put
manufactured pipe under the luniber classification, thus reducing the
rate from Seattle to Spokane from 46 to 20 cents per 100 pounds.

* * * * * * *

“Prior to the cut rates in favor of the coast the Spokane factory had
as territory all of eastern Washington, Idaho, and Montana, and, as
stated above, was shipping pipe at the rate of two carloads per day.
The loss of the factory here means the loss of fifty families and a pay
roll of about $3,000 per month. It is needless to say that water com-
petition did not enter into this rate discrimination, as no wood pipe
is shipped via ocean to interior points. You must understand that
while the railroads, under the protest of the local factory, put back
the rate to 46 cents from Seattle to Spokane, refused and are still
refusing to adjust the rate to points east of Spokane; hence wood pipe
- manufactured on the coast takes the lumber rate in all territory east
of Spokane, thus making it impossible for a Spokane factory to com-
pete in this territory. Considering the increased cost of manufacture
at Spokane and the fact that there is not sufficient business to main-
tain a factory without outside territory, the Spokane factory had to be
abandoned.”

THD SMALLER PLACES.

The foregoing illustrations, taken from the testimony, give some idea
of the discriminations in freight rates in force, as they affect a few
of our larger cities. These are cases in which the evidence is definite,
clear-cut, and all to the same effect. They are es examples.
Less conspicuous, perhaps, but far more important to the consuming pub-
lic, is the far-reaching, systematic discrimination which exists against
the smaller cities, towns, and hamlets in every State. The small
place is hopeless and helpless. There is no railroad competition
at these points. In most instances there never has been any. It
is the common practice to.make the rates to such places just as high
as the rates to the big commercial center beyond, with little reference
to how much farther it is beyond. Frequently, particularly in the
western part of the country, this rule is varied so that the small place
pays the rate to the competitive point beyond plus the local rate back.
In other words, over large sections of the country, small places are in
substantially the same position with reference to the larger places that
Spokane holds with reference to the Pacific coast terminals.

é aoe situation was set forth by Judge Cowan in his testimony, as
‘ollows:

“Let me call your attention to the fact that a merchant situated
in a little town east of a given commercial emporium in thousands of
cases in this country must pay the rate of freight to the farther dis-
tant point and the local rate of freight back.”

Interstate Commerce Commissioner Fifer appeared before the Sen-
ate committee and submitted several illustrations of this form of dis-
crimination. One of these instances was the case of the city of
Charlotte, a city of 20,000 population, lying half way between New
Orleans and the Virginia cities—Richmond, Lynchburg, and Norfolk.
In this case the rates from New Orleans to Charlotte were twice as
high as from New Orleans to the Virginia cities, to which the traffic
passed through Charlotte. That rate per ton per mile in these cases
was four times as great to Charlotte as to the Virginia cities.

Another illustration of the same thing is the “blanket” or _post-
age-stamp schedule, applying from all territory between the Atlantic
Ocean and the Missouri River to the Pacific coast. The rate gener-
ally is exactly the same from Omaha, Chicago, Pittsburg, or New York,
or any other point in all this territory to the coast, even though the
distance be twice as great in one case as in the other. Commissioner
Fifer declared that under the law as at present interpreted by the
court there was no corrective for this sort of discrimination.

DISCRIMINATION AGAINST COMMODITIES, ‘

By classification.—Conspicuous examples of discrimination against
commodities are found throughout freight classifications. The hun-

6758 9

 
130

dreds of changes in classification of commodities from one class to
another by the railroad classification committees in the last few years
bear testimony to this fact. 2

Classification of freight is based on what the traffic will bear. It is
a part of the rate. There is scarcely any evidence in the classifications.
that any rule of reason or science has been applied. It is a case of
“cut and try.” The tariff expert puts the commodity in a class, and
then, if the complaint is too vigorous, he probably lowers it, and if
not he raises it until he thinks it yields all the revenue the traffic will
bear. Thus the classification of a commodity often depends largely
upon the financial strength of the concerns principally interested in
its production and distribution. Such a system could not but lead to
discriminations. Moreover, it leads to confusion. Very often the rail-
road officials are themselves unable to agree as to the meaning of the
classifications.

Mr. Wagner, a manufacturer of North Milwaukee, gave the committee
an instance in his experience in attempting to ‘‘deal directly with the
railroads,” which is illustrative of the success in such undertakings of
small shippers who are not favored. In part, Mr. Wagner said:

“We are making large quantities of rough, unfinished hardware,
which we have been shipping out to our ¢ustomers for a number of
years as ‘iron forgings,’ taking a fourth-class rate. Last year the in-
spectors raised all our shipments to ‘ferrules,’ taking a third-class
rate, and making a difference of about 50 per cent in our freight rates.
We took samples of these goods and submitted them to the Chicago,
Milwaukee and St. Paul officials here, also, to the Milwaukee official
of the railroad inspection bureau, and they both agreed with us in
calling the goods ‘iron forgings,’ entitling them to the fourth-class
rate. We then corresponded with the chairman of the official classi-
fication committee, who has control of the inspection, giving him data
which showed that according to the value per pound, weight per cubic
foot, and finish of the goods the fourth-class rate should apply. The
railroads claim that these three items are what determine the classi-
fication of an article,

“Our communication was not acted upon favorably, and as there
was a meeting of the committee at Chicago, the writer went down
there and saw Mr. Gill, the chairman, personally, but without doing
any good. He remarked to me at the time that this difference in
classification on that portion of our product would amount to only a
few hundred dollars a year, and if I would spend the same time and
energy in some other branch of our business it would bring better
returns financially. In the light of our previous experience of four or
five years in endeavoring to secure equitable rates, etc., his remark was
certainly true, but is it not a sad commentary on the state of affairs
in a country like ours that this should be the case?

“Aside from the justice or injustice of our claims, is it not placing
a tremendous power in the hands of one man, or let us say a committee
of sa dozen men, all paid and controlled by one of the interested
parties—that is, the railroads—to determine absolutely whether any
shipper or consumer shall pay a just rate or something far higher?
Where is there a more powerful trust than this little committee which
is accountable to no one but its masters, who are interested in securing
high rates, and which controls this subject absolutely without appeal
over the greater part of our country?”

There was another instance of similar character presented to the
committee. In this case the complainant was a large manufacturing
concern with over a million dollars invested, who tried to ‘deal
directly with the railroads,’ too. This manufacturer gets out a sec-
tional bookcase. This case is capable of compact crating in small
pieces. It was entitled, seemingly, to a lower classification than the
common bookcase, which is big, clumsy, and occupies much space in pro-
portion to its weight. The roads refused to allow any reduction from
the regular classification that had applied to bookcases for a quarter
century—namely, one and one-half times first class. In view of the
argument that the making of rates should be left with the roads in the
interest of facility of business between shipper and carrier—that
changes may be promptly made to meet changing conditions, ete.—it
seemed to this manufacturer that he would do well to persist. So he
tried to see the chairman of the “ Official Classification Committee.”
He said, “I assure you he was harder to get at than the Czar of Russia.
A shipper stood just as good a chance of interviewing that man ag he
wong ee ae Czar of Russia.”

Still another illustration of this point is the case of Mr. Cabot, who
testified before the committee. Mr. Gregory S. Cabot, the largest man-
ufacturer in the United States of carbon black (dry color for printing
ink), testified that while the market value of his product had gone
down from 60 cents to 4 cents per pound, its classification by the rail-

6758
1381

road companies had been advanced and the cost of tra::sportation
thereby increased, and this in spite of the fact that the method of
packing had been so changed that it is possible to carry practically
twice as many pounds per carload.

“In less than carload, the classification was in the beginning first
class ; in 1887 it was advanced to one an one-half times first class. In
carloads. 1887, the classification was sixth class, same as other forms
of dry paint; in 1889 it was advanced to third class and maintained
until January, 1905, when it was raised to second class, rule 25, or an
advance of about 10 per cent. And all this time there was a constantly
and rapidly increasing quantity of traffic in this commodity.”

Discriminations against live stock—One of the most far-reaching
and damaging discriminations brought to the attention of Congress in
these hearings was the discrimination against live stock and in favor
of packing-house products and dressed meat. Live stock furnished
about 12 per cent of the entire traffic of the Western roads. The
rates on live stock vitally affect the entire agriculture of all this
Western country, from the breeding country in the south to the feeding
country in the north. Every man that grows stock, of that grows
crops to be fed to stock, is interested in this matter. In all this country
the freight rate to the central market is taken out of the pocket of the
producer and the grower. The live stock to the market is the property
of the farmer and the ranchman; he pays the freight, or, if he sells
locally, it is taken out of his price. Packing-house products and fresh
meats are the property of the beef trust.

Uniformly throughout the country there is an unwarrantable dis-
crimination against live stock as compared with these trust products.
At the same time, the trust product is the more expensive of transpor-
tation. From St. Paul to Chicago the proportional rate on dressed
meat was cited by a representative of the Chicago Live Stock Exchange
as 133 cents per 100 pounds, while the rate on live stock was just
twice as high.

Judge Cowan, representing the Texas Cattle Raisers’ Association,
cited a case brought by the Chicago Live Stock Exchange “ before the
Commission, involving the right of the railroads to charge the shippers
a higher or greater rate for the transportation of cattle than they
charge the packing houses on the Missouri River for a longer distance.
That case was decided a few days ago, and it was held that such a
discrimination was unjust and unlawful and that the shippers are
entitled to a rate of 184 cents per 100 pounds for the shipment of cat-
tle to Chicago if the packers are entitled to 184 cents per 100 pounds
for the dressed product. The decision was manifestly just and ought
to be enforced.”

The beef trust, which could stand a fair rate, is favored; the grower
and feeder, whose business yields a small profit, sometimes a loss, and
is at best always precarious, must stand the high rate, the extortion.
Mr. Fifer, of the Interstate Commerce Commission, calling attention to
the importance of just rates to consumers and producers before the
Senate committee, -declared :

“You take a man on the plains of the West—a cattle raiser who
has a thousand head of cattle; he markets them in Chicago or New
York; the rate may be ever so high. Perhaps a million human beings
eat that beef, and the excessive rate is divided up to that extent. A
load under which a single man will stagger two will carry with ease
and ten will not feel it at all.

“But how is it with the producer who has the thousand head of
cattle? All he has in the world is perhaps invested in his herd, and
it is a matter of the most vital importance whether he pays 50 cents
a hundred or whether it is 5 cents higher, making 55 cents a hundred.
He is the man that feels the excessive rate.”

Discriminations against grain and American milling.—Still worse, if
possible, than this discrimination against live stock is the discrimina-
tion against grain, particularly against wheat for domestic consumption,
as against the shipments of the same commodities for export to foreign
countries. It is answered by the railroad that this discrimination opens
the foreign market to our grain. This is true, but the same market
would take our grain as finished product in the form of meal and flour if
the preference were shown these commodities instead. But the pur-
pose of this discrimination is not benevolent. So the direct opposite
condition prevails in this respect, and flour receives an adverse rather
than a favorable discrimination.

The purpose of these discriminations is to force our wheat and grain
into foreign hoppers to be ground in order to give the grain-elevator
trust complete control of our cereal crops from the field to the con-
sumer abroad. This is a railroad-made trust. Through elevator con-
cessions and other forms of railroad favoritism it has come about that
one elevator company has a monopoly of the grain business on each line

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of railroad. Ag the several lines of railroad are built together by joint
ownerships, ‘communities of interest,” etc., these several elevator com-
panies are built together and directed with a perfect comity and accord
of business policy. There is practically no competition among them.
They constitute, outside of the milling industry, in effect, one purchaser
of the great cereal crops of the country.

The milling business is one of the leading industries of the coun-
try. It has developed a el me probably twice our entire wheat
crop. It is: distributed over thirty-three States. Neither its ownership
nor control are as yet centralized to any important degree affecting
competition. The mill market is a realy competitive market for the
producer of American cereals. This milling industry is therefore a
thorn in the side of the grain-elevator trust, and is marked for destruc-
tion by the railroads. It is deliberately proposed to ruin a large portion
of this great industry through systematic discrimination, A reduction
in the milling capacity of the country such as is contemplated will give
the grain trust absolute power to fix the price on our surplus cereal
products.

From the statement before the House committee by F. H. Madgeburg,
representing the Millers’ National Association, I quote the following as
showing the effectiveness of these discriminations :

“In 1900 the aggregate flour exported was 96 per cent of the entire
export of wheat, while in 1901 (after the discriminations were estab-
lished favoring wheat) it had dropped from 96 per cent to 55 per cent,
owing to the discrimination practiced.”

Mr. B. O. Eckart, a Chicago miller, representing the Board of
Trade and the Illinois Manufacturers’ Association, declared before the
committee :

“That it is unfair and unjust to a great industry of this country to
compel us to pay a tariff rate of 173 cents a hundred on flour from
Chicago, for instance (i. e., to New York), and at the same time to
carry wheat on a secret cut rate of 8 or 10 cents per 100 pounds. It
practically means confiscation of so much milling property.”

Mr. E. P. Bacon testified that wheat from Missouri River points was
carried to New York for export in competition with the Gulf ports
at a rate of 13 cents per 100 pounds, ‘and the bill of lading in stating
that rate had indorsed upon it a statement that if used for domestic
consumption at New York” the rate should be 2534 cents per 100
pounds, or practically twice the export rate.

Because of the discrimination in favor of grain shipped for export,
because similar advantages are not given to flour shipped for export,
because such flour is not given the benefit of milling in transit rates
the milling industry of this country is not permitted to compete in
foreign markets upon the same footing as the grain trust.

Thé significant feature of this discrimination is that its object is to
build up and perfect a monopoly.

The purpose of this monopoly is to control the market of the cereal
produce of the American farmer, and when it is perfected the growers
of grain will be in substantially the same position as the producer of
crude petroleum in Pennsylvania.

DISCRIMINATIONS AGAINST PERSONS.

It was asserted by the railroad, and accepted by the Interstate Com-
merce Commission, that under the operation of the Elkins law the
practice of giving rebates to favored shippers was for the most part
discontinued. The railroad company is no longer dividing its income to
any considerable extent with any of its patrons through the direct re-
bate. ‘The railroad representatives profess to be glad of this. If true,
it certainly would save the roads much money, and it would probably
also operate to greatly increase indirectly the amount of the transpor-
tation taxed upon the people, paid in the price of supplies and manu-
factured articles.

But still there are favored shippers who through various occult in-
fluences maintain with the railroads friendly relations which enable
them to obtain special concession and favors which give them very
material business advantages as against their competitors not similarly
favored. Every great industrial trust is inseparably bound up through
the “community of interest’? with one or more of the great railroad
groups of the country. The comity of business policy and relations
existing among these railroad groups is such that a trust is a privileged
shipper on practically every railroad in the United States.

Discriminations in tariffs.—These discriminations take various forms.
Sometimes they appear as discriminations in the published tariff rates.
It is set up by the railroad attorneys before the United States court
that the only test of the lawfulness of a rate is the fact that it is
published ; and the court sustains their case.

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In competition with such favored shippers a small business has
little chance. The roads refuse to consider the complaint, in some in-
stances even falling to accord a courteous hearing of the complaint.

There appeared before the committee of the Senate a manufac-
turer of Milwaukee, who was making hardware specialties, among
them springs and axles for children’s vehicles. He said his principal
competitors were at Toledo and Pittsburg. He had to get his raw mate-
rial from Pittsburg at a rate of 183 cents per 100 pounds. He was
seeking to build up a market at St. Paul and Minneapolis. From Mil-
waukee to the twin cities, 335 miles, the witness testifie§ that his rate
on axles and springs was 40 cents per 100 pounds. His Toledo com-
peritor reached the same market, a distance of 600 miles, for a rate of

7 cents on axles and 42 cents on springs; and the Pittsburg com-
petitor, 800 miles away, at 387 cents on Axles and 48 cents on springs.
The combination of rates on the raw material to Milwaukee plus the
rate on finished product effected a discrimination such as to practically
exclude the Milwaukee manufacturer from competition in that market.
“As a result,’’ he said, ‘‘we must see business that belongs to us go
to competitors several hundred miles farther away from this district
than we are, or give up a large profit to hold the trade.”

“ Subterfuges” for rebates— Concessions.”—Attention is directed
to the testimony before the Senate committee, on April 29, 1905, of Mr.
James H. Hiland, third vice-president of the Chicago, Milwaukee and
St. Paul Railway Company, relating to the giving of rebates:

“Senator CULLOM (of the committee). Is there any subterfuge that
ee them (the railroads) to give a rebate without making it a
rebate

“Mr. HILAND. There are subterfuges that can be adopted and made
the means and channels for concessions in rates. They are not rebates.

“Senator CULLOM. Are they means of concessions that ought not to
be granted under the law? Are the railroads, in other words, living up
to the law?

“Mr, HILAND. I would like to answer that, Senator, by saying they
ie concessions. Whether they are lawful concessions or not I do not

now.”

There are “‘ concessions’ and there are “ subterfuges ’’ through which
certain shippers are favored. Whether they are in violation of law, Mr.
Hiland, third vice-president, in charge of traffic of one of the greatest
railroad systems in the country, had not found out from his legal de-

artment. It should not require recourse to the legal department for

r. Hiland to know that these “ concessions’? and ‘ subterfuges,” if
not rebates in a technical sense are precisely to the same effect, and in
fact are practices which the law was framed to prevent. It is not a
question of the name, but of the thing itself. And these subterfuges
are the same, and in gact are the things which the act of Government
has stamped as pernicious and made punishable as a criminal offense.

Some illustrations of the nature of these ‘‘ subterfuges”’ and “ con-
cessions’’ I take from the testimony given by Mr. C. W. Robinson, a
lumber manufacturer, who came before the committee on behalf of the
New Orleans Board of Trade and the Central Yellow Pine Association:

Rebates through purchasing agents—Railroads use large quantities
of lumber and timber for building and construction purposes. In fact,
the railroad companies are about the largest purchasers by contract
of such material that ever enter the market. ‘‘ Very generally,” says
Mr. Robinson, “ purchasing agents have been instructed to buy supplies
from parties who are large shippers over their respective lines, and
there is a great possibility of the direct rebate being given through
the office of the purchasing agent.” It may be added that there are
many other lines of supply, of which the roads are extensive buyers,
such as iron and steel, coal, and lubricating oils. Most of the latter
is said to be purchased of the Standard Oil Company.

Switching charges.—Another one of these “subterfuges” which is
very fruitful of special advantage to large shippers, particularly at
competitive points, is ‘the absorption of switching charges at terminal
points on shipments which originate at competitive points, and the
refusal to absorb switching charges where the shipment originates at
noncompetitive points.” ‘

The following is an instance of this practice cited by Mr. Robinson
in the lumbering business: 3

“At Cincinnati there is a large buyer of lumber whose yard is on
*Hazen's switch.’ Said switch is located on the Cincinnati, Lebanon
and Northern Railway, and to reach such switcH from the tracks of the
Louisville and Nashville road cars must pass over the Eggleston Avenue
track of Pauabares Cincinnati, Chicago and St. Louis Railway, and
thence over the Cincinnati, Lebanon and Northern Railway. These
roads charge the Louisville and Nashville $6.50 to $9 per car for

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switching, and on lumber which originates at noncompetitive points,
on the Louisville and Nashville Railway, the producer must pay this
switching in addition to the regular published tariff rates; but if the
lumber originates at a competitive point, then the Louisville and Nash-
ville pays this switching charge and by so much depletes its tariff
rate. aay

“The midnight tariff..—A commonly practiced method of discrimi-
nation between persons, particularly in the lumber business, is the pro-
mulgation of special, or what are sometimes called “ midnight tariffs.
Mr. Robinson cites the following as an example in his knowledge. To
quote Mr. Robinson: ‘‘ Early in the year 1905 the Southside Hlevated
road, of Chicago, was in the market for about 400 carloads of sawed
and planed cross-ties, and bidders are asked to name a price f. 0. Db.
Chicago. $

. The blanket rate on ties and lumber (and such ties are nothing but
one kind of lumber) from the entire yellow-pine belt to Chicago is
26 cents per 100 pounds. A number of bids were submitted to the
Southside Elevated road, and, so far as I can learn, all the bids were
rejected as being too high. [Effective March 22, 1905, the Illinois
Central Railroad issued its tariff, D-12013, I. C. C. No. 3153, in which
tariff a rate of 26 cents per tie is named on yellow-pine ties to Chi-
cago from (points) Luzon, La., to Pearl, Miss. (a distance of about 100
miles). The tariff contains a provision reading ‘cars must be loaded
to the full loading capacity, but not in excess of 10 per cent beyond
their market-weight capacity. Ties to be billed at 165 pounds per tie.’
On April 6 the Illinois Central promulgated another tariff (C—12013,
I. C. C. No. 3171), canceling the previous tariff. The new tariff
named the same rate per tie, the only difference being that the weight
is given as 120 pounds per tie, instead of 165 pounds. Assuming that
the weight per tie, as given in the last tariff, is correct, this makes a
cut from the regular tariff on lumber of 6 cents per 100 pounds, or
reduces the lumber rate from 26 cents per 100 pounds to 20 cents per
100 pounds on this particular class of lumber and on this particular
piece of road.”

Any manufacturer located on this pao piece of road who had
been favored by the Illinois Central Railroad (and the presumption is
warranted that there were such) with advanced information of the
eut rate which would prevail during this comparatively short time
would, of course, be in a position to underbid competitors and furnish
the material. After shipment was made under this contract the rate
went back to where it stood before. There have been instances of this
kind cited in which the cut rate remained in effect not longer than a
week. Some of the lumber of the favored shippers was loaded ready
for shipment when the tariff issued.

Abuse of “rebilling rate” (from Mr. Robinson’s testimony) .—‘An-
other abuse is what is known as the ‘rebilling rate.’ By rebilling
rate is meant a rate by which goods received in unbroken carload lots
over one railway can be rebilled over the same or another line, com-
pleting one continuous trip of the same commodity, simply changing
the consignee and altering the destination of the identical shipment,
without unloading or handling of freight. Such rates or privileges
are greatly abused, and are the source of a great amount of indirect
rebating. To illustrate—and I must ask you to pardon the use of a
fictitious road, but which really and truly represents several roads—on
the St. Louis and Cartersville road, not many miles out of St. Louis,
is the town of Hawkinsville, Il]., which town has a population of about
1,000 people. The blanket rate on yellow-pine lumber to Hawkinsville
from all points in the yellow-pine belt is 24 cents per 100 pounds.

“To St. Louis, Mo., the blanket rate is 20 cents per 100 pounds, but
on lumber consigned to Hawkinsville the roads south of the Mississippi
River are allowed 18 cents of the through rates, the St. Louis and
Cartersville road receiving the remaining 6 cents of the through rate.
At Hawkinsville there is no agent of the car-service association. By
a secret understanding between the St. Louis and Cartersville road
and certain favored shippers, cars may be held at Hawkinsville, for, say,
fifteen days without any car service accruing, and then be billed or
reshipped to any point in the central traffic association territory, and
the name of the consignee changed. Let us assume that lumber
shipped to Hawkinsville is rebilled to Johnsonville, in the extreme
northern part of Ohio, the through rate to Johnsonville from the
yellow-pine belt being 31 cents. The St. Louis and Cartersville road,
with its connecting lines, gets 12 cents per 100 pounds from St. Louis
to Johnsonville, the result being that the through rate is reduced from
31 to 30 cents, and no car-service charges to follow. Hundreds of car-
loads of Jumber are shipped to Hawkinsville yearly, only to be rebilled
as outlined, and in the States of Illinois and Ohio there are other
points at which the same practice is in full force.”

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Abuse of “milling in transit.’—Another form of special favor to
shippers cited by Mr. Robinson is the abuse allowed by the railroads
to be made by certain shippers of the so-called “milling in transit
rates.” Some roads make to some manufacturers of lumber, for ex-
ample, a special rate, which comprehends the transportation of logs to
the mill before manufacture and of lumber from the mill to market
after manufacture. This device opens wide the door for favoritism
and discriminations.

“Tap-line allowances.”—A reduction in the rate called a “ tap-line
allowance" is made to lumber manufacturers having logging roads, the
amount conditioned upon the length of the logging road, the amount
of traffic, and any other condition which the railroad choses to consider.
The conditions being different in each case, the opportunity is afforded
in practice to make what amounts to a special rate to each manu-
facturer. - The manufacturer who has the greatest commercial power
secures the largest concession.

Mr. Robinson describes this form of discrimination, as follows: ‘ For
a number of years all the roads in the yellow-pine region west of the
Mississippi River have given to sawmills operating on their lines and
having logging roads an allowance of from 2 to 4 cents per 100 pounds
of through rate; roads east of the Mississippi River, with the excep-
tion of the Mobile and Ohio Railroad, have declined to make to mills
on their lines any allowance whatever, or allow them any participa-
tion in the through rate, notwithstanding that some of the mills in
Mississippi have logging roads 30 to 40 miles in length. This practice
is unfair and gives to the manufacturer of yellow-pine lumber enjoying
such a participation in the through rate an advantage of from 60
cents to $1.80 per thousand B. M. in freight allowance.”

At these hearings Mr. Gardner, a lumber manufacturer of Laurel,
Miss., also testified that manufacturers east of the Mississippi were
discriminated against as compared with manufacturers west of the.
river by an allowance called a ‘“tap-line allowance,’ which was
universally granted west of the river to manufacturers having logging
roads.on which traffic originated, but which was not granted to manu-
facturers east of the Mississippi. This discrimination amounted to
from 2 to 6 cents per 100 pounds, or 60 cents to $1.80 per 1,000 feet
of lumber. Mr. Gardner estimated that 5V per cent of the southern
pine in five States west of the Mississippi moved at less than tariff
rates because of these allowances. Further, he declared “that the
methods of making rates down there through the South have a tend-
ency to consolidate interests and make unreasonable rates and to make
practically what are discriminations by allowances to originating roads.
Some of them get as high as 6 cents out of a 16-cent rate, where the
mill and the road are the same thing.”

Underbilling.—A form of indirect rebate is what is known as under-
billing. A shipment is carried by the railroad for a favored shipper,
and when the waybill and expense bill are made out the weight of the
shipment is put down as several hundred, or possibly several thousand,
pounds less than the actual weight. The favored shipper gets free the
amount of transportation represented by the difference betwen the
actual and the “ billed” weight. It is evident that a published tariff
is no protection for any shipper from a discrimination of this sort.

A shipper, testifying before the Senate committee of facts within his
own experience and knowledge, sajd: ‘A railroad company may publish
rates, but there are ways of getting around those rates. For instance,
a car is misrepresputed—that is, the contents of it is—and I have asked
the Interstate Canmmerce Commission to say that a railroad company
should know what it is doing. A railroad man a little while ago told
me that these goods were not billed right. Now, he therefore put the
shipper in this position: That if the shipper is going to determine what
he is going to pay he is going to deliver the car accordingly, and the
railroads in many cases in the country don’t know what goes into a
car and don't know what goes out. I know of a point where 150 cases
of strawberries was systematically loaded on a car upon which there
was never any freight paid, and the rate was 213 cents a crate. * * *
It is done to-day.”

The industrial railroad.—The industrial railroad is another loophole
for the payment of indirect rebates. ‘There is a switch, or possibly a
spur track, quarter of a mile in length, running into the yards or
works of a manufactory, mine, or jobbing warehouse. <A paper railroad
is organized by the industrial concern—a company to own this “ rail-
road.” Then this ‘ railroad,’ which is really only a switch, becomes
the ‘terminal road ’’ for all traftic received at this plant and the “ orig-
inating road” for all traffic shipped out. It is entitled to a division
of the tariff rate on this traffic, a “ proportional,” as it is called. This
proportional is big to the favored concern and small or nothing to the

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little one. It is in proportion to the “pull” or the bargaining power
of the shipping concern. Every great industrial trust has a full com-
plement of such “ railroads.”

There was a case of this kind before the Interstate Commerce Com-
mission brought, I believe, by the independent salt mills at Atchison,
Kans., involving gross discriminations in favor of the salt trust. The
trust received from the railroad, according to Mr. Davies, about 35 per
cent of the tariff rate on shipments merely for the use of a switch at
the trust plant. The evidence in this case has been with the depart-
ment of justice a year or two and nothing has been done. Presumably
nothing can be done under the law. Mr. Davies, of Chicago, gives this
illustration :

“In Chicago there is an Iroquois coal company. That coal com-
pany has its rate. They transport coke from Pennsylvania or West
Virginia to that point. I think the distance is over 600 miles. The
freight rate on that kind of coke is $2.60 per ton, and they deliver to
the switch in Chicago on what they call ‘ Chicago Short Line,’ and it is
a very short line, because it is nothing more than a switch, into the
Iroquois Iron:Company’s yards, and they pay that Iroquois Iron Com-
pany no less than 40 cents a ton.” eer

Demurrage charge.—Similar to the absorption of switching charges,
as already explained, is the discrimination in the charges for demur-
rage, so called. On all carload shipments there is a time limit set by
the railroad companies, or through the organizations of the several
railroads, known as “ car-service associations,’ on the detention of cars
at points for loading or unloading. A fixed per-diem charge is made
for any such detention over twenty-four or forty-eight hours—that is,
it is made to most shippers. For favored shippers this demurrage
charge may be absorbed and nobody except the party to the transaction
be the wiser. ‘(In other words,” to quote from the testimony, “in fix-
ing the charges it is not the commodities that are shipped on the Ameri-
can railroads to-day that determine what the service is worth; it is the
chromo of the shipper.” : :

Organized industry favored.—Because of the “community of imter-
est’ existing among the “ big business”’ enterprises of the country and
the railroads of the country—because of the mutual graft, if you
please—it is a settled poly, of the roads to favor organized industry in
almost every point. aid Mr. Davies in his testimony, “If you will
organize a big trust and go to a railroad company and tell them that it
is organized in that way, you can get 30 per cent reduction from the
fact that you are organized.” Being challenged to cite an example of
this discrimination in his own knowledge and experience, he replied:
“To my knowledge I paid more for the transportation of a carload of
strawberries from Tennessee (to Chicago) than the through rates on the
packing-house products from Kansas City to Liverpool, England. The
rate to-day on bananas imported by way of New Orleans or Mobile gate-
way is 47 cents per 100 pounds, with an 18,000-pound minimum, as
against the transportation of strawberries on the basis of 20,000-pound
minimum at 51 cents, and that rate involves 15 cents per 100 pounds for
icing, and there is a messenger carried on the banana train that is not
carried on the other.”

Interstate Commerce Commissioner Prouty appeared before the Sen-
ate committee. He declared that, in his judgment, the most serious
form of discrimination that the country would have to contend with in
the future is this discrimination as it appears in the open published
tariff rates, and he cited the favoritism of the Standard Oil Trust. He
declared, ‘You go out in New England to-day and you will find the
‘freight’ tariff put absolutely into the possession of the Standard Oil
Company, every foot of the territory of the New York, New Haven and
Hartford Railroad. You will find that class of discrimination all
through this country. I think in the future that class of discrimina-
tion will probably be more serious than the question of rebates. That
is really not a discrimination against localities. That is discrimina-
tion as between shippers. That is the adjustment of a tariff in such
a way as to prefer one shipper to another.”

On this subject Mr. Joseph Bartells, of St. Paul, a jobber of inde-
pendent oil, cited the following discriminations with which he found it
necessary to contend in his business in Minnesota. He said that the
rates on oil had been raised by the railroads at the solicitation of the
Standard Oil Company from 17% to 193 cents as 100 pounds between
Pennsylvania and Chicago, and from 15 to 20 cents per 100 pounds
between Chicago and St. Paul. This makes the total through rate
for the independent product to St. Paul 294 cents. ‘The independent
dealers are obliged to make their prices based on the freight rate. The
Standard pipes its oil to Chicago, and also enjoys special concessions
on freight shipments. It can therefore make its prices independently

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of the pub ished freight tariff. For example, Mr. Bartells cited the
Standard Oil prices in the middle of last April as 8 cents per gallon
at St. Paul and 12 cents per gallon at Fergus Falls, Minn., while the
difference in rate was only 14 cents per gallon.

ENORMOUS ADVANCES IN FRBDIGHT RATES.

Since January, 1900, freight rates have taken great jumps. Directly
or indirectly the entire industrial field has been affected. One result
is that the people of the country are now paying annually about
$200,000,000 (I. C. C. estimated $155,000,000, 1903) more per year
for transportation service than they would pay were the old rates
still in force. These advances are in force in every section of the
country. They are in force on nearly every important article of
freight shipment. Many of them were put in force through advance
in classification of commodities for shipment. Of the three classifica-
tions covering the merchandise traffic of the country one shows 572
commodities so advanced, another 531, and the third, 240. In addition
to these advances there were very great advances on several most im-
portant articles of shipment in commodity rates, such as iron and steel,
soft coal, and lumber. Besides these the public burden has been in-
creased by the greatly increased cost of transportation by private car
and freight line companies.

Advance in rates on hay.—Among the most conspicuous and impor-
tant commoditites directly affected by these advances in the classifica-
tion of freights is hay. Mr. John B. Daish, representing the National
Hay Association, stated before your committee that the trunk line
raflroads had carried hay and straw from the West to Bastern markets
as sixth-class freight for thirteen years. The rate under this classi-
fication from Chicago to New York, for instance, was 25 cents per
100 pounds. With the advance of January, 1900, hay went to the
fifth-class, rate, Chicago to New York, 380 cents per 100 pounds. At
Tie same time grain was being carried to New York at 15 to 173%
cents.

These advances in the transportation of rates on hay, being made
in the form of a classification, necessarily affected all shipments within
the ‘ Official Classification’’ territory. Mr. English, a dealer in hay
for many years, submitted statistics showing that nearly one-half of
the hay crop of the country was produced in Wisconsin, Minnesota,
Iowa, Missouri, Nebraska, and South Dakota. He said, ‘‘I think in the
last two years (i. e., since the advance) not one ton of that hay has
come East * * * to the seaboard markets. Taking this hay from
the sixth class and putting it in the fifth class increases the freight on
hay from $1 to $2.60 per ton, according to the distance of haul and the
location. Prior to that we in Baltimore frequently brought hay from
west of the Ohio River. We shipped hay from Ohio and Illinois and
Wisconsin and all the Western States. I have been in the hay business
for well on to twenty years, and prior to this time we considered Illinois
and eastern Iowa our best source of supply, but in the last two years
(i. e., since the advance) I have not handled a carload of hay from IIli-
nois and very little from Indiana.” .

In effect, this advance in the classification of hay has practically
excluded the hay crop of the North Central States from the Hastern
markets.

In April, 1904, the Interstate Commerce Commission, in compliance
with the resolution of the Senate, presented a memorandum showing
the effect of these advances in increased freight charges to the public.
The advances were found to range from 40 cents to $1.50 per ton, and
were estimated to average 80 cents per ton. The estimated shipments
affected were 3,420,980 tons yearly, and the advance was placed at
$2,434,000 annually. The total amount of this advance to the date of
the report was placed at $10,000,000.

Advance in rates on sugar.—Another one of these advances in classifi-
cation was sugar, which was likewise advanced from the sixth to the
fifth class. And the people of the United States have paid out on this
advance to date something over $5,600,000.

Advances in rates on live stock.—The most vigorous complaint before
the Congressional committees against advances and overcharges in
freight rates was that which was made by the live-stock interests.
These excessive rates for the transportation of live stock vitally affect
the prosperity of the whole agricultural West. The agriculture of
nearly all of this whole section derives the largest part of its money
income from the sale of live stock. Live stock is the most valuable,
single, finished product of this great industry. It constitutes about 12
per cent of the total tonnage of the traffic of the western railroads. It
is probably largely because of its pot importance that the railroads
have stendily advanced the charges for hauling and handling this traffic.

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Bven a slight percentage of advance in the rates on traffic of so great
volume and so high class would obviously yield an enormous increase of
revenue to the carriers.

Most conspicuous among the complainants against these advances and
overcharges was the Cattle Raisers’ Association of Texas, represented
by Judge Sam H. Cowan, of that State. The advances complained of
by the cattle raisers of the Southwest affect almost equally all live-
stock regions. The rates most complained of are those on wuich cattle
are shipped from breeding grounds of the Southwest to feeding grounds
in the Northwest. It is this character of overcharges that have bank-
rupted the stock-feeding industry of Iowa and other Western States.
So extensive is this specialization by localities in the breeding and feed-
ing branches of this industry become that any oppression of this traffic
must necessarily operate most injuriously through the whole live-stock
industry. Said Judge Cowan in his testimony, “‘ That is an extensive
business, and there have been some 400,000 head of cattle shipped that
way in the last two or three years. When we had the trail and the
cattle were driven the railroads thought it profitable to transport them
at $55 per car. But the settlement of the country and the closing of
the trail destroyed that competition, and so from time to time the rail-
roads have advanced the freight rates, so that to-day the rate is $100
per car, for which they were glad at one time to accept $70 per car,
and are even undertaking to pay rebates to get business.” >

Judge Cowan further declared that the advances in rates on this class
of traffic alone amounts to not less than $3,000,000 annually. .

The importance and character of the “ cattle raisers’ ’’ complaints are
best appreciated from an examination of their complaint submitted in
the case brought by them before the Interstate Commerce Commission,
a copy of which complaint is put in by Judge Cowan as part of his
statement before the Senate Committee. The following important
statements are made, the proof of which the Cattle Raisers’ Association
has laid before the Interstate Commerce Commission :

The Cattle Raisers’ Association, of Texas, embraces about 1,500
members, engaged in all branches of the cattle business, principally in
the States of Texas, New Mexico, Oklahoma, Arizona, and Indian Ter-
ritory, and the States of Colorado and Kansas, and, to some extent, in
Nebraska, Wyoming, South Dakota, and the Republic of Mexico. The
membership of this association owns approximately 4,000,000 cattle in
these States and Territories.

The principal markets named are Kansas City, St. Joseph, South
Omaha, St. Louis, Chicago, Fort Worth, New Orleans, Denver, and
Pueblo, Colo. Many shipments are made from the Southwest to the
Northwest for grazing and feeding purposes.

The complaint charges that “all of the interstate rates applicable to
all interstate shipments of cattle and other live stock from all points
in said States and Territories are unjust, unreasonable, and unlawful,”
and that the rates put in force in 1899 and subsequently were “ like-
wise unjust and unreasonable,” and, as instancing the advances in
frefght rates on beef cattle in the preceding five years, the compalinant
submitted a statement of representative rates showing such advanees
from 1898 to 1903. From this statement it appears that from ten
important shipping points representing Texas, Oklahoma Territory, and
Indian Territory the rates _to Chicago, St. Louis, and Kansas City
markets had been advanced during this period in amounts ranging from
4% to 94 cents per 100 pounds, or from 12 to 31 per cent.

The complaint further avers that the roads conspired and confed-
erated to bring about these advances, charging that on February 1,
1899, a joint arrangement was made among them whereby the rates on
beef cattle from all southwestern points to markets were advanced
about 2% cents per 100 pounds. It further charges that in like manner
about December 15, 1899, the rates from all Texas, Indian Territory,
and Oklahoma Territory and New Mexico were advanced about 3 cents
per 100 pounds, and the rates from other points were advanced in like
manner and for amounts not stated. Other advances have also been
subsequently made, particularly about March, 1903, there was another
advance of 3 cents per 100 pounds, making the cattle rates which have
been maintained.

The complaint goes on to state that the rates in 1898, before the
advances were substantially what they had averaged for the preceding
ten years, and the increases which made the rates higher than for
fifteen years were unwarranted. It is further offered that these inter-
state rates are from 20 to 30 per cent higher than the local rates
within States where the rates are regulated by law. The following
examples are cited:

Texas local rates, beef cattle or calves, 500-550 miles, 26% cents per
100 pounds; 650-700 miles, 30 cents per 100 pounds,

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Interstate rates, beef cattle and calves, Fort Worth and north Texas
points to Kansas City, 500-550 miles, 364 cents per 100 pounds.

Nove Texas points to St. Louis, 600-700 miles, 424 cents per 100
pounds.

“And by the local distance tariff of the States of Illinois and Iowa,
rates on cattle and other live stock are proportionally still lower than
those of Texas, while local rates in Kansas, Missouri, and Nebraska are
nee substantially higher than local rates for similar distances in

exas.””

The complaint also states that, in addition to these advances, the
roads have ceased to grant free return passage for shippers to go with
and care for their live stock in transit, but require the payment of the
regular fare for the return passage.

_ The advances are not justified by advances in the value or price of
live stock, “as is well known to the defendants, and are of less value
on the markets to-day than at any time in many years, and the burdens
of excessive rates of freight to-day bear more heavily upon the pro-
ducers of cattle than at any time in the past, so that upon shipments
from southwestern Texas, western Texas, New Mexico, and Arizona, the
rates of freight to the markets, upon ordinary range cattle, which are
oe kind produced and shipped, take from 30 to 50 per cent of their
value.”

The complaint further declares that the advances are not justified by
any improvements in the character of the service. “As to this, com-
plainant says that the service has not improved; that cattle trains, as
a rule, are not run at any greater speed; and, in fact, as complainant
believes, the service is poorer than it was ten years ago, both in the
manner of handling cattle and other live-stock shipments and in the
time consumed in their transportation, and is therefore less valuable
than it was ten years ago.”

Attention of the Commission was called to the $2 terminal charge
at Chicago, “imposed, charged, and collected, since June 1, 1894,” by
all roads entering Chicago. ‘Complainant avers and charges that the
same was and is an unreasonable exaction added to and collected in
addition to said unreasonable transportation charges, and that the
service for which it purports to have been imposed, viz, for delivery to
the Union Stock Yards at Chicago, was and is comprehended in the
through rate. ;

“Complainant says that said through rate to Chicago at all times
comprehended the service of transportation of live stock to said Union
Stock Yards upon the Chicago rate from all points in said States and
Territories, and that the same was at all times sufficiently high to
afford a reasonable compensation for such transportation from points
in such States and Territories to the Union Stock Yards at Chicago.
including the delivery there of such live stock. That such termina
charge is therefore unjust and unreasonable, and in violation of sec-
tion 1 of the act to regulate commerce. Complainants further show
that no such charge is made at any of the other markets, and that
under the circumstances the imposition of such charges at Chicago con-
stitutes an undue and unreasonable prejudice and disadvantage to
shippers who ship, or desire to ship, to said market, and is therefore
in violation of section 3 of the act to regulate commerce.”

In addition it is charged that the roads exact additional payments
for the feeding of cattle on trains and that the charges so exacted are
50 per cent more than the value of such feed.

As evidence of the correctness of these statements regarding the ad-
vances in the rates, Judge Cowan submitted part of the testimony of
Mr. Vaile, freight traffic manager of the Missouri, Kansas and Texas
Railway Company, in the hearing had before the Interstate Commerce
Commission :

“Mr. Cowan. There has been a general complaint of an advance in
rates, has there not?

*Mr, Harun. Yes, sir; there has been complaint.”

* * * * * *

“Mr. Cowan. The advances which were made in those rates made
them higher than thev had ever been before?

“Mr. HAILe. J think they are.

“Mr. Cowan. Is it not a fact that for ten years previous to the ad-
vances made in 1899 the rate from Fort Worth, for example, which
would be a fair one, had never been more than 3134 cents per 100

ounds ?
re Mr. HaiIue. I will tell you. I think that is substantially true, Mr.
Cowan.”
* * *, * * * *

“T find that such rate was, in 1889, to Kansas City, 284 cents, and it

was advanced from that figure up to 83 cents, where it remained for a

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series of years, and was reduced again to 28 cents, and then advanced
to 333 cents, and then again to 364 cents.

“Mr. Cowan. The 364-cent rate to-day is a higher rate than has ex-
isted since the organization of the Interstate Commerce Commission,
and since we have had a file of the tariffs with them?

“Mr. Haun. Yes, sir.

“Mr. Cowan. What else could you expect, then, than that the cattle-
men would complain of the advances in these rates?

“Mr. Harun. Oh, I expect them to complain.”

Mr. Murdo MacKenzie, a cattle raiser, operating one of the largest
ranches in the country, appeared before the committee to complain of
these advances in freight rates. He testified that at one time, under
conditions of active competition, the rate per car from Amarillo, Tex.,
and common points to northern feeding grounds had been $55. He
said:

“Next year they came to us and asked {if we would not agree to
raise the rate to 305 per car; that if we would agree to give them $65
the rate would be satisfactory to us, and that it would be perfectly
satisfactory to them. That was a paying rate. * * * That was
in 1890, if I remember well. This state of affairs continued up until
1898. In 1899 they increased our rate, and from year to year con-
tinued increasing our rate, until to-day we are paying them $100.”

With reference to the deterioration in the service obtained, Mr. Mac-
Kenzie testified that it is necessary to unload cattle to feed more times
in transit, because of the slower rate of travel, which is only ten to
twelve miles per hour. The cattlemen ask that the rate be eighteen to
twenty miles per hour. They say that such rate of speed is necessary
to the welfare of their business, and it is certainly not excessive.

In_ this connection Mr. MacKenzie testified before the committee of
the House, ‘““Up to 1897 I could go to a railroad company and tell
them that I would give them from ten to twelve cars on a train and
they would give me a special train. But now they will not move any
freight unless they get the full tonnage of a train—the full tonnage
that the engine is rated to carry. In many instances they overrate
their engines, so that they will not make more than seven to ten miles
an hour. I have had shipments on the road—I have had from 3,000
to 5,000 cattle on the road—and I have got a service of from seven
to ten miles per hour. | ;

“Now, gentlemen, it would be impossible for me to tell you or
explain to you the losses we entail unless you are cattlemen; in fact,
I do not know about it myself * * * do not know how these
things are arrived at, but I know the loss to us is enormous.”

The loss in the shrinkage of cattle on account of say 24 hours’ delay
is 25 pounds to 40 pounds per head. Mr. MacKenzie said, ‘I take
it at 25 pounds, and deduct that from the weight of a steer that will
sell for $4.50 per hundred, and vou will see that we lose a little over
$1 a head on every steer we ship to market. * * * Now, gentle-
mep, when you think of it, you may suppose that 25 pounds is a very
small thing in the weight of a steer, and that it don’t make any
difference. But here is a poor little devil who has been working hard
all the year feeding his cattle with high-priced corn, and with the
poor price of cattle on the market he must lose $1 per head. What
show has he got to go into the courts to make the railroads pay for
this?, He has none; and even if he does succeed it takes him years
to get it, and costs him more than the whole thing is worth.”

Mr. MacKenzie testified that the rates for shipment of cattle to
market had been increased also by changing from a rate per carload
to a rate per 100 pounds. This did not appear directly from the
tariffs, but was none the less burdensome in fact. The rate per car
had been $62.50 to Kansas City. The rate was changed to 28 cents
per 100 pounds, and the minimum carload weight set at 22,000 pounds.
Had this weight been fair and practicable in fact there would not have
been necessarily any increase in the rate. But, as a condition of the
proper shipment of cattle, it is necessary to load cars to a certain
limit. ‘This means about 25,000 pounds per car on the average, and at
28 cents per 100 pounds this meant $70 per car, or an increase of
$7.50 per car. But the railroad tariff officials tried to make the ship-
pers believe that the rate had not been raised.

In 1900 the rate per 100 pounds was raised to 314 cents, making the
rate $78.75, or $8.75 higher than after the first increase, and $16.25
higher than before the carload rates were withdrawn. In 1903 the
rate per 100 pounds was again advanced, this time to 34% cents per
100 pounds, making $86.25 per carload of 25,000 pounds, or $7.50 more
than had been charged since 1900, and representing a total increase
per carload of steers over the carload rate in force in 1898 of $23.75,
or about 38 per cent.

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_As instancing the unreasonableness of these advances, Mr. Mac
Ixenzie related an experience with the traffic officials. At the time
when the rate from Amarillo and common points to Kansas City, 500
miles, stocd at 314 cents (before it was raised the last time to 343
cents), the shippers went to the roads and complained, citing the rate
from Las Animas, Colo., to Kansas City, 500 miles, 234 cents per 100
pounds. The roads admitted the discrimination and, to “help” the
Texas cattlemen, raised the rate from Colorado to Kansas City to 26
cents, although the Colorado rate had previously been satisfactory to
them, i. e., the roads. ;

Another witness who came before the Senate committee to complain
of the railroad oppression of the live-stock industry was Hon. . AL
Harris, formerly United States Senator from Kansas, who appeared as
representative of the American Short Horn Breeder's Association, an
extensive live-stock organization. Mr. Harris strongly indorsed the
correctness of the sentiments and statements of Judge Cowan. He de-
eclared that the cattle rates in the Southwest had in the last five or six
years been advanced 25 or 30 per cent.

Another petitioner to the committee of the Senate was the Chicago
Live Stock Exchange, which handles practically all the live stock re-
ceived at this, the greatest live-stock market of the world. The state-
ment of the exchange setting forth the ‘‘ terminal charge” extortion
at the Union Stock Yards, in part, follows:

‘“For the past eleven years this exchange has been fighting for its
patron’s interests against the extortion by the railroad companies in
the matter of the ‘terminal charge’ of $2 per car, which, on June 1,
1894, was added to the freight on each and every car of live stock
shipped into or out of the Union Stock Yards of Chicago on western
railroads. This amount was put on by the railroads to cover a charge
varying from 80 cents to $1.50 per car, begun at that date by the Chi-
cago Junction Railway Company for the use, by the various railroads, of
tracks connecting the terminals of said roads with the Union Stock
Yards and owned by the Junction Railway Company. A storm of in-
dignation arose, and every shipper protested, and the Chicago Live
Stock Exchange, on behalf of those shippers, at once instituted pro-
ceedings to remove the charge. The matter was brought before the
Interstate Commerce Commission as the proper tribunal to give re-
dress, and, notwithstanding the efforts of the railroads, its decisions
have always been favorable to the exchange, and at least one-half of
the charge was declared unjust and unreasonable. The United States
Supreme Court confirmed the Commission’s view. * * *

"The exchange, however, has never been able to preyent the con-
tinued collection of this charge by the railroad. The hundreds of thou.
sands of men who have suffered for eleven years and are still suffering
this extortion feel that some means should be devised for their protec-
tion. ‘There have been over $6,000,000 taken from them under this
charge without ene cent of additional benefit.”

ADVANCD IN RATES ON LUMBBR.

In February, 1903, an advance was ordered by the roads of 2 cents
per 100 pounds, or $8 per car, in all rates on Southern pine lumber,
from all Southern producing points, from weorpia to Texas, inclusive,
to all markets north of the Ohio River, to all points in Middle and
Eastern States—to practically all markets to which this lumber is
shipped. So far as the evidence shows, no justification has been offered
by the roads for this advance, except that the traffic is able to bear
the burden of the higher rates, :

Mr. Robinson, representing the New Orleans Board of Trade, before
the committee of the House told of a hearing had at Atlanta_to con-
sider complaints of the lumbermen against these advances. He*said:
“Mr. Culp, traffic manager of the Southern Railroad, was on the stand.
He was asked to explain why this raise of the rates on lumber was
made. As nearly as I can remember his exact language it was this:
The railroad companies, desiring to share in the general prosperity
of the country, looked around to see who could stand an advance iu
rates. In their judgment—mark you, in their judgment—the manu-
facturers of lumber in the Southern States were prosperous and could
stand a raise in rates. Therefore they raised the rates.’’

The statement before the Senate committee by Mr. Gardner, a lum-
ber manufacturer of Mies pls was to the same effect. There {fs no
competition in this traffic. The only limit recognized by the roads is
what the traffic will bear. Mr. Gardner went to Mr. Harrihan, general
manager of the Illinois Central Railroad, to complain of excessive
rates on lumber, and Mr. Harrihan’s reply to Mr. Gardner, as he
quoted it to the committee, was: ‘‘ You people are prospering anyway,
and when times get so hard that you can not do business, then we will
reduce your rate.”

This advance in the rates means an average increase of 60 cents per
1,000 pounds in the price of Southern lumber in the Northern mar-

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ket. It affects directly all the extensive consuming territory north
of the Ohio River and east of the Mississippi. It is estimated by the
Interstate Commerce Commission that this advance in freight rates.
applies to annual shipments of lumber amounting to 20,000,000 tons.
On this basis, the total amount collected annually under this advance
would be about $8,000,000, and, if it is figured from the time the
advance was made, 1903, to the present time, this advance probably
amounts to about $25,000,000. This is what it has cost the consumers
of lumber to have the roads advance these rates. his is the sig-
nificance of this little 2-cent advance in the freight rates.

Aside from these excessive rates to Northern markets, Southern
lumber dealers complain bitterly of the rates for local distribution
of this product. On this traffic the rates are often still more exorbitant.
An illustration of this situation was given by a committee representing
the Missouri, Kansas, and Oklahoma Territory Association of Lumber
Dealers. The illustration shows how the roads use their monopoly
power to extort exorbitant rates for transportation of freight at non-
competitive or nonfavored points in the distribution of Southern lum-
ber to consumers in Kansas and Oklahoma. In this case the shipment
originates in Texas. The committee statement is as follows:

“Let us suppose a train load of lumber originates at Conroe, Tex.,
on the Atchison, Topeka and Santa Fe Railroad. and let us_ suppose
that this lumber is distributed along its line to Chicago, the distances
and rates will be as follows:

Dis- Rate per
tance. |100 pounds.

 

Miles. Cents.
342 18%

 
  
 
 

 

Gainesville, TOK. ccceaemasiiwkninan anannekinkigiaasmmesaeinhe

Ardmore, Okla.__ 382 25
Purcell, Okla_-... 449 £6;
Guthrie, Okla _. 513 QR
Wichita, Kans - 653 é
Topeka, Kans __ 815 284
Lawrence, Kans - 842 23
Kansas City, Mo .......-.....---...------- . 882 23
BSCR GG FL ot arcs aout utopian Mperetecee vp atti ici ola Whewes asia 1,340 24

 

 

“And all points between Carrollton, Mo., and Chicago on this line get
a 24 cent rate. You will notice that the rate to Gainesville, Tex., and
Ardmore, Okla., jumps up 63 cents per 100 pounds in a distance of 40
miles, or 3034 mills per ton per mile, whereas the through rate to Chicago
is 3.6 mills per ton per mile. The rate increases in inverse ratio to the
distance the lumber is carried. This is not an isolated case, but this
is a fair sample of the lumber rates adopted by all the roads operating
in the State of Kansas and in Oklahoma.

“ Texas originates lumber with* its own State, and has a stringent
State railroad law. This accounts for the advance in freight as soon
as the road strikes Oklahoma, and also emphasizes the necessity of an
interstate railroad law. The distance from Conroe to Chicago is more
than twice the distance from Conroe to Wichita, and yet the rate to
Chicago is 24 cents, while the rate to Wichita, over the same road,
under precisely similar conditions, is 283 cents per 100 pounds.”

ADVANCES ON SOFT COAL.

In the early part of 1903, advances in rates on soft coal were made
throughout the official territory, which are estimated by the Interstate
Commerce Commission, to average about 10 cents per ton. The ton-
nage affected is estimated to be something over 100,000,000 annually.
Based on this amount, the advance of 10 cents per ton would be over
$10,000,000 a year. And if this rate is maintained to the present time,
the total increased charge collected would be in excess of $30,000,000
on this commodity alone.

ADVANCES ON IRON AND STEEL.

In this same memoranda the Interstate Commerce Commission state:
“At the beginning of the year 1908, the rates on all iron and steel
articles were advanced 10 per cent in the territories governed by official
classifications. The annual reports of the carriers do not appear to in-
clade all iron and steel articles in the tables which give the separate:
tonnage for particular commodities.” The total tonnage assigned to
commodities to which this advance is applicable, however, amounts ap-
proximately to 20,000,000 tons annually. An advance of 10 per cent
would equal from one-half to one and one-half cents per 100 pounds,
and average probably about 1 cent per 100 pounds, or 20 cents per ton.

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On the basis of this tonnage the net annual increase in the freight
charge because of this advance will be approximately $4,000,000.

Express companies——The foundation of the abuse in the freight line,
private car, and express company lies in the discrimination by the rail-
road company in favor of these institutions as against the public. This
fact is well illustrated by the testimony of a Chicago shipper before
the Senate committee with reference to the express companies engaged
in the transportation of perishable fruit.

In the first place, the express company is not a common carrier; is
not subject to the act to regulate commerce, and consequently there is
no deterrent confronting it in its wrongdoing. This Chicago shipper
is a representative of seventy associations of fruit growers and acts
in the capacity of general consignee for these associations at Chicago.
The point which he makes in this connection is that the managers of
railways discriminate in favor of express companies because they have
private interest therein.

The significance of this illustration, briefly stated, is this: Until
recently the bulk of the Louisiana strawberry crop was brought north
by express, and a very considerable portion is still so shipped. At the
shipping points an official is employed by the railway company and the
express company—by the railway on a salary and by the express com- .
pany on a commission. The very system by which the local agents of
the railroads are also constituted as agents of the express companies,
but on a commission basis, is caluculated to induce them to maintain
and promote the proportion of express business at the expense of freight
or railroad business.

In the given illustration the cost per carload on strawberries by
freight, including refrigeration, is $152 per car; time, fifty-two hours.
.In consequence of this slow schedule, or because of fruit being
overripe or water-soaked, or because of the failure of the railroad
companies to provide cars, or for other causes, it is frequently necessary
that such fréits go forward by express. The cost by express—time,
thirty-six hours—is $400 per car. Of this amount the railroad, which
furnishes 97% per cent of the service, receives $180. The express
company, which furnishes the 24 per cent of the service, receives $220.
The shippers say that they are willing to pay 25 per cent more than
the present srete ate :190—and they should be given a thirty-six
hour service, such as the railroad gives the express company for $180,
and that they should not be obliged to pay the express company more
than twice as much for no additional service.

This discrimination favoring the express company gives them a very
great advantage as compared with the ordinary shipper. These ex-
press companies are engaged in the commission business. They find
eustomers for much of the traffic which they handle.

As another illustration of this discrimination, Mr. Davies submits
the following instance: “A friend of mine, a solicitor in the freight
business, went to a house in Chicago that had four carloads ready to
ship to New York. The rate was $2.25 a hundred. The railroads
were religious. They would not shade the rates, and it was a good
line, and expected to get the business on the merits of the service.
Two days afterwards he went up there, and the express company
had hauled down the cars, and they were shipped to New York and
delivered to the store at the other end, including the cartage, which
they own, for $1.50, and the railroad companies, I presume, got 45
per cent of the $1.50 and were satisfied.” :

Private car lines.—From all parts of the country where perishable
fruit is grown or shipped came complaints of the oppression of the
private car and refrigerator car companies. Prior to the advent of
the private car line in the’ Michigan fruit business a charge of 79
cents per 100 pounds covered the total cost of all service, including
refrigeration, for the shipment of fruit to Boston. With the advent
of the private cars, $20 per carload was added as an icing charge.
When Armour secured an exclusive contract on the Pere-Marquette
line, this additional charge was increase to $55 per carload, except at
competitive points. Not only was this charge exorbitant, but it
involves resulting discrimination as between the grower, who has a
choice between the Armour car and the railroad car and the ship-
per who must use the Armour car. This discrimination maintains
at present. In May, 1905, the Michigan Central withdrew from
the Armour contract with the result that discrimination is re-
stored as between competitive and noncompetitive points in the
Michigan fruit belt. Mr. Mead, representing the National League of
Commission Merchants, testified with reference to this condition:
“One man who can ship fruit over the Michigan Central will get a
rate of $25 (for icing) to Boston. The man who uses the Pere-

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Marquette road (where the Armour exclusive contract prevails) will
have to pay $45.”

Testimony was submitted in which it was declared that the rates for
transportation of peaches from Georgia to northern markets is most
exorbitant. The rates were cited, and from these rates on carload ship-
ments of 20,000 pounds of peaches the charge per ton per mile is prac-
tically three and one-fourth times the average ton-mile rate on freight
in the United States. The charge of $67.50 per car for refrigeration
from North Georgia to New York was designated as ‘“‘ enormous.”

Complaint from the citrus fruit growers of California set forth that
in addition to the enormous rate for refrigeration many of the cars fur-
nished are so small that they will not carry the required minimum
carload rate without great damage to the fruit. This results in a
necessary underloading of the cars and a consequent much higher rate
of charge than is given in the tariffs.

Growers of California deciduous fruits complain still more of the ex-
cessive charges for refrigeration. Sid their representative before the
Senate committee: “ This icing charge is exhorbitant, averaging about
$106 per car, and believed by many to be all profit for the reason that
the (Armour) Company can, as it does in some instances, put up its
own ice or own a controlling interest in companies that may be per-
mitted to furnish it with ice, consequently the profits acruing to such
uy ultimately find their way into the treasury of the Armour

ompany.

It developed in the testimony before the Senate committee that the
rates for refrigeration from the Sacramento Valley to eastern points
range from $80 to $120 per car and averaged about $106 per car. At
the same time the Northern Pacific Railroad was shipping fruit from
Washington and North Pacific Coast points under a charge for icing of
$25 per carload.

Mr. Joseph H. Call appeared before the Senate committee on behalf
the Southern California Fruit Exchange and the citrus fruit interests
of California. Mr. Call stated that evidence in the rate cases in
which he participated before the Interstate Commerce Commission es-
tablished that the average costs to growers per 80-pound box of putting
oranges aboard car is $1.10. The freight to eastern markets under a
blanket rate amounts to 90 cents per crate, with the charge for refrig-
eration at $70 to $80 a car. The total cost of laying the fruit down in
the eastern markets is $2 to $2.10 per box, and the average selling price
for the past three seasons was as follows: 1902 to 1903, $2.20; 1903-4,
$1.977; 1904-5, $2.18. So high are the freight charges and refriera-
tion charges on this traffic that the margin of profit to the growers is
very narrow and the business is indeed precarious. ‘The total freight
paid annually on this traffic to railroads is about $12,000,000, and is
about ten times the total estimated profits to the growers on the prod-
uct_so shipped.

Not only are the rates for transportation and refrigeration under the
private-car system uniformly exorbitant and unreasonable, but they
are,charged for a service that is often inadequate and unsatisfactory.
Referring to the service in the shipment of the Georgia peaches, it was
declared, ‘As to the refrigerator car service, in spite oF the enormous
charge of $67.50 * * the service was bad, peaches spoiled en
route and cars could not be had at many places for loading.”

Mr. Mead submitted testimony that the service was inadequate, re-
sulting in enormous loss to fruit and berry growers; that the refriger-
ation was imperfect, necessitating underloading of cars and conse-
quently an increase of about 20 per cent in the already high freight and
icing charges. In case of loss or damages he declared it well-nigh im-
possible to fix the responsibility, and that the freight bills were not in
any way itemized so that the shipper could know how much he was
paying for any part of the service nor to whom he was paying it. He
cited one case in which Armour & Co. sued a receiver of freight for
charges on a shipment shipped in an Illinois Central car, the only
apparent connection being that it was shipped at the Armour rate; and
another case in which the Chicago and Eastern Illinois Railroad sued a
receiver for a freight charge on an Armour service. ‘In one instance
the railroad is suing for that work and in the other Armour is suing
tor the work performed by the railroad.”

Mr. Mead submitted in evidence of the failure of Armour & Co. to
furnish efficient service where they have exclusive contracts to furnish
all the equipment to move the traffic the following letter, by a pioneer
trucker of North Carolina, to the Carolina Fruit and Truckers’ Journal:

WaLuacn, N. C., May 5, 1905.
Editor Carolina Fruit and Truckers’ Journal:

During my thirty-five years’ experience in the strawberry business in
this section I have never seen anything to compare with the disastrous
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145

results of the present season. In fact, it looks now like this, the most
valuable strawberry crop North Carolina has ever produced, will be
lost on account of poor transportation facilities. Our association has
done all it could to keep the transportation people posted as to existing
conditions, and told them it would take 2,500 refrigerator cars to move
the crop; yet the supply of cars gave out before we had been shipping
ten days. Thousands of crates of berries have rotted at the railroad
stations for want of cars, and ey of our growers are ruined unless
the transportation people stand the loss, as they should do.

The situation is terrible. We have had no refrigerator cars left at
this station to be loaded in five days. What we had came by in the
‘pick-up’ train, and with instructions to load for New York only.
They packed them mostly without slats, 7 crates wide and 4 high,
running about 450 crates to the car, and are being delivered one to
three days late. The markets are taking good berries at good prices.
The “* pick-up "’ berries are selling for nothing to 8 cents, as to condition.

Growers are demoralized and about frantic. Yesterday there was
one empty car on the “ pick-up,” which was givin to one party who had
bill of lading for 800 crates. As soon as the car stopped other grow-
ers began to carry their berries into it, and for some time it looked like
we would have a general hand-to-hand battle, while our clever agent,
who has been worried until he looks like he is just out of a spell of
fever, was powerless. ‘‘ Forbearance has ceased to be a virtue’’ here,
and we must have more cars or a heavy police force, for our boys
want to fight.

The ‘ pick-up” train as now managed will not do. You can not
haul heavy loads of guano and strawbef%ries successfully on the same
train. One came by here so heavily loaded with guano it had to be cut
in two, and took one part to Teacheys and engine came back after the
remainder. I don’t know how long it takes to get to New York that
way.

The railroad people make a big difference between guano and straw-
berries when they make up the tariff, but when they make up their
trains they all go together. Of course railroad people claim that
freight must be higher on berries, as they are perishable. This is all
right if they bear this in mind in their movement. The berries that
are being packed in the “ pick-up” cars, 450 crates to the car, had bet-
ter be dumped into the creek. Three box cars loaded with berries left
here yesterday, which berries had been picked up and lying at the sta-
tion since Monday. Some of the crates were leaking when they were
loaded, but they got about 500 in a car and they will be in bad shape
when they are unloaded.

J. S. WESTBROOK.

Only about 600 cars were delivered, and Mr, Mead estimated the re-
sulting loss “at least half a million dollars.” (Mr. Robbins of the
Armour car lines complainingly testified that the Armour Company
would probably have to pay $75,000 damages.)

The commission men complain also that Armour & Co. engaged in the
buying and selling of fruits and produce, and that these exorbitant
rates work a gross discrimination against all other dealers and commis-
sion men, enabling the Armour establishments to drive them out of
business. The advantage of the car-line company engaged in the fruit
business is described as follows: “If Mr. Armour ships to-day in his
own cars his own products he has the advantage of the commission men
to the extent of the return he receives plus his car rental and less the
actual expense of ice.” Between Michigan and Boston, for example, this
would amount to probably $50 per carload on peaches.

Since September, 1904, Armour & Co. advertised and caused to be
generally circulated the announcement of their withdrawal from the
produce and commission business. Mr. Mead, of Boston, testified, how-
ever, that Armour & Co. continued in this business, operating under
the name of a dummy corporation. As an instance in his own personal
knowledge he named the J. T. Kimball Company, of Boston, a concern
organized and operated by Armour clerks. Similar complaints of the
undue advantage to the car line engaged in the produce and commis-
sion business come from all sections of the country. J

It was stated before this committee that rebates are paid and ad-
mitted by the Santa Fe Refrigerator Line. | The testimony of Mr. Leeds
pefore the Interstate Commerce Commission was cited on this point.
He declared that his company had built a new refrigerator line and
entered the fruit transportation business in California. He stated that
he was then, June, 1904, paying rebates, sending money by checks to
the shippers of fruit. He said he had to do it to get the business,
because Armour & Co. had established the practice in their business in
the same territory.

6758 10

 
146

Mr. C. N. Brown, an orange grower, testified: ‘‘They paid us those
rebates, and every one of them would stand in line to get to talk to us—
for that $35 a car—with the cash in hand, too. We did not have to
wait for it.” :

Mr. Stevens, testifying in this connection, said: “ If ey (the Santa
Fe Railway Company) entered into competition with the Southern Pa-
cific, as testified by Mr. Leeds, they gave a rebate of $25 for the short
haul to Chicago and $35 for the long haul. But, as would be inferred
and was implied by the gentleman this -morning—and I had a talk with
him afterwards—it would seem that that was given in the way of a
reduction in refrigeration, and as a matter of fact that is not true. It
was a rebate, and that rebate was handed over to one individual. If
he saw proper to distribute it among the growers, all right. I justify
the Santa Ife in that. I am opposed to rebates in any shape or form
or manner, but if you are fighting the devil you will have to fight him
with fire. The Santa Fe would not have received a carload of fruit
from the Sacramento River in the way of tonnage to its system if it
had made a reduction of $35 a car on refrigeration.”

CALIFORNIA FRUIT TRUST.

The California Fruit Trust was described by Mr. Stevens, a fruit
grower of Sacramento, Cal., who appeared before the committee as a
representative of the Horticultural Convention of California, of the
transportation committee of which organization he had for twelve years
been chairman. Mr. Stevens declared that he represented on this sub-
ject the sentiment of 95 per cent of the fruit growers of his State. He
described the organization of the “ California Fruit Distributers.” This
association was formed in 1902, and represents a remarkable instance
of the creation of monopoly power through railroad favoritism. The
Southern i’acific Railroad gives an exclusive contract to the Armour
ear lines. Through this contract the Armour lines control absolutely
the shipment of fruit from the Sacramento Valley, except where th
Santa Ie enters. On a basis of mutual advantage and community 0:
interest the car line and the ‘‘distributers”’ are on such terms as en-
able the “ distributers”’ to dominate the markets and all other impor-
tant factors in the fruit industry.

The California Fruit Distributers is an organization which has all
the attributes of a trust. It enjoys a powerful monopoly element,
through its relationship with the Armour car line, and this is per-
petuated through the exclusive contract granted the car line by the
railroad company. As a condition of membership, limitations of the
business are agreed to amounting, it would seem, to a combination in
restraint of trade. The operation of this restriction is such as to
place the control of this fruit business in the hands of three compa-
nies—the Earl Fruit Company, Porter Bros. Company, and the Pro-
ducers’ Fruit Company. ‘These companies are all on most friendly
terms with the Armour Car Company. This relation which they hold
with the car lines enables. them to control absolutely the markets
and the distribution of California deciduous fruits. How they use this
power to further their own interests and to the great detriment of the
interests of the growers and public generally is set forth in detail by
Mr. Stevens.

These big distributers are engaged in two forms of the fruit busi-
ness. They ship fruit for the growers on a commission. They buy
fruit from the, growers, deducting a commission, and sell the fruit in the
eastern markets for their own profit. In either case the grower has
no voice in saying to whom and where the distribution of this product
is proclaimed by the distributers themselves. They say they can pre-
vent gluts. If this is true they can also create gluts, should it be to
their interest to do so. Considering the two branches of their business,
it is clear that on those consignments which they ship as their own
property there are two forces which make for high profits for the dis-
tributers. In the first place, they must get a high price in the market
in which they sell. In the second place, they must be able to bny the
fruit f. 0. b. California at a low price. These two objects are attained
under this arrangement to a remarkable degree.

To secure gocd markets and good prices for their own shipments, the
distributers have reserved a large proportion of the best markets in the
country. They ship the bulk of the commission consignment—shipped
for the grower—to the markets of Boston, New York, and Chicago.
These are auction markets at which the competition is most severe, and
the profits realized on these consignments by the growers are ordinarily
small. But it is in the power of the distributers by consigning an
unusual quantity to any given point to ruin the market entirely, re-
sulting in loss to growers. This practice so discourages the growers

6758
147

that they are ready to sell f. 0. b. California to the distributers at any
price which the distributers shall designate.

Meanwhile the markets reserved by the distributers for their own
product are paying them good prices for the fruit which they, because
of the market conditions which they have created, are able to buy of
the growers at their own prices.

In evidence of the correctness of these statements the attention of
the committee was called to several statements setting forth in detail
the facts as to distribution and prices in various markets of California
of deciduous fruits in recent years. Several particular instances were
cited by Myr. Stevens in which the growers ship consignments of this
fruit at a considerable net loss. With reference to the distribution
of consignment business, the following statement is offered: *‘t Of these
3,664 cars shown here, there were 2,862 sold in New York, Chicago,
and Boston, and only 802 sold in 120 other markets, as reported. I
have here another table showing a comparison of the prices of 1903
and 1904, showing that the losses on the week ending August 5, 356
cars, averages $429, or an aggregate of $152,724. That is the cars
gold in all the markets. That is not one market, or anything of that

ind.”

In other words, of the total of 3,664 cars sold by the distributers for
growers on commision, 2,862 cars, or about 80 per cent of the total,
were put into these three biggest auction markets of the country, where
the most active competition prevails. Only 802 cars of the growers’
shipments were allowed to go to the 120 other markets where fruit is
bought in carloads. With this evception these markets were reserved
exclusively to the distributers for the sale of the fruits which they had
-bought f. o. b. California, amounting to something over 3,000 cars.
The distributers use these large consignments in auction markets to
creite gluts and demoralize prices, so that they can make the lowest
possible price f. o. b. in California on their f. 0. b. business. The
greatest prosperity to the distributers is promoted by the destruction
of profits to growers on consignment business, by forcing the largest
possible amount of the product to be sold to them in California, and
by so demoralizing the market that they can get this product at the
lowest possible price. Then, by virtue of their absolute control of the
distribution of the traffic, they sell the product in the markets which
they have built up by this manipulation and restriction of supplies.
And it should ever be remembered that the power of the fruit trust to
do these things is founded in the relationship which it has with the
ear line, which in turn derives its monopoly power through the ex-
elusive contract by which it enjoys discriminations in its favor at the
hands of the railroads. The existence of this fruit trust, as the ex-
istence of every other trust, is traceable directly to the discriminations
and favoritism of the railways.

 

APPENDIX B.
Betterments paid for out of profits and surplus.
[From Mundy’s “ Earning Power of Railroads,”’ 1906.]

 

 

 
   
 

Name of road. Years. | Amount.
Baltimore and Ohio Railroad ..--.....------------------- 1899-1905 | $19, 007, 460
Buffalo, Rochester and Pittsburg Railway -.... 1899-1905 3, 422, 327
Central of New Jersey ---..-.-----.------------- 1903-1905 4, 362, 848
Delaware, Lackawanna and Western -......-.--- 1901-1904 | 13,347,160

1902-1905 5, 278, 731

Erie Railroad ......5---- ==. .-ss---5 5
1902-1905 4,144,023

Pee Valley Railroad

 

New York Contral and Hudson River Railroad -.- 1899-1904 9, 207, 099
New York, Ontario and Western Railroad --...--- -| 1902-1905 2, 500, 000
Northern Central Railway ---..-.------------- -| 1900-1904 3,641, 755
onneyivans ane eiriieeis eee ea 1899-1904 | 50,504, 183
ennsylvania Company (owned by Pennsylvania Rail-
vont seneeecaveee = 7 2 Bee eviesetoceventes e seiaenieenss 1900-1904 9, 000, 000

Philadelphia, Baltimore and Washington (consolida-
_tion of Baltimore and Potomac and Philadelphia,

Baltimore and Washington railroads) 1903-1904 8, 180, 513
Reading Company-...-.----------------- 1905

2,710, 618
Chicago and Eastern Illinois Railroad_------------------ 1960-1904 2, 374, 390
Chicago and Northwestern Railway ---- 19M0-1905 | 26,422,041
Chicago. Milwaukee and St. Paul Railway. «| 1900-1905 9, 999, 096

6758

   
  

 

 
148

Betterments paid for out of profits and surplus—Continued.

 

 

     
   
 
 
 

 

 

Name of road. Years. | Amount.

Chicago, St. Paul, Minneapolis and Omaha Railroad_._.| 1899-1905 | $31,000,

Cleveland, Cincinnati, Chicago and St. Louis Railway -| 1901-1904 2,479, 486
Illinois Central Railroad ....-...--.-.--.----:-----.------ 1900-1905 | 16,630,040
Pittsburg, Cincinnati, Chicago and St. Louis Railway .| 1900-1904 3, 956, 427
Wabash Raivroad -. <0... ccuccieeee Geseteeedceccads'adesad 1900-1905 4,087,398
Wisconsin Central Railway --...-.----------------------- 1900-1905 2,218, 756
Chesapeake and Ohio Railroad ..-.-.-.--.---------------- 1900-1905 6,599, 842
Norfolk and Western Railroad ___....-...---------------- 1900-1905 | 12,250,000
Atchison, Tepeka and Santa Fe Railroad 1896-1904 | 30,000, 000:
Missouri, Kansas and Texas Railroad-_-___.. 1903-1905 3, 752, 932
Missouri Pacific Railroad --...-....-.. 1901-1903 6, 474, 200
Texas and Pacific Railroad_ -| 1900-1904 4, 902, 634
Great Northern Railway --. 1898-1905 | 15,850,000
Northern Pacific Railway --| 1898-1905 | 19,999, 603
Union Pacific Railway... s.0s-ssses evens cnn censcnencee 1900-1905 | 13,479, 165

6758
RAILROAD RATE BILL.

The interests of the railroads in this legislation as compared with
the mining, agricultural, manufacturing, and mercantile industries is
minor in its character. ‘Our industries furnish the vital life blood.
the railroads simply the veins and arteries through which it circulates.”

“T do not propose by my vote to put in the hands of seven men the
question as to whether there shall be a Fall Liver, a Lawrence, a
Lowell, a Manchester, a Biddeford, or a Lewiston. Their interests are
too vast. There are too many millions involved. The employment of
too many people is dependent upon it.”

SPEECH

OF

HON. CHARLES E. LITTLEFIELD,

OF .MAINE,

IN THE

HOUSE OF REPRESENTATIVES,

Monday, February 5, 1906.

WASHINGTON.

1906.
6537
SPEECH

HON. CHARLES E. LITTLEFIELD.

The House being in the Committee of the Whole House on the state
of the Union and having under consideration the bill (H. R. 12987) to
amend an act entitled ‘An act to regulate commerce,’ approved Feb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. LITTLEFIELD said:

Mr. CHairMAan: At the last Congress I voted for a bill that
was aimed to meet some of the difficulties that are now sought
to be reached by the pending measure. More ample considera-
tion and further examination of the question, and as I trust a
more full appreciation of the gravity of the situation, has led
me to the conclusion that as the bill now stands it is impos-
sible for me to support it, and I beg the indulgence of the com-
mittee for a while that I may give some reasons that lead me
to that conclusion. I am perfectly well aware that conditions
exist throughout the country giving rise to agitation that this
legislation is expected to adequately meet. I have not any
doubt, Mr. Chairman, that grievances exist, that injustices
have been done, that there is oppression, and that there are
grave discriminations and great difficulties involved in the
transportation problem. I doubt very much, however, whether
the picture is entitled to the dark shades that have been given
to it by some of the distinguished gentlemen who, in the enthusi-
asm of the moment, have engaged in this discussion.

It would not be very surprising, Mr. Chairman, with some
two hundred and ten,thousand miles of railroad transportation,
with the investment of something like eleven billions of capital,
involving every financial and business interest in the Republic,
in its articulation, interdependence with these business interests,
that we should necessarily have difficulties, injustices, oppres-
sions, and grievances. I suppose, Mr. Chairman, that this
great body of which we are members in time past has been
guilty of foolish and extravagant conduct, and I have no doubt
that in time to come it will to a certain extent repeat those cu-
rious performances. The Supreme Court itself has had occa-
sion from time to time to reverse itself, upon a more full con-
sideration of important questions depending before it, and
the Interstate Commerce Commission has made more blunders
than it has exercised right and proper judgment in connection
with this very question in the discussion of which we are now
engaged; so that, Mr. Chairman, it is not surprising these con-
ditions exist. I concede also, Mr. Chairman, that they exist
in such a degree as may require reasonable legislation for the

6537 é 3
4

purpose of adequately and conservatively meeting the situa-
tion, and to a reasonable extent I am perfectly willing to go,
and, as I shall indicate a little later, I am perfectly willing to
follow in the lead of any distinguished gentleman who may
have mapped out a line of legislation that will reasonably and
conservatively and fairly and judiciously undertake to meet
adequately this situation.

There are a few things, perhaps, to which I should call at-
tention and allude to in passing. Tirst, there is this: A good
deal is said, if I may judge—I have been necessarily deprived
of attending the exercises of the House for the last two or
three days—but a great deal has been said in this discussion
as to the paternity or proprietorship of this legislation. Now,
Mr. Chairman, I take a very languid interest in the question as
to who may be the originator of legislation that may be desira-
ble. If William Jennings Bryan is the proprietor or originator
of the proposition that impresses me as wise and just, I shall
vote for it, Mr. Chairman, notwithstanding he is the proprietor.
[Applause.] It is entirely immaterial to me who may be asso-
ciated with or responsible for a legislative proposition. If it
commends itself to my judgment, IT will vote for it, no matter
who may support it. On the other hand, if it fails to commend
itself to my judgment as being right I will vote against it, no
matter who may indorse and approve or originate it. The re-
sponsibility of legislation is ours and we act, Mr. Chairman,
upon it. It is a great pleasure, though, for me to say in the
very outset of this discussion under these conditions that I
would support—although, as I shall indicate a little later, it
might not be absolutely necessary for the purpose of adequately
taking care of existing conditions—I would support a measure
that went as far and no further than the recommendations of
the President of the United States in 1904 and 1905.

I said I cared very little about the paternity of the measure.
I would not like to have that applied, however, to the name of
the distinguished gentleman who stands to-day as the sponsor
of this meastre before the House. If this legislation proves to
be wise—as I very much fear, aye, as I believe it will not if
enacted into law—if it should prove to be wise, it is a great
pleasure to me to know that the distinguished chairman of this
committee has given his name to this bill. His services—long,
arduous, patriotic, efficient, and successful—to his constituents
and to his country, his great ability, and his high character and
unquestioned integrity rightly entitle him to any mark of legis-
lative distinction that is within the power of this body to bestow.
[Applause. ]

Now, I wish to advert to a few fundamental suggestions before
I reach the discussion of the concrete proposition pending before
this body. I hear people discuss this measure, and I read the
discussions, and they refer glibly to a reasonable rate and the
circumstances under which this legislative body may exercise
a legislative control over that rate. What is the origin of the
legislative power to control the exercise of a public franchise?

The origin rests, Mr. Chairman, so far as this general control
is concerned, upon the broad fundamental principles of the com-
mon law, because never yet was a public franchise granted,
either for the operation of a railroad or a water company, an
electric-light company, or for any other public purpose, that did
not involve inherently the fundamental proposition that it should

6537
5

be exercised in the public interest, that the public should be
served at a reasonable rate without any discrimination. That
is fundamental. It has been the law of the land from the time
whereof the memory of man runneth not to the contrary. We
do not act here under the legislative power to regulate and con-
trol a franchise by virtue of this inherent power, because we are
not acting upon Federal corporations. Very few railroad corpo-
rations get their life and being from Federal legislation. The
vast mass of them are the creatures of the State; and it would
be for the State to exercise this power as a scientific, legal prop-
osition. But we undertake to exercise a power, and we can ex-
ercise it by virtue of the commerce clause of the Constitution,
which enables us to say, not how they shall exercise a franchise
and protect the people in the exercise of their rights and serve
them iz a just and reasonable manner without discrimination,
but upon what conditions corporations engaged in interstate
commerce shall do their business. And under that I concede,
Mr. Chairman, that we have undoubted power to enact this
legislation.

I grant the suggestion of my distinguished friend from Michi-
gan [Mr. TownsEenp] upon that line. I think our power is full
and plenary. But let me go a little bit further with some gen-
eral suggestions which absolutely underlie this whole agitation.
What is a reasonable rate? Who is there upon this floor that
can tell? I undertake to assert, Mr. Chairman, and I challenge
successful contradiction, that there is not to be found in the
books, either in the reports of the States or the reports of the
United States Supreme Court, one single case that lays down a
definite, scientific rule upon which a reasonable rate can be
determined. It is absolutely indefinite and indeterminate to the
very last degree. Not only is that true of the decisions of the
courts of the country—and well might Mr. Justice Harlan, in
the opinion in Smythe v. Ames, say that this was surrounded by
a great deal of embarrassment—I say, not only is it true as to
the judicial tribunals of this country, but it is more than true of
the Interstate Commerce Commission. They do not know, no
other person knows, what that definite, scientific rule is. You
may search the opinions of the Interstate Commerce Commis-
sion from the year 1887 to the year of our Lord 1905, and no
live man can tell by any decision that tribunal has ever rendered
what its next decision will be upon the question of the scientific
determining of what a reasonable rate is. No railroad, no
shipper, can tell from the decisions already rendered what the
next decision is to be. I do not suggest, Mr. Chairman, that
these important and underlying considerations should negative
any legislative action.

But I suggest them on the threshold of this discussion in
order that we may appreciate the vast and tremendous diffi-
culties involved in this great question, in order that we may
fully understand what power we are proposing now by this bill
to vest in a purely political tribunal without recourse and with-
out appeal. If any distinguished gentleman desires to examine
the law for the purpose of ascertaining the character of this
indefiniteness and would like to get the most recent and valuable
declaration of a court upon this great question as to whether
there is any definite, scientific basis upon which a reasonable
rate is to be determined, which is the absolute foundation of
all this agitation, the complete genesis upon which this bill

G37
6

must ultimately rest, I will give him two cases to which he
ean refer. There is a distinguished and able judge in my State,
Judge Savage, a very learned man, who has rendered two opin-
ions which contain more careful, scientific detail, marking it
out more plainly than any other opinion yet announced by any
court; and yet after all he says they have this same delightful
uncertainty and this characteristic great indefiniteness. I will
give you the names of the cases, and if you have any occasion
or curiosity you can refer to them. Kennebec Water District
against Waterville, 97 Me., 185; Brunswick and Topsham Water
District against Maine Water Company, 99 Me., 71.

Now, these suggestions, Mr. Chairman, are simply funda-
mental, and they illustrate the infinite difficulties involved in
the question to be submitted to this tribunal, which is to be
vested with power by this bill. It provides for determinations
that are practically absolutely arbitrary to the very last de-
gree. That is the kind of power we propose to rest in this
tribunal.

I have said, Mr. Chairman—and I wish to emphasize that
assertion—that I would be entirely willing upon this occa-
sion to follow the recommendations of the President of the
United States; and so I would. But I submit that this bill
goes vastly further. I do not wish to be understood, how-
ever, as admitting that it is absolutely necessary to pass many
of the provisions of this bill, except a few minor details, be-
cause I submit, and I submit it with all candor, under these cir-
cumstances of excitement, that if the provisions of existing
law, statutory, Federal in their character, and the provisions
of the common law, which require every carrier to serve at a
reasonable rate and without any discrimination, independent
of either Federal or State legislation, fundamental as the law
itself, I submit, Mr. Chairman, that if the existing provisions
of Federal legislation, which are nothing more than the enact-
ment of the fundamental provisions of the common law, and
their application to interstate commerce, if they were reason-
ably and fairly and continuously enforced, and the people
who are affected by this condition would avail themselves of
their common-law rights in the, tribunals established by law
for the purpose of maintaining and vindicating them, nine-
tenths of the occasion for this legislation would absolutely
vanish and disappear.

But, Mr. Chairman, I said that I would support this bill.
provided it followed the recommendations of the President of
the United States. Now, I wish to make myself clear. There
are three great important particulars in which this legislation
is not in harmony with the recommendation of the President of
the United States. Under these circumstances it has become
a very important political question, and we stand here to-day
upon this floor and witness the edifying spectacle of both sides
of this Chamber engaging in a legislative race to see which side
will get most credit for applying relief to this condition: and in
that. race, I submit, Mr. Chairman, that the procession has
gone away beyond its leader; the army is away in advance of
its general. The leader has made some prescriptions calculated
to take care of this disease, but under our zeal, under the cir-
cumstances, I submit, Mr. Chairman, with great confidence and
T trust with great candor, that in our zeal we have gone vastly

6537
7

further and are about to apply remedies not recommended or
asked for, which, in my judgment, will be vastly worse than the
disease.

First, this bill confers upon this Commission, in my opinion,
the power to initiate rates; second, the bill does not give what
the President's recommendation, twice repeated, declares is
necessary in order that it may conserve wise legislation. It
does not give any court of appeal. And the third is vastly more
important than either. This bill puts in the hands of a tribunal
of seven men the power to say whether they shall have elimi-
nated the preferential rates that prevail everywhere in all this
great Republic, from the Atlantic to the Pacific, from the Cana-
dian border to the Gulf of Mexico, and which absolutely affect
every class of business interest in this country, and upon which
their business welfare and prosperity depend,

INITIATING RATBS.

( Now, I say first, Mr. Chairman, it confers the power of initi- °
ating rates. It is hardly necessary for me to call attention to -
the fact, as I shall now do, that the President says in so many ©

words that he does not want that power conferred. He says:

I call your attention to the fact that my proposition is not to give
the Commission power to initiate or originate rates generally, but to
regulate the rate already fixed and originated by the road upon com-
plaint and after investigation.

The committee agreed entirely with that, and made this as-
sertion in their report:

As before observed, the power to initiate rates is not given to the
Commission. So far as is known, but very few persons have thought
it wise to confer this power, and it is just to the Interstate Commerce
Commission to say that, as we are advised, no member of the Com-
mission thinks it wise that they should be invested with this power.

I want to say, Mr. Chairman, that I concur with the Presi-
dent, and I agree with the distinguished chairman of this com-
mittee. I do not believe that a tribunal of seven men should
be at one and the same time a detective agency, a prosecuting

sie

attorney, and a lord high executioner, even though railroads .
may be the subject aimed at.) I agree with the President of the .

United States, and with the distinguished chairman of the com-
mittee. Now, as to this assertion of the chairman as to the
effect of this bill, I feel bound to say, taking into account his
great ability and integrity, when I came to read the bill I had
grave doubts of the fact, but on more careful reading of it, and
I submit it to the consideration of my distinguished friend, it
satisfied me, Mr. Chairman, that while it may not have been
intended or expected, that this amendment contained in this
bill does, under the circumstances, confer precisely that
power. I call your attention, Mr. Chairman, to section 4 in
this bill, which amends section 15, and I beg you to note care-
fully its language:

That the Commission is authorized and empowered, and it shall be
its duty, whenever, after full hearing upon a complaint made—

Now, mark the language—
as provided in section 13 of this act.

This section 4 neither adds to nor takes from the powers
vested in this Interstate Commerce Commission by section 13.
It does not increase their power; it does not diminish their
power. It leaves it exactly where section 13 defines them. And
then we have this concluding language in section 4, amending
section 15:

6537
8

The foregoing enumeration of powers shall not exclude any power
which the Commission would otherwise have in the making of an order
under the provisions of this act.

Expressly providing that the provisions of law that obtain in
section 138 shall remain absolutely intact. Now, let me call
your attention to section 13, and the manner in which, under
that section, complaint may be originated.

Suc. 13. That any person, firm, corporation, or association, or any
mercantile, agricultural, or manufacturing society, or any body politic
or municipal organization complaining of anything done or omitted to
be done by any common carrier subject to the provisions of this act
in contravention of the provisions thereof, may apply to said Commis-
sion by petition, which shall briefly state the facts, etc.

What does section 4 amending section 15 do? It simply re-
enacts all the provisions of section 13; but I have not read them
all. Under section 13 the Commission have held that a common
carrier could not make complaint. Complaints were confined to
parties interested adversely to the common carrier. The amend-
ment gives to common carriers that right. This does not make
any other change in that section, but that section contains an-
other provision which further defines how complaints can be
made. The concluding parts of section 13 read as follows:

Said Commission * * * may institute any inquiry on its own
‘motion in the same manner and to the same effect as though complaint
had been made.

That is “the complaint” made as provided in section 13 of
this act.

As the law now stands, adverse complaint and complaints or
inquiries instituted by the Commission amounting to the same
thing, are the only things upon which the Commission can
base an investigation or a finding. Their finding or order is
not effective until approved and enforced by the court. The
amendment simply adds the carrier as a complainant and makes
the orders made on complaints self-executing. As to adverse
complaints, the only change made is in the consequences fol-
lowing the complaint. The adverse complaint is, under the bill,
poterttial as the basis of a self-executing order. That portion of
section 13 conferring upon the Commission the power to “ insti-
tute any inquiry ” remains in full vigor, as no attempt is made
to in any way amend it. The Commission still has the power to
“initiate any inquiry,” and as the bill makes the adverse com-
plaint potential ag the basis of a self-executing order, and as the
inquiry instituted by the Commission still has, by the express
language of the statute, “the same effect as though complaint
had been made,” the conclusion is obvious and necessary that
the Commission “ may institute any inquiry ” that will also be
the potential basis of a self-executing order. Hence to all in-
tents and purposes they can initiate rates.

Mr. HARDWICK. Mr. Chairman, will the gentleman yield
’ for a question?

The CHAIRMAN. Does the gentleman yield?

Mr. LITTLEFIELD. Certainly; except I would not like to
have the gentleman take up too much of my time, as I have a
great deal of ground to cover.

Mr. HARDWICK. Just a moment. I am very much inter-
ested in the point the gentleman is making, and have the oppo-
site view of it. Section 15 says, ‘“ Whenever, after full hearing
upon a complaint made, as provided in section 13.”

Mr. LITTLEYVIELD. Precisely so.

6537
9

Mr. HARDWICK. That language would not cover any ac-
tion originated by the Commission itself, would it?

Mr. LITTLEFIELD. It covers every complaint contemplated
by section 13. Section 13 provides for two methods of originat-
ing proceedings, in terms for the originating of complaints, one
by the adverse party, and expressly confers upon the Commis-
sion the power to originate an inquiry, in effect a complaint
itself, in the same manner and with the same effect as though
a complaint were made.

Mr. HARDWICK. It does not say that the Commission may
originate complaints itself.

Mr. LITTLEFIELD. No; it does not,.in terms; but com-
plaints are provided for and the Commission is authorized to
make a complaint substantially itself. The Commission origi-
nates the inquiry, in the same manner and irith the same effect
as though complaints were made, and I will say further that a
distinguished member of that Commission, after conference with
myself, now entertains the view that this probably does confer
upon the Commission this power. I agree with the President,
the committee, and the Commission that this power of origina-
ting complaints ought not to be conferred upon them, and this
bill clearly carries that power with it. They ought not to be
allowed to roam’ about the country looking for trouble. If peo-
ple are injured they will find it out. and if they are not enough
interested in having their wrongs righted to make a complaint
to the Commission they ought not be wet-nursed into litigation
by a statutory prosecutor.

REVIEW BY THE COURTS.

This bill does not undertake to give any review by the courts;
and I desire to read the recommendation of the President of the
United States upon that point, and then I desire to discuss this
question for a few moments as to how effective a review may
be and under what circumstances it may be had. The President
of the United States repeats twice the proposition that there
must be a review by the courts. I will read his first recommen-
dation:

In my judgment, the most important provision which such law should
contain is that conferring upon some competent administrative body
the power to decide, upon the case being brought before it, whether a
given rate prescribed by a railroad is reasonable and just, and if it is
found to be unreasonable and unjust, then, after full investigation of
the complaint, to prescribe the limit of rate beyond which it shall not
be lawful to go—the maximum reasonable rate, as it is commonly
called—this decision to go into effect within a reasonable time and to
obtain from thence onward, subject to review by the courts.

It does not answer that recommendation to say that under
certain circumstances the court can review the action of this
Commission, circumstances which practically amount to confis-
cation, under which the extraordinary power of the court of
equity can be invoked. I submit the President of the United
States in making this recommendation contemplated that the
legislation that conferred upon this Interstate Commerce Com-
mission the power to fix a maximum rate and maintain that
rate until it was overturned by a review by the courts would
contain a provision providing for that review. He repeats this
recommendation.

Mr. MANN. Mr. Chairman, will the gentleman pardon me?

The CHAIRMAN. Does the gentleman yield?

Mr. LITTLEFIELD. Yes.

6587
10

Mr. MANN. Does the gentleman think the President of the
United States contemplated that the courts should determine in
review what was a reasonable rate—should review the reason-
ableness of the rate?

Mr. LITTLEFIELD. That is exactly what the President
said.

Mr. TOWNSEND. Does the gentleman contend that the
power could be conferred upon a court to do anything of that
kind?

Mr. LITTLEFIELD. Mr. Chairman, I will reach that point
a little bit later, and I think I will explain my position perfectly
well to the gentleman from Michigan [Mr. Townsenp]. The
President says:

But, in my judgment, the necessity for giving this further power is
by no means as great as the necessity for giving the Commission or
administrative body the other powers I have enumerated above; and
it may well be inadvisable to attempt to vest this particular power in
the Commission or other administrative body until it already possesses
and is exercising what I regard as by far the most important of all the
powers I recommend as being vitally important—that to fix a given

maximum rate, which rate, after the lapse of a reasonable time, goes
into full effect, subject to review by the courts.

Now, if language in a Presidential message is entitled to or-
dinary construction, I submit that that conveys to the ordinary
mind the meaning that the President of the United States con-
templated, whether constitutionally or otherwise—I have not
reached the discussion of that point as yet—that the same legis-
lation that invested this tribunal with this extraordinary auto-
cratic power would also vest another tribunal with a power to
review the determination of that tribunal. Whether it is consti-
tutional or not raises another question. I would say, in connec-
tion with this question, that under these peculiar circumstances
and curious conglomerate of legal relation, that this Commis-
sion undoubtedly, when it undertakes to determine whether or
not an existing rate is fair or reasonable, acts in a judicial ca-
pacity, and it is also absolutely true, Mr. Chairman, that when it
undertakes to say what a rate shall be it acts in its legislative ca-
pacity; so that we have, independent of the question of review,
a curious conglomerate of legal powers in this incongruous, ad-
ministrative, judicial body; a union of judicial power, execu-
tive and legislative power supposedly to be exercised, aye, must
be exercised, according to the genesis of this bill at one and the
same time by the same tribunal.

I will say as to that proposition that I am not clear whether
it is possible, whether it is constitutional, whether it is proper
for us to combine judicial, legislative, executive, and adminis-
trative functions in one and the same body at the same time,
political in its character though it may be. There has not yet
been any deternination by the courts of the United States or
any other courts that hold that that either can or can not be
done. The courts have talked about it. Judge Sage, in an
oral opinion in one of the Federal reporters, said that this
tribunal exercised a quasi judicial power as well as a legis-
lative power; but that is the foundation of your whole propo-
sition—that you can combine in one body three—yes, three—
absolutely distinct, independent, constitutional powers—judicial,
administrative, and legislative.

That is the foundation of your proposition. Now, if it be
sound that that can be done, I want to say that at least on
one of the phases of the power vested in this tribunal—that this

6537
1

curious act vests in it—the court would have the right to re-
view at least that judicial power. Whether they could go fur-
ther and vest in it the right to control the legislative power, of
course, aS my friend says, that raises a serious question, and
I doubt whether it can be done. Under the theory as main-
tained and thoroughly believed in by some, that when in this
bill this Interstate Commerce Commission is vested with the
power to say whether a rate is reasonable or otherwise and
vested with the power to fix a just and reasonable rate, it is
acting, Mr. Chairman, in accordance with the provisions of the
law, and if it should turn out that it did not fix a just and rea-
sonable rate that it then violated the law and hence it was open
to review by some higher tribunal on the ground that its acts were
unlawful. It is claimed the court would have that power. I
do not say I adhere to that so far as I am concerned, but if you
can take your conglomerate Commission and make it stand up
under the provisions of this bill, it may be possible that you
could make a provision that would stand, that would take that
same Commission before a court that would review its deter-
minations in accordance with the law of the land.

Why, it is no answer to the suggestion to say we are engaged
in legislation here that involves a proposition that no railroad
can be protected against a decision of the Interstate Commerce
Commission unless—what? Why, unless its decisions practi-
eally deprive it of its constitutional rights, take its property
without due compensation, deprive it of its property by depriv-
ing it of the value of its use; that under these extraordinary
circumstances a court of equity is called upon to intervene.
Now, for a moment let us divorce ourselves from the excitement
appertaining to this great question. Does not every lawyer
upon this floor know that a court of equity never interferes
under circumstances like that except—when? ‘Except when the
constitutional right of a railroad is invaded or infringed. Is
this a bill for the purpose of exercising the right of eminent do-
main and under that guise take away the value of the prop-
erty of the railroad companies? If you are going to exercise
the control you are talking about and the circumstances under
which you propose to exercise it, one might suppose that you pro-
pose to invoke at least one element of eminent domain, that of
taking the property. We are creating a tribunal which will
simply say what is a reasonable rate.

Does the Constitution of the United States, I ask you, Mr.
Chairman, guarantee to any railroad company 6 per cent on its
capital, 5 per cent, 4 per cent, 3 per cent, 2 per cent,.or 1 per
cent? Not for a moment; and the only point where we are
able to interfere is precisely the point that is just within the
point of confiscation.

Mr. TOWNSEND. If I understand the gentleman’s argu-
ment correctly, he holds that it is possible that a court might
review the orders of the Commission on the ground that it
would be lawful to make-such a review. I ask him if he does
not understand that this bill provides that this action may
bring in question the lawfulness of the Commission’s order,
and if the court has power to do that, inasmuch as this bill
does not interfere with any of the existing powers of the court,
that that right would still rest with the petitioner?

Mr. LITTLEFIELD. I will answer the gentleman by this
suggestion: Every lawyer knows—and that includes my friend,

6537
12

because he is a good lawyer—that no man can go into a court
of equity and ask for the interposition of a writ of injunction
except in an extraordinary case. It is absolutely fundamental
to the equity jurisdiction.

It is only when the constitutional right under this bill would
be infringed and invaded that the power of the court can be in-
yoked, and there is not a lawyer when he sits down and coolly
reflects but knows that is a perfectly accurate statement of the
law of the land. This right can not be impaired by the Con-
gress or by any tribunal created by it. Now, forsooth, is that
an appeal from the orders of the Commission that are to take
effect and be operative until this extraordinary power is invoked?
Now, I do not say that the legislative discretion of this Com-
mission can be reviewed by the court. I do not think it can,
although I will admit the authorities are not entirely uniform
on the proposition as to when the court will interfere.

Mr. TOWNSEND. I am not talking about

Mr. LITTLEFIELD. One moment. I desire to say this: I
say apy orders of this conglomerate tribunal known as the “ In-
terstate Commerce Commission,” composed of judicial, executive,
and legislative authority, so far as it exercises judicial authority,
it is subject to review; so far as it exercises purely executive,
administrative, or legislative authority, I do not think it is open
to review.

I do not think it is open to review until the exercise of that
legislative discretion infringes the constitutional right of either
the railroad or some other person in this country, and in this
instance it is only railroads, because it is only aimed at them.

While I am on this point of the discussion I want to call
attention to the fact that there is no well-considered case that
says just exactly under what circumstances the court will in-
terfere b¥ injunction. Asking the time of the House, I am
going to call attention now, just for a moment, to the decision of
the Supreme Court upon that question found in Smythe v.
Ames, 169 United States, 466. I will read a few of the citations
upon which the court relied, and call your attention to the facts
upon which the court passed in that particular case. The court~
makes several citations, three or four of which I shall read ex-
tracts from. One extract is from the case of Budd v. New York
(145 U. S., 517), where the court said—this was involving the
precise proposition as to when the United States Supreme Court
would interfere by injunction to restrain the operation of an
order of a State commission, not the Interstate Commerce Com-
mission, but a State commission, involving the same legal prin-
ciple—and in that case the court said that—

Such power [commission] was not one to destroy or a power to com-
pel the doing of the services without reward, or to take private property
for public use without just compensation or without due process of law.

And from the case of Reagan v. Farmers’ Loan and Trust
Company (154 U. 8., 362) the court made this citation:

This, as has been often observed, is‘a Government of law, and not a
Government of men; and it must never be forgotten that under such
a Government, with its constitutional limitations and guaranties, the
forms of law and the machinery of government, with all their reach of
power, must in their actual workings stop on the hither side of the
unnecessary and uncompensated taking or destruction of any private
property legally acquired and legally held.

And again, from the St. Louis and San Francisco Railway
ease (156 U. S., 649) :

6537

 
18

There is a remedy in the courts for relief against legislation estab-
lishing a_ tariff of rates which are so unreasonable as to practically
destroy the value of property of companies engaged in the carrying
business, and that especially may the courts of the United States treat
such a question as a judicial one, and hold_such acts of legislation to
be in conflict with the Constitution of the United States, as depriviny
the companies of their property without due process of law, and as de-
priving them of the equal protection of the laws.

The next case is the Covington case, and from that the court
cited :

A statute which, by its necessary operation, compels a_ turnpike
company, when charging only such tolls as are just to the public, to
submit to such further reduction of rates as will prevent it from keep-
ing its road in proper repair, and from earning any dividends whatever
fer stockholders, is as obnoxious to the Constitution of the United
States as would be a similar statute relating to the business of a rail-
road corporation having authority, under its charter, to collect and
receive tolls for passengers and freight.

Now, I beg you to note that in these three or four citations
made by Justice Harlan in his opinion every one of them pro-
ceeds upon the hypothesis that it is confiscation that fixes the
boundary of the jurisdiction of this Commission, and it is only
when the point of confiscation is reached that the extraordinary
power of the court in equity and appeal, forsooth, to review the
decision obtains. Nobody on earth, Mr. Chairman, can question
the jurisdiction of this legislative body in the operation of its
legislative functions, and we clothe this Interstate Commerce
Commission with our legislative power, with all its privileges
and subject to all these conditions, and among others, that su-
preme power to exercise within its scope its uncontrolled dis-
cretion.

Now, what does Justice Harlan say after having cited these
various opinions, every one of which turned upon confiscation?
He said: ;

In see of the adjudications these principles must be regarded as
settled.

After statmg two principles unrelated to this discussion, he
states the third, as follows:

While rates for the transportation of persons and property within the
limits of a ‘State are primarily for its determination, the question
whether they are so unreasonably low as to deprive the carrier of its
property without such compensation as the Constitution secures, and
therefore without due process of law, can not be so conclusively deter-
mined by the legislature of the State or by regulations adopted under
its authority, that the matter may not become the subject of judicial
inquiry.

Now, that was the Smyth & Ames case. Seven railroads
were being considered and the order of the railroad commission
of the State of Nebraska cut down their rates 293 per cent. It
turned out upon examination that in one case at least un-
der this order of the railroad commission the earnings of one
railroad had been so reduced that it would have been operated
at a loss of $62,243, and it was absolute confiscation in that case.

There were seven roads affected, and in all but two they
would have been operated at a loss, and in those with only a
yery small margin above operating expenses. So the court said:

On the contrary, we are of opinion that as to most of the companies
in question there would have been, under such rates as were estab-
lished by the act of 1893, an actual loss in each of the years ending
June 30, 1891, 1892, and 1893; and that in the exceptional cases above
stated, when two of the companies would have earned something above
operating expenses in particular years, the receipt of gains, above
operating expenses, would bave been too small to affect the general

6537
14

conclusion that the act, if enforced, would have deprived each of the
railroad companies involved in these suits of the just compensation
secured to them by the Constitution.

So that I ‘think, Mr. Chairman, that the summation of the
legal proposition is fairly this: That the Court will simply stop
just this side of confiscation. This bill confers no rights of
review of any kind upon the courts. So far as the railroads
are concerned it stops short of nothing except their constitu-
tional rights, which it has no power to invade.

PREFERENTIAL RATES.

Now I wish to go further and say, in my judgment, this bill
confers upon the Interstate Commerce Commission power over
the preferential; and here again I regret very much to say that
I am not able to agree with my distinguished friend the chair-
man of this committee. I want to call attention right here to
this important fact. Is there any agitation to-day in this
country, is there any demand in this country that this Inter-
state Commission should be authorized to put its hands upon
the preferential in existence throughout the length and breadth
ot this land, without which business could not exist and inter-
ference with which would greatly impair business? What is the
agitation and what is its strength?

Is there much said against the increase of rates or against
excessive rates? Very little. The complaints are principally
about rebates and discriminations, but little about excessive
rites. And under those circumstances or conditions has any-
thing been said concerning the preferential rate? The report
says:

As but little complaint has been made to the committee concerning
classification, it was not deemed wise at this time to suggest new legisla-
tion upon that subject. So, too, with the question of the relation of
vate’. The committee has not deemed it wise at this time to suggest
new legislation to change existing law upon that subject. It is one of
yery great importance—interesting, however, as a rule—to certain par-
ticular communities rather than to the public at large. It involves
conflicts between towns and cities rather than the public generally, and
it relates more to the building up of certain local interests of a local
nature rather than to the interests of the people of the whole country.

Therefore we thought best not to hamper or hinder the subjects of
the bill by adding to them those other less urgent considerations. In
fact, the committee has endeavored to confine its action to the recom-
mendations of the President as contained in his annual messages of
1904 and 1905. S

Here we have the great authority of this committee establish-
ing the fact that there is “ but little complaint,” and that the
recommendation of the President does not include “ the relation
of rates.” This ought to settle that question.

Now, right here upon this point let me cal attention to one of
the latest fulminattons of an archagitator on questions involving
railroad legislation and railroad rates. I refer to an aarticle by
Ray Stannard Baker in the February number of McClure’s, in
which he makes one of his very intense and interesting attacks
upon the beef trust and speaks of the rebates and advantage
of indiscriminations by which they are enabled to build up their
business.

He says, referring to Armour:

He was getting special favors, rebates, concessions, discriminations.
by which unfair, unjust, and positively unlawful means he built up his
business. That was wholly bad.

Not a word about preferentials or differentials or even exces-
sive rates per se, but rebates, discriminations, private cars, re-

6537
15

frigerator cars, switches treated as independent lines, fake law-
suits, etc. And that is the burden, Mr. Chairman, of the song.

Now, I submit that this bill confers upon this Commission the
power to control the preferential, and of course I understand
perfectly that in this I am undertaking to demonstrate a propo-
sition that will be gratifying to the gentleman from Michigan
[Mr. TownsEnp], and I feel sorry that I am obliged to differ
with the distinguished chairman of the comunittee.

I believe, My. Chairman, that this bill is not only open to that
construction, but is bound to have that construction. Under ex-
isting conditions, what has the Commission done? When the
Commission has found what they call an unjust or undue pref-
erence, and that a locality is injured by this preference, or an
individual industry, they have issued an order, ordering them
to desist, and these orders have to be complied with in one of
two ways. What is the essence of a preferential? ‘The essence
is that less is charged pro rata for a long haul of transportation
than for a short haul. How would you correct this preferen-
tial? Wither by raising the rate of the long haul or by lowering
the rate of the short haul. Either, Mr. Chairman, is equally as
potential, as successful; and in compliance with such orders of
the Commission heretofore made, both ways have been used
interchangeably and with like success. That is to say, they
have either raised the rate of the long haul or lowered the
short-haul rate. Now, I submit that this bill

Mr. TOWNSEND. Will the gentleman yield?

Mr. LITTLEFIELD. Yes.

Mr. TOWNSEND. Does the gentleman state that the Com-
mission have ever raised a rate?

Mr. LITTLEFIELD. I do not know whether they have
raised a rate or not. No; the Commission has never raised a
rate and it has never lowered a rate. The Commission, when-
ever they have made any order in connection with the prefer-
ential, if Mr. Prouty stated it correctly to me—the Commission
has simply issued an order for the railroad to desist when they
are engaged in what they believe to be an undue or an unjust
preference. between localities, and they have left it to the rail-
roads to determine whether they would raise the long-haul rate
or lower the short-haul rate.

Mr. TOWNSEND. I desire to say to the gentleman in that
connection that if he will read the report that the Commission
made to the Senate during its hearings, or read Senate Docu-
ment No. 30 in the Fifty-fourth Congress, he will discover that
they did lower a rate. I call the gentleman’s attention specif-
ically to the case known as the “ Walla Walla Case.” The Com-
mission ordered that they should desist from charging the then
existing rate, and that they should not exceed a certain lower
rate.

Mr. LITTLEFIELD. That is precisely the proposition here.
This bili in terms gives the Commission the power to lower a
rate absolutely. Iam obliged to the gentleman. The order which
he says the Commission made is precisely the order they are
authorized by this bill to make.

Now, what is the bill? Let me read it on that point. Sec-
tion 15, page 10, as amended, says, after providing that the
Commission shall investigate the question of unduly preferen-
tial or prejudicial rates:
or otherwise in violation of the provisions of this act—

6537

 
16

Mark you—
otherwise in violation of any of the provisions of this act.

It does not stop at one section, it does not stop at two sec-
tions—“ or otherwise in violation of auy of the provisions of
this act.”

Any act that they have no right to do, any act that they
ought to do, can be inquired of by the Commission under the
express language of this bill. Now, how does section 3 read?
It is not amended by this section, but it is a part of this act.
Section 3 reads:

Src. 3. That it shall be unlawful for any common carrier subject to
the provisions of this act to make or give any undue or unreasonable
preference or advantage to any particular person, company, firm, cor.
poration, or locality, or any particular description of traffic, in any
respect whatsoever, or to subject any particular person, company, firm,
corporation, or locality. or any particular description of traffic, to any
undue or unreasonable prejudice or disadvantage in any respect what-
soever.

Now, I am not discussing the propriety of this; I am dis-
cussing the question whether they have the power to take charge
of the preferentials. I have here the report that was made to
the Senate by the Commission, and if I have time before I get
through with this discussion I will take occasion to refer to it,
because it demonstrates the inefficiency of this Commission as
compared with the traffic managers in the control of the rail-
road system in fixing rates, if the determination of the Su-
preme Court of the United States stands for anything.

Now, this section 3 of the act in terms gives the Commission
the power to inquire into the preferential between localities,
and section 15 says they may inquire into any violation of the
provisions of the act.

And then what? My friend says that they have imposed a
lower rate. That is just exactly what this bill authorizes them
to do when they find a preference existing, which simply means
a low rate with a long haul as compared with a high rate with
a short haul. What does this bill say? The bill says they may
fix ‘‘the charge or charges to be thereafter observed in such
ease as the maximum to be charged.” They are authorized by
section 3 to consider the preferential proposition. They are
vested with a power by the amendment to consider the violation
of any provision of this act, and this act itself authorizes them
to say what the maximum rate is that shall be charged, and
they can say to the short haul with its high rate, Cut down the
rate and wipe out the preferential. Now, there is another pro-
vision of this bill which practically in terms confers this vital,
important power upon this Commission, and against which I
may say now that my argument is made and in which I find
the most vital objection to this legislation, because’I think it is
extremely dangerous in its character.

What is the next provision? I am reading now from line 25,
page 10, “and to make an order that the carrier shall cease
and desist from any violation.” Mark you, that, so far as it
goes, is exactly a repetition of the law as it now stands. How
does the law read on that point as it stands now? It reads as
follows in section 15: If they find that anything has been
done or omitted to be done in violation of the provisions of this
act—

it shall be the duty of the Commission to forthwith cause a copy of its
report in respect thereto to be delivered to such common carrier, to-

6537
17

gether with notice to such common carrier to cease and desist from
such violation.

That is all we have in the law to-day—an order to cease and
desist. Now, then, suppose we have a preferential, and the
Commission are of the opinion that it is undue and unjust to
the extent of being 10 per cent too low, or, if you please, upon
the short haul 10 per cent too high? . What does this amend-
ment do? This amendment authorizes them to make an order
that the common carrier shall cease and desist from such
violation.

Now, on the assumption that I have made—and it is a per-
fectly proper assumption, because it might well occur—they
have found a violation of the act to the extent of 10 per cent
too low on the long haul or 10 per cent too high on the short
haul, a violation of ‘the provisions of this act.” Then, what
does the bill say? Instead of stopping there, as the old law
did, it goes on to provide “ and to make an order that the carrier
shall cease and desist from such violation to the extent to
which the Commission shall find the same to exist ”’—expressly
conferring upon this Commission, if they find a discrimina-
tion either upon the long or the short haul, the power to
order the common carrier to desist to that specific extent.
I say I am not discussing the propriety of the proposition—
whether they will exercise their judgment wisely or other-
wise—but I am discussing the question as to whether the
power is vested in this Commission, and I submit it will be
impossible under a fair analysis of the conditions of this bill,
taken in connection with the provisions of the existing law, to
hold otherwise. .

They have the power to take into account the preferential
and say whether or not the long haul—that is, the low rate—
shall be higher or the short haul—that is, the high rate—shall
be lower. It would be, if in their judgment it was unjust or un-
reasonable, a violation of the provisions of this act, and in terms
they are authorized to say to what extent that desisting shall
take place, or, to quote the language exactly, “the extent to
which the Commission find the same to exist.” So that, I think,
Mr. Chairman, I have demonstrated that this bill confers upon
this Commission what I believe to be a tremendous power.
Now, what is the power? It is the power to regulate and con-
trol the preferential that exists not only between industries and
individuals, but between localities, and you want to bear in mind
this fact, if this is an important power and if this is a grave’
question, we ought to be careful how we act here, because any
power vested in this Commission is probably vested in it for all
time.

We are not legislating for to-morrow morning; we are not
legislating for the year 1909. We are legislating here, not only
for the railroads, but for the business interests of this country
and for our children and our children’s children, and the ques-
tion is whether we will take the vast interests of this country,
independent of the railroads, because, as I say, I submit to
you that the interest the railroads have in this question is, in
my judgment, a minor one in its character as compared with the
vast interests involved in this bill, so far as the business in-
terests are concerned—the question is whether we shall take
from their managers the control of the railroads and their de-
velopment of the conditions that exist to-day, with flourishing

6537—2
18

localities, and the permeation of these preferential rates through-
out the length and breadth of this country, that flexible, move-
able, adjustable, articulate control that is now vested in them
and place it in a cast-iron strait-jacket. of which this Com-
mission shall be the sole possessor of the key with which to
lock or unlock the industries of this country.

What is a preferential? Simply this: How would California
get its fruit into the East and be able with its peaches to com-
pete with the peaches of Georgia and Delaware if it were not
for what, Mr. Chairman? Why. a long haul at a low rate.
Where would the oranges of California be in competition with
the oranges of Florida if they were not able to carry them across
a continent from the Pacific to the Atlantic through the opera-
tion of a long haul at a low rate? And yet this bill puts it in
the power of this Interstate Commerce Commission to keep in
California by change of that preferential every particle of fruit
grown in that State. A blunder on their part would rot it in
the orchards.

Mr. SIBLEY. Will the gentleman yield for a moment? I
wish to say, inasmuch as the time of the gentleman from Maine
has nearly expired and there are so few of us who entertain
the opinion so ably expressed by the gentleman from Maine, I
hope the distinguished chairman of the Committee on Inter-
state and Foreign Commerce will afford us an opportunity to
voice our opinion by extending to the gentleman time sufficient
to conclude his remarks.

Mr. HEPBURN. I will yield thirty minutes additional time.

Mr. SIBLEY. I hope the gentleman

Mr. HEPBURN. There are other gentlemen who expect to
speak who are here awaiting their time.

Mr. SIBLEY. Oh, we understand that, but I trust he may
be permitted to conclude. This debate had better go over one
day more. We have got everything except the appropriation
bills behind us and let us have one more day's debate, so the
truth may be ascertained, rather than we shall not have the
opportunity of hearing the gentleman from Maine.

Mr. GAINES of Tennessee. Now, Mr. Chairman, I want to
ask——

Mr. LITTLEFIELD. I hope I will not be interrupted much
more.

Mr. GAINES of Tennessee. Just a single question. From
1887 to 1897 the Commission fixed rates, upheld some differ-
entials, and possibly regulated or reduced others. During these
ten years the country was not paralyzed nor were widows bank-
rupted. Why can not we have a Commission like that?

Mr. LITTLEFIELD. I will advert to the action of the Com-
mission, if I have time, before I get through my speech.

Mr. GAINES of Tennessee. Why can not we confer this
power on a commission? It is not more power than the Com-
mission exercised for ten years.

Mr. LITTLEFIELD. The Commission has never yet suc-
ceeded in enforcing in the Supreme Court of the United States
practically a single decision they ever made upon the question
of differentials.

Mr. GAINES of Tennessee. None have ever gone there.

Mr. LITTLEFIELD. Ah, well; that is another proposition.
Whether any minor cases involving merely cases of advice
have been followed or not I can not undertake to say. I have

6537

 
19

their report, I have it here in my hand, and, if I am not in-
terrupted and have sufficient time, I will allude to it before I
get through; but I defy any man to take that report and un-
dertake to tell us whether they have undertaken in any advice
they have given to disturb any preferential or differential that
has existed in this country from time immemorial until now,
and under which the vast industrial development is growing
now from one end of this country to the other.

Mr. TOWNSEND. Will the gentleman yield to me just a
moment? I would ask the gentleman if his attention bas been
ealled to the fact that the carriers themselves in trying to fix
differentials have themselves voluntarily gone to the Commis-
sion and submitted the question to them and allowed the Com-
mission to fix the differentials for them? I ask the gentleman
if he knows that to be the fact?

Mr. LITTLEFIELD. I understand an arrangement of that
sort may have been made some time, but that does not involve
this question. I call attention to the preferentials between lo-
calities. In 1902 I stood on the wharf in Tacoma, and I saw
taken out of an old fishing smack halibut which were loaded in
a freight car, and I learned that very car was attached to a
passenger train and was carried to the Atlantic coast; and three
weeks later, on returning, I learned from a fish dealer in my
town that he had sold halibut that had come that distance by
means of a preferential. Furthermore, Mr. Chairman, the
farmers of Nebraska within the last year have been sending
their cream to a creamery in Omaha. That creamery has manu-
factured it into butter and sent it to Lowell, Mass., in competi-
tion with the farmers around St. Albans, who send their cream
to the creamery in St. Albans. So, through a pronounced
preferential the farmers of Nebraska are competing at that
point with the farmers of Vermont. This the Commissjon can
arbitrarily stop. Out in the State of Iowa there is furnished an
illustration of what in operation this legislation could accom-
plish. They have now existing a plan formulated by the rail-
road commission of the State of Iowa which concentrates in the

‘hands of the jobber in Iowa the jobbing trade.

Now, how, and why? Why, simply in this way: The jobber
ean ship from Chicago in carload lots right through Colfax to
Des Moines, 20 or 30 miles beyond Colfax, and the jobber in
Des Moines can break the cargo lots, and can ship the same
freight in smaller lots back to Colfax at substantially the same
price or less than the direct rate from Chicago to Colfax. There
is a preferential existing throughout the State of Iowa, and it
will be open upon this bill for the shippers in Chicago to insist
that there is a preferential existing in favor of the jobbers in
Iowa; and that there is no reason why the rate from Chicago to
Colfax should not be in proportion to the rate from Chicago to
Colfax via Des Moines back to Colfax. This Commission, un-
der this bill, can disorganize the whole railroad system of Iowa.

Look at the wheat that is raised in the great Northwest.
How much of the wheat that is raised in the Northwest could
find a market on either ocean, find either point of departure,
find either the hungry people of Europe or Asia, the Occident
or the Orient, if it was not for a low preferential rate that
exists in its favor?

Take into account, if you please, the cotton industry. We
have cotton mills in the South, we have cotton mills in the

6537
20

North. Now, I happen to know, under existing conditions,
with the favorable hours of labor and the lack of embarrassing
labor legislation prevailing in the South, and the facilities they
have for the employment of child labor, that to-day it is all the
people in New England can do, with their cotton mills, to com-
pete with the cotton mills in the South. A preferential exists
in favor of the cotton mills in New England. They transport
their raw material at a cheaper rate on a long haul than the
mills in the South can from the same point of the supply of the
raw inaterial. They ship their manufactured products out in
precisely the same way, on a long haul, at a cheap rate.

Do I want to turn over to the tender mercies of a political
commission of seven the existence of the cotton industries of
New England? Within two weeks I have had it stated to me
by distinguished gentlemen who believe in this legislation and
are anxious to see it prevail, that they hope under its terms to
destroy the preferential charges existing in favor of these New
England industries in order that the industries located near the
raw material can have the benefit of what they call their natural
proximity thereto. They conceded that by this indirect method
they expect to transfer the cotton manufacturing industry
from the North to the South. I do not propose by my vote to
put in the hands of seven men the question as to whether there
shall still be a Fall River, a Lawrence, a Lowell, a Manchester,
a Biddeford, or a Lewiston. Their interests are too vast. ‘There
are too many millions involved. The employment of too many
people is dependent upon it.

I will not take the chances with any political tribunal
without revision or appeal and put into their hands these
vast business interests. Worcester, the heart of the great
Commonwealth of Massachusetts, represented upon this floor
by a worthy and able son of a most distinguished sire, and
presenting to-day the finest illustration of diversified manu-
facturing industry that can be found in the confines of this
great Republic or in any other land, is absolutely dependent
upon its preferential long haul for the shipping in of its raw
material and the shipping out of its manufactured products.
I will not consent to put the fate of Worcester into the hands
of any commission to say what its future shall be, whether it
shall live or die, whether it shall flourish or whether it shall
vanish as a manufacturing industrial center; whether its
manufactories, now busy and active, profitably employed, shall
be silent, filled only with rusting machinery, and its houses,
now occupied by an industrious people, shall in the future be
filled with poverty, want, and distress.

I have in my own State—I do not know that it is affected by
the preferential—the finest illustration of the dependence of
development upon railroad transportation that I think can be
found anywhere. Fifteen years agd, at Rumford Falls, there
were but two farmhouses, and yet at that spot, with its splen-
did, wondrous beauty, there vis a waterfall with 30,000 poten-
tial horsepower roaring, rushing, and tumbling unharnessed to
the sea. It had no transportation. Material had to be carried
in and hauled out by teams. About fifteen years ago men of
genius, with capital behind them, put a railroad into Rumford
Falls, and that place is utilizing to-day 17,000 horsepower. It
has 10,000 people, and is the finest illustration of manufacturing
and industrial development that can be found anywhere. I do

6557
21

not propose to leaye that community where any seven men can
arbitrarily and without appeal control its destiny and say
whether it shall live or die.

Let me call your attention, Mr. Chairman, to this fact, that
the power to fix a maximum rate, segregated from other rates,
if you can segregate them, independent of its relation to other
rates, without correlation to other rates, is very trifling, espe-
cially if it is confined to complaints in individual cases, as com-
pared with this vast power you are conferring upon this Com-
mission. ,

In case of an excessive rate, if it is so charged, and if the
Commission determines that the rate is excessive and cuts it
down, who is affected?

The railroad, and the railroad company alone. It simply
affects the stockholders and bondholders by diminishing the
receipts of the company. And if they get to where it reaches
beyond the danger point, they have a remedy. It would aid
industries and communities by cheapening and facilitating trans-
portation. But here is a vast community and vast interests that
are absolutely dependent upon railroad transportation for their
life; and whoever has the power to put their hands on the rail-
road transportation has the power to throttle the business inter-
ests served thereby and wipe out localities, especially if they can
control the preferential. Gentlemen know that industries are
now carried on by vast aggregations of capital, with the large
volume of business that is done on a very small margin, so that
apy increased burden on that business might well bankrupt those
engaged therein. What would be the effect upon a community
or industry if the long-haul rates were raised? It would make
it impossible for them to successfully carry on the business in
which they are now engaged, and if the short-haul rate was
lowered the result would be the same.

If the long-haul rate were raised, the railroads would gain,
at least temporarily, and there could be no complaint from them.
because while the dissolution was taking place in the industry
or locality affected, the railroad would be getting its harvest.
It vweuld be increasing its gains, and it could not complain of
the rate that had been made. Where is the appeal, however, for
the locality that is adversely affected, if you please, by an inad-
vertent or mistaken order of this Commission? Do you find it
anywhere? It is not so nominated in the bond. There is no
appeal for the industries of this country. They stand before
this Commission at their mercy and in their power. They can
regulate us and they can control us. Do gentlemen have any
notion of the interest involved in this legislation? I say, in
the whole equation, that the interest of the railroads is negli-
gible in extent. What have the railroads involved? ‘There are
said to be about $11,244,852,000 of capital invested in railroads,
according to the census.

Of course, my friend from Michigan says it will be about six
or seven billions. Other people say it will be about fourteen
billions. They receive $2,188,108,801 annual earnings and
income. How about the interests and the products of indus-
tries the existence of which are solely dependent upon cheap
transportation? How about the value of mines and mining,
of manufactures and of agriculture? There are in agriculture,
mines, and manufactures invested $32,860,630,402 capital—manu-
factures, $9,846,628,564; mines and mining, $2,500,000,000 (esti-

6537
22

mated), and agriculture, $20,514,001,838. The value of their
annual products was $18,575,304,735—manufactures, $13,039,-
279,566; mines and mining, $796,826,417,. and agriculture,
$4,739,118,752. In addition to this are the billions invested in
mercantile pursuits, likewise dependent upon transportation for
existence. If the long-haul preferential was wiped out and there
was an increase made, so as to cut off in transportation their
ability for competition, these business interests might be de-
stroyed. m

What would agriculture be worth if this Commission was to
exercise an unwise and vicious power? I call attention again
to that vicious power and the evil of its exercise over any in-
dustry, either of mines or mining, agriculture, manufacture, or
mercantile, as being without right of appeal from the autocratic
fiat of this Commission when it is once issued. Only the rail-
road can interfere. Manufacturers, farmers, miners, and mer-
chants do not exercise any public franchise. The Constitution
does not guarantee them a reasonable return for the amount of
money invested in mines and mining, in agriculture, or in manu-
facturing industries or mercantile ventures. They have to
fight for their lives in the open market, and this Commission is
to sit on the valve that controls the circulation without which
they can not live. I submit to the candid consideration of this
committee, Mr. Chairman, that all of these interests are vastly
more vital and more potent than the mere interest of the trans-
portation companies themselves. Our industries furnish the
vital lifeblood. The railroads simply the veins and arteries
through which it circulates. The railroads have an opportunity
to go into the court and protect their rights and preserve their
existence under the power of injunction, but these industries
have not.

Now, let me go a little further and call your attention to the
fact that the answer may be made that this power is only to
be exercised in cases where an injustice bas been done. Now,
the question is whether it is wiser and safer to put these vast
business interests, involving billions of dollars of invested
capital and $18,000,000,000 and more of annual products. in
the hands of seven men politically appointed, dependent for
their tenure of office upon favor of the powers that be or that
are to be, or to leave them in the hands, if you please, of the ten
or twelve that have up to date managed them in this tremendous
and successful development.

What has been the result—what has been accomplished: under
the contro] of seven or eight men as railroad managers—and
I’ assume it for the purpose of argument, although I know,
and every other man knows, that no seven or eight men con-
trol the immense diversity of rates for transportation in this
country, but, on the contrary, thousands of men are engaged
every day of the three hundred and sixty-five days of the year,
less Sundays, in adjusting and modifying and regulating and
accommodating these rates to the condition or conditions of
business to meet the demands of the markets throughout the
country ?

Mr. GROSVENOR. Will the gentleman allow me an inter-
ruption?

Mr. LITTLEFIELP. Yes. although I have but a short time.

Mr. GROSVENOR. I,want to ask the gentleman if it is not
a fact that these seten men, or six or ten men, that he is talk-

C587
23

ing about—president, general superintendent of the great rail-
road lines—have nothing whatever to do with fixing the rate
and know nothing about the system?

Mr. LITTLEFIELD. I have no doubt the gentleman is en-
tirely right.

Mr. GROSVENOR heonitinaing’, But that they are fixed by
the traffic managers?

Mr. LITTLEFIELD. Precisely so. Hundreds and thousands
of traffic managers, experts, grown up in the business for years
and familiar with the development of the business and with the
great industrial interests of the country and ot the people whose
servants they are.

Now, then, is it wise to take it out of the hands of these
hundreds and thousands of men who have demonstrated their
ability and capacity by the condition of the industrial, agricul-
tural, mining, and mercantile prosperity and success of this
great country to-day, the parallel of which has not been
seen since history began to be written? It is for gentlemen
who want to transfer the control and power for fixing
rates, especially the differential rate, to put the control of
this vast property and this medium of transportation, these
instruments of communication between one part of this coun-
try and the other, serving its vast business interests over
long distances and necessary rates—it is for the gentlemen who
want to transfer it from the thousands of experts to satisfy us
that the seven men, politically appointed, will give us better
administration and accomplish better results.

Mr. COOPER of Wisconsin. Will the gentleman allow me?

Mr. LITTLEFIELD. Yes; if you will not take up too much
of my time.

"Mr. COOPER of Wisconsin. In connection with the gentle-
man’s statement that the rates are fixed by the traffic managers,
I want to ask him if he recollects the incident mentioned in one
of the Interstate Commerce Commission’s reports, where a rate
was raised in the Southwest, complaint was made, and the
traffic manager went on the stand and swore that he did not
himself raise the rate, but that he raised it in pursuance of a
dispatch or letter sent to him by an official in New York State;
that he had nothing to do with it himself? The Commission
decided that it was unjust and that it ought to be lowered.

Mr. LITSLEFIELD. Does the gentleman from Wisconsin.
have an idea that with thirteen billions of money and 213,000
miles of railroad you will not have sporadic cases of unjust
rates? That is absolutely incident to every human condition.
We can not expect perfection from railroad managers; and I
want to say to you that if you put it on the basis of perfection,
the abilit” to determine what is right and what is wrong under
the laws of the land—thank God! not agitation, not excitement,
not passion or prejudice, but under the laws of the land—I say
if you put it on the question of efficiency, I will demonstrate
from their own record the utter incapacity of this Interstate
Commerce Commission to take charge of this great question. 1
state that advisedly.

Let me go further and see how they can justify turning over
this great transportation that so articulates itself with the
pusiness interests of this great country and upon which every-
thing is dependent from the hands of these experts into the
hands of seven men. To justify it they must satisfy us that

6537
24

they will improve conditions. Will there be more farms? Will
they be better cultivated? Will there be more industries? Will
they build up larger towns than have already been built up by
traffic conditions that have been operated under practical
economic conditions and natural laws in a zone where it is
practically impossible for legislation to effectively enter? If
they will not do that, what will they do? Will they paralyze
development, or go further? I submit that it is for them, not-
withstanding some disagreeable and unjustifiable conditions, to
satisfy us and satisfy the industries of this country that they
are going to safely exercise this power and at least maintain,
if not improve, conditions. Who is there that can take the
responsibility of making that assertion and guaranteeing that
result? How can we get a “bond of fate?”

Now, I call attention to what my friend from Michigan [Mr.
TOWNSEND] has once or twice alluded to, and I hold in my
hand a document called ‘“ Regulation of Railway Rates, Ap-
pendix D,” and it is the response of this Interstate Commerce
Commission to a resolution of the Senate committce. What
does it say? I am not going to undertake to revise every de-
cision made by this Interstate Commerce Commission. I am
going to do this: I am going to try the efficiency of this Interstate
Commerce Conmission. I want to go further and say here that I
have no reflection to make on any gentleman who is a member
of that Commission. I know the most of them. They are
men of high character, great ability, of public spirit; they are
honest, patriotic citizens endeavoring to do what they think
is right, and if it be true that they have blundered more often
than they have been right, it is not because of any lack of
intention; it is not because of any inferior ability; but it is
because of the infinite and inherent difficulty involved in the
whole situation, in the attempt to control by legislation what
should be left to the operation of individual control and the
operation of natural laws and causes. It is not their fault; it
is the fault of the scheme of control.

Let me call attention to what they say, and after I have
ealled attention to this Commission I desire to call the atten-
tion of this.committee to the possibilities inherent in this situa-
tion, the kind of Commission that we might finally land with,
because, as I have already said, we are not legislating for to-
morrow, we are legislating for years to come. I do not believe
that Theodore Roosevelt would ever appoint men on that Com-
mission who were not good men, and if certain men are ap-
pointed whom it is now suggested may be appointed I would
very gladly join in saying that in my judgment it would be a
very wise selection; but Theodore Roosevelt is not always to be
President of the United States. We may not always control
the policy of this Governmnet. There may be other men to
control it, and I shall refer to that a little later. What has the
Commission done up to date? I try them not upon all the acts
they have performed, but by every act they have performed upon
which the court has passed, and I have here the record. I
am going to take the cases that have gone to the courts of the
United States for the purpose of determining whether this con-
glomerate Commission, consisting of judicial, executive, and
legislative power, has been able up to date by reason of the
uncertainty and indefiniteness of the situation to reach wise
and just and lawful conclusions. Here is the record: Exces-

6537 :
25

sive rates, Commission sustained, three cases; Commission not
sustained, twelve cases. Now, then, if that is any criterion,
they are four times as likely to be wrong as they are to be right.

Mr. TOWNSEND rose.

Mr. LITTLEFIELD. Oh, I am coming to what the gentle-
man undoubtedly has in mind in a moment. I shall call atten-
tion to that. Wait until I am through and then I will yield.
I am going to give these people a fair deal; yes, a square deal—
something that is often talked about. [Applause.] Unjust dis-
crimination, Commission sustained eight times; unjust discrimi-
nation, Commission not sustained twenty-four times. That is their
record. In other words, in case of unjust diserimination, prima
facie, the record shows when they have been tested by the law
of the land as administered by a tribunal that holds its tenure
for life, subject to good behavior, and can not be removed except
by impeachment—this tribunal that can be removed any mo-
ment by Executive power—the record shows, when tested by
that standard, that they are three times as likely to be wrong
as they are to be right in the case of unjust discriminations.
Now, I ought to say this, there are three of these cases involy-
ing the maximum rate where the Commission adopted a rule
that had not been passed upon at that time by the court, and
they adopted the wrong rule, so that it does not indicate that
the Commission were in that sense wrong. It ought to be de-
ducted from the amount.

There were seven cases involving the preferential where they
had announced a decree before the court construed the rule, and
therefore the Commission, of course, was wrong in that, so that
there are ten cases that should be deducted. But I am going
to give the defense the Commission itself makes on this ques-
tion, for I want to treat the Commission fairly. The Chairman
of the Commission says:

Four cases have been discontinued and 4 are now pending in circuit
courts. In 6 of the 29 cases in which the orders were not enforced
the decision was based wholly or partly—perhaps it would be fair to
say mainly—upon the ground that the new trial in the courts, which
occurs under the present law, developed such a different state of facts
from those found by the Commission, because of new and additional
evidence not produced before the Commission, as to modify or change
in material respects the findings upon which the ruling of the Com-
mission was predicated. In the other 23 cases the decisions of the
courts, also rendered after new trial, were based upon a different con-
struction of the act than had been made and attempted to be applied
by the Commission. In these cases, in other words, the courts held
directly or by implication that the statute did not give the Commis-
sion authority to make the orders sought to be enforced.

The courts have not held in these cases that the grievance found
and condemned by the Commission did not exist in fact as ascertained
and reported; they have merely held that the things done which con-
stituted the grievance could not be prevented under the present Jaw.
It was not decided in any case that the acts complained of were not
wrongful and unjust, but that the correction attempted by the Cam-
mission was not within the scope of its authority.

Mark especially this language:

It was not decided in any case that the acts complained of were not
wrongful and unjust.

Now, in Appendix A we have the cases given by the Commis-
sion. he first case I call attention to, bearing in mind the fact
that the assertion of the chairman is—inadvertent, no doubt—
that the facts show that where they undertake to interfere with
the rate it did not appear that the railroad was right, but it ap-
peared, on the contrary, that the Commission was right and the

6537

 
26

railroad wrong. Let me take the second case which they cite, and
the second case is a case of the Interstate Commerce Commission
v. Baltimore and Ohio Railroad Company (145 U. S., 263). That
was a case involving the question as to whether or not it was un-
just for a railroad company to sell party tickets in lots of ten
for less than they sold one ticket. What did the Commission
do? Well, the Commission held that the party-rate ticket consti-
tuted an unjust discrimination and was therefore illegal.

Now, to sustain the assertion of the chairman of this Com-
mission, it should appear that the court also held that that was
unjust, but overruled for other reasons. The Commission, as it
appears by the opinion, held that the “ party-rate” tickets con-
stituted “unjust discrimination and are therefore illegal.” Let
me quote from the language of the opinion:

The court held that they were not open to the objection found by
the Interstate Commerce Commission.

In other words, they were just and they had the right to sell
them, but upon the question of justice or injustice the Interstate
Commerce Conmission was not sustained by the court and the
railroad was.

Mr. GAINES of Tennessee. Have you any data showing how
many cases of Federal judges were reversed by the Supreme
Court wherein it reversed or affirmed the action of the Com-
mission? Do you not find the Supreme Court reverses the
courts as well as the Commission?

Mr. LITTLEFIELD. Certainly. I find they reverse the
courts; but we are not vesting autocratic, despotic power in a
court. I am simply discussing the tribunal in which you pro-
pose to vest this power. It is beside the proposition when I
am undertaking to determine whether or not the railroad mana-
gers have been right or the Commission have been wrong to
spend my time discussing a question as to whether a Federal
judge is right or wrong. Now, I will not take further time,
because my time is drawing to a close, to go over these cases in
detail, and will briefly summarize them.

In Interstate Commerce Commission v. Lehigh Valley Raii-
road Company (74 Fed. Rep., 784) the Commission determined
the cost of carrying a ton of coal at 85 cents. The chairman
says: “The court held that this method of estimating the cost
of carrying coal was not justified, because it assumed that the
expense of transporting coal over this particular branch of the
earrier’s system was necessarily only the average cost of car-
rying coal over the entire system.” But the court, in its
opinion—not quoted by the chairman—went further, and said:
““We have only to add that the evidence before us is quite con-
vincing that the actual cost of transporting coal from the
Lehigh and Mahanoy regions to Perth Amboy was and is con-
siderably more than 85 cents per ton;” hardly a holding that
the carrier’s charge was unjust.

In Cincinnati, New Orleans and Texas Pacific Railway Com-
pany et al. v. Interstate Commerce Commission (162 U. S., 184),
the Commission held that the Atlanta rate was unreasonable
and reduced it from $1.07 per 100 pounds to $1, on the ground
that it was unreasonable, and the abstract shows that “ That
court held that the Atlanta rate was not unreasonable.” The
road was right, the Commission was wrong. In Interstate Com-
merce Commission v. New York, Philadelphia and Norfolk Rail-
road Company the Commission held charges on articles from

BOLT
27

Jersey City to Philadelphia unreasonable and ordered a re-
duction.

In the circuit court, after hearing more evidence, the petition
was dismissed and again the carriers’ rate‘was sustained as just.
In Hast Tennessee, Virginia and Georgia Railroad Company v.
The Interstate Commerce Commission (181, U. S. 1) the Commis-
sion found that it could not sustain one of its decisions unless a
certain rate was shown to be unreasonable, and upon a full
hearing it was compelled to dismiss the petition, as it could not
be shown that the carriers’ rate was wrongful or unjust, and
for the fifth time the road as against the Commission was
sustained.

In Interstate Commerce Commission v. Chicago, Burlington
and Quincy R. R. Co. (186 U. S., 320) the Commission held “a ter-
minal of $2 was unreasonable,” and say in their abstract: “ The
Supreme Court said that the order of the Commission con-
demuing the $2 rate was general and operated upon all the car-
riers in the whole territory covered by the complaint, and it
plainly appears from the decision of the Supreme Court that
on account of such reduction having been made from undefined
territory ig was unable to determine from the record whether
the order of the Commission as applied to the whole territory
was and should be enforced.” It is proper to say, as illustrat-
ing a method of ratiocination, tliat from the case it “ plainly
appears ” that the court used this language:

It can not be in reason said that the inherent reasonableness of the
terminal rate, separately considered, is irrelevant, because its reason-
ableness is to be determined by considering the through rate and the
terminal charge contained in it, and yet when the reasonableness of the

rate is demonstrated by considering the through rate as reduced, it be
then held that the through rate should not be considered.

Well, that looks pretty elementary, and then the court said:

In other words, two absolutely conflicting propositions can not at
the same time be adopted.

By the court, mind you, not by the Commission, because
the Commission did adopt it and proceeded on that basis. It
says further:

It follows that there can be no possible view of the case by which
Vie conckunlon that the rates were unjust and unreasonable can be sus-

By all of which it does not seem to appear tkat the carrier
was wrong and the Commission right on the facts. Seventhly
and lastly. in Interstate Commerce Commission v. Louisville
and Nashville Railroad Company (190 U. S8S.. 273), the Com-
mission also found as an independent proposition that the rates
from New Orleans to Lagrange were unreasonable and unjust
under the first section of the act, and on that point the
court said: “No room in reason is left to sustain the view
that the Commission could have held that the rates to La-
grange were in and of themselves unreasonable, irrespective
of the competitive condition prevailing at Atlanta and the
arrangement of rates which arose from it, which formed the
main subject of complaint.”

I leave this statement of the chairman, with this abstract
of the cases that he cites to sustain it, without any comment.
It is clear that more than two-thirds of the time, on the ques-
tion of the justice or the injustice of the rate, where it has
been tested by the courts, the Con nission has been wrong and

Ee
28

the carriers have been right, and upon that showing they
coolly ask me to turn over these vast business interests to this
Commission, subject to its plenary autocratic power. I do not
reflect upon the Commission. It simply demonstrates the in-
herent difficulty of placing a commission in a position where it
has to deal with a question so vast and complicated.

Other people may think differently about it, but for one, Mr.
Chairman, I will not accept an invitation to place such vast
business interests of this country in the hands of a commission
that is thus indeterminate, because of its demonstrated in-
ability to determine those things wisely and well or as well as
the carriers themselves have determined those questions.

Now, I said this is a political Commission. That is true.
What do I mean by that? I mean exactly what I say. I mean
that that Commission is bound to be affected by the political
conditions that prevail from time to time in this country. What
is it? Why, this Commission, as it exists to-day, consists of
five men. The act creating it reads as follows:

Suc. 11. That a Commission is hereby created and established to be
known as the ‘ Interstate Commerce Commission,” which shall be com-
posed of five Commissioners, who shall be appointed by the President,
y and with the advice and consent of the Senate. The Commissivners
first appointed under this act shall continue in office for the term of
two, three, four, five, and six years, respectively, from the 1st day of
January, A. D. 1887, the term of each to be designated by the Presi-
dent; but their successors shall be appointed for terms of six years,
except that any person chosen to fill a vacancy shall be appointed only
for the unexpired time of the Commissioner whom he shall succeed,
Any Commissioner may be removed by the President for inefficiency,
neglect of duty, or malfeasance in office. Not more tnan three of the
Commissioners shall be appointed from the same political party. No
person in the employ of or holding any official relation to any common
carrier subject to the provisions of this act, or owning stock or bonds
thereof, or who is in any manner pecuniarily interested therein, shall
enter upon the duties of or hold such office. Said Commissioners shall
not engage in any other business, vocation, or employment. No vacancy
in the Commission shall impair the right of the remaining Commission-
eys to exercise all the powers of the Commission.

The act provides that they can be removed for inefficiency,
neglect of duty, or malfeasance in office. What does this act
do? Of course everybody understands that the President of the
United States to-day can arbitrarily remove any man on that
Commission by simply stating that he is inefficient, that he has
neglected his duty, and that he has been guilty of malfeasance
in office. There is no review of the action of the President.
He is supreme. But the specification of these causes of removal
is some restriction upon the arbitrary exercise of that power
by the Executive, but in the last analysis the Executive can re-
move them, and no one can say him nay.

The CHAIRMAN. The time of the gentleman has expired.

Mr. SIBLEY. Mr. Chairman, I ask unanimous consent that
the time of the gentleman may be extended five minutes in order
to enable him to conclude his remarks.

Mr. MANN. Mr. Chairman, I yield five minutes to the gentle-
man from Maine.

Mr. LITTLEFIELD. I am very much obliged to the gentle-
man. This bill, Mr. Chairman, provides in an additional sec-
tion—not an amendment to section 11, which provides for the
circumstances under which removals shall be made—but this
act provides for a new section, and the new section does not
say anything about the circumstances under which a removal
shall be made:

6537
29

Src. 8. That a new section be added to said act at the end thercof,
to be numbered as section 24, as follows:

“Sec. 24, That the Interstate Commerce Commission is hereby en-
larged so as to consist of seven members with terms of seven years,
and each shall receive $10,000 compensation annually. The qualiti-
cations of the Commissioners and the manner of the payment of their
salaries shall be as already provided by law. Such enlargement of the
Commission shall be accomplished through appointment by the Presi-
dent, by and with the advice and consent of the Senate, of two addi-
tional Interstate Commerce Commissioners, one for a term expiring
December 31, 1911, one for a term expiring December 31, 1912. The
terms of the present Commissioners, or of any successor appointed to
fill a vacancy caused by the death or resignation of any of the present
Commissioners, shall expire as heretofore provided by law. ‘Their suc-
cessors and the successors of the additional Commissioners herein pro-
vided for shall be appointed for the full term of seven years, except
that any person appointed to fill a vacancy shall be appointed only for
the unexpired term of the Commissioner whom he shall succeed. Not
more than four Commissioners shall be appointed from the same po-
litical party.”

I do not undertake to say as an absolute hard and fast legal
proposition that the same restrictions do not apply, but I very
much doubt it. If the section creating the Commission and pro-
viding that they could not be removed, except for inefticiency
and neglect of duty and for malfeasance in office, had been
amended by making the Commission seven instead of five, there
would not be any question about it. But under these circum-
stances you have a new section practically providing for a pew
Commission. And that Commission, if that restriction does
not apply, can be removed without cause at any time by the
President of the United States. In any event the President has
the supreme power of reioval and no tribunal can review his
action.

Let me submit this proposition. I have said that Theodore
Roosevelt may not always be President of the United States.
According to his repeated declarations, he will he President for
the balance of this term and no longer, And after that some
other gentleman will be President of the United States. What
is possible? I can imagine some man as President of the
United States in whose hands I would not want to see vested
the power to contro] this Commission of seven men, four to be
‘members of one political party. How long would it take a
President with a complacent Senate to remove enough to make
four of his political party? And what if that political party
happened to be the Populist party? I want to say here and
now in all seriousness, when many distinguished gentlemen
who, not perhaps in connection with this question, sometimes
lend their aid to the dissemination and the propagation of the
ideas that tend to segregate a few individuals in the community
into what is known as the “ classes” and array against them the
masses, nobody can tell who will be the President of the United
States or what influence will be behind him. If you inflame
the masses and preach and inveigh against what you call the
“ classes »—against invested capital—I warn you now that you
may kindle a fire that you can not stamp out when you get ready
to extinguish it. [Loud applause. ] ;

Let me go a_little bit further and ask, What if we have a
Populist President? I have in my mind the name of a gentle-
man that I would not want to leave the constitution of this
tribunal in the bands of. It would be perfectly open to him
to have four that represented his peculiar views and his
extraordinary vagaries in connection with the government of
this great country. More than that, it would be open to him

6537
30

to arbitrarily remove the other three; and what power is there
on earth, under the terms of this bill or any other, that would
require him under those circumstances to appoint three others,
and make that Commission full? Why, the law now assumes
that it is not necessary to fill vacancies, and expressly provides.
“No vacancy in the Commission shall impair the right of the
remaining Commissioners to exercise all the powers of the
Commission.”

It makes only four a quorum, and it is open to any vicious
man who occupies the White House and has his creatures in
this Commission to take, by removing three, the industries of
this great country by the throat and compel them to bow down
and worship him. Three is a majority of a quorum, and your
act is so constituted and the possibilities are such that it is open
to have three men, viciously inclined, take the mining, manu-
facturing, and agricultural and mercantile interests of this
country, and, through the medium of that vital transportation
upon which they exist and without which they can not live,
throttle them until they waver and die or render the necessary
tribute to Cresar to enable Cresar to control the political des-
tinies of the Republic.

Now, other men may agree to it. but so far as I am concerned,
Mr. Chairman, I decline to assent to that proposition. I know
that public agitation and excitement, inspired, maybe, by pas-
sion and prejudice, violence and hate, may carry men off their
feet. To-day we have agitation and excitement and preju-
dice arrayed against the great transportation interests of this
country. Our friends of the West, inspired by their exaspera-
tion and out of just resentment cry out, “ Crucify him! Crucify
him!” and the more extreme this legislation the greater the
gratification.

I warn you that if we weakly quail before this storm and
turn over these vast interests bound hand and foot to this
fallible political tribunal without recourse or appeal, that when
the disastrous results that are well-nigh sure to follow the
exercise of this tremendous uncontrollable power shall be visited
upon a helpless people that same people will turn again and
rend you because you have been false to your trust as repre-
sentatives of the American people. Inspired by passion, preju-
dice, smarting under the sting of resentment, because there are
wrongs that have not been redressed, they may now bless us,
but then, with equal facility and vastly greater zeal, they will
rise up and curse you. They now applaud. Then we shall be
anathema maranatha. [Loud and long-continued applause. ]

6537

O
GOVERNMENT REGULATION OF
RAILWAY RATES.

SPEECII

OF

HON. H.C. LODGE

OF MASSACHUSETTS,

IN THE

SENATE OF THE UNITED STATES,

Thursday, March 22, 1906,

ER,

A
&
Seeet

WASHINGTON

1906.
6047
SPEECH

HON. H. C. LODGE.

REGULATION OF RAILROAD RATES,

Mr. TILLMAN. I ask that the unfinished business be taken
up for consideration.

The VICE-PRESIDENT. The Senator from South Carolina
asks unanimous consent that the Senate proceed to the consid-
eration of the unfinished business.

There being no objection, the Senate, as in Committee of the
Whole, resumed the consideration of the bill (H. R. 12987) to
amend an act entitled “An act to regulate commerce,” approved
February 4, 1887, and all acts amendatory thereof, and to en-
large the powers of the Interstate Commerce Commission. /

Mr. LODGE. Mr. President, I ask that the amendment
which I offered to the bill, and to which I desire to address my-
self, may be read by the Secretary.

The VICE-PRESIDENT. The Secretary will read; the
amendment submitted by the Senator from Massachusetts.

The SEecrETARY. It is proposed to strike out section 8 of the
bill and to insert the following:

On the passage of this act an’Interstate Commerce Commission shall
be appointed by the President, by and with the advice and consent of
the Senate, to take the place of the present Interstate Commerce Com-
mission. aid Commission shall consist of nine members, one for and
from each judicial circuit of the United States. Not more than five
members of said Commission shall be of the same political party; at
least three of said Commission shall be lawyers of good and regular
standing at the bar, and three others shall be persons of experience in
the management and operation of railroads. Three members of said
Commission shall be appointed for three years, three shall be appointed
for six years, and three for nine years, and all subsequent appointments
made on the expiration of a term of service shall be for nine years.
Any Commissioner may be removed by the President for inefficiency,
neglect of duty, or malfeasance in office, and vacancies caused by death,
removal, or resignation shall be filled by the President, by and with the
advice and consent of the Senate, by appointments for the remainder
of the unexpired terms. The members of the Interstate Commerce
Commission shall receive $12,000 compensation annually, and the chair-
man of the Commission, who shall be a lawyer, $12,500.

No person owning stock or bonds of any common carrier subject to

the provisions of this act, or who is in any manner pecuniarily inter-
ested therein, shall enter upon the duties of such office or at any time
hold the same. Said Commissioners shall not engage in any other busi-
ness, vocation, or employment. No vacancy in the Commission shall
impair the right of the as ae Commissioners to exercise all the
powers of the Commission. All laws and parts of laws conferring
owers and imposing duties upon or otherwise relating to the hereto-
‘ore-existing Interstate’ Commerce Commission shall continue in full
force and effect and be applicable to the Interstate Commerce Commis-
sion established by this act, except as herein otherwise provided.

1 the proceedings depending before the heretofore-existing Inter-
state Commerce Commission at the time this act shall take effect shall,
without break or interruption, be deemed to be depending before the
Commission established by this section, and shall continue on to con-
elusion before the new Commission.

6647 3
4

Mr. LODGE. Mr. President, this amendment was founded
upon one which was offered by the Senator from Virginia [Mr.
Martin] at the last session of Congress. I prepared it after
consultation with Senators on both sides of the Chamber, I
hope that it may receive the attention of the Senate and if
there are changes which will improve and perfect it I trust they
will be made.

The purpose of the amendment is apparent upon its face. It
is an effort, so far as it can be done by law, to give to this Com-
mission by salary and by tenure of office all the strength and
dignity which it is possible to confer. When one of the Com-
missioners appeared before the Interstate Commerce Commit-
tee of the Senate he stated that be did not think an increase of
salary was of much importance; that there would be no diffi-
culty in getting suitable men for this Commission, just as it was
always possible to get good men for the courts. It seems to me
that that is a mistaken idea. Nothing can give to any execu-
tive commission, the creature of yesterday, the dignity which
pertains to and adheres in a court. The courts and the judges
represent centuries of tradition. They have been the arbiters
of life and death. They have been the support of power, and in
later days the sure defense of personal rights and persona] liberty.
They have in almost all the history of the English-speaking
race, and, indeed, of all civilized nations, filled a great place, and
about them have gathered that indefinable respect and rever-

ence which time alone can give. But this Commission has, and ,

necessarily can have, none of these qualities except what an act
of Congress can confer. Therefore, Mr. President, it seems
very important to do all in our power to elevate its character
and assure its ability so far as is possible by law.

There seems to bea tacit assumption in all the discussion which
has gone on here that if a matter is referred to the Interstate
Commerce Con mission all will be well; that they, like the king
in the English maxim, can do no wrong. Yet they are, after all,
men and fallible like the rest of us. I think we have not
paused enough to consider how immensely important are the
functions to which we are about to call this body of men by the
bill which we now have under consideration, and I wish to
touch briefly on some of the duties which we expect those offi-
cers to perform.

The great importance of our railroad system is well known,
and in a general way is constantly stated; but I desire, if I can,
to bring it home a little more forcibly by some details. Burke
said in a very famous speech that ‘‘small minds and great em-
pires went ill together,” and certainly what is true of a great
empire, as he then contemplated the governments of the world,
is true of this Interstate Commerce Commission. After they
are clothed with the powers which we propose to confer upon
them they will be able to affect the welfare of more people,
and the value of infinitely more property, than could have been
affected by the act of any monarch ruling in Europe at the time
when Burke made his great speech on conciliation with America.

We call upon them primarily to decide as to the rates to be
established by the railroads. We know that that is a large
question; but, Mr. President, I confess I did not realize how
large and intricate a question it was until I had made some careful
 »investigations in regard to the interdependence of rates. I desire
6647

.
5

to read at this point a brief statement which I have had prepared
in regard to that matter. The facts given are somewhat dry,
but it brings home, I think, better than anything I have yet
been able to find, the enormous complication and importance of
the questions which this Commission will be called upon to de-
cide from day to day and in the course of the work imposed
upon them.

The course of the railroads of the United States has natu-
rally been laid between the industrial and commercial centers,
between places of production and the various markets. The
early railroads were built after this tendency from and to the
cities which had grown to be commercial centers principally
because of their advantageous position for the conduct of
traffic by water—Boston, New York, Philadelphia, Baltimore,
Savannah, Mobile, New Orleans, and Galveston because of
their harbors on the Atlantic and the Gulf; Pittsburg, Cleve-
land, Cincinnati, Detroit, St. Louis, and Chicago because of
their favorable situation on the inland waterways. The de-
velopment of the western grain fields, to which Chicago was
the natural gateway, and the great traffic which ensued between
Chicago and New York led to the building of numerous rail-
roads, which competed with the water routes between those
cities. Second in importance were the channels of traffic be-
tween New York and Cincinnati and St. Louis, which led to
the building of competing railroads between those cities and
to Boston, Philadelphia, and Baltimore, seaports competing
with New York. The traffic between any one of these western
cities and any one of these eastern cities, whether eastbound
or westbound, came into competition with the traffic between
any other eastern and western city, it being evident that cer-
tain regions beyond Chicago could also be reached via St. Louis,
that certain regions beyond St. Louis could also be reached via
Cincinnati, and that the entire European market could be reached
through either Boston, New York, Philadelphia, or Baltimore.
The contests between these different commercial centers and
seaports and the railroads connecting them gave rise to rate
wars which were fierce and almost continuous, until, after many
tentative compromises, there was attained the rate adjustment
which is in effect to-day. By reason of the volume of traffic
which flows between them the rate between Chicago and New
York is the basis to which practically all the rates east of the
Mississippi and north of the Ohio rivers are adjusted. The
rates between New York and Chicago, which are the result of
contests which have been fought to a finish by the railroads and
the communities concerned, are designated as 100 per cent
rates. The rates to and from intermediate cities and terri-
tories have also been arrived at through contest and compro-
mise and are established as percentages of the 100 per cent
rate—that is, the rate from New York to Pittsburg is 60 per
cent; ‘to Cleveland, 71 per cent; to Detroit, 78 per cent; to
Indianapolis, 93 per cent; Peoria, 110 per cent, and to St. Louis,
116 per cent of the New York-Chicago rate. By arbitration
and other adjustment the rates to and from Philadelphia and
Baltimore bear a fixed relation to the New York-Chicago rate.
Rates from Boston and interior New England points, rates
from the territory surrounding Buffalo and Pittsburg, and
from othér interior points are established in relation to the

6647
6

New York-Chicago rate, as well as rates to and from Norfolk
and other points in Virginia. Rates in the opposite direction—
that is, from Chicago to New York—are also considered as
100 per cent, upon which basis are likewise made practically
all the West to East rates from points on the Mississippi and
Ohio rivers and the territory north and east thereof.

If, therefore, a railroad rate upon an article of general produc-
tion and consumption is reduced between an eastern and a
western point in the territory specified, the equities and rivalries
of other producing and consuming localities and the competi-
tion of carriers produce the following results:

(1) All railroad rates are reduced between all eastern and
all western points in the territory described.

(2) Rates for combined rail and lake transportation are re-
duced.

(3) Rates via the Hrie Canal and the Great Lakes are
reduced to maintain the difference between them and the all-rail
rates and the rail-and-lake rates.

(4) Rates on through traffic from and to points west of the
Mississippi River and from and to points south of the Ohio
River are reduced.

(5) Rates may be reduced to and from points in Canada. It
has been estimated that a change in one of the rate bases men-
tioned has forced the changing of not less that 8,000 rates.

Upon the 60 per cent of the Chicago-New York rate fixed for
Pittsburg are based, as the result of many years of controversy
between competing manufacturers and rate wars between the
railroads serving the several districts, the fixed differences for
rates from the Mahoning and Shenango valleys, which are 40
cents per ton higher than the Pittsburg rate; from the Cleveland
district, which is 60 cents per ton higher than the Pittsburg rate,
and from the Johnstown district, which is 30 cents per ton less
to the East than the Pittsburg rate. The rates on the raw
materials that enter into the manufacture of pig iron—coke, ore,
and limestone—to the Pittsburg, the Mahoning Valley, the She-
nango Valley, and the Wheeling districts are adjusted in equilib-
rium so delicate that a change in the rate on ore, coke, or lime-
stone to either of these districts would necessitate a change in
the rates on these commodities to the other districts or else
a change in the rate on the manufactured iron and steel from the
district in which the rates on the raw material had not been
adjusted. Likewise a serious reduction in the rates on the
products of the furnaces at South Chicago and Joliet will neces-
sitate changes from the Pittsburg district, and therefore from the
Wheeling, Mahoning Valley, Shenango Valley, and Cleveland
districts.

The adjustment of rates to and from points in the territory
south of the Ohio and east of the Mississippi rivers depends
not only upon the rates that are made from the West to the
crossing points on the Mississippi and from the North to Cairo,
Evansville, Louisville, Cincinnati, and other crossing points on
the Ohio River, but on the rates by water from New York and
Baltimore on the east and on rates from New Orleans and
Mobile in connection with the water lines to those points.

What follows the changing of one important rate in this south-
ern territory is exemplified by the following statement of what
happened as a consequence of a recent change in rates from

6647
7

Baltimore to Atlanta and Louisville to Atlanta. Rates corre-
sponding to the reduction from Baltimore were made from
Boston, New York, Philadelphia, and the other eastern seaports
as well as from all interior Eastern and New England cities to
Atlanta. Reductions corresponding to that from Louisville were
made from Cincinnati, Evansville, Cairo, and Memphis. These
reduttions from the eastern seaports and the Ohio and Missis-
sippi River crossings necessitated a reduction in the rates from
every point in the United States north or west of these gate-
ways, and likewise a relative reduction from Virginia cities to
Atlanta and reduction from the South Atlantic ports of Norfolk,
Charleston, Savannah, and Brunswick. The changes in these
rates to Atlanta forced corresponding change to the neighboring
city of Nashville and a proportionate reduction to Chattanooga,
Macon, Columbus, and other cities in Georgia. The change at
Chattanooga in turn affected rates from Florence, Sheffield, and
Decatur; from Knoxville, Montgomery, Selma, and Birmingham,
as well as from New Orleans and Mobile. This change in the
rates to Atlanta also ramified throughout Virginia and the
Carolinas, the total changes necessitated by the initial change
being not less than a hundred thousand.

Another traffic current which affects rates throughout a wide
territory and in multiplied ramifications is that between Chi-
eago and St. Louis and New Orleans. The roads tributary to
this port naturally work to develop its traffic, with the result
that lines leading from the grain and grazing regions of the
West to the Atlantic seaports have had to make certain revi-
sions in their rates. A reduction in the grain rate made in
January of last year from Kansas City to Galveston forced re-
ductions in rates on grain from the territory beyond and via
Kansas City and Omaha not only to New Orleans, but to New
York and Baltimore. Reductions were also forced to New Or-
leans from all stations in the grain-raising States of South
Dakota, Iowa, Minnesota, and Illinois.

Changes similar to those which have been specified as fol-
lowing the modification of a rate from Louisville to a southern
point also follow the change in a rate from St. Louis to New
Orleans or other southern distributing point. In such a case
the ramifications begin at Buffalo and Pittsburg and extend
westward to Arkansas, Indian Territory, Oklahoma, and New
Mexico, affecting the rates from these regions to points south
of the Ohio and east of the Mississippi rivers. Changes in rates
that affect New Orleans and other points in Louisiana also
affect the rates to and from Texas, the present adjustment of
rates to and from Texas and Louisiana being as delicate as
that in other regions of the South where, as we have seen, a
reduction in one rate may demolish the entire structure.

The growth of population in the Mississippi and Missouri
valleys has brought about a development of industry and com-
merce which causes an extensive interchange of traffic between
the communities that range from Minnesota and Wisconsin to
Tennessee and Arkansas and from the Dakotas to Colorado and
Oklahoma. It is obvious that to and from many places in these
regions traffic can cross the Mississippi or Missouri rivers at
any one of several gateways. Therefore there has grown up a
rate adjustment for this traffic the interdependence of which
may be illustrated by a reduction in the rates on buggies, car-

6647
8

riages, and spring wagons recently made from Freeport, IIl., to
points in Iowa, which immediately brought about corresponding
reductions from Chicago, Peoria, St. Louis, and Dallas, and then
reductions from Milwaukee, Racine, Madison, Janesville, Be-
loit, Wis., Kankakee, Bloomington, Decatur, and other points in
Illinois to all points in Iowa and Wisconsin. These reductions
spread from all shipping points east of the Illinois-Indiana
State line to all points west of the Mississippi River. A re-
duction in the rate on wire and nails from Chicago to Denver
brought similar reductions from other Illinois to all Colorado
points, and had the effect of reducing the rates on wire and nails
eastbound from the Colorado mills through all of the Missouri
River gateways. The interrelation of rates in this region
may be summarized by the statement that a change in a rate
between St. Louis and either Kansas City, St. Joseph, Atchison,
Leavenworth, Nebraska City, Omaha, or Council Bluffs imme-
diately changes the rate to each other of these Missouri River
gateways and automatically reduces the rates between Memphis,
St. Louis, Peoria, Chicago, St. Paul. Duluth, Sioux City, Sioux
Falls, and all points between the Missouri River and the Rocky
Mountains.

The rates from St. Louis, Mo., to St. Paul and Minneapolis
are on an established basis, attained after compromise through
the customary period of warfare, of 105 per cent of the rates
from Chicago to St. Paul and Minneapolis; the Chicago rates
apply throughout Illinois as far south as Peoria, Decatur, and
Springfield. The rates from Chicago and Des Moines are made
a percentage of the rates from St. Louis to Des Moines, and the
rates from Chicago to interior points in Iowa, such as Cedar
Rapids, Ottumwa, and Marshalltown, bear a fixed relation to
the rates from Chicago to Des Moines. The rates from St.
Louis to Des Moines are fixed upon the rates from St. Louis to
St. Paul and Minneapolis. Therefore a reduction in a rate
from Chicago to St. Paul and Minneapolis would result in a
corresponding change from St. Louis to these cities, which, in
turn, would change the rate from St. Louis to Des Moines,
which would change the rate from Chicago to Des Moines, and
likewise the rates from Chicago to Cedar Rapids, Ottumwa, and
Marshalltown.

The complications which beset the making of rates between the
regions east of the Rocky Mountains have their effect upon the
rates to and from the Pacific coast, which also must be kept in
certain adjustment with the ocean rates, a change in the
through rate via any route from any place of production in
the East necessitating a change via any other route to any sea-
port competing with another seaport for the trade of the inte-
rior. It is the same with the rates from the Pacific coast. For
example, canned, dried, and green fruit and vegetables produced
in California, Oregon, and Idaho compete with one another not
only in the West, but pretty much throughout the United States
and in certain parts of Europe. A change in the rate on any
one of these commodities via any route from any producing
center would bring about corresponding changes via other
routes from the same and other producing centers.

As another example, sugar is produced and refined in Texas
and Louisiana and also in Colorado, Utah, Idaho, and in Cali-
fornia; sugar from Cuba is imported and refined at New York

6647
9

and Philadelphia. All of these places of production and refining
compete for the markets of the Mississippi and Missouri valleys.
Therefore a change in the rate on sugar from California to a
Missouri Valley distributing center would probably cause a
change in the rate on sugar from New York, Philadelphia, Utah,
and Colorado. A change in the rate on any commodity from
St. Paul to Butte, a distributing center of Montana, would cause
a change in the rate from every crossing point on the Missouri
River to the distributing points not only in Montana, but in
Utah and Idaho.

In a word, the merchants of Chicago, St. Louis, St. Paul,
Duluth, Sioux City, Omaha, Kansas City, Denver, Salt Lake
City, Butte, Spokane, Seattle, Tacoma, Portland, San Francisco,
Los Angeles, Galveston, and New Orleans are all competing to
a greater or less degree for the trade of the entire territory
between the Mississippi River and the Pacific Ocean. The rate
adjustment now existing is the result of experience, of compe-
tition between carriers, competition between communities, com-
petition between the producers and between the distributers.
It is an adjustment that is ever in unstable equilibrium, changes
constantly being made to meet the fluctuating conditions of in-
dustry and conimerce which in this region are peculiarly and
intensely energetic.

For the grazing grounds which range from the Canadian
boundary to the line of the Union Pacific Railway Chicago is the
controlling market. If the rate for beeves from any point in
this vast region to Chicago is reduced, corresponding reductions
must be made from the adjoining points, and these reductions
affect the rates from all other points on the various railroads
leading from that territory. As the cattle are on the hoof and
can be shifted from one end of a range to another, often over
a distance of two or three hundred miles, without damage or
increased expense, this shifting can readily be made to a station
on a road which has reduced its rates and away from the rail-
road that has not made a corresponding reduction. An attempt
to adjust live-stock rates through the Interstate Commerce Com-
mission necessitated the inclusion in the complaint by certain of
the live-stock interests of all the railroads between Canada and
Texas. But be it said that the complaint was far from unani-
mous, many shippers expressing entire satisfaction with the
status.

An interesting example of competition arose out of the enor-
mous demand for flour in China and Japan during the recent
war. Enormous purchases were made from the Minneapolis
millers. who were quoted rates via the Atlantic seaboard and
the Suez Canal. The railroads leading to the Pacific coast were
enabled, by the necessity of transporting cars to the coast to
bring east products of the Northwest and of the Orient, to quote
the low rates necessary to secure shipments of this flour from
Minneapolis to the Orient via Puget Sound. This rate, estab-
lished solely to obtain this particular and temporary tradflfic,
was so low as to cause the millers and farmers at interior points
on the Pacific coast to demand correspondingly low rates on
their shipments for domestic consumption at the coast. As it
was impossible to grant their request, the low rates from Minne-
apolis were withdrawn. ;

The exposition just made applies to that interdenendence of

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10

railroad freight rates which grows out of the competition be-
tween railroads, between communities, between producing cen-
ters and markets. There is another phase of this interde-
pendence which grows out of the relation and competition be-
tween commodities themselves. It is a general principle that
crude or raw materials should, other things being equal, pay
lower railroad rates than the manufactured products. There-
fore, for example—

(1) Rates on pig iron are lower than rates on steel billets,
blooms, and ingots, which rates in their turn are lower than
those upon finished iron or steel products.

(2) Animal hides are accorded lower rates than leather.

(3) Wool and cotton are accorded lower rates than weolen
and cotton fabrics.

(4) Rates on live stock are less than on dressed beef, and
less on hogs than on hams and other provisions.

(5) The rates on ore are less than on bullion and matte.

(6) Rates on lumber are less than on products manufactured
therefrom.

(7) Rates on denims are less thin on overalls and jumpers.

It therefore follows that a change in the rate on a finished
product or on a raw material which is a factor in its produc-
tion may necessitate changes on the other kinds of raw ma-
terial and on the finished product. For example, a change in
thesrate on lumber would result in a corresponding change on
articles taking lumber rates, such as lath, shingles, telegraph
and telephone poles, and upon articles manufactured from lum-
ber and taking higher rates, such as sash, doors, blinds, and in-
terior finish; or, as another example, a change in the rate on
sulphur to paper-manufacturing points would result in corre-
sponding changes on other articles of paper stock, such as brim-
stone, caustic, soda, kaolin, copperas, potash, soda ash, resin,
ground clay, and ground rock.

That competition known in economics as “ substitution ”’—the
use of one commodity in the stead of another if there is too
great a variant in the price—compels the railroads in behalf of
established industries to maintain a certain relative adjustment
in the rates on competing commodities, for example, as follows:

(1) Soap, soap extracts, soap powders, washing compounds,
washing powders, and washing crystals, all of which are used
for cleansing purposes and are commercially competitive.

(2) Glue (animal product), dextrin (vegetable product),
easein or milk curd (animal product), all of which are adhe-
sives largely used for manufacturing purposes and directly com-
petitive.

(3) Hemp, sisal, manila, and jute, all vegetable fibers, directly
competitive in the manufacture of rope and twine.

(4) Strawboard, wood-pulp board, binder’s board, box board,
news board, and chip board.

(5) Corundum, carborundum, and emerald.

(6) The different kinds of paint.

(7) The different kinds of paper.

(8) Copper wire, copper rope, copper cable, insulated wire,
insulated cable. ;

(9) Wrought-iron pipe, cast-iron pipe, all iron and steel tubes.

(10) Rolled oats and all cereal foods.

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11

(11) Raisins, dried prunes, dried peaches, dried apricots,
dried pears.

(12) Canned salmon and all other canned fish.

(18) Canned fruits and canned vegetables.

This analysis of rates, Mr. President, is simply to show the
fact which I desire to call especial attention to—that these
railroad rates are all interdependent and interlaced and that
when you decide as to one rate you may affect ten thousand
rates covering a third or a half of the United States, and that
means affecting for weal or woe the daily business of all that
great area.

But, Mr. President, this is not all by any means which the
Interstate Commerce Commission is called upon to do. I have
not the slightest intention of casting any reflection whatever
upon the able and distinguished gentlemen who now occupy
those important positions. They have been eulogized by the
eloquent and distinguished Senator from Iowa [Mr. DoLLIvEr],
and he has pointed out to attentive consideration the ten vol-
umes of their reports, which is certainly, as he said, a monu-
ment of industry, if nothing else. But that is not all. This
Commission has been engaged in promoting and advocating leg-
islation. I find, in the testimony taken before the Interstate
Commerce Committee on the 8th day of December, 1899, that the
following proceedings were had in the Interstate Commerce
Commission :

[Reprinted from hearings before Committee on Interstate Commerce,
United States Senate, Friday, April 13, 1900, page 396.]
Provuty ExHiBir A.

At a general session of the Interstate Commerce Commission, held at
En a in Washington, D. C., on the 8th day of December, A. D.
Present: Hon. Martin A. Knapp, chairman; Hon. Judson C. Clem-

ents, Hon. James D. Yeomans, Hon. Charles A. Prouty, Commissioners.

The following proceedings were had, to wit:

AMENDMENT OF THE ACT TO REGULATE COMMERCE.

Cooperation with certain mercantile organizations to secure the
adoption of amendments to the act to regulate commerce being under
consideration,

It was unanimously voted to instruct the Secretary to cooperate with
the representatives of these organizations for the purpose of securing
the adoption of necessary amendments, and particularly the passage of
a bill which has been approved by such organizations at a meeting held
in Chicago on November 22, 1899, and to that end to give the public in-
formation as to the present state of the law, and the necessity for
amending it by distributing such reports, papers, and documents as are
designed to accomplish that purpose, and to devote himself assiduously
to such duty.

A true copy.

[SEAL.] Epw. A. MoSELEY, Secretary.

That was a formal order of the Commission to enter, in con-
junction with mercantile organizations throughout the country,
upon a general campaign in favor of amendments they thought
proper to the interstate-commerce act in order to enlarge their
own powers. There follows on the next page, which I will
not read, a circular which they subsequently sent out.

Mr. FORAKER (to Mr. Lopez). Why not insert it?

Mr. LODGE. Very well, I will insert the whole of this state-
ment, including the order of the Commission and the circular.

Mr. BEVERIDGE. What is the nature of the circular?

Mr. LODGE. It refers to Senate bill 1489, introduced by
the Senator from Illinois [Mr. CuLtom], and then udvocates

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12

the changes proposed in that bill. It was circulated throughout
the country in order to secure support for that measure, which
had the approval of the Commission.

The circular letter referred to is as follows:

Inclosed please find copy of Senate bill No. 1439, introduced by Sena-
tor CULLOM December 12, 1899, which embodies provisions amendatory
of the act to regulate commerce. The Dill is designed to give the Inter-
state Commerce Commission the authority intended to be conferred by
Congress when the Jaw was originally enacted.

A few railroad officials and some newspapers have charged that the
Commission by recommending these amendments is seeking unlimited
authority to make rates. This charge is entirely without foundation.
The Commission neither asks nor desires to be invested with general
rate-making power. It simply asks for authority to correct rates which
have been previously established by the carriers in the full exercise of
their rate-making power, when such rates are found by the Commission,
after due notice, investigation, and full hearing, to be in violation of
the act; and the Commission asks this because experience has demon-
strated that there is practically no other way by which the public
can be protected against excessive or unjustly discriminative rates. :

has been asserted in some quarters that the powers asked for in
this regard would imperil the commercial interests of the country.
This statement is altogether erroneous. On the contrary, the passage
of this measure would conserve the interests of producers, manufac-
turers, and shippers general , while protecting the rights of the car-
riers. On November 22, 1899, this bill was submitted to a convention
composed of representatives of leading commercial and industrial organ-
izations of the country at Chicago. There were present authorized
delegates from the Millers’ National Association of the United States,
the National Association of Manufacturers of the United States, the
National Business League, the National Board of Trade, the National
Transportation Association, the National Live Stock Association, the
United States Brewers’ Association, the Vapor Stove Manufacturers’
National Association, the National Hay Association, the National Asso-
ciation of Freight Commissioners, and others.

After carefully considering the measure section by section it was ap-
proved by the conference. Since that time more than twenty other
national business associations have expressed their approval of the bill.
The shippers of the country, therefore, with the approval of the Inter-
state Commerce Commission, seek such amendment as will empower the
Commission to proceed on the lines and to the ends contemplated by
the original act. The language and phraseology of that act, as inter-
preted by the Supreme Court of the United States in various decisions,
has been found insufficient to authorize the procedure and action neces-
sary to give effect to its purpose. The language of the proposed amend-
ments is believed to be so clear as to admit of no misinterpretation.

Your attention is particularly called to the fact that the authority
to correct rates which have been found to be unlawful is neither arbi-
trary nor final under the provisions of this bill. In every case the cer-
riers must have due notice and opportunity to be heard before any
change in rates can be ordered, and all orders of this character _are
made subject to review by a circuit court of the United States and by
the Supreme Court of the United States.

As already stated, the sole purpose of these amendments is to fur-
nish the means of enforcing the present provisions of the law against
unreasonable rates and unjust discriminations, and to that end to con-
fer upon the Commission the degree of authority respecting rates which
for ten years it was supposed to have, but which the Supreme Court
has declared it does not possess.

If the general features of the bill as above outlined meet your ap-
proval, it is respectfully suggested that you take action expressing your
approbation and support to the Senators and Representatives from your
State and to the Committees on Interstute and Foreign Commerce of
the United States Senate and House of Representatives at Washington,
either alone or with others, or by petition or otherwise.

I would be glad to hear from you in respect to the matter, and
would be pleased to receive advice of any action which you may take
and copies of any letters, petitions, or other documents which may be
forwarded to Senators and Representatives or either of the committees.

Very respectfully,

Mr. DOLLIVER. Mr. President
The VICE-PRESIDENT. Does the Senator from Massachu-
setts yield to the Senator from Iowa?
6647

Epw. A. MOsEetnpy, Secretary.

 
13

Mr. LODGE. Certainly.

Mr. DOLLIVER. I should like to be informed by the Sen-
ator as to the impropriety of that, and how far it differs from
the activity of other Departments of the Government in making
recomniendations for bringing the law into harmony with the
good of the public service?

Mr. LODGE. The Senator from Iowa seeks to defend what
I have not attacked. I have not attacked the Commission for
doing that nor have I reflected upon them. I am pointing out
that this is a great function which they are filling; and I was
going on to say that in the resolution in which the Senator from
South Carolina [Mr. T1LLMAN] is so much interested, although
he is such a relentless opponent of executive power, the Coim-
mission are specifically authorized and invited to suggest legis-
lation to Congress.

Mr. DOLLIVER. Mr. President, I had that resolution in
mind; and my recollection is that it passed the Senate by a
unanimous vote of the body.

Mr. LODGE. It did; and I have not yet criticised the Com-
mission. I am pointing out the duties which are placed upon
them. Without that resolution, however, they have been doing
that work; they have been

Mr. NEWLANDS. Mr. President——

The VICE-PRESIDENT. Does the Senator from Massachu-
setts yield to the Senator from Nevada?

Mr. LODGE. With pleasure.

Mr. NEWLANDS. I wish to ask the Senator whether he
bears in mind the fact that the original interstate-commerce act
calls upon the Interstate Commerce Conmission to make recom-
mendations to Congress from time to time in regard to legisla-
tion?

Mr. LODGE. I had forgotten that they were called upon to
make recommendations to Congress. But I am finding no fault
with their making recommendations. My point is that. that
body will have, in addition to the duties they have to perform
under this act, very large additional duties in preparing legis-
lation and advocating the enlargement of their own powers
when they find them too small or are overruled by the courts.

Mr. FORAKER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Massachu-
setts yield to the Senator from Ohio?

Mr. LODGE. Certainly.

Mr. FORAKER. I rise only to suggest that there is certainly
a very wide difference that must be manifest to anyone the
moment he thinks about it, between making an official recom-
mendation, in accordance with the requirements of a statute,
and organizing a propaganda, and in carrying out the particular
purpose, writing, preparing, and distributing literature in be-
half of a purpose connected with legislation.

I remember that during the last two or three years there has
been a great outcry because the letter carriers of the United
States have had the presumption to ask, through their organi-
gation, that their pay might be increased. That has been
thought to be very wrong indeed, and they have been criticized
and threatened with dismissal from the service if they persisted
in it. That same rule has been applied to others who are
engaged in the public service; and the rule prohibiting men who

6647

 
14

are engaged in the public service becoming the promoters of par-
ticular ideas with respect to legislation has been, as I think, gen-
erally approved.

I did not rise to criticise the Interstate Commerce Commis-
sion, but only to call attention to this fact. I know in all the
newspapers it was commented on when this convention was held
in Chicago last August, I think it was, that a representative of
the Interstate Commerce Commission was there, acting as a
sort of secretary ; that he had much to do with the marshaling
of many civic and commercial bodies and organizations that
were represented there; and it was charged that some of them
existed only on paper. I do not know what the fact is, but it
showed how thoroughly an organization may be brought into
bad repute when they go into that kind of business. I think it
is bad practice.

Mr. LODGE. Mr. President, the resolution to which I re-
ferred authorized the Commission to make suggestions to Con-
gress, and the Senator from Nevada [Mr. NEwLanps] calls my
attention to the fact that they were invited to give recommenda-
tions under the original law. I do not question their right at
all, but I merely desired to point out that it was a very impor-
tant duty to impose on any executive board.

Mr. TILLMAN. Mr. President.

The VICE-PRESIDENT. Does the Senator from Massachu-
setts yield to the Senator from South Carolina?

Mr. LODGE. Certainly.

Mr. TILLMAN. The, Senator from Nevada having called
attention to it, I have looked up the original act, and I find in
it this section:

Sec. 21. That the Commission shall, on or before the ist day of
December in each year, make a report to the Secretary of the Interior,
which shall be by him transmitted to Congress, and copies of which
shall be distributed as are the other reports issued from the Interior
Department. This report shall contain such information and data col-
lected by the Commission as may be considered of value in the determi-
nation of questions connected with the regulation of commerce, together

with such recommendations as to additional legislation relating thereto
as the Commission may deem necessary.

Now, it has occurred to me—it is not my function or purpose
to rush in to defend the Commission, and the Senator from
Massachusetts says he is not attacking them——

Mr. LODGE. I have not attacked them.

Mr. TILLMAN. But the Senator from Ohio [Mr. ForaKer]
has seemed to indulge in some very caustic criticisms. I want
to remark that after the decision of the Supreme Court in 1897,
practically destroying the Commission except as a body of stat-
isticians and arbitrators or conciliators, as we have had them
described in the Interstate Commerce Committee, these people,
I presume, were afraid that their functions would become so
useless that they would be legislated out of office some day, and
they were probably considering whether or not they had not
better hustle about and attract attention to the worthlessness
of the Commission in order to let people see that, if they were
to be of any use, there must be some amendment to the law.

Mr. LODGE. I think, Mr. President, that their minds
probably worked very much in that way, but, of course, if it is
to be held that when the court overrules a decision of some board
of this kind, then the board is to immediately go to work and
get the law changed so as to accord with their view of it, there

6647

 
15

is nothing further to be said. The law and the recent resolu-
tion authorized them, invited them, to suggest legislation. I
say it is an important duty. I do not find, however, in any law
that they are called upon or invited to carry on a public agita-
tion throughout the country, as they have done by writings. by
speeches, and by circulars. That work has been done very
actively and very thoroughly. In illustration of it I shall
presently call attention to a speech which one of ablest and most
distinguished of the Interstate Commerce Commissioners has
recently made.

But my point now is this, Mr. President: If we are creating a
board of Interstate Commerce Commissioners who are to be in
the operation and discharge of their functions judge, jury, and
prosecuting officer, resembling nothing that I can think of except
the French juge d’instruection, if they have those multiplied
powers, to begin with. and in addition are to be charged with
preparing and recommending legislation for Congress, with
making investigations into the general business of the country,
and with carrying on a perpetual discussion about all railroad
legislation, I say, Mr. President, we can not go too far in our
effort to secure for those positions the highest talent and the
highest character which the country affords.

Now, I desire to call attention a little in detail to the objects
and purposes of this amendment:

Said Commission shall consist of nine members, one for and from
each judicial circuit of the United States.

That is a rough way—the only way that suggested itself to
me or to others—of getting a proper represeutation of the dif-
ferent sections of the country upon this Comission.

Mr. TILLMAN. Mr. President——

The VICE-PRESIDENT. Does the Senator from Massachu-
setts yield to the Senator from South Carolina?

Mr. LODGE. Certainly.

Mr. TILLMAN. Has the Senator examined to find out
whether or not that would be giving a proper distribution of
representation on the Commission?

Mr. LODGE. I said it was a rough way of reaching it. Un-
less we go to work and make up districts ourselves, and say
there shall be one from each of the districts set forth in the act,
I know of no better way of getting at it. It seems to me it is
a desirable result, but if there is a better way of attaining it, and
the Senator from South Carolina will suggest the method, I shall
very gladly adopt it. My only desire is to get a proper repre-
sentation of the different sections of the country.

Mr. TILLMAN. I had naturally drifted into the idea, along
with others, that nine was a very desirable number of Commis-
sioners. We think there ought to be an increase, and as there
are nine judicial circuits, one from each circuit would probably
distribute the members of the Commission geographically in a
fair and proper manner; but I find such inequalities in the cir-
cuits as to population, area, railroad mileage, and the number
of complaints that have come to the Interstate Commerce Com-
mission, that it would seem, upon a little examination of a map
which I had prepared, but can not put my hand on at the mo-
ment—I will get it before this debate is over—that that is
wholly inappropriate and would be unfair and unwise. If we
are going to say they must come from any particular place or

6647
16

section, we would have to divide the country anew. I will
illustrate that by reciting from memory that I think the first
judicial circuit has only about 6,000 miles of railroad in it,
whereas there is a circuit down on the Gulf which has 30,000
miles of railroad in it. hat is a mere illustration of the ine-
quality that would come from judicial-circuit distribution. I
will present the map later. I have had it prepared and will
get it.

Mr. LODGE. It seems to me that business is a better test
than mileage, but I am perfectly willing to accept any fair
scheme which will distribute nine commissioners so as to give
representation to the different sections of the country. I
think that it is well to increase the number with that same
purpose in view. Take as an illustration the present Com-
mission, which consists of five members. There is one Commis-
sioner from Vermont, one from close by in New York. one from
Georgia, one from Missouri, and a new one from California bas
just been named. There is the great Middle West entirely with-
out representation, and the Northwest, and a large part of the
Southwest with no representation on that Commission. I doubt
if it is possible with only five Commissioners to get any proper
geographical distribution, and I think it is very desirable to
have the different sections of the country represented. After
all, the Commissioners are merely human—I do not wish to be
thought to be making an attack upon them when I say that—
and almost all human beings are more or less affected by
the very human preference for the localities to which they are at-
tached, for the State which they represent, for the places where
they were born, and so on. It would be very unnatural if they
should not have preferences of that kind. Therefore, I think
it is extremely important that there should be some distribution
of the Commission, so that every portion of the country may
be fairly represented on the board, either by judicial circuits
or by such other arrangement by districts as we may make here.
I have no doubt, as the Senator from South Carolina says, we
can make much better ones than those which now exist in the
judicial circuits.

Mr. TILLMAN. Mr. President, I merely want to suggest to
the Senator, by way of letting his mind rest on that view in
that connection, whether or not he regards this Commission
as approximating in dignity and power and responsibility the
Supreme Court?

Mr. LODGE. I think, Mr. President, that it has enormous
power, but I do not think that it approximates in dignity or in
weight to the Supreme Court, nor do I believe it can ever do
so, for the very reasons which I have already suggested. It
has neither the traditions nor the habits of a court, nor is it
one of the great constitutional departments of the Government.

Mr. TILLMAN. With that I agree in some measure, but the
responsibility which rests upon this Commission, or will rest
upon it if we legislate along the lines we are contemplating,
and the power it will have will be so great that I would re-
gard it as the nearest in dignity and power to the Supreme
Court of any department of the Government not mentioned in
the Constitution. Of course, I probably ought to except the
Senate and House of Representatives, which will create and
govern that body; but, holding the view that I do, that this

6647
17

Commission is to be a body of great responsibility and power,
with very large salary, and everything to lift it as far above
partisanship and sectionalism as is possible, I would deprecate
anything which would look like a recognition of sectionalism
in its composition. if we can possibly get rid of it.

Mr. LODGE. Does the Senator from South Carolina think
it would be a good idea to have all three Commissioners from
the State of New York, for example?

Mr. TILLMAN. No, I should think it would be a good plan
for the President to consider most carefully and seriously the
make-up and antecedents of any man whom he might suggest
to us for appointment on the Commission.

Mr. FORAKER. Mr. President

The VICE-PRESIDENT. Does the Senator from Massachu-
setts yield to the Senatoy from Ohio?

Mr. LODGE. With pleasure.

Mr. FORAKER. I can not resist the temptation, unless the
Senator from Massachusetts objects to my interrupting him
here, to say that I am in accord with the suggestion just now
made by the Senator from South Carolina, that men should
not be selected for this Commission, if we are to have one,
representing the different sections. I say that, not alone upon
argument, to which I have not time to resort, but rather upon
experience. I do not know whether or not the Senator from
Massachusetts is familiar with the Maximum Rate case, so
called. -

Mr. LODGE. I have read it.

Mr. FORAKER. We have, in the decision rendered in that
case, ap illustration of what the representation of sections will
do, without anybody intending to do anything except only his
full duty.

That was a case, aS Senators will remember, in which the
question before the Commission was whether the rates from
Chicago and Cincinnati to Chattanooga, Atlanta, Rome, Me-
ridian, Knoxville, and other places in that territory were rela-
tively too high. The Comniission found that they were. They
ordered a reduction. I will go into this at length when I have
the time. I merely want now to give the Senator the benefit
of what is in my mind, if it shall be of any benefit.

The opinion was prepared by Mr. Clements, a member of the
Interstate Commerce Commission, who resided at Rome, Ga.
Now, Rome and Atlanta were common points. The rate from
Cincinnati, for instance, to Atlanta and Rome was $1.07. It
was the same to both points. The rate was the same from
Chicago to both Atlanta and Rome. They were common points.
But they so worked it out, honestly, of course, Mr. President—
I do not mean to reflect at all on Mr. Clements, who wrote the
opinion——

Mr. LODGE. I trust the Senator from Ohio is not going to
read the opinion.

Mr. FORAKER. I am not going to read the opinion, but I
am going to state the result.

What was the result? To make it short, the Commission
agreed—Mr. Clements wrote the opinion—that the rates were
too high from Cincinnati and Chicago to Rome and Atlanta
and these other points, and they made a reduction. ‘They re-
duced the rate, on an average, 19 per cent to all points except

6647. 2

 

 
18

Rome, and reduced the rates to Rome nearly 29 per cent. In
other words, the rate from Cincinnati to Rome «and Atlanta
was $1.07. They reduced the rate from Cincinnati to Rome to
75 cents and to Atlanta to 86 cents. They worked that out
according to a rule which they adopted. But it shows, whether
consciously or not, that Mr. Clements was there, representing
his section, determined to see that it had a square deal, and to
give it a square deal. Rome, not the Rome that sat on her
seven hills and from her throne of beauty ruled the earth, but
Rome, sequestered in the foothills of northern Georgia, a com-
mon point with Atlanta, was given this greater reduction.

Mr. TILLMAN. Mr. President——

Mr. LODGE. Mr. President:

The VICE-PRESIDENT. Does the Senator from Massachu-
setts yield to the Senator from South Carolina?

Mr. TILLMAN. The Senator from Massachusetts will permit
me—— :

Mr. FORAKER. Now, I want to say—and then I will not
interrupt the Senator from Massachusetts further unless I feel
inclined to and he will allow me—that the vice of this whole
business is the idea that the different sections have got to be
represented, the different professions have got to be represented,
the different political parties have got to be represented. What
have parties and what have sections to do with the efficient dis-
charge of this duty?

Mr. President, I shall contend at the proper time that if you
are going to have a rate-making commission it shall be composed
of three men, all of whom shall live in Washington, or some
other place from which men can be chosen who are supposed to
have no prejudices, no biases, no sections to represent, and who
will be fair and honest toward all the interests involved.

Mr. LODGE. Mr. President——

Mr. BACON. I hope the Senator will permit me for just a
moment.

Mr. TILLMAN. Will the Senator from Massachusetts in-
dulge me for a moment?

The VICH-PRESIDENT. The Senator from Massachusetts
has not yielded.

Mr. LODGE. I desire to reply to the Senator from Ohio be-
fore I yield to others.

The argument of the Senator from Ohio is mine. I think it
leads directly to what I am advocating, because I do not believe
we can find in this country three men or five men or nine men
who are wholly devoid of local feeling and prejudice. I repeat.
I think these gentlemen on the Interstate Commerce Commission
are merely human, and the example of Rome, Ga., is a perfect
example of exactly what I want to avoid by giving a representa-
tion to each section, so that there will be no possibility of favor-
itism to one town or one section over another, because the Com-
missioners will be able to balance each other and see that one
section is not punished and another unduly benefited. I draw a
different conclusion from the example which the Senator from
Ohio has cited. It seems to me to argue my case and not his.

Now, Mr. President-——

Mr. TILLMAN. Will the Senator indulge me a moment be-
fore he resumes his argument? I dislike to interrupt him.

6647

 
19

The VICE-PRESIDENT. Does the Senator from Massa-
echusetts yield to the Senator from South Carolina?

Mr. LODGE. I yield.

Mr. TILLMAN. I merely want to say that while I am in no
sense a defender of Mr. Clements, I should like to know a little
more in regard to this alleged favoritism to Rome.

Mr. LODGE. I wish the Senator from South Carolina would
not discuss Mr. Clements and his favoritism in the middle of
my speech. He can do it just as well later on.

Mr. TILLMAN. The Senator can strike out everything I say
after I get through.

Mr. LODGE. That is a detail which we can take up subse-
quently.

Mr. TILLMAN. I think when Mr. Clements has been at-
tacked, as I think probably unfairly, or——

Mr. FORAKER. I expressly stated that I was not making
any attack upon Mr. Clements.

Mr. LODGE. I must proceed, Mr. President.

The VICE-PRESIDENT. The Senator from Massachusetts
declines to yield further.

Mr. TILLMAN. Of course I must surrender, if the Senator
from Massachusetts will not permit me to proceed.

The VICE-PRESIDENT. The Senator from Massachusetts
declines to vield further.

Mr. LODGE. I think it is desirable to make this board, so
far——

Mr. BACON. Mr. President, I do hope the Senator from
Massachusetts will permit me to say a word for Mr. Clements
right in this connection. He has been assaulted here, and a
very grave reflection has been made upon him. Certainly I
will not occupy much of the time. I just want to say this——

The VICE-PRESIDENT. Does the Senator from Massachu-
setts yield to the Senator from Georgia?

Mr. LODGE. I have made no reflection whatever upon Mr.
Clements.

Mr. BACON. I know; but the Senator yielded to the Sena-
tor from Ohio, who did, and I think in the same connection——

Mr. LODGE. I had no idea what the Senator from Ohio
was going to say.

The VICE-PRESIDENT. Does the Senator from Massachu-
setts yield to the Senator from Georgia?

Mr. BACON. I simply want to say a word.

Mr. LODGE. I yield, certainly.

Mr. BACON. Mr. President, I do not propose to go into the
discussion of the question as to the propriety of the ruling
which was made. I have known Mr. Clements for a long
time, and am perfectly certain that when the facts are ascer-
tained there will be such an explanation of them as will re-
lieve him absolutely of such reflection as that cast upon him by
what has been said by the Senator from Ohio.

Mr. FORAKER rose.

Mr. BACON. The Senator will permit me for a moment. If
the Senator from Ohio had simply sought to apply what has
been done by the Commission to the contention that Mr. Clem-
ents naturally favored the section from which he came, that
might have been so in accordance with what is human nature
that no reply would have been needed. But the idea of sug-

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20

gesting that Mr. Clements, coming from Rome, was a party to
the deliberate and intentional discrimination between Rome and
Atlanta is utterly beyond all reason or possibility of correct
foundation in fact or reason.

Mr. Clements has been a member of the Commission for four-
teen years, and in all that period this is the first thing I have
ever heard which in the least reflects upon him as a man finely
fitted for his position, devoted to his duties, diligent, capable,
honest, and impartial; and I am sure that an examination of
his record will prove that I have in no manner overstated the
estimate in which he is held, and is entitled to be held, by the
public.

I think, so far as Atlanta and Rome are concerned, if the
Senator from Ohio knew how big a place Atlanta is he would
not for a moment suggest that anybody in the State of Georgia
would discriminate against Atlanta in favor of any other lo-
eality, even if he lived in the latter.

Mr. FORAKER. Mr. President, I fully subscribe to all that
the Senator from Georgia has said in favor of Mr. Clements.
I know Mr. Clements and I have a high regard for him, and I
was particular to say that Mr. Clements in making this decision
acted honestly and in accordance with the rule which he and
the Commission had adopted, but which worked out this par-
ticular result.

But nevertheless the fact remains, as the result of what they
did, that Rome did get this exceptional benefit, which does look
like a discrimination, and’ which was regarded as a discrimina-
tion by all the interested cities at the time the order was made.

Mr. BACON. But if it was the unanimous act of the Commis-
sion, how can it be that it was influenced by the fact that Mr.
Clements lived in Rome? It seems to me that defeats the en-
tire contention of the Senator, unless he means to say that Mr.
Clements’s influence over the Commission was so great that he
could secure from them a unanimous ruling in favor of the
small town of Rome.

Mr. FORAKER. I mentioned that simply as a coinci-
dence——

Mr. LODGE. Mr. President, I must decline to yield any fur-
ther to a discussion about Mr. Clements.

The VICE-PRESIDENT. The Senator from Massachusetts
declines to yield further.

Mr. LODGE. We have now heard from the complainant and
from the defense, and I think the question may rest there.

Whether we can remove the Commission from undue geo-
graphical considerations or not, I think everybody will agree
that it is in the highest degree desirable to put them as far away
as possible from geographical considerations, and also whether
we get the three archangels, whom the Senator from Ohio is
going to have, living in Washington, or whether we get merely
uine honest and able American citizens, I regard it as highly im-
portant to put them by their tenure and by their salary and by all
the dignity we can confer .upou the office as far beyond the effect
of geographical considerations or public clamor as it is possible
to place them.

We are all susceptible to public clamor as well as to local
patriotism. That is a weakness of human nature. Senators
will remember an illustration of it in Pickwick, when Mr. Pick-

6647
21

wick and his friends went down to see the election at Eatan-
sswill. When they arrived there was a mob in the street, which
called upon them to cheer for Slumpkey. Under Mr. Pickwick’s
lead they all cheered for Slumpkey. ‘“ Who is Slumpkey,”
whispered Mr. Tupman. “Hush,” said Mr. Pickwick; “I do
not know, but I have observed that under these circumstances it
is generally wise to do what the mob do.” ‘ But,” said Mr.
Snodgrass, ‘‘suppose there are two mobs?” ‘“ Shout with the
larger,” said Mr. Pickwick. Volumes could not have said more.

Mr. Pickwick, who was a very wise man, pointed out a com-
mon weakness of human nature. There’is a tendency always to
shout with the largest crowd. I wish to see the Commission raised
as far as possible to a point where they will be not susceptible to
public clamor, where they can decide these great questions with
an eye single to the public good, and with an absolute regard
for the rights of all who are involved.

I have also provided in this amendment that three of the Com-
missioners shall be lawyers. There have been forty-three cases
taken up from the Commission to the Supreme Court. In
thirty of these the Commission has been overruled; in only
two affirmed. The cases that were not taken up were really
more in the nature of arbitration. I think it would be desirable
to have men to interpret the law under which they act who
could make a little better percentage of affirmations in the Su-
preme Court when their cases were taken up for review.

The term of the Commissioners is made long by my amendment
for the same reason that the salary is made high, in the hope of
securing the very best men.

I have also proposed that three Commissioners shall be men
who have had experience in railroad management and operation.
It seems to me it is very desirable to have on the Commission
men who know something about the practical operation of rail-
roads. Mere hostility to railroads does not seem to me a suffi-
cient qualification in itself for passing upon these great ques-
tions. I think we need more knowledge than that. In my
opinion we require on the Commission a knowledge of law and
good lawyers. I think that they also should have a knowledge
of railroads. Let the other three members be simply laymen
without special knowledge, if you please, or without special
training either in law or railroads. In suggesting that the
chairman of the Commission shall be a lawyer, I merely follow
the English precedent, where the railway commission court has
for its presiding officer one of the judges of the highest court,
recognizing in that way the importance of great legal ability -
when it comes to the decision of these important questions.

Mr. President, I think it is a good rule, whenever Congress
confers great powers, to guard them well, and I would guard
them here, first, by the character and ability of the Commission,
and then by assuring to all who come before the Commission
their day in court afterwards if they are dissatisfied with the
‘Commission’s ruling.

In the speech which I made some little time ago on this same
question I made no allusion to any local or sectional aspect
which it might present. We in New England believe that the
prosperity of one part of the country makes for the prosperity
of all. We can not conceive that we should prosper while the
vest of the country or any other important part of the country

6647
22

was suffering from adversity. At the same time to every sec-
tion of this country the powers conferred on the Commission are
a matter of great moment, and I desire, if I may so far trespass
on the patience of the Senate, to point out the nature of the
importance this bill possesses to that part of the country from
which I come.

One of the railroad Commissioners, Mr. Prouty, has recently
been making speeches in New England, and he made one speecb
in Boston in which he took occasion to point out how mistaken
the attitude of the New England Senators and Representatives
was in regard to this bill. I do not know that he was quite
clear as to just what our position was, but he certainly thought
we were making a mistake. His speech was widely read. It
might, if unanswered, give a very false impression of the atti-
tude of New England Senators and Representatives, and I do
not think it states very fairly the condition of New England in
relation to this question. There is no part of the country
which so much requires proper regulation of railroads as New
England, and there is no part of the country which would
suffer more from a misuse or abuse of the powers conferred
by this proposed act than the New England States.

Mr. Prouty in his Boston speech took occasion to point out
how much better off New England would be if she only could
have a railroad commission here in Washington, if not at
home, vested with great powers; and in order to show our de
pressed and unfortunate condition he took as a standard of
comparison the State of Iowa and the Kingdom of Prussia, or,
rather, Germany. He wished to suggest how much better off
we would be if we only had the laws of Iowa or the laws of
Germany in regard to our railroads.

Mr. President, the comparison with Iowa is a severe one for
Massachusetts or any one of the little New England States to
encounter. Iowa is a great State of over 55,000 square miles.
There is probably no spot in the world that has a richer soil.
It is a beautiful State. It has great deposits of coal. It has
enormous natural endowments. It is equally fortunate in the
character of its population. Theré is no State in the Union
with a finer or better population than that of the State of Iowa.
There is no State which has been more strongly or powerfully
represented in the National Government than the State of Iowa
from the day when she first entered the Union. At this mo-
ment there are two representatives of that great State in
the Cabinet. The leader of the Senate, honored and beloved
_by all Senators on both sides, is the senior Senator from
Iowa [Mr. ALtison]. The name which this bill bears is that
of a distinguished Member of the House of Representatives
from the same State. No State is more fortunate in its nat-
ural gifts and in the ability and character of its people than
that great State of Iowa, in the heart of the country.

As to Massachusetts, Mr. President, we are very proud of
our old State; very proud of its great history, and of the men
who have made that history. But it is a small State. It bas
only about 8,000 square miles. It has not a fertile soil. It has
no mines. It is dependent on its sister States for all the mate-
rials which it works up into finished products in its many indus-
tries. Certainly, Mr. President, if the legislation of Massa-

6647
23

chusetts is bad, no State ought to show it so quickly or be so
sensitive to it.

Yet, Mr. President, I turn for comparison in population to
the census of 1905. which was taken during the past year in
Massachusetts and also in Iowa, and I find, according to the
statement furnished me by the Director of the Census, that the
population of the State of Iowa, uwecording to the State census.
of 1905, was 2,210,000, and in 1960, according to the returns of
the Twelfth Census, it was 2,231,000, a loss in five years of
21,000. The population of Massachusetts, according to the cen-
sus of 1900, was 2,805,000. The population in the past year was
shown by the State census to be 3,003,000. The State of Massa-
cbusetts gained practically 200,000 people in the last five years,
while the State of Iowa appears on the face of the census re-
ports to have lost 21,000.

Mr. President, those figures, considering the enormous
natural advantages of the State of Iowa, a great State, six times
as large as the State of Massachusetts, certainly, I think, dis-
prove the proposition of Mr. Prouty that we are suffering in
Massachusetts from injurious or ineffective legislation or that
we are in sore need of more and new legislation to save us from
ruin. We have a railway commission in Massachusetts. We
were one of the earliest States to adopt such a commission. It
does not undertake to fix rates. It advises the rate to be made
and trusts to publicity. Our law has been copied in Eng-
land. It is a law praised by Mr. Acworth in his testimony as a
model law on the subject of railroads, and under that law the
State has suffered as little from railroad discrimination, I will
venture to say, and has come less, I am sure, to the Interstate
Commerce Commission for relief than almost any other State in
the Union.

Mr. NEWLANDS. Mr. President——

The VICE-PRESIDENT. Does the Senator from Massachu-
setts yield to the Senator from Nevada?

Mr. LODGE. I do.

Mr. NEWLANDS. The Senator .from Massachusetts has
ealled attention to the fact that Massachusetts has gone ahead
while Iowa has retrograded in population during the past five
years, notwithstanding the fact that the State of Iowa has
great natural advantages and great natural wealth that Massa-
chusetts does not have.

I would ask the Senator from Massachusetts whether that
might not be attributed to the economic policy of the country,
which, through a high tariff, has protected the special indus-
tries of Massachusetts unduly, building up wealth and popula-
tion there; and also whether the financial control of the rail-
road systems of the country, largely centered in Massachusetts,
New York, and States adjoining, has not resulted in such an
adjustment of rates as to drain the wealth from the interior of
the country to Massachusetts and adjoining States?

Mr. LODGE. Mr. President, I will not enter into a tariff
discussion at this point. In regard to the railroad rates, Mr.
Prouty’s argument, made in Boston, was that New England would
be a great deal better off if she could only have an interstate
commerce commission with larger powers; that they would
give her better rates than she has now. That was his whole
argument as addressed to New England, and it was an abso-

6647
2+

lutely sectional appeal. He took his hearers up into a high
mountain at the board of trade dinner and showed them all the
glories he was going to confer upon them when these enlarged
powers were placed in the hands of the Interstate Commerce
Commission. He did not take the view of the Senator from
Nevada, that Massachusetts has been making rates favorable to
herself, and I never heard anybody suggest for a moment that
such rates were made by the railroads.

Mr. NEWLANDS. Mr. President, there was some testimony
by Mr. Tuttle, of the Boston and Maine system, before our com-
mittee, Mr. Tuttle being one of the most intelligent and capable
railroad men in the country, showing that Massachusetts had
a watchful eve regarding the rates throughout the entire coun-
try; and the rates were so adjusted through the control of dif-
ferent railway systems as to secure a market for Massachusetts
products in far-distant States. Whether that adjustment was
right or wrong, I do not pretend to say, but it is very evident
throughout the testimony that through the great railway mana-
gers who control these great systems (and recollect that the
financial control is all in a very small area—New York, Massa-
chusetts, and Pennsylvania) there is an organized system of
so adjusting the rates as to advance these States of great popu-
lation and wealth.

Mr. LODGE. Mr. President, I have failed signally in my
attempt to convey my meaning to the Senator from Nevada.
Mr. Prouty’s argument in New England was that New England
was suffering from undue discrimination, and he used as an
argument that the rates in Iowa and the rates in Germany
were a great deal lower than they were in New England. That
is his argument. I leave the Senator from Nevada to discuss
that with Mr. Prouty himself. What I want to show is that
though the rates in New England are somewhat higher than
they are in Iowa, Mr. Prouty did not have his facts quite cor-
rect, and that there is a good deal to be said by way of explana-
tion.

In the first place, Mr. President, it was much more expensive
to build the railroads of New England than to build the rail-
roads in the West. It was an old, settled community. The
land damages were very great and in a thousand ways the ex-
penses of the railroads in New England far surpass those of
roads in the newer parts of the country. For instance, this one
single item will show what I mean. When the railroads began
in Massachusetts and in New England generally they ran at
grade crossings everywhere. The country was not then as
thickly settled as it is now, but with the growth of population
this condition became intolerable. We have therefore compelled
the railroads to abolish those grade crossings, and in the last
fifteen years the railroads have expended in Massachusetts
$14,000,000 in abolishing grade crossings alone, having been
forced to do it by acts of the legislature. Then, under our law
we have no stock or bonds in any of our railroads which do not
represent absolutely paid-up capital. There is no watered stock
in the railroads. It has all been paid up under our corporation
act. In order to earn even a very moderate dividend on these
railroads it is absolutely necessary that the charges should be
somewhat higher than in portions of the country where the origi-
nal cost was very much less. It is also to be remembered that

6647
25

the Federal Government gave the Iowa railroads land of enor-
mous value to assist them in the work of construction. A writer
in the United States Investor for September 2, 1899, estimates
that over 6,000,000 acres, about the area of the State of
Massachusetts, was given by the Federal Government to the
railroads of Iowa. In the same journal for November 25,
1899, Mr. W. W. Baldwin, the present assistant to the presi-
dent of the Chicago, Burlington and Quincy Railroad, esti-
mated that the grant was about 2,700,000 acres, or about half
the area of Massachusetts. Of course in the old States there
were no such aids to railroad building; there could not be in the
nature of things.

Mr. Prouty takes as his principal standard of comparison the
railroad haul from Boston to Newport, Vt., the town in which
be lives, a small town near the Canadian line, I think. When
he compares the railroad haul from Boston to Newport—250
miles—with the same distance in Iowa, it is almost as if one
should compare an absolutely flat surface with the same dis-
tance measured up a mountain. In other words, the grades in
Massachusetts have made the railroads very much more ex-
pensive. I have not been able to get any full information on the
subject, but I believe that the grades in Iowa are practically
nothing as compared with New England. For example, in going
from Boston to Newport, Vt.. over the White Mountain divi-
sion, the train has to cross Warren Summit, where the alti-
tude is 1,090 feet, thence it descends, and in going over the
Passumpsic division it again reaches the altitude of 1,150
feet. It finally reaches Newport, which is at a level of 950
feet. If the freight trains should go over the Concord divi-
sion they would have to go over Canaan Summit, which is 956
feet high, and then descending it must go over the Passumpsic
division at the height of 1,150 feet. Such grades as these
have added, of course, enormously, as I have just said, to the
expense of the roads.

Without undertaking to discuss in detail all the intimations
made by Mr. Prouty as to what the Commission would do
in the way of reducing freight rates for the benefit of New
England if it had the power, I was interested particularly by
his suggestion that if this Interstate Commerce Commission
secured its enlarged powers there ought to be a reduction of “ mil-
lions of dollars” a year in the rates on coal consumed in New
England. He explains that this reduction would not fall on
the New England rouds, but on the great coal-carrying roads
of the country, mentioning the Delaware, Lackawanna and
Western, the Reading, the Pennsylvania, the Baltimore and
Ohio. the Norfolk and Western, and the Chesapeake and Ohio.
Yet the Senator from Nevada a moment ago was pointing out to
me that Massachusetts and New York control these railroads
and were able to get low rates, and that is the reason why there
was a prosperous aud growing population. Here Mr. Prouty
comes along und says that under a properly administered Inter-
state Commerce Commission there ought to be a saving of mil-
lions of dollars a year taken out of the coal roads outside of
Massachusetts and New England. It is perfectly evident that if
the charges of these roads on that proportion of their coal traffic
destined for New England should be reduced proportionate re-
ductions would have to be made on all their coal traffic, and if

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26

the reduction to New England alone should amount to millions
of dollars, the total reduction would amount to many millions
more. It will be remembered that when a delegation of railway
employees called on the President and stated their objections to
rate-making legislation he assured them that there would be
no such reductions of rates as would affect their wages, and the
advocates of this legislation have uniformly made light of the
argument that it would endanger either the wages of employees
or the incomes of the owners of railway securities. But if,
according to Mr. Prouty, when they get new powers and begin
to benefit New England by their rulings “ millions of dollars”
are to be cut off of the incomes of the roads on one item of
traffic alone it must be apparent that this could not be carried
very far without reducing wages and endangering dividends
and interests on bonds.

Mr. FORAKER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Massa-
chusetts yield to the Senator from Ohio?

Mr. LODGE. Certainly.

Mr. FORAKER. If it will not interrupt the Senator from
Massachusetts, I call his attention in this connection to the
fact that the only provision made in the Hepburn bill under
which rates can be affected is a provision providing for the
reduction of rates or the fixing of a maximum rate, which is
generally regarded as a provision for reducing, because nobody
expects the Commission to make rates higher. So there could
not be any action taken by the Commission to relieve the people
of the great burden that the Senator from South Carolina has
so frequently referred to, except in the direction of reducing
rates and reducing revenues, and thereby bringing about the
result that the railroad men on the occasion mentioned were
complaining of.

Mr. LODGE. These coal rates are one special grievance
from which Mr. Prouty proposes to relieve New England,
anfl he makes it appear that rates on coal to New England are
higher than the coal rates either in Prussia or in Iowa. As-
suming that the rates he cites are correct, I call attention to
some testimony before the committee. Mr. H. §. Rand, presi-
dent of the Burlington Lumber Company, in a letter to the
Senate Committee on Interstate Commerce (pp. 3368 et seq.,
Report of Hearings), indicates that the Lowa coal rates are far
from satisfactory to people doing business in Iowa. He says,
on page 3371:

Owing to the above, the Iowa rates on coal to Burlington are so
high that our factories get their supply from Illinois.

He cites rates from Dunfermline, I1l., to Burlington, 88 miles,
85 cents per ton; from Peoria, Il]., 96 miles, 85 cents, and con-
trasts these with rates made by the Iowa commission from
Avery, Iowa, to Burlington, 93 miles, 97 cents, and from Oska-
loosa, Iowa, 105 miles, $1.01. In his testimony before the com-
poittee, on page 2194, Mr, Rand says:

The principal reason why we do not have more manufacturing in
Iowa is that it is more profitable to put your money into farming.
Another reason is the inelasticity of our Iowa distance tariff—

Exactly what happened, if he is right, in every country in
Europe where there are fixed Government rates— .
and another reason is that when you want outside people to come
in and go into manufacturing they always find this Iowa distance-

6647
27

tariff law, and they say: ‘If you are fools enough to make that kind of
a law we will not live with you.”

Mr. G. W. Trayer, engaged in coal mining in Illinois and Iowz,
gave some interesting testimony (pp. 2224 et seq.) on tthe effect
of Iowa rates on the coal business in that State. On page
2225 he said:

Instead of being manufactured at home with Iowa coal, Iowa corn
and live stock are mainly sent out of the State, where Iowa coal can
not naturally reach the manufacturer of them, or it is prevented in
part by the same rate disabilities which sent the corn and live stock
uway. Missouri and Kansas coal go into Omaha on as favorable:
terms and relatively more favorable terms than Iowa coal does, and
Missouri and Kansas coal go clear up to Sioux City on relatively more
favorable terms. I am not speaking of absolute rates; I am speaking
of relatively more favorable terms. ‘

Mr. Murray Carleton, on page 2519, testified :

In Iowa, where rates are made by a State commission, the inelastic
nature of the tariff, based only on distance, has driven practically
everything except agriculture and mercantile business out of the State.

He quotes from the Des Moines Daily Capital of February 4,
1902. to show that the Iowa law is retarding the development
of that State. Mr. E. T. Koch, traffic manager of T. M. Sin-
clair & Co., pork and beef packers at Cedar Rapids, Iowa (pp.
3520 et seq.), at the bottom of page 3323, said:

It is the railroads’ arrangement of rates outside the State that
wee it possible for the pork-packing industries within the State to.

Then Mr. Prouty took up the cotton-manufacturing industry
in New England, and intimated that New England was not
treated fairly by the railroads, and suggesting that if the Hep-
burn bill should be passed the Commission would readjust
the rates for the benefit of the cotton mills. The mills now
have the advantage of water rates for their raw material,
but their rates on finished goods are not so low relatively as
Mr. Prouty thinks they should be, and he intimates that he
would cut them to a level proportionately as far below first-
class rates as the rates from southern mills are below first-class
rates from southern points.

One of the points he made is that when they reduced rates
from Atlanta to Chicago they reduced them more than they did
the eastern rate, although by doing so the goods from Atlanta and
Massachusetts came into Chicago on an equality. In this new
propsition he would abandon considerations of distance, for the
distance from Atlanta to Chicago is 275 miles shorter than the
distance from New England. Notwithstanding this greater dis-
tance from the New England mills, he does not apparently be-
lieve that the southern roads should be permitted to make rates
enabling southern cotton goods to compete in Chicago on equal
terms with those of New England. They go in now on a parity,
and he would have his audience believe that the Commission
would interfere with the making of sucb rates as those on cotton
goods from Atlanta when they are to the disadvantage of New
England, but that when low rates are made to enable Now Eng-
land industries to compete on an equality in distant markets the
Commission would not disturb the adjustment. He refers, for
instance, to the rate on paper from Rumford Falls, Maine, to
Chicago. He said:

That strikes me as an exceptional rate, made undoubtedly to enable
the manufacturer at Rumford Falls to meet in the Chicago market the
manufacturer of Wisconsin and Minnesota. Similar special rates exist
in all parts of this country—

G647
28

I am quoting from Mr. Prouty—

There is nothing in this proposed legislation which would in the
slightest degree interfere with the maintenance of that rate or any
corresponding rate.

It is a rate so low that he felt bound to call attention to it,
but this statement as to the Rumford Falls rate can be reconciled
with what Mr. Prouty said about the cotton-goods rates only
on the assumption that his intimation that those rates would
be reduced was merely meant to please his audience, or that he
really believes—-which I can not imagine—that the Commission
would be influenced by sectional considerations and would inter-
fere with rate adjustments enabling the South to compete on an
equality with New England, but would not interfere with those
enabling New England to compete on an equality with Wiscon-
sin and Minnesota.

He also makes a suggestion in regard to boots and shoes, an
enormous interest in New England, and especially in Massa-
chusetts. It is hard to tell just what Mr. Prouty means in his
reference to boots and shoes. He says he has a complaint that
the classification is unjust. If he has, that is a matter which
the Commission can deal with under the present law. for the
United States court in Cincinnati, in the Proctor & Gamble case,
recently sustained an order of the Commission changing the
classification of soap in less than carload lots. If, then, there
is a grievance and a complaint about boots and shoes in New
England, as Mr. Prouty says there is, why does not his Com-
mission remedy it now?

I will now give some detailed comparisons with rates in New
England and Iowa in order to show how valueless comparisons
are which are made on isolated examples.

No one denies that the average rates in New England are
higher than in Iowa for the reasons I have already given as to
the grades, cost of service, ete. If, however, one was to make
comparisons, as Mr. Prouty does in his Boston speech, it is
possible to make a very specious argument, taking the follow-
ing samples of unusually low New England rates to show that
because of the inefficiency of the Iowa State commission rates
were very much higher than in New England. Eighty-five per
cent of the railroad business in Iowa is through business, only
15 per cent being local. Taking New England, however, as one
State about the size of Iowa, as Mr. Prouty did, it is a fact that
about 80 per cent of the revenue of the Boston and Maine sys-
tem would be local and only 20 per cent through traffic.

The following is a memorandum of low rates in force on the
Boston and Maine Railroad, and if they stood alone and were
used as Mr. Prouty used his examples, they would give an
impression the reverse of that which he was seeking to convey :

Rate on crush stone, any distance over 100 miles and not over 150
miles, 75 cents per gross ton, carloads of 20 gross tons or more.

Rate on manure, any distance over 190 miles and not over 200 miles,
7% cents per 100 pounds, carloads of 30,000 pounds or more.

Rate on slab wood and edgings from Hewpart _Vt., to Boston, Mass.,
$18.24 for not exceeding 30,000 pounds. The distance from Newport,
Vt., to Boston, Mass., is 250 miles.

Rate on iron pyrites, Charlemont, Mass., to Boston, Mass., 874 cents
per gross ton of 2,240 pounds, carloads of 20 gross tons or more;
‘distance, Charlemont, Mass., to Boston, 127 miles.

Rate on sand-struck brick, Mechanicsville, N. Y., to Boston, Mass.,
$1.80 per thousand, weighing between 4.500 and 5.000 pounds per
thousand brick; distance, Mechanicsville, N. Y., to Boston, 189 miles.

6647
29

Rate on import clay, Boston, Mass., to Mechanicsville, N. Y., car-

10008 ot 30,000 pounds or more, 10 cents per 100 pounds, a distance of
miles.

Class rates from Rockland, Me., to Pittsburg, Pa., a distance of '955
miles are:

a 4.5

6
50 um i W cents, and from Brunswick, Me., to Pala-

tine Bridge, N. Y., via Rotterdam Junction and the West Shore Railroad,
class naneS ape ‘ 4 r

6
3 @ 6 In WT iB cents for a distance of 378 miles.

Slew
Ble

It is hardly fair to draw any comparison between the rates
on agricultural products transported in New England with the
rates charged on similar commodities shipped within the State
limits of Iowa. On the main lines of the railroads in Iowa
the freight trains will haul from 2,000 to 2,800 tons gross in one
train, whereas on the different divisions of the Boston and
Maine Railroad they can not haul to a train a greater average
than 1,000 tons gross, excepting on the southern division, from
Concord, N. H., to Boston, where they haul about 1,800 tons
gross. Let me take now some of Mr. Prouty’s examples and
examine them from the New England standpoint.

The rate on potatoes, carloads, from Newport, Vt., to Boston
is 17 cents per 100 pounds—not 19 cents, as stated by Mr. Prouty.
This 17-cent rate extends as far north as Sherbrooke, Province
of Quebec, a distance of 273 miles from Boston, and to Swanton,
Vt., a distance of 286 miles from Boston. The rate from points
in northern Aroostook County, Me., to Boston is 21 cents per 100
pounds, as stated by Mr. Prouty, but there is in force a rate
of 26 eents per 100 pounds, all rail, to Pier 50, East River, New
York, the distance being 636 miles. Rate of 293 cents per 100
pounds, quoted by Mr. Prouty, applies to Thirty-third street,
New York City, via Troy, N. ¥:, and the New York Central
Railroad. The distance is 736 miles, and the higher rate is
charged on account of the increased distance and the added
terminal charges of the delivering railroad. The supply of po-
tatoes for the Boston market comes principally from Aroostook
County, Me., the shipments from Vermont being limited. Con-
siderable quantities are shipped from points in New York. The
rate from a point in New York 250 miles from Boston, the same
distance as from Newport to Boston, is 17 cents per 100 pounds,
the same as the Newport rate, but a rate of 183 cents per 100
pounds extends across the State of New York as far as Buffalo,
a distance of nearly 500 miles. The rate from Ogdensburg,
N. Y., to Boston, not to be exceeded from intermediate stations
on the Rutland Railroad, a distance of 393 miles, is 17 ceuts
per 100 pounds. y

The rate on hay—carloads—Newport, Vt., to Boston, is 17
cents per 100 pounds, as stated by Mr. Prouty. This same rate
extends to Sherbrooke, Province of Quebec, and Swanton, Vt.,
and an 18-cent rate extends beyond Sherbrooke, as far as Levis,
Province of Quebec, a distance of 416 miles from Boston.. An
18-cent rate also extends as far west as Ogdensburg, N. Y., on
the Rutland Railroad, 393 miles, and an 183-cent rate as far
west as Buffalo, about 500 miles. Very little hay is shipped
from Newport and vicinity, it being a dairy country, and the
hay is principally consumed on the farms. Last year there
were shipped, all told, out of Newport, ten carloads of hay.

6647
30

In establishing rates on such commodities as hay and pota-
toes, it is necessary, on account of commercial conditions, to
have substantially the same rate cover a large area of terri-
tory, so that it would not be fair to cite a rate on hay and pota-
toes from a point like Newport, Vt., 250 miles from Boston,
without considering the rates made from the entire territory
from which the great bulk of the commodities is shipped. Mr.
Prouty has explained the principle involved, in his reference to
the milk case, in which he stated that beyond a distance of 190
miles the carriers might charge the same rate, no matter what
the distance was.

It is true, as stated by Mr. Prouty, that the rate on lumber from
Newport, Vt., to Hartford, Conn., a distance of 256 miles, is 15
cents per 100 pounds, but this same rate extends to Hoboken,
N. J., via Rotterdam Junction, N. Y., and the West Shore Rail-
road, a distance of 450 miles; while a carload of lumber can be
shipped from Newport to Pittsburg, Pa., a distance of 800 miles,
at a rate of 17 cents per 100 pounds.

Mr. Prouty stated that the carload rate on butter, Newport
to Boston, was 46 cents per 100 pounds. No one ever shipped
a carload of butter from Newport to Boston to any one con-
signee. Butter is shipped from several different shippers to
several different parties, in less than carload lots, and the rate
is 45 cents per 100 pounds. A special butter train is run
weekly throughout the year. The butter is picked up in small
lots at all points along the line of the Passumpsic division.
reaching Boston ready for early morning delivery the follow-
ing day. In the summer time refrigerator cars are furnished,
and every possible attention is given to this important traffic.
Considering the service performed ‘and the fact that the ship-
ments are never made in carload lots, the 45-cent rate appears
to be a reasonable one.

Mr. Prouty also said:

It is possible that rates can be found which are lower for corre-
sponding distances in New England than they are in either Iowa or
Prussia. I know of none.

One of the great industries of Vermont is the granite business,
considerable quantities of which are shipped from Mr. Prouty’s
home town—Newport, Vt. There is a rate in force on building
stone, carloads, Newport to Albany, N. Y., of $1.26 per ton, di-
vided among two railroads, and netting the Boston and Maine
Railroad 96 cents per ton for its haul of 278 miles, from New-
port to Troy, N. Y. This pays the Boston and Maine Railroad a
rate of 3 mills per ton per mile. There is also a rate of 18 cents
per 100 pounds on building stone, carloads, Newport to Chicago,
Ill., via Sherbrooke, Province of Quebec, and Grand Trunk Rail-
way, a distance of 981 miles, 3.67 mills per ton per mile; also a
rate of 6 cents per 100 pounds on paving and curbing stone, car-
loads, Newport to Troy, N. Y., a distance of 278 miles, 4 mills
per ton per mile; also a rate of 15 cents per 100 pounds on
building stone, carloads, Newport to Pittsburg, Pa., a distance
of 800 miles, 3.71 mills per ton per mile. Perhaps rates lower
than three and four-tenths of a cent per ton per mile can be
found in Iowa and Germany, but they certainly do not show
themselves at once to the investigator in either case.

Now, let us look at Mr. Prouty’s argument from the Iowa
side so far as I have been able to get the figures. The rate on

6647
31

potatoes, let me say in passing. for 250 miles in Iowa is 13.05
cents instead of 124 cents, as stated by Mr. Prouty. It is not
fair, however, to draw any comparisons between rates on agri-
cultural products applicable in the mountainous and rough New
England States, where the cost of building railroads and oper-
ating railroads is very many times greater than in Iowa, and
whose principal industry is manufacturing, with the rates ap-
plicable in the flat prairie State of Iowa, where on the main
lines of our railroads freight trains of from 2,000 to 2.800 tons
gross are hauled in one train, where there is practically no in-
dustry except agriculture, and where the entire traffic origina-
ting in the State is composed of farm products of one kind or
another. It would be just as fair to compare the average yield
of farm products per acre of the total acreage of the State of
Vermont with the average yield per acre in Iowa.

On potatoes and hay the comparison seems to be very unfa-
vorable to New England, but probably not more so than the
relative tonnage and importance of the agricultural products
to the entire tonnage moved in Iowa and in the New England
States or the tonnage of these commodities raised in Iowa and
in New England. Hay is one of the most important crops of
that State. The principal market for Iowa hay is in the far
South and East, where the mileage is very long, and the rates
to these markets have to be on a very low basis to permit the
marketing of hay at all. It is probable that the low rates made
for long mileages over which hay is actually moved largely
influenced the Commission in the low rates which they made on
State business and on which very little hay is shipped, each
section of Iowa producing all the hay required for local con-
sumption.

Butter rates in Iowa are very low, as any butter moved in
this State in carloads is not for consumption, but is for concen-
tration, to be reshipped later to eastern cities, principally New
York, Philadelphia, and Baltimore.

On lumber carloads the New England rates compare very
favorably with Iowa rates, taking into consideration the cost
of construction and cost of operation of New England railroads.

Mr. Prouty states that there is now very little claim on the
part of the Iowa railroads that these Iowa rates are too low.
Yet the railroads refuse to accept on interstate business—which
is naturally long-haul business which justifies the railroads
in handling it at a lower rate per ton per mile than should in
all fairness be charged on short-haul business—as their fair pro-
portion, the rates fixed by the Commissioners, and in many in-
stances their proportion of such interstate rates on the usually
accepted bases of divisions gives them higher earnings than
would the Commissioners’ rates. This is recognized by connect-
ing railroads not reaching Iowa and who do not demand of the
Iowa lines that they accept for their earnings the State rates.
nor do the railroads permit of the application on interstate traf-
fic of the combination of rates on stations situated on the Iowa
State line where such combinations would make a lower through
rate on interstate traffic than that authorized in the regularly
published interstate tariffs. The reason that the low rates of
Iowa have not seriously embarrassed the railroads is that only
a very small percentage of the traffic handled in this State is
local within the State. About 85 per cent of the traffic is said

6647
382

to be interstate and consequently not affected by the Commis-
sioners’ rates. Furthermore and most important, these low rates
have prevented the railroads from making any joint rates locally
in the State of Iowa, on the ground that the Commissioners’
rates are so unreasonably low that no railroad can afford to
accept any less than these rates in the forming of joint through
rates between points on two different railroads, and a rate from
a point on one railroad to a point on another railroad is made by
adding the rates to and from the junction point of the two lines,
there being no joint rates or through rates applicable over the
continuous mileage of two different railroads. :

Let us apply the Iowa conditions to the less than car-
load shipments of copper wire, dynamos, etc., referred to by
Mr. Prouty, and the rates would be as follows:

On copper wire, less than a carload, from Providence, R. L., of
which Phillipsdale is practically a suburb, to Bradford, Vt.,
_the rate would be on the Iowa basis as just described :

 

Miles. | Cents.

 

 

Providence to Boston, via the N. Y..N. H. & H.
Boston to Bradford, Vt

Through Wiswosuavasd cusres otxtieapesteseek cand Genes eentd

45 16.49

 

 

 

Instead of 32.16 cents, as stated by Mr. Prouty.
On dynamos and transformers, less than carload, from Pitts-
field, Mass., to Bradford, Vt., the rate would be:

 

Miles. | Cents.

 

Pittsfield, Mass., to Springfield, Mass., via the Boston and

 

Albanyess sccscesedscicesecaciovcsselensce's oles cseesisieeseraseneos 52 20.4
Springfield, Mass., to Bradford, Vt.-.......--------.------------ 247 48
Through eadtbskeeesuaacnexs oor sasedee see hess ads sdeeeen ee cee 299 68, 4

 

 

 

Instead of 54.4 cents, as stated by Mr. Prouty.

Carrying this principle still further, the rates from Newport,
Vt., to New York, via the most direct lines, would be made as
follows on the Iowa basis:

POTATOES (CARLOADS).

 

Miles. | Cents.

 

 

Newport to Springfield, Mass., via Boston and Maine.__.___.. B24 16.5
Springfield to New York, via New York, New Haven and

PartlOn a de wyocsecttonen seated canbe cen stadees esate cass 136 8.8

TREOUGE: 22 ccs cx caaacucwacununsiwavcs tweNWaxcencedecmaunen 460 25.3

 

 

 

Newport to: Springfield)... osc ocss sone nads se cesesenescege 324] 14
SPUINEUSIA 10 NOW VOR nc. cae ecetsnnctes na ccm oxcemeeeneescesa 136 7.36
MhrOUs My cet etetbsste weet octatets ete seed eekcerae aon: 460 21.36

 

 

 

6647
33

BUTTER (CARLOADS).

 

 

 

 

 

Newport to Springheld cc cc.csctncwasemcesecacdsouusieaaatansnce B24 31.5
Springfield to Now Yorke ans: sccscccswsccaccetesesesus sean ea sa5 136 | 18.8
TP A sic ctelen del soer danse Sosa Mauna bio canes oeewden! 460 | 50.3
LU MBER (CARLOADS).
|
Newport to Springfield .-._....-......----.-------- ee eee eee 324 11.18
Springfield to New ¥ orks 2¢ ec ciicradianses Geos = ceceitee sn erences 136 7.18
TRO tp heise A cit ole saad stone ad lene er nema 460 18.31

 

In the opposite direction :
FERTILIZER (CARLOADS).

 

Miles. | Cents.

 

 

 

 

 

 

 

 

New York to egnne a 6.24

Springfield to Newport 12.50

EDRTOUP DB: 22 seneetp ug parece Mase at Meee ae Seneca set Saeeseeekes 18.74
SUGAR (CARLOADS).

New York to Springfield........-----.-.--------...--------- oe 136 10.72

Springfield to Newport -_.-.-.------------------ 2-2-2 --- eee eee ee 824 21.50

PRU GU AY cuicccincmude puis che sinnsaasecsakausnmaananmenmennnn’ | 460 32. 22

 

 

I wish now to say a single word in regard to the comparison
with Prussia. I have seen inuch discussion and have read a
number of answers to Mr. Meyer's book. and I have seen extracts
from the report of the Prussian commissioners to which the
Senator from South Carolina [Mr. Tir~Man] referred when 1
spoke before, and I have not yet seen anything which meets the
main point that I then made. They upset Mr. Meyer’s proposi-
tion about milk rates into Berlin, a point to which I did not
allude and which seemed to me of no great moment, but they
do not touch the main argument which I ventured to offer
when I discussed that question before.

In making any comparison with a European country let me
say at the outset we overlook too much the fact that we are
dealing with a huge system in this country, a system of 212,000
miles—more than all Europe—while all these systems of individ-
ual countries in Europe are little systems easily managed in
comparison with ours. This fact ought always to be kept
steadily in mind in this discussion of comparative rates.

I know of no publication in this country giving details
as to Prussian rates by which Mr. Prouty’s figures can be
checked. I understand that the Commission sent a man abroad
last summer and it is proyable that these figures were obtained
by him. In any event Mr. Prouty’s use of the figures is such
as to create the impression that Prussian rates are lower than
those in New England or in Iowa. ‘They seem to be so in the
specific cases which he cites. Yet the fact remains that the aver-
age rate per ton per mile in Prussia is far above the average
rate in the United States. Mr. Prouty does not think that com-

6647——_3
384

parison should be made on the ton-mile basis, but that basis
seems to me to be the only one on which intelligent comparisons
of average rates can be made. It is undoubtedly true that the
average in America is brought down by the large volume of
long-distance low-class traffic. Mr. Prouty would have us be-
lieve that the rates in Prussia are not similarly reduced by low-
class traffic beeause that traffic in Prussia moves by water. I
am satisfied from my own investigations that the reason is
just the other way and that the low-class traffic in Germany
goes by water because the railroad rates are high.

Mr. Prouty says that the fact that there are no express com-
panies in Prussia has the effect of increasing the average ton-
mile rate, as small packages are handled by rail on express
time and at higher rates than are charged for ordinary service.
He says nothing of the fact that the German Government
operates a parcels-post service, carrying packages up to 110
pounds in weight (50 kilos) (see Pratt’s Railways and their
Rates), and that the great bulk of the business done by express
companies in the United States is done by the parcels post in
Germany, which is excluded from computation because it is
government postal business, thus lowering the average returned
rate. Moreover, if it is fair to direct attention to the fact
that the average Prussian rate is increased by the higher
charges for fast freight, it is equally fair to direct attention to
the way in which the average rate in the United States is
increased by fast-freight service in this country, such as the
fruit and vegetable trains, that are moved on schedules faster
than those of many passenger trains and on which the rate per ton
per mile is far in excess of the average for the United States.
Taking these things into consideration, the comparison based
on rates per ton-mile is not unjust to Germany. As a matter of
fact, German rates ought to be lower than those in the United
States. Germany as a whole is a much more densely populated
country and ought to have a much greater density of railroad
traffic, and density of traffic is the most powerful factor in rate
reduction. Another reason why rates should be lower in Ger-
many ‘than in the United States is that the wages of railway
employees in Germany are much lower. The pay of employees
on the railways of the United States makes up about two-thirds
of the total cost of operation. On page 3126 of the Senate
hearings Mr. Slason Thompson gives an unsatisfactory table of
comparison of railway wages in the United States and other
countries. The figures he gives for the United States are not
an average for all employees, but are the average for ‘“ other
trackmen,” as given by the statistician of the Interstate Com-
merce Commission for 1903. This is the lowest-paid class of
American railway labor, and the average for 1903 was $1.31.
He gives the average German wage at 57 cents per day, but does
not say what class of labor it represents. If Mr. Thompson’s
figures for Germany represent the lowest-paid class in that
country, and the other classes are paid in about the same pro-
portion, it would make the daily wage of a German railway
engineer about $1.75 per day, against an average of $4.01 in
the United States in 1903 and $4.10 in 1904. That the wages of
a German engineer are probably below $1.75 would seem to be
indicated by the fact that according to some figures published
by the Bureau of Manufactures in the Department of Commerce

6647
35

and Labor, about the 1st of last September, the average wage
of a locomotive engineer in England is $1.62 per day, and that
of an engineer in Belgium $1.01. Mr. Thompson gave these
same figures on page 3127 of the Senate committee hearings.
The Fifteenth Annual Report of the Commissioner of Labor on
Wages in Commercial Countries has some better data as to the
daily wages of railway employees in Germany in 1898. The fig-
ures given for locomotive engineers range from $1.19 to $1.83
per day; for locomotive firemen, from 78 cents to $1.43, and for
conductors, from 51 cents to $1.56 per day. The average wages
of these same classes of employees in the United States in 1898
were: Locomotive engineers, $3.72 per day; firemen, $2.09, and
conductors, $3.18. In 1904, the latest year for which statistics
are published, these wages in the United States were: Loco-
motive engineers, $4.10; firemen, $2.35, and conductors, $3.50.
These figures speak for themselves and require no comment.

Mr. Prouty further says that German passenger rates are lower
than ours. How he reaches such a conclusion I can not imagine.
I have traveled in Germany a good deal. I have made some in-
vestigations in these matters there out of curiosity. I did so
last summer as to their passenger rates. Their passenger rates,
as I found them, are much higher than ours. If Mr. Prouty
reaches his conclusion by taking their third-class rate, which in-
volves a car that no American would travel in, I can imagine
that he might probably reduce their rates of passengers to a
low rate; but even then I do not see how he can get it down
lower than our passenger rates on the average, because ours are
the lowest in the world, and our cars are incomparably better
than the best German cars.

I have looked at Rolfe’s Satchel Guide to Europe, 1905, which,
according to the title page, is revised annually, and I find some
German rates, with distances stated in miles. From Leipzig to
Berlin, 101 miles, the rates are: Express, 15.40 and 11.80
marks; ordinary, 13.20, 9.90, and 7.20 marks. Counting the
value of a mark at 23.8 cents, would make the first-class rate
on express trains $3.6652, or about 3.66 cents per mile; second-
class express, $2.8084, or about 2.80 cents per mile; first class
on ordinary trains, $3.1416, or about 3.14 cents per mile; second
class on ordinary trains, $2.3562, or about 2.35 cents per mile,
and third class on ordinary trains, $1.7136, or about 1.7) cents
per mile. For the year ended June 30, 1904, the average pas-
senger rate in the United States was 2.006 cents per mile, which
is far below any service of equal goodness anywhere in Europe.
This rate has increased very slightly in recent years, owing to the
effect of the trolley lines in taking off of the steam railways a
considerable proportion of their short-distance traffic carried on
commutation rates. The effect of the voluntary and compulsory
reductions in passenger rates being made during the current
year will, of course, have a decided effect on the average rate.
You will note that in these Leipzig-Berlin rates not only the
first-class, but the second-class rates as well, are above the aver-
age in the United States. As a sample of short-distance Ger-
man rates, I find that from Berlin to Potsdam, 16 miles, with a
first-class rate of 2.10; second class, 1.60, and third class, 1.05
marks ; equivalent, respectively, to 49.98 cents, 38.08 cents, and
24.99 cents. These rates per mile would be about 3.12 cents,
2.38 cents, and 1.56 cents. Other rates given in this guide book
would figure out abopt the same.

6647
36

Mr. Slason Thompson, on page 3126 of the Senate hearings,
under the head of foreign passenger rates, says:

Germany.—Fast trains: First class, 3.45 cents; second, 2.55; third,
1.79. Ordinary trains: First, 3.06 cents; second, 2.3; third,.1.53, and
fourth, 0.77 (not allowed on fast trains) ; average receipts per passen-
ger mile about 1.07 cents, due to 90 per cent of travel being third and
fourth class on cars little better than American box cars.

I can not understand how Mr. Prouty makes the average
Prussian passenger rate 9 mills per mile, unless he includes all
classes and divides the total receipts by the number of passen-
gers carried 1 mile, including all free passengers, which would
include the large number of soldiers transported every year.

Mr. SCOTT. Will the Senator from Massachusetts allow me
a moment?

Mr. LODGE. With pleasure.

Mr. SCOTT. As to the accommodations between Leipzig and
Berlin, the rails and the cars that are run on them are perhaps
the best they have in Germany. Is not that true?

Mr. LODGE. Yes; and that is the reason why I took it for
comparison.

Now, Mr. President, Mr. Prouty also took up the case of port
differentials. The Senator from Ohio in that very great agru-
ment which he made the other day, in discussing the question
of port differentials, pointed out that by their action on port
differentials the Commission had the power to close the port
of Boston to-morrow if they so pleased. They could indeed close
every port in New England, and our seaboard is the one great
natural gift that we have. I am not going to argue this point
elaborately, for I have already taken much more time than I
ought to have taken, and I will try to dispose of it in a few
sentences.

Mr. Prouty’s reference to port differentials raises the ques-
tion of what might be expected if the Commission should under-
take to fix export rates to the several ports under the Hepburn
pill. Their action in making the recent arbitral award was
entirely extra-official, and their award has no more force than
that given it by the agreement of the commercial bodies to
submit the controversy to arbitration and abide by the decision.
If, however, they should undertake to fix port rates under the
Hepburn bill, their action would be official, and the question
would be brought up whether they would not be governed
by the clause of the Constitution prohibiting the giving of any
preference to the ports of one State over those of another by
any regulation of commerce or revenue. If the courts should
hold that the power to fix port rates was subject to this limita-
tion, it is difficult to see how export rates to the ports could be
made on any but a mileage basis. The short distance from
Chicago to Boston is 1,001 miles; to New York, 912 miles; to
Philadelphia, 822 miles, and to Baltimore, 801 miles. It is
apparent, therefore, that mileage rates on export grain would
not only give to Philadelphia and Baltimore increased advan-
tages on the inland rates as compared with Boston, but would
give to New York an advantage over Boston, while at present
Boston and New York have equal rates.

As an example of the manner in which the Commission
now deals with this vital question let me cite the follow-
ing case: Export grain is carried from the West by lake
vessels both to Buffalo, N. Y., and to Fairport, Ohio. Thence

6647 7
37

the grain is carried by rail from Buffalo to Boston over the
New York Central and Boston and Maine lines, and from
Fairport to Baltimore over the Baltimore and Ohio Railroad.
The distance from Fairport to Baltimore and from Buffalo to
Boston happens to be the same—480 miles. There was abso-
lutely no evidence introduced to show that there was any dif-
ference in the railroad cost of hauling grain from Fairport to
Baltimore as compared with Buffalo to Boston, yet the Com-
mission ruled that all grain carried from Buffalo to Boston must
take a rate of one-sixth of a cent per bushel higher on oats
and barley and three-tenths of a cent per bushel higher on wheat,
corn, and rye than between Fairport and Baltimore.

But I ask leave of the Senate to print some further facts in
regard to the port differentials which I have here, an extract
from one of the Boston newspapers.

The paper is as follows:

ATTACKS FACTS CITED BY PROUTY—‘‘ MERCHANT’’ DOUBTS THE INTER-
STATE COMMISSIONER’S SINCERITY IN RAISING THE CASE OF IOWA
FOR COMPARISON.

To the Editor of The Herald:

While to the casual reader the address delivered by Mr. Prouty, the

Interstate Commerce Commissioner, before the State Board of Trade
yesterday may seem a powerful argument in favor of greater control
on the part of the Interstate Commerce Commission of railroad rates,
yet a critical examination will show the absurdity of some of the
statements put forth by Mr. Prouty.
_, He evidently desires the people of Massachusetts to believe that
if increased power is given to the Interstate Commerce Commission
rates in Massachusetts generally will be lowered, the implication
being that railroad rates are now higher here than they should be.
He cites the case of Iowa, and compares it with Massachusetts and
other New England States, claiming that the rates in Iowa are lower
than in Massachusetts because Iowa has a railroad commission having
powers similar to those now desired by the Interstate Commerce Com-
mission. It is almost impossible to credit Mr. Prouty with sincerity
in advancing such an argument.

In the first place, the advisory decisions of the Massachusetts rail-
road commission are as effective as the decrees of the Iowa State
commission, or any other State commission.

Secoadly, Iowa can not properly be compared with Massachusetts.
Iowa is an agricultural State, relatively speaking, it has very few
manufactures. Its great products are corn, cattle, and hogs. To
compare its fertile prairies with the rocky soil of New England and
claim that rates should be as low in Massachusetts, with its unproduc-
tive soil, heavy grades, expensive tunnels, and high cost of fuel, is
simply disingenuous.

The railroad mileage in Iowa is over 9,000 miles: in Massachusetts,
2,000. Iowa has 41 miles of railroad to every 10,000 inhabitants ;
Massachusetts has only 7 miles. On the other hand, the Massachu-
setts railroads are taxed $1,400 per mile of line, while the Iowa rail-
roads are taxed only $200 per mile. Iowa has an ample supply of
domestic coal; Mass:chusetts has none.

If Mr. Prouty will read the testimony recently taken before the
Senate committee at Washington he will find that witness after wit-
ness testified that rates in the State of Iowa were inelastic, owing to
the decisions of the State commission; that its railroads universally
charged the full maximum rates, and that as a result Iowa has no
large cities, its manufacturers have not increased, it has no large
jobbing houses, and seems destined to remain forever an agricultural
State—practically because of the fact that its local railroad charges
are fixed by the commission.

Furthermore, if the rates in Massachusetts and Iowa were to de-
pend solely upon cost of railroad transportation, it is clear that rates
much higher than those of Iowa would be justified on the ground of
extra expense.

In speaking of the recent controversy as to port differentials be-
tween the Atlantic seaports, Mr. Prouty again misstates the position
of Boston. He said:

“Boston claimed that we should take away the entire advantage of

6647
38

Baltimore upon the land and should compel it to bear the entire bur-
den of its disadvantage upon the ocean.”

The above statement is not true. Boston claimed that the through
rates from the West to Europe should be the same, whether the mer-
chandise went on board the steamer at Boston, New York, Philadel-
phia, or Baltimore. The Commission decided that for years the
through rates by way of Baltimore and Philadelphia had been lower
than through Boston, and that Philadelphia and Baltimore had a
right to a lower through rate. Boston claimed, furthermore, that if
the Commission decided to give Baltimore and Philadelphia a differen-
tial against New York, logic should compel it to give the same differ-
ential to Boston, which claim the Commission refused to concede.

Boston showed conclusively that steamship rates were little, if any,
higher at the southern ports than at Boston; that the cost of han-
dling cargo was much higher at Boston than at the southern ports,
and that if there were any steamship advantages at Boston over the
southern ports they were more than compensated by the shorter land
haul to said latter ports.

The Commission decided, largely on the ground of distance, that the
southern roads should have lower railroad rates on this export traffic
than Boston, entirely ignoring the fact that_on the through distance
from the West, for example, to Liverpool Boston is over 200 miles
shorter, at least a day’s sailing on an average freight steamer.

The remarks by Mr. Prouty show an amount of misinformation al-
most appalling.

MERCHANT.

Mr. LODGE. Also, Mr. President, to show how much this
law involves and why it means so much to our people, I wish
to introduce a few statistics in regard to the port of Boston,
which is to be put absolutely at the mercy of this Interstate
Commerce Commission, and then ask if it is unreasonable that
we should desire provisions which would protect us, in common
with the rest of this country, so far as possible against injudi-
cious or hasty action, and let it be remembered that what we
ask for ourselves is just as important to every other corner in
the country and every other State, great or small.

For the fiscal year ending June 30, 1905, Boston was the sec-
ond port in the country, with aggregate receipts of $24,369,-
384.72. For the seven months ending February 1, 1906, Boston
was again the second port in the country, with aggregate re-
ceipts of $16,236.365.76. I will ask leave to print these and
some additional figures in my speech.

The VICE-PRESIDENT. Without objection, leave will be
granted.

The figures referred to are as follows:

[Extracts from annual report of the Secretary of the Treasury.]
Fiscal year ended June 30, 1905.

 

 

 
   
 

‘ Cost to
Duties and Aggregate

Name of port. tonnage tax. receipts. a
Baltimore ..........-.----.-22-220220---- 3, 154, 535.50 $3. 314,349.41 | $0,082
Boston ....... g , 869, 384. 72 1518, 214, 28 033
Chicago ....... 7, 950, 855. 35 7, 964, 313. 73 031
New Orleans - -| 5,461,144. 72 5, 491, 270. 85 052
New York .__. 172,580, 741.04 | 174,574, 127.16 021

Philadelphia_. -| 18,907, 963.55 | 19,005, 414.00 a
San Francisco --_........-.-22..0222----- , 406, 535. 09 7, 462, 452. 26 065,

 

 

 

 

Fiscal year ending July 1, 1906.
For seven months ending February 1, 1906:

 

 

 

 

Rs £15 280 808 18
ae SE EES
New Orleans_---_..____--__-__._---.--_------- 3) 414; 056. 99
San Francisco 4, 371, 487. 31

 

6647
39

Mr. LODGE. Mr. President, it is within the power of those
who administer this law, it is within the power of any Execu-
tive who appoints these Commissioners, and of the Commission
itself, to make or unmake the fortunes of any portion of the
country.

Mr. SCOTT. Mr. President, will the Senator allow me to
ask him a question?

The VICE-PRESIDENT. Does the Senator from Massachu-
setts yield to the Senator from West Virginia?

Mr. LODGE. Certainly. :

Mr. SCOTT. If the Commission made a rate per ton per
mile, would it not, in the Senator’s judgment, ruin the coal in-
terests of my own State of West Virginia?

Mr. LODGE. Certainly ; beyond doubt.

Every State is vulnerable; but there is no part of the country
that is so vulnerable as New England, New York, and New
Jersey. New England has her seaboard, with some forests in
Maine, and a few granite quarries, and then you come pretty
much to an end of her economic possessions which can not be
taken from her. New York has her marvelous port, which noth-
ing can take from her, and she has her highway to the Lakes ;
but we in the East have no mines, we have no indefinite
tracts of fertile soil, we have no coal, and we have no iron.
We must go to the States of the South to get our cotton; we
must go to the Middle States to get our iron and our coal;
we must go to the West to get our leather and our food stuffs;
we must bring into New England everything that we manu-
facture, and our manufactures constitute the wealth of those
six States.

Mr. FORAKER. I should like to ask the Senator whether
or not he ever made a calculation to ascertain how much cot-
ton he would get for the cotton mills of New England if the
rates were fixed upon a mileage basis or anything approximat-
ing that? .

Mr. LODGE. Why, Mr. President, if rates were fixed upon a
mileage basis, every manufacturing industry in New England
would go out of existence; it would turn it all into a desert.
If you should, in addition, abolish differentials, you would send
the entire exports of the country to New York chiefly and, in a
smaller degree, Boston; you would have in New England one
great city, Boston, and behind it nothing. We have now a uni-
form rate stretching—I take this as an illustration, of course
it would go further, but I take simply the New England ter-
ritory—we have a uniform rate from North Adams, a town on
the western border of my State, to Waterville in Maine. The
whole intervening territory between, north and south of that line
and 300 miles in width, is filled with industries giving life and
support to thousands of human beings. But force upon them a
inileage rate, fix a distance rate, and you drive every industry
back to the North Adams line.

Mr. NELSON. Will the Senator yield to me for a question?

The VICE-PRESIDENT. Does the Senator from Massachu-
setts yield to the Senator from Minnesota?

Mr. LODGE. Certainly.

Mr. NELSON. Is there any proposition in this bill to make
a distance mileage rate?

Mr. LODGE. No, Mr. President; none absolutely requiring a
distance rate.

6647
40

Mr. NELSON. Then what is the use of discussing it?

Mr. LODGE. Mr. President, I can discuss this subject in any
manner I feel inclined to; and one way of discussing it is to
point out what an enormous stake my section of the country and
your section of the country, Mr. President, have in it. I am
trying now to show the enormous possibilities for evil as well
as for good which are contained in this bill. I want this legis-
lation, and am just as anxious for it as the Senator from Min-
nesota. There is no part of the country which needs proper
railroad regulation and supervision more than New England,
and there is none which needs to have that legislation better
guarded than New England, New York, and New Jersey.

Mr. FORAKER. I should like to ask the Senator, or any
Senator who can give the information, whether or not the
Interstate Commerce Commission, when it has undertaken to
fix rates, has ever undertaken to fix rates except either upon
the mileage basis or what approximated to a mileage basis.
Did they ever do it, or is it possible to do it?

Mr. PERKINS. I should like to ask the Senator from Massa-
chusetts what, in his opinion, would be the effect of a mileage
rate applied to the citrus and other fruits of California?

Mr. LODGE. I think the result will be that you will have to
sell them all in the Philippines. [Laughter.]

Mr. FORAKER. If the Senator from Massachusetts [Mr.
Lopce] will allow me, I will give the Senator from California
[Mr. Perkins] a bit of information on that point. I am in re-
ceipt of a letter from Milford, Del., making bitter complaint
that the citrus-fruit growers of California are allowed the same
rates to New York as they are charged in Delaware. [Laugh-
ter.]

Mr. LODGE. Mr. President, my point is not to charge any-
thing against the Interstate Commerce Commission. I am try-
ing to argue simply the importance of having a commission
worthy to undertake this work and, further, the necessity of
guarding it by a proper access to the courts, but this speech
about New England was made by an Interstate Commerce Com-
missioner in my own State and my own city, and I wish to
reply to it. I wish to show why we are so very anxious to
have this bill, when it passes, a safe as well as an effective bill.

I was describing when I was interrupted the conditions of
New England, her natural endowments, and those of New York
and New Jersey, for they are practically in the same class, in
order to point out that we were peculiarly vulnerable, because
our prosperity rests upon our experience, our traditions, our in-
vested capital, and on our organization of workingmen and of in-
dustry. With unjust treatment all these conditions can be easily
broken down and disappear.

In order to demonstrate what I have just said I desire now to
eall attention to some of the interests of New England and to
show how dependent we are upon railroad rates. I saw it
stated the other day in some newspaper that the New England
Senators were dominated by the special interests of New Eng-
land, by the manufacturing and the railroad interests. Why,
Mr. President, in the manufacturing industries of my State alone
there are, according to the census of 1900, 500,000 people en-
gaged. To-day in the railroads of the State, little State as it is,
there are 60,156 people engaged. In other words, there are from

6647
41

a million and a half to two millions of the population of Mas-
sachusetts absolutely dependent on the well-being of the indus-
tries and the railroads of the State, and if I am not to represent
the interests of those people, whose interests am I sent here to
represent? I may be very easily mistaken in my view of this
bill, but certainly the only influence which guides me is my de-
sire to protect and guard the interests which give my State life
and prosperity and which furnish income and employment to the
people who live within its borders. That is the only motive that
influences any Senator from New England or from any State in
the Union.

Mr. President, I now wish to call attention very briefly to a
few figures which I have put down here simply to show how
important this matter of railroad rates is to us. Mr. Prouty
thinks we are not fairly treated now. That may or may not be
the case, but what we want is that the Government regulations
shall be guarded and shall be safe.

The area of Massachusetts is 8,040 square miles. Her popu-
lation to-day is 3.003.680, with a density of population of 348.9
to the square mile. The gross value of her agricultural prod-

ucts is $42,208,274, or $15 per capita. The gross value of her
manufactured products is $1,035,198,989, or $369 per capita.
Her agricultural and manufactured products together amount
to $384 per capita. :

Let me quote at this point the following extract from the
inaugural message of Governor Guild, of Massachusetts :

Of all the States and Territories on this continent only four contain

a smaller area. Because of geographical limitation, as well as from
a notable lack of mineral deposits, forests, and rich arable soil, a
slow rate of gain in material prosperity might logically be expected of
Massachusetts in comparison with many States possessing greater
natural advantages. Yet, on the contrary, at the last taking of our
national census it was found that Massachusetts, fifth from the foot
in area, is seventh from the top in population, fifth from the top
in the annual value of her manufactures, and third from the top in
the annual amount paid in wages. Measured by assessed valuation of
the property in her borders, Massachusetts is exceeded by but two
States. Fifth from the foot in area, Massachusetts is third from the
top in wealth.
* * * * * * *

Our Massachusetts census, just taken, tells a wonderful story. Im-
migration does not swarm to hopeless fields. In the decade between
1895 and 1905 Massachusetts added over half a million to her popu-
lation. It is extraordinary that this great increase, which is, within
less than fifty thousand, the same increase that was shown between
1885 and 1895, should have been possible in what was and is, with one
exception, the most densely populated State in the Union.

It is more extraordinary that this half million of increase, largely
immigrants, should be not merely vast in proportion to area, but, with
four exceptions only, larger in actual numbers than the increase shown
by any other State or Territory in the whole United States.

The annual value of the manufactured products of Massachusetts
increased by but $175,173,033 between 1885 and 1895. It increased
by $300,267,558 between 1895 and 1905. The total value of goods
made in Massachusetts was $1,150,074,860 in 1905.

The increase in the value of the annual product of cotton goods from
1885 to 1895 was $32,190,463. From 1895 to 1905, in spite of south-
ern competition, it was $38,949,280. The increase in our wool and
worsted products between 1885 and 1895 was $7,400,533. Between
1895 and 1905 it was $50,581,514. The increase in our shoe product
between 1885 and 1895 was $7,405,548. Between 1895 and 1905 it
was $70,271,966.

On October 31 the total amount on deposit in our savings banks was,
in 1885, $274,998,412; in 1895, $439,269,861, and in 1905, $662,808,-
312. The increase in the last decade was greater by over $58,000,000
than in the decade that preceded it. In 1885 the average deposit for

6647
42

each: person of population was $141.64; in 1895, $175.69, and in 1905,
$220.67, The gain in deposits per capita in the last decade was sreater
by nearly a third than the gain in the preceding decade. :

Massachusetts is the forty-first State in area in the United
States; she is the thirty-first in agriculture; she is seventh in
population; she is second in density of population, and she is
fourth in manufactures. Among all the States in the Union in
the capital invested in manufactures Massachusetts is third;
in wages paid she is third, and in the number of wage-earners
she is third. E

New England has an area of 69,973 square miles; a population
of 5,592,017. The gross value of her agricultural products is
$169,523,485; the gross value of her manufactured products is
$1,875,792,081, making a grand total of $2,045,315.516. Of all
the capital invested in the United States New England repre-
sents almost 20 per cent, and with the Middle States 60 per cent.

Among all the States and Territories of the Union, Massa-
chusetts is— ;

In textiles first, with $212,000,000 (Pennsylvania second, with
$160,000,000) .

In cotton goods first, with $110,000,000 (South Carolina sec-
ond with $30,000,000).

In woolen goods first, with $73,000,000 (Pennsylvanta sec-
ond with $49,000,000).

In boots and shoes first, with $117,000.000 (New York second,
with $25,000,000. Total for whole United States, $261,000,000).

In paper and wood pulp second, with $22,000,000 (New York
first, with $26,000,0G0).

In proportion of wage-earners to total population :

 

Per cent.
Rhode Island first_______ be eau 21
Connecticut secdnd == --6 ee ee eae eee 193%
Massachusetts: “third... 055.520 200-- oe shee el ae coe es 18
New Hampshire. fourth: 2n22 5222. sccce see e oe eo ees 17
New Jersey. fifth: 220.2222. s2424 222 soho soe seas ee eeeece SS 13

Delaware sixth _____
New York seventh__
Pennsylvania eighth
Maine ninth______
Vermont twelfth

Mr. President, on the industries which those figures indicate
there are a great many people dependent for life, for existence,
for their daily wage, for their homes. 2

Let me call attention to another point. Nothing is more
common here than to describe with noble indignation the half-
dozen men in New York who get together and make the rates,
as if all we had to do was to break their power, and as if that
was all that was involved. I desire, Mr. President, simply to
call attention to the misleading character of such statements,
and I take the figures from my own State as an example.

The Commonwealth of Massachusetts in its sinking funds,
established for paying the outstanding indebtedness of the
State, holds Fitchburg Railroad bonds for $5,000,000; Boston
and Maine Railroad bonds, $5,000,000. The amount of railroad
securities held by our Massachusetts savings banks and trust
companies is $152.551,438.08. The total amount of deposits in
the Massachusetts savings banks on October 31, 1905, was
$662,808,312, divided among 1,829,487 open accounts. (See p.
5, Savings Bank Report.) Under the law no account can be

6647

  
  
: 43

over $1,000, and the average of such accounts deposited is
$362.29. In those institutions, under a carefully guarded law.
of those savings of our working people, $662,808.312, in all there
is $152,000,000 invested in railroad securities of different kinds.
The total amount of stock of Massachusetts railroads held in
Massachusetts is $129,055,425, divided among 36,201 Massa-
chusetts holders. These figures were furnished by the account-
ant of the railroad commissioners of this State as of June 30.
1905, and their report gives a good statement of the railroad
situation in Massachusetts. This makes an aggregate of $291,-
606,863 of railroad securities held in Massachusetts, exclusive
a bonds held by life and fire insurance companies and national
anks.

Mr. President, in this great measure we are dealing with the
fortunes of all those people, and this law is capable of bringing
them to ruin or of maintaining them in prosperity. Is it any
wonder that we, their representatives, should be anxious about
it? We have not in New England, as I have said, great natural
endowments, the mere possession of which gives wealth. What-
ever we have there we have worked for hard. We ask for no
discriminations in our favor. We ask merely for the equality of
treatment that every portion of the Union ought to have. But
what we possess is perhaps to a greater extent than is true of
any other portion of the country the result of more than two
centuries of unremitting toil.

Inde durum genus sumus experiensque laborum.

Naturally in that dense population, dependent almost entirely
on manufacturing industry, there is great anxiety as to the pas-
sage and the terms of this great bill.

Mr. President, I repeat what I said at the beginning, that,
with these great interests, New England desires a good railroad-
rate bill. She desires, in my judgment, proper railroad regu-
lation and supervision, and she desires the Commission to be
made up of the highest ability and best men we can get. I am
sure that the Senators from New England represent her when
they say that access to the courts should be preserved; that
every man in this country is entitled to his day in court.

The Senator from Texas [Mr. BatLrey], toward the close of
his very able argument on Monday last, said that to create dis-
trust in the courts was to do the country irreparable injury, but
that it was an even greater injury to teach a debasing belief in
the infallibility of the courts. With that proposition I am in
full accord. A debasing belief in the infallibility of any human
institution or in human beings clothed with any function is
a peril of the most serious kind, but I do not think that this
point is a practical one. It does not seem to me that we are
in any danger at this moment from too great belief in any
man or too great reverence for any institution. On the other
hand, I think that there is a very great danger, indeed, of the
creation of that distrust of our institutions of government which
the Senator from Texas spoke of as an irreparable injury to
the country.

It is the fashion at this moment in certain quarters to in-
dulge in furious attacks, and with utter disregard of truth, not
only upon all our institutions of government, but upon our char-
acter as a people and the conduct of both our public and our

6647
44 ,

private affairs. Concocting slanders and heaping together false-
hoods for the purpose of selling them is not a pleasing trade,
and when carried on in the name of virtue and reform it is a
peculiarly repulsive one. To seek in this way to gratify that
envy which is, unfortunately, not uncommon in human nature,
or thus to take advantage for hire and salary of popular pas-
sions or of righteous popular indignation at proved wrong-
doing, is a miserable calling and morally on a very low level.
Slander and misrepresentation directed against individuals are
not of much importance. If a man, whether engaged in public
or private business, is not able by his character and his honesty
to withstand such assaults, he is of little worth. As Doctor
Johnson wisely said, ‘‘No man was ever written down except
by himself.” Men, moreover, are evanescent. Slanderer and
slandered soon fade away and disappear. ‘“ We strut and fret
our hour upon the stage, and then are heard no more.” But
wise institutions and free systems of government, painfully
wrought, tried in the fires of sacrifice and suffering, should
endure, for if they fall, they bring countless miseries in their
ruin. ,

The real evil of all this sorry business lies in the creation of
that distrust of our institutions to which the Senator from Texas
referred. Yet the most serious quality of these attacks does
not reside in those directed against the Senate. Every branch
of the executive and legislative departments of the Government
has been at one time or another in our history subjected to
these indiscriminate assaults. No President was ever so
maligned as Lincoln, and I have lived to see his fame rise up as
world-wide as it is pure and unsullied, unharmed by the abuse
of the forgotten creatures who thought to blacken his character
and thwart his purposes. Within my own brief experience I
have seen the House held up to public scorn and its Speaker de-
nounced with unbridled ferocity on account of reforms which
all men and all parties accept to-day, and which rescued that
great body from a condition of inanition and contempt.

At this moment it is the turn of the Senate of the United
States. The Senate has been assailed as virulently before when
it has undertaken to perform the duties for which the Constitu-
tion designed it. Checks and balances in government are rarely
popular, and the brake which is essential to preserve the train
from accident or destruction not unfrequently jars some peo-
ple’s nerves when it is applied. But President and House and
Senate all have one great security—they can ask the popular
verdict, they can take the judgment of the people after the
sober second thought, and they can plead their own cause be-
fore the great popular tribunal. Thus they have come through
many trials, and they will have no difficulty in securing justice
now as before.

But the case is widely different with the courts. They can
make no popular appeal; they can enter upon no defense; they
ean secure no verdict at the ballot box. They must do their
duty in silence, and trust to the slow processes of time to vindi-
eate them. For this reason it has been an unwritten law of our
politics—a law rarely infringed—not to assail the courts. It
is no debasing belief, no superstitious reverence, which has dic-
tated this custom. No one thinks for a moment that the courts
are infallible. There have been in our history some bad judges,

6647
45

happily very few, to our honor be it said; there have been, and
there are, many of only moderate capacity; but the courts of
the United States as a whole, and the Supreme Court above all,
irreproachable in character and of high ability, have been one
of the finest achievements and one of the great glories of our
American system of government. No greater harm could be
done, no more malignant evil could be wrought, than to breed
pgpular distrust in the administration of justice.

I cut from a newspaper the other day an interview with Mr.
Debs. It appears that there are some men in the far West
suspected, apparently on good prima facie grounds of complicity
in a brutal assassination. Mr. Debs objects to their being tried
at all. His language is:

We have no courts to appeal to; they belong to the plutocracy, and
I am opposed to spending our means going up against a brace game
judiciary.

His remedy is civil war. You may say that is the raving of a
man of violence and of anarchy. Perhaps it is the last ex-
treme; but is it wise for others to encourage that wholly false
view of the courts and to teach the American people that the
courts are not to be trusted?

I took from the Chicago Record-Herald of December 31, 1904,
the following interview with Mr. Prouty, a distinguished, ener-
getic, and able member of the Interstate Commerce Commission.
He said:

“Tf the Interstate Commerce Commission were worth buying, the
railroads would try to buy it. They have bought pretty nearly every-
thing in this country that is worth buying, and the only reason they
have not tried to purchase the Commission is that this body is valueless
in its ability to correct railroad abuses.”

This statement was made by Interstate Commerce Commissioner
Charles A. Prouty yesterday in a discussion of legalized pooling. Asked,
in view of this statement, whether it would be wise to give a commis-
sion control over rates, the Commissioner replied :

“The public must trust some one, and that would be the best remedy
it is possible to obtain under existing conditions. I am aware, how-
ever, that the great danger would lie in the possibility of the body to
which should be intrusted the guardianship of the people’s, rights not
performing its duty.” |

Because of a possibility of purchase by the railroad interests, he was
asked.

“Yes; but not ia the sense of an actual cash transaction. The rail-
roads, it is well known, own many of our courts and other public
podies, but not because they have of necessity bought them by the
expenditure of money. They have a different way of doing things.
They see to it that the right men, the men of friendly inclinations, are
elected. There would exist the danger of their doing this in the case
of a ‘strong’ Commission, so that it might be composed of men who
would sit idly by and do nothing of value.”

Now, Mr. President, there is a man of high character, holding
a high public position, deliberately stating to the people of this
country that the courts and other public bodies are owned by
the railroads. He says the railroads own them by electing
them. United States judges are appointed. They are not
elected. They are appointed by the President. The necessary
implication is that if they are owned by the railroads the Presi-
dent has appointed men owned by the railroads. )

If this were the utterance of some of our irresponsible maga-
zine writers, whose only thought was to turn a penny by meet-
ing what seemed a momentary demand for a sensational state-
ment, it would be bad enough, but very far from fatal. Writers
of that type come and go. They seize upon the excitement

6647
46

of the moment and presently rise like a flock of shore birds
and whirl away to another spot where they think they can
find a fresh feeding ground. These modern imitators of Titus
Oates will pass away as he passed away. They will bring no
innocent heads to the block as he did, although they may here
and there cause distress. They will not end in the pillory as
he did, because the pillory has been abolished, but they will go
out of fashion just as he did into silence and contempt. It is
when a man of ability and character holding high Government
position like that of an Interstate Commerce Commissioner uses
the language which I have quoted that the matter becomes
deeply serious. It is when doubts and suspicions as to our
courts are suggested by the words of men eminent in public
office, as has been the case in the past months during the dis-
cussion of this question; it is when every effort is made to shut
the courts out from all consideration of the momentous questions
raised by this bill that the matter grows grave indeed, for it is
in this way that the distrust is bred of which the Senator from
Texas spoke and which every reflecting man must believe to be
an inestimable if not an irreparable injury to the country. Con-
gress should be the last place where any such attacks on the
courts should be made—the last place where ideas of that sort
could find a lodgment.

I have no superstitious reverence for the courts and no belief
in their infallibility, but I look upon them not only as the bul-
wark of society and the guardians of liberty, but the symbols
also of law and liberty. Where the decisions of the courts are
obeyed, where justice is unimpeded, there are liberty and order,
and there is no liberty without order. The oppression of the one
tyrant is bad enough, but the oppression of a multitude of
tyrants is infinitely worse. All Europe turned from the tyranny
of the countless feudal lords and gave itself up to the tyranny
of the one man who was made the king. It was far better than
the tyranny of many. With disorder you may have license, you
may have anarchy, but you will have no liberty. When you get
to anarchy and disorder then you go over the dreary round, the
old vicious circle, and land in the “ reaction” and the “ savior
of society.” We want neither socialism, which would reduce
all things to a dead level and put all power into the hands of
the Government, nor do we want anarchy, which represents
chaos.

We wish men to be free,
As much from mobs as kings; from you as me.

We want the sober freedom for which we have paid so great
a price and which we have slowly and painfully built up and
maintained. It is not that I apprehend these dangers from this
specific bill, but I do apprehend grave dangers now lurking
in the readiness to criticise the institutions of Government
made by the hands of the people themselves and to slander the
courts which administer our justice. Men are of slight im-
portance. Let them say of us what they like and banish us for-
ever if they choose—we men here—but it is the duty of every
one of us to see to it that the great heritage of the past, which
has given us freedom and everything we love and have fought
for, is handed on untainted and unbroken to the generations
which come after us. [Applause in the galleries.]

6647

O
REGULATION OF RAILROAD-RATES.

 

THE TWO KINDS OF COURT-REVIEW.

oF BRECH

OF

Hon. CHESTER I. LONG,

OF KANSAS,

IN THE

seo OP THE USTED STATES,

Tuesday, April 3, 1906.

aha
aye

WASHINGTON.

® 1906.
c6c9
SPEECH

HON, CHES TET: de deON Gs

 

The Senate having under consideration the bill (JI. R. 12987) to
amend un act entitled “An act to regulate commerce.” approved IFeb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. LONG said :2

Mr. Prestpent: The pending bill is framed upon the assump-
tion that certain propositions have been scttied by the decisions
of the Supreme Court during the last thirty years. The Sena-
tor from Ohio [Mr. Foraker], in the able and carefully pre-
pared speech which he delivered some time ago in the Senate,
challenged nearly all of these propositions, and if the speech
had been made before these decisions were delivered, it would
undoubted!y have made a much stronger impression in the
Senate and the country than it did. Mr. Richard Olney, ex-
Attorney-General and ex-Secretary of Staite, clearly described
the situation in the closing words of his article in the North
American Review of last October when he stated that if the
propositious which he contended for, which were the same as
those advanced by the Senator from Ohio, had been presented
to the Supreme Court a half or even a quarter of aecentury ago,
they would, in all human probability, have been determined
adversely to the jurisdiction of Congress to fix rates. But
the Supreme Court almost thirty years ago decided the case of
Munn ¢. Illincis. (94 U. 8., 118.) The question decided in that
care was that a State had the power, through its legislature,
to prescribe a maximum charge for services performed for
the public. That case has never been reversed, but has been
followed from the day that it was delivered and should be con-
sidered as the settled law in this country.

The court also at the same term decided what are known as
the “ Granger Railroad cases,” and since that time certain prop-
ositions relatiug to railroad regulation by governmental author-
ity have heen considered as finally determined. It has also
‘been decided by the Supreme Court that a State can regulate
railroad rates through a commissien, and the leading cases
deciding this dectrine are the Reagan case (154 U. &., 362) and
Railway Commission cases (116 U. S.. 807).

The Senator frem Ohio in his speech took the position boldly
that Congress did not have the power to fix rates of transporta-
tion, and that if it did have that power it could not delegate it
to a commission, as contemplated by this bill. If he is correct
in either of these propositions, the pending bill is unconstitu-
tional, and the attempt thus to regulate interstate commerce
will end in disinal failure.

 

«For amendments offered by Mr. Long on Monday, @pril 2, 1906, see
page 35.
2 6669
3

Ti is true that the Supreme Court of the United States has
never decided that Congress possesses the power to fix rates.
Neither has it decided that if it possesses this power it can
call to its assistance a commission to assist in making rates.
The reason that the Supreme Court has never passed upon this
question is that it never has been presented to it, for Congress
has not, as the Senator says, attempted to fix rates for the trans-
portation of freight and passengers. Neither has it attempted
to confer such power on a commission.

THIS BILL FIRST ATTEMPT BY CONGRESS TO FIX RAILROAD RATES.

If this bill becomes a law it will be the first time that Con-
gress has assumed to exercise such power, either directly or
through a commission. I believe that Congress, under the powers
granted to it in the Constitution to regulate commerce with
foreign nations and among the several States and with the In-
dian tribes, has the same authority and power over interstate
commerce that a State has over commerce carried on wholly
within its borders. If a State, under its sovereign power to con-
trol commerce within its limits, has the power to fix rates di-
rectly by the legislature or through the medium of a comimis-
sion, then I believe that Congress has the same power in its
regulation of interstate commerce to fix rates directly or with
the assistance of a commission.

The Senator from Ohio quoted the statement of Mr. Justice
Tlarlan in the Northern Securities case (193 U. S., 342), that the
court expressed no opinion upon the question as to whether
Congress had the power to fix rates for the reason that Con-
gress had not chosen to exercise its power in that way or to
that extent. In the same case, however, Justice IJarlan said:

Is there, then, any escape from the conclusion that, subject only to
such restrictions—

Referring to the restrictions in the Constitution—
the power of Congress over interstate and international comimerce is as
full NG complete as is the power of any State over its dumestic com-
mMmcree?

In the same case Mr. Justice White, speaking for himself and
three other justices, said:

The plenary authority of Congress over interstate commerce, its right
to regulate it to the fullest extent, to fiz the rates to be charyed for the
movement of interstate commerce, to legislate concerning the ways and
vehicles actually engaged in such traffic, and to exert any and every

other power over such commerce which flows from the authority con-
ferred by the Constitution, is thus conceded.

Mr. Justice Jackson also said (Kentucky v. The Indiana
Bridge Company, 37 Iederal, 567) :

Possessing such sovereign and exclusive power over the subject of
commerce among the States, it is dificult to understand why Congress
may not legislate in respect thereto to the same extent both as lo rates
and all other matters us the Statcs may do in respect to purely local or
internal comincree.

Many other cases might be cited, all following the doctrine in
Gibbons v. Ogden (9 Wheat., 197):

The power over commerce with foreign nations and among the several
States is vested in Congress as absolutely as it would be in a single
governn.ent, having in its constitution the same restrictions on the ex-
ercise of the power as are found in the Constitution of the United
States.

It has been decided that the power of Congress over commerce
ameng the Indian tribes includes the power to prohibit the com-

6669
4

merce entirely. Its power over foreign commerce is the same
as over Commerce among the States, and the Supreme Court has
devided that Congress has the power to prohibit foreign com-
merce. Its power over interstate commerce was decided in the
Lottery case (188 U. S., 821) to be plenary and unrestricted,
except by the limitations in the Constitution, and it was there
decided- that the word “regulate” included “ prohibit.” The
same doctrine was announced in the case In re Lahrer (140
UL S., 545).
CONGRESS CAN DO WHAT STATES ILAVE DONE.

In the light of these decisions there is no escape from the con-
clusion that the power of Congress over interstate conmmerce is
as full and complete as the power of a State over its domestic
conunerce. If a State has the power to fix rates by its legisla-
ture direct or through the instrumentility of a commission, then
Congress has the same power.

Following the doctrine of the decisions to which I have re-
ferred, I believe that Congress possesses the power to fix rates
the same as a State. But we ave not left wholly to conjecture,
for when the Maximum Rate case (167 U. 8., 479) was con-
sidered by the Supreme Court, the question in that case being
whether Congress in fact had conferred the rate-making power
upon the Commission, Justice Brewer, gheaking for the court,
said: :

There were three obvious and dissimilar courses open for considera-
tion. Congress might itself prescribe the rates; or it might commit to
some subord:mate tribunal this duty; ov it might leave with the com-
panies the right to fix rates, subject to regulations and restrictions,
as well as to ihat rule which is as old as the existence of common car-
riers, to wit, that rates must be reasonable.

The court decided that Congress had left to the carriers the
right to fix rates. It held that there was nothing in the inter-
state-commerce act that could be construed so as to imply that
Congress had conferred the rate-making power upon the, Com-
mission; but there is nothing in the opinion from first to last that
even intimates that Congress could not confer such power on a
Commission, if it saw fit to do so. This bill seeks to impose
that additional duty upon the Commission, under certain limita-
tions and restrictions, and I believe that under the decisions of
the Supreme Court Congress has the power to do this if it de-
cides that it is for the best interests of the public to take such
a course. That the fixing of rates is a legislative function has
been the settled doctrine of the Supreme Court ever since the
ease of Munn v. Illinois, but it must not be taken from this that
rates so fixed can not be inquired into by the courts.

THE EXTENT OF JUDICIAL REVIEW OF LAW-MADE RATES,

It is very interesting to trace the develonment of the doctrine
of judicial interference with law-made rates and to show how
far and to what extent the courts will interfere with the rate
made by a legislature direct or through the assistance of a com-
mission. It was assumed shortly after the case of Munn vr.
Illinois was decided that the courts could not be invoked to in-
quire into or consider any question relating to law-made rates,
but this position was soon shown to be untenable by the later
decisions of the Supreme Court, in which the case of Munn v.
Illinois was construed.

In the Schottler case (110 U. S., 454) Chief Justice Waite,
who had written the opinion in the Munn case, referred to that

6669
5

ease and said that, following that case, the Government had the
power to regulate the price at which water should be sold by
one who enjoys a virtual monopoly of the sale. Then, referring
to the Munn case, he said:

As was said in that case, such regulations do not deprive a per-
son of his property without due process of law. What may be done
if the municipal authorities do not exercise an honest judgment, or if
they fir upon a price which is manifestly unreasonable, need not now
be considered, for that proposition is not presented by this reeord. ‘The
objection here is not to any improper prices fixed by the officers, but to
their power to fie prices at all.

It was clearly decided that the right of the legislature to fix
maximum charges was the power decided in the case of Munn v.
Illinois. Justice Miller in the Wabash case (118 U. 8., 56D), re-
ferring to the case of Munn v. Illinois and the other cases de-
cided at the same term, after discussing in detail the questions
presented in these cases, said:

And the great question to be decided, and which was decided, and
which was argued in all those cases, was the right of the State witbin
which a railroad company did business to regulate or limit the amount
of any of these traffic charges.

There was in this case no determination of the extent of the
control by the legislature, but only as to the puicer to fix maxi-
mum charges. The question was again hefore the court in the
Railroad Commission cases. (116 U.S., 321.) The right of the
legislature to fix railroad rates through the instrumentality of
a commission was then determined, but Chief Justice Waite
went even further in deterinining the limitations of the power
of the legislature than he did in the Schottler case. In the
Commission cases he said:

From what has thus been said, it is not to be inferred that this
power of limitation or regulation is itself without limit. This power
to regulate is not a power to destroy, and limitation is not the equiya-
lent of confiscation. Under pretense of regulating fares and freights,
the State can not require a railroad corporation to carry persons or
property without reward; neither can it do that ichich in law amounts
to a taking of private property for public use without just compensation,
or without due process of lar.

This case was decided in 1885, and while it was not necessary
to the decision of the question in that case, for, as the court said,
the railway commission of Mississippi had not yet fixed a tariff
of rates, although its power to do so was affirmed by the court,
yet there words of Chief Justice Waite, defining the limitations
of the powers of the legislature in fixing rates and deciding to
what extent the courts would interfere with such rates, has
become the settled doctrine of the jurisprudence of this country,
as determined by the Supreme Court.

THE MINNESOTA MILK CASE,

I might refer to other decisions in which the same doctrine
was announced, but the question was clearly and definitely set-
tled in the Minnesota Milk case (1384 U. 8., 459). In that case
the railway commission of Minnesota having fixed a certain rate
for the transportation of milk, which was not complied with by
the carriers, the commission brought a mandamus proceeding
in the supreme court of Minnesota to compe! the carriers to
observe the rates made by the commission. The railroad com-
pany in its return to the alternative writ alleged that the rates
fixed by the commission amounted to a taking of property with-
out due process of law and that the rate was not a reasonable
fare or just compensation to the company for the service ren-

6669
6

dered. The carriers asked for the privilege of introducing
evidence to prove the allegations of its return, but the supreme
court of Minnesota denied the application to introduce testi-
mony in proof of the allegations and rendered judgment against
the carrier. The case was taken to the Supreme Court of the
United States, and it was there determined that if the statute
of Minnesota, as construed by the supreme court of that State,
prevented an inquiry in court upon the question as to whether
its property was being taken without due process of law, then
the statute was void, for it was determined that a hearing
before the commission upon this question was not due process
of- law, but that a carrier was entitled to have that question
tried in a court of justice. Justice Miller, in his concurring
opinion in that case, laid down several propositions that are
goed to-day and have been followed by the Supreme Court since
that time. After deciding that the State has the Icgislative
power to establish the rates of compensation for carriage of
property and that the legislature could exercise that power
through a commission, he said:

Neither the legislature nor such commission acting under the author:
ity of the legislature, can establish arbitrarily and without regard 1
justice and right a tariff of rates for such transportation, which is so
unreasonable as to practically destroy the value of property of persons
engaged in the carryiug business on the one hand, nor so crerbitant and
extravagant as to be in utter disregard of the rights of the public for
the use of such transportation ou the other,

He then said that in either of these classes of cases there
was an ultimate relief in the courts, and especially in the courts
of the United States when the tariff of rates fixed cither by the
legislature or by the commission is such as to deprive a party
of his property without due process of law. He also said that
until the judiciary was appealed to, the tariff of rates, so fixed,
was the Jai of the land and must be submitted to, both by the
carrier and the party with whom he deals. These propositions,
so clearly and forcibly announced by Justice Miller, agreeing
as they do with the statements of Chief Justice Waite, in the
cases to which I have referred, have been followed by the Su-
preme Court, and are the law to-day unmodified, and neither
restricted nor enlarged by the later decisions. <A carricr can not
get relief in a court of justice by simply showing that the rate
fixed by the legislature or commission is wnreasonable, but it
must show that the rate is so unreasonable and so unjust as to
amount to a taking of its property for a public use without just
compensation. Justice Blatchford, who delivered the opinion
in the Minnesota Milk case, also delivered the opinion in the
ease of Budd v. New York: (143 U. S., 517), and explained in
detail the scope and extent of that decision.

JUSTICES HARLAN, BREWER, AND BROWN ON EXTENT OF JUDICIAL INTER-
FERENCE.

Justice Harlan, in the Land Company case (174 U. 8., 754),
clearly defines the extent of judicial interference with rates
fixed by law, either by a legislature direct or through the assist-
ance of a commission. He says:

But it should also be remembered that the judiciary ought not to
interfere with the collection: of rates established under Icgislative
sanction unless they are so plainly and palpably unreasonable as to
make their enforcement equivalent to the taking of property for public
use without such compensation as under all the circumstances is just
both to the owner and to the public; that is, judicial interference
should never occur unless the case presents, clearly and beyond all

6669
7

doubt, such a flagrant attack upon the rights of property under the guise
of regulations as to compel the court to say that the rates prescribed will
necessarily have the effect to deny just compensation for private prop-
erty taken for the public use.

The Kansas City Stock Yards case (183 U. S., 91) contains a
clear and able discussion of the law as defined by the Supreme
Court, this case being decided in November, 1901. Justice
Brewer, discussing all the leading decisions of the court upon
these questions, and after quoting the words of Justice Harlan,
to which I have just referred, makes this statement:

As to parties engaged in performing a public service, while the power
to regulate has been sustained, negatively the court has held ilat the
legislature may not prescribe rates which, if enforced, would amount to
a confiscation of property. But it has not held affirmatively that the
legislature may enforce rates which stop only this side of confiscation
and leave the property in the hands and under the care of the owners
without any remuneration for its use. It has declared that the pres-
ent value of the property is the basis by which the test of reason-
ableness is to lhe determined, although the actual cost is to be considered,
and that the value of the services rendered to cach individual is also to be
considered. It has also ruled that the determination of the legislature
is to be presumed to be just, and must be upheld unless it clearly ap-
pears to result in enforcing unreasonable and unjust rates.

In a still later decision of the court (186 U. S., 268), affirming
the supreme court of the Minnesota in sustaining the order of
the railway conunission of Minnesota fixing rates on coal in
carload lots, Justice Brown says:

It is sufficient, however, for the purpose of this case to say that the
action of the commission in fixing the rate complained of as to this par-
ticular class of freight has not been shown to be so unjust or unrea-
sonable as to amount to a taking of property without due process of
law, and we therefore conclude that the judgment of the Supreme Court
must be affirmed. .

WHAT THE COURTS WILL DO IF THEIR JURISDICTION IS NOT UNLARGED.

It is clearly shown by these decisions, to which many more
might be added, that unless there is something inserted in this
bil! enlarging the present jurisdiction of the courts over rates
made by legislative authority, that the courts will only interfere
and set aside such rates when they are confiscatory. and they
have decided that rates are confiscatory when they do not afford
a fair return on the property that is employed in performing the
public service. The rates can not be fixed so low hy the legisla-
ture that they leave the property in the hands and under the
care of the owners without any remuneration for its use. They
have declared that the present value of the property is the basis
by which to test the question as to whether there is a fair re-
turn on the property employed, although the actual cost is to be
considered.

But this view of the law as determined by the Supreme Court
is well understood, and it was probably unnecessary for me to
consider this phase of the question so much in detail. I would
not have done so were it not for the effort that is being made to
amend this bill so ax to change this procedure and impose upon
the courts additional duties by seeking to enlarye the jurisdic-
tion which they now assume over rates made by legislative au-
thority.

It has been stated that the supporters of this bill favor re-
stricting the review by the courts of rates made by Congress
with the assistance of the Commission. Those who favor this
bill wish to leave the jurisdiction of the courts in relation to
such rates just as it is te-day, as defined by the decisions of the

6669
8

Supreme Court. There are those who wish to amend this bill
so as to enlarge the jurisdiction of the courts and ask them to
consider questions in relation to rates made by legislative au-
thority that so far they have declined to consider, when rates
made by State legislatures, with the assistance of State con-
missions have been the subject of consideration by the Supreme
Court.
THE BILL NOW RECOGNIZES THE RIGHT OF REVIEW.

The Senator from Pennsylvania [Mr. Knox], in the very able
and instructive speech which he made the other day in the Sen-
ate, said:

IT have contended that a law authorizing a commission to set aside
rates and practices upon complaint, and to substitute others in their
stead, must proceed either upon the theory of the commission’s action

being final, or upon the theory that it must be subjected to review in
the courts. ~

Ile further said, after referring to the provisions in the bill
which recognize that a court may suspend or set aside an order
of the Commission:

One of two things is certain, either the bill does or it does not pro-
vide for a review. If it does not provide for review, and if those in
favor of the bill as it now stands do not contemplate or desire a review,
then, in all fairness, these provisions should be stricken from the Dill.

The fact is, however, as I have already shown, that the friends of the
bill as it now stands claim, not that it does not contemplate a review,
but that the bill either sufficiently provides for a review, or recognizes
a right claimed to exist independently of the bill.

Certainly no one at this late day would attempt to draw a bil)
seeking to make the orders of the Commission final. There are
too many decisions of the Supreme Court holding that such
orders can not be made final, beyond. the power of the court
to inquire into certain questions decided by the Commission.
The Senntor is right when he says that the friends of this
dill do not claim that it does not contemplate a review, but they
contend that the bill now sufficiently provides for a review
and reeognizes that the right of review exists independently
of this bill. If the provisions referred to by the Senator were
stricken from the bill, it might be contended that it was the
intention of Congress to make the orders of the Commission
final, and if the bill could be so eonstrued there would be no
question of its invalidity. The bill provides that its orders,
except for the payment of money, shall go into effect within
thirty days unless the same shall be suspended, modified, or
set aside by the Commission or be suspended or set aside by @
court of competent jurisdiction.

ORDERS OF COMMISSION CAN NOT BE MADE FINAL.

The bill thus recognizes the power of a court of competent
jurisdiction to suspend or set aside the orders of the Commis-
sion. This bill was drawn upon the theory that it was not
within the power of Congress to make the orders of the Com-
mission final beyond the right of the courts to inquire into
whether the Commission had exceeded its authority or made
rates so low that they were confiscatory.

It was once contended that the legislature did have the au-
thority to make its rates final and to provide that those made
by a commission were conclusive and could not be inquired into
or set aside by a court. This contention is no longer tenable,
as it is now adwitted by all that while it is a legislative func-
tion to fix a future rate, which may be done either by the legis-

6669
9

lature or through the assistance of a commission, yet it is a
judicial function to inquire into and ascertain whether rates
fixed. by a legislature or by a commission under the authority
and direction of the legislature, are so unjust and so unrea-
sonable as to amount to a taking of property without just corm
pensation.

A CONTROVERSY OVER KIND AND EXTENT OF REVIEW,

This is not a question between @ revicir and no revicir, but
it is a question of the find and ertcnt of the review. I am not
here to take the inconsixtent position that while I believe pro-
visions for review are in the bill yet I am unwilling in lan-
guage to express such a review by an appropriate amendment.
The Senator suggests that no suit can be brought against
the Interstate Commerce Commission because no authority is
given in the bill to sue the Commission. The venue of all
suits is clearly defined, and it was no doubt the theory of the
framers of the bill that the right of the carrier to sue the Com-
mission for an injury under an order made by the Commission
is clear and undoubted. They no doubt came to this conclu-
sion from an examination of the Reagan case (154 U. 8., 362)
and the Smyth v. Ames case (169 U. 8., 466). In both of
these cases the constitutionality of the laws attacked were sus-
tained by the Supreme Court, but in each case it was decided
that the Commission had acted beyond its authority. While
the Nebraska law authorized a suit to be brought in the courts
of Nebraska to challenge the order of the board, yet the suit
that was brought (Smyth v. Ames) was a suit in equity in the
United States court, which disregarded entirely the provisions
for review by the statute. But I agree with the Senator from
Pennsylvania that there should be no question in regard to the
right of a carrier that has been injured by an order of the Com-
mission to sue the Commission in the United States circuit court.

FAVORS AN AMENDMENT FOR COURT REVIEW.

I do not object to an amendment authorizing suit to be
brought against the Commission and conferring jurisdictioa
upon the United States circuit court sitting in equity to hear
and determine any such suit. I believe under this bill without
amendment that two questions can be inquired into by the court
in a suit brought by the carrier or anyone else injured by an
order of the Commission, and I am not opposed to amending
the bill by defining such jurisdiction of the court. I believe that
suit can be brought to set aside the order of the Commission
when the Commission has acted beyond its authority, for general
unlimited jurisdiction is not conferred upon the Commission to
mmake rates. It is a body of limited jurisdiction, and the
law clearly defines its duties, and it must act within the law or
its actions are yoid. I also believe that under this bill, with-
out amendment, if the Commission makes an order that is a
violation of the rights of the carrier, whiclg are secured by the
Constitution, the court, on a suit being hrought, will suspend or
set aside such order; and believing that these things are in the
bill now I am not opposed to making the bill clear and definite by
inserting such provisions. And so, though satisfiel with the
House bill in this particular and having no doubt of its constitu-
tionality, but reposing confidence in the great legal ability of
the Senator from Pennsylvania [Mr. KNox] and other Senators
who hold similar views to those which he expressed, I am will-

6669
10

{ng, in order to remeve all questien as to the constitutionality of
this bill, in order to make it plain that there is no intention to
make the orders of the Commission final, to put in an amend-
ment providing that suits may be brought in the United States
circuit court against the Commission to set aside any order of
the Commission and the orders may be suspended or set aside
when it appears that the order complained of was beyond the
authority of the Couinission to make or in violation of the rights
of the carricr secured by the Coustitution. The amendment I
have offered, and which has been read, is in line with this
suggestion.
FEAR SUCIT AN AMENDMENT WOULD NOT BE SATISFACTORY.

But I fear that this amendment will not he satisfactory
to the Senator from Pennsylvania and the other Senators who
are seeking to amend this bill by inserting a provision for a
court review. It is not the intention of those who are insisting
upon a veview to insert a provision to limit the jurisdiction of
the courts to the two questions suggested in this amendment.
They know that the courts would assume this jurisdiction now,
for they have assumed it in cases arising under State statutes
and have clearly defined the length to which the courts will go
in examining the orders of a subordinate tribunal. If the Com-
mission has acted within its authority in making the order, then
{he rate will only be set aside by a court if it Is so unreason-
ably low as to amount to confiscation, and a confiscatory rate
has been defined to he one that does not give a fair return on
the property that is employed in performing the service. What
is a fair return is a judicial question which the courts will de-
termine,

To show the kind cf a review that is sought to be placed in
this hill, I wish to refer to the statements of a friend of the bill,
the Senator from Massachusetts | Mr. Lopce], and an opponent
of the bill, the Senator from Ohio | Mr. Foraker]. The Senator
from. Massachusetts [Mir Lopce], in his very able speech show-
ing the folly and unwisdom of attempting to make rates by law,
but in which he announced his willingness to support this bill,
which does what he so eloquently condemned, said that he would
faver it provided there was a provision placed in it for review
by the courts, not only as to whether the rate is confiscatory,
but also as to whether it is just and reasonable. THe said:

Finally, there should be ample provision for appeal to—or, more
properly, a review hy—courts of competent jurisdiction sitting in equity,
not only as to whether the rate is confiscatory, but also whether it is

just aud reasonable, and an arrangement should be mude by law for
the rapid disposition of all such cases.

The Senator from Ohio said:

The making of a rate is a legislative act, and legislative discretion of
the Commission in determining what is a reasonable rate cun not be
interfered with hy the courts in the absence of special statutory author-
ity, unless the vate be fircd so high that it is extortionate to the shipper,
or so low that il is confiscatery @s to the carricr.

lie further said:

 

 

But between extortion on the one hand, and confiscation on the other,
there is, in most cases, a considerable latitude within which the action
xf the Commission, without special statutory provision for revicw of
é by the courts, would be final and conclusive.

I believe that if we have a commission to which Congress
fives the authority to fix maximum rates under certain restric-

6669
i1

tions, it is the duty of that commission to exercise its judgment
as to the limit to be fixed, and that judgment when once exer-
cised should not be controlled or revised by a court on review,
if the commission acted within its authority, unless the rate is
fixed so high as to be extortionate to the shipper, or so low as
«to be confiscatory to the carrier.

THE TWO KINDS OF COURT REVIEW.

The issue here could not be more clearly defined than hy com-
paring the statements of these two Senators as to what they
desire placed in the bill with the amendment which I have
offered. A confiscatory rate is not solely one that leaves the
property in the hands of the owner without any return:for its
use, but a rate is confiscatory unless it will afford a fair re-
turn on the property employed in the service. This bill provides
that the rate must be fairly remuverative, and the fifth amend-
ment to the Constitution provides that private property can not
be taken for a public use without just compensation.

But what the Senators from Massachusetts and Ohio desire,
and what the Senator from Pennsyivania desires, if we take the
provisions for court review in the document which he had
printed, is to place ia this bill provisions that will authorize the
court to sit in judgment on the arisdom and policy of the rates
made by the Commission and suspend or set them aside, not only
when they are confiscatory, but when for other reasons they
deem them unwise or unfair. Some of the provisions referred
to by the Senator from Pennsylvania, in the document to which
I have referred, have been passed upon by the supreme courts
of the respective States. These provisions are all similar.
They all give to the court the very widest latitude and jurisdic-
tion in considering orders of the Commission, and they are so
nearly alike that one might believe that they had emanated from
a esmmon source. No provision is broader than that of the
statute of Minnesota, which authorizes the court, in considering
an order of the Commission, to e.raimine the whole matter in
controversy, including matters of fact, as well as questions of
lai. and lo affirm, modify, or reverse such order in whole or in
part, as justice may require,

WHAT THE SUPREME COURT OF MINNESOTA DECIDED.

The supreme court of Minnesota (69 Minn., 375), in passing
upon this provision, said that the courts did not have authority
to fix rates, to substitute their judgment for the judgment of the
commission, and that the court could not place itself in the
shoes of the commission and try de novo the question of what
are reasonable rates; that upon appeal under this statute the
court could review the acts of the commission only so far as to
determine whether the rites fixed by it were confiscatery. The
question was whether the court should assume this broad juris-
diction, or whether it should follow the precedents laid down
by the Supreme Court of the United States in the absence of any
statutory provision for review. Judge Canty, who delivered the
opinion of the court, said:

If by this the legislature intended to provide that the court should
put itself in the place of the commission, try the matter de novo and
determine what are reascnable rates, without regard to the findings
of the commission, such intent can not be carried out, as the statute

which so provided would be unconstitutional. The fixing of rates is
a legislative or administrative act, not a judicial one.

6669

  
12

He further said:

While the district court takes the evidence de noyo, it can not put
itself in the place of the commission, and try the facts in controversy
de novo. The district court can review. the findings of the commis-
sion only so far as to determine whether or not the rates fixed are so
unreasonable as to be confiscatory, just as an appellate court reviews
the verdict of the jury for the purpose of determining whether it ig,
so excessive that it can not stand.

Judge Mitchell, who also concurred in the decision, made the
following statement in his cpinion:

It must now be accepted as the seitled law that, when rates or
charges by railway companies have been fixed by the legislature or a
commission, the determination of the question whether such rates are
“reasonable "’ or ‘“‘unreasonable” is a judicial function. But this is
so, not because the fixing of rates is a judicial function (for all the
authorities agree that it is a legislative one), but solely by yirtne of
the constitutional guaranty that no one shall be deprived of his
property without due process of law. Therefore the only function of
the courts is to determine whether the rates fixed violate this constitu-
tional principle.

Courts should be very slow to interfere with the deliberate judgment
of the legislature or a legislative commission in the exercise of what is
confessedly a legislative or administrative function. ‘To warrant such
interference, it should clearly appear that the rates fixed are su grossly
inadequate as to be confiseatory, and hence in violation of the Consti-
tution. If is not enough to justify a court in holding a rate ‘* unrea-
sonable,” and hence unconstitutional, that, if it was its province to fix
rates, it would, in its judgment, have fixed them somewhat higher.
Any such doctrine would result, in effect, in transferring the power
of iixing rates from the legislature to the courts, and makiny it a
judicial and not a legislative function. When there is room for a
reasonable difference of opinion, in the exercise of an honest and intel-
ligent judgment, as to the reasonableness of a rate, the courts have no
right to set up their judgment against that of the legislature or of a
legislative commission. In my opinion, it is only when a rate is
manifestly so grossly inadequate that it could not have been fixed in
the exercise of an honest and intelligent judgment that the courts have
any right to declare it to be confiscatory.

So the supreme court of Minnesota declined, although directed
by statute, to assume the rate-making function, and limited its
inquiry into the question as to whether or not the rates were
s0 Tow as to be confiscatory. The Supreme Court of the United
States, on appeal from a judginent of the supreme court of
Minnesota in a similar case to this (156 U. 8., 257). took the
same positicn, and confined its investigations to the question
as to whether the rates fixed by the Minnesota commission were
80 unrersonably Jow as to amount to a taking of the property
of the carrier without just compensation,

THE SUPREME COURT OF TEXAS TAKES a DIFFERENT VIEW.

But the supreme court of Texas, in the Railway Commission
case (90 Tex. Rep. 853), construed differently the provision
in the railroad-commission law of Texas. After referring to
article 4565, set out in full in the document referred to hy the
Senator from Pennsylvania, the court considered the following
article, 4506:

In all trials under the foregoing article the burden of proof shall
rest upon the plaintiff, who must show by clear and satisfactory evi-
dence that the rates, regulation, order, classification, act or charges
complained of are unreasonable and unjust to it or them.

The court then says:

It is claimed by the Attorney-General on behalf of the railroad
commission, that the courts have no power under this law to review
the action of the railroad commissioners in regard to any of the matters
enumerated unless the complainant shali show that the act complained
of amounts to a taking of property without proper compensation or
without due process of law, and in support of this position it is as-
serted that prior to the enactment of this law the words ‘* unreason-
able and unjust,” when used in reference to the action of legislative

6669

 

 

 
18

bodies and of commissions created by them, had received the interpre-
tation that such acts must be unreasonable and unjust to the extent
of being violative of the Constitution, and that the words “ unreasona-
ble and unjust ’’ must be so construed because it will be presumed that the
legislaéure used them in that sense. We know of no decision of any
court which has defined either ‘‘ unreasonable" or “ unjust” to mean
that the act so characterized is the taking of property without proper
“compensation or without due process of law.

I wish to call the special attention of Senators to this part
of the decision of the supreme cuuirt of Texas:

It is true that the courts have established the rule that the reason-
ableness and justice of rates fived by the lcgislaturc, or by a commis-
sion empowered ly it so to do, are ordinarily questions committed to
the discretion of those bodies, and not subject to revision by the courts,
Iut in such cases the law did not authorize any revision of such action
by the judicial department.

I desire to call the attention of Senators to this, showing that
the decision of the supreme court of Texas and the jurisdiction
which they assumed was by reason of the insertion in the pro-
vision for court review of the words that “ they may prove that
the charges are unjust and unreasonable to it or them.”

The court then said that the courts, acting under the general
rule, did not revise the exercise of discretionary power on the
part of the legislature or the commission, but only protected
parties against a violation of the constitution. The court said
the question in this case was whether the statute quoted had
changed the law, and if it had not, the same-test would be ap-
plied. After discussing the facts of the case. the court said that
it was evidently the intention of the legislature to establish «
much more liberal rule than previously existed on this subject.
The court then says:

The language of the law is so antagonistic to the rule established by
the decisions, which construction is claimed to have been adopted by
the legislature, that we must conclude that the lezislature intended to
change those rules in their application to the subjects embraced in the
articles quoted, otherwise there was no need for the articles 4565 and
4566. Indeed, the conferring of Ahat jurisdiction vpon the courts of
itself imposed the duty to try the case by the ordinary rules of pro-
cedure, unless otherwise provided. The attorney-general urges the in-
conveniences of such a rule and the possibility of blocking the business
of the commission by such proceedings. It may not he a wise policy to
extend this liberality to those who are affected by the exercise of the
powers conferred upon the commission, but that question is for the les-
islative branch of the government, and not for the courts, to deal with.

It will thus be seen that the supreme court of Texas, under
a statutory provision that permits the court on review to de-
termine the justness and reasonableness of the rates fixed by
the commission, held that the effect of this statute is to change
the rule laid down by the courts that they will only set aside
the order of the commission when the rate is so unreasonably
low or so manifestly unjust as to amount to a cenfiscation of
the property of the carrier. his case has been followed in
Railroad Commission case (96 Texas, 394).

THE KANSAS COURT OF VISITATION CASE.

In 1898 an act was passed by the legislature of the State of
Kansas creating a court of visitation. That act was considered
by the United States circuit court in the case of the Western
Union Telegraph Company v. Myatt (98 Fed. Rep., 2535), and by
the IXansas supreme court in the case of State v. Johnson
(G1 Kans., 805). The court created by the leszislature was in-
ferior to the supreme court, and there is a provision in our
constitution authorizing the legislature to create courts inferior
to the supreme court. Vrovision \as made in the act for a

6669
14

full review of the decisions of the court by the supreme court,
but the attempt was made in this legislation to confer upon
this judicial tribunal the power to fix rates and the power to
perform the usual functions performed by a board of raidroad
commissioners.

Full jurisdiction and authority was given to this court to
hear complaints in regard to rates, to fix rates when it found
that the rates of the carrier were unreasonable and unjust, and
to perform the functions and powers usually performed by a
board of railroad commissioners. At the same session of the
legislature the law which had provided for a board of railroad
commissioners and which had been upon the statute books for
many years was repealed, showing clearly that it was the in-
tention of the legislature to confer all powers and supervision
in the fixing of rates on the court of visitation. The act
was first considered in a suit brought in the United States cir-
cuit court, involving as it did the fixing of telegraph charges,
and it was declared unconstitutional because of the inter-
mingling of judicial, executive, and legislative functions in a
yery able decision by Judge Hook, now United States circuit
judge. The supreme court of Kansas took the same position,
that it was not within the power of the legislature to confer the
rate-making power upon a judicial tribunal (61 Kans., 820).
It was said in that case:

The rate-making power, being esseptially legislative in its nature,
whether exercised directly by the legislature or delegated by it to a
competent board or commission, can no more be imposed on or exer-
cised by the judicial department than can the pardoning power of the
governor or any other distinctively executive function. It is a cardinal
principle of representative government that the making of laws and
rules regulating the future conduct and fixing the rights of parties be-
longs to the legislative department—a power which can never be re-
posed in or exercised by the judiciary.

It was further said: ;

Counsel for petitioner do not seem to question the rule that the

- establishment of freight rates is a legislative prerogative. Yet, as we
understand them, they contend that this establishment may be accom-
plished through the decrees of a judicial tribunal in furtherance of and
incidental to granted power to determine what are reasonable rates.
In other words, admitting that to decide what is a reasonable rate is a
judicial power, they argue that when a court determines this it may
proclaim its findings in respect thereto, and this declaration is binding,
not only upon parties to the inquiry, but upon all other parties who
may thereafter be affected.

This decision has peculiar application and relation to the bill
introduced by the Senator from Ohio | Mr. ForaKker].

Conceding that courts can not legislate, they insist that courts may
do that which, in legal effect, is nothing more or less than legislation.
It is one thing to determine whether a freight rate is reasonable in
a controversy between a shipper and a carrier, and another thing
to decide, at tlie suit of the State or a private party, what shall be
charged in the future for such services. A decision made in the first
case might be a precedent when a similar controversy subsequently
arose; but the promulgation of the first decision, however formally
done hy a judicial tribunal, could not have the far-reaching effect of a
legislative act, for it is peculiarly within the province of the levisla-
ture to regulate future conduct. Chief Justice Marshall said: “The

fee makes, the executive executes, and the judiciary construes
he law.

COOLEY AND SUPREME COURTS OF NEBRASKA, CONNECTICUT, AND LOUI-
SIANA ON JUDICIAL LIMITATIONS.

Judge Cooley. in his work on Constitutional Limitations, page
498, makes the following distinction betweex legislative and ju-
dicial power:

6669
15

_ The difference between the departments undoubtedly is, that “the leg-
islature mikes, the executive cxecutes, and the judiciary construes the
law.” And it is said that that which distinguishes a judicial from a
legislative act is, that the one is a determination of what the existing
law is in relation to some existing thing already done or happened,
while the other is a predetermination of what the law shall be fur the
regulation of all future cases falling under its provisions.

In the case of Nebraska Telephone Company v. State, the
supreme court of Nebraska (55 Nebr., G27) said:

Where a public-service corporation has performed a service and sues
to recover therefor, in the absence of an express contract far a specific
compensation the measure of its damages is a reasonable compensation
for the services performed; and whether the compensation which it
demands is reasonable is a judicial question. Where the legislature
has fixed the compensation which a public-service corporation may ex-
act for the performance of a service, then the reasonableness oi the
compensation so fixed by the legislature—that is, whether the limiting
of the corporation to the compensation fixed by the statute would re-
sult in a confiscation of the corporation's property—is a judicial ques-
tion (Smyth v. Ames). Tut the power—the jurisdiction—to determine
what compensation a public-service cerporation may exact for service
to be rendered by it we understand to be a legislative, and not a judi-
cial, function.

In the case of The Norwalk Street Railway Company's ap-
peal (69 Conn., 597) the court said:

This distinction is illustrated in the decisions of the United States
Supreme Court, dealing with legislative regulations of charges by rail-
road companies. The regulation of such charges is held to be dis-
tinctively a legislative function which may be delegated by the legis-
lature to a subordinate legislative or administrative body, but if this
subordinate body or the legislature exceeds its powers and a person
is thereby injured in his rights of property, he may invoke the judicial
power to determine that question of legal injury; and the reasonable-
ness of the charges, although a question legislative in its nature, must
be reviewed by the court as necessarily incident to the exercise of its
judicial power. But if the court should attempt to establish for the
future a schedule of charges, it would exceed the limits of judicial
power; it would act as legislator in respect to a matter as to which
it must also act as judge.

I refer also to a decision of the supreme court of Louisiana
in the Railway Commission case. (109 La. Rep., 2628.) In dis-
cussing what the court should do in an action brought to review
an order of the commission, it said:

That is a matter submitted to the judgment of the commission, not
that of the railroad or of this court, unless the selection trenches upon
the legal rights of the railroad corporation, The mere reference of
disputed issues between the parties to this court for adjudication was
not intended to constitute it an ‘administrative’ board, revisery in
character over the orders and conclusions of the commission. Our
action is judicial, not administrative. It was not intended that we
should substitute our judgment for that of the commission every time
there is a dispute touching the particular place on the line of railroad
where it would be best for the public interest that a station or a depot
should be placed. To come successfully before this court, the appellant
must be able to point out some legal right of its own which has been
infringed upon. :

DECISIONS ON COURT REVIEW DO NOT AGRDE.

So the decisions of the courts on the different provisions for
court review collected by the Senator frem Pennsylvania are
at variance, different courts construing practically the same
statute in an entirely different way. I call the attention of the
Senate to there decisions to show the necessity for the use of
great care and caution in the wording of a provision for review,
for it may affect the constitutionality of this whole measure.

Early in the session the Senatov from Ohio [3fv. ForaKrr]
introduced a bill imposing the duty of fixing rates on the courts
in conjunction with Congress. That bill has so fav not received

GBGY

 
16

serious consideration in the Senate, and up to date no support
has been tendered it aside from the nurturing watch care of the
Senator: from Ohio.

But there is a disposition in some quarters, and especially in
the literature that has been rained down upon the members of
this Senate for weeks and weeks, to take the position that this
question of the regulation of rates is not one, after all, for
Congress to exercise, either directly or through the instrumen-
tality of a commission; that while the Commission under this
law will fix the limit beyond which the carrier can not go in
fixing rates for the future, yet in some way and in some manner,
by providing for a particular kind of review, that the whole
controversy can be transferred to the courts, which will finally
determine the limit of rates which shall be fixed. And so it
has been suggested that a provision should be incorporated in
this bill providing for a review by the courts. I will favor
such a provision provided that there is no attempt or sugges-
tion in it to transfer to the courts powers that are clearly
legislative and administrative. I object to any plan which pro-
poses to confer the rate-making power on the courts, either di-
rectly or indirectly, for such power is confided to Congress and
not to the courts, and the courts should not discharge the
power even if it is attempted to be conferred by statute. The
jurisdiction of the courts affecting orders made by the Commis-
sion has been detined in the past, and the power of Congress
to enlarge the jurisdiction of the courts has been discussed by
experts in railroad law in the hearings to which I shall now
refer.

But before I read these statements, which may be found in
the hearings, I want to refer to the admirable speech of the
senior Senator from Minnesota [Mr. NeLson] made yesterday.
I see nothing that can be added to it, for it clearly states this
whole proposition. The question of regulating interstate-com-
mnerce rates is a power that is conferred upon Congress, as is
shown by the speech of the Senator from Minnesota. It is in
no respect conferred upon the courts, and they can not assume
it directly, as proposed by the Senator from Ohio [Mr. Foraker],
or indirectly, as is proposed in the provisions for review in the
document which has been prepared and printed at the request
of the Senator from Pennsylvania [Afr Knox].

Mr. KNOX. Afr. President

The VICE-PRESIDENT. Does the Senator from Kansas
yield to the Senator from Pennsylvania?

Mr. LONG. Certainly.

Mr. KNOX. Do I understand the Senator from Kansas to
throw out the suggestion that I am responsible for anything con-
tained in that document?

Mr. LONG. Not at all. I simply referred to the document.

Mr. KNOX. That document is merely a transcript of the
legislation of the yarious States to which it refers.

Mr. LONG. Certainly. Neither do I wish to imply that the
Senator desires a review that will impose upon the court the
function of fixing rates.

Mr. KNOX. Mr. President——

The VICE-PRESIDENT. Does the Senator from Kansas
yield to the Senator from Pennsylvania?

Mr. LONG. Certainly.

6669

 
17

Mr. KNOX. In reply to that, if I may say just a word, I
will state that I do not know of anyone in the Senate who is
contending for such a provision.

Mr. LONG. I am endeavoring to prove to the Senate, and
especially to the Senator from Pennsylvania, that if a provision
is inserted in this bill similar to the provisions which are con-
tained in the document which he had printed, it will result in
conferring the rate-making function on the courts by review.

I will now refer to the opinions found in the hearings by
gentlemen, who, while they may not be as great constitutional
lawyers as there are in the Senate, yet certainly on this ques-
tion of the law in relation to railroads, their opinions are en-
titled to great consideration. It is their business to guide the
operations of great corporations, to determine questions affect-
ing those corporations, and I now want to refer to their opin-
ions as to what can be done by Congress in conferring jurisdic-
tion on the courts to review the orders of the Commission.

VIEWS OF VICTOR MORAWETZ.

Mr. Victor Morawetz, general counsel of the Atchison, Topeka
and Santa Ie Railway Company, in the hearings beiore the
Committee on Interstate Commerce, Volume II, page 8u1, said:

Congress can not vest in the courts power to fix future rates or
to consider and pass upon the wisdom or policy of the Commission in
prescribing a particular rate which is neither confiscatory nor unreason-
ably high. It is well settled that Congress can not constitutionally
require the courts of the United States to perform any duties that are
not of a judicial character. Congress can not require the courts, di-
rectly or indirectly, to perform duties of an administrative or of a
quasi legislative character.

He further said:

Congress can require the courts to pass upon the question whether a
vate fixed by a commission is confisecatory. It can also require the
courts to determine whether a rate fixed by a commission or by a railway
company is excessive—illegally high. But Congress can not require the
courts to pass upon the mere business policy of fixing a rate anywhere
between those two extremes.

The Senator from Ohio [Mr. Foraker], in his speech, from
which I have quoted, says that he wants a special statutory
authority authorizing the courts to consider something in rela-
tion to a rate aside from the question whether it is unreason-
ably high, and therefore extortionate to the shipper, and a rate
that is unreasonably low, and therefore confiscztory as to the
earrier. Mr. Morawetz, in his statement, says that Congress

an not confer upon the courts the power to decide anything
between these two extremes.

He further said:

This precise question has never been decided nor considered by the
Supreme Court, because it never arose. Congress never attempted to
do such a thing. But a similar question has arisen under State legis-
lation purporting to vest the rate-making power in the courts and this
legislation has been condemned as unconstitutional.

In State v. Johnson (61 Kans., $05) the supreme court of Kansas de-
cided that the act of the legislature of that State creating a court
called the ‘court of visitation’? was unconstitutional, for the reason
that it conferred upon this court the power of prescribing the future
rates for railway companies, that being a legislative and not a judicial
function. The same conclusion was reached when the yalidity of this
KKansas law was considered by the circuit court of the United States
in Western Union Telegraph Company v. Myatt (98 Ted. Rep., 835).
(See also Nebraska Telegraph Co. v. State, 50 Nebr., 627.)

He further said:

It is clear, however, that if Congress can not give to the courts
original power to prescribe what rates the railway carriers shall charge,

6669: 2

 
18

Congress can not require the courts to do this indirectly, by requiring
them to reconsider the wisdom and policy of the Commission in fixing
arate. In other words, Congress can not make the court in effect an
appellate railway commission to sit in review of the actions of the In-
terstate Commerce Commission, to hear de noyo the questions passed
upon by the Interstate Commerce Commission and to substitute the
ideas of the court as to the wisdom and policy of a particular rate for
the ideas of the Interstate Commerce Commission. Any statute au-
thorizing a commission in the first instance to exercise purely discre-
tionary power in fixing rates and requiring the courts to review this
discretion of the Commission would be unconstitutional, because the dis-
eretion to be reviewed by the courts would be a legislative discretion
and not a lesal discretion. It is obvious that such a statute would in-
directly make the courts the rate makers for all the railways in the
United States, because a decision of the Commission or the action of
the Commission in fixing a rate would in no case be final. Wither party
could ask the court to reconsider the whole question as it was con-
sidered by the Commission and substitute its ideas of the wisdom and
policy for the ideas of the Commission. 4

The courts undoubtedly can be required to pass upon the question
whether a rate prescribed by a commission is unreasonably high, and
therefore unlawful. The courts have been required under the existing
laws to pass uwnoon the question whether the rate charged by a carrier
is unreasonably high and in violation of the provisions of the interstate-
commerce act. The courts also can be required to pass upon the ques-
tion whether the act of a carrier in fixing a rate is in violation of any
legal order of the Commission. But they can not be required to sub-
stitute their ideas as to the wisdom or policy of fixing a rate between
the two extremes of legality which I have mentioned—that is, a rate
which is unreasonably high and the rate which is confiscatory.

The Senator from Ohio, in his speech, states the law the same
as Mir. Morawetz—that the courts will consider only whether
the rate fixed by the Commission is so unreasonably high as to
be extortionate to the shipper or so unreasonably low as to be
confiscatory to the carrier; but the Senator from Ohio wants
a provision in this bill that will permit the court to look into
the wisdom and policy of the rate fixed between those two ex-
tremes, and Mr. Morawetz says that that jurisdiction can not
be conferred upon the courts, because it would in effect be con-
ferring the rate-making power.

Myr. FORAKER. Mr. President

The VICE-PRESIDENT. Does the Senator from Kansas
yield to the Senator from Ohio?

Mr. LONG. Certainly.

Mr. PORAKER. This statement of Mr. Mcrawetz, to which
the Senator refers, is only the giving of an opinion, and it has
no binding authority, I suppose. I presume other lawyers
would have the privilege of baving a different opinion, espe-
eially those charged with the performance of the duties.

Mr. LONG. Certainly. Mr. Morawetz probably may not
equal some Senators as a constitutional lawyer; but upon this
particular question as between Mr. Morawetz, a railroad law-
yer, and the Senator from Ohio, a constitutional lawyer, the
Senator will pardon me for saying that I would give very great
consideration to the opinion of Mr. Morawetz, who has deyoted
his life to questions relating to railroads, and how their powers
can be restricted by legislation. But it is, of course, only his
opinion.

Mr. FORAKER. I do not know just what it is Mr. Morawetz
says, but

Mr. LONG. I will say to the Senator.

Mr. FORAKER. But the only contention I have made hag
been that between what was confiscatory and what was ex-
tortionate, anything that the Congress might see fit to pre-

6669

 

 

 
19

scribe would be a lawful rate with which a court could not in-
terfere. That I have said on all occasions. M1. Morawetz and
I do not differ on that, so far as I know. I have not said eny-
thing at any time or any place that was in contradiction of that,

Mr. LONG. Possibly the Senator was not in the Chamber
when I read from his speech, in which he defined the kind of
review he desired in this bill. As I understand the Senator’s
language, he wishes a review that will give the court the au-
thority to pass upon the reasonableness of a rate which is
between one that is so high as to be extortionate to the shipper
and so low as to be confiscatory to the carrier. The Senator
wants a provision in the bill that would authorize the court to
pass upon such a rate and revise the judgment of the Commis-
sion.

Mr. FORAKER. And so I do, Mr. President.

Mr. LONG. That is what I thought.

Mr. FORAKER. And not only did I contend for that, but
I contended that the court ought to have the power conferred
upon it in making this review to determine whether the rate
that was condemned as unreasonable was in fact unreasonable,
or whether it was a just and reasonable rate that should not
have been condemned; and the court should have the power—
and it could not have it unless we conferred it upon it—of de-
termining whether or not the rate suggested was between the
extremes of confiscatory and extortionate, and, therefore, a rea-
sonable and just rate which the Commission had a right under
the command of a statute to prescrihe.

Mr. LONG. I so understood the Senator,

Mr. FORAKER. I do not think there is much difference be-
tween Mr. Morawetz and myself, although I do not remember
exactly what Mr. Morawetz said. I remember I was present
when he testified, but I do not remember that he said any-
thing that was-startling or anything that was in contradiction
of any well-accepted ideas among lawyers.

Mr. LONG. I think the last statement of the Senator from
Ohio makes it very plain as to what he wants. He wants the
court given authority by a provision for review to revise a rate
that is somewhere between a rate that is so high that it is
extortionate to the shipper and a rate that is so low that it is
confiscatory to the carrier, both of which will now be set aside
without any special statutory authority. He wants a provision
for review authorizing the courts to reyise and set aside
rates between those two extremes.

Mr. HOPKINS. And a rate that has been set aside also.

Mr. LONG. And the rate of the carrier that has been get
aside by the Commission.

Mr. FORAKER. The Senator only partially states the casa.
This bill says the rates fixed by the Commission shall be reason:
able, just, and fairly remunerative. If it be competent for us to
empower a commission to fix rates in that way, it is a commana
which the Commission shall observe; and so they would be
charged with the duty not only of fixing a rate which wag
between what was extortionate on the one hand and confisca+
tory on the other, but which, being between either, would also
be fairly remunerative. It might be that the rate fixed, to
illustrate, would pay but 2 per cent on the value with reference
to which the rate was to be computed. It might be held—and

6669
20

I think it would be held by any court—that that was not a
fairly remunerative rate. What I want is that the court shall
have power not only to determine that a rate is between the ex-
tremes of extortion on the one hand and confiscation on the
other, but that it is so between the extremes as it will be just
and reasonable and fairly remunerative. That will be the com-
mand, if we pass this bill, as the Senator insists we shall, with
the provision in it to which I have referred that the Congress
will lay upon this Commission—and we have a right to know
whether or not the Commission to which we have deputed this
fmportant power has executed it in accordance with the man-
date of Congress.

Mr. LONG. The court has the right to inquire, of course, as
to whether the Commission exceeded its authority under the law.
It can only act within the law. It has not general rate-making
power, and it is a question at all times to determine whether or
mot it has obeyed the law in fixing the maximum rate. But I
suggest to the Senator that the Commission should perform some
final function. If we pass this bill it will be the function of that
Commission to fix the limit beyond which the carrier can not go
in fixing its future rates. I contend, while it is a judicial
question to determine whether that limit is so high that it is ex-
tortionate to the shipper or so low as to be confiscatory to the
carrier, that between those two extremes it is not a judicial
question if the Commission follows the law. It is an adminis-
trative question that can not be conferred upon any court on
review.

Mr. FORAKER. The Senator is precisely right in the ab-
sence of legislation, but if we say to the Commission you shall
make a rate that is just and reasonable, which would bring it
between the two, and which, in addition, shall be fairly remu-
nerative, that is a command which the Commission must obey.
My contention is that the court should have power to review
the action of the Commission and determine not simply whether
a rate is between the two, confiscatory on the one hand and ex-
tortionate on the other, but whether, in addition to being just
and reasouable because between the two, it should yet be fairly
remunerative. Fairly remunerative is an important part which
the Senator wants to overlook, and without

Mr. LONG. I do not overlook it.

Mr. FORANER. And without legislation with respect to
which no court would have any powcr to review any action
of the Commission.

Mr. LONG. I will say further to the Senator that the rate
must be justly compensatory, which is practically the same
thing.

Mr. FORAKER. Will the Senator oblige me by telling me
what he means by “ justly compensatory?” .

Mr. LONG. In my opinion, there is no great difference be-
tween the words in this bil] and the provision in the fifth
amendment of the Constitution. The Senator must remember
that the word *‘ confiscatory ” even, as defined by the Supreme
Court, means a fair return on the property that is employed in
the performance of the service. So that is a judicial question
which the courts will determine and which we can not keep
the courts from determining.

Mr. FORAKER. Mr. President, the Senator must allow me
to interrupt him without complaining, because he has done me

6669

 
21

the honor of directly addressing himself to me and calling upon
me for expressions in return to his suggestions. He uses the
language “ justly compensatory ” as an offset, I suppose, to
“fairly remunerative.” What I want to know is not what is
the constitutional signification, but what, in a practical way,
does he mean by a rate that is “ justly compensatory?’ Does
he refer, as I have heard Senators say, to what is a just com-
pensation for the services rendered? Is that what the Senator
means by it? in

Mr. LONG. That is a question for the court to determine.

Mr. FORAKER. Well, it is a question for the Senate to de-
termine. We are called upon to pass judgment upon it. What
is meant by it? Will some Senator tell me?

Mr. LONG. It is a question for the court to determine
whether the rate fixed is one that affords a fair return for the
services performed. Whether it is on that particular rate or
whether it is on that rate in conjunction with all the other busi-
ness of the carrier is for the court and not for the Senate to
determine.

Mr. FORAKER. Mr. President, I do not wish to interrupt the
Senator unduly, but this expression is being employed here
from time to time, and I want to find out what Senators who
employ that term mean by it—whether they mean that the rate
shall represent a just compensation for the services rendered in
the transportation of a particular lot of freight from point to
point. If that is what the Senator means, then I know what
he is talking about. Can the Senator tell me whether or not
that is what he means?

Mr. LONG. Later on I will discuss that particular provision
iv this measure.

Mr. FORAKER. What objection is there, may I ask the
Senator, to discussing it now? He has been employing that
term, and employing it in his references to myself. He em-
pioys it in refutation of something I am quoted as having said at
some other time. I do not know how to answer the Senator
until I know what he means by the term.

Mr. LONG. It is a judicial question, and it is for the courts
to determine just what will be considered in determining
whether a rate is fairly remunerative. My own opinion is that
it is not on the particular rate alone that they will determine
whether there has been a fair return. Rates in this country
are not based on the cost of the service. They are based more
nearly on the value of the service. I believe a rate will be
considered in conjunction with other rates to determine whether
there has been a fair return for services performed. But this
is not the question I was discussing.

Mr. FORAKER. The Senator, by his last remarks, has made
clear why it is necessary, if we are to have any intelligent dis-
eussion in which this term is employed, to have the term de-
fined. It is true, as he gays, that 1ates are generally fixed, ac-
cording to the way rates have been made heretofore, with refer-
ence to the value of the service rendered, rather than with the
idea of making a just compensation for the service rendered.
The term employed in the Constitution, when it is applied to the
taking of private property for public use, involves a valuation of
the property with a view to finding out what it is worth and
how much is taken, in making whole the person from whom it is
taken; and in that there is no element of indefiniteness or

6669
22

speculation. The value of that property is not mixed up with
the value of any other property. lt is simply, What is the thing
that is taken worth? The term “just compensation” was em-
ployed in the Constitution with reference, in other words, to the
exercise of the power of eminent domain. Nov, are we to apply
that rule in the making of this statute? If we are to employ
those words we ought to know what they mean, so we may
know what the rule is that we are going to call upon the courts
to enforce.

Mr. LONG. I want to say again to the Senator that the
question is a judicial one. It is for the courts to determine,
after the law is passed, as to the construction that shall be
placed upon it, and whether each particular rate must he
fairly remunerative or whether that rate in conjunction with
all the other business of the carrier must be remunerative. The
nearest approach to an opinion upon that proposition is in the
Minnesota case (186 U. S., 269), where the court discussed it,
but did not definitely determine it.

But this is not the question I was discussing. I was calling
the attention of the Senate to the fact that the Commission,
if this bill becomes a law, has delegated to it by Congress
certain administrative functions. It is to determine certain
facts following the standard fixed by Congress. It can deter-
mine certain questions, and it is not for a court to sit on the
wisdom and policy of the decision of the Commission, but it is
essentially a legislative and administrative question. Congress
could make the rate. It could require that the rate should not
go into effect until approved by Congress or until approved
by another commission, but we can not require that it shall
not go into effect until approved by a court or be set aside by a
court on review, unless certain constitutional rights have been
invaded. :

Mr. CULBERSON. Mr. President——

The VICE-PRESIDENT. Does the Senator from Kansas yield
to the Senator from Texas?

Mr. LONG. Certainly.

Mr. CULBERSON. If it will not interrupt the Senator, I
would like to ask a question explanatory of this bill which he
is advocating, as I understand.

The rule heretofore has been that the measure of the rate
fixed by railroad companies should be just and reasonable.
This bill provides that the Commission shall fix a rate which in
its judgment is just and reasonable and fairly remunerative.
What I desire to know of the Senator, who: is, I understand,
addressing himself to this bill, is what it is intended to do by
adding the words “fairly remunerative?” Is it intended to
change the old standard of just and reasonable, and if so, is
it intended to liberalize that standard by increasing the rates
which may be fixed by the carrier or the Commission, or is it
intended to restrict the measure of the rate as it has been ad-
judged by the courts at common law in this country? In other
words, what is the effect intended to he had by the addition of
the words “fairly remunerative” in the description in this bill
ef what the rate shall be?

Mr. LONG. I had nothing to do with the insertion of these
words in the bill. I do not think they materially change the
rule or standard, if at ail.

6669
23

Mr. CULBERSON. Would the Senator object, then, in order
to avoid confusion, to striking out those words?

Mr. LONG. I would not object to striking them out.

Mr. ALDRICH. Mr. President——

The VICE-PRESIDENT. Does the Senator from WKansas
yield to the Senator from Rhode Island?

Mr. LONG. Certainly.

Mr. ALDRICH. There are two things in the Senator's argu-
ment that trouble me, and I will be very glad if the Senator
will permit me to ask him two questions.

This bill empowers the Commission to fix just and reasonable
rates.’ If it fixes an unreasonable rate, does it exceed its
authority, within the meaning of the amendment which the
Senator has offered?

Mr. LONG. If it fixes a rate that is so unreasonable as to
amount to a taking of the property of the carrier without just
compensation, it does exceed its authority. d

Mr. ALDRICH. How is that question to be ascertained?

Mr. LONG. By the courts.

Mr. ALDRICH. My second question perhaps has already
been answered. Does the Senator think that Congress can ex-
clude the courts from the consideration of a rate that is within
the range or within the field he has talked about—between a
rate that is extortionate and one that is confiscatory? Can
Congress exclude the courts from considering rates fixed within
those limits?

Mr. LONG. What does the Senator mean by “ exclude?’

Mr. ALDRICH. To forbid the court; or can Congress under-
take to give the Commission power to fix those rates finally,
without any review by the courts?

Mr. LONG. Congress can not

Mr. BEVERIDGE (to Mr. Atpricu). “ Prevent.”

Mr. ALDRICH. Yes; “prevent” is a better word than “ ex-
clude.” I accept the suggestion. Can Congres prevent the
courts from considering that question?

Mr. LONG. Congress can not prevent the courts from con-
sidering the whole question

Mr. ALDRICH. Certainly.

Mr. LONG. And determine what their judgment should be
as to the order of the Commission.

Mr. ALDRICH. In other words, Congress must give the
courts, if it gives them any power at all, power to review the
question as to the reasonableness of the rates, within the Sen-
ator’s meaning of the word ‘ reasonable?”

Mr. LONG. It is not, in my opinion, necessary to give the
courts authority to review these questions.

Mr. ALDRICH. That was not my question.

Mr. LONG. The ceurts will assume——

Mr. ALDRICH. That was not my question. My question is,
Can Congress prevent the courts

Mr. LONG. Congress can not prevent the courts, and should
not—and a bill that sought to prevent the courts would be
declared unconstitutional—Congress can net prevent the courts
from inquiring into the whole question and determine whether
the rate has been fixed so high as to be extorticnate to the
shipper or so low as to be confiscatory to the carrier.

Mr. ALDRICH. But that hardly answers my question, if
the Senator will bear with me. The Senator is contending that

6669

 

 

 
24

there is a great field of rates between extortionate rates and
confise:ttory rates as to which the decisions of the Commission,
acting for Congress, must be final unless the whole system is to
be overthrown. Now, how can we make those final? Can you
prevent the courts from considering every question which is in-
volyed in the making of those rates?

Mr. LONG. You can not prevent the court from considering
the whole question, but the court will not assume to set aside
the rate, if the Commission has acted within its authority, un-
less the limit fixed by the Commission is unreasonably high or
unreasonably low.

Mr. ALDRICH. The Senator is now undertaking to sdy what
the courts will hold.

Mr. LONG. I am giving my opinion. But I will proceed to
read the opinions of experts on railroad law on this question,
as found in the hearings.

Aft. Walker D. Hines, vice-president of the Louisville and
Nashville Railread Company, in his statement before the com-
mittee (Hearings, Vol. II, p. 1150), said—and I call the atten-
tion of the Senator from Rhode Island to this language:

The court can not and will not go into the questions of wisdom and
policy which the Commission may determine. The court will be prac-
tically confined io a decision whether the order so operates as_to de-
prive the carrier of its property without due process of law. Even if
the court could go beyond that, as a practical matter I do not believe
it will do it. The court will say, as it has said in so many cases of a
similar character, that. when the legislature selects a certain adminis-
tretive trilunal to decide things the decision of that tribunal is tinal,
untess there is some palpable abuse of power or discretion or some
palpable mistake on the facts.

dlr. ALDRICH. The Senator will discover, I think, the dif-
ference-between these two cases. There is no attempt made
here, and no proposition on anybody’s part, that the Commission -
shall determine and prescribe wise rates, but just and reason-
able rates, and that is the standard which Congress fixes and
whigh the Commission must follow. So all attempts to change
the standard by setting up a standard of wisdom, or any other
standard, of course, does not touch the ease at all.

Mr, LONG. The question is simply this: The standard is
fixed by Congress; authority is given to the Commission; it must
act within that authority; it fixes a maximum rate, and, using
the language of Mv. Justice Miller, that rate is the law of the
land the same as though fixed by Congress, if it is fixed within
the authority the Commission had, and the court will only de-
termine whether that rate is so unreasonably low as to be con-
fiscatory, which takes the property of the carrier, or so high
as to be extortionate, which takes the property of the shipper.

Mr, ALDRICH. The Senator is using his own language now,
and not that of Judge Miller.

Mfr, LONG. Yes. Ma. Hines further said—and I call the
attention of the Senator from Rhode Island to this:

If yow get an order from a commission making a rate, no matter how
you word the power of the judicial review, the court is not going into
those fects any further than is necessary to protect the carricr from
confiseavion, in my judgment. So, no matter how much right you

might have theoretically to do that, the matter is going to_be left prac-
tically with the Commission, unless it palpably abuses its discretion.

VIEWS OF ROBERT MATIIER.
Noperc Mather, general counsel of the Rock Island system and
the =risco system of railways, in the hearings, on page 1460,
ecla:

8669 -
25

I want to make it perfectly plain that the determination of the Com-
mission as to what _a rate shall be in a given case is, in the nature of
things, under our form of government, absolutely incapable of review,
except by another similar Commission, or by Conaress itself. Neither
the review provided for in the Townsend bill nor the general powers of
the United States court, in an application in equity to restrain the
enforcement of any rate established by the Commission, could give to
the carrier any reconsideration or redetermination of that question.
The making of a rate is a legislative function. The only question the
court can decide is whether the rate established is _a reasonable rate.
(Reasin ». Farmers’ L. and T. Co. 154 U. 8. 302; T. and P. livy. Ce,
v. Commission, 162 U._8., 197; Maximum Rate Case, 167 U. S., 234;
ee v. Johnson, 61 Kans., 803; W. U. Tel. Co. v. Myatt, 98 Fed.,
OOD.

None of the ‘moral and social” or other industrial considerations
which might move the Commission in determining what rates should or
should not be made could be considered by the court in determining
whether the rate established is reasonable. The court's inquiry would
be a cold case of figures, its determination being whether the rate
established is confiscatory. If the company on all its other business
was enabled to carn a fair return on the value of its property, the court
would never interfere with the enforcement of the rate established by
the Commission.

On page 1472 he also said:

The question whether in the making of a rate or of a system of rates
or of a system of differentials, New York and Baltimore or any other
Atlantic port shall be permitted to retain that portion of the commerce
of the country which it now holds or to increase it or to lose part of it
as against the Gulf ports is a political question entirely—that is, it is
entirely a legislative question. It is addressed to the legislative discre-
tion of the lawmaking body of this country. The question is, What does
the good of the country demand in a case of that kind?

Mr. FORAKER. Mr. President

The VICE-PRESIDENT. Does the Senator from Kansas
yield to the Senator from Ohio?

Mr. LONG. Certainly.

Mr. FORAKER. I beg the Senator’s pardon for again inter-
rupting him, and I break in upon his argument only to call his
attention to the fact that all the witnesses from whom he has
been quoting were talking about just and reasonable rates
without having any other standard prescribed by the statute.
The term “just rate” or “reasonable rate” is, as everyone
knows, an indefinite term, and it allows great latitude. If you
are to consider only whether a rate is just and reasonable, any
rate is just and reasonable that is fixed between confiscation
on the one hand and extortion on the other. But when you
add the other element, which was put in advisedly and not
until the Hepburn bill was framed, I believe—‘ fairly remu-
nerative’’—you have a new element and one that these wit-
nesses did not consider at all, and an element which the court
in review would have a right to consider and pass upon and to
determine with respect to it whether or not the Commission
had obeyed the act of Congress in that regard.

Nowhere in all that testimony, so far as my recollection goes,
ean the Senator find any witness testifying as to what the power
of the court would be except only in the absence of all additional
legislation on the subject and upon the theory that the statute
prescribed as the standard the indefinite one of just and reason-
able rates. After the words ‘‘ fairly remunerative ” came in, of
course, they constituted a new factor which the court would
have a right to make ineuiry about and pass judgment upon.

Mr. LONG. But, as I have stated before. in my opinion these
words do not materially differ from the words found in the Con-
stitution—t just compensation.”

6669

 

 
26

Mr. FORAKER. Then, if the Senator ‘comes back to that, I
again insist that we shail have a definition of “* just compensa-
tion” as applied to the making of railroad rates.

Mv. LONG. I say to the Senator again that it is a judicial
enestion whether “ just compensation ” shall be confined to that
particular rate that was challenged, or whether to that rate in
conjunction with the cther rates made by the carrier.

Vir. FORAKER. We heard a very earnest insistence from the
Senator from Iowa [Mr. Do.ttver] a few days ago to the effect
that under the Hepburn bill as framed only one rate can be con-
sidered by the Commission at a time and only one rate can be
affected at a time. Now, assuming that only one rate can be
affected, let us, just for the sake of having some intelligence as to
this point thrown into the discussion, get a definition, if we can.
of what is meant by “just compensation” in the matter of
making a rate.

Mr. DOLLIVER. Mr. President

The VICE-PRESIDENT. Does the Senator from WKansas
yield to the Senator from Lowa?

Mr. LONG. Certainly.

Mr. DOLLIVER. I would not ask the Senator to yield,
except to say that I certainly did not claim that only one rate
could be included in a complaint. I said a complaint could only
be made against one line of road. Of course complaints could
be made against a number of rates on the same line of road if
they were objectionable. I make that statement simply to cor-
rect the Senator from Ohio.

Mr. FORAKER. I think I quoted the Senator from Iowa
correctly ; I intended to; but we will assume that he is correct
and I am not. He ought to know more about what he said
than I do. We will take it that it means the rates on only one
line of road. Can we not find out what weuld be just compen-
sation to the carrier? Suppose you want to fix a rate on one of
the roads leading from Chicago to New York, what would be
the process ef arriving at a justly compensatory rate for haul-
ing a earload of anything, say from pumpkins to silk?

Mr. LONG. As I stated to the Senator before, that is a ques-
tion for the court to determine. It is a question that the court
will determine independent of what we may say about it.

Mr. FORAKER. The Senator forgets that if we insert those
words we are commanding the Commission to fix rates that are
justly compensatory, and before we lay that command on the
Commission we ought to know what it is we are going to re-
quire the Commission to do.

& v % * %* %

Mr. KNOX. Mr. President.

The VICE-PRESIDENT. Does the Senator from Kansas
yield to the Senator from Pennsylvania?

Mr. LONG. Certainly.

Mr. KNOX. Accepting the Senator's statement, and of course
fully crediting it. that he is responsible for this amendment,
and that, like any other amendment, he would be willing to
accept any suggestions that met his approbation, and that they
could go aleng in the ordinary course of parliamentary pro-
eedure, I should like to inquire if he would be willing to add
to his amendment the following words. [ shell read a por-
tion of the amendment hefore I indicate the words to which
my question is dirceted:

6669

 

 
27

And jurisdiction is hereby conferred on the circuit courts of the
United States—

I am reading from the second page, the third line—
to hear and determine in any such suit whether the order complained
of was beyond the authority of the Commission or in violation of the
rights of the carricr secured by the Constitution.

Would the Senator be willing, and thereby conform to the
language of the Constitution, to add, after the word “ Constitu-
tion,” the words “or the laws of the United States,” making
the last clause of the amendment read:

Or in violation of the rights of the carrier secured by the Constitu-
tion or the laws of the United States?

I call the Senator's attention to the fact that the second sec-
tion of the third article of the Constitution of the United States
prevides that the judicial power shall extend to all cases arising
under the Constitution, the laws of the United States, and
treaties made in pursuance thereof,

Before I sit down I should like to ask a further question,
which I think is quite important. Would the Senator be willing
to indicate on the thirteenth line, or at such other appropriate
place in the amendment where it might be inserted, the right to
the shipper to bring suit, if he is not satisfied with the order of
the Commission, which order not only may affect the rate, but
may affect the practice which if put in force might be ruinous
to a shipper or to a community? Would he be willing to insert,
as I have inserted in the section of the bill I introduced, that the
shipper or any other person who is a party to the proceeding and
who is dissatisfied with the order might likewise bring a suit
to determine whether their constitutional rights or their rights
under the statute of the United States had been violated?

Mr. LONG. I will inform the Senator from Pennsylvania
that I am not willing at this time to accept the amendments
he suggests, for the reason that we are not at this time con-
sidering amendments to the bill for the purnsre of adopting
them. But if the Senator will present his suggestions in the
form of amendments to the amendment, at the proper time,
after hearing from the Senator the reasons why the amend-
ments should be incorporated in my amendment, I will give
consideration to those suggestions, and if convinved that the
amendments are proper and should be placed in the amend-
ment I will at that time be pleased to accept them.

Mr. KNOX. Mr. President, if the Senator will permit me,
I would not have risen and made this request except in response
to the Senator’s own yoluntary statement a moment avo that
he was responsible for the amendment and would be willing to
accept any suggestion that met with his approval. Otherwise
I should not have made the suggestion at this moment.

Mr. LONG. Now, if I may be permitted to proceed.

* * Eo * * * *

Mr. Mather, in closing his remarks before the Committee on
Interstate Commerce upon the proposition we were considering,
used this language:

So that the proposition I want to make perfectly clear, and to leave
here as my opinion as a lawyer, is that no court, whenever such a case
as that is presented to it, could ever possibly decide that political ques-
tion, and there ix no way hy which Congress might phrase the act so as
to confer upon the court the power, to say that such and such a rate is
a reasonable rate under existing circumstances and then provide that

6669
28

the existing rate was then and should be the Jawful rate, or could take
away from that act of the court its essential character of being a
finding of a political or legislative question. .

It is on that ground that I say that not under any circumstances nor
by any use of language could Congress confer upon the court any power
which, in its final analysis, leaves it to the court to determine what
could be the rate or relation of rates in such case.

Mr. ALDRICH. Mir. President

The VICE-PRESIDENT. Does the Senator from Kansas yield
to the Senator from Rhode Island?

Mr. LONG. Certainly.

Mr. ALDRICH. Does the Senator from Kansas approve the
statement made by Mr. Mather?

Mr. LONG. I am submitting it as the opinion of a gen-
tleman who is an expert on railroad law. Mr. Mather is gen-
eral counsel of the Rock Island Railroad system.

Mr. ALDRICH. I was trying to find out whether it met the
approval of the Senator from Ixansas.

Mr. LONG. This statement?

Mr. ALDRICH. Yes.

Mr. LONG. It does.

Mr. SPOONER. Will the Senator allow me to ask him a
question?

Mr. LONG. Certainly.

Mr. SPOONER. Does the Senator from Kansas think it is in
the power of Congress, the amount being sufficient, to deprive
any citizen of the United States of resort to the courts to pro-
¢ect a right arising under the Constitution and laws of the
United States?

Mr. LONG. Certainly not. That is what the courts are for.

Mr. SPOONER. That is what I thought.

NOYES ON LAW-MADE RATES.

Mr. LONG. Judge Walter C. Noyes, in his excellent work on
‘American Railroad Rates, states the proposition, page 250, as
follows:

It seems impossible to draw a constitutional statute conferring upon
a court power to review upon the facts the action of the Interstate
Commerce Commission in making a rate. ‘The courts could not make
a rate, for rate making is not, and can not be, a judicial function.
‘They can not supervise the action of the Commission for precisely the
same reason. ‘There is no difference in principle between making a rate
and reviewing upon its merits the action of a commission in making a
rate. In both cases the exercise of legislative not judicial discretion
is required. A statute requiring the courts to participate, directly or
indirectly, in making rates for the future would impose nonjudicial
functions and would be unconstitutional. To repeat what we have al-
ready pointed out-—it can not be too clearly borne in mind that while
the courts can determine the reasonableness of a carricr’s charges
they can not in the same way and from the same point of view deter-
mine the reasonableness of commission-made yates. When a rate is
made by a commission, under a law, it has the effect of a law, which
the courts can only review upon constitutional grounds. The distinc-
tion is between the reasonableness of a charge and the reasonableness
of a law. But it may be said that the courts always have examined
rates made by commissions to determine whether ihey are reasona-
ble, and decisions of the Supreme Court of the United States may be
pointed out where the enforcement of commission-made tariffs has heen
enjoined because the rates were unreasonable. But, as we have already
seen, the word ‘unreasonable’? in the sense of these decisions means
confiscatory. The only ground upon which the courts could interfere
with rates made by the Interstate Commerce’ Commission would be that
they violated the fifth amendment of the Constitution—that they de-
prived the railroad of its property without just compensation or due
process of law. And they could only Lave that effect when they were
confiscatory.

6669

 
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Under the common law, the courts have power to pass upon
the reasonableness of the charges of carriers. They must cou-
sider all the facts entering into the rate. They may substitute
their judgment as to a just and proper charge for that of the car-
rier, but the courts in exumining a rate made by the legislature
act in a different capacity. The act of the legislature in fixing a
rate is a law that such shall be the rate. he courts can no
more question its wisdom cr policy than in the case of any
other law. It is immaterial whether they think it should have
been greater or less. The courts have nothing to do with legisla-
tive-made rates, except to determine whether they violate con-
stitutional provisions. In the case of Reagan v. Farmers’ Loan
and Trust Company (154 U. 8., 897) Justice Brewer, for the
court, said:

The courts are not authorized to revise cr change the body of rates
imposed by a legislature or a commission; they do not determine
whether one rate is preferable to another, or what under all cireum-
stances would be fair and reasonable as between the carriers and the
shippers; they do not engage in any mere administrative work.

NOT OPPOSED TO COURT REVIEW.

There is a disposition by those who are not in sympathy with
this legislation to insist that there is an effort here to prevent a
full review of the orders of the Commission by the courts.
Nothing is further from the intention of those who favor this
legislation. No one should object to the carrier having an
opportunity to have its day in court. It has its day before the
Commission, where a full hearing is had and where full oppor-
tunity to examine the whole question is permitted before the
rate made by the carrier is changed or modified by the Com-
mission. But that is not sufficient. The Supreme Court has
gone further and said that the carrier should have its day in
court to review the orders of the Commission. The only ques-
tion is, What can be reviciced? What can a court do after the
order of the Commission is made? In the first place, the court
ean examine and determine whether the Coniunuission has acted
within its authority. General rate-making power is not con-
ferred upon the Commission. The power to make rates gen-
erally is not delegated to that body. No authority is given
under this bill to fix definite rates, and if a definite rate is fixed
the Commission has acted beyond its authority. Authority is
only given to fix rates upon complaint, and if the Commission
attempts to change a rate without complaint it acts beyond
its authority. And so inquiry into the question as to whether
the Commission has obeyed this law—not only this, but all
other laws that have been passed for its government and guid-
ance—is always and should always be permitted in the courts,
and no attempt should be made here or elsewhere to prevent
such an inquiry by the courts.

One other thing has been determined, and that is that the
trial before the Commission is not due process of law; that
the finding of the Commission that a certain rate is fair
and reasonable is not final upon ihe carrier; that the carrier
ean go into court, not claiming that some other rate would be
fairer or more reasonable, not to question the wisdom and the
policy of the particular rate, but can go into court and charge
that the rate is so wnreasonable as not to afford just compensa-
tion; that it is so low that it does not afford a fair retura
upon the property employed in perfurming the service, and the

6669
380

courts have held that if such proof is made the rate fixed by
the Commission will be set aside, and this bill as it comes to us
from the House recognizes that such proceedings may be bad
in court to determine this question.

THE EFFORT TO CONFER INDIRECTLY RATE-MAKING ON THE COURTS.

But there are those who are not favorable to this legisla-
tion. There has been.much opposition to giving authority to
the Commission to fix a maximum rate, but realizing the
strength and support that this proposition has in the public
mind, they have abandoned all hope of defeating this part of the
bill.

The Senator from Ohio [Mr. Forarrenr] presented the alterna-
tive proposition, for all realize that there is a necessity for addi-
tional legislation, and bis proposition, instead of conferring the
power upon a commission to ascertain what is a just and reason-
able maximum rate for the future, conferred it upon the court
to determine in a particular rate that all above a certain point
would be unreasonable and unjust and enjoining the collection
of all above that point, leaving that below as the reasonable rate
in that particular case and then providing by law that that shall
be the maximum rate on this commodity between those points
for the future. That is, the court is to take the first step in
rate making. But this rate, instead of being made by Congress
and a subordinate administrative tribunal—a plan that bas been
approved in the different States—is made by Congress in con-
junction with the courts. This plan has not met with much
popular favor. But there will be an effort made in this bill,
before we get through with it, to accomplish indirectly what
the Senator would rather accomplish directly, and that is, that
after the Commission has fixed this maximum rate, after a final
hearing upon a complaint, the controversy shall be referred
to a court and there, on a review of the proceedings before
the Commission, the whole question shall be entered into and the
court determine whether or not the order of the Commission is
not only within its authority, not only that the rate fixed is so
low as not to afford a fair return on the property employed in the
service, but also whether or not it is a reasonable rate. In other
words, this commission-made rate, made by Congress through
the instrumentality of a commission, shall have no more standing
or be entitled to no more consideration in a court of justice than
a rate made by a carrier.

DANGER IN ATTEMPTING TO CONFER RATE-MAKING ON THR counts.

I do not believe that without special legislative authority in
this bill the courts will go this far. I do not believe, further,
that this authority to participate in rate-making will be exer-
cised by the courts, even though provision is made in this bill
imposing that duty on them. I believe that there is great
danger in this legislation being declared invalid and unconstitu-
tional if we insert in it a -—provision authorizing the courts to
participate with Congress in the rate-making function.

I believe that the fullest review should be accorded anyone
injured by an order of the Commission. When a suit is brought
in court to set aside an order of the Commission the question
will at once arise whether the order was a lawful order or not.
and to determine its lawfulness the court will inquire whether
the Commission acted within its authority, for there are certain

6669
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limitations and restrictions placed upon the Commission by the
present law and by the pending bill. It will be necessary for the
court, if it finds that the Commission acted within its authority,
then also to find whether the order fixing a maximum rate will
afford the carrier just compensation for the service performed.
The carrier can not be compelled to perform service for the pub-
lic without receiving a fair return upon the property employed
in performing the service. While the court will see to it that
the property of the carrier is not taken without just compensa-
tion under the order of the Commission, it should not review
the order of the Commission as to its wisdom or policy.

Congress under the Constitution has the power to regulate
interstate commerce. It can not transfer its power to the
courts. Following the decisions of the Supreme Court on the
acts of legislatures, this regulation can be made through the
assistance or by the interposition of a commission. I believe in
Congress exercising its preragutives, and I do not believe in
its attempting to impose that duty upon the courts. It is not
practicable for Congress to fix these rates itself by law. It can
only do it through the interposition of a commission, but when
it does so, and the commission acts, using the language of Jus-
tice Miller, “ that rate becomes the law of the land,” and should
not be set aside unless it is so high as to be extortionate and
takes the property of the shipper without just compensation or
so unreasonably low as to take the property of the carrier with-
out just compensation.

WHY I OPPOSED THE ESCI-TOWNSEND BILL.

The Esch-Townsend bill that pussed the House one year ago
and came to the Senate sought to impose the rate-making power
upon a special court of transportaticn by providing for a review
of the orders of the Commission as to their lawfulness, justness,
or reasonableness.

I opposed the Esch-Townsend bill for this reason, among
others, when it was considered sacred, and I aunounced my op-
pesition publicly in my State. I called attention to the fact
that that bill was constructed along the lines of the Kansas court
of visitation law, which had been declared unconstitutional by-
both the State and Federal courts. But this bill is constructed
along different lines, providing as it does for the procedure be-
fore the Commission, and not seeking to restrict or enlarge the
jurisdiction of the courts in dealing with orders of the Comimis-
slop,

That jurisdiction is clearly and Gefinitely defined by the nu-
merous decisions of the Supreme Court of the United States.
We know how far the courts will interfere with the erders of
State commissions. By analogy and compaviscn, we can readily
ascertain how fav and under what circumstances the courts will
interfere and set aside the orders of the Interstate Commerce
Commission. It has always been permissible for a shipper to
go into court and attack a rate made by a carrier as unreasonble
and unjust, but a rate made Ivy. legislative authority stands on a
different basis. It can only be attacked in court wiien it is so
unreasonable that it does not afford a fair return on the prop-
erty employed in performing the service. There should be sonie
tribunal to determine whether a charge is reasonable before and
not after it is paid. Tor almest twenty yeurs Congress as
been regulating interstate commerce through the agency of the

6669
i)

Interstate Commerce Commission. It has never imposed the
duty upon it of fixing maximum rates to take the place of those
it determined were unreasonable and unjust. This bill seeks to
impose such a duty upon the Commission. It is an important
function. It should only be imposed upon a commission which
is constituted upon broad lines and whose duties are clearly and
definitely defined.
ONE OF THREE COURSES WILL BRE TAKEN BY THE COURTS.

If a provision for review is placed in this bill, similar to the
provisions in the different States contained in the document pre-
pared by the Senator from Pennsylvania, one of three things
will occur:

First, the United Slates courts arill follow a course similar to
that taken by the supreme court of ALinnesota, decline to e.cer-
cise the rate-making function, and confine their consideration of
the rate, as they do noir, to the question as to whether it is con-
fiscatory, and as to whether the Conunission acted within the
authority of the law;

or

Second, the courts avill assume the jurisdiction, and if they do,
then we should not assume to confer this poirer on the Commis-
sion, when, in fact, it is to be exercised by the courts on revicic,
but we should adopt the plan of the Senator fron Ohio, and im-
pose the duty on the courts in the first instance;

or

Third, the Supreme Court, folloiring its decisions and taking
a course similar to that taken by the supreme court of Kansas
in the Court of Visitation case, will determine that this atlempt
to confer upon the courts the legislative and administrative
function of firing rates is unconstitutional, jor the reason that
the Constitution gives to Congress the poircr to regulate inter-
state commerce, and Congress can not transfer that poirer to the
courts, and this provision being incorporated in @ bill that might
not*have been enacted avithout it, is so closely intervoren awith
the other provisions of the bill that the whole act is unconstitu-
tional and void.

If the court should take the first course under such a pro-
vision for review as is desired by the Senator from Massachu-
setts [Mr. Lopcr] and the Senator from Ohio [Mv. Foraker],
no injury would be done and those who favor this legislation
would not be disappointed; but if the court should take either
the second or third course which I have designated—and I think
that one of these two courses would surely be taken—then the
purpose and object of this legislation would entirely fail.

TILE KIND OF COURT REVIEW I PAYOR.

And so while I believe that this bill would not be held uncon-
stitutional in its present form, for it specificaliy recognizes the
right of review and can not be construed as an attempt to pre-
vent a review, yet I am willing to place in it provisions that are
more definite along this line. But I am not in favor of any
provision for review similar to’those in the different States, to
which reference has been made, because I believe that such a
provision would imperil the constitutionality of the law and re-
sult in its being declared invalid by the courts. If a provision
for a court review is inserted in this bill that is so broad as to be
construed as imposing the rate-making power upon the courts, it
will be done without my vote.

6669
33

OPPOSED TO ATTEMPT TO ABOLISIT TEMPORARY INJUNCTIONS.

I do not favor the attempt to take from the courts any of the
power that they now exercise. I want a carrier that believes
itself injured or damaged, or its property rights invaded by the
order of the Coinmission, to have the same right to go into court
and have that order suspended as is accorded to any other
citizen of the United States who feels aggrieved by an act of
Congress or the enforcement of any other law. I do not be-
lieve that Congress has the power to take from the courts their
present authority to grant temporary injunctions. Believing,
as I do, that the orders of the Commission can only be set aside
when made beyond its authority, or when the constitutional
rights of some one have been invaded, I do not believe in placing
unnecessary and exacting burdens on any person whose rights
have been invaded when he goes into court to have those rights
protected. I believe with the senior Senator from Texas | afr.
CULBERSON] that if the courts are authorized permanentiy to
enjoin the operation of confiscatory rates by final decree, to
deny them authority to so do temporarily would limit the exer-
cise of the judicial power.

A person can no more be deprived temporarily of his property
without due process of law and without just compensation than
be can be so deprived permanently. If a rate fixed by the Com-
mission is so low that it takes the property of the carrier with-
out just compensation by restricting its use, then the carrier
should not be compelled to accept that rate a single day, for by
accepting it one day or two days its property to that extent has
been taken from it without just compensation. It may at the
end of six months or a year obtain a final decree setting aside
the order of the Commission, but it will be impossible to obtain
a return from the shippers of what was unjustly taken from it
through the order of the Commission. IT am opposed to such an
unwise and unjust procedure. I have no objection to a pro-
vision requiring notice and a hearing to be had before the order
of the Commission is suspended by temporary injunction. No
attempt should be made, however, to prevent the court from
issuing a temporary injunction, for the carrier should not be
compelled to accept a confiscatory rate a single day, even though
it is made hy a commission.

Mr. MORGAN. Mr. President——

The VICE-PRESIDENT. Does the Senator from WKansas
yield to the Senator from Alabama?

Mr. LONG. Certainly.

Mr. MORGAN. Is there any provision in this bill which
compels the carrier to accept the rate prescribed by the Com-
mission?

Mr. LONG. There is.

Mr. MORGAN. I hare not seen it. What is the remedy
eontained in this bill if the carrier should decline to accept
such a rate?

Ar. LONG. There are penalties provided for refusal on the
part of the carrier, and a wwandamus proceeding is provided to
enforce acceptance.

Mr. MORGAN. Does this bill affirm that a carrier engaged
in interstate commerce has no right to step business if it finds
it unprofitable?

Mr. LONG. I do not think the bill goes so far as that.

6669——3
bd

Mr. MORGAN. It does not go so far as that?

Mr. LONG. TI think net.

Mr. MORGAN. Then it seems to me the bill has a very
slender underpinning.

CONGRESS SHOULD NOT ATTEMPT TO TRANSFER POWER REPOSED IN IT BY
THE CONSTITUTION,

Mr. LONG. The courts of the United States cap be relied upon
to protect any person, whether an individual or a corporation, in
his constitutional rights, for they have always done so in the past;
but I do not believe that Congress should endeavor to transfer or
delegate to the courts its constitutional power to regulate inter-
state commeree. It is a great and important function, and Con-
gress will prove recreant to the trust reposed in it by the Ameri-
ean people, and we will be violating the plain provisions of
the Constitution, if we seek to perform this function in any
other way ov manner than that marked out by the Supreme
Court of the United States. Rate-making will after this bill
becomes a law be intrusted to the carrier, as it is to-day. ‘The
only difference will be that the Commission will have authority
to fix a maximum limit, beyond which the carrier can not go
in making its future rates. Congress in this bill provides
what that limit shall be, and has delegated to the Commission
the duiy of ascertaining the facts and applying the limitation.
It is essentiaNy an administrative function that is delegated
to the Comission by Congress, and not legislative. It is a
function that can not be imposed upon the courts, and the at-
tempt so to transfer it should not succeed. It would be doing
a great injustice to the public to attempt to take from the courts
their present power to protect the lives and property of the
people when invaded. It also would be a great calamity and
unworthy of us as representatives if we attempt to transfer
to the courts a duty and responsibility which is imposed by the
Constitution upon Congress.

I believe that this legislation is necessary. I believe that it
is wise, prudent, and desiruble to have a subordinate tribunal to
Congress, to which complaints can be made against rates fixed by
a carrier and which has the authority, after a full investigation,
to set aside the challenged rate and substitute a maximum rate
which, in its judgment, is just and reasonable. I believe that
this power should be carefully guarded and restricted and that
no attempt should be made to restrict or limit the court in its
power to prevent injustice, to prevent action beyond the authbor-
ity conferred by the laws and the Constitution.

We hear much in these days about the injustice of the courts
and their assumption of powers not warranted by the laws and
the Constitution, but it is gratifying also to know that from the
possible aggression of the exccutive or legislative departiwwents
there is a refuge in the courts for an invasion of personal rights,
and that there, independent of statute, independent of legisla-
tive or exccutive authority, the rights, liberties, and property
of the citizen can be successfully defended and amply protected.
I do not at all agree with the criticisms that have been made
in this debate upon the judiciary of the United States. I think
that the judges of our district, circuit, and supreme courts are
gencrally sincere, honest, faithful public servants, and that they
are endeavoring to perform their difficult duties in a way and
manner that will meet with the indorsement and commendation

6669
o~
vv

of the people; but while I recognize that the courts are always
a harbor of refuge for the injured and oppressed, yet I also
know that the Constitution imposes certain duties upon Con-
gress, among which is the regulation of commerce among the
States, and that Congress can not and should not attempt te
exercise this duty by either directly or indirectly transferring
it to the courts.

On Monday, April 2, 1906, Mr, Long offered the folowing
amendments to H. R. 12us7: ;

Qn page 11, line 5, after the word ‘ prescribed,” strike out all af
Bate ae down to and including the word ‘ jurisdiction” at the end
of line 9.

On page 14 strike out all of line 18 down to and including the word
“effect”’ in line 2, page 15, and in lieu of the words stricken out on
page 14 insert the following:

That all orders of the Commission, except orders for the payment of
money, shall take effect within such reasonable time as shall be pre-
scribed by the Commission and shall continue for such period of time,
not exceeding two years, as shall be prescribed in the order of the
Commission, unless suoncr set aside by the Commission or suspended
or set aside in a suit lreught against the Commission in the circuit
court of the United States sitting as a court of equity for the district
wherein any carrier plaintiff in said suit has its principal operating
office: and jurisdiction is hereby conferred on the circuit courts of the
United States to hear and determine in any such suit whether the
order complained of was beyond the authority of the Commission or
in viclation of the rights of the carrier secured by the Constitution.

6669

  

O
THE RAILROAD RATE BILL.

SPEECH

OF

HON. SAMUEL W. McCALL,

OF MASSACHUSETTS,

IN THE

HOUSE OF REPRESENTATIVES,

FRIDAY, FEBRUARY 2, 1906.

WASHINGTON.

1906.
6512
SPEECH

HON. SAMUEL W. McCALL.

The House being in the Committee of the Whole House on the state
of the Union and having under consideration the bill (H. R. 12987) to
amend an act entitled “An act to regulate commerce,” approved Feb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. McCALL said:

Mr. CHAamrMAN: If the pending bill made an effective re-
sponse to public opinion upon the railroad question, it would
deal in the most comprehensive and the most particular terms
with rebates or favored rates, whether given directly or in
any of the indirect forms in which they have been extended.
A secret rate lower than the rate which is published for
all or valuable concessions given shippers, under whatever
subterfuge, are obnoxious to the law, which contemplates not
merely a just and reasonable but an equal rate. What is de-
manded to meet the real evil, and what was demanded by public
opinion until its attention was diverted to an utterly irrational
and haphazard remedy, is legislation making clear beyond ques-
tion the right of every man to equal treatment and giving
him the amplest remedy for every violation of his right. The
private car, refrigerator car, the industrial switch, receiving a
part of the through rate as if it were an independent line, every
instrument of favoritism and injustice, had justly received pub-
lic condemnation. These evils were dealt with in general terms
by the amendment known as the “ Elkins Act.” But that act
needed to be broadened; it needed to be made more specific, so
that it should prohibit unequal treatment under whatever guise,
and then it needed to be enforced, not merely by a fine, but in
clear cases of evasion by imprisonment both for the giver and
the receiver of the secret rate. If a law had been passed upon
these lines one year ago, every demand of what can justly be
ealled “ public sentiment” would have been satisfied. The Re-
publican national convention in 1904 made no declaration what-
ever regarding railroads. The Democratic convention declared
against rebates and discrimination. Rebates and discrimina-
tions in all their protean forms were the real evil. The Presi-
dent in his annual message declared against them, but he pro-
mulgated as a remedy that the Commission be given authority
to fix railroad rates whenever a complaint should be made.

The leading authority upon railroad economics in the British
Empire said, not long ago, of the bill passed by the House last
winter in line with the President’s recommendation, that it
would have done no more to stop rebates than would the reen-
actment of Magna Charta. I endeavored to point out at that
time upon this floor that there was no possible relation between

6512 3
4

the giving of rebates and the fixing of rates by a commission,
and that a railroad could as easily give a criminal rebate from
a rate fixed by a commission as from one fixed by itself. And
the advocates of. this legislation have refrained from penetrat-
ing the awful mystery and have discreetly permitted the rela-
tion between rebates and commission rate making to remain a
secret until this day.

The issue of political rate making in the Congress of the
United States is not the result of any evolution or of any
expression of public opinion, but it is a mere fungus growth.
It sprung up in a night. It grew out of the Presidential non
sequitur, and I am very willing to concede that a non sequitur is
something in which a busy man may sometimes indulge. If
teachers of logic are looking for a perfect example of a non
sequitur for their classes, I commend them to the statement of
the evils and the statement of the remedy contained in the
President’s annual message to Congress in December, 1904.

And at once political rate fixing became a burning issue—I
mean in Congress, but not before the people, for there has been
no election since it was so suddenly and so illogically sprung
upon the country. Mr. Bryan, the once idolized leader of his
party, for a time dethroned, but summoned back again by the
overwhelming exodus of Silver Democrats at the last election,
Mr. Bryan, who might have brought action for infringement,
generously hailed political rate making as a decisive step
toward his cherished dogma, Government ownership, and he
fixed upon it the stamp of his emphatic approbation. He looked
upon it as his own child, and not long ago, as he was starting
around the globe, in almost the last words he uttered upon
American soil, with a paternal solicitude he commended the
bantling to the tender care of the President.

The Democratic party followed its leader and took up the
cause of rate making with enthusiasm and unanimity. As for
the Republicans, rate fixing had been made party policy by our
just elected President, and, logic or no logic, we were expected
to get in line. This is the genesis of the public opinion upon
this point. If any political platform adopted prior to the
President’s message by either of the great parties suggested any
form of rate making by the National Government as a remedy
for discrimination or for any other purpose, I trust some gentle-
man will cite it.

So far as favoritism is concerned, in every one of its forms
I am opposed to it. I would have you enact against it the
most drastic law which ingenuity could devise. And I would
have the right of every man to a just, reasonable, and equal
rate taken to the courts at the expense of the Government, in
the first instance, and ultimately of the railroads, if they were
held to be in the wrong, under every effective species of remedy,
taken to that forum where Anglo-Saxon freedom has won its
noblest triumphs. For my part I prefer the natural and benefi-
cent liberty of the courts to the cast-iron regulations of a com-
mission. I would encourage proceedings such as that in Scot-
land, which, for a differential given in good faith, took from a
railroad company in damages and costs about $700,000. But
in this measure we are neglecting to follow the vital line and
paltering with the highest interests of the country. I am for
every feature of your bill aimed at discrimination, and I would
favor far more stringent features; but your rate fixing, which

6512
5

is the substantial part of your bill, is economically as vicious as
it is illogical and I propose to submit to you some reasons why
I can not give my support to a measure which I fear you have
already almost unanimously determined to enact.

And I shall at the outset dispose of two or three preliminary
propositions. It ts claimed that it was intended to confer the
rate-making power when the interstate act was passed, and that
the Commission for ten years exercised it. The facts are that
the framers of the act declared in the debate that it did not
confer the rate-making power; the courts as early as 1890
decided that the power did not exist; there was no general be-
lief that it had been conferred, and although the Commission
assumed to pass on the relative reasonableness of rates in a
few cases, when it attempted to exercise the power In a really
important case, its authority was challenged, and the Supreme
Court finally decided that the act did not confer the power of
fixing a rate.

Of the same character as the misapprehension which I have
referred to is the pretense that the rate-fixing power in this
bill is altogether exceptional in its character—not for every-day
use, but likely only to be exercised upon rare and great occa-
sions. Gentlemen simply run away from their proposition, and
it is little cause for wonder. Their bill confers the power to
revise all the rates in the country and to substitute other rates
for them upon the happening of a mere formality. In the maxi-
mum-rate case thousands of rates were involved, and there is
the testimony of a high officer of one of the railroads concerned
that the reduction ordered by the Commission in that case would
have cost the railroads $3,000,000 a year. It would have meant
bankruptcy to some of the railroads. But if you need a decision
of a court upon so plain a proposition, rend what the Supreme
Court said when it passed upon the asserted power which is
similar to that granted in your Dill:

If—

Said the court, in 167 United States, 510—
the power existed as is claimed there would be no escape from the con-
clusion that it would be within the discretion of the Commission, of its
own motion, to suggest that all the interstate rates on all roads of the
country were unjust and unreasonable, notify the several roads of such

opinion, direct a hearing, and upon such hearing make one general
order reaching to every road and covering every rate.

It is clear that the present bill gives the Commission, upon
the mere formality of somebody’s filing a complaint, power to
set aside great groups of rates and to substitute other rates for
them. The pretense that it contemplates only the challenging
here and there of a single rate demonstrates clearly that the
advocates of this measure do not understand it or that they do
not dare avow its purpose. On the theory that a mere isolated
rate is to be tried here and there your bill amounts to nothing
from your own standpoint, for, as was said by a railroad presi-
dent the other day, it would take hundreds of years for your
court to sit in judgment upon each of the billion or more rates
in the country. Indeed, the new rates would increase faster
than your Commission could decide them. I shall therefore
assume that this measure is a rate-fixing scheme of the most
sweeping character.

The fundamental question, then, involved is, Do we want
rate making by a Government board? The burden of proof

4512
6

rests upon the man who contends that such a system should be
substituted for the system at present in force. It is upon the
advocates of this bill to show that we should set aside the
American system of fixing freight rates. which has given us
rates hardly half as high as are paid by the other great coun-
tries of the world, although our railroads pay their labor twice
the wages paid in the other countries. The burden of proof, I
say, rests heavily upon those who would radically substitute
for our present system the foreign system of fixing rates by the
Government. Magnificent platitudes about eminent domain and
our duty to exercise the great commerce powers of the Constitu-
tion will not sustain the burden. Give us a reason why we
should discard a system which has been a success for a system
which has been a failure.

The experiment has been thoroughly tried. We have the re-
sult of the experience of other nations and of our own. You
will find the experience of the great countries of the world ad-
-mirably set forth in a book by Professor Meyer upon Govern-
ment Regulation of Rates. If Professor Meyer is wrong in
any of his important statements, I have not observed that those
who differ with him have pointed out his errors. And my friend
from Pennsylvania [Mvr. SripLey], in his masterly speech yester-
day, left little to be said upon this point.

Take first the experience of Germany, which for more than
a quarter of a century has had rates fixed by the Government.
In the case of Germany, however, the Government owns the rail-
roads and has all the rights which go with the proprietor and
also with the state. The state is simply managing its own
property and manfully paying the bills. In that country the
rates were made upon a mileage basis, and this difficulty was at
once encountered. If the rates were high enough per mile so
that traffic hauled for a short distance would yield a net revenue,
they would be so high for a long haul as to be practically pro-
hibitive of long-distance traffic; and on the other hand, if the
mileage rate were so low that merchandize could be carried a
great distance profitably, the short-distance traffic would be
carried at a loss. The German Government made repeated at-
tempts to give concessions from the mileage rate in favor of
long-distance traffic. For instance, it made the so-called “ taper-
ing rate,” that would permit the wheat of eastern Germany to
find its way by rail to the great manufacturing centers along
the Rhine. Saxony, in the center of Germany, also produces
wheat, and the Saxon millers and landowners contended that
they had a “natural right” to the market in their neighborhood,
and that it was a discrimination for the Government to bring
the wheat of eastern Germany at an exceptionally low rate
to western Germany in competition with the wheat and flour
of Saxony. The German Government is a reasonably autocratic
Government, and yet, resist as it would, it was finally compelled
to yield and to reestablish the mileage rate upon the eastern
wheat; and the German minister declared that 125 miles was
the maximum distance at which wheat could be carried by
rail in Germany for domestic consumption. The same minister
said that for most purposes of trade eastern Germany and the
Rhine country were farther apart than Germany and New
York or Germany and Buenos Ayres.

The same thing was illustrated in the raising of sugar. At
the time of the sugar campaign there is a great demand for

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labor in the sugar-producing sections, and the state railroads
would sell excursion tickets to the laborer for less than the
regular rates; but the landowners of other portions of Ger-
many claimed that these special rates had the result of induc-
ing the labor, which they would naturally employ, to leave them
unless they paid higher wages—in effect these landowners
claimed that the excursion tickets operated to take away from
them their natural rights—and although it was admitted that
the laborer secured higher wages and these wages resulted in
a better standard of living and that the travel which the work-
ingmen got broadened to an extent their intellectual horizon,
yet the Government finally yielded and stopped the practice of
selling excursion tickets and restored the hard and rigid state
rate.

This insistence upon the right to a market which proximity
gives, this resistence to discrimination and favoritism shown by
hauling at a low rate the merchandize of a community at a great
distance so that it may compete in the same market with the near-
by community, is also seen in the manufacture of iron and steel.
And the effect of the recognition of the natural-right theory, the
mileage theory, in Germany, resisted in vain by that Government,
has been undeniably toward establishing a zone system of com-
merce, toward preventing Germany from becoming a common
market, and to break it up into little principalities for the pur-
poses of trade. And it is most striking and significant that the
German Government, in order to escape from the consequences
following its own exercise of the rate-making power upon rail-
roads, expended millions of dollars upon canals connecting its
rivers so that traffic might be conducted by private parties be-
tween remote parts of the Empire.

Waterways are to-day the vital currents of German trade,
although wherever railroads are permitted to compete with
water they secure the bulk of the traffic. This is proven by the
vastly greater tonnage of export coal carried by railroad than by
the Rhine. Traffic upon the railroads along the Elbe greatly ex-
ceeded the traffic upon that river, but after the Government as-
sumed control the situation was reversed. The German Goy-
ernment therefore has exjended vast sums of money in order to
confer upon private parties the power to fix under the operation
of natural laws the rates for long-distance traffic. There could
not be a more striking example of the evils of government rate
fixing than is afforded by the experience of that great and highly
civilized country.

In France the rates are made by the Government, not by a
political commission of seven men, as the bill before the House
would result ultimately in establishing for this country, but by
a bureau of thirty-three highly trained experts with a great
staff of assistants, although France has barely a tenth of the
mileage of the United States. The Government of France has
a very large financial investment in its railroads and, as in Ger-
many, it exercises to quite an extent the functions of proprietor
as well as the regulating power of the nation when it fixes rates.
You will find a similar condition in France to that which exists
in Germany. The natural waterways, supplemented by canals
built by the state, are the props which chiefly support industrial
France. And you will find, as I have said, in both France and
Germany freight rates at least twice on the average what they
are in America, although the great item in the operation of the

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railroad, the wages paid the workingmen, are on a scale less than
half what the American railroads pay. , :

The French experts find it necessary to deviate from their
ordinary rates, and in a single year 80 per cent of the traffic was
carried at special rates. What would be the effect upon public
opinion in this country if our national railroad Commission
should yield to fair economic demands and permit, if they could
do so under this bill, such a deviation from the regular rates?

In England the railroads are not owned by the nation, and
the Government, with the conservatism toward private prop-
erty which characterizes the British people, permits great lati-
tude to the railroads, and they approach in cheapness of serv-
ice and efficiency the railroads of the United States, although
their rate is much higher and their average wage is much
lower than in this country. In England, however, the Govern-
ment established parliamentary rates which, as Mr. Ackworth
says, were obsolete almost before they were enacted. They
were maximum rates such as you propose to have created under
this bill. The tendency has been for the railroads to adhere to
the maximum rate or to approach it closely. The establishment
of rates materially lower would be a confession that the maxi-
mum rates were unreasonably high and might lead to action by
the Government reducing the maximum rate. In all of these
countries we see a rigidity to the rates established by the Gov-
ernment, and we see, too, the lack of constant supervision of
detail, due to the enormous task of revising the great mass of
rates, and a lack of responsiveness to the temporary conditions
of business which an army of traffic agents, scattered over the
country at the sources of freight supply, would keep in touch
with and fully recognize in the making of rates.

The Governments of Austria-Hungary and Russia absolutely
fix their railroad rates, and substantially the same results are
witnessed there as in Germany, only in a more exaggerated
form. I have not alluded to Canada because its rate system
has been in operation only a year, and so short an experience
would be of little value. But even in that short time the com-
mission have begun to readjust rates from the standpoint of
distance and to operate as a protective tariff, and they have
succeeded in classifying beans, which are carried in small
quantities, with wheat which moves in train loads.

The experience of Australia, where the railroads are con-
trolled by the government, is valuable. Her railroads are every-
thing that the people of this country would not desire. Their
operation throws a striking light upon one of the favorite
theories of our own Commission—a theory that is entirely
natural and would have been effective had the Supreme Court
not intervened, and which would be effective under this bill.

Our railroads have made certain points, scattered all over
the country, what are termed “ basing points,” and have given
them a special rate slightly better than that to the communi-
ties immediately about them. This system results in build-
ing up centers of trade and distribution at different points in
the country, and it results also in giving the localities around
these centers lower freight rates, notwithstanding the claim
that they are discriminated against, because it enables the
railroads to consolidate their freight and haul it from the sea-
board or other sources of supply to the center of distribution
at greatly less expense, in perhaps 2,000-ton train loads, The

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9

Australian system is hostile to the basing point because it
adopts to an extent a mileage rate, as our Commission would
be compelled to do, and what is the result? A road is built,
say from Melbourne 100 miles into the interior, and at its
terminus a town springs up which becomes a center for supply-
ing the country about it and the ‘still farther interior. But
the road is afterwards extended, and the manufacturer or the
jobber in the once flourishing interior town is obviously at a
disadvantage with his competitor at Melbourne, because he has
a freight rate from Melbourne and another freight rate when
he ships his goods to the buyer. He must either retire from
business or go to Melbourne, and the result is that the commer-
cial and banking and great industrial business of Australia is
done at the four or five ocean termini of the railroads. The
freight trains from the seaboard centers peddle out small
parcels of freight at a great number of points, and such distri-
bution is enormously expensive.

The destruction of ‘“ basing points,” so called, in the United
States, would take away a great part of the business of
Atlanta, Memphis, and Kansas City, and scores of other inte-
rior centers, and would transfer it to New York and Chicago
and St. Louis. If you think our industry and trade should be
centralized in a few great cities instead of being diffused
throughout the States of the Union, then you will support this
bill, because, if it permits the adjustment of relative rates, it is
an admirable instrument to accomplish that purpose.

Then first-class passenger fares are lower in this country than
in Europe, but if one travels third or fourth class he may
sometimes travel more cheaply abroad than first-class here, and
in Germany one may save by traveling fourth-class in a box
ear on a slow train. But if one traveled on a corresponding
scale of luxury in the United States he would bill himself
through and go as freight.

Now, what is the American system which, without any con-
sideration worthy of a great economic subject and upon mere
generalities, you are airily proposing in this bill to set aside
for the policy which I have been describing? In this country
the interstate rates have been made by the railroads with
practically no check, so far as governmental interference is con-
cerned. It has been the prime policy of the railroads to de-
velop a vast continental traffic drawn at low rates and between
the most remote sections of the country. It has been to make
of America a common market. The “ natural-right ” theory has
more than once been involved. The low long-distance rates
brought the agricultural preducts of the West in competition
with the farms of New York, New England, and Pennsylvania,
in markets which, on the “ natural-right” theory, belonged to
the farmers of the last-named States. And while your lands
have gone up enormously in value the farms of New England
and the Hast have greatly decreased in value. Yet on the whole
the East has benefited because it concentrated its energies upon
manufactures and trade and the railroads took its products to
the West at low rates in the cars which bore your produce East,
and which would otherwise have returned empty.

If we had had since 1865 a railroad commission with the
power in this bill to fix railroad rates it is a moral certainty
that many now civilized portions of the West would be un-
settled regions, and as a necessary consequence your great

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10

cities would not be the magnificent affairs they are to-day.
The Hast, relatively powerful, would have resisted the invasion
upon its natural markets by the low long-distance rates, with the
inevitable result that has been witnessed in Germany. There
would have been a distance tariff, and a distance tariff would
have held back the settlefhent of the far western lands for
generations.

The Interstate Commerce Commission has more than once
affirmed the “ natural-right’” theory, and if it is to pass upon
the conflicting claims of sections it can not escape from that
theory. The elevator and dock owners and great merchants
of New York protested against a rate from the West to New
York on wheat destined for export lower than the rate to that
city on wheat for internal consumption. The low rate for the
export wheat was directly for the benefit of the farmer, but it
took from the men of New York certain profits that they
claimed the “ natural right” to have, because their city was the
gateway to the Continent, and the Interstate Commerce Com-
mission ordered that the rate on the wheat destined for export
should be the same as that for New York. The question in-
volved was of vital importance to the farmer, and it is sig-
nificant that the railroads were fighting his battle, which the
Commission decided against him in effect upon the natural-right
theory. The Supreme Court supported the railroads and over-
turned the decision of the Commission.

The striking feature in the American railroad system, then,
has been the remarkable development of the low long-distance
rate which has made of the country a common market and has
stimulated trade between its most remote parts. The Ameri-
can railroad rates, in the mass, are not the arbitrary fiat rates
such as would be ground out by a governmental machine, but,
in a sense, ‘they are self-made rates, and result from the free
play of commercial and industrial forces. Even such a differ-
ential as that established in favor of Baltimore and Philadel-
phia against New York and Boston, which would at first sight
appear artificial, was the result of one of the fiercest and most
expensive commercial wars ever waged upon this continent,
and when a few months ago the Interstate Commission was
ealled upon to arbitrate, under an agreement between the
cities, as to this differential it reached the very conclusion that
was the outcome of that war.

The enormous expansion following the civil war was suc-
ceeded by the severe financial crisis of 1873, and for a half
dozen years the country was in the gloom of a profound depres-
sion. There were armies of unemployed in the factory cities
of the East, vast numbers of immigrants seeking employment
who had poured into the country during the years of its appar-
ent prosperity. Our industrial collapse would have been even
more serious and profound had it not been for the policy of our
railroads. New lines had been opened up through rich areas.
inhabited only by the buffalo and the wolf. But in spite of the
fact that the price of whéat had fallen 30 per cent, the railroads
established such low rates to the seaboard that the lands were
quickly put under the plow, and a great portion of the surplus
population of the East was transferred to the farms of the
West. Nearly the entire wheat crop of some of the States be-
yond the Mississippi found a market on the other side of the
Atlantic. Mr. Edward Atkinson, as exact an economic author-

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ity as ever lived in America, estimated that the saving upon the
transportation of wheat from the Mississippi to the Atlantic
during the fourteen years succeeding 1873 amounted to 33 cents
on every bushel. Suppose we had had a governmental commis-
sion at that time, when the Hast was politically the strongest
section and held the dominant power. Is it not almost a cer-
tainty that they would have listened to the protest of the latter
section against the disturbance of their domestic market in those
depressed times, and that those now mighty and stable Com-
monwealths that lie beyond the Mississippi would have waited
for that great development which the railroads forced upon
them? Why, those great States are the very daughters of the
economic American system of making freight rates. They would
not have come into being under the system established by this
bill, and yet they are now blindly clasping hands to strangle
the mother who bore them. The working of natural laws and
the unhampered genius of the enterprising American railroad
men proved during that great crisis the salvation of the country.

The rate making of our railroads is done by an army of tens
of thousands of men, picketing every part of the country. Often
cars have to be returned empty over a long route. A rate that
would pay the difference between hauling a car loaded and
hauling it empty in such a case would pay the railroad. The
traffic agent will often discover a commodity of low value in
one part of the country that can be used in another part, and
which, unless carried at a very low freight charge, can not be
earried at all. The transportation will pay the owner of the
commodity something; it will also pay the railroad, and the
commodity will be used to advantage by a distant consumer.
That traffic would be at once set in motion. The nicest curve,
the strain of a swift train upon a bridge, the building of tun-
nels, can present no more technical questions to the engineer
than are often faced by the thousands of traffic men who, in
their eager search for tonnage, must consider rival markets and
the relative demands of localities.

The flexibility of this system, where rates are fixed by eco-
nomic laws, is infinitely preferable to the wooden system estab-
lished by this bill, where, after a rate has been determined, you
walk off and leave it a fixed and immutable fact for three years,
unless a decree cau be obtained from an overworked Commis-
sion changing its decision and establishing a new rate. And by
the time the authority would be conferred the necessity for a
change of rate would probably have passed away.

The editor of the London Statist. perhaps the leading financial
organ of the British Empire, in writing recently of a typical
report—that of the American Great Northern Railroad—said the
results shown in that report would fill the shippers of Great
Britain with envy, in which country he declares that, notwith-
standing the density of traffic, the people under tariffs directed
by government have had very little reduction in a quarter of a
century.

Gentlemen talk of throttled competition. You must remember
that the most effective competition is not between two or more
parallel railroads serving the same points, but between railroads
connecting different sources of supply with the same market.
The competition between markets has done more to reduce
freight rates permanently in this country than the competition
between parallel roads, including the injurious and spasmodic

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“cutting” in rate wars. The rates from Chicago to New York
compete with the rates from Chicago to. New Orleans and, it may
be, with the rates from Chicago to the Pacific. The lines from
St. Paul to New York or Boston run in opposition to the steam-
ships plying between South America and London or with the
railroads that carry the wheat of interior Russia to the sea.
The primary instinct of self-preservation will inspire railroads
to protect the markets of the territory they serve. Every in-
terest of private property impels them not merely to preserve,
but to build up their communities. But here you propose to have
a governmental agency step in and set aside the primary edicts
of commerce and trade. It may be for this agency to say not
that the railroad shall serve its own interests by serving the
interests of its territory, but to say that the natural advan-
tages of its community are not equal to those of a competing
community a thousand miles distant served by another railroad,
and that the latter community should have a relatively better
rate. And it will doubtless be claimed that it has the power, in
order to prevent whit may be called discrimination between
communities to readjust the rates.

Suppose the farmers of Vermont should contend before the
Commission that they were only 200 miles from Boston, and
that it was a destruction of their natural market for the agri-
cultural products of the West to be brought 1,000 miles iuto
Boston as cheaply as their own produce, and that their rate
to Boston should be relatively reduced. What will your Gov-
ernment commission say to that? Or, suppose some iron-manu-
facturing locality in Pennsylvania should assert that the low
rates on coal and pig iron to Worcester, in New England, was
a discrimination against the rights of the former locality, what
will your railroad commission say to that? It is inevitable that
sooner or later, struggle as you may, you will repent the ex-
perience of Germany and have a distance tariff. Mr. Ack-
worth, the leading English authority, speaking fifteen years
ago of the effect of low rates to bring distant markets together
and of the inevitable tendency of government rates ta become
distance rates, said if anyone “‘ wishes to put an end to this state
of things and to return as near as may be to the age of gold,
when the Middlesex farmers had in the London cattle market
the full advantage of their geographical position, he can not do
better than devote his energies to securing a government con-
trol of railway rates.” There is no reason why you gentlemen
from the South and West should not have the mileage basis
if you want it, but I shall do what I can—I fear much too
little—to make you see just what you are voting for. If you
want sooner or later to put an effective brake upon our progress,
you will find no better way to do it than to vote for the policy
upon which the pending bill embarks the country.

Then, the port-preference clause of the Constitution would
prohibit the Commission from giving one port an arbitrary dif-
ferential rate better than another port. Do away with these
differentials and you strike a mortal wound at competition.

I have not understood that a popular government was adapted
to carrying on to advantage, even on its own account, a busi-
ness ordinarily conducted by private enterprise. From the time
when the Pilgrims saved themselves from starvation only by
abandoning the practice of raising corn in common and permit-
ting each family to raise its own corn to the time when Massa-

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chusetts built the Hoosac Tunnel for about thirty millions, which
it afterwards sold for ten millions, or when Illinois completely
bankrupted itself in building railroads and canals and conduct-
ing the banking business, the experiments of government on
this continent in running business enterprises have uniformly
been attended “with great waste, if not uniformly with failure.
But what may not be expected when a governmental agency
manages business for which private individuals pay the bills?
The pending measure not merely confers upon a commission
the power of establishing a rate, but it makes them in important
particulars general managers of the railroads.

It confers upon them authority to prescribe just and fair
and reasonable regulations or practices in respect to transpor-
tation. It attempts to give them both judicial and legislative
powers, making them now a little congress and now a little
court, for the Supreme Court has held that it is for the ju-
diciary to say what is a reasonable rate and for the legislature
to prescribe what’a future rate shall be. The latter is the
least of the legislative powers conferred. The Commission may
by an order destroy the prosperity of a section of the country
and may, in effect, impose restrictions upon commerce between
States which it was the prime purpose of the Constitution to
prevent. With the Government fixing rates, constituencies
would inevitably carry their grievances into politics. I believe
it will be contended’ that your bill in substance confers the
power to impose a rate for one section in its relation to the rate
of another section. You will therefore have the different parts
of the country knocking at the door of the National Government
for favors, and intrigue and politics will rekindle the sectional
jealousies that have now been happily allayed. This policy
will again plant the seeds of discord in the hearts of the
American people.

The railroads are not even permitted by this bill to give ex-
cursion rates between interstate points without first publishing
a schedule thirty days in advance, or unless the Commission
makes a special dispensation or a general regulation permitting
it. If that does not make a legislature of the Commission, then
the hitherto accepted notions of the function of legislation will
need to be radically revised. The “ Be it enacted by the Phil-
ippine Commission,” which gives vitality to the laws of a people
who are neither a citizen nor a foreign people, will be matched
by the ‘“ Be it enacted by the Interstate Commerce Commission ”
in laws passed for the government of the people of the United
States. If the making of railroad rates is a legislative func-
tion which can be delegated by calling it administrative, why
may we not in a bill originating in the House confer upon a
commission the power to fix tariff rates?

You propose to confer upon a mere human agency a practica’
task that would be superhuman. It is made their duty upor
complaint to revise any and all the thousand millions or more
freight rates in the country and an untold number of passenger
rates. In addition to administrative functions, in defiance ot
the Constitution, you confer upon them, as I have said, judicial
and legislative powers. They are to be vested with author-
ity over a dozen billions of property and nearly a million and
a half of employees. The enormous magnitude of the task is
admitted, but there is to be an easy solution for it all.

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14

We are to have a Commission made up of prodigies and paid
splendid salaries. The President, at Austin, Tex., last April,
before the two houses of the Texas legislature, gave his notion—
and a lofty one it was—of the character of the men who should
constitute the Commission. “They should not,” he said, “be
swayed by any influence whatever—social, political, or any
other—to show improper favoritism to the railroads,” and, “on
the other hand, if the rate is unjustly attacked, no matter if
that attack has behind it the feeling or prejudice of 99 per cent
of the people,” they will stand up against that attack. This is
a noble ideal, but where are these paragons to be found? Even
far higher officers than commissioners are not always found to
be unresponsive to public sentiment. The President has un-
doubtedly selected for the commissions he has already filled
the men whom he believed the best adapted to the work.
Nearly all the members of the present Commerce Commission
were appointed by him, and yet the Administration bill intro-
duced in the House a year ago proposed to abolish this Com-
mission absolutely. The first Canal Commission were paid
magnificent salaries, and yet they were unceremoniously deposed
from office in scarcely a year after the President had appointed
them. And the present Canal Commission, even with the aid of
the $10,000 press agent, does not seem to command the admiring
approval of the country. [Applause.] The President will be
compelled to discover a new field if he finds the remarkable men
that he undoubtedly desires to appoint. But, even if he should
find them, he can not endow them with immortality, and some
day another President will appoint their successors, provided
the Board should not be abolished beforehand, and these suc-
cessors may be made of common official clay. For my part, I
doubt that you will get a better Commission than the one you
now have. I have known the New England member from boy-
hood. He is a brilliant lawyer, and one whom it is not possible
to corrupt. The chairman is an able and fair-minded man. The
other members command the respect of the people who know
them.

But the difficulty will be not so much with the men as with
the system. They will be unable to perform those impossible
duties, and then their work is near the political line, across
which they will inevitably drift, and, as has been attempted
already in some.of the most enlightened States in the Union,
some day, acting under pressure or under the spur of ambition
or of a desire to “do things,” some great schedule is liable to
be broken into atoms, and the commerce and industry of one sec-
tion may be arbitrarily transferred to another. I believe that
it is vastly better for the interests of the country, so long as
rates can be fixed under the operation of economic laws, to re-
ject the artificial method proposed by this bill, which makes of
a comnission a sort of Providence with power to create one
city and destroy another. ‘

It is an extraordinary power—the power to fix railroad rates.
It might be so exercised as to act as a tariff between States; to
strike down trade between remote sections of the country; to
dissipate the foreign and domestic commerce of New York;
to cause the great city of Chicago, like many another exhalation,
to sink back again in the marshes from which she sprang. And
yet gentlemen contend that this power is so unimportant that
we can call it “ administrative” and delegate it.

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As representing some of the people of New England upon this
floor, I say to you that I believe they do not care to offer up
.Supplications to any statutory deity at Washington for the
right to continue to exist, but that they will bravely take their
chances with those economic forces which, with a disastrous
exception, have hitherto ruled. Having seen her commerce
swept from the seas by the action of the national Government
in imposing an utterly useless and unstatesmanlike embargo,
New England can more safely reckon with the constant or
slowly changing economic forces than to have her domestic
commerce subject to the “theories of progress”’ of a commis-
sion, possibly of martinets and almost certainly of politicians.
The prosperity of her people is vital to the existence of the
great railroads which now serve them, but if that should be
entirely disregarded, if the railroads should attempt to destroy
themselves by destroying the communities which support them,
the people of New England still have the courts, and if you
will perfect their remedies’ the dangers that they will be under
in even the extreme case I have supposed will be less than the
dangers you are creating by the policy of this bill.

Economie writers divide American railroad commissions into
two classes—the strong and the weak. The strong ones are
those bristling with formidable legal powers and the weak ones
have commonly powers of investigating and reporting facts
and making recommendations. Mr. Charles Francis Adams,
an admirable authority, says the strong commission means “ the
constable’ and the weak one “ public opinion.”’ The difference
in the effect upon its possessor of the authority to advise and
the authority to command is strikingly illustrated by the so-
called “strong” and “weak” commissions. The strong com-
missions, aS a rule, are in antagonism with the railroads and
often also with the courts which are compelled to intervene to
set aside decrees essentially confiscatory. The weak commis-
sions, having the power only to advise, base their advice upon
rational and reasonable grounds. The best illustration of the
weak commission is that of Massachusetts. Its power regard-
ing rates is purely advisory. When a complaint is made, it in-
vestigates and reports, advising the rate which it deems rea-
sonable, and I believe in every instance in the history of the
commission its advice has been accepted by the railroads. I
venture to say that the Massachusetts commission has done as
much for the development of the railroad system and for the
protection of its public as any State commission in the Union.

If you are seeking a model for a national commission, I do
not know of a better model. The national commission has been
most successful in those cases where it has acted somewhat
upon the theory upon which the Massachusetts commission is
constituted. Over 90 per cent of the complaints made to the na-
tional commission have through its influence been adjusted be-
tween the railroads and the complainants to the satisfaction of
both parties. But in the cases in which the Commission has
fulminated decrees as to rates it has accomplished very little
for the public or the railroads. Of thirty-four decisions which
have been carried to the courts it has been overruled in thirty-
two cases and only successful in two. If you want to change the
rate-making provisions of the present law, permit the Commis-
sion, as now, to declare a rate to be unreasonable and then let
them, as in Massachusetts, suggest the rate that they deem rea-

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16

sonable. If their suggestions are rational, they will have public
opinion behind them and the railroads will be forced to com-
ply; but arm them, as you do in this bill, with the terrors of the
law, with the power to command railroads to make a rate or to
fix a so-called maximum rate, with authority to promulgate
little statutes, and you are sure to breed antagonism between the
Commission and the railroads. Then confer upon them the
powers proposed in a bill prepared by a very able member of the
Senate, against every species of favoritism, let them proceed in
the courts in the interest of individuals who have suffered by
unreasonable rates or unfair practices of railroads, have the de-
cision of these cases expedited, and it seems to me you will have
made a much better solution of the railroad question than you
afford in your bill.

Much could be accomplished by the equal enforcement of the
laws already upon the statute books if those who enforce our
laws are possessed by the unappeasable rage of justice. Sir, I
have no sympathy with that vicious sentiment which would
prosecute a man, not because he is guilty, but because he is rich,
and that would make our prosecuting offices the refuge of every
demagogue and mountebank. But great as is our country, it is
not and it never will be great enough to shelter two kinds of law,
the one for you and me, for the general mass of American citi-
zenship, and the other for some executive grand duke.

A railroad rate is a fluctuating thing in the cost of its pro-
duction, and from an economic stnndpoint no law can fairly
fix a future rate which does not fix those material elements upon
which the rate depends. As was pertinently asked by Mr.
Benton, an able lawyer of my own State, if the State fixes the
price that railroads are to receive for transportation, would it
fix also the prices that go into the making of the cost of that
transportation?

Will it fix the price of coal and ties and iron, the wages of
labor, and those other varying elements of the cost of service,
all of which absorb by far the greater part of the rates they
receive? What prudent man would care to conduct a business
with the Government fixing the price at which he should sell
his product and leave him subject to the laws of supply~and
demand for everything he was compelled to buy? A rate that
1s reasonable to-day may be unreasonable to-morrow simply
from the standpoint of the cost of production, and, under the
present law, what is a just rate can always be determined at
any given time by a court and jury whenever an individual
claims that an unreasonable rate has been exacted. The ques-
tion of unreasonableness can be tested in the courts. The juries
will not hesitate to do as they have done in England, and the
public will be protected. Is that not far more rational than the
method you propose in this bill?

Mr. STEPHENS of Texas. Will the gentleman yield for a
question?

Mr. McCALL. If I can get through in the limited time which
I have, at the end I shall be very glad to yield to the gentleman.

I can not find an economic authority worthy of the name who,
prior to one year ago, supported the theory of Government-
made rates for this country. After the President had promul-
gated the notion of rate making as a cure for rebates and dis-
criminations, there appeared a crop of economists whose names
had previously escaped the attention of the country, each with

6512
17

a patent nostrum guaranteed to work a cure on the President’s
plan. It was the heyday of the economic quack. We have
even had it proposed, on high authority, that if it were dis-
covered that one of many competing railroads, say, between
Chicago and New York, had given low, secret rates, those rates
should immediately be declared to be the reasonable rates
although they would be forced upon the competing railroads,
who were eitirely innocent, and might be made bankrupt by
them. That is a fair illustration of some of the economic
theories that have been evolved upon this question.

It is said that the sentiment of the shippers is behind this
rate-making proposition. With the exception of isolated indi-
viduals, whatever sentiment has been expressed in favor of
this policy did not appear until] it was proposed fourteen months
ago and was authoritatively put forth as the remedy for the
evils of discrimination and the giving of rebates. Even then,
few complaints were made that the rates were too high, but that
they were unequal, and on the assumption that the proper
remedy for that inequality was in the fixing of rates by the
Commission, the proposition was supported by business organi-
zations. But the more the plan was studied the less it received
the approbation of the business men of the country. The first
serious opposition came at the convention of shippers called
by Mr. Bacon, the promoter of this movement. The organiza-
tions in that convention were those which he himself had selected
and the most important of them, and probably the majority of
them, were opposed to his scheme and were therefore ruled out
of the convention. It is said that those protesting delegations
were packed by the railroads. But what shall be said of the
great national convention of the boards of trade of the country,
the most representative convention of business men that is held
upon this continent? This convention, held in the city of Wash-
ington during the last month and only a year after this new
gospel had been preached, adopted a resolution with regard to
rate fixing where the proceeding was to begin with the courts
and end with them and was, in effect, a most emphatic condem-
nation of this policy.

That resolution was adopted by a vote of ten to one of the
delegates assembled. And Jet me say to Members on the other
side of the House that this rate-fixing policy found no more un-
compromising opponents in that convention than were found
among the delegates from the great cities of the South. They
saw its viciousness not merely from the traditional Democratic
standpoint, but also from the position of self-interest. They
saw the South standing exultant upon the threshold of a bril-
liant era of prosperity, just entering upon her career of indus-
trial glory, and that the railroads will do for her what they
have already done for the North and West unless the capital
which would naturally be invested in them should be frightened
away by this populistic hullabaloo in which you are joining.

Mr. ADAMSON. May I interrupt the gentleman?

The CHAIRMAN. Does the gentleman from Massachusetts
yield to the gentleman from Georgia?

Mr. McCALL. Certainly.

Mr. ADAMSON. I do not wish to injure the gentleman by
taking his time, but I will endeavor to make reparation. I
know the gentleman desires to be correct, therefore I desire to
make a correction. I understood the gentleman a few moments

6512-2
18

ago to declare that under this law excursions could not be per-
mitted without taking time in going before the Commission. I
wish to call the gentleman’s attention to section 22 of the “act
to regulate commerce.” It makes a provision for excursions as
well as for governmental and charitable purposes.

Mr. McCALL. It may be that I am mistaken, but I think that
it is provided that schedules of all rates and fares shall be
printed thirty days before they are put in force. That would
operate by implication to change the existing law.

I willingly agree that my friend has studied the bill more
carefully than I have. But that is my conclusion.

Mr. ADAMSON. I do not think there was any intention to
alter that special section.

Mr. BARTLETT rose.

The CHAIRMAN. Does the gentleman from Massachusetts
(Mr. McCatz] yield to the gentleman from Georgia [Mr.
BarRTLettT] ?

Mr. BARTLETT. May I be permitted to say that in this bill
there is a distinct provision that none of the provisions of the
act of 1887, unless repealed or altered by this bill? The saving
clause of this particular bill is that it saves to the Commission
every right and power they had under the act of 1887.

Mr. McCALL. It covers that particular point of that particu-
lar subject in the act of 1887, and what the gentleman says
upon that point is all right.

Mr. BARTLETT. We do not cover the point.

Mr. McCALL. I beg the gentleman’s pardon. I think the
bill very clearly covers the point of supplying the schedules for
rates for a period of thirty days before they are put in force.

Mr. BARTLETT. That is the act of 1887 also.

Mr. McCALL. Yes; I may be mistaken, but I am still of the
opinion strongly in my reading of the bill that I am correct. I
thank the gentleman for calling my attention to the point.

It is contended that the policy of national rate making is
necessary in order to avert governmental ownership. Hither
governmental ownership is an evil or it is not. If it ig a wise
policy, we should embark upon it, but if it is an evil, the way to
avert it is certainly not to take the first long step from economic
rectitude that lies in its direction. Some very vicious policies
have threatened our country and have been made dangerous by
our taking the first step as a compromise. That is true with
reference to inflation. It is emphatically true with reference
to the coinage of silver, when the reason was given for taking
repeated steps in coining or buying that metal that they were
necessary to avert free coinage, until finally we had thousands
of tons of silver stored in the Treasury, and it was only by an
almost unexampled act of Presidential heroism that we did not
go to the silver standard by the mere force of gravitation.

You do not propose to have the Government take the railroads
by this bill, but you propose to have it take away from the con-
trol of the owners their only beneficial interest, which is the
rate. It is said by the advocates of the bill, for purposes of
prejudice or extenuation, that the securities of our railroads
are bountifully watered. If true, that would be a relevant mat-
ter, perhaps, for the courts to consider when a shipper claimed
that an unreasonable rate had been-exacted. Certainly it fur-
nishes no argument for the passage of this bill. It must be
considered as a matter of denunciation and indulged in for

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19

the purpose of exciting prejudice. But let us see what the fact
is. There is no higher authority upon the subject of railroads
in the United States that President Hadley, of Yale, who first
won distinction as professor of railroad economics in that uni-
versity. :

Last year he made the statement in a letter published in the
Boston Transcript—and the letter was by no means generally in
favor of our railroads—that the railroads of the country could
not be duplicated for $50,000 a mile. In other words, counting
their franchises as of no value, the material and labor necessary
to duplicate them would be in the aggregate not less than ten
and a half or eleven billion dollars, which is substantially the
amount of their outstanding capitalization, Probably it would
cost the Government, if it undertook to duplicate the work,
twice that amount, and that would not include the enormous
sums that have been thrown away in reconstruction, where, in
order to do away with curves and grades, much original con-
struction has been abandoned. If you count the franchises as
nothing—and your railroads can not be duplicated to-day by
private enterprise for less than substantially the amount of the
capitalization—how can you say that there is any material
amount of water in their securities? In the capitalization of
some railroads the nominal capital is not equal to the amount
actually paid in. In some cases the stock was sold by the rail-
road at a high premium and the premium went into its treas-
ury. Undoubtedly there are cases where railroads were built
over a new country at great risk, where business was not de-
veloped, and the men furnishing the capital received stock
bonuses. These bonuses were offered openly in order to attract
capital necessary for the work. I fancy you will hardly deny
that the investor was fairly entitled to a chance for extra profit
to pay him for the risk he assumed. If the railroad should
turn out to be unprofitable, he might lose his entire investment.
The man who paid $2 an acre for his land saw it increase, in
many cases, by the building of the railroad, by the jeopardy of
the money of other men, to $100 an acre. Are we to call the
$98 water? Gentlemen are not heard to advance that theory.

Mr. MANN. Will the gentleman permit me a suggestion in
that line?

Mr. McCALL. With pleasure.

Mr. MANN. The total capitalization of the railroads of the
United States is about thirteen billion dollars.

Mr. McCALL. I think the total outstanding capitalization is
less than twelve billions.

Mr. MANN. The total amount of stocks and bonds is some-
thing over thirteen billion dollars, with a railroad mileage of
over two hundred thousand miles. In Great Britain, together
with continental countries, the total amount of mileage is con-
siderably less than two hundred thousand miles, with a total
capitalization of over eighteen billion dollars, so that the
amount of capital we have invested per mile in this country is
far less than the amount of capital per mile invested in the
roads owned by the European governments or by private owner-
ship there, notwithstanding the prevalent opinion that every-
thing here is watered and everything there is not watered.

Mr. McCALL. I am very much obliged to the gentleman for
his interruption, and it only adds another excellent authority to

6512
20

the authority whom I have already quoted, President Hadley,
of Yale University.

Then it is said that money bonuses and land grants were given
to encourage railroad building, and in listening to the very elo-
quent speech of the gentleman from Michigan on Tuesday I at
first thought he was entirely overlooking the fact that there
had been any material investment of private capital. That
bonuses were given does not now impress me as of the greatest
consequence, because the Government, or the people who gave
them, did so from the standpoint of their own self-interest, and
in many cases they profited richly by the building of the rail-
road; but I think it fair for gentlemen to correct the order in
which they mention the sources of supply of capital to build
railroads. I believe I am entirely within the truth when I say
your bonuses and grants from national and local governments
and individuals would not all combined pay 5 per cent interest
for a single year upon our railroad capitalization.

There is no species of property that deserves the grateful con-
sideration of Congress more than the railroad property, for it
has conferred incalculable benefits upon the country. Without
the railroads our population would be confined to the seaboard
and the water courses. Three-fourths of the country would be
unsettled and uncivilized. But largely as a result of daring
investments that have been made we have to-day, with one-
twentieth of the population of the globe, a valuation of more
than a hundred billions, or one-third of the entire capital of the
globe.

Mr. SIBLEY. Will the gentleman pardon an interruption?
The gentleman speaks of one-twentieth population. I think it
is important that you also show that with one-twentieth popu-
jation we are furnishing one-third, or thirty-three and a third
per cent, in round numbers, of the entire food products of the
world.

Mr. McCALL. Yes.

The great factor in the advancement of America has been the
free play given for individual action. If at the outset we had
tied up the energies of men by statutes and removed the spur
of ambition from the inventor, the railroad builder, and the
man of business, the progress of our country would have been
far less marked than it has been during the last century, and
the progress that the rest of mankind has gained under the in-
fluence of our example would also have been less. The Amer-
ican railroad managers, not through altruism or philanthropy,
but by their individual genius, called into play by the benefi-
cent influence of our free institutions, have been working out
the destiny of the American people. They have helped power-
fully to mold a vast and naturally diverse continent into one
people. They have, in a double sense, bound together the most
remote parts of the country by cords off steel. The have inter-
woven our interests and our hearts inextricably with the meshes
of the iron net. And if they are to receive your denunciation
intead of your gratitude, then there is no species of property
in the country which may not be plundered by law. There is
a prescription that will almost infallibly work in forcing
through such legislation. Fiercely denounce some Wall street
magnate by name and then add some lurid declamation about

6512
21

insurance, and you could successfully rob any business in the
country except farming, and if farmers were not so numerous
they too would not escape.

Mr. ADAMSON. Will the gentleman allow a question?

Mr. McCALL. Certainly.

Mr. ADAMSON. Do you suppose the law would allow any
farmer in this country who would be guilty of such an action to
escape the penitentiary?

Mr. McCALL. I trust the gentleman did not think I was re-
flecting upon the farmer.

Mr. ADAMSON. You are claiming immunity for the others.

oe McCALL. I was applying your prescription, that was
all.

Mr. ADAMSON. My prescription simply requires those who
are powerful to do right—to practice equality and justice—as
well as the other classes of the people.

Mr. McCALL. That is a magnificent generality upon which
you could put any proposition through in legislation.

Mr. ADAMSON. We have not indulged in generalities, but
we have provided some magnificent specialties in this bill.

Mr. McCALL. We often make a mistake, I venture to say,
in thinking that there is a genuine public opinion. Quite too
often here we think there is a raging popular sentiment when
it is only that we have a tendency of blood to our heads. The
people do not send us here to enact every popular noise into law.
{Applause.] We often make a mistake, I venture to say.

We have seen, then, two clearly defined systems of rate mak-
ing—that of France and Germany and other foreign countries
and that of America. We have seen that the foreign system,
although put in force in countries having dense populations and
with a relatively low scale of wages has led to high rates and
restricted trade, and that any extensive commerce between por-
tions of these countries remote from each other has only been
made possible by rivers and canals. On the other hand, we have
seen the American system put in force over a sparsely settled
area and, although the wage scale has been more than twice
that abroad, the average freight rate has been only half as great,
and we have seen the most remote parts of a continent trading
with each other, the whole country made a common market and
a commerce pouring over our railroads not far in volume from
the combined raiiroad commerce of all the rest of the world, an
interstate commerce so vast as to make even our prodigious for-
eign commerce seem insignificant. And you are proposing by
this bill to strike down the American system under which these
marvels have been produced and substitute the foreign system.
Measuring my word and speaking to the exact relation be-
tween the system you are overturning and the system you are
.adopting I say that I believe you are about to vote for the most
un-American proposition ever submitted to an American Con-
gress. The fundamental question here, stripped entirely of
sentiment, is whether we shall continue the American system,
where the rates have inevitably sprung from the action of
economic forces, or whether we shall adopt the expensive for-
eign system of government-made rates and have the management
of your railroads thrown into politics, as if there were not al-
ready enough in this country upon which the politician can lay
his felonious paws. [Applause.]

6512
22

The Government may, if it desires, provide and operate at its
own cost highways over which its citizens may travel and move
their property, but it has not been a commonly exercised func-
tion to require citizens, at their own cost, to carry the persons
and property of other citizens. It certainly has been a no less
common function of government to fix the price of bread and
to establish public granaries for corn. And if either of these
functions must be exercised, it should be under the most careful
safeguards or it will be attended with grave danger. Burke
says that certain of the Pope’s territories, being obliged to fur-
nish Rome and the State granaries with corn, were utterly
ruined, and then he adds: ‘“ Having looked to the Government
for bread, they on the first scarcity will turn and bite the hand
that fed them. To avoid that evil, Government will redouble
the causes of it.” The philosophy of Burke’s illustration ap-
plies to the pending bill. It is not the least weighty of the
objections against it that it will tend to corrupt the American
people. It implies no defamation, but only a slight knowledge
of human nature to see that you are holding out to them a
temptation dangerous to their morality and dangerous also to
the rights of private property. Your railroad securities are
held in a comparatively small portion of the country, and the
great mass of people scattered over the rest of the country, with
little interest of ownership, will be interested in cheaper trans-
portation. Will not the pressure of the greater mass of what
you call public opinion have the same effect upon the national
Commission as it has had upon State commissions, against
whose rates the courts have felt compelled to intervene? If so,
you must remember that the constitutional safeguards against
the National Government are fewer and less effective than
against the State governments.

Can anyone justly say, in view of the history of our rail-
roads and the splendid service they are rendering, that the time
has arrived for our Government to embark upon so venturesome
a policy? The great organizations of labor, with their admirable
sense of self-preservation, clearly see the danger.

Your bill pretends to grant a judicial review of orders of the
Commission fixing rates, but it adopts the device of permitting
this to the railroad on the peril of its life. If the railroad avails
itself of your inestimable privilege of review and the courts
decide in its favor, it costs the Government nothing and the rail-
road has the enjoyment of its former rate; but if, as has hap-
pened in two cases out of thirty-four, the court sustains the
Commission, the railroad, if it has not adopted the Commission’s
rate, which may prove to be confiscatory, must pay a penalty to
the Government of $5,000 per day, multiplying each day by the
number of times the rate is enforced, a penalty that in some
cases would mount into the millions. Do you call this a fair
judicial review? ‘Would there be any taint of a “square deal”
in saying to a man whom a police justice had fined, “ Yes; the
justice may be wrong, as justices usually are, and you may
appeal; but if the higher court happens to sustain the justice,
you shall lose your life?”

Mr. ADAMSON. May I interrupt the gentleman?

Mr. McCALL. Certainly.

Mr. ADAMSON. Does not the gentleman think that the
carriers can avoid all such risks by putting in force the rates
fixed while they litigate to set them aside?

6512
23

Mr. McCALL. Certainly; and that illustrates the point.
You are trying to coerce the carrier on penalty of his life.

Mr. ADAMSON. But if a man is going to the penitentiary he
may appeal without asking a supersedeas, then if he does not
win he saves that much time.

Mr. McCALL. There is no such proceeding in the bill, as I
understand it.

Mr. BARTLETT. The gentleman certainly does not under-
stand that there is no provision in this bill permitting an inter-
locutory order by the court to stay the enforcement of the
order until it can be adjudicated? This bill provides for the
interlocutory order.

Mr. McCALL. I think it is doubtful if that is in. Evidently
the gentleman’s opinion is different from the opinion of his col-
league who just interrupted me. I understood him to say the
railroad might yield and adopt the rate.

Mr. ADAMSON. I suggested that he might litigate the rate
without asking a supersedeas.

Mr. BARTLETT. I started to say it is true that it says
unless it is stopped by an injunction. I apprehend that the
gentleman must know and believe as a lawyer that it is not in
the power of Congress to prevent a railroad from appealing to
the court and the processes of the court until the questions have
been decided.

Mr. McCALL. In my opinion it is entirely clear that that is
the purpose of the bill.

Mr. BARTLETT. I wish I could make it accomplish that.

Mr. McCALL. There mray be evidence of a sense of justice
in all this, but, if so, it is the sense of justice not of man, but
of the hyena and the bear. The philosophy of it is that you
may run for your life, but you are eaten if you stand, and you
will be eaten if you are caught. Compared with the scheme
of this bill there is a certain nobility in the policy of govern-
ment ownership, wrong as I believe that policy to be. You
carve our magnificent railroad system not as a feast fit for the
gods, but hew it as a carcass fit for hounds.

We pass laws here with an easy optimism and a profound
faith that, so great are the American people, their prosperity
is proof even against vicious government. And so the two
great parties, in playing the game of politics, sometimes vie
with each other in pandering to the popular passion of the
hour, and court the roar of the galleries rather than history’s
approved voice. Undoubtedly the splendid strength and youth
of the American people are well-nigh unconquerable, but no
state was ever yet so great that a persistence in evil courses
eould not lay it low. We may presume too far. If we are
guilty of reckless and impulsive action here we may wreck
the nation. If you will pardon an old fable: As the bov
Phaeton, driving the horses of the sun, but lacking Apollo’s
darting glance and unerring touch of rein, did not follow the
safe middle course, and thus wrought havoc to both the earth
and sky; so by impulse and unsteadiness in driving this
Washington chariot of ours, now steering too high and now-
too low, we may put our American constellations to flight, dry
up the courses of our iron rivers, and make of our fertile
prairies the sands of another Libya. [Applause.]

In some remarks which I submitted on this floor one year
ago upon a similar measure I dwelt upon what I regard as much

6512
24 .

more important aspects of the proposed legislation than its
economic features. I shall not repeat what I then said, but
content myself with the barest reference. This bill makes
an enormous contribution to what I regard as an evil of the
times—the steady encroachment of the legislature upon liberty.
Our boasted American freedom is being construed to mean the
power to weld statutory fetters upon the individual—to impose
upon our own selves a species of slavery. We sometimes say
that we are restraining the individual in the interest of the
other eighty millions, and we thus take away the rights of every
individual man in the whole mass and sacrifice liberty to a mere
abstraction. This is a condition abhorrent to the idea of the
founders of the Republic, who knew that men had suffered as
greatly from too much as from too little government; that they
had thousands of times been punished by law for actions essen-
tially virtuous, and so, taking care to safeguard that high kind
of liberty which would protect the individual against the
encroachments of the Government, they set our State upon the
middle course that lies between anarchy and despotism. This
tendency to too much government is not confined to one party,
for I have observed that gentlemen who delight most in quoting
the immortal Jefferson are sometimes the fondest of imposing
these fetters upon the people. The aggregate achievement of
individuals has made America. To my mind, American free-
dom is individual freedom. Give men as much liberty as you
can consistently with order and under the stimulus of freedom
and order and the right to enjoy what they accomplish and
what they gain this nation will keep magnificently moving on.

And then there is centralization. At the rate we are now
moving it will not be long before we regulate everything and
everybody from Washington. You can not govern the whole
universe from a single point and have a shred of liberty survive.

Instead of chasing every will-o’-the-wisp that shows itself
upon somebody’s horizon, Jet us then guide ourselves by the
great first principles of the American Government. And to
return to this bill, you will have, in my opinion, a better
railroad system and a better people if you safeguard in the
courts the fundamental right of every man to a reasonable
and equal rate and permit those rates to respond, as they have
hitherto, to economic forces. In the conditions existing to-day
I believe the people would shrink from governmental ownership,
because of the expense and danger incident to governmental
management. But that expense and that danger would cer-
tainly not be less when you make our Interstate Commission
general managers of railroads built and owned and operated at
the risk of private capital. [Loud applause.]

6512

O
REGULATION OF RAILROAD RATES.

SPEECH

OF

Hon. P. J. McCUMBER,

OF NORTH DAKOTA,

IN THE

SENATE OF THE UNITED STATES,

Tuesday, March 27, 1906.

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WASHINGTON.
1906.
6659
SPEECH

or

HON. P. J. McCUMBER.

The Senate having under consideration. the bill (H. R. 12987) to
amend an act entitled “An act to regulate commerce,’ approved Feb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. McCUMBER said:

Mr. PresipENT: Senate resolution No. 86, being a resolution
introduced by me on the 26th day of February of this year, is a
brief synopsis of the points I desire to make in my argument
upon the rate bill; and as it contains at least one or two fea-
tures which I shall ask to be incorporated in an amendment to
that bill, I am desirous to make that resolution a part of my re-
marks, and will ask the Secretary to read it.

The VICE-PRESIDENT. The Secretary will read as re-
quested.

The Secretary read as follows:

Resolved, That the “act to regulate commerce,” approved February 4,
1887, and acts amendatory and supplementary thereto, should be so
amended as to provide:

First. That the provisions of said act shall be so extended as to cover
and include all rates and charges for transfer or switching, and apply
to all terminal or other facilities for receiving, handling, and shipping
goods, wares, and merchandise, and shall prohibit any and all unjust
charges or discrimination in relation thereto.

Second. That if it be established that any railroad company has
granted or paid, directly or indirectly, by or ee any means or
device whatever, any rebate or preference to any shipper, that both
such railroad and said shipper shall be adjudged to pay a fine of three
times the amount of such rebate or the value of such preference granted
or. eet in addition to any other fine or penalty now provided in
said act.

Third. That all refrigerator cars or cold-storage cars or other cars,
whether owned by any railway company or by any other person or cor-
ie weed in interstate commerce, shall-be covered by the provisions
of said act.

Fourth. That all charges paid by any railroad company for use or
rental of any such cars shall be just and reasonable to the end that the
owner of such cars using the same for shipment of his own goods shall
secure no unfair or unjust benefit over any other shipper of like goods;
and all unjust and unreasonable charges by the owners of such cars
for the use or rental thereof to any railway company or for use or
rental thereof by any other shippers or for icing or other service in
connection with the use thereof shall be prohibited. :

Fifth. That on and after January 1, 1909, every railroad company
doing an interstate-commerce business shall furnish all cars, whether
refrigerator, -cold-storage, or other specially constructed, or designed
cars for the carriage of special merchandise, necessary for the ‘con-
duct of its business as a common carrier, and shall furnish at just and
reasonable ‘rates all icing and other service necessary or proper for the
protection of any goods in transit; and on and after such date no such
railroad company shall enter into any contract with the owner or ship-
per of any goods to ship the same in the cars of such owner or shi):per
or pay any rental for such cars.

6659 3
4

Sixth. That all discrimination in rates or service between persons
shipping from one point to another point shall be strictly prohibited ;
but such provision shall not prevent any railroad company from making
such special rates to or from any locality as it may deem necessary for
the development of such locality or enterprise therein, as may seem to
be for the interest of such locality, business, or the railroad serving the
same,

Seventh. That the said Interstate Commerce Commission shall be pro-
hibited from making any rules or regulations or adjusting any rates the
result of which shall in any respect prevent or discourage free and full
competition between the several carrying lines of the country.

Highth. That such Interstate Commerce Commission shall make no
rule or regulation having for its object the distribution of the carrying
or transportation business of the country between any particular carry-
ing lines or between any particular cities; but that all such carrying
business or transportation of goods shall be allowed to go to such road
or roads or through such city or cities as shall be able under free and
unfettered competition to secure the same.

Mr. McCUMBER. Mr. President, that resolution in a very
few words and in a general way expresses my own convictions
and my own personal views as to the scope and the breadth of
any law that should be proposed for the government of inter-
state commerce. It is more drastic in some respects than the
bill which bas been reported from the Committee on Interstate
Commerce. It is drastic in those provisions which are intended
to meet drastic conditions, such as rebates, discriminations,
private-car offenses, and the like. On the other hand, Mr.
President, it would liberalize the present law in respect of spe-
cial rates designed to develop either a new country or a new
industry. It would allow, under proper safeguards and restric-
tions, special rates for those smaller and weaker industries and
to localities for the very purpose of developing them to such a
condition that they could break the monopoly of the great trusts
and corporations and give the public the benefit of honest com-
petition.

It does not contain any provision about changing the rate-
making power from the managers of the railways to a political
board, for the reason, Mr. President, that, in my humble judg-
ment, such a provision will not in the slightest degree tend to
affect rebates in any way, shape, or manner, or any of the other
evils of which we are complaining, byt would, on the contrary,
be injurious to the public.

Why? First, Mr. President, because it would destroy that
elasticity so necessary for building up the interior of the coun-
try and building up any new industries; second, it would de-
stroy to a very considerable degree the little competition that
now exists between the great carrying lines; and, third, it would
lead directly to government ownership of railways in a very
short time; and I think that we would all deprecate a condition
of that character. A provision, Mr. President, which is very
doubtful of good results and very certain of bad results, in my
judgment, ought not to be made the law of the country.

Mr. President, I believe that this bill substantially as re-
ported by the Committee on Interstate Commerce will pass this
body, that it will be concurred in by the other House, be signed
by the President, and become the law of the land. Then what?
The worst disappointment that has ever befallen a reaiiy 1n-
jured and expectant people. Why? Because the bill itself
from beginning to end in its entire scope is not a bill that can
possibly reach at the real things that the people are actually
complaining of; secondly, because there is not a single provi-

6659
5

sion aimed at a single one of the real injustices or the evils
complained of that is not already a law; and the only other im-
portant provision is one which does not remedy any existing
evil, but, in my opinion, will result in incalculable injury to the
whole country.

Mr. President, the press of the country, with more zeal than
logic, has for more than a year persistently, in season and out
of season, insisted that all of our transportation evils and all
of the evils which are back of these transportation offenses are
awaiting only this panacea of Interstate Commerce Commission
rate-making power in order to be entirely eradicated. In this
the people are being deceived, and as surely as the sun shall
rise to-morrow they will awaken soon to a realization of that
deception. Worse than this, Mr. President, they will awaken
to a realization of the fact that rates which heretofore have
rapidly, and in many instances marvelously, declined will in
the future become stationary or go even higher; that rates
which heretofore have been sufficiently flexible to adapt them-
selves to the commercial and industrial exigencies of the
country will hereafter become rigid and unyielding; that the
great interior of the country, with its thousands of little cities
which have flourished and grown independent, will in the future
become more and more subservient to a few of the great sea-
board towns of the country; and that the competition which
has played, heretofore at least, some part in the matter of
lowering and maintaining lower rates will hereafter lie dor-
mant. They will awaken, Mr. President, to a realization of the
real reason for the utter and absolute complacency of all the
great trusts in the country, which are the prime causes of all
our transportation evils, and of a thousand other wrongs
against the public; and, Mr. President, there will be some
reaction, in my opinion, when they find that not a single one of
these great trusts has been in the slightest degree affected.

It is impossible to properly consider any legislation pro-
posed to remedy offenses in railroad rate making without in-
vestigating the causes which lead to such offenses, causes
which not only invite them, but, in very many instances, force
them upon unyielding railways.

Mr. President, industrial and commercial America of to-day
is not the industrial or commercial America of thirty years
ago. Remedies which might have been successfully applied to
conditions of thirty years ago have absolutely no potency when
applied to the new conditions of to-day; and, Mr. President,
the sooner we wake up to this truth and open our eyes to a
full realization as to where our industrial course has brought
us, the sooner we stop temporizing and avoiding the real issue
and face the foe, intrenched though he may be in seemingly
impregnable positions, the better will it be for the people and
for Congress. We may as well understand now where we are
at and what we are up against, industrially and commercially,
and then, if we have any remedy for the evils which flow from
these changed conditions, let us apply that remedy.

Mr. President, in all the great crises in the world’s history,
whenever the critical time has arisen which was to determine
the survival of the fittest, whether in physical, political, or
industrial evolution, the inexorable law of nature has never
given but one alternative, destruction or adaptation. Destroy

6659
6

the opposing conditions or submit and adapt yourself to them.
That is as much the law to-day as it has been any time in the
history of the world.

There is a most extreme nervous tension over this whole
country and over the world at large which is ominous, a nervous
tension verging almost on hysteria, if we can take the press
as a standard. This is not because of the little dissatisfaction
that grows out of rate making or the complaints that are made
by shippers. It has a broader and a wider significance than
that. These are only evidences of this world-wide restlessness.
It can only be compared, it seems to me, with that tense strain
of public sentiment in this country which followed the election
of Mr. Lincoln and continued up to the very beginning of the
civil war.

What is this crisis? It is the struggle for supremacy between
individualism on the one hand and combination on the other;
between. the unit individually and the unit collectively: be-
tween great corporate interests and opportunities and indi-
vidual interests and opportunities. These two conditions are
now coming in such sharp contact with each other that one or
the other will ultimately be supreme. The people are realizing
which one of these conditions is rapidly gaining the ascendancy,
and, as Americans, with their inherited ideas of independence,
they are not disposed to surrender this individual opportunity,
with its fairer hopes, with its loftier ambitions, with its fairer
aspirations, without most earnest and desperate opposition.

Mr. President, this is the people’s battle. This is what is ab-
sorbing the interest of the public, awakening distrust, creating
an antagonism and uncertain apprehension. The mere changing
of the rate-making power of railroads from manager to board,
even though it produce all that its most ardent advocates could
possibly dare to claim, would be infinitesimal in its influence
upon the final result of this contest. Destruction or adaptation
is the issue. We must accomplish the one or accept the other.

What is our present industrial situation? Why is the temper
of the people becoming so acute? What are the complaints
that are made to-day and to which we ought, in justice, to
listen? The great industrial concerns of the country, which,
by reason of their power, their wealth, their economy, are able
to control, and are controlling more and more, the principa!
branches of industry, and which, while enriching themselves
often with marvelous rapidity, are able to strike down competi-
tion wherever it may raise its head—these are the causes of
this great unrest and uncertainty, amounting to extreme hos-
tility in very many instances. These great corporations enjoy
natural advantages irrespective of any carrying privileges
through the railways themselves. These advantages are mostly
of an economic nature, wholly independent of special privileges.
There is the economy in the great packing houses where not a
hair, not a drop of blood, not a hoof, nor a horn, nor a bone, nor
an organ, hor its contents are wasted; the economy in our great
manufacturing industries, where not a single stroke of the
hammer, not a turn of the wrist, not a contraction of a muscle,
but is turned to profitable account; advantages in vast credit
and ability to control other industries which might otherwise
be antagonistic; alliances, both offensive and defensive between
each and all of such industrial corporations, whereby the one

6659
7

secures from the other either actual aid or assurance of non-
interference while it deals with its smaller adversary. These
advantages are wholly independent of special carrying privi-
leges. To compete against such advantages, the smaller con-
cerns must have the special rates. Were it in my power.I1
would give it to them. I certainly would not prevent a railroad
from giving such special or preferential rates as would enable
them to compete with the greater concerns. Against such a wall
of economic advantages, competition may hurl itself in .vain.
Its defeat is assured.

If a rival arises of such importance as to challenge serious
consideration, it is found to be to the mutual advantage of both
to unite into a still greater concern and monopolize to a still
greater extent the markets of the country.

And so it is that the average American finds that the field of
individual opportunity for the man of moderate means to build
up an industry which he may with assurance develop and trans-
mit to his children, is becoming more and more limited and
supplanted by the great corporation, and he can either go to
the wall, eke out a mere existence, or accept a clerkship, or
become the manager of a department in the larger concern.

If this average American goes into the open market to pur-
chase the necessaries of life, he finds but the dying embers of
competition. The meat trust has fixed a month beforehand
just what he shall pay for his steak or ham or bacon. The
leather trust has determined the price of his shoes and his
harnesses. The hat and clothing manufacturers have made an
arrangement with each other and with the retail merchant as
to the unalterable price for the retail of their respective
wares, and the merchant who varies a farthing loses his busi-
ness. The sugar trust, measuring with scrupulous ability his

*means to pay, fixes the price of his sugar each day. The oil
magnates have a mortgage for a definite amount of his earn-
ings if he indulges in the luxury of light. If he travels he
falls into the clutches of the hotel trust. If he wants a home
he finds a combination on all available building lots. If he
has sufficient wealth to pass this barrier and contract to build,
he has fallen into the grasp of a greater trust—the labor trust—
whose iron rules forbid more than eight hours for a day’s labor,
or more than one-half of the laborers’ ability during those eight
hours. If he desires amusement he is met with the theater
trust, and the business man, though his earnings may be fair,
is forced to live in a stall. The trusts see to it that he has nq
surplus at the end of the year.

And so, Mr. President, go where he will, he finds himself cor-
ralled by this great wall of trusts upon every side. He sees
his opportunity cut off completely, and do we wonder that his
mind has got into a condition where it is in a very receptive
mood to seize with alacrity and with a ravenous appetite any-
thing he thinks will throttle these great corporate interests?

I was very much interested a year or two ago in the most
eloquent address—I might almost call it lecture—made by the
Senator from Iowa [Mr. DoLLIvER] on the future possibilities of
the young men of energy. He depicted in the most glowing
terms, as he always does, the possibilities of every young man
who has brain and the energy to go to work to accomplish some-:
thing for himself. His rhetoric was beautiful, because no mat-

6659
8

ter what the Senator from Iowa may say his wildest fancies al-
ways fly on painted wings. He gave us an example of the Stude-
baker Wagon Company. He depicted an old man who a few
years ago in his blacksmith shop hammered day after day while
the sparks flew from his sturdy strokes. He followed him
up the ladder of prominence until he had some 30,000 people
under him, and the Senator gave that as one of the glories and
opportunities for the young man of to-day.

Ah, Mr. President, if we should take that Mr. Studebaker and
put him in his same old blacksmith shop to-day, hammering with
the same energy which he did in those days in which there was
opportunity, we would find that he would never get out of
that blacksmith shop. The Studebaker of to-day, the young
Studebaker, would put a wagon down in front of his shop for
one-third what the old man could make it for. yA

These are the conditions that the people are complaining
against, and bitterly complaining against, and if we can help
them in any way I certainly would be one who would be very
glad to do it. So I feel that we are diverting this hostile senti-
ment from its real cause—the great combinations and the great
trusts—and we are directing it, fanned by the press into a flame,
along certain channels. The sugar trust is far in the distance.
The meat trust is somewhere, but we can not reach it. The
railways, however, reach into every town and every section of
the country, and we see them constantly before us, and it is
very much easier to turn the attention of the public to and the
animosity of the public against that which they can see than
against that which they feel but can not see. So I feel that we
are using this sentiment of public indignation, of public ani-
mosity, and we are directing it in such a way that it will in the
end be detrimental and not beneficial to the very people whose
interests we are attempting to subserve.

The real root of the evil which is challenging the serious con-
sideration of the public and creating this animosity which in the
end will force paternalism upon the Government is the trusti-
fication or combination of the industries of the country. And
as I have said before, we can not deal intelligently with rail-
road rates independent of the great corporations, which every
day fix the price of the people’s commodities for the next day,
and even coerce the great railway systems into rebates and
other unlawful devices. What will it avail the public even if
in a given case a product is shipped 1 cent per pound cheaper
rom Chicago to New York if half a dozen men who own all
rf such commodity or control it still continue the old price?

Now, what the people really.want is this: They want a law
that will break every one of these great industrial concerns
into a thousand different pieces. Then they want another law
that will prevent them from ever combining again; and they
want another law that will prevent any one of them gaining
such ascendency or growing to such an extent that it will be
able again to monopolize the business of the country. And if
the Senator from South Carolina, or any other Senator, can
conceive of any plan whereby we can constitutionally reach that
condition, he will go down in history as the greatest benefactor
of the human race. I have myself found no way, but I know
that those are the conditions with which we are dealing and
they are the conditions about which the people are complaining.

6659
9

Mr. President, there are other forces that are working more
and more toward the aggrandizement, toward increasing the
size and importance and the influence, of these great industrial
concerns more insidious than the others I have mentioned,
simply because no one yet has suggested any remedy for them.
I refer to our banking system, to our great fire and life insur-
fnce companies, to the savings banks, to our great trust com-
panies.

Our national banking system has been one of the greatest
blessings this country has ever enjoyed. , It has been able to
keep a stable currency, which must be the basis of all industrial
progress and prosperity. Our great life and fire insurance
companies have likewise been of inestimable value to the
American people. Our savings banks and our. trust companies,
investing the savings of men of small means, have also been of
great benefit. But all of these working together have carried
within them a seed which under favorable conditions has grown
and developed and brought forth its train of evils.

Mr. President, the great increase in the gold production of
the United States in the last ten years, the mighty balances of
trade, averaging $400,000,000 in our favor during the last ten
years, have given us a quantity of available cash and currency
beyond anything that the country has ever known before.

The savings of the people—for despite the fact that they are
trust ridden it is a matter of fact that during these prosperous
times their savings have been greater than ever before—have
poured billions into these receptacles, and thereby subjected
enormous sums of money to the control of comparatively few
persons. These immense sums of money have been invested;
they have been used for speculative purposes in making and
breaking markets and have been manipulated to such an extent
that they have made vast fortunes for comparatively few people,
and those vast sums of money, looking for investment, go back
again to those same industries and increase their. power and
thereby decrease the opportunity for the smaller individual in-
dustry.

This, Mr. President, is creating an intense animosity, an ani-
mosity which if not checked, I believe, will in the end force
this Government more and more into the field of paternalism.
I am not raising my voice against the accumulation of great
fortunes by honest means, such as grow naturally from the
development of any business. The great inventors, such as
Edison, have been worth hundreds of millions of dollars to this
country, and they are well worthy the millions which perhaps
they have saved. So, too, a man may project a railway into a
new country, and by the marvelous development of that country
he may become many times a millionaire, but in doing so he has
made it possible for hundreds of thousands of people to become
rich, to have the comforts and blessings of life; and while he
has made one million he has made it possible for the people to
make a thousand millions. The field of opportunity should al-
ways be open to men of that class. They have been one of the
greatest blessings to the human race.

But what the American people object to, and what they have
a right to object to, is the vast sums that are being made by their
savings, by speculation and manipulation, and which sums, go-
ing into the already immense industrial combinations, advance

6659
10

their power and control, and, of course, thereby diminish the
field of opportunity for smaller business interests. They object,
and they have a right to object, to the great increase in the nui-
ber of nonproducers as compared with the producing popula-
tion of the country, for the former must always either directly
or indirectly live upon the latter.

This, Mr. President, is a very brief statement of the condi-
tions as they exist to-day. We are rapidly passing through an
evolutionary stage which in compacting the mass is destroying
the individual, and not without serious complaint on the part
of the latter, and to my mind a very just complaint. It does
not answer this to say, as has often been said, that there is op-
portunity for development and opportunity for advancement
within the limits of these great concerns. This does not answer
human aspirations. The ambition of every father is not that
his son shall be a high-salaried clerk, not that he shall simply
be an overseer or the head of a department, but that he shall be
the head of his own business, with a field of opportunity in
which may be broadly developed both the individual and the
man; and nothing short of that is going to satisfy human ambi-
tion.

Mr. President, these are the conditions the people are crying
against. How are you answering their complaint? If you say
that the new provision in the rate bill, the only important provi-
sion which is not now the law—that of changing the rate-mak-
ing power from the managers to a political board—will accom-
plish anything in changing those conditons; if you are luring
the public into the belief that this provision will answer their
prayer, then certainly the Senator from South Carolina spoke
with inspired wisdom when he said that this bill was one of
the greatest farces ever perpetrated on the public. Of course
he said this before he knew that he was to become the step-
father of this same bill.

There is a false supposition that this will be a new law affect-
ing rebates, but as a matter of truth it does not add one syllable
to the old law upon rebates. In my opinion that law is insuffi-
cient, as it now stands, and it ought to be modified. Why?
Because it does not strike with sufficient and effective force
the principal party to the rebate transaction. To be sure it pro-
vides for a fine of $5,000, we will say, but that may be a mere
bagatelle as compared with the entire amount which may be
received by one of these great concerns in rebates during a year.
If the meat trust or any other one of these trusts which are
wringing these rebates out of the railways receive $200.000
in a single year, and if at the end of the year you require it to
pay back $600,000 in fines, the next year, so far as that company
is concerned, rebates will have become a matter of past history.

The resolution which I offered follows the recommendation of
the President, that both the giver and the taker of a rebate
should pay a penalty equivalent to three times the amount of the
rebate. Why has this recommendation, the strongest and most
potent remedy in abating this abominable practice, been ruth-
lessly thrust aside? Why have we abandoned the most effective
weapon we have in our warfare against this evil while we sub-
stitute therefor a provision merely granting the Interstate Com-
merce Commission the power to fix maximum rates, which no
one has had the temerity to assert on this floor would in the

6659
11

slightest degree affect the rebate business, because anyone must
know that it is just as easy for a railway company or a trust of
any kind to avoid a rate that is made by the Commission as a
rate made by the proper board of managers themselves?

Mr. President, it has been shown that a reduction of 14 mills
per ton per mile in the aggregate would prohibit any railway
company from paying any dividend; that another reduction
of 13 mills in the aggregate would prevent them paying one
dollar upon their bonded indebtedness. I cite these facts for
the purpose of showing how sensitive every great carrying line
must be to any loss of its business. Now, we will suppose that
the beef trust, which controls the greater part of the shipments
of beef from Kansas City or Omaha or Chicago, or the sugar
trust, which practically controls all shipments of sugar in the
country, or the oil trust, which controls practically all the oil
shipped back and forth in the country, says to the railways,
“T control all of the shipments of meat,” or “oil” or “ sugar,”
as the case may be. “ Not only this, but my business is so re-
lated and correlated with all the other great concerns of the
country that I can turn one-quarter of your business into other
channels. I want to destroy my competitor, and I want you
to give me a rebate or such other privilege as will enable me to
drive him out of the market; and if you do not do it, I will
turn this business another way and drive you into bankruptcy.”

The freight agent is responsible entirely for the success of
his road. The real earnings come from the freight rather than
from the passenger traffic. The very. existence of that line will
depend upon his not losing any particular portion of that busi-
ness, and he is thereby forced into giving this rebate in order to
save his own business. It seems to me that inasmuch as the
great industrial concern is the real party in interest, the real
party who has driven the railway into this act, it should
be the principal party against whom the law should be aimed,
simply because they are enabled in that way, first, to de-
stroy the smaller competitors, and as soon as they have done
this then to raise their prices again to such an amount as is
possible and at the same time not have a serious diminution in
their sales. <i

I will give but a single example: For the last four years the
price of cattle on our western plains has been gradually de-
clining. For the same number of years the cost of converting
those cattle into meat has also slightly declined. During the
same years the price of the finished product as it comes to our
tables has very enormously advanced.

Mr. BEVERIDGE. I wish merely to make a suggestion to
the Senator in connection with his very interesting speech.
Has the Senator the figures for the last three generalizations he
has made; and if so, will he put them in his address?

Mr. McCUMBER. I have not got them to-day. I take them
generally from statements I have read in the reports. I think
they are true. I do not know the exact amounts.

Mr. BEVERIDGE. I thought-I remembered that last year,
for instance, cattle on the hoof in the farmer’s field brought 8
cents. But the Senator has made three generalizations here
of very great economic importance, and if he had the figures it
would be very helpful to many who are studying the problem if
he would insert them.

6659
12

Mr. McCUMBER. I have not got them here. I take them
from the cattle shippers, and I think they are absolutely cor-
rect.

If we can place any dependence upon the magazine articles
that have been written in the last fifteen years—not those
written within the last two or three years of hysteria, but in the
earlier period, such as come from the North American Review
and magazines ef that character—this has been the method
adopted by the great trusts in their evolution from compara-
tively innocent bodies to those of the greatest concerns in the
United States.

Mr. President, the people are asking for the enforcement of
the present law. They are not asking particularly for the
reenactment of the old law, which is being done in this bill,
but they are asking for the enforcement of the laws we have
to-day. They are asking that rebates shall cease. We have a
law for that to-day. They are asking that the great shipper
shall have no undue preference over the small shipper. We
have a law for that to-day. They are asking that the owner
of private cars shall not be able to charge such rentals for the
use of his private cars that it operates in effect as a method of
rebate which enables him successfully and easily to compete
against smaller concerns.

In brief, what the people are asking for is simply honest deal-
ing and an honest enforcement of the law. I know it is difficult
to enforce a criminal law of any character, but I believe it is
no more difficult to enforce this than almost any other law,
and especially with the new provision which you have for a
systematic method of bookkeeping.

I am informed that even an editor in New York has been able
to unearth considerable of these rebates in the sacred realms
of the sugar trust, working unaided and alone, and if this is
true, can you say that the Attorney-General, with the entire
force and wealth of the country backing him, with any number
of specialists to work up the case, is unable to do what an
individual can do working alone? This new bill contains an
admirable provision in the matter of a uniform system of keep-
ing railway records which will, in my opinion, assist greatly in
securing the proper evidence of rebates. Now, supplement this
with a law compelling every rebate to be paid thrice over by the
party receiving it, and, in my judgment, you ‘will have com-
pletely destroyed the system.

Mr. SPOONER. Will the Senator allow me a moment?

Mr. McCUMBER. Certainly.

Mr. SPOONER. In the line of the Senator’s argument, I call
attention to the fact that the House of Representatives has
passed a bill which is pending in the Senate before the Judiciary
Committee, to forfeit rebates made to large corporations to which
he refers, and providing for the recovery of double rebates at
the suit of the Government in execution of the forfeiture pro-
vided by the bill. That is in line with the Senator’s argument.

Mr. McCUMBER. It is absolutely in line, and it is in line
with the recommendation of the President, with the exception
that I make it a punishment, and it is a punishment only when it
is more than a recovery back of the amount received.

Mr. SPOONER. This is in addition to other penalties,

6659
18

Mr. McCUMBER. The provision which I have in my reso-
lution here requires them to pay three times over, and especially
would I enforce that against the party receiving the rebate.

Mr. BEVERIDGE. Does the Senator embody his suggestion
in a resolution?

Mr. McCUMBER. It is in my resolution which was read at
the beginning of this address.

Mr. BEVERIDGE. I do not want to interrupt the Senator,
but I am very much interested in his remarks. May I ask why
the Senator does not put it in the way of an amendment to the
bill itself? If it is in the form of a resolution how does he make
it effective?

Mr..McCUMBER. The Senator was probably not here when
I opened the address.

Mr. BEVERIDGE. I was not.

Mr. McCUMBER. After reading the resolution, I stated that
there were two or three provisions in it which I would ask to
have inserted as an amendment in the bill itself.

Mr. President, much more intolerable than rebates is the
private car system which has grown into use. It is, in effect, a
system of legalized discrimination of a most offensive nature.
It is but another instrumentality in the hands of the monster
industrial concern to secure special freight reduction, which,
with its already great advantages, makes it the easier to drive
its competitor out of the country’s markets.

This is accomplished in three ways:

First, by charging such a high rate to the carrying railways
for the use of the refrigerator car, over and above a fair rental
value, as to constitute, in effect, the equivalent of a large re-
bate.

Second, by making such excessive and, in many instances,
outrageous charges for icing and other privileges to outside par-
ties using their cars as to wipe out their profits.

Third, by securing from the railway companies, by the same
methods adopted in forcing rebates, special privileges, such as
rushing their products to their destination ahead of those of
their competitors and in securing for them special terminal
privileges and advantages.

Mr. President, I am not an expert upon car building, but I
have inquired from my friend on my right as to the cost of
building the refrigerator cars. I am informed that it fanges
from $800 to $1,100. We will take, therefore, $1,000 as a fair
basis. We all understand that the cars are simply rented to
the railways for three-quarters of a cent per mile. The compa-
nies using them pay full freight, but charge back for the car.
It is stated by Mr. Hill, in his testimony before the Interstate
Commerce Committee, that the average earnings of one of these
ears is about $2.50 a day. Remembering that every one of the
ears can practically be used either for meat or fruit; that some
of them can be used in the southern fruit section one season of
the year, in the California fruit section another, in the Michi-
gan and Middle States another, while those for meat are used
the year around, and remembering also that these trains run
Sundays as well as other days, we can safely estimate that they
will make a run of three hundred days in a year. That would
bring in an income of $750; in other words, 75 per cent upon
their investment in that car.

6659
14

Of course there will be other expenses, but reduce it down to
50 per cent, if you please, that 50 per cent income will amount to
what? Take it upon the first basis: If they were given simply
a reasonable value on their investment at 6 per cent, they would
receive $60 a year instead of $750 a year. The balance of that
amount, or whatever the sum may be, above the $60, or a reason-
able investment, is the equivalent of a rebate multiplied many
times over. ; *

Now, how can any small concern compete against those con-
ditions? To overcome this I have recommended in this reso-
lution, which I will ask to go in as an amendment, first, that all
of these special private cars shall be brought under the rules
and the laws of the Interstate Commerce Commission. - That is
already in the bill to-day. Secondly, that the charges for rental
and use and for icing shall only be reasonable and just, to the
end that the owner of those cars shall never have an unfair ad-
vantage over the smaller shipper. Thirdly, that at the end of
about three years all railway companies doing an interstate
business shall be compelled to own their own facilities and their
own cars. The sooner the railway companies cease their part-
nerships with any of the shippers, the sooner they are divorced
from all character of business outside that of the carrying busi-
ness, the better I believe for the railways themselves and for
the country. .

Mr. BACON. I should like to inquire of the Senator if in
his suggestion he means: to include cars engaged in the trans-
portation of passengers as well as cars engaged in the trans-
portation of freight?

Mr. McCUMBER. I did not, for the reason that I have heard
no complaint of any abuses and extra charges by those cars.
In fact, our sleeping cars, our Pullman cars, etec., I believe,
give us better accommodations than we can get in the hotels for
the same price, and we are traveling at the same time.

Mr. BACON. I merely asked the question of the Senator
because his language was so general that it would include
them,

Mr. McCUMBER. I did not intend it to include them, al-
though they might be included in the resolution.

Mr. President, the old-law writers defined law as a rule of
action prescribed by the supreme or sovereign power, command-
ing what is right and prohibiting what is wrong. That defini-
tion, to my mind, should be the breadth, the scope, the limita-
tions of government. If the Government will simply make:
good laws and then enforce those laws, there will never be
any need -for it to come down from its lofty position of govern-
ing to the position of entering into the industries of the country
in competition with the people to whom those industries belong,
because we well know that if we take that first step into the.
realm of paternalism, Government control of railway rates, I
mean such control as would be manifested in the fixing and,
determining absolutely those rates, the next and sure to follow
step, in my mind, will be the Government ownership of roads.

Why? Mr. President, because there is always an element
of the public who are demanding it; and whenever there is
such interference on the part of the Government in the running-
of the roads of the country that the owners themselyes desire to

6659 .
15

get rid of them, then we will have this double force working
together and forcing it upon the country.

Ordinarily, Mr. President, when there is a wrong to be
remedied, the first thing considered by a legislative body whose
duty is to remedy it, is to ascertain what is the best remedy.
There may be a hundred bills introduced to cure the wrong,
each having its advantages and defects.

It is scarcely possible that any one should be the perfect
remedy. Each may have its virtues and vices, and out of all
there should be selected those provisions which will insure the
greatest amount of good and the least amount of harm. Why
should a different rule prevail in this case? Why does anyone
insist upon a different rule? The press of the country seems
to have usurped the function of Congress, and said in advance
of any consideration that one certain remedy is the only remedy.
It has given no reasons in support of that contention, nothing
but the bald statement.

Mr. President, it seems to me that whenever it comes to the
question of deciding a matter according to our own judgment or
according to the judgment of the press of the country, the people
expect us to use our judgment, and to use it patriotically and
honestly for them, and not to be swayed by any character of
prejudice.

The committee was directed to take testimony upon this
question. That testimony amounts to about five large-sized
volumes, nearly all of which is directed toward the one question
of the feasibility of conferring the rate-making power upon the
Interstate Commerce Commission. Lawyers, railroad managers,
scholars, shippers, men who have made railway economics the
study of their life, foreign railway managers and those who have
studied into that question all gave their testimony upon this
subject, and the consensus of the opinion of all and the testi-
mony of nearly every man to support the contention was that
granting the rate-making power to any political board would
be injurious to the country in the long run.

Now, sitting in judgment upon that specific question, the press
ask us to disregard all of this testimony that has been taken
earefully and laboriously, to disregard our own judgment, and
simply pass a law on what they have seen fit to assert was
necessary for the Government of this country.

Before considering the expediency of this question, there are
certain legal propositions that rather obstruct our path, and
some of them are very important. They are these: First, has
Congress itself any constitutional power to fix rates for rail-
ways? Secondly, conceding that it has, can it delegate that
power to a commission? Is it legislative or administrative?
Third, if it can be exercised by a commission, is it possible to
exercise it in any way that will not be in conflict with the pro-
visions of the Constitution against granting preferences to the
ports of one State over the ports of another State?

Mr. President, our Attorneys-General and our ex-Attorneys-
General, men who were presumed to know the law, seem to
differ radically upon this subject. Lawyers of note upon this
floor do not always agree upon the proposition. It raises at-
least a serious question as to what the decision of the courts
will be when it is up for final adjudication. It raises a question

6659
16

of sufficient importance, as suggested by the Senator from Wis-
consin [Mr. Spooner], to justify us in scrutinizing it with the
greatest of care; and if we are sincere in wanting to get a bill
that will benefit the public, and one that will stand as law, we
should, then, strike from it everything that is absolutely unnec-
essary, and especially if it is also in our opinion unconstitutional.

Conceding, Mr. President, that all of these legal difficulties
which I have mentioned can be overcome, that all of the propo-
sitions can be answered in the affirmative, we are led directly
to the question of expediency. I am less concerned about the
illegality of delegating the rate-making power to the Interstate
Commerce Commission than about the propriety of it. If we
should err in legal judgment in delegating this authority, the
courts can correct our error, but if we should err in making this
the law of the land this first step which we have taken in the
realm of paternalism can never be retraced, but will compel us
to take further steps and walk deeper and deeper into that
realm of buried hopes, decaying ambitions, and moldering
aspirations,

If the effect of granting this power will insure absolute
equality to all shippers from any given point to another, if it
will insure that elasticity in the matter of rates necessary for
the development of certain sections of the interior and certain
industries in the interior of the country, so that such sections
or such industry may compete with others in the markets of
the world; if it will tend to open up and keep open the greatest
possible degree of competition between roads and between lo-
calities ; if it will continue the gradual lowering of freight rates
from the interior, as has been done in the past; if it is possible
for a commission to give such enlightened judgment upon the
questions of rates from every station on every railway in the
United States as the demands of justice may require, then trfiily
the rate-making power should be conferred upon a commission.

But if it can be demonstrated with almost mathematical ac-
curacy that the placing of this gigantic power—the commercial
destiny of every village, township, and county in the United
States—in the hands of a political body of five or seven men
will strangle the last vestige of railway competition, bind every
section of our vast domain in the clasp of a hard and inflexible
schedule of rates; that it will make the whole interior of the
country pay homage to a few seaport cities, and, finally, that it
will build up a great political machine that will hold both or all
great political parties by the throat, then, in my humble opinion,
the people do not want it.

At the very threshold of this discussion we are met with
grave and far-reaching questions. How will that mighty power
be exercised? Will it open up commerce and traffic to the
freest and fullest competition, or will it practically close the
gates against all competition? Will it tend to build up and pro-
mote the welfare of the great interior, the western arid and
semi-arid regions of our extensive domains, which require the
fullezt and greatest elasticity in the matter of rates, or will it
destroy such elasticity in rate making so necessary to the de-
velopment of this section? Will it tend, by a hard rule, to fix
rates absolutely, or will the result of its exercise leave perfect
freedom to vary rates from day to day, from week to week,
as the exigencies, the conditions of any locality along any line

6659
17

of railway may demand? Will its exercise tend to build up a
few of the great seaports at the expense of the interior and at
the expense of all other seaports, or will it tend to facilitate
the progress and prosperity of the tities of the interior and the
country tributary to them? Can a commission by a single order
or 10,000 orders meet every contingency, every inequality of
distance, inequality in amount carried, inequality of bonded
indebtedness, inequality in maintenance, inequality of values,
inequality of stock as compared with actual value, and the
thousand other inequalities which must be weighed and meas-
ured in connection with rate making? Can five or seven men
perform the duties now incumbent upon an army of 50,000 men?

Under our present laws railways may lower their schedules
of rates upon three days’ notice. They may raise the schedule
upon ten days’ notice. Except for these slight limitations the
flexibility of rates is free to meet all commercial exigencies,
the constant shifting of demands of production and consump-
tion. When such rates shall have been established or fixed:
by a commission, their status can only be altered by the slow
process of the rehearings before the Commission, in most cases
ineffectual to meet the exigency because of necessary delay.
To all intents and purposes, therefore, such rates will become
fixed and unalterable. That this would have little effect upon
a few of the seaport cities of our country may be conceded.
But what effect will it have upon the interior, upon the West
and great Northwest? This is a question of supreme impor-
tance,

To understand this we must first understand what forces
have been responsible for the upbuilding of this great section in
the past. Many of us on this floor have spent all of our lives
in that section; have grown to manhood in that part of the
United States. And every man who has watched our progress
or development and the causes which conduced to it knows that
the progress, the prosperity, the development of that country
and its industries have been due to the efforts of each of the
great transcontinental lines to build up the industries and the
country along and contiguous to its own road, and that this has
been accomplished by discrimination in rates—not discrimina-
tion between individuals, which is always pernicious, but dis-
crimination in favor of their own territory; in other words, it
has been accomplished by giving especially favorable rates to
those sections.

It has been done by giving discriminations in rates as be-
tween localities. It has been done by giving preferences where
those preferences were absolutely needed to build up a great
country. And this is something that we can not justly and
fairly take away from that section of country.

They have maintained immigration bureaus to attract set-
tlers along the lines of their roads. They have given special
rates to land seekers. They have given special rates for the
purpose of developing industries. They have given special rates
to laborers to harvest the farmers’ grain. They have given
special rates to develop the lumber industries of the Pacific
slope. To meet these special privileges given by one great trans-
continental line other lines of like character were compelled to
‘do likewise, and these all working together have been responsi-
ble for making the interior the best country that God’s sun

6659——2
18

ever shone upon. It is due, Mr. President, to this very discrimi-
nation, and if you enforce the law rigidly it can not but be in-
jurious to that particular section of the country.

Discrimination in rates as between localities is at the very
foundation of the progress and prosperity of every State with-
out the immediate zone of large manufacturing industries, or
whose products were far removed from the field of consumption.
It is the application of the great Republican principle of pro-
tection to infant industries, a protection growing out of the
inequality of conditions by reason of greater distance from the
field of consumption.

You people of the East many years ago said to the Govern-
ment: “On account of cheaper labor we are unable to compete
with the Old World in our manufactures. To equalize this, give
us a preferential tariff.” We of the West said to the railroads:
“On account of shorter hauls we are unable to compete with
the Eastern and Middle States, whose products are raised at
‘the very gates of the manufacturing centers which consume
them. To equal this, give us preferential freight rates.”

The Government gave to the Hast its tariff, and as if by magic
10,000 industries sprang into being in all the villages and ham-
lets, and the whole length of the Alleghenies became skirted
with fiery furnaces giving a prosperity undreamed of. The rail-
roads gave to the West rates that made it possible for it to
compete with the eastern agriculturist and drive him out of
his own fields, and as a result our Indian plains bloomed with
the grains and the flowers of the white man’s civilization, and
homes, those fairest flowers of civilization, dotted our expansive.
prairies.

Without that discrimination there would have been no Da-
kotas, no Minnesota, no Montana, or Idaho, or Washington.
Take away that discrimination, place us on a mileage basis,
and our progress and prosperity would vanish like frostwork in
the morning sun.

This matter of discrimination, Mr. President, is absolutely
necessary for the building up of certain sections of the country,
and it is absolutely necessary in order to maintain their pres-
ent prosperity.

Mr. BEVERIDGE. Mr. President, will the Senator allow
me to ask him a question?

Mr. McCUMBER. Certainly.

Mr. BEVERIDGE. Is it the Senator’s position, then, that
not only the present proposed law should not be enacted, but
that the existing law on the same subject should be repealed?

Mr. McCUMBER. In my opinion, the present proposed law
should be enacted with a modification. So that I may not be
misunderstood, I will state that I expect to support the law
which the wisdom or unwisdom of the Senate shall deem to
be for the best interest of the American people, but I think,
however, it should be modified. I think our present law in
reference to discriminations has not been enforced, and be-
cause it could not be enforced is the reason why it has not
been a greater damage to us than it really has been.

I can show you, and propose to show before I get through,
that instead of enforcing the spirit of that law in the North
Atlantic cases the Interstate Commerce Commission enforced
exactly the opposite, by its own decision, and absolutely de-

6659
19

stroyed the competition which we claim is necessary for our
own State.

Mr. SPOONER. When the Senator speaks of discriminations
I suppose he refers to the discriminations which were lawful
at the common law.

Mr. McCUMBER. Certainly; not discriminations between
individuals——

Mr. SPOONER. Ob, no.

Mr. McCUMBER. But discrimination in favor of the weaker
locality or in favor of the weaker industrial concern as against
the stronger that did not need it.

Mr. BEVERIDGH. Will the Senator permit me?

Mr. McCUMBER. Certainly.

Mr. BEVERIDGE. My question was drawn out by the state-
ment of the Senator that certain portions of the country in the
interior and farther west had been developed by reason of these
discriminations which were an economic necessity and which
the present law prevents, and that if the present law had been
rigidly enforced those discriminations by which the interior has
been built up would have been prevented and an incalculable
injury, to use the Senator’s own words, would have been done
to the country. That is the reason why I asked the Senator
whether his position was not only that the proposed law should
not be enacted, but that the existing law should be repealed.

Mr. McCUMBER. I purpose to make that clear before I get
through.

Mr. SPOONER. My observation had no reference whatever
to the Senator’s question. I simply wished to understand the
Senator from North Dakota that when he spoke of preferences
and discriminations, and the general question of facilities in the
West, he referred to those which were permitted by the common
law.

Mr. BEVERIDGE. He specifically said, however, they were
those which were forbidden by the existing interstate-commerce
act, which, if it had been rigidly enforced, would have pre-
vented them.

Mr. McCUMBER. If the present interstate-commerce act had
been rigidly enforced, there could have been no discriminations
between localities, as I understand. 5

Mr. BEVERIDGE. And therefore the Senator said the inte-
rior of the country and farther west would have been incalcu-
lably injured.

Mr. McCUMBER. Certainly. If, as a matter of fact, the
railway company provides that its charges for taking our prod-
ucts out of our country shall be only one-half of what it charges
for bringing things into our country between exactly the same
points, you can see there is a discrimination in favor of output
as against importation; and that discrimination was absolutely
necessary for our growth and prosperity.

Mr. President, Minnesota is not yet fifty years of age as a
State. It is my native State, and as I travel over that beautiful
country with its fair fields, with its massive red barns, with its
great white dwellings, and as I follow into my own Red River
Valley of the North I will find the same condition, except per-
haps on a little larger scale, as I view the prosperity of those
great Northwestern States; and then as I compare those barns
and those houses with many of those of the Eastern and the

6659
20

Middle States, whose gray, decaying walls have not known the
touch of paint for fifty years—for, Mr. President, everybody will
acknowledge that red and white paint are the surest index in the
world of agricultural prosperity—as I look at those conditions I
can not but ask myself by what magic has it been possible for us
of the Dakotas and Minnesota and Iowa, nearly 2,000 miles from
eastern seaports, where every bushel of our grain that we sell
is to be carried across the ocean, to move that grain nearly 2,000
miles and drive the eastern agriculturist out of his own field?
Has it been by any method of dividing the country into great
sections, which they call differential sections, and so adjusting
the rates between the several carrying lines that they will each
receive their proportionate share, and also that each one of the
great seaport cities will receive what this Commission may de-
clare to be its proportionate share of the business; or has it been
for the reason that I have stated, of the great effort of those
companies to find outlets for our own exports?

What difference does it make to the Northern Pacific or the
Great Northern Railroad Company, which are the principal
routes in Minnesota and in my State, whether New York or
Boston or Baltimore or Philadelphia gets their share of the
business? What they are interested in is in securing the very
lowest rates that can be secured from their terminals to the
Atlantic coast, where our goods must pass en route across the
ocean.

Mr. President, suppose that this gigantic power is given to
this Interstate Commerce Commission, what is going to be the
result? Will it be the destruction of all competition between
the great carrying lines? I ask that question in all sincerity—
will it be the destruction of competition between all the great
earrying lines? Mr. President, coming events cast their shad-
ows before. On the 27th day of April, 1905, the Interstate Com-
merce Commission handed down its findings and conclusions
in the North Atlantic Seaport Differential case. That decision,
to my mind, projects a shadow into the future that is as dis-
cernible and as clear as the shadow of an eclipse across the face
of the earth and demonstrates beyond any possible question
the certainty of the very danger that I have spoken of thus
far in my discussion. This opinion foreshadows not only the
condition which we will be in when the Interstate Commerce
Commission fixes the rate, instead of the powers that are in
possession to-day, but what the Government’s position will be
when we reach that next—and, to my mind, sure to follow
step—Government ownership of the railways of this great coun-
try. Government ownership in the Old World has resulted in
building up a few of the great seaport towns, congesting the
people there and congesting traffic there, while at the same
time it has absolutely destroyed the prosperity of all of the
interior.

I might say a great deal, Mr. President, upon this subject,
but it has been so eloquently stated by the Senator from West
Virginia [Mr. Scotr] and by the Senator from Massachusetts
{[Mr. Longe] that I will not touch upon that subject any fur-
ther than to show that that has been the inevitable result. It
has been said on this floor that these Commissioners will be
human, men of good judgment, and the country need fear
no tyrannical action. The surest—aye, the only—preventive

6659
21

against tyranny is to never place tyrannical power in the hands
of any person or body of persons. But in this instance this
autocratic power can only be carried on by autocratic methods,
and tyranny will be the inevitable result.

Mr. President, it may be said at the outset that the granting
of this power, in my opinion, will at one blow absolutely de-
stroy competition between all of the great carrying lines of the
country ; it will strangle that very principle which we have in-
serted in every law—the free exercise of the competitive spirit
of every one of the great carrying lines. It will be tenfold
worse, Mr. President, than that which we sought to guard
against in the Northern Securities case. Why? Because in
that case we simply prevented two competing lines from com-
bining, while in this case you will place all of the great trans-
continental lines under one great management, and, as I will
show you, that management will be forced—absolutely forced—
by industrial and commercial exigencies to follow the same
rules that the railways followed when they made their own
arrangements of pooling, because in effect it amounts to pooling.

Ever since these great rival lines connected the Atlantic sea-
board with the interior of the country there has always been
more or less freight warfare between the great lines and also
between the great cities that were served by those lines, grow-
ing out of the adjustment or the lack of adjustment of differ-
entials. Whether these wars were beneficial to the public in
the long run I am not prepared to say. But the condition
which existed there, and which made it possible for those wars,
was of inestimable value to every shipper from the interior to
the seaboard.

Mr. President, this decision makes perfectly ‘clear what is
meant by differentials; but as I am speaking for more than the
Senate here, I will make my point clear, so that it may be dis-
tinctly understood what that term means.

That territory bounded on the west by the Mississippi, south
by the Ohio River, east by a line running from Pittsburg to
Buffalo, and north by the Great Lakes, is called “ differential
territory.” All shipments for the east, originating directly or
indirectly in this territory, had by agreement of the several
lines of road operating between such territory and said ports,
been based on the rate from Chicago to New York; that is, the
rate between any point in this territory to New York was either
the same as the Chicago rate to New York or a certain per-
centage less or greater than that rate. To other points on the
Atlantic seaboard the rate is higher or lower than to New York
by a given number of cents per hundred pounds. Thus the rate
to Boston might be greater, that to Philadelphia and Baltimore
less. These differences above or below the New York rate are
termed “ differentials.”

At the time that this matter was considered py the Inter-
state Commerce Commission, rates upon all classes and commodi-
ties, with the exception of grain and iron, were 2 cents lower
to Philadelphia and 3 cents lower to Baltimore than to New
York. The Boston rates were the same as New York on export
traffic, while on domestic traffic they were higher by amounts
ranging from 7 cents per hundred pounds on first-class to 2
cents on sixth-class commodities. The question involved, how-
ever, differentials only on export traffic.

6659
22

Now, anyone who has followed the cases decided by the Inter-
state Commerce Commission can not but be impressed with the
great number which are instituted by or through the boards
of trade of our great commercial cities, and that the spirit
which governs the institution of these actions has not been
so much a desire to protect the interest of individual shippers
as to secure the greatest amount of business for this or that
particular city. This case was no exception to the rule. The
real parties in interest, as in most cases, were cities against
railroads, and not the public against railroads. The public was
not the party to this action. If it was indirectly a party I can
not but feel that its interests were shamefully dealt with. The
parties to this action were the municipal corporations of Boston,
New York, Philadelphia, and Baltimore, on one part, and the
several railroads operating between this differential territory
and these cities on the other part. The interest to be consid-
ered, and which was, in fact, considered, was not the interest of
the people of my State who might ship their grain to New York,
Buffalo, or Baltimore, but the interests of those particular cities
in securing what each claimed as its share of the business of
the country, just as though any city independent of its location
-was entitled to any particular division or share of the business
of the country.

Now, to show how this Commission walked the same path
which has led, in the old country, to preferring great seaports,
at the expense of the interior, upon the assumption that such
cities are entitled, as a matter of right, whether they can hon-
estly compete under natural conditions with other cities, to their
share of the business, and thus destroying all competition, I wish
to call attention to the reasonings and the conclusions of a ma-
jority of this Commission.

On page 62 of the decision in re North Atlantic seaport differ-
entials the Commission say :

It is said that a fair differential is one which would give to these
several ports the traffic to which they are entitled. It is also said that
these several ports are entitled to what of this traffic they can obtain
under a fair differential.

They are entitled not to what they can secure under fair
competition, but under a fair (equalizing) differential. By
what process of reasoning does the Commission arrive at a con-
ciusion that any city as a matter of right is entitled to such
differential that it may obtain its proper proportion of the ex-
port business of the country? If Baltimore is one-half the size
of New York, then under this decision those rates must be so
made that Baltimore will get one-third of the export business
and New York will get the other two-thirds.

Mr. President, we have condemned, and we condemn to-day,
pooling between railways. This principle adopted by the Inter-
state Commerce Commission not only legalizes pooling, but
imposes it upon all railways. That simple proposition that
rates are to be made for the benetit of cities and not for the
benefit of the public condemns beyond all measure the power
which would authorize such principle being carried into effect
by a political body.

I want to say to the Senator from Massachusetts [Mr. Lopcr],
who so ably defended and pleaded for his own New England
States the other day as against the arbitrary power that might

6659
23

be given this Commission, he may well complain if there is no
way that we can escape that arbitrary power, for if they follow
this opinion they may protect New England, but that opinion is
against the law. If they do not follow it, they destroy. the in-
dustries of New England and many of the industries of the in-
terior.

Again, on page 62, the Commission say:

If again it can be properly done, these rates should be so adjusted
that competitive traffic will be fairly distributed between the different
lines of railway which serve these ports. Pach one of these four cities
is reached by two or more great railway systems. The prosperity of
these cities and systems can not be separated. The ability of a rail-
road to adequately discharge its duty for a reasonable charge depends
upon the business which it can obtain, and no one of these systems
should be deprived of its fair proportion of this export trade.

In simple, plain English what does this mean? It means that
the public must be compelled to support a road if that road can
not of itself compete with another road; that the rates must be
so adjusted that the weaker one shall receive its proportion of
the carrying business. For illustration: If the Baltimore and
Ohio Railroad can carry my grain from Chicago to Baltimore for
5 cents per hundred pounds less than the Pennsylvania line can
carry it to New York, I shall not have the benefit of this natural
competition and Baltimore shall not have the benefit of its loca-
tion; but that the Pennsylvania line must be supported and must
have its proportion of that traffic, and if it can not be secured in
any other way, the Baltimore and Ohio road must raise its rates
or else the other road must lower its rates; and if the other
road can not afford to lower its rates, then the Baltimore and
Ohio must raise its rates. That is the same Commission to
whom you are going to give the power to determine what are
just and fair rates.

Does not the mere statement of the proposition by the In-
terstate Commerce Commission carry with it its own con-
demnation? Carrying this proposition out in all the great trans-
continental lines, that road which has been built or may in the
future be built through a poor country, a country that will not
give it sufficient business to pay its running expenses, must
have its proportion of the carrying trade, and rates must be so
made by the other lines that it may secure its proper proportion.

It has always been supposed in the past that great cities were
entitled to the enjoyment of the conditions which made them
great so long, and only so long, as they subserved the interest
of the public, and that railroads were quasi-public institutions,
because they subserved the interest of the public. The conclu-
sion of the Interstate Commerce Commission reverses this rule
and promulgates the startling proposition that the public interest
must be subservient to the demands of great cities for the con-
tinuation of their prosperity, and that the public business is for
the benefit of all the roads or at least all such as the Commis-
sion may consider of sufficient importance to demand its pro-
tective care. That is certainly a new theory.

Again they say, on page 63:

Now, if there had been no export business in the past, if those
domestic rates had been adjusted solely with a view to what was right
‘between the communities, it is altogether probable that the differentials
in favor of Baltimore and Philadelphia would have been even greater
than they are to-day.

6659
24

But constituting itself as the guardian of the interests of New
York and Boston, the Commission decided that the differentials
should be even less than they are to-day, so that these latter
cities could enjoy greater commercial prosperity and the whole
country, the producer, is made to pay higher freights for the
benefit of Boston and New York.

I am not erticising these Commissioners, because I insist that
when that power is given them it will have to be exercised
along such lines or else they will so disrupt all rates as to pro-
duce a case of practical anarchy among all the railroads.

Again, they had to take into consideration the ocean freights.
They had to look beyond Boston and Philadelphia and Balti-
more. They found, for instance, that our goods, our wheat and
corn, would go through the route of least resistance, and that
meant the cheapest route, not merely to the seaboard, but to
Liverpool, where our grain was carried. They found also that
the rates from Baltimore to Liverpool were generally a little
more than from New York and Boston, while the facilities for
handling and shipping at New York and Boston were better than
at Baltimore. They so equalized these different conditions and
weighed them and measured them that it became possible for
them to arrive at a differential which would allow each of these
roads to carry what they considered its proper proportion and
each of these cities to have its proportionate share of the busi-
ness.

On page 69 of this opinion the Commission give us another
view. They say:

In view of the fact that Baltimore and Philadelphia have natural
advantages in location, that Boston and New York have certain natural
advantages in the way of ocean facilities, that it is impossible to make
and maintain the same rate through all the ports, we think the true
inquiry in adjusting this differential is, What will equalize the advan-
tages of transportation through these various ports? What part of the
advantage which Baltimore and Philadelphia enjoy on the,score of the
inland haul shall they be allowed to retain to compensate them for
their disadvantage in the water haul?

In other words, neither Baltimore nor Philadelphia shall re-
tain the natural advantages which they have by reason of loca-
tion to any extent that will more than equalize any special ad-
vantage that New York and Boston have in ocean facilities. If
this is not tieing up competition, then I would like to be in-
formed of any process or any combination of the railroads
themselves which could more effectually strangle competition.

Again, on the same page, they say:

The most important factor in determining the route is undoubtedly
the rate. It was said in testimony upon the former investigation, and
has been repeated in this, that a difference of from one-fourth to one-
eighth of a cent a bushel will determine the port to which grain shall
be exported. Other traffic is not equally sensitive, but it must follow,
with respect to this low-grade freight, that the through rate by all lines
should be substantially the same.

Now, note their decision: “ It must follow with respect to this
low-grade freight that the through rate by all lines should be
substantially the same.” Why should the rates by all lines be
substantially the same? Why should not the shipper have the
benefit of the lines which can carry his goods most cheaply to
any port? The answer of the Commission is that if that nat-
ural rule should apply certain cities would not receive their
share of the export business and certain railroads would not

6659
25

receive their share of the carrying trade. They decided that it
was their duty to look after the interest of those roads and
those cities which can not, under natural laws and natural con-
ditions, compete with other roads or other cities; and they con-
sidered it their duty to so check and interfere with the natural
law of competition that it shall not work against the interest
of such roads or such cities. I candidly ask the question, Is this
what the people of my country or of any of the inland country
are asking for? If it is not, is it what they will surely get if
“the Commission has power to give it to them? I am not blam-
ing or complaining of the Commission. It will be compelled to
take the place of the traffic managers of all railways. To-day
each manager is compelled to look after the interests of his
own system. When he is supplanted by the Interstate Com-
merce Commission that Commission must look after the interest
of their system, and it can only do so by so adjusting rates so
that everyone shall receive its portion of the business, because
it has stated again and again that the public necessities demand
that each one of these roads shall receive its proper proportion of
the carrying business in order that it may properly subserve the
interests of the people along its line.

So they are driven into the same position that they have been
driven into in the old countries; and I am doubtful if they will
get as good an adjustment of it as they would if they would
leave it entirely in the hands of the present managers.

Mr. DOLLIVER. Mr. President——

The VICE-PRESIDENT. Does the Senator from North Da-
kota yield to the Senator from Iowa?

Mr. McCUMBER. With pleasure.

Mr. DOLLIVER. The Senator appears to be reading from
the finding of the Commission in the case of the seaboard dis-
criminations or preferentials submitted to the Interstate Com-
merce Commission for a voluntary arbitration. Does the Sena-
tor claim that there is anything in the existing law that would
give to the Interstate Commerce Commission the jurisdiction
which they voluntarily, at the request of the railway companies,
exercised in that case?

Beyond that, I call the Senator’s attention to the fact that the
pending bill expressly excludes, or in effect excludes, the juris-
diction to determine these differentials and confines the juris-
diction of the Commission entirely to a complaint against a
given carrier for excessive or discriminating rates, and does.
not authorize the Commission in any way to enter this field of
territorial discrimination, weighing against each other the sepa-
rate and independent railway systems of the country or the in-
dependent and separate markets of the country.

Mr. McCUMBER. Mr. President, the Senator speaks of the
existing law. Under the existing law the Commissioners held in
that case that they could not make it binding upon the company,
but that that was the law which should govern and it is the law
which they would enforce if they had the power to enforce it.
The pending bill, by giving them the power to fix maximum
rates, in my opinion, does give them the power to enforce ex-
actly that provision. Let us suppose that here is a line from
Chicago to New York and another line running from Chicago
to Baltimore and New York. One line can afford, by reason of
its facilities, by reason of its not being too greatly in debt, and

6659
26

a thousand other reasons, to carry grain, say, at 20 cents a hun-
dred. When the Commission pass upon the question of the rate
on grain for that railroad alone they are compelled to say that that
20 cents a hundred is a reasonable rate. When they come to the
other road they will find that it can not pay dividends unless it
charges 25 cents a hundred, yet by saying that the rate upon the
first road shall be 20 cents a hundred they are compelled by the
logic of events to hold that that is a reasonable rate between
Chicago and New York, because the product is going by the road
that will take it the cheapest. So the other road would be
destroyed. But following the North Atlantic differential case,
they would be compelled to call a halt and say the interests of
the country demand that reasonable rates shall be so construed
that they will be reasonable for every one of these roads, so that
they all may participate in the traffic.

I have tried to study out the real meaning and intendment of
this rate-making power. I should like to ride in your train, if
I knew what station it was going to land me in; but there is not
a single one among your own advocates who can tell me the
direction it is going or on what track it is running. None of
you arrive at the same conclusion as to where you are going,
because you do not start upon your first basis; and that is this
basis of reasonableness. I know of no method of determining
accurately the question of reasonableness, except you take up
one road at a time, and if you do that you have got just as many
reasonable rates as there are roads and all different. On the
other hand, if you take a railroad that can haul for the least
amount between two given points and you make that your basis,
then every one of the other roads will have to carry unreason-
ably low to compete; and if you take as a basis the road that
will be the most expensive, whether it is by valuation or any-
thing else, then the rate of every other road will be unreason-
ably high; and if you take some middle ground between them,
then half of them, on one side, will be unreasonably high, and
the other half unreasonably low.

Mr. TILLMAN. Mr. President——

The VICE-PRESIDENT. Does the Senator from North Da-
kota yield to the Senator from South Carolina?

Mr. McCUMBER. With pleasure.

Mr. TILLMAN. The Senator said a moment ago that not
one of us knew where we are going or where the train would
land. Does the Senator know where he is going? [Laughter.]

Mr. McCUMBER. I am going to stand where I am until the
Senator shows where he is going to land me; but if he can
show me a better place than where I am, I am going with him.
I do not want the Senator to understand that because I criti-
cise this portion of the bill, I am opposed to the bill as a whole.

Mr. TILLMAN. The Senator said a moment ago, if he will
permit me, that this territory, speaking of the inland territory,
had been built up by reason of favoritism. He did not use that
language exactly, but that was the idea—that there had been
discrimination in favor of it. 2

Mr. McCUMBER. You can use that language, because that
is what I mean.

Mr. TILLMAN. I have seen a good many statements coming
from farther west, where there is a great outcry over the dis-
crimination against those points—Denver, Spokane, and other

6659
27

points are loud, howling, in fact, because they say they are
practically being destroyed by this very favoritism; and I, for
one, have been trying to go to that point where everybody will
have an equal show, and where you will have no discrimination
between sections or between localities or between individuals. .

Mr. ALDRICH. Mr. President.

The VICE-PRESIDENT. Does the Senator from North Da-
kota yield to the Senator from Rhode Island?

Mr. McCUMBER. Certainly.

Mr. ALDRICH. I should like to ask the Senator from South
Carolina a question, if the Senator from North Dakota will per-
mit me.

Mr. McCUMBER. Certainly.

Mr. ALDRICH. I should like to ask the Senator from South
Carolina whether this bill, in his opinion, gives jurisdiction to
the Commission over the question of differentials?

Mr. TILLMAN. I have not examined that particular point.

Mr. ALDRICH. Well, it is the most vital point in this bill,
or one of the most vital points, and it is a question about which
there seems to be a difference of opinion.

Mr. DOLLIVER. Mr. President:

The VICE-PRESIDENT. Does the Senator from North Da-
kota yield to the Senator from Iowa?

Mr. McCUMBER. Certainly.

Mr. ALDRICH. I would be glad to have any Senator answer
it who thinks he can.

The VICE-PRESIDENT. Does the Senator from North Da-
kota yield to the Senator from Iowa?

Mr. McCUMBER. I yield to all Senators.

Mr. BEVERIDGE (to Mr. AtpRicH). Repeat the question.

Mr. ALDRICH. It is whether the bill before the Senate gives
to the Commission jurisdiction over differentials between differ-
ent localities and ports.

Mr. TILLMAN. The main thing in it is to give the Commis-
sion jurisdiction over the fixing of rates.

Mr. ALDRICH. I was content with the Senator’s first an-
swer, which seemed to be conclusive. I would be glad to hear
some one else who will give a different answer.

Mr. DOLLIVER. The jurisdiction given by section 15 of this
bill is plain, I think. It gives jurisdiction to the Commission,
where a complaint is made that a given rate is too high or is in
the nature of a discrimination forbidden by law, to make an
order prescribing a maximum rate and an order to require the
carrier to cease and desist from the discrimination in so far as
they find it to exist. The complaint authorized is under section
13 of the existing law, and must be directed against a given
carrier, or, where more than one carrier participates in a joint
rate, against the carriers participating in it. It will be seen,
therefore, that the bill deals with no rates except rates that are
too high, charged by a carrier, or in the case of a joint rate, by
the carriers who participate in it, and with cases of discrimina-
tion made by a carrier on its own line or upon the joint line of
more than one carrier participating in the same joint carriage.

It is therefore obvious that the bill applies to no excessive
rates and no discriminations except such as are involved in the
carriage of goods over a particular line or a joint line. It does
not therefore include these port differentials or any of the ter-

6659

 

 
28

ritorial conflicts, such as the one that was recently submitted by
the trunk lines to the voluntary arbitration of the Interstate
Commerce Commission. ;

Mr. McCUMBER. Evidently we differ a little upon the con-
struction of that law. Let us suppose that the board of trade
of the city of Minneapolis, in Minnesota, should lay before the
Commission the charge that the rates charged on all of class A
freight between Minneapolis and Chicago over the Chicago and
Milwaukee road was excessively high and unjust. Does the
Senator mean to say to me that the Commission would not be
compelled to take cognizance of that matter? If I understand
the law, you may not only bring in one little shipment, but you
may also invite the railroad commissioner of any State to make
up a schedule of rates which he says are too high, and the Com-
mission has to consider those; and if I can understand law at
all, if I can construe the language of that measure, if I read it
correctly, then the power lies with the board absolutely to con-
sider not only one article, but any class of articles between any
two cities, and that in effect will determine the whole question.
If you can take up one class, you cau take them all up in the
same way.

Mr. ALDRICH. But this provision of section 15 of the bill

as it came from the House directs the Commission to inquire
into any rates that are otherwise in violation of the provisions
of “this act”—that is, the interstate-commerce act; and the
third section of the interstate-commerce act reads as follows:
_. That it shall be unlawful for any common carrier subject to the provi-
sions of this act to make or give any undue or unreasonable prefer-
ence or advantage to any particular person, company, firm, corporation,
or locality, or any particular description of trafiic.

Those words are written into the interstate-commerce act,
and any rates which are in violation of that provision it is the
duty of the Commission to consider and report upon as much
as upon the question of reasonableness. I can not understand
the use of language’ if that does not give to the Interstate Com-
merce Commission jurisdiction over differentials.

Mr. DOLLIVER. Will my friend the Senator from North
Dakota permit me?

Mr. McCUMBER. Certainly.

Mr. DOLLIVER. Admitting what the Senator from Rhode
Island says, it is evident that the discriminations referred to
there are not such discriminations as might be claimed to arise
by comparing the rate on the Illinois Central from Chicago to
New Orleans with the rate on the Lake Shore and New York
Central from Chicago to New York City.

Mr. ALDRICH. “Any” is the word used.

Mr. DOLLIVER. But it is not competent to establish a
claim against the Illinois Central on account of a discrimination
made by some other railroad. The whole object of this bill has
been to narrow the jurisdiction of the Commission to a com-
plaint directed to be made by certain authorized parties against
a common carrier, or, where there is more than one, against
the railroads interested in the joint carriage. There can not
be found in the bill a line which authorizes the Commission to
weigh the rates to New York against the rates on another
railroad to New Orleans, or Baltimore, or Philadelphia, or
anywhere else.

6659
29

Mr. FORAKER. Mr. President——

The VICE-PRESIDENT. Does the Senator from North Da-
kota yield to the Senator from Ohio?

Mr. McCUMBER. I will yield to the Senator, and then I
must proceed.

Mr. FORAKER. I wish to ask the Senator from Iowa, if
the Senator from North Dakota does not object, how otherwise
under this bill, if it become a law, it would be possible for’ the
Interstate Commerce Commission to hear and determine whether.
the rate from Chicago to New York is an unreasonable rate
as compared with the rate to Baltimore and Philadelphia,
which, because of the differential, is put 2 or 8 cents lower, and
for no other reason?

Mr. DOLLIVER. The Interstate Commerce Commission will
be required under this bill to deal with the complaint on its
merits, to make whatever inquiry is necessary, to use the infor-
mation it has and all the information it can get, but directed to
the question whether the rate complained of as excessive is in
reality too high.

Mr. FORAKER. That is it precisely; but the question we
are determining is whether or not the rate from Chicago to New
York is excessive as compared with the rate from Chicago to
Philadelphia or Chicago to Baltimore. The complaint may not
be in that exact form, but necessarily, if there is an intelligent
investigation, it will comprehend that, because it is only by con-
sidering relative rates that you can determine whether or not
a difference of 2 or 3 cents on grain from Chicago to New
York is a discrimination; and if the Commission would be com-
pelled to consider that, the whole system of differentials goes
to the wall, and the disruption which the Senator from North
Dakota has pictured so eloquently and forcibly would inevitably
follow, for according to the finding of the Commissioners them-
selves a difference of one-eighth of a cent per bushel on grain
from Chicago to New York would destroy the whole distribu-
tion that has been brought about between the roads and the
cities by this differential.

Mr. McCUMBER. I really can not understand the position
of the Senator from Iowa when he considers section 3 of the
law as it now stands. The bill which he is advocating provides
for the enforcement of the provisions of that law, and as this
law prevents anything which would be a discrimination as be-
tween localities as well as between persons, and as discrimina-
tion between localities is always a question of differentials, of
course the Commission must consider and fix differentials in
order to prevent those discriminations between localities.

Mr. DOLLIVER. It is true that section 8 refers to differ-
entials, but not to differentials such as he is talking about. It
refers to differentials that may exist along a line of railroad
between the localities served by the railroad.

Mr. FORAKER. If the Senator will allow me, he will cer-
tainly concede, when his attention is called to it, that the kind
of differential, to employ his expression, to which he now refers
is known in technical language as a “ preferential.”

Mr. DOLLIVER. Very well.

Mr. FORAKER. Differentials are those that apply to ports,
and the term has been correctly employed by the Senator from
North Dakota.

6659
30

Mr. DOLLIVER. The word “ differential” applies to ports,
but section 3 of the original interstate-ccommerce act does not
refer to such discrimination as may urise out of the fact that
one railroad charges more than another, but out of the fact that
the same railroad charges one point on its line more than an-
other.

Mr. ALDRICH. The Senator from Iowa must find that dis-
tinction outside of the language of the act, because the language
of the act is broad enough to cover and does cover in terms any
possible discrimination between localities.

Mr. FORAKER. Will the Senator from North Dakota permit
me to ask the Senator from Iowa just one more question?

Mr. McCUMBER. Certainly.

Mr. FORAKER. In the interstate-commerce Dill, as it is
called, presented by the Interstate Commerce Commission, it
was carefully provided that they should lave jurisdiction not
only to determine maximum rates, but minimum rates, and to
fix differentials. When the bill which is now under considera-
tion was introduced, or, at least, when it came here, that had
been taken out of it. I want to ask the Senator from Iowa
why it was that all allusion to differentials in terms was
stricken out of the bill, except only for the reason that he fore-
saw that it would be absolutely impossible for the Commis-
sion to fix differentials, that it would be in conflict with

Mr. DOLLIVER. I will say frankly that my study of the
question convinced me that it would be quite impossible, and
for practical purposes possibly dangerous to the commercial
peace of the country, to clothe the Interstate Commerce Com-
mission with the power against which my honorable friend
the Senator from North Dakota is contending. I studied very
carefully that decision and other decisions in which they under-
took to exercise this territorial jurisdiction, weighing one mar-
ket against another and one railroad against another, although
they serve far separate communities; and upon a study of
the question, running over a very long space of time, I became
conyinced that such a jurisdiction ought not to be conferred
upon the Commission. That suggestion of the Interstate Com-
merce Commission was omitted in the bill which I had the
honor to introduce in the Senate because I recognized the
force of what the Senator from North Dakota has said in re-
lation to this matter, and I did not desire to be put in the at-
titude of seeking to clothe the Commission with that vast power
over the competitive market places of the United States.

Mr. McCUMBER. The Senator undoubtedly.

Mr. SPOONER. Will the Senator allow me for a moment?

Mr. McCUMBER. Certainly.

Mr. SPOONER. I want to ask the Senator from Iowa for
his opinion. He has given the bill careful examination. In
his opinion, would it work no change in this bill to insert in it
a proviso that it is not the intention of this bill and it shall
not be construed to authorize the Commission to fix differentials?

Mr. DOLLIVER. If the word “differential” has a fixed
and technical definition, as my friend from Ohio suggests, I cer-
tainly would have no objection to that. I would rather, how-
ever, clothe the proposition in such general phraseology as would
avoid any uncertainty as to the word “ differential.” In the
testimony before our committee the word seemed to be used

6659

 

 
31

indiscriminately to describe the differences between the rates
of different railroads and between different points on the same
railroad; and there evidently was some confusion in the tech-
nical meaning of the term. But so far as this bill is con-
cerned—and I do not know whether anybody agrees with the
bill or not—the intention of it was to narrow the jurisdiction
of the Commission to the simple business of reducing a rate
which was found to be too high or reducing a rate at the high
point which was found to be a discrimination against localities
along the lines of the carriers interested in that rate.

Mr. BACON. Mr. President——

The VICE-PRESIDENT. Does the Senator from North Da-
kota yield to the Senator from Georgia?

Mr. BACON. I should like to ask the Senator from Iowa a
question.

The VICE-PRESIDENT. The Senator from North Dakota
has not yet yielded. Does he yield?

Mr. McCUMBER. I would if I had not yielded so often for
the Senator from Iowa to answer questions.

Mr. BACON. Then I will not trespass upon the Senator.

Mr. McCUMBER. However, I will yield this time to let the
Senator from Georgia ask the question.

The VICH-PRESIDENT. The Senator from North Dakota
yields.

Mr. BACON. I appreciate the courtesy of the Senator, but
1 realize the fact that possibly he has extended it as far as he
should, and desires to conclude his speech. I can make the
inquiry at some other time. While I appreciate it, I will not
take advantage of the Senator’s courtesy.

Mr. McCUMBER. I thank the Senator very much.

Mr. President, I do not think that the Senator from Iowa
[Mr. DoLtLiver] comprehends the point I desire to make in this
respect, and I will give a concrete case. We will suppose that
the Northern Pacific will make rates to Tacoma, on the western
coast, lower on a certain class of goods, or on all export goods,
than the Great Northern will make to Seattle. The result
would be that the Northern Pacific would get that business.
It would get all of the export business, and Tacoma would be
the exporting city.

Now, following the decision and the rule that was laid down
in the North Atlantic Differential case, what would be the duty
of the Commission when the case is brought up before it? They
have said that it is not to the interest of the public that the
business shall be taken by one line entirely away from the
other. They have said that it is not for the interest of the
public that the people of the great cities should be deprived
of their export busine~;. They have given that—and with good
reason, I think, in many instances—as the very foundation of
their holding.

Now, what I mean to say is that when the Commission pass
upon the reasonableness of the rate of the Northern Pacific
from Minneapolis or St. Paul to Tacoma, they will be forced,
by the logic of the situation, in order to maintain a proper equi-
librium, which will be for the benefit of the public, also to con-
sider what would be the effect upon the other roads of lowering
the rate-to a certain amount. I am not only defending them
upon that proposition, but I am insisting that unless we have
. 6659
382

absolutely chaotic conditions with respect to our railways that
will be absolutely necessary. The railways themselves have
found it necessary in order to continue the business without a
continuous rate warfare, and I believe the Commission will be
justified in holding more or less to that particular contention.

Now, Mr. President, I wish to go a little further.

Mr. NEWLANDS. Mr. President.

The VICE-PRESIDENT. Does the Senator from North Da-
kota yield to the Senator from Nevada?

Mr. NEWLANDS. _I wish to ask the Senator a question.

Mr. McCUMBER. Certainly.

Mr. NEWLANDS. That is, whether there is not this distinc-
tion: I understand the Senator to refer to the case of a rate
from Minneapolis to Tacoma by the Great Northern and from
Minneapolis to Seattle by the Northern Pacific.

Mr. KEAN. Just the reverse.

Mr. McCUMBER. Just the reverse.

Mr. NEWLANDS. Just the reverse; and he assumes that one
rate—the rate to Seattle—is less than the other, and in that way
Seattle would absorb all the export business. Now, we will
assume that these two roads were in one ownership. I can
imagine then that under this bill if that preference were given
to Seattle over Tacoma or to Tacoma over Seattle, a complaint
would be made under this act. But if the two roads are in
separate ownership, each in the ownership of a corporation, I
do not see how the Interstate Commerce Commission could be
called upon then to determine the question for the only com-
plaint, if the Senator will permit me——

Mr. McCUMBER. I will make that clear.

Mr. NEWLANDS. The only complaint will be of the action
of a particular road in the area of its own territory.

Mr. McCUMBER. I know; but suppose——

Mr. NEWLANDS. And a comparison with the action of
another road in——

Mr. McCUMBER. I understand that.

Mr. NEWLANDS. Will not furnish any basis for determining
the reasonableness or the unreasonableness of the charge by the
individual road.

Mr. McCUMBER. The point is simply here. Suppose the
rate on the Northern Pacific is challenged as being still too high.
Suppose the Northern Pacific can carry freight at rates at which
the Great Northern can not profitably carry it to Seattle, and
the rate of the Northern Pacific is still challenged as being too
high, that they could afford to carry cheaper even than the rate
fixed; then I say that the Interstate Commerce Commission will
be forced to take into consideration what other roads could
earry it for in fixing a standard of reasonableness for the
Northern Pacific.

Mr. NEWLANDS. Not, it seems to me, if the Interstate Com-
Inerce Commission——

Mr. BEVERIDGE. How will the Commission get jurisdiction
over the Great Northern?

Mr. McCUMBER. I am not speaking of any jurisdiction over
the Great Northern. I say the Commission would not reduce
the rate if the effect of the reduction would be to deprive Seattle
of its business or to drive the Great Northern out of business.
In other words, they will fix no rate that will send another rail-

6659

 
33

way, a competing line, into bankruptcy or that will seriously in-
jure it. That is the proposition which I have been trying to
lay down. ‘

Mr. NEWLANDS. I do not understand, let me say to the Sen-
ator, that the Interstate Commerce Comniission, in determining
the reasonableness of rates upon a given road, is to allow the
rates on another and different line to enter into the calculation
at all.

Mr. McCUMBER. Then the Senator has not understood the
argument I have been trying to deduce, and that which is
clearly deducible, from the North Atlantic Differential case,
where they claimed that it is necessary and proper to take that
matter into consideration.

Mr. NEWLANDS. The Senator must recollect that that case
was not considered under the interstate-commerce act. It was
considered as a matter of voluntary arbitration between the
parties.

Mr. McCUMBER. It was an arbitration, but in that they are
laying down a few general propositions that would govern in
fixing rates.

Mr. NEWLANDS. That govern them in voluntary arbitra-
tion——

Mr. McCUMBER. Yes; and in involuntary arbitration.

Mr. NEWLANDS. And not in exercising authority under the
interstate-commerce act? It seems to me the Supreme Court
has laid down the rule in Smith v. Ames as to what shall be
considered in determining the reasonableness of rates, and
they simply consider the question of value and return upon
value—the value of the individual road and the return upon
the value of the individua] road—and no other considerations
than those are alluded to in that opinion.

Mr. McCUMBER. And the value of one road, if fixed by
what it can pay, is three times, perhaps, as great as the value
of another road that is beside it and competing with it. That
is not a basis for determining it, and I confess I do not know
any reasonable basis for determining it. It has to be deter-
mined according to the exigencies, the conditions of the traffic
throughout the country, the law of supply and consumption.
That is what will necessarily have to determine it, and it can
not be based upon the valuation of any other road.

I wish to call attention to another matter, and then I will
pass from this. On page 70 the Commission say :

What does the result fairly show? Does this competitive traffic move
through these ports freely, or do these differentials give to Baltimore
and Philadelphia a distinct and unfair advantage over New York and
Boston?

They conclude that it does, and therefore modify the differ-
ential accordingly. What does the Commission mean by an
unfair advantage? It calls a natural advantage which would
give greater business to Baltimore and Philadelphia and the
roads leading thereto unfair. They apply it to serving the en-
tire public. And its idea of fairness demands a surrender of the
benefits of a natural advantage.

Again, on page 74, they say:

It is therefore possible that in the future it may become evident that
Boston can not fairly compete for this traffic upon the present basis ;
put we do not feel that the record before us would justify that in-
ference to-day.

6659. 3

 
34

If, however, in the future it shall appear to the Commission
that Boston can not fairly compete with Philadelphia or Balti-
more, then the Commission will see to it that Baltimore and
Philadelphia rates are so increased that Boston can compete. :

Finally, on page 75, in treating of ex-lake traffic, the Commis-
sion say:

These four cities are all seaports. This is a fundamental advantage
of location which entitles each and every one of them to participate
in this export business and the public requires that this right shall be
recognized.

Now, that is a judicial or semi-judicial utterance, ‘“ and the pub-
lic interest requires that this right shall be recognized ”—the
right of this differential in their favor—so that they may secure
their proper proportion of the business. I am not denying that
perhaps the public interest in the long run will require that.

Now, why does the Commission stop with these four seaports?
Why should not the same rule apply to Portland, Me., or
Charleston, S. C., or any other of the smaller ports? On what
theory does the Commission base its finding that each of these
cities is entitled to participate in the export business? The
only cities that are entitled to participate, according ‘to the
economics of my country, which is the shipper, are those cities
that can furnish us the cheapest transportation between the
field of production and the field of consumption in the old
country, where it is going; and if Boston can do better than
any other city, then, according to our views, Boston is entitled
to the whole of it. But according to the views of the eastern
people who are interested in building up Boston and building
up their industries, the essential interest of the people of that
section is exactly the contrary.

Commissioner Clements dissented quite strongly against this
proposition. The view which I have taken in reference to this
decision, and the view which, it seems to me, must be taken
by everyone who is an advocate of honest competition, seems
for the most part to be exactly in harmony with the view taken
by Commissioner Clements, as shown in his dissenting opin-
ion; and as that opinion demonstrates more clearly than I am
able to do the dangers which would follow from earrying into
effect this decision if the power were actually given to the
Commission, I will avail myself of the privilege of quoting from
his dissenting opinion. After considering many of the conclu-
sions of the majority, he says, page 78:

If this were a proceeding against a carrier reaching by its lines all
of the ports in question, it would be within the jurisdiction of the
Commission to deal with the differences in rates as discriminations
between localities by such carrier and, if found undue, to condemn
them. * * * But there is a manifest and radical difference between
a matter of discrimination like that by a carrier between places on its
line, and which is clearly covered by the provisions of the third sec-
tion of the act to regulate commerce, and the fixing of differentials in
rates to or through the various ports and over independent and com-
peting railroads. In the latter case the law has undertaken to leave
the free play of competition to adjust rates, subject only to the re-
quirements made of each carrier that its rates shall be reasonable and
just and shall not unduly discriminate between commodities or between
persons and localities reached or served by it.

In this he properly differentiates a discrimination by a rail-
road between localities along its line and a differential in rates
to various ports over different competing lines. I think, how-
ever, that when this supervisory control is given to the extent

6659
35

of absolutely fixing the rates by the Commission, he will be
compelled to follow the rule adopted by the other four members.

Again he says, page 78:

The foregoing report proceeds upon the idea that there is some
legitimate and ascertainable standard of fairness by which there can
be fixed a limited and proper degree of competition and measure of
distribution of the traffic between the ports and carrier other than that
wrought by competition. The law undertakes to fix no such standard
or limitation; nor does it authorize the Commission to do so even for
the purpose of puree. to rest these questions so long and so often in-
volved in the competitive contests between carriers.

And it might be added, that the law neither undertakes to fix
such standard or limitation, nor ought it ever to put in the
hands of a Commission the power to fix such standard or limita-
tion.

Again he says, page 79:

Thus it is seen the purpose and effect of the conclusions is to declare
what differences in rates the railroads should make to the four ports
for the purpose of distributing the business. Whether the carriers see
fit to follow the suggestions of the Commission, which they are, of
course, in no sense bound to do, or decline to acceed to the same, will,
in my opinion, leave the Commission in an embarrassing attitude.

If they acquiesce we will have gone beyond our authority to interfere
in the course of trade, determining the direction and destination of
commerce, a matter with which we are not charged. To-morrow we
may be called upon to determine what share the Gulf ports may have
and the Gulf roads carry, the next day to fix the proportion to which
the Pacific coast is entitled.

And, again, he very forcibly says on page 80:

In declaring as between competing lines and competing ports what
differentials shall govern, assuming that they will govern, we hamper
competition, and by this regulation of distribution effect in reality a
division of territory, a division of traffic, and a division of earnings,
which in substance and effect tend to defeat not only the purpose of
the antitrust act against the restraint of trade, but the pooling pro-
vision of the interstate-commerce act, with the enforcement of which
the Commission is charged.

And, again, on page 81:

May competing carriers lawfully effect, through the agency of the
Commission, restraint of competftion and trade by a division of trafic
between themselves and the ae when to do the same thing through
an agency of their own would be unlawful? I think not.

In this last quotation he clinches the argument that forcing a
division of traffic by the rate-making power destroys the very
competition that we are seeking to maintain.

Mr. President, I believe it is to the best interest of the country,
or certain sections of the country, that railroads should have the
right to discriminate in their favor, not that they may raise
the rates unreasonably high, but that they may place the rates
unreasonably low. I will give a case of this kind. Suppose
citizens of Oshkosh, Wis., go to the Milwaukee or whatever road
serves them and say, ‘ We have the timber here; we should like
to build up a great furniture manufacturing industry; but
Grand Rapids, in Michigan, has corralled all the Chicago busi-
ness; they have been running for fifty years; they can conduct
their business so economically that for several years at least we
could not compete with them; and our only method of competi-
tion is for you to give us preferential special rates to the Chicago
market.” The railway says, “We will haul your products for
three years for just exactly what it will cost, and after that we
will raise the rate to such an extent as we can afford to carry
them. This will then build up your industry.”

6659
36

Now, the Commission appears and says, under the law which
you would pass, ‘“ You can not give this rate to that particular
city unless you give it to every other city on the line, and to
every other person who is attempting to build up any kind of
an industry along any particular line.” Thus you are deprived of
building up a business there that would benefit the railways and
would benefit also the country.

You deprive them of competition. I recall this character of
a condition: Here is a section of country where they raise
nothing but potatoes, or another section where they raise nothing
but flax. They have raised an excellent crop of potatoes there,
but at the same time they have raised an excellent crop over
the country, and they find, when they want to ship those po-
tatoes to the market, the freight rates will equal what they can
get for them in the market of consumption. The railway says,
“We will carry these goods this year at even less than cost.
We will carry them for the express purpose of keeping that
business there. To do that we will have to lower our rates here,
and we will have to raise them, it may be, in the wheat-raising
section, because we can not afford to cut down the general re-
sult of our income to meet running expenses.”

Under this law they could not do it. They could not change
the rate except upon thirty days’ notice, and in thirty days the
potatoes would be rotten.

I believe that the best interest, especially of any new country,
demands that a railway may discriminate in favor of any lo-
cality by giving especially low rates to some particular industry ;
that while they shall be always prohibited from making any
rate unreasonably high, they shall not be prohibited from mak-
ing one unreasonably low for a legitimate purpose.

Mr. President, in the Old World the railway management sim-
ply supplies the demand for carriage. They do not attempt to
make markets. They supply the demand for the markets.
The exact reverse is the rule in this country. Our railways,
especially in a new country, must give special attention to cre-
ating markets. Their management must study the demand;
they must carefully compare the field of production with the
field of consumption, not only in this country but in every other
country. They must build up and stimulate trade. In this
country they make the demand; they work for it; they develop
industries, and they find markets. As long as they do this, then
I say that they should have the privilege of giving such special
and low rates under certain conditions to certain places in the
country as would be beneficial to the part of the country that is
given those particularly low rates.

Now, Mr. President, answering the Senator from South Caro-
lina about the complaints in the southwestern part of the coun-
try. The southwestern cattle raisers complain somewhat not
that their rates are too high—they are not saying that—but they
say that compared with the rates North Dakota and Montana
get they are not treated fairly; that their rates are much higher
than in those States. So the lumbermen from the South say that
the rates from the southern lumber districts as compared with
the rates from the Pacific coast districts are excessively high.
thus favoring the Pacific coast. °

That is true for three reasons. First, those rates were
made excessively low for the very purpose of developing that

6659
37

western lumber industry. Again, the railroad companies could
afford to do it, because the industry is of such importance that
they can haul loaded trains both ways. Again, they do it be-
eause the settlement along the northern roads is much more
dense than it is along the southwestern roads, and therefore
they can carry cheaper. Now, if the railways can give us that
benefit we are entitled to it.

Mr. TILLMAN. Mr. President——

The VICE-PRESIDENT. Does the Senator from North Da-
kota yield to the Senator from South Carolina?

Mr. McCUMBER. With pleasure.

Mr. TILLMAN. Do I understand the Senator to contend that
the population along the road from Dakota to the Pacific coast,
where these lumber districts are, is more dense than it is from
any point in the South northward?

Mr. McCUMBER. I said the Southwest.

Mr. TILLMAN. Going over to Texas as far as our lumber
district extends?

Mr. McCUMBER. I will take the section on the Rio Grande,
the roads that run to Denver and to the coast. They pass
through more country that is unsettled a certain portion of the
distance than the roads running through the northern section.
Minnesota and the Dakotas are very well settled. There are
great settlements in Washington and along the Northern Pacific.
Along the Great Northern road we have a considerable popula-
tion in every one of the States, while in portions of Nevada and
portions of California, in Utah, Arizona, and the other sections
there is very much less population, and of course less business.

Mr. TILLMAN. I think the Senator will find on examination
that he is away from the facts in regard to the density of popula-
tion in the country between the Pacific and the Dakotas or the
part of the country south of the Dakotas which is near the edge
of the arid belt. I know it runs between the ninety-ninth and
the hundredth parallel ; but there is no part of that country that
is at all comparable to any part of the Southwest in lumber.
There may be no lumber away out in the Rio Grande country ;
I do not think there is; it is too dry; but from any part of Texas
where there are trees I am sure northward through the Indian
Territory and Oklahoma the country is four times—ten times—
as densely populated as any part of the country west referred
to, until you reach the Pacific coast.

Mr. McCUMBER. That may be true as to certain portions
of it. But now let me take up this same matter of the dis-
crimination in favor of localities. In the early part of the
history of North Dakota, or of the Dakotas, all of our lumber
came from the pine woods of Minnesota and Wisconsin and
Michigan. There was very little competition. But away to the
west of us lay the immense primeval forests of fir and pine of
Oregon and Washington. We needed their lumber and_ they
needed our market. They were too remote from the field of
consumption to compete with the lumbermen of Minnesota and
Wisconsin on anything like equal carrying charges. The only
way to meet this condition was by discrimination, and by a great
discrimination in favor of the western product and even over
the same line of road. ,

So the managers of our northern railways said to the lumber-
men of the west coast, “For what carrying charges ca you

6659
38

compete on the plains of Dakota with your lumber as against
Minnesota and Wisconsin?” ‘They thought they could compete
on a 65-cent rate per hundred. The railroads said, “e We do not
think you can compete on a 65-cent rate. If you will go into
the business; however, with sufficient capital, so that you will
give us loaded trains each way, we will give you a 50-cent rate,
or a 40-cent rate, if that is necessary.” And a 40-cent rate, I
believe, was given. ; :

Mr. President, that was a simple proposition, having for its
object the development of the lumber industry of the Pacific
coast and the development of the farming industry in my own
State.

Under that agreement lumber was carried from the Pacific
coast into the Red River Valley at a cost that barely more than
paid the cost of running trains one way. Had Minnesota and
Wisconsin been given comparatively favorable rates, then all
of the forests of Oregon and Washington would have been
to-day in their primeval beauty and grandeur. It was by rea-
son of this discrimination that we have been enabled to build
up the great lumber industry on the one hand, and that we
have been enabled to build up the agricultural section upon the
other hand. If we were to take away that discrimination to-
day, the discrimination that the West enjoys in the matter of -
these freights, then all of our prosperity would vanish like
frostwork in the morning sun.

Mr. CLAPP. Will the Senator pardon a short question?

Mr. McCUMBER. Certainly; though I will be through in a
short time.

Mr. CLAPP. I do not like to interrupt a Senator speaking,
but I should like, if the Senator can, to have pointed out a
single word in the House bill that would enable the Commission
to interfere with that condition beyond what they might have
interfered with it under the original bill as it stands to-day as
a law.

Mr. McCUMBER. One of two things is certain under this
bill. Either the Commission will have the power to determine
what are just and reasonable rates or it will not have that
power. If it has that power, it has got to base its decision upon
something. If it bases its decision upon the North Atlantic
differential theory that it has promulgated, it will be bound to
follow the theory I have suggested. If it bases it upon any
other theory, then you would have as many different kinds of
reasonable rates as there are railways in the United States.

I know of no system, I will say to the Senator from Minne-
sota, whereby the Commission can determine what is a reason-
able rate without absolutely destroying all the relations of one
road to another and bringing about a chaotic condition in trans-
portation, unless it takes into consideration the question what
would be reasonable on other roads and what other roads can
haul the freight for.

Mr. CLAPP. If the Senator will pardon me again, he must
concede that before the Commission under the new law can
ascertain a reasonable rate the Commission must first be justi-
fied in condemning the existing rate. The Senator is undoubt-
edly familiar with the decisions of the Supreme Court in regard
to the long and short haul clause of the existing law. I under-
take to say that there is not a line, or word, or syllable in this

6659
39

bill which enlarges the power of the Commission as to the long
and short haul clause as found in the existing interstate-com-
- merce law. If the Commission would not find those rates un-
reasonable under the existing law, clearly they could not in the
place of those rates substitute an alleged reasonable rate under
the proposed law.

Mr. McCUMBER. Mr. President, let me come down still
closer to the point. I will not give the exact figures, but I
will give enough to show the result. I will give a good illus-
tration. We will say that a carload of wheat carried from my
city to the Senator’s city or Minneapolis, where we market it,
is carried by the roads at $50 per car. Now, that same car is
loaded at the same place and carried back to the same city
where it started for $100 per car.

This is done under a system which has been adopted by the
railways that it is for the best interest of our country; that
we get these benefits for the things we ship out rather than the
things we ship in; that while we ship out 3,000 bushels of
wheat, for instance, if it is but $50 a car, we will save 5
cents a bushel more than we would upon an equalization of
those rates. To be sure, when we ship something in it will cost
more. It may cost us 5 cents more for a pitchfork, but while
selling 3,000 bushels of wheat we do not buy back 3,000 pitch-
forks, and hence we are really benefited by this discrimination.

Now, suppose the Interstate Commerce Commission is called
upon to decide that the rate from Minneapolis to my town at
$100 a car is excessively high, what evidence will they receive?
One of the things that would necessarily be submitted is that
the railway company hauled the same car the other direc-
tion for only $50, and if they can haul it one direction for
$50 they can haul it the other direction for $50. They may
cut down on the $100 rate, but the chances are if they do cut
down on the $100 rate on the ground that it is excessive, the
company will make up on the $50 rate, which is the real rate
that benefits us, and the only one that amounts to anything to
us, and will make it cost all the more to move our products
eastward.

Mr. CLAPP. I will ask the Senator if that could not be done
under the existing law, provided the Commission could find
successfully that the $100 rate is an unreasonable rate? Is
there anything in the existing law to prevent the Commission
from attacking that rate?

Mr. McCUMBER. The Commission will attack the $100 rate.
I am assuming now that they hold that it is unreasonable, and
that they hold that instead of the $100 rate they could well
afford to carry freight for $75 westward. Now, what is the
railway going to do with the other $25? They will proba-
bly —— ‘

Mr. CLAPP. That is a violation of the existing law.

Mr. McCUMBER. Just a moment, Mr. President. They
probably will attach it to the eastward haul, because the east-
ward haul already may be low, and the railway can not afford
to carry both ways at a less amount. In other words, they must
have $150 for hauling that car both ways. I want to let them
have the opportunity to differentiate in favor of the eastward
haul, and I would not willingly put it in the hands of the Com-
mission to say that they shall not have that power.

6659
40

Now, Mr. President, a word before closing. A work half done
had better be left undone. Unless this Commission can prop-
erly consider everyone of the freights that it will be called upon
to consider, it seems to me that we ought not to force it upon
them, or even expect them to do it or allow them to do it.

Mr. President, I make no claim to expert knowledge on the
subject of railroad rate making. There are, however, a few
basic principles relative to the subject which, if not known by
every person, are at least understood by those who have given
the subject even casual consideration, principles which ought
not to be lost sight of. We know, in a general way, how these
rates are arrived at. The official charged with the rate-making
power on any great line of railway receives daily reports from
every station along the line as to condition of crops, business,
the amount of produce that will be required to be moved from
each station, etc. Not only this, but he receives information di-
rectly or indirectly from ‘points along every other railway sys-
tem. Those lines he must utilize and those which are in com-
petition with his line. He must study the market of the entire
nation and the entire world. He must constantly have before
him the schedules of charges for all ocean traffic, and the amount
of that traffic, because he must fix his rates in accordance with
it. He must understand exactly what the variation of a half
cent per hundred pounds on any commodity between any points
will have upon the rates and charges and business of other lines,
as well as his own, so that, in fact, every agent, every em-
ployee in every station along every line of railway does his part
in imparting information which shall be the basis of fixing rates
from day to day. I therefore do not exaggerate when I say
that it takes an army of 50,000 men to make railroad rates for
the railroads of the United States. Now, we propose to place
this extraordinary power in the hands of five men, who, though
they be giants in intellect, could not consider the one-hundredth
part of 1 per cent of the things which properly should be con-
sidered in the matter of rate making.

I judge from the remarks of the Senator from Massachusetts
{Mr. LopcEe] that if he pays the Commissioners twice as much
he will make them twice as intellectual. I will hardly agree
with that proposition, Mr. President. I think that though their
intellect be gigantic and a thousandfold multiplied they could
not consider properly one-quarter of the rates that would nat-
urally come before them, because I believe that as soon as that
rate-making power is given it will be followed by applications
from nearly every great commercial city to secure lower rates
or preferential rates to its own particular locality for the
very purpose of securing its own prosperity ; and if they are not
successful in that way they will get in as defendants for the
purpose of preventing some other city from getting the pref-
erentials, and the Commission will be naturally overwhelmed
with a great amount of work.

I am informed that there are more than 100,000 schedules
of rates filed every year with this Commission. That means
320 for every working day in a year. It means 40 for every
working hour. Now, how can we expect a Commission to take
into consideration and justly consider every one of these propo-
sitions, which must be determined not alone on value, but on
a thousand other conditions, such as the inequalities of bonded

6659
41

indebtedness, inequalities of cost of construction, inequalities
of a thousand other kinds, which must necessarily be taken into
consideration in the matter of fixing and determining even
what shall be considered as a fair and reasonable rate.

Mr. President, the Commission have declared a rule that
they will follow, and it seems to me that they will be compelled
to follow the rules which they have laid down in this North
Atlantic differential case.

Mr. President, a word before closing. All who have written
about the conditions in the old country agree that granting the
rate-making power to any political commission has worked dis-
astrously to every one of those inland cities which did not have
the benefit of water transportation. We have no water trans-
portation to amount to anything in this country, and I conceive
it would be much worse in this country than in the old. I take
just a little excerpt from the testimony of Mr. Meyer, given
before the Interstate Commerce Commission. He says:

The experience of all such countries has been to bring into politics the
question of reasonable rates and the great question of confiiet of sec-
tional interests, which is an incident necessary to the development of a
country ; and the ultimate result has been that railway rates have be-
come inelastic and finally have ceased to decline; they have become
stationary and have remained so.

The result of that has been to paralyze commerce to a very large
extent, the railways as effective agents for the development of com-
merce, and the resources of a country; and unless there has been the
Possibility of escape from that paralysis through a recourse to a means
of transportation that was abandoned in this country in the seventies,
namely, by river and canal, the effect has been absolutely disastrous.

And, again, he says, speaking of what the result of the German
ownership or fixing of rates has been:

Berlin has lost all its import trade in petroleum, except trade de-
pendent upon petroleum consumed in Bremen and the immediate neigh-
borhood ; and the petroleum import trade has gone entirely to Hamburg
for eastern Germany, which distributes by means of the Elbe and then
then the canal from Berlin, and then the Oder.

On the other hand, for western Germany the petroleum trade hag
gone entirely to Rotterdam and Mannheim, which is the head of navi-
gation of large vessels on the Rhine, at the point where the Main
empties into the Rhine.

And so the hard and fast rules enforced upon railway carriage
in the German Empire have had the effect of totally destroying
business in some centers and moving it to others, have built up
some sections—namely, those with extra facilities for water
transportation—and have destroyed those centers which depend
wholly upon railway transportation. The like is also true in
Australia. The interior is as much a desert to-day as it was a
hundred years ago. On the other hand, the whole interior sec-
tion of our country has been built up, because of the constant
endeavor of each line of railway to make the country contiguous
to its line prosperous, even at the expense of sinking millions
upon millions of dollars in making rates so low that other sec-
tions of the country could not for a time compete.

Mr. President, there are about one and one-fourth million
voters employed by the railroads of the United States. At
present each one of this great army must deal separately with
the organization that controls the particular railroad in which
he is employed. Some of those railroads, which are operating
upon their own systems, upon their own theories, contemplate
improvements in one direction, some of them in another direc-
tion; and all these matters of expenses and improvements are

6659
42

considered in determining what they can pay their employees;
but, now, when you substitute and project this political body
into the management of the railways of the country, even to a
slight degree, does anyone for a single moment believe that this
immense political influence will not make itself felt, first, in
demands before this commission for higher wages; second, for
shorter hours, and third, for smaller train loads, ete.? If they
appeal there in vain, does anybody for a single moment believe
that they will not make stupendous power felt in the only body
that is back of this great political power—the Congress of the
United States? For my part, I say, Mr. President, Heaven pity
the nation when it is wholly at the mercy of all the great trusts
and of all these political combinations in the United States.

I am informed that when Germany took over the railways
from private to public ownership, she foresaw all of these great
dangers, and she disfranchised everyone of the employees.
That would be contrary to our idea of government, and it could
never be done in this country; but it shows that we shall more
and more and to a greater extent be subjected to these great
political organizations and influences if we once bring the Gov-
ernment down from its lofty function of governing to that of
taking part in the business industries of the country.

The bill contains amendments to the old law that will assist
in its better enforcement, and I will cheerfully support those
provisions. If this other provision, which I believe will be det-
rimental to all but a few great seaports and possibly some other
lines of railway, is adopted, then, in my judgment, both for con-
stitutional reasons and for fair play, I believe the courts should
be open, with provisions for speedy determination to all persons
interested alike.

Mr. President, since the day of Magna Charta, which insured
for all time the right of every man to a fair trial, no principle
has been more sacredly cherished or protected by all English-
speaking races. While litigation in late years may be slow and
often hampered with trivial technicalities, still, when we com-
pare it with trials by departments or boards or courts-martial,
its superiority stands out grandly above all other methods of
determining the personal or constitutional rights of the citizen.
And I, for one, do not believe that the time has come or any con-
dition has arisen which demands the substitution of a political
board for a judicial tribunal.

Mr. President, in closing I only want to say one other thing. It
has been reiterated here again and again with impassioned decla-
mation that, unless we take this first step toward socialism, the
placing of the rate-making power in the hands of a political
commission, the people will rise in their majesty and compel us
to take another one, and that is government railway ownership;
in other words, that if we do not do one great wrong, the people
will rise and compel us to do a still greater wrong.

But the people, as a whole, do not want and do not ask their
representatives to do anything but right. Whenever the people
have understood a subject they have never yet, by their vote,
allowed any great wrong to be perpetrated by us, much less
perpetrate it themselves. The people not only want their rep-
resentatives to do the right thing, but they want them to do
the right thing in the right way.

6659
43

Mr. President, I need give but a single illustration of the
ability of the people themselves to change their own minds
when they have duly considered a matter. I call attention to
the great campaign of 1896 between the gold standard and free
silver. During that campaign had there been a vote had by
the people of the United States during the months of July,
August, September, or even in the early part of October, the
advocates of the gold ‘standard would have gone down to de-
struction before an avalanche of American votes. Our school-
houses throughout the entire country, devoted to the education
of youth during the day, were given up in the evenings for
the education of bearded men. We were told at that time that our
silver money had been surreptitiously demonetized some years
before, that there would be necessarily a great contraction of the
currency to the benefit of the wealthy people of the country
and to the detriment of the poor. They fought it out in
argument; and on that day of November when the question was
determined the people of the United States completely changed
their first conclusion; and they did the best thing, Mr. Presi-
dent, that was ever done in this-country, for if we had adhered
to that policy, notwithstanding all of the savings and all the
great accumulation of gold since that time and the wealth which
the mines have developed, our money would not have been worth
more than 40 cents on the dollar in its purchasing value as
compared with what it is to-day.

So. Mr. President, I have confidence that the people are not
themselves insisting that we shall surrender our own judgment
upon any particular phase of this case. I am sincere in my
belief that that portion of the bill which changes the rate-
making power from the railways to a political body will! be to
the detriment of the people, and I do not feel that I am acting
against the interest of those people. I would be perfectly will-
ing to submit that question wherever it may be justly and
fairly heard.

I am afraid that we are substituting the press for the people
in this case. I am not so certain, the matter never having gone
to the people, that they will say that out of all the remedies
there is one, and only one, that the Congress can conscientiously
and honestly consider.

What the people want are results. They want a law that will
go directly to the evil, and then they want that law enforced.
They do not want the enactment of a new law which will not
touch the wrong. They want a law that all rates shall be just
and reasonable. They want a law that no preferences will be
given to the great shipper over the small shipper. They want a
law that the owners of special cars shall not have such privi-
leges as will enable them to drive out of business concerns so
small that they can not afford to manufacture their own special
ears. They want a law that no rebates of any character shall
be allowed any person whereby he gains an advantage over
others. In a nutshell, they want simple justice’ and fair play.
And I believe that they want another thing which the press have
forgotten to agitate. The people in business, representing all char-
acters of enterprise, are compelled to compete in the open
markets of the world and against immense business interests.
They therefore have a right to demand, and do demand, that
the railways which carry their products shall also be compelled

6659
44

to compete for them; and they want no law which will allow
a commission, through the rate-making power, to destroy that
competition.

I have very little fear of the result this will have upon the
railways themselves. I do not believe they will be greatly in-
jured. I believe that rule will be applied which was applied
in the North Atlantic differential case. I believe that the Com-
mission will see to it that they in their determination of rea-
sonable rates will not destroy any railway if they can help it.
But I am interested in what is going to be the final result upon
the great interior of this country, the exact center of which I
myself represent. While I am here, Mr. President, I purpose
to vote according to my own judgment. I do not think the
editors who have written up this question in lurid lines have
given it the study that I have; I do not think they have given
it the consideration that any one of the Senators here present
has given it. I simply ask that in its consideration, instead of
always putting our ear to the ground to get the public sentiment
for the sole purpose of ascertaining which way the wind is
blowing that it may blow us safely into a political port, that
we shall put our ear to the ground and keep it there to hear the
complaints that are being made by the people; then study out
those complaints, and, under our obligations as Senators, before
God do our duty according to the best of our information and
our judgment in remedying the complaints.

Mr. President, I want to say finally that I will not be a party
in deceiving the people into a belief that in their battle against
these great combinations, the source of all their real injuries,
they are going to get any remedy in this bill that will amount
to anything in whatever way we may pass it.

6659

O
Hepburn Railroad Rate Bill.
SPEECI

HON. JAMES R. MANN,

OF ILLINOIS,
IN THE House oF REPRESENTATIVES,
Wednesday, February 7, 1906.

The House being in Committee of the Whole House on the state of
the Union and having under consideration the bill (H. R. 12987) to
amend an act entitled “An act to regulate commerce,” approved leb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. MANN said:

Mr. CHairmMAN: I can not hope to equal in eloquence the gen-
tleman from New York [Mr. Cockran] who has just preceded
me or the leader of the minority in the House, the gentleman
from Mississippi [Mr. Winrrams], who will follow me, but I
beg your indulgence while calling your attention to the magni-
tude of the interests which we seek to interfere with, the evils
which the country now suffers from, and the method of relief
offered by the pending measure introduced by the distinguished
statesman and patriot, the gentleman from Iowa [Mr. HEp-
BURN], whose courage and whose persistence have succeeded in
bringing the bill before this House with the unanimous sup-
port of our committee. In future history it will be noted as a
remarkable occurrence, that in giving consideration to this
great political and economic question the twelve Republicans
and six Democrats of that committee have put aside the spirit
of partisanship, have kept down mere individual judgment, and
in the effort to accomplish a great result have unanimously
directed their attack to the main point in controversy and have
presented to this House a bill which includes the individual
opinion of no member, but the best judgment of all the member-
ship of that great committee.

THE RAILWAY INTERESTS.

The railroads can not be crippled without directly injuring
the transportation service which they render. They can not be
injured without affecting the financial condition of the country,
and an injury to the general financial condition is felt by all
branches of industry. The railway interests are so enormous
and have so many persons employed that they are entitled to
receive the most careful consideration before any legislative
action is taken which might prove detrimental to them. The
216,000 miles of direct line of road, the 300,000 miles of track-
age, the 1,300,000 employees, the gross earnings of $2,100,000,000,

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2

the freight-service charges of $1,500,000,000, the operating ex-
penses of nearly $1,400,000,000 represent an industry of such
vast proportions and so interwoven and connected with the suc-
cess or failure of every other industry and so interdependent
upon the growth and prosperity of each and every locality that
it is not to be lightly dealt with or treated with malice or
handled with hysterics.

Over 70 per cent of the railway stocks of this country paid no
dividends in the year 1897, which was an ordinary year. Over
42 per cent, or $2,696,000,000, of railway stocks paid no divi-
dends in 1904, which was a fat year. <A business which in-
creased its gross earnings from a little over $1,200,000,000 in
1805 to nearly $2,000,000,000 in 1904 and $2,100,000,000 in 1905,
which increased the amount paid to railway employees from
$495,000,000 in 1898 to $817,000,000 in 1904, which increased
the average cost of running a train 1 mile from 95 cents in 1898
to $1.31 in 1904, while the average revenue for 1 ton of freight
carried 1 mile only increased from 0.754 of 1 cent in 1898 to
0.780 of 1 cent in 1904, which carried, in 1904, 1,309,000,000
tons of freight, including that received from other carriers,
and received therefor $1,379,000,000, or about $1 a ton, is not
to be treated as a public enemy.

It is easy to see that the fixing of railway traffic rates is a
work involving tremendous difficulties, which can only be illus-
trated and which can not be defined or comprehended. Let
me give you an illustration: Persons employed by the rail-
roads may be engaged in connection with the actual transpor-
tation of freight or passengers, or the maintenance of right
of way and structures, or the maintenance of equipment, or
in general administration. The final object of the road is the
actual transportation, so that everything in the way of ex-
penses, except actual transportation, is in its nature prepara-
tory for actual transportation itself. The cost of actual trans-
portation on two roads might be about the same, but the cost
of preparation might be very different. For instance: In the
New England States there are two railroad employees engaged
in actual transportation for every one employee engaged in
maintenance of right of way and equipment, while on the Pacific
coast two persons are engaged in maintenance for every one
person engaged in actual transportation. It is often necessary
for a road to carry freight at rates which but little more than
pay the cost of the actual transportation, for without such car-
riage the actual cost of other freight transported might be con-
siderably increased. It is often necessary for roads to carry
freight at rates which in addition to paying the actual cost
of transportation contribute something more than the cost of
mere wear and tear of equipment and right of way, but which
do not contribute anything toward fixed charges or dividends.

The successful railway manager must in some way secure
business enough for his road at such rates as in their totality
will pay not only the cost of actual transportation, but will
also pay the cost of maintenance of way and structures, cost of
maintenance of equipment, cost of general administration,
taxes, interest on bonds, and other fixed charges, and still show
some profit on the balance sheet, or else his road goes into
bankruptey and he goes into cblivion. That all freight can
not be charged for on the same basis is self-evident to every

6580 .
3

one, White diamonds and black diamonds must have different
rates. Rates must be adjusted in such a way as to be fair to
the capital invested in the road and also fair to the persons
using the road for the accommedation of their business. This
is not easy to do.

In the group of States including New York, Pennsylvania,
New Jersey, Delaware, and Maryland there is a railroad stock
issue of $1.364,000,000, and the railways reported for the fiscal
year 1904 (the last report published) the carriage of 414,000,000
tons of freight; while on the Pacific coast there was a stock
issue of $759,000,000 and only 42,000,000 tons of freight carried.

In this same group of New York and Pennsylvania the mileage
of loaded freight cars going north and east was 985,000,000 ;
going south or west, 572,000,000; while the mileage of empty
freight cars going north and east was 221,000,000 and going
south and west 627,000,000; and of the total mileage of freight
ears in the last reported year, out of a total of 14,553,000,0C0
miles traveled by the cars, 31 per cent, or four and a half
billions, was mileage of empty freight cars. The difficulty
in the way of fixing rates includes the consideration of the
leaded car, the movement of the loaded train, and the movement
of the empty train, the trend of the loaded cars, and the trend
of the empty cars. If the cars are moved loaded to a point,
they must either be returned loaded or empty eventually to the
starting point or to some other starting point. And the difli-
culty in the way of understanding rate making is largely coin-
prehended in the fact that the railway manager must at all
times consider that having moved a car with a load in it he
must either move the car back empty or find another load at
some rate which will more than pay the expenses added to it by
carrying its load.

I think it might be proper to give a few of the figures with
reference to the railways. The railway stocks amount to
$6,359,000,000, the funded debt to $6,873,000,000, making an
aggregate capitalization of $13,231,000,000. About 20 per cent
is owned by the railways themselves. The average capitaliza-
tion is $64,000 per mile, to which should be added $4,200 per
mile on account of current liabilities. The railway capitaliza-
tion of this country, with 216,600 miles, is a little over $13,000,-
000,000. The railway capitalization in Great Britain and the
European continent, with 149,000 miles, is over $18,000,000,000.
So that the total capitalization of cur roads is not excessive;
but we ought to understand, also, that the amount of stock and
bonds is not, after all, a fair criterion of the amount of value of
the roads.

The total number of persons employed on the roads for the
year 1904, was 1,296,000, or 611 to each 100 miles, and of these
there were engaged in actual transportation 566,000 persons ;
engaged in the maintenance of equipment, 261,000; engaged in
the maintenance of way and structures, 415,000; in general ad-
ministration, 48,000.

The total number of freight cars in the country, excluding
all private cars, for which no report is received, was 1,692,000,
and of these there were 310,000 20-ton cars. The 20-ton car
was the car a few years ago. Now the 30-ton car is the prin-
cipal car, and of these there are 707,000. But there are 260,600
40-ton cars, 107,000 50-ton cars; then there are some cars up
to 75 tons.

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4

While the cars have been increasing in capacity, the locomo-
tives have likewise; and if it were not for the fact that there
have been increased economies in railway transportation the
rates could not be so low as they now are. One of the needs
of the future will be to increase still further the economies in
transportation.

These figures show that in dealing with this subject it is nec-
essary for Congress not to deal unjustly with the railroads.
We can not afford to take the_position that we will deprive the
investors in the eapital of the railways of a fair return upon
their investment.

In the year 1904 there were $2,696,000,C00 of stocks which
paid no dividends; there were $78,000,00C more which paid not
to exceed 2 per cent; there were $112,000,600 more which paid
not to exceed 3 per cent; there were $178,000,000 more which
paid not to exceed 4 per cent; there were $928,000,000 more
which paid not to exceed 5 per cent. So that the total pay-
ment of dividends on the aggregate capitalization of the rail-
roads was about 3 per cent, and of the total $2,000,000,000 cf
gross receipts less than 10 per cent of it, or $183,754,236, found
its way eventually into the pockets of the owners of the stock.

Another illustration of the difficulties between different Iocali-
ties of the country in the fixing of the rate may be seen in the
ease of the group of roads lying east of Ilinois and: west of
Pennsylvania, as compared with the group of States lying west
of Indiana and east of the Missouri River.

In the Indiana and Ohio group the railways paid $124,000,000
to the employees and carried 292,000,000 tons of freight, while
in the Illinois and Iowa group there was an expenditure of
&152,000,000 to employees and they carried only 225,000,000 tons
of freight. The expenditure to employees in the Indiana and
Ohio greup was $28,000,000 less than in the Illinois and Iowa
group and the number of tons of freight carried was over 60,-
600,600 more.

These facts illustrate how difficult it is to make comparisons
of freight rates, how difficult it is to determine what shall be
the rate at this point and what shall be the rate in that locality,
and yet, Mr. Chairman, I am as firmly convinced as one can be
of the necessity of the passage of a bill like this. It is with me
a belief that it is absolutely necessary, both for the interests
of the shippers and the interests of the railway, that there
shall be placed between them a disinterested body which shail
decide conflicting questions which may arise. [Applause.]

Mr. STERLING rose.

Mr. MANN. I will yield to the gentleman.

Mr. STERLING. The gentleman gave the per cent of divi-
dends on the stock; has he the figures of the percentage of divi-
dends on the actual value of the railroad property?

Mr. MANN. Mr. Chairman, nobody knows what the actual
yatue of the railvoad property is. As I said, the amount of
capital stock is no fair criterion. Much of the capital stock of
the road is not intended to ever pay dividends; much of the
capital stock of the road was issued and is held solely to eontrol
the ownership of the rond and for use in stock gambling. Much
of the stock of the roads is far less than the actual value of
the road.

Mr. SMITI of Kentucky. The gentleman mentioned that
about 20 per cent of the capitalization of the railroads was

6580
5

owned by the railroads themselves. I desire to know whether
he means that it is owned by the roads in their corporate capac-
ity or by the managers and directors individually ?

Mr. MANN. Owned by the railroads in their corporate ca-
pacity. The railroads own in their corporate capacity $1.942,-
000,000 of stock of other railroads, and they also own $558,000,-
000 of bonds of other railroads.

RATE REGULATION NEEDDD.

Now, Ar. Chairman, without any intention to in any way deal
with this question from the standpoint of passion or hysterics,
with no idea on the part of this Congress or any desire on the
part of the people to interfere in the slightest degree with all
the labor and action necessary for the proper equipment and
management of railways, let us see what it is that we propose to
do in this case. And, first, I will trespass upon your time to the
extent of calling attention to what the President stated in his
message, not merely because the President stated it, but be-
cause his statement is as good a statement of the case in a few
words as has ever been made. In his message of a year ago the
President said:

_, While I am of the opinion that at present it would be undesirable, if
it were not impracticable, finally to clothe the Commission with gen-
eral authority to fix railroad rates, I do believe that, as a fair security
to shippers, the Commission should be vested with the power, where 2
given rate has been challenged and after full hearing found to be un-
reasonable, to decide, subject to judicial review, what shall be a rea-
sonable rate to take its place; the ruling of the Commission to take

effect immediately, and to obtain unless and until it is reversed by the
court of review.

And in his recent message he said:

In my judgment the most important provision which such law should
contain is that conferring upon some competent administrative body
the power to decide, upon the case being brought before it, whether a
given rate prescribed by a railroad is reasonable and just, and if it is
found to be unreasonable and unjust, then, after full investigation of
the complaint, to prescribe the limit of rate beyond which it shall not
be lawful to go—the maximum reasonable rate, as it is commonly
called—this decision to go into effect within a reasonable time and to
obtain from thence onward, subject to review by the courts.

It is not improper for me to call the attention of the House
to the fact that in the first report which I submitted to this
House from the Committee on Interstate and Foreign Commerce,
which was a minority report filed in the House January 24,
1898, I stated that in my opinion Congress “is also called upon
to enact legislation which will authorize the Interstate Com-
merce Commission or some other national authority to prevent
excessive or unreasonable rates and to decide what are reason-
-able, fair, and compensatory rates, both as to passenger and
freight traffic.” I have remained of that opinion ever since.

It will be noticed that in the Presiednt's first message he
recommended that power be given the Commission to fix abso-
lute rates, although he did not use the term “ absolute rates.”
In his second message he suggested the power to fix maximum
rates.

PROVISIONS OF TIIE BILL.

Now, you wish to know what we have attempted to do through
the Hepburn bill. Let me briefly enumerate the main propo
sitions of this measure. What dees the bill do?

(a) Enlarges definition of the common carriers covered by
putting under the provisions of the act all railroads transporé-

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6

ing passengers or property from one State to another, without
regard to whether they are used for such transportation under
a common control or arrangement or for continuous shipment,
thus permitting the establishment by the Interstate Commerce
Commission of compulsory through routes for shipment where
the companies have failed to establish such through routes,
and the authority to do this is expressly conferred upon the
Cemunission.

(0) Enlarges the definitions of the terms “railroad” and
“transportation ” by expressly including under the one all ter-
minal facilities and under the other services in connection with
the receipt, delivery, elevation, and transfer in transit, ventila-
tion, refrigeration or icing, storage, and handling of property
transported when such services are not exempt from the provi-
sions of the act as stated therein.

(c) Provides that the schedules of tariffs shall state sepa-
rately icing charges and other charges which the Commission
may require. :

(d) Provides for thirty days’ public notice before change of
tariff schedules can be made, instead of ten days for increase
and three days for reduction now required.

(e) Empowers the Commission, when finding any existing
rates unreasonable, ete., to prescribe the reasonable maximum
yates for the future; which rates shall go into effect after
thirty days’ notice, and remain in effect during the term of three
years’ observance.

(f) Empowers the Commission to prescribe what regulations
or practices in respect to transportation are just, fair, and rea-
sonable, and requires their observance.

(g) Authorizes the Commission to apportion the division of
through rates and the terms and conditions under which through
routes shall be operated.

(h) Provides that the allowance made by the carrier to the
owner of the property transported for service, private cars, etc.,
furnished by him, shall be no more than is just and reasonable,
and the Commission may determine the maximum charge to be
allowed.

(i) Provides a forfeiture of $5,000 against any carrier, or offi-
cer or agent thereof, failing to obey an order prescribing the
maximum rates or prescribing regulations or practices observed,
and makes every distinct violaticn a separate offense.

(7) Requires the United States courts to enforce the orders
of the Commission, when it appears that the order was regularly
made and served, by injunction or other mandatory process.

(x) Provides for the keeping of uniform books of account and
memoranda, partly to aid in the gathering and compilation of «
statistical information and partly to prevent the prayment of
secret rebates or other preferences.

THROUGH ROUTES.

You may ask what is the purpose of enlarging the definition
of common carriers in such a manner as to permit the Interstate
Commerce Commission to establish through routes and through
rates. Let me give just one illustration. The Standard Oil
crowd are great owners of railroad stocks. They are interested
not only in the stock of the Standard Oil Company, but they
are interested in and owners of great masses of railroad stocks.
They have their influential men upon the boards of directors

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7

of many railroad companies. They own pipe lines of their own.
These pipe lines are not common carriers. The oil which they
transport is transported through their pipe lines. Competitors
of the Standard Oil Company usually do not own a pipe lina.
Take, for instance, a case where oil is to be transported fron
the interior to the Atlantic seaboard. The Standard Oil Com-
pany owns a pipe line. Their competitors do not own pipe
lines. The Standard Oil Company hence does not care for the
establishment of through routes and through rates on the ship-
ment of oil. Their competitors have frequently found that
they could not obtain a through rate, but were compelled to pay
the sum of the local rates of the different roads over which the
oil must be shipped in order to pass from the interior point to
the seaboard.

By this bill we propose that the Interstate Commerce Com-
mission shall have the power, if no through rate now exists on
oil from Cleveland to Boston, to establish a through route, and
to fix the through rate, and to divide that rate among the roads
which constitute the through route. Under the terms of the
present interstate-commerce law, the two roads connecting with
each other are not covered under the act for the purpose of a
through route, unless they make a through bill of lading; but
under the terms of the pending bill, if two carriers are other-
wise engaged in interstate commerce, and hence come under the
terms of the law, they can not lawfully refuse to give a through
bill of lading and make a through rate and a through route,
and, if they do, the shipper who is injured may appeal to the
Interstate Commerce Commission and secure relief.

% a * * * % *

REASONABLE MAXIMUM RATES.

The principal provision in this bill is giving the Commission
power to prescribe reasonable maximum rates for the future.
The distinguished gentleman from Texas [Mr. RussEeLL], who
so ably instructed and entertained the House a few nights ago,
criticised the President and marred his speech by his unjust
criticism that the President had used the term “ reasonable
maximum rates” with an innuendo—with the intention to ac-
complish something besides the fixing of a reasonable rate
which should be the maximum.

Why, Mr. Chairman, the term ‘reasonable maximum rates,”
which seems new to my Democratic friends in the IHlouse, was
in the first law passed on the subject. Illinois was a pioneer
in this legislation, and in the original act in that State the
power was given to the railroad and warehouse commission te
fix “reasonable maximum rates,” and that was given by the
Iowa law and by the laws of other States. It is a term as well
known as any ordinary term in legislative acts, but when the
distinguished Members of the minority side of the House not
familiar with these acts of some of the Northern States raised
the question we promptly changed the wording; but the Presi-
dent of the United States used the language with fair intent to
accomplish the purpose which we seek to accomplish in this bill.

The gentleman from Texas [Mr. RussEti], who is a new
and valued addition to our committee, stated in his speech that
none of the bills introduced in Congress provided for a maxi-
mum rate. Mr. Chairman, in the bill which I introduced on the

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8

94th of last February it was provided that the rate of freight,
ete., “found by the Commission to be reasonable and just shall
- be the maximum charge or rate of freight demanded,” ete. The
distinction between the power to fix an absolute rate and the
power to fix a maximum rate is one of vital interest and im-
portance. The power to fix generally absolute rates is the
power to destroy competitive forces, to paralyze industries, to
injure railroads, to interfere with all of the principles and
methods of modern business life; while the power to fix a
maximum rate is a power which has been exercised and con-
strued in- many of the States and which does not prevent the
continuance of those competitive forces so essential to the
preservation cf a proper distribution of railway traffic and so
vital to the prosperity both of railroads and to shippers.

Mr. Chairman, the language of section 15 of the interstate-
commerce act, as proposed to be amended by this bill, is care-
fully prepared. Under the interstate-commerce act it was con-
strued by the Interstate Commerce Commission they had: the
power to fix a great many rates in one case. The Maximum
Rate case has been referred to here, where the Commission at-
tempted to fix all rates of the six classes of freight for the en-
tire country south of the Ohio and east of the Mississippi River
in one order.

What do we propose to do here? We do not give to the In-
terstate Commerce Commission the power to fix rates. We say
by legislative act what the rate shall be. The Legislature de-
fines what the rate shall be. The rate shall be just, reasonable,
and fairly remunerative. That is a legislative declaration as
to the rate just as much as though we said the rate shall be 50
cents a hundred pounds. We make the declaration ourselves,
we do not confer upon the Interstate Commerce Cominission any
legislative authority or any judicial authority. We say ~s a
matter of legislative act that the rate shall be just, that the rate
shall be reasonable, that the rate shall be fairly remunerative,
and then we leave to the Commission the administrative power
to defermine what in each particular case is the just, reasonable,
and fairly remunerative rate. We do not confer upon the Com-
mission the power to put these rates into force in the future.
That is a legislative act. We authorize the Commission to find
what the reasonable, just, and fairly remunerative rates are
and then we say by the act that this order of theirs shall go into
effect ; so that the Legislature finds what the rates shall be and
puts those rates into force; and all the Commission is given
power to do is the administrative act of making the computation,
as it were, ascertaining the facts in a particular case as to
whether the rates are complying with the provisions of law
which we make, and if they are not, then we put new rates into
force by our act.

a * % Eo a ue i:

Mr. MURDOCK. Can you conceive of a rate that would be
just and reasonable and at the same time not fairly remunera-
tive?

Mr. MANN. I do not think they mean the same. “ Unjust”
applies to discriminations, “ unreasonable” to value of service
or amount. ‘ Fairly remunerative” means that there shall be
?emuneration for the service rendered which shall be fair to
the railroad and to the shipper in that particular case. What

6580
9

may be fairly remunerative in one case might be confiscatory
if applied to another case, and what may be fairly remunera-
tive for one commodity under particular circumstances may
mean ruin to the company or the shipper if applied in the same
ratio to all of the business. <A large share of the freight charges
to-day are so low they contribute little or nothing toward the
fixed charges of the road, and yet it is profitable for the rail-
roads to carry such freight at these fairly remunerative rates.
Any scheme of rate making which did not authorize the Com-
mission in making the rates to take into consideration all of
the circumstances and conditions surrounding the movements
and character of the traffic would be a definite injury to busi-
ness instead of a benefit. It may be that the term “ reason-
able” would meet the case, though that has a defined, common-
law meaning, which ought to be avoided. If the common-law
meaning of the term ‘ reasonable” were applied to all the
freight rates now in the United States it might perhaps raise
half of them.

The Commission, in fixing a freight rate, must take into con-
sideration not merely the rate upon the particular commodity
involved between the points named, but must also take into
consideration the general character of business upon the read
and what other commodities pay between other points. If the
Comuiission, in fixing a maximum rate, is required to fix a rate
which, in addition to paying the cost of the actual transporta-
tion, pays its share of the cost of maintenance of right of way,
structures, and equipment and also its proportion cf the cost of
fixed charges, and leaves something for dividends, it is plainly
manifest that the Commission must proceed upon different
lines in fixing rates from the lines now followed by railway
officials. It is not the purpose of the pending measure to lay
down new principles for rate making. It is the desire, I take
it, to leave the Commission to decide, as the railroads now de-
cide, upon the particular circumstances in each case.

FULL HEARING REQUIRED,

We do not propose to give the Commission authority to make
rates ad libitum without full consideration. We confine the
authority of the Commission to act after a full hearing. A full
hearing is a jurisdictional question with the Commission. If
the Commission shall entertain a complaint and make an order
covering a thousand rates without a full hearing upon the differ-
ent rates that order is ineffective. The present law makes no
such requirement. The present statute gives to the Commission
when complaint is made the power to make an investigation
and make an order. We confine in this bill the power of the
Commission to make the finding after a full hearing of the
case. What is the theory of that? The same that goes
through our judicial procedure.

The Commission can not act without the hearing. It is not the
purpose of the bill to give the Commission the authority to initi-
ate rates throughout the country. When a complaint is presented
and a hearing is had, then we say that the Commission is the
best qualified to pass upon the case. Here is the situation. Here
are the railroad companies, absolutely necessary to the shipper.
‘The railroads can not continue in business without them. ‘he
railroads would go into bankruptcy at once without the shippers.

C580
10

The shippers can not continue in business without the railroad
company. The two are essential to each ether. The two have
grown up so that the railroads and the shippers are inter-
twined and interdependent on each other. Neither can exist
without the other. The railroad depends for its life upon the
power of the State; it comes within the control of the Gov-
ernment. It can continue in business only upon terms which
Government grants to it. What do we do? We say that the
railroads must have freight from the shippers and that the -
shippers must have the freight facilities offered by the rail-
roads. Who shall decide in case of a conflict between these
as to what is the proper rate? Shall the railroads permit the
shippers to determine the rate to be paid? Shall the shippers
permit the railroads to determine the rates to be paid? Is
either one to have the power to control the other? The proper
method is to do as we do with all trials of property. The
right of shipment is as much a right of property to-day under
our system as the right to hold a piece of land or to own a
dollar bill. We submit the right of trial of property in a way
to a disinterested commission, which, after hearing both sides,
shall reach a conclusion.

Now, I have often seen courts for whom I had not a great
deal of respect so far as the capacity or abiltiy of the judge
was concerned. There are thousands of lawyers in this land
just as capable of rendering justice and deciding great ques-
tions as the nine eminent gentlemen who sit in this Capitol
as the last resort in the determination ef justice. But we have
learned that an able judge, or one who is not so able, after he
has listened to the testimony and after he has been instructed
by the counsel, renders a fairer decision than the ablest lawyer
does in his own chamber, retained by one side of the case.
[Applause.]

Some of the distinguished gentlemen opposing this bill have
said that it is the beginning of conferring the rate power.
Not at all. We commenced controlling the rate power when
the first bill was passed upon this subject. The distinguished
gentlemen from Massachusetts [Mr. McCarzt] and Pennsyl-
vania [Mr. Srptry] say: ‘Stop rebates. We are with you
upen stopping rebates.’ Why, Mr. Chairman, the power to
stop rebates is the power to control rates. When railroad com-
panies were first organized the railroad owners believed that
they had the same right to sell the commodity which they had
to sell that any merchant had to sell his commodity, and there
was no pretense of giving the same rate to everybedy. The
railroad would give to this man this rate and to another man,
who would bring it large quantities of freight, another rate.
It was considered legitimate. It was the same process which
we follow in many kinds of business. It was the old idea, now
generally exploded, even so far as merchandise selling is con-
cerned, that you sell to the person who wants to buy after
bartering and dickering over fixing the price. And when
Congress stepped in and said that the railroads could not make
rates as they pleased, they could not discriminate between
imdividuals, we then and there took control of the fixing of
railroad rates. Would anybody take away that power which
we have exercised? Would anybody iet the railroads now fix
rates as they pleased and discriminate between individuals as

6580
11

they please? And yet it is but a step further to say that, having
forbidden them to discriminate between individuals, we shall
forbid them to unjustly discriminate between commodities and
between localities, and we shall forbid them to charge extor-
tionate rates. This is the exercise of a power which no one
questions.

But they say that the power may be wrongly used. Ah,
Mr. Chairman, the power of government may always be wrongly
used. The judge on the bench may be corrupt, the executive
may be bought, the legislature may be bought, every official
may become corrupt, but when we fear power because we fear
we can not elect honest officials, then we fear self-government,
and we abandon republican principles. [Applause.]

I am no more afraid of conferring upon the Interstate Com-
merce Commission the power, after full hearing, to determine
justice between the shipper and the railway company, than I
am afraid of conferring upon the Supreme Court of the United
States the power which it is now exercising of determining the
rights between the State of Illinois and the State of Missouri
in a case out there. [Applause.]

“ PAIRLY REMUNERATIVE ” CONSIDERED.

Mr. MACON. Does not the gentleman believe that if we
eliminated the words “ fairly remunerative ’ we would eliminate
a somewhat dangerous proposition?

Mr. MANN. Section 15, as we propose to amend it, provides
that if the Interstate Commerce Commission, upon complaint
and after full hearing, shall be of opinion that any rates charged
by the railroads are unjust or unreasonable, etc., the Commis-
sion shall prescribe what will, in its judgment, ‘‘be the just
and reasonable and fairly remunerative rate or rates, charge
or charges, to be thereafter observed in such case as the maxi-
mum to be charged.” I have already endeavored to explain
to the House the necessity of inserting the words “fairly re-
munerative,” or words of similar meaning, such as “ compensa-
tory,” but perhaps I ought to be more explicit.

In the last fiscal year for which full reports have been com-
piled, the year 1904, we find that there were 641,000,000 tons
of freight originating on the lines of railroads making the
returns. That of this, over 51 per cent, or 320,000,000 toils,
were the products of mines, Lituminous coal leading with a
tonnage of 174,000,000 tons. The products of the forest aggre-
gated 12 per cent, or 80,000,600 tons, including lunber to the
amount of 67,000,000 tons. Grain amounted to 30,600,000 tons;
cotton to 3,000,000 tons; live stock to 10,000,000 tons; dressed
meats to 1,730,000 tons. Merchandise amounted to less than
5 per cent of the total, or 20,986,689 tons. It is self-evident that
merchandise and coal can not be charged the same rate. If
bituminous coal were charged the same freight rate that is
charged the average product of freight, the cost of coal in
many parts of the country would be so great as to compel a
change in our method of living.

On every railroad, nearly, you will find that there is an
excess of loaded cars going in one direction and an excess of
empty cars going in the opposite direction. Less than half the
railroad employees are engaged in the actual transportation of
freight. More than half of the employees are engaged in imain-
tenance and administration.

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12

Of the $2,000,000,000 collected in the year 1904 as gross re-
ceipts by the railroads, less than 25 per cent, or $465,872,674,
were paid out by the railroads as net interest on the funded
debt and net dividends on stock. A very large proportion of the
freight which was carried, known as coarse and bulk freight,
probably contributed nothing toward the payment of this inter-
est or dividends. If the freight charge will pay more than the
cost of actual transportation and its share of wear and tear of
equipment, way, and structures, it brings a profit instead of a
loss, provided it would not otherwise be secured; nay, more, it
may bring a profit, although not paying sc much as the actual
cost of transportation if carried in cars which would have to be
moved in the same direction anyway, and which otherwise
would be moved empty. A freight train may contribute nothing
toward the payment of dividends or interest. It may con-
tribute nothing toward the payment of taxes or other fixed
charges. It may contribute nothing toward the payment of
maintenance of right of way. It may contribute nothing toward
the payment of maintenance of equipment; and yet, if it will
pay operating expenses, it may be profitable to the read to
carry the freight, because it may be in the movement of cars
which otherwise would be empty and the cost of movement the
same.

“ Fairly remunerative ” means it may be a rate which, whether
it contributes anything toward the payment of fixed charges or
not, is, for the service which is rendered in the particular case,
fair to the railroad and to the shipper. We propose to give to
the Commission the power to say in each case what is a fairly
remunerative rate for the service rendered. Each case will
depend upon its own facts.

THINGS NOT PROVIDED IN THE BILL.

Mr. Chairman, having discussed somewhat hastily some of the
things which the pending bill proposes to do, I beg to call the
attention of the House to some things which it does not pro-
pose to do.

The bill does not provide for absolute rates.

It does not provide for the compulsory raising of rates.

It does not provide for maximum rates.

It does not provide for differential rates.

It does not provide for arbitrary classification.

It does not provide for permanent rates.

The CHAIRMAN. The time of the gentleman has expired.
The gentleman from Georgia is recognized.

Mr. ADAMSON. Mr. Chairman, I will be glad if the gentle-
man is given time to conclude his remarks.

Mr. HEPBURN. I yield such further time as the gentleman
may desire to consume. [Loud applause.]

* k * % K ke a

Mr. MANN. Mr. Chairman, after all, in determining a great
question like this, we have reached that point where we come
to the parting of the ways. ‘The issue has been presented, and
it must be met. Shall Government, when the issue is presented,
say that the railways may do as they please—may resort to
extortion if they choose, without regard to the rights of the
Government—or shall we say that properly safeguarded Govy-
ernment shall exercise its right of control to prevent extortion
and prevent unjust discrimination?

6580
18

Now, as I was saying, Mr. Chairman, we do not provide for
absolute rates. We do not provide for differential rates. We
do not interfere with the construction of the long and short
haul clause as it has been made. We do not give to the Com-
mission the power to make arbitrary classifications. It is true
that in making a review of rates, if the rate be changed, it may
involve a change of the class or it may involve an exception
from a class, or it may involve a fixing of a commodity route.
But we do not authorize the Commission of its own sweet will
to change this article or that, to readjust the classifications of
the country, or readjust the freight rates in this arbitrary or
initiatory manner. We confine the action of the Commission to
the case which is presented and prevent them from arbitrarily
injuring any particular locality. We do not give them the
power to say which port shall be built up, which city shall be
preferred; we leave open the competitive forces of the rail-
ways. The old bills which we had sought to stifle competition ;
we leave competition in force. The railroads running south,
west of the Mississippi, and the railroads running east, north of
the Ohio, will have to fight out the question as to which road
shall carry the grain for export abroad.

We do not seek to determine those questions. Much has been
said here in denunciation of the principle of basing points.
Whether basing points be' right or not, their establishment has
been one of the movements of economic forces, which ought not
to be idly interfered with while the great question of overcon-
centration of population in large cities continues to be the prob-
lem of the age. It is claimed that basing points tend to build
up local distributing centers, and that doing away with basing
points would result in many cases in the South and West es-
pecially in adding to the business of a few large cities at the ex-
pense of minor distributing points, in the same way as it is
claimed the establishment of cheap parcels post would result in
building up mail-order houses at the expense of the country
merchant and the city wholesaler.

Mr. Chairman, it is sometimes much easier to complain about
the faults of others than it is to right the faults in ourselves.
The grossest discriminations, the most unjust preferences known
to-day in the carriage of freight are those which exist under the
postal laws and regulations. Here, for instance, are the pop-
ular magazines and books in competition with each other. By
our postal laws we carry the magazines through the mails from
New York to San Francisco for 1 cent a pound, which is far
less than the cost of the service. On the other hand, we charge
‘for carrying a book from New York to Philadelphia 8 cents a
pound, which is far above the cost of the service. We lose prob-
ably not less than $20,000,000 or $30,000,000 a year by the car-
riage of second-class mail at a cost of 1 cent a pound. We make
it up partly from excessive charges levied against beoks, which
are in direct competition with the magazines and newspapers
comprising second-class matter.

We propose to confer upon the Interstate Commerce Conimis-
sion the power to regulate abuses of much less notoriety, while
we admit that up to the present time we have been unable to
regulate those abuses in. the postal service over which we have
direct control. It is not surprising that railroad officials, when
they notice the incapacity of Government to correct abuses un-

6580
14

der its direct charge, on account of the political influence of
newspapers, magazines, ete., do not desire the railroad business
to be placed under the control of a governmental agency which,
in the end, may be influenced by the sume motives and controlled
by the same fear.

But the danger to the railroads of radical railroad legislation
is far less than the danger to the business interests. If a com-
mission shall be created which will listen to the conflicting in-
terests of different localities and which shall endeavor to
conserve the natural advantages of one community over another,
which shall endeavor to fasten upon our country zones of in-
fluence and zones of trade, which shall endeavor to interfere
with or restrain the active, persistent, and constant competitive
forces of commodities and localities, as well as shippers and
railroads, we will have entered upon a dangerous, if not a
paralyzing, course.

* ‘ as cd oe * * *

T should like to take up for discussion at this point the so-
ealled “court” feature of the bill. I am inclined to think that
under this bill the interests of the railroads are properly safe-
guarded, but I can not, in view of the time fixed for voting
upon the bill this afternoon and in justice to the two great gen-
tlemen who are -to follow me in this debate, go into that ques-
tion at this time.

SUMMARY.

Let me then make a summary of the position which I occupy.

I believe that the shipper, with a just complaint concerning
the service rendered to him by the railway or the charge there-
for, should have an impartial tribunal pass upon this question
between him and the railroad company, vital to them both; but
I do not believe it advisable or wise for the Government to
attempt to reduce to such a low point the earnings of capital
invested in railway enterprises as will tend to prevent the
investment of new capital. On the contrary, assurance should
be given for a reasonable return on the investment. The rail-
roads to-day are wholly inadequate to the existing transporta-
tion needs. Many of the lines need double tracking. Some
need a third or fourth track. Most of them need better ter-
minal facilities. More rapid transportation is needed for many
classes of freight, and particularly for live stock and perish-
able freight. More safety appliances are required, not only
for the benefit of the employee, but for the passenger, and the
citizen who is neither. More care should be demanded in the
transportation of passengers. Signal systems by which railway
collisions will be rendered almost impossible are of as great ~
importance as the question whether the grain business from
disputed points shall go to Milwaukee or Minneapolis.

The study of recent years, both as to railway transportation
and water transportation, leads me to believe that in the not
distant future transportation by rail will be immensely cheap-
ened. We have increased the length, width, and depth, the ca-
pacity of steamships and of railway cars; but while we have
deepened our harbors we have not widened our railway tracks.
An evolution in the construction of railways is inevitable.
When it comes, it will require vast sums of capital. It will
require confidence on the part of those furnishing the funds
that they will receive a fair return for their investment.

6580
15

The business of the ccuntry can not live without the use of
the railroads. The railroads can not live without being used by
the business interests. The railroads are necessary to the ship-
pers. The shippers are necessary to the railroads. The freight
rates determine whether the shipper shall live. The freight
rates also determine whether the railroad shall live. If the
rates be too high, a particular shipper may be driven out of
business. If the rates be too low, the railroad may be driven
into bankruptcy. The railroads being a necessity to the ship-
pers and the shippers being a necessity to the railroads, the
reasonable plan is in fixing the freight rates to be paid that
both shippers and railroads shall come to a mutual agreement
after mutual exchange of opinions and positions; but in case
the shippers and the railroads are unable to agree, there should
be some tribunal to settle the dispute without leaving it wholly
to the judgment of one of the interested parties.

That is the proposition in the pending measure. It is pro-
posed to give to the Interstate Commerce Commission, to a
limited degree, the rate-making power. The Commission may
hear complaints that any particular rates are unreasonably high,
or unjustly discriminatory, and may decide what shall be the
highest rates to be thereafter charged by the carrier. This
will not prevent the carrier, in the face of competition, from
lowering its rates, in order to save its share of the business.
The Hepburn-Dolliver bill now pending before us is immeasur-
ably superior to the old Nelson-Corliss bill, the Cooper-Quarles
bill, or the Esch-Townsend bill of the last session. Those bills
proposed to give to the Commission the general power to fix
absolute railroad rates which could not be changed, except
upon filing a new petition and having a new hearing before the
Commission. Those bills enacted into law would have fastened
upon the business interests of the country a system of arbitrary
and absolute rates entirely unresponsive to the business inter-
ests, or the changing conditions of transportation or business.
The enactment of any of those bills into law might have proven
a catastrophe to the shipping and business interests of the land;
but the Hepburn bill, now pending, is very different. True, -it
confers the rate-making power to an extent upon the Commis-
sion, but it permits the Commission at any time, of its own
motion, to change its order; it permits a rehearing of the case
at any time; it provides that the rate fixed by the Commission
shall not be the absolute rate, but only the maximum rate, and
it provides that this rate shall be compulsory only for the term
of three years. This will give the power to correct the evils
which are complained of, but will not give the power to con-
fiscate the property invested in railroads, or to paralyze the
business interests of the country and prevent the location and
establishment of new industries along the lines of the railroads.

It will not give the Commission the power to determine dif-
ferentials, the power to say whether grain from the Northwest
shall be shipped for export by way of the Gulf ports or the
north Atlantic ports, the power to destroy the law of competi-
tion, the power to ruin one city or one locality for the benefit of
another city or another locality. The former bills were in-
tended to destroy railroad competition. The pending Dill in-
yites competition and it preserves all the competitive forces
which tend to increase the economy of transportation and re-
duce the cost thereof.

6580
16

The fixing of railroad tariffs is the most compfex and delicate
work now carried on in our country. The interests, the locali-
ties, the commodities, the persons interested are as diversified
as our land, our productions, and our people. No one set of men
ever have or ever can manipulate the delicate mechanism of rail-
way tariffs for all parts of our country, for all commodities pro-
duced by us, and for all interests which may be destroyed or
‘upbuilt.

But government must exercise some control. It is as neces-
sary for government to Le the judge in the last resort between
shipper and carrier as to the rate to be charged, as it is for
government to determine the right to any other class of prop-
erty.

The railroad officials fear that it is dangerous to confer, to
any extent, rate-making power upon a governmental agency.
Let us admit it. There is some danger. No one can tell how
dangerous it might become if fully exercised. But no new
legislation is ever enacted without some element of danger in
its possibilities. The best guaranty is that the pending measure
is conservative. It protects the interests of the shipping com-
munity and does not permit the confiscation of the railway
properties. The present bill is a compromise measure. It prob-
ably does not meet the full views of any one. But the subject
is a great one. It is the most stupendous subject in its many
ranifications which has ever come before this body. In a sense,
we grope in the dark.

This measure is an advance in the complexity of our internal
affairs and in the progress of government paternalism. The
necessities of the case require us to take this step. We cau
not avoid it. If properly used in the future, it will be a great
advantage to both shippers and railroads. If improperly used
in the future, we must trust the people to correct its abuse as
we must at all times trust the people to provide safe govern-
ment and to observe the safeguards of government. [Great
applause. ]

6580

O
Regulation of Railway Rates.
SPEECI

HON. JOHN T. MORGAN,

OF ALABAMA,
IN THE SENATE OF THE UNITED STATES,
Tuesday, January 9, 1906.

REGULATION OF RAILROAD RATES.

Mr. MORGAN. If I am in order at present, I call for the sec-
ond reading of Senate bill 2828.

The bill (S. 2828) to provide for the regulation, by judicial
authority, of the freight rates of railroad companies and other
common carriers and the preferential advantages granted by
such common carriers to certain persons and places, to the
wrong and injury of others was read the second time by its
title.

Mr. MORGAN. I desire to submit some remarks upon the
bill and will proceed now unless the Senate otherwise orders.
I ask leave, without reading it, to introduce a copy of the bill
as a part of my remarks.

The bill introduced by Mr. Morcaw January 8, 1906, is as fol-
lows:

A bill to provide for the regulation, by judicial authority, of the freight
rates of railroad companies and other common carriers, and the pref-
erential advantages granted by such common carriers to certain per-
sons and places, to the wrong and injury of others.

Be it cnacted, etc., That all railroad corporations or companies and
all other corporations, companies, and persons engaged as common car-
riers in transporting, by land or water, freight or passengers among or
petween the States, or in or through the District of Columbia, are pro-
hibited from demanding or receiving more than a reasonable compensa-
tion for such service on their respective lines of transportation, or any
part thereof on which they are so engaged, directly or by agreement
with any other corporation, company, or person; and they are likewise
prohibited from giving unreasonable preferences in rates or charges for
transportaticn services, or in the facilities of transportation, to any
shipper or passenger to or between any place or places on such routes
or lines of transportation to other shippers or passengers.

Sec, 2. That the shipper or cwner of any property, or any passenger
on lines or routes of transportation, such as are mentioned or described
in section 1 of this act, may sue such common carrier in any district
court of the United States having jurisdiction of the parties to the suit
for the recovery of such unreasonable charges for transportation or
for any damages sustained by the plaintiff in the.suit by reason of the
giving unreasonable preferences in rates or facilities of transportation
that are prohibited in the first section of this act; and in any suit
brought under or in accerdance with the provisions of said section the
court shall entertain jurisdiction without respect to the sum sought to
be recovered therein: Provided, That the sum claimed by the plaintiff
in the action shall be $50 or more, ;

Suc. 3. That appeals to the Supreme Court of the United States may
be granted or writs of error may issue from the Supreme Court of the
United States for the review of a final judgment in any suit author-
ized in sections 1 and 2 of this act on the application of any of the
parties litigant without reference to the amount. of the judgment
therein. rendered in a district court of the United States, and in such

6423
2

cases the district courts and the Supreme Court of the United States
shall advance the same for trial or hearing over other civil causes on
their dockets if, in the opinion of the court, the public interests are not
injuriously affected by such order. tle

Suc. 4. That if the plaintiff in a suit in_the district court of the
United States instituted under or in accordance with this act shall
obtain judgment for a sum less than $50 the costs of such suit may be
taxed equally between the parties plaintiff and defendant therein. If
the recovery in such suit by the plaintiff shall be as much or a sum
Pheu than $50 the entire costs shall be taxed against the defendant

erein.

Src. 5. That any citizen of a State may make complaint to the
governor thereof, setting forth the facts which show a breach of the
provisions of this act by any common carrier engaged in the business
of transportation described in the first section hereof, and thereupon
such governor, if he determines that it is proper and_ expedient for
the pee of the State that suit should be instituted, and is empowered
by the laws of such State to institute suit for the determination of the
questions and matters mentioned in the first section of this act, is
hereby authorized to institute and prosecute a suit against any of
the common carriers referred to in this act, in the name of the State
of which be is governor, in any court of the United States having juris-
diction thereof, for the recovery of any such demand, or for the re-
covery of any damages that such citizen may be entitled to recover or
that the people of such State or of any defined locality in such State
have suffered through the unlawful conduct of such common carrier.
Such sums as may be recovered in such suits in the name of the State
are to be at the disposal of the legislature of such State. The State
instituting such snit shall be regarded in all respects as the plaintiff
in the action: Provided, That such a suit shall not be brought in any
State in a district court of the United States for any judicial district
of the United States within such State; but such suit in a district court
of the United States may be instituted in any otber State or district
of which the defendants ure citizens, or in which any of them are lia-
ble to be sued in the district or any other courts of the United States.

Src. 6. That the service of process upon any director or officer of a
corporation, or company, mentioned in the first section of this act, at
any place in which he is liable to be sued in any court of the United
States, shall be sufficient service as to such corporation or company,
and as to all the members thereof, to compel their appearance to abide
by and perform its orders and the final judgment of the court when
rendered.

Src. 7. That nothing in this act contained shall be construed as de-
priving any person who sues in his own right and name from instituting
any suit under its provisions, or any other suit, at law or in equity,
in any State court or in any court of the United States, against any
common carrier.

Sree. 8. That in all suits instituted under the provisions of this act,
or in accordance therewith, against common carriers in the district
courts of the United States the question of the reasonableness of rates
or compensation demanded by or paid to a common carrier for the
transportation of freights or passengers, and the question of the reason-
ableness of any preference given by a common carrier to shippers of
freights or of passengers over other shippers or passengers, or to any
place over any other place, shall be considered as mixed questions of
aw and fact, to be determined and decided by a court and jury.

Mr. MORGAN. Mr. President, in all the great number of sug-
gestions and propositions to regulate, by statute, the rates of
compensation that common carriers may lawfully demand and
receive for the transportation of passengers or property, there
are two that can not escape final decision by the Supreme Court
of the United States. Unless Congress cuts off from the parties
to a suit the right of appeal or writ of error, for review by that
court, of the judgments of inferior courts, such cases as are
the subject-matter of this bill, they will reach that court and
will be finally decided by it through some channel. But the
journey will be slow. .

It is by no means certain, if Congress should deny the right of
appeal or writ of error in such cases, that the Supreme Court,
in its constitutional power and right of review, prohibition, and

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8

mandamus over inferior tribunals, can not compel them to obey
the Constitution of the United States.

But the occasion for the discussion of such a proposition is so
very remote that I only allude to it to call the attention of the
Senate to the supremacy of the original jurisdiction of the
Supreme Court of the United States as the final arbiter of all
suits for all causes of action brought by a State of the Union in
that court.

The two causes of action to which the provisions of this bill
relate that I now Lave the honor to offer in the Senate involve
the contract rights that may be claimed by carriers as being
beyond the final control of the powers of Cqugress—rights that
are so protected by the Constitution that Congress can not law-
fully impair them if they are, in fact, reasonable and just—
contract rights that can only be decided to be reasonable and
just by the judgment of a court of competent jurisdiction.

There is a contract, express or implied, in every lawful act or
engagement of a common carrier in the transportation of pas-
sengers or freight. No phase or form of legislative enactment
can extinguish this essential element that inheres in such en-
gagements between a shipper and a common carrier.

A common carrier can not lawfully transport freights against
the consent of the shipper. Such an act is a conversion of the
property so transported. As to a passenger, such wrongful
transportation against his will is a tort. If the transportation
is with the consent of the parties it is lawful as to them, and
the right to demand compensation and the amount of it is only
governed by the reasonableness of the charge. If the amount
of the compensation for such service is not settlel by agree-
ment,‘’the law implies that it shall be reasonable. If it is fixed
by agreement between the parties, the law, fur reasons of public
policy founded in justice, requires that the rate or compensation
shall be reasonable; otherwise, the recovery for the service is
limited to the quantum meruit, or the sum that is reasonably,
and therefore justly, due to the carrier from the shipper, with-
out regard to the price stated in the contract. :

The test of reasonableness, which is an equitable phase or
form of justice in the contracts of public carriers and other like
employments, has grown out of a public policy that has the
effect of law, and is practically inviolable. This public policy
is based upon the necessity of placing restraints upon common
earriers and some other classes of persons who, in virtue of
their business occupations, in which not a great number of per-
sons are usually engaged, have monopolistic advantages over the
general community, and are yet indispensable to the success of
commercial pursuits. If such advantages are not checked by
active competition or by some principle of law that is of uni-
versal application to persons so employed in the service of the
people, monopoly and extortion will necessarily exist, to the
serious detriment of trade and commerce. These interests are
sedulously guarded against such wrongs and evils in all civil-
ized countries, and especially by the common law of England.

In official service the officer, great or small, who practices
extortion is denounced by the common law and by many highly
penal statutes as an enemy of society, and is weighted down
by courts and juries with just and severe punishments.

The situation with which Congress is anxiously trying to
deal at this time closely resembles extortion by public officials,

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4

and it deserves and requires the check and punishment of severe
laws. It is difficult in the present state of public feeling on
this subject to resist the inclination of lawmakers who are free
from partialities to enact laws by State legislatures and by
Congress to treat the officers of railroads, whether engaged in
transportation among the States or within the States, as hold-
ing their offices in those corporations in trust for the people, as
if they were governmental officers, by adoption of law. I am
not quite sure that Congress and the State legislatures can not
so regard their public service and hold them to the full respon-
sibilities of such officers as are elected or chosen to the per-
formance of governmental service and punish them for official
extortion. But it is not yet necessary to make any new de-
parture in legisluiion to reach this class of public extortioners.
In the Elkins. law there is as near an approval of this prin-
ciple as is necessary at present, and if amendments to that ex-
cellent law are found necessary to prevent its evasion, Congress
should make them.

Returning to the two questions with which this measure is
intended to deal, they both arise out of the question of the rea-
sonableness of contracts, express or implied, as to the compen-
sation that common carriers may justly demand for transporta-
tion of goods or passengers, and the reasonableness of any
discriminations or preferences in the rates or facilities of trans-
portation as between different shippers or passengers or be-
tween different places on the same lines or routes of transporta-
tion.

Contracts, express or impliea, are of the essence of such op-
erations, and as contracts these matters are to be dealt with.
I have selected these features of the situation that includes
other evils, because they are very comprehensive in character,
including other resulting or dependent evils, and because they
are the most prominent and earnestly contested points that are
being urged upon the consideration of Congress.

If these abuses can be corrected by Congressional legislation
through methods that are not entirely new, and are not expen-
sive to those who are being wronged by the railroad companies,
and by decisions that are finally conclusive of all the ques-
tions involved, such a line of procedure must certainly engage
the careful study and examination of Congress, as it will com-
mand the confidence of the people. I believe that such a result
will follow the enactment of this bill into a law substantially
as it is formulated.

While this measure removes some existing statutory difficul-
ties to its successful operation, chiefly such as relate to the sum
in controversy, as an element of jurisdiction in the district
courts of the United States, and as to the amount of the judg-
ment that carries the right of appeal or writ of error to remove
causes in the appellate jurisdiction of the Supreme Court, and as
to the costs of the suits in the cases provided for in this bill,
there is not a principle of law upon which this bill rests that
is not well established. It only brings to the support of justice
methods and forms of procedure in the courts that are appar-
ently being overlooked in our anxiety to deal summarily with
widespread and dangerous combinations and extortionate mo-
nopolies that seriously oppress many of the productive, indus-
trial, and commercial classes of our country.

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5

The course of this proposed legislation in this bill is antici-
pated by and is marked out plainly in the history of the juris-
prudence known as the “common law of England” from the
beginning and also as it is extended and amplified in our courts
and applied to the genius of our Government. It will stand
as a reaffirmation of that great body of laws, both customary
and statutory, and it is not in the way of any new and experi-
mental system that has been presented for arriving summarily
at results that are in the end the same that are reached by the
provisions of this measure.

It can be stated with perfect confidence as a fact that no
leading question that relates to the rights of shippers or rail-
roads, or as to the rights, duties, and liabilities of the railroad
companies that engage in the transportation of commerce and
passengers among the States, can be finally settled until it has
been passed upon by the Supreme Court of the United States.
As that is the bourne to which all such questions are destined and
must finally reach, the choice of routes can only be a question
of expediency. It is especially a fatuous mistake on the part of
those who seem to believe in threatening the railroad companies
into submission to the will of the people by summary proceed-
ings of commissions or by harsh and aggressive legislation, that
their measures can escape trial by jury in the courts of first
instance or that they can escape the powers of prohibition,
mandamus, or injunction of the Federal courts or the final
judgment of the Supreme Court.

This bill is not desigr-d tp defeat or embarrass any such
experimental methods, and need not be framed with such a
purpose, for the reason that all legislation affecting the con-
tracts of shipment and transportation between common carriers
and their employers, when its validity or its effect is finally
settled as to the principles of law involved in any such contro-
versy, will be settled in the Supreme Court of the United States.

As we must all seek the same forum of final arbitrament, the
question of the route we shall take to reach it is merely one of
public convenience.

In the first section this bill declares a settled principle of
common law hy act of Congress. Why is this apparently con-
ceded principle of law reaffirmed in this bill? There are several
reasons why it is appropriate to the occasion, such as showing
a common agreement among the States to settle its application to
the provision in the Constitution for regulating commerce among
the States, which is new in our present plan of government and
was directly the reverse in the Articles of Confederation.

The prohibition of unreasonable charges or rates of transporta-
tion as being unlawful or extortionate by force of the statute law
reaches to validity of an oppressive contract or bargain driven
by a railroad company that has an opportunity to force a ship-
per into terms who has no other means of reaching a market
with his produce. This form of duress, when it is practiced by
a railroad company, as, for example, in the shipment of fruits
from the Pacific States to the Atlantic States, greatly impairs, if
it does not check or destroy, an industry of enormous value.

In the English common law precedents may not be found to
meet the case of shipments to very distant markets of perish-
able fruits, and it might be answered to a suit for redress that

6423
6

the common law does not impose the doctrine of reasonable
rates upon a carrier who might undertake to carry and deliver
such goods in good condition at points so unreasonably distant.
Our present condition as to transportation to great distances is
so altered that the common-law rule as to the reasonableness of
freight charges by common carriers should be extended by stat-
ute over the entire country.

As for the common law of England, the Supreme Court does
not admit that it necessarily obtains as a rule cf decision in our
Federal courts, and some of the States have never adopted the
common law. Without such a declaration, in some form, the
decree or rule of reasonableness as applied to the freight
charges of common carriers should be uniform throughout our
Union and all of our possessions; but it may not be so held in
all the State courts, and it should be the general law of the land.

Such a declaration by Congress will establish the rule as one
of public policy in respect of interstate commerce and will
necessitate the participation of juries in the law courts in
ascertaining the facts, at least, which properly enter into and
properly control the question of the reasonableness of such
demands, which is the basis of their lawfulness.

The prohibition of any other than reasonable charges by com-
mon carriers of interstate commerce will establish, also, a predi-
cate for penal legislation in cases where the intent of the car-
rier is extortionate.

There is a necessity for such laws that grows out of the enor-
mous powers cf railroad companies in controlling oppressively
the handling of the commerce of the people. Their powers are
so great and the just control of them is so difficult that if it
was permitted by the Constitution Congress would institute, in
the place of the common law, a statutory code that would ex-
tend to every question among the vast number of new ques-
tions that have arisen and are to be settled by new applications
to them of the rules and principles of the common law.

The frightful tendency of such a code, shaped and controlled
by partisan pslitics as it would be to the end of government
ownership or the manipulation of all railroads and all lines of
ocean transportation by acts of Congress, is quite great enough
to admonish the friends of our present form of government that
such a departure would be fatal to it.

The new situation, not contemplated when this great plan of
government was ordained, that common carriers have become
the exclusive owners of the routes over which interstate com-
merce is conducted, accounts for all the difficulties we are now
endeavering to provide against. The navigable water courses
are still in the ownership of the people, and are free to all, like
the ordinary public roads, but the railroads and the reluctance
of Congress in keeping the water courses open to safe and con-
venient navigation have well-nigh destroyed their usefulness to
the people.

The railroads have the field and the mastery and, as to the
justice and reasonableness of their exactions, the courts alone
can afford any real security to the people. The right of trial
‘by jury as to the reasonableness cf such exactions is the true
palladium of the safety, the rights. and the liberties of the
people as against the corporations. I say the rights and the
liberties of the people because the seventh amendment of the

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7

Constitution was ordained to preserve the right of trial by jury
in all actions upon contracts, express or implied, as well as for
many other purposes. It was a barrier, made uecessary by the
aggressions of the great English judges, against the exclusion
of juries from their courts as an embarrassment of justice.

The Anglo-Saxon founders and builders of the common law
resisted these aggressions of the great chancellors of England
with trembling and yielding opposition, and with little suc-
cess, but the American people interposed the seventh amendment
as an inviolable barrier to the aggressive spirit of the English
judges and placed their right of trial by jury among the essen-
tial liberties of the people.

I am a devotee to the right of trial by jury, esteeming it
among our most valuable liberties, and I oppose every measure
yet offered in Congress, or that may be offered, to have the
reasonableness of freight and passenger rates settled by a com-
mission, or by a court from which trial by jury is excluded,
and every such measure that attempts to define by statute, or
by a special tribunal acting in virtue of a statute, what are rea-
sonable rates and to make such definitions conclusive upon the
courts and the people.

Trial of such questions by juries is the only safe and proper
method of reaching just results.

The railroads are public servants of all the people, and their
usefulness is so great and so universal that the people can not
afford, with justice to themselves. to inflict any serious injus-
tice upon them, and will not do so through their representatives
in the jury box.

There is also an element of equity in every controversy in
the courts as to the reasonableness of railroad freight rates and
preferences in transportation that appeals to the judicial con-
science. Such a sense of justice and right is not more com-
pletely exercised by any tribunal than it is in a law court, of
which a jury is a constituent and indispensable part. This is
a grand theme for the consideration of an American Congress,
which I must leave to the more enlightened judgment of the
Senate, without further comment at this time.

This bill aims to place a remedy, by suit in a district court
of the United States, in reach of every person whose rights are
violated by unreasonable charges or unreasonable preferences
by any common carrier engaged in transportation among the
States, without regard to the amount that may he recovered in
the suit. where the sum claimed by the plaintiff is at least $50.
And if the sum recovered is less than $50 the covrt is required to
divide the cost equally between the parties, plaintiff and de-
fendant.

This provision ix intended to create some degree of equality
between a poor suitor who has a just ground of complaint and
a rich and powerful corporation that has wronged a citizen.

The inducement that is thus offered to several or many per-
sons who are interested in the questions presented in the com-
plaint to assist the plaintiff in bearing the burdens of the liti-
gation strongly recommends this feature of the bill to my sup-
port. 1

In one such suit it is possible to settle questions that affect
extensive communities.

6423
8

The appellate jurisdiction of the Supreme Court of the United
States in such cases is also required to be exercised under the
existing general laws and regulations without regard to the sum
claimed in the complaint or recovered in the judgment by either
of the parties to such suit, and all of the courts are required to
advance such causes on their dockets, unless the public conven-
lence is thereby obstructed.

This plan seems to me to be quite sufficient to reach conclu-
Sive results with reasonable speed. But there is to me a much
more attractive feature. It is to leave in the hands of the peo-
ple the initiative as to the proceedings that they believe are
necessary to secure justice to them, instead of leaving such mat-
ters to the discretionary and arbitrary determination of law
officers of the Government.

The advantage and justice of such a provision needs not to be
discussed before legislators who have the experience in such
matters, as Senators must have had. When a just cause is
denied a hearing by reason of an adverse governmental policy,
or through the partiality or indifference of a law officer of the
Government, the situation is even worse than if a stranger sat
in the seat of judgment.

The next feature of the bill is a provision that brings the
States into active cooperation with the Federal Government in
giving judicial protection to the rights of the people who have
grievances to redress against interstate common carriers, and,
likewise, to protect such carriers against popular indignation
and hasty injustice in consequence of their conduct in conducting
such transportation. It empowers the governor of a State to
bring suit in the district court of the United States in another
State, and in the name of the State he represents, based upon
causes of action such as are described in the first section of the
bill, when he is thereto requested by a citizen, or citizen of the
State of which he is governor, to whom the cause of action
thereby enures. The request of the citizen to whom the cause
of action belongs, that the State should bring suit in its own
name against the carrier, transfers the cause of action to the
State and makes the State the party plaintiff when the governor,
being thereunto empowered by a law of the State, consents to
bring such suit. The use to which the recovery shall be ap-
plied, if a judgment is recovered, is to be declared by a law of
the State, and if it is not so declared the recovery will be for
the use of the State.

The jurisdiction of the district court of the United States to
entertain a suit by a State against the citizen or corporation of a
different State is clear under section 2 of Article III of the Con-

.Stitution, “‘ that the judicial power shall be extended to all cases
in law and equity arising under the Constitution, the laws of the
United States, * * * and to controversies * * * = be-
tween a State and citizens of another State.”

In all such cases “the Supreme Court shall have appellate
jurisdiction.”

If this bill becomes a law, the right of trial by jury in the
cases provided for in the first section arises under the provisions
of the seventh amendment. It is also ‘a case arising under a
law of Congress ” that enables the governor of a State to sue on
a cause of action in the name of the State, on the request of a

6423
9

citizen to whom the cause of action enures or belongs. It is
also a controversy ‘‘ between a State and the citizens of another
State” where the citizens of one State are wronged or oppressed,
as to interstate commerce, by the citizens or corporations of an-
other State.

In any of these characters, and for the adjudication of the
Federal questions that are stated in the provisions of this act,
the State has the right to sue in the United States district courts
of other States, they being so empowered by this act and by the
laws of such State. No plan, it seems to me, could be more pro-
pitious for the control of the enormous powers of the railroad
corporations and of the navigation companies and combines than
through the cooperation of the States and the Federal Govern-
ment in the manner presented in this bill, and nothing could
more effectively promote the general welfare.

It is a painful and alarming fact that a political issue that
was joined between great contending parties in the first years
after the adoption of the Constitution, and was at daggers
drawn as a party question in Jefferson’s candidacy for the of-
fice of President, and reached its climax in the time of the great
triumvirate—Calhoun, Clay, and Webster—should still be the
cause of suspicious jealousy between the States and the Federal
Government. And whatever may tend to bring our country
under the benign influence of a more generous regard for all the
rights and powers of the Federal Government and of these
forty-five sovereign States should be welcomed with joy by
every true American.

In the presence of the great questions respecting the powers
and duties of the common:carriers, that have become the great-
est combination of wealth and commercial power that has ever
existed and are a controlling factor in political contests. it is
our duty to bring about the friendly cooperation of the States
and the Federal Government, all of whose combined powers
will be needed in the adjustment of these new conditions, that
owe their origin almost exclusively to the acts of State legis-
latures in the promotion of commercial rivalry between the
States.

If Congress should be so wise and so fortunate as to check
the power and subdue these combined aggressions of interstate
common carriers, there will still follow a retinue of questions
that will breed still more dangerous contentions between the
States and Congress. The States can and will control the
corporations created by them as to commercial transportation
within their respective limits, but that field will be too nar-
row for any national benefit, and its limits will be constantly con-
tracting. The States will attempt to tax the property of their
own corporations and to forfeit their charters for violation
of their charter duties and of State laws; but they will be put
down by the laws of Congress if the exertion of such positive
rights shall in any manner interfere with interstate commerce
or with any authority they may choose to exercise over the
instrumentalities of commerce, which are already being defined
as including everything that is appurtenant to a railroad,
from its right of way and roadbed and tracks up to palace
cars and “Jim Crow” cars and leased cars and refrigerator
ears and all their paraphernalia, and all their crews, from engi-
neers and conductors down to the scrub women.

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10

In this wide and constantly expanding field of conflict there
will be no end of controversy until the Federal Government has
become the owner of all the connecting railroads in the United
States. When that is accomplished the Government of the
country will be in the hands of the common carriers and their
officials, and Congress will only register their edicts. No elec-
tion will be carried against their nominees.

If it is possible to point out a constitutional forum provided
by the builders of the Republic that has the power to bring the
States and the Federal Government into harmonious action in
conducting this tremendous task no man will be accused of an
immodest ambition who will venture to perform so high a duty
to the country. ;

A brief consideration of the fact that such a forum was estah-
lished in the Constitution and of the reasons for its existence
and of the breadth of its powers should not be heard with impa-
tience or rejected because it may dispense with the considera-
tion of some favorite plan of procedure that others are adya-
cating with honest zeal and great ability. Let us not reject any
remedial legislation that promises good results and is not in
conflict with the Constitution.

I do not object to any law that will reach the evils we are
trying to suppress if it is foursquare with the Constitution.
In the end all the measures that may be enacted by Congress
on this subject must pass the ordeal of final trial as to their
constitutionality in the Supreme Court of the United States, to
stand or fall by the judgment of that great tribunal.

While I may support other measures that are offered, I will
give the preference to the measure that is the most direct, the
most speedy, with the least cost to the people and the least
embarrassed with doubts, and is broad enough to cover the real
causes of the evils that we are trying to cure.

This is no proper occasion for the exploitation of party pol-
itics, for trying to get the lead of excited people for party pur-
poses, or to gratify a prurient ambition to sit in the focal rays
of “the lime light,” which is the coveted apotheosis of the
demagogue.

Next to the sovereign will of the people, the greatest and
most potent power of the Government ordained in the Consti-
tution is the original jurisdiction of the Supreme Court of the
United States. It is a court in which alone sovereigns or their
representatives are the complainants, and in which a hearing
in that character is never refused on account of the character
of the party summoned to answer at its bar if the complaint
is for causes occurring within the jurisdiction of the United
States, or on account of the sum in controversy or the charac-
ter of the suit if it comports with the peace and dignity of the
United States and with its laws that are constitutionally en-
acted.

The original jurisdiction of the Supreme Court of the United
States depends upon the character or office of one of the parties
to the suit, either as plaintiff or defendant, and is limited to
two classes of cases, as follows:

In all cases affecting am i i 7 . is
suls, and ‘those in which a State should be a party: te Bete otc

shall have original jurisdiction. (Constitution, section 2 of Article III
second paragraph.) %

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11

The force of this supreme ordinance is intensified and its
scope is more clearly defined in the second clause of section 2
of Article III, as follows:

In all other cases before mentioned—

As in cases of “controversies between State and citizens of
another State ’"—
the Supreme Court shall have appellate jurisdiction, both as_to law
and fact, with such exceptions and under such regulations as Congress
shall make.

When the suit of a State has relation only to its sovereign,
governmental rights, powers, or duties, or when it chooses to
invoke the aid of the original jurisdiction of the Supreme Court
of the United States in a case in controversy with its own citi-
zens or with the citizens of another State, or with another State,
or with an ambassador or other public minister or consul, or in
cases “in which a State may be a party,” as in the case of the
removal of such a suit pending in the district court of the
United States into the Supreme Court for trial on the motion of
either party, it is within the option of the State to bring its
suit in the Supreme Court, at least as to all parties defendant,
except ambassadors and other public ministers and consuls.

The original jurisdiction of the Supreme Court of the United
States had an august origin and was clothed with its supremacy
by the authority and right of thirteen sovereign American
States, now increased to forty-five in number, that were recog-
nized by Great Britain, their former sovereign, in the treaty of
peace, and by other great powers as being each a sovereign
and independent State. That treaty was made with each of the
thirteen States, by its name and in its independent character,
through their diplomatic agents, who were chosen and com-
missioned by their common representatives, the Congress of the
Confederation. After years of anxious conference and discus-
sion the delegates of these separate States met in convention and
ordained the Constitution of the United States, which wus sub-
mitted to and finally ratified by all these sovereign powers.

In their delegation of powers to the new government they casu
about to devise and create a supreme arbiter of all controversies
of a judicial nature that might arise between them, or between
a State and a citizen of another State, and as to foreign ambas-
sadors and other ministers and consuls.

Probably it was not the purpose of the Constitution to create
a tribunal to decide any political controversy between the States,
or between a State and the citizens of another State, or as to
foreign countries, except as to the interpretation of treaties,
which function is included in the appellate jurisdiction of the
Supreme Court, but in all other controversies such a tribunal
was necessary to settle questions that might arise where a
sovereign power was a party.

In this great conception of an arbitral tribunal there was the
assurance of peace, with justice and honor, and the further
assurance that the citizen, when sued by a State, should have
the safeguard of a tribunal that represents all the States.

The sovereign State enters this tribunal as a party to a suit
as a demandant of justice for its people, and the court decides
upon the convenient form of procedure to reach the merits of
the case. It may proceed as in equity cases, or as in common-

6423
12

law cases, and may call a jury to decide the facts, as has been
several times done. It may formulate writs and processes to
meet the exigencies of the litigation, and impose costs according
to its judicial discretion upon the litigants. It is not confined
in the exercise of its jurisdiction to statutory provisions of law,
either as to the scope of its powers or as to the method of their
exercise or of compelling obedience to its decrees, except by
the principles of the Constitution of the United States, which
the justices are sworn to observe, protect, and defend. Its
decrees are final—without appeal. No other court has shared
in its judgment or participated in its opinions, or can do so.

In a suit brought by a State in the Supreme Court of the
United States, asking the exercise of its original jurisdiction for
the correction of abuses by a railroad company, in the demand
of unreasonable freight rates, or in giving unreasonable prefer-
ences to certain shippers, it requires no trained mind to see that
such original jurisdiction would include in its rightful authority
all the judicial powers of the court to establish justice in that
and in all other cases of a like character. Such a decision from
that tribunal would be alike conclusive on all courts and legis-
latures and on all interstate and common carriers.

That high tribunal would not exercise legislative powers to
prescribe freight rates to all railroads, for that is not within
the competence of any judicial tribunal. Neither can Congress
prescribe to the Supreme Court that, in the exercise of its
original jurisdiction, it shall consider a freight rate, established
by its act, as being just and reasonable, for political reasons
or any reason of public policy. Congress has no power to com-
pel the Supreme Court, in the exercise of its original jurisdic-
tion to follow its decisions, by statute, upon the construction or
validity of any contract that was valid when the Constitution
was ordained. And no tribunal, constituted by act of Congress,
can settle, judicially, that a freight rate is unreasonable and
unjust and prescribe, legislatively, that a different rate shall,
in the future, apply to all railroads; for that is an unconstitu-
tional blending of the powers of the separate departments of
the Government.

In the present state of our organic law no separate depart-
ment into which the powers of the Government are distributed
can have or exercise all the requisite authority to adjudicate
upon, and to legislate so as to establish and execute a uniforni
law to prescribe the charges of common carriers that shall be
held to be reasonable or just, as an absolute rule of law.

The present system, much as it may be criticised or con-
demned, ix safer than any result that is to be expected from
such a tearing up of the solid foundations of the Republic.

Trial by jury is the institution by which natural justice will
in a large and uniform method be introduced into the judgment
of the courts in deciding upon the reasonableness of freight
rates. This we have, and the courts will see to it that it is not
abrogated.

If a State prefers to bring its suit in a court that can not ren-
der judgment except upon the verdict of a jury and to resort
to the appellate jurisdiction of the Supreme Court for the cor-
rection of errors, it will bring its suit in the district court of
the United States. If a State prefers to invoke the original
jurisdiction of the Supreme Court of the United States, where it

6423
18

is in the discretion of the court to summon a jury, it will sue in
that court and in such form of civil action as it may direct.

If it is necessary to sue every corporation in the lines of
transportation from Portland, Me., to Galveston, Tex., or from
Miami, Fla., to Seattle, Wash., for the purpose of settling a
freight rate or contract in which they are all interested through
a common agreement as common carriers, such corporations, or
the States under whose laws any of them are acting, may be
summoned as defendants in a single suit in the Supreme Court
of the United States, exercising its original jurisdiction.

The citizen, suing in his own right and in his own name, can
go into a district court of the United States with his suit against
a railroad company, where he will find a jury to pass upon his
claim, if it is as much as $50, and will divide the costs with his
powerful antagonist if he obtains a verdict for a sum that is less
that $50.

Some jurists are in doubt as to whether the right of a State
to sue in the Supreme Court of the United States and invoke its
original jurisdiction is not exclusive of its right to bring a suit
in any other Federal court.

I take it that this question depends upon the character of the
cause of action upon which the suit is founded and not upon the
sovereign character in which the State acts in bringing the suit.

I think the rule on this subject is well stated and supported
by authority in the language of a careful and able law writer,
which I will quote: ;

Where the character of a cause gives appellate jurisdiction, and the
ebaracter of the party (an ambassador or State) gives original juris-
diction, the appellates’ jurisdiction is not thereby ousted.

Citing Cohens v. Virginia, 6 Wheaton, 392 et seq.; Martin v.
Hunter, 1 Wheaton, 337; Curtis Commentaries, 8. 109: Story’s
Constitution, 8. 1697 to 1792.

The existence of this doubt has caused the insertion in the
bill of a separate section providing for suits, in certain cases,
by States, in the Supreme Court of the United States.

It could not have been intended by the framers of the Consti-
tution that a State should be excluded from the right of appeal
to the Supreme Court in all cases, and that being so restricted
it could only sue in the Supreme Court of the United States on
such cases of action as relate to its rights, powers, and duties
as a government.

The Supreme Court, in the exercise of its original jurisdic-
tion, is a supreme council of state, discretion, and judgment, as
to the right of the matter in controversy between a State, rep-
resenting its people, and other States and their citizens, corpo-
rations, or municipalities. It can annul or sustain acts of Con-
gress and of State legislatures, and it can issue mandates to the
executive officers of the States and of the Federal Government
to restrain them from the usurpation of unlawful powers, or
the abuse of lawful authority. In that court only the States
can demand to be heard as plaintiffs, representing citizens or
the body politic whose rights are in jeopardy.

I am glad to quote the following statement on this point from
the distinguished constitutional lawyer of Alabama, Hon. Han-
nis Taylor, LL. D., who has the sincere respect of the American
bar for his abilities and his learning:

6423
14

WASHINGTON, D. C., January 8, 1906.

My Drar SEnaAToR: I have been reflecting upon the interesting ques-
tion propounded in your letter of the 3d instant. By reference to my
book on the Jurisdiction and Procedure of the Supreme Court of the
United States, I find that | have stated the matter in this way:

“23. Original jurisdiction not exclusive.—In settling the doctrine
in Marbury v. Madison that the original jurisdiction of the Supreme
Court can not be enlarged by Congress the court went so far as to
deny the right of that body to give appellate jurisdiction where the Con-
stitution confers criginal. That proposition was modified, however, a
few years later in a suit in which Virginia and one of its own citizens
were parties (Cohen v. Virginia, 6 Wheat., 397, 398; 5 L. ed., 289),
the question at issue involving the construction of an act of Congress.
When it was argued that as the Supreme Court had original jurisdic-
tion in cases in which a State is a party, that fact excluded its ap-
pellate jurisdiction, the court held otherwise on the ground that the
original jurisdiction in cases in which a State is a party refers only
to those cases in which the Supreme Court obtains jurisdiction by rea-
son of the character of the parties, and not at all to those cases in
which the Federal jurisdiction attaches, because the question in-
peed arises under the Constitution, treaties, or laws of the United

ates.”

My test, therefore, supports the view you now put forward. In
eee at the record in Cohen v. Virginia I find that Mr. Pinkney
said:

““4. Lastly. It is insisted, for the defendant in error, that this
court has no jurisdiction in the present case, because a State is a
party to the original controversy which the writ of error brings before
the court. That the jurisdiction of this court in all cases where a State
is a party is original, and therefore it can not have original juris-
diction in this case. The obvious answer to this argument is that the
jurisdiction now claimed does not arise under that part of the Consti-
tution which gives original jurisdiction to the Supreme Court in cases
in which a State is a party; but the jurisdiction is asserted under that
clause which gives the Federal judiciary cognizance of all cases aris-
ing under the Constitution, laws, and treaties of the United States,
without regard to the character of the parties.”

That view the court adopted. In a note to the case in the Law-
yers’ Cooperative Edition South Carolina Reports I find this:

“Federal courts have jurisdiction of cases arising under the laws
and Constitution of the United States whoever may be parties, and
even when a State is a party and the proceedings a writ of error to
the State court.”

As ever, faithfully, yours, HAaNNiIS TAYLOR.

Hon. JoHN T. MorGan,

United States Senate, Washington, D. C.

Evidently the power to sue in the Supreme Court was a priv-
ilege extended to or reserved by the States that created that
court, in consideration of the fact that they were independent
sovereignties, as to each other, and could not properly be com-
pelled to sue.in courts subordinate to other States, or in Federal
courts within the limits of other States, whose judges and jurors
might be controlled by local influences. There is no restriction
as to the nature of the cause of action, or as to the amount in
controversy, that affects the original jurisdiction of the Supreme
Court when a State appears at its bar to demand justice.

There is no attempt in this bill to do more than to qualify a
State as a plaintiff who may bring a suit and recover for the
wrongful acts of common carriers of interstate commerce, as to
freight rates and preferences done to the citizens thereof.

This declaration does not add to the exclusive classes that may
sue in the Supreme Court of the United States under its original
jurisdiction. It only defines certain cases in which the State may
sue as the real party in interest. When a sovereign State appears
in that court as a plaintiff in an action it would be assumed,
most probably, that the State has authority to control the de-
mand sued upon in its own name and that it has the duty of

6423
15

giving aid to its citizens in obtaining justice as to all their con-
stitutional rights and equities in the claim sued upon. Such is
the universal rule of international law under which the govern-
ments that are parties to treaties and conventions for the set-
tlement of private claims alleged to be owing to their citizens or
subjects assume a right to have a decree or award made to them.
as governments, in case of recovery, whereby the claim of the
real owner of the demand or cause of action is merged in the
finding of the commission and is barred, as to a further recovery
by the claimant, although the real owner never receives com-
pensation from his own government for the amount of the award
recovered by it. But this rule of international law may not
extend to the States of the Union that have no interstate code,
unless Congress declares their right to represent their ciitzens
in all cases in which the States may sue in the Supreme Court
of the United States.

It is a cautionary provision in this bill intended to prevent a

failure of justice. :
' This bill does not rest solely on that principle of international
law, although it might be done safely. It goes further and
requires a law of a State or the petition of the claimant made
to the governor to enable him to accept control of the claim
as governor and to sue upon it in the name of the State. This
is intended as a security to the defendant against further suit
in any court upon the claim that is sued upon in the name of the
State in any Federal court having jurisdiction to hear and de-
termine it upon its merits.

In such original suits in the Supreme Court of the United
States the court would not be obstructed by rules of practice,
statute laws, or precedents as to the consolidation of suits or
as to setting down for hearing many suits involving like ques-
tions or other questions depending for their decisions on the
same or like principles, so that the speedy and final settlement
of a wide variety of cases and questions might be considered
and decided at the same hearing. In the vast amount of liti-
gation that is likely to arise out of any view of this sea of
railroad troubles it is well that we have a court of supreme
constitutional powers, that no legislature can fetter with rules
of procedure, that can take original cognizance at the suit of
a State of any and all questions of a civil character in respect
of common carriers of interstate commerce and settle them
speedily and economically to all concerned.

I earnestly appeal to all Senators, who desire to compose these
public troubles that threaten to become public calamities, to give
earnest consideration to the great powers provided for such
emergencies in the original jurisdiction of the Supreme Court
of the United States that is created by the Constitution.

IT can not look forward hopefully to any event of the future
that will more benignly bless our country than will be realized
when the States and our Supreme Court take up these vexed
questions and threatening conditions and work together patri-
otically for their speedy and just settlement.

Congress can not compass this great national evil by the ex-
ertion of all its powers, with all its wisdom, and the occupation
of all its time in devising and executing schemes of legislation.
In its power to define and provide for the punishment of crime

6423
16

it can, in a large degree, prevent extortion and other abuses of
justice and public policy by railroads and navigation companies,
but that phase of the subject is not touched by this measure.
A predicate for such legislation will be established in its pro-
hibitory clauses, if this bill is enacted into a law, that will serve
as the broad foundation for the punishment of such crimes.

I do not agree with those who essay to cure these public evils
through Congressional legislation in fixing rates of trans-
portation that must at last pass under the judgment of the
Supreme Court, weighted with a heavy load of intermediate em-
barrassments, as to the constitutionality of the laws and of the
tribunals created to administer them; but this bill does not ob-
struct their plans in the slightest degree. It is only an addi-
tional way or facility for reaching the same results, that should
be opened to the service and assistance of the people.

It should be the desire of all that controversies between the
railroads and the people should never take on a political aspect.
It is not the right or the province of political leaders to force
into partisan caucuses or conventions or into the ballot box
questions of such immense magnitude, which are purely judicial
in their character and can only be finally settled by courts of
justice.

The measure I have the honor to offer is intended to open the
doors of the courts of justice to the people where they can get
speedy redress for their grievances on terms that, to a great
extent at least, equalize the powers of litigants, so that the rich
and powerful corporations will not be able to force weaker
men to the wall, and thus enforce, through the delays and costs
of litigation, that power of duress and oppression which their
combinations are employing to increase their power and riches
and to oppress the people.

If the States and the Federal Government act in concert,
through their courts, to repress these evil conditions they will
cease, and the railroads of the country, instead of being oppres-
sors of the people, will become the useful and honored instru-
mentalities of good government and of progress in our splendid
country.

It is worthy of most serious examination, whether the needful
reform in present conditions should not begin with the people
and the States in the courts of the country, under the final
supervision of the Supreme Court of the United States, to which
such questions must come for final settlement, rather than with
Congress, where no great economic question can escape entan-
glement with partisan politics.

In my judgment it is better for the public health to drink
the pure waters from their fountains rather than from the
contaminated brooks after they have wandered through the
marshes and infections of political camps.

I move that the bill be referred to the Committee on Inter-
state Commerce.

The motion was agreed to.

6423
59th Congress, Ist session.

REGULATION OF RAILROAD RATES—NATIONAL INCORPORATION OF
RAILROADS—NATIONAL OWNERSHIP OF RAILROADS,

SPEECH

OF

Hon. FRANCIS G. NEWLANDS,

OF NEVADA,

IN THE

SENATE OF THE UNITED STATES,

WEDNESDAY AND THURSDAY,
APRIL 4 AND 5, 1906.

WASHINGTON.

1906.
6724
SPEECH

HON. FRANCIS G. NEWLANDS.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled “An act to regulate commerce,” approved Febru-
ary 4, 1887, and all acts amendatory thereof, and to enlarge the powers
of the Interstate Commerce Commission—

Mr. NEWLANDS said:

Mr. Present: Although I joined in reporting the pending
bill from the Committee on Interstate Commerce, I do not
regard it as a comprehensive measure. I think that now is the
time to secure full and comprehensive action upon the subject
of interstate commerce, and that we should not content ourselves
with such fragmentary legislation as we have hitherto enacted.

I believe that in legislating upon the subject we should, in
the first place, create the great carrying corporations that
operate between States. We should then provide against
overcapitalization. We should provide for a simple system
of taxation by the States that would be mathematically cer-
tain in its computation, and we should fix a definite return to
the stockholders upon the capital invested. We should also
take into consideration the relations of the employees of the
railroads to these corporations. We should provide for an
insurance fund against accidents and old age, and we should
also provide for a conciliation of disputes between carriers and
their employees. We should frankly recognize the economic ne-
cessity of consolidation and combination and the monopolistic
character of the business, and regulate all with a proper regard
for the interests of the public served by it, the property rights
of the capital employed in it, and the human rights of the labor
employed by it.

CONSTITUTIONAL POWER.

There can be no question as to the power of Congress. The
power is granted in those sections of the Constitution which
provide for the national defense, for the regulation of commerce
with foreign nations and between the States, and for the estab-
lishment of post-offices and post-roads.

In the exercise of these powers it is absolutely essential
that there should be highways. Canals and railroads are
highways. The United States, therefore, has the power either
to construct such highways or to authorize their construction
by agents; and in doing the latter it can create national corpora-
tions for that purpose. It is not necessary to cite the authori-
ties, for the power is without question and has been exercised
frequently.

Under these powers we are to-day constructing the great
Panama Canal and will operate it. Under these powers we

6724 3
4

bave acquired the Panama Railroad and are operating it. Under
these powers we incorporated the Pacific railways—the Union
Pacific, the Atlantic and Pacific, and the Texas Pacific Rail-
way, the two former running in Territories of the United States,
the latter from a point in the State of Texas to a point in the
Staté of California. Under these powers we incorporated the
National Maritime Canal Company of Nicaragua. Under these
powers we are to-day in the process of incorporating the pro-
posed canal between Lake Erie and the Ohio River, called, I
believe, The Erie and Ohio Canal, which is intended to join the
Great Lakes with the Ohio River and the Gulf. The bill for
that purpose has passed the House almost without opposition
and will probably pass here without serious opposition. The
Nation, therefore, under the granted powers, has the right and
the power either to construct these great highways, or to
authorize their construction by corporations created by itself.
SHALL THE MACHINE BE STATE OR NATIONAL?

Now, it is true that the same machine is used for both State
commerce and interstate commerce. The same railroad accom-
modates both. State commerce is under the control of the
State. Interstate commerce is under the control of the nation.
And obviously it would involve economic error to provide for
the State commerce a separate machine from that employed in
interstate commerce. The same railroads must be employed
for both. But the corporation must be created either by the
State or by the National Government. If it is created by the
State, then the National Government uses a State agency in
the exercise of its power over national commerce. If it is cre-
ated by the National Government, then the State uses a national
agency in the exercise of its control over State commerce.

The reason why these corporations have been created by
the States is that in the first place the commerce contem-
plated was entirely within the boundaries of a State, from
a point in one State to another point in the same State. But
these purely State railroads have now grown into great national
systems under conditions of great embarrassment and difficulty;
and one can but admire the genius of the men, who strug-
gling against inadequate laws, have been able to build up these
great systems of national highways, intended for national com-
merce, and embracing the commerce of numerous States and
some of them the commerce of the entire Union.

Thus far the nation has not exercised its full powers as to
railroads. For many years it exercised no powers whatever,
and it is only within the last twenty years that the constant
growth of interstate commerce, as compared with purely local
or State commerce, has forced the question upon public consid-
eration. Railroads at first were purely State institutions in-
tended only for transportation within State boundaries, but
they have now, through consolidation, merger, lease, or com-
munity of interest, grown into great institutions of national
scope and character, whose traffic is conducted without regard
to State boundaries—whose capital embraces over one-tenth
of the wealth of the country, and whose employees number
about one-twelfth of its effective labor.

Had such growth been contemplated doubtless a national in-
corporation act would have been provided. but as it is the
growth has been accomplished under inadequate and lax State
legislation, under which simplicity of organization and opera-

6724
5

tion is impossible. The weakness of all national legislation
thus far has been that it has not at the. very start created
national machinery for incorporating the artificial beings called
upon to exercise the great national function of interstate trans-
portation. It has been content, while permitting State cor-
porations to exercise this function, to regulate its operation.
The result has been that State machines are performing
national functions, and are inadequate to do so without com-
plexity of organization, baffling to the mind of a regulating
Interstate Commerce Commission.

As the result of this experience legislation has been a
growth. Had we contemplated in the first instance that
national commerce would absolutely dwarf State commerce,
and that both State and national commerce would be conducted
upon these great machines of transportation, we would doubt-
less have seen the wisdom of having the greater sovereignty
create the machine that is to do the business of both and not
have the lesser sovereignty, whose jurisdiction is confined to
a contracted area, create that machine. The interstate com-
merce is three-fourths of the commerce of the entire country.
The State commerce is only one-fourth. We were told in the
Nebraska case that of all of the commerce of the railroads of
that State one-twentieth only was State commerce, and all the
balance was interstate. It is clear, therefore, that we ought to
have national machinery for the transaction of this commerce,
that this is the time for it, and that we will never have a better
opportunity for creating it.

The passage of a national incorporation act would require
the addition of only fifteen or twenty sections to this bill. The
pending bill simply provides for the regulation of rates. We
could, right in this bill, furnish the machinery for the incor-
poration of national corporations, and we could make this leg-
islation either coercive or persuasive. In my judgment, at first
it should be made‘merely persuasive. Later on it’ might be
deemed wise to apply coercive legislation, as we did when the
national banks were created, by taxing the State note issues 10
per cent. In using the term “coercive,” I do not wish to imply that
Congress could force State railroads to come under national
charters. What I mean is that we could so cripple them in
their operations in interstate commerce as to make them eager
to avail themselves of national charters, and even then, of
course, the consent of the States to the change would be re-
quired—a consent which I believe could be obtained with as
little difficulty as that now obtained in the various States by
corporations organized under the laws of sister States.

This coercion could be applied in different ways. It could
be applied by absolutely preventing State corporations from en-
gaging in interstate commerce, or it could be applied by impos-
ing such a tax upon the commerce carried by such corporations
as to be practically prohibitory of their engaging in it. But, in
my judgment, the legislation now should be merely persuasive
and should offer such obvious advantages to these great sys-
tems, whilst at the same time properly protecting the public, as
to induce them to incorporate under its provisions.

MUST CONGRESS FIX THE STANDARD FOR RATES?

Mr. President, as to the pending bill, it seems to me it is

weak in that it does not provide a rule which is to control
6724
6

the Interstate Commerce Commission in regulating rates, and I
have some doubt as. to whether we can, under the Constitution,
grant this power to a mere administrative commission unless
we prescribe the rule, so that their action will be largely one
of computation and mere administration, not involving legisla-
tive discretion. It is contended that the legislature can dele-
gate this power to a commission by providing a rule or standard
for its action, and this contention seems to be upheld by a great
many decisions relating to the States.

Now, what rule or standard does this bill provide? It
simply declares that the rates shall be just and reasonable,
and it is said that is the rule which the Commission is to
follow. But Congress could not fix, or confer upon a commis-
sion the power to fix, unjust and unreasonable rates. Under
the limitations of the Constitution the only power Congress
itself has is to fix just and reasonable rates, and when it trans-
fers that power to a commission, does it not transfer to the
Commission all the power it has?

It may be that the courts will finally hold that it is so difficult
for a legislative body to exercise this power directly that it is
warranted in creating an administrative board for the purpose.
If that is so, legislation of this kind will be sustained, in my
judgment, not upon the ground that it fixes the rule for the
Commission’s action, but upon the ground that Congress can
grant to a commission all the power that it has in fixing the
rates for interstate commerce.

VALUATION OF RAILROADS AND RETURN.

It seems to me that in this very bill, outside of the question
of national incorporation, we could provide the standard and we
could follow the rule laid down in Smyth v. Ames, the Nebraska
Case (169 U. S., 546), in which the Supreme Court says:

We hold, however, that the basis of all calculations as to the reason-
ableness of rates to be charged by a corporation maintaining a highway
under legislative sanction must be the fair value of the property being
used by it for the convenience of the public. And in order to ascertain
that value, the original cost of construction, the amount expended in
permanent improvements, the amount and market value of its bonds
and stock, the present as compared with the original cost of construc-
tion, the probable earning capacity of the property under the particular
rates prescribed by statute, and the sum required to meet operating ex-
penses, are all matters for consideration, and are to be given such
weight as may be just and right in each case. We do not say that
there may not be other matters to be regarded in estimating the value
of the property. What the company is entitled to ask is a fair return
upon the value of that which it employs for the public convenience.
On the other hand, what the public is entitled to demand is that no
more be exacted from it for the use of a public highway than the
services rendered by it are reasonably worth.

We could provide that the Interstate Commerce Commission
should value the property of all these railroads, should make a
present valuation, and to that should be added such additional
investments as may be made in the future. We would then have
the basis of value. We could also provide in this bill that the
Interstate Comnierce Commission, in exercising the power of
fixing rates, should so adjust rates as to yield a return upon
such value of not less than a certain percentage—not less thau
5 or 6 per cent or not less than 4 per cent or more than 6 per
cent.

If the bill provides the machinery by which the value of the
railway property can be ascertained and also fixes the return
upon that value, we then have a rule established by Congress

6724
7

which involves simply mathematical computation upon the part
of the Interstate Commerce Commission. Of course, if we fix
the rule for the exercise of the judgment of the Commission
the bill would not be so open to constitutional objections as it
is now.

Mr. President, I prefer that valuation of the property of
these railroad corporations which would be exhibited in a
fair capitalization. I should prefer legislation which would
provide for the national incorporation of these great railways
and the issue of bonds and stock representing their actual
value and cash outlay, so that wherever the question of the
regulation of rates comes up, either by State commissions or
national commission, the factor of value would be omnipresent
in the capitalization of the roads in stock and bonds.

But if we are not to have comprehensive legislation of that
kind, then the next best thing is to provide in this bill for a
valuation of the roads by the Interstate Commerce Commission.
A valuation has already been made by the Census Bureau,
based simply upon the existing income of the roads, and they
have made a valuation of about eleven billion dollars, I be-
lieve, approaching within a billion or so of the existing capi-
talization of the roads, which it is claimed is exaggerated.

Mr. FORAKER. Within 10 per cent.

Mr. NEWLANDS. Within 10 per cent, the Senator from
Ohio says. Now that is based upon income, but there can be
another kind of valuation, following the principles laid down in
Smyth v. Ames, by considering first the actual cost of repro-
duction; second, the cost of the road to the corporation, third,
the market value of the stock and bonds, and fourth, the
value as determined by existing income, for the Supreme Court
says that all these factors can be taken into consideration.

If the Interstate Commerce Commission, then, should be au-
thorized in this bill to provide for the employment of experts
to make a valuation of the roads, we would have the basis
for sound action in the regulation of rates; and if we should
add to that the legislative will as to the return upon the capital
invested, we would have two factors in the problem determined
by Congress. We would have the rule established and the
rest would be a mere matter of mathematical calculation.

VALUATION THROUGH NATIONAL INCORPORATION.

So far as this bill is concerned, I would suggest that a pro-
vision be inserted in it for ascertaining the value of the rail-
roads engaged in interstate commerce and that a provision also
be made fixing the return in the shape of interest upon such
value.

But I believe that we should also add to this bill provisions
for the national incorporation of railways.

In such additional provisions we could declare that no stocks
or bonds should be issued, either for construction, extension, or
improvement of such railways, or for the purchase of connect-
ing or intersecting lines except for full value in money or
property, or without the approval of the Interstate Commerce
Commission. In this way we could guard against overcapitali-
zation, y

The President in his message has called attention to the evils
of overcapitalization in the following words :

Of these abuses perhaps the chief, although by no means the only one,
is overcapitalization—generally itself the result of dishonest promo-

6724
8

tion—because of the myriad evils it brings In its train; for such cap-
italization often means an inflation that invites business panic; it
always conceals the true relation of the profit earned to the capital
actually invested, and it creates a burden of interest payments which
is a fertile cause of improper reduction in or limitation of wages; it
damages the small investor, discourages thrift, and encourages gam-
bling and speculation; while, perhaps, worst of all is the trickiness and
dishonesty which it implies—for harm to morals is worse than any pos-
sible harm to material interests, and the debauchery of politics and
business by great dishonest corporations is far worse than any actual
material evil they do the public.

This measure does not reach this abuse, and it should be

amended so as to prevent it.
DUTY OF CONGRESS TO FIX THD RETURN.

We could also limit in this bill the rate of interest to be re-
ceived by the investors upon such valuation, and thus in the
future the great increase of business which is induced by the
extension of the railroads and the expansion of commerce will
tend automatically either to the betterment of the roads or to a
reduction in rates.

It has been said that it is unfair to limit in any way the re-
turns of these corporations; that we do not limit the returns of
people generally in business, or of corporations engaged in
business. But we must recollect that ordinary occupations and
businesses are not of public nature, and the public has no right
to regulate or control them. This regulation and control arises
from the fact that the highways are public highways, the
function a public function, and the Government simply entrusts
the conduct of this function to certain agencies, and all the
agent is entitled to under the decisions is a fair return upon the
amount he has invested. If that is a fact, it is competent for
Congress to fix that return and not leave it to chance or
accident.

Beyond this, if we are careless regarding the return, and allow
a corporation to receive 10, 15 or 20 per cent instead of 5 or 6
per cent interest, the result will be that the stocks will rise in
the market, their value being based upon income, and if you
should permit the $10,000,000,000 now claimed to be invested
in these great highways in this country to receive an interest of
10 per cent instead of an interest of 5 per cent, you would
find immediately in the market that these securities would be
quoted at $20,000,000,000, and if you allow interest at 15 per cent
you would find the market valuation would be $30,000,00Q000,
and if you allow 20 per cent you would find the market value
would be $40,000,000,000.

Now, then, are we to assume that at different stages in the
regulation of rates the value of these properties is to vary with
the income? If we do there will be no limit to their value, for
if there is no restriction on the return there will be no limit
to the value. If to-day these railroads are valued at $10,000,-
000,000, based upon existing income, they must be valued at
$20,000,000,000 if the return is doubled. Thus will the value
increase proportionally to the income, and if we do not apply
a fair restrictive regulation of the rate of interest we will bring
about a serious readjustment of values all over the country.

. The cry will be raised by investors that the Government has

permitted the securities to reach this high value, just as it is

claimed to-day that the value of these properties is not neces-

sarily the value actually put into them by experts, but the value
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9

based upon income. The return must be fixed therefore either
by the Commission or by Congress, and Congress is just as com-
petent to fix it as is the Commission. State legislatures already
exercise the power of regulation over the rate of interest.
Throughout the United States the legal rate of interest does
not exceed 6 per cent.

Those laws are intended to guard against usury. A law of
this kind is intended to guard against extortion. Unless the
return is fixed by somebody, either by the Commission or by
the Congress, we will have varying valuations running through
the years.

AUTOMATIC ADJUSTMENT V. COMMISSION ADJUSTMENT.

Mr. President, it seems to me exceedingly important that we
should fix this rule of valuation and retyrn, simply because it
will work automatically toward a gradual reduction in rates.
I believe myself that under the pending bill the Commission
will be overwhelmed with work. I have been impressed with
the evidence of the traftic managers before our committee, the
ceaseless vigilance which they employ in moving the traffic,
in providing a market place for the surplus of the country
which they serve, and in bringing from the outside the things
needed by the communities which they serve.

They have many thousand men in that service—the great
traffic managers at the head of each system, the assistant traffic
managers, the district traffic managers, and then every agent
and every station is a part of this great machinery for the ad-
justment of rates, not simply as a matter of profit to the corpo-
ration, but as a matter of serving the requirements of the com-
munities through which the railroads run. In this adjustment
much elasticity of action is required.

I do not believe that any board of seven men can exercise
intelligently all the powers that are exercised by these thou-
sands of competent, skilled, trained traffic managers and their
assistants, and I believe if the Commission attempts it, it will
be overwhelmed, and in the end it will either be inert and in-
active, or it will bring the adjustment of rates practically to
a mileage basis.

It is true that these rates are to be adjusted, only upon com-
plaint; but all the rates can be complained of. An entire
schedule can be complained of. We are told that within a
single year one hundred and sixty thousand different schedules
have been filed in the office of the Interstate Commerce Com-
mission, each one of these schedules involving varying classi-
fications and varying rates. Any one or all of these schedules
can be challenged, and if challenged the challenge must receive
the consideration of the Interstate Commerce Commission.
Will it be possible for it then to consider all the cases? It
will be obliged to adopt some rule, and the easiest rule in the
end will be the mileage rule, with modifications according to
distance.

The advantage of fixing a return of a certain percentage upon
a valuation of the property is that it protects the investors in
these great public securities, and it forces a limitation of profits,
so that automatically, as the receipts of the company increase,
the rates will be reduced.

All that the average investor, outside of the speculator, asks is
a fair return upon his money. The great banking institutions in

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10

New York that negotiate the securities of these great corpora-
tions rely upon other people’s money for the exercise of their
power. We have had illustrations of that in recent investiga-
tions. Hundreds of millions of dollars collected from all over
the country by the insurance companies, or the savings of the
people in savings banks and trust companies, supply the funds
which are invested in a large proportion of these securities.

The average investor to whom these securities are presented
looks simply to the rate of interest, and if he gets 4 or 5 per
cent he is willing to pay par for the securities. All the real
investors require is a fair return of from 4 or 5 per cent, and the
proposed limitation of profits is absolutely fair to them.

ELIMINATES THE SPECULATIVE ELEMENT.

It is said that if this return is limited there will be no induce-
ment to these great railway promoters to extend the roads:
that it is the speculative idea that attracts them into these oper-
ations. That may possibly be true as to the great promoters
who have made millions and hundreds of millions out of these
operations, but it is not true as to the people themselves. All
they expect is 4 or 5 per cent, and they are willing to put
their money into any investment that will secure that return.

I do not believe, Mr. President, that in order to stimulate
enterprise in this country in railroad building it is necessary
to hold up before some man or some set of men a prize of
from ten million to one hundred million dollars for the opera-
tion. I think that if we protect the bondholders and stock-
holders by fixing a return of this kind, it will lead to the
elimination of the speculative element in railroad operations,
but I do not regard that as of consequence, for the speculative
element has little to do with material railroad building. You
will find that the men who really conduct this business, the
men who really build the railroads, the men who really
manage them, are men of moderate means, who are content
ae moderate salaries, and yet do their work faithfully and
well,

We find in the Government service to-day—in the scientific
branches of the Government, such as the Geological Survey—the
highest standard of efficiency and energy, accompanied by a
public spirit which seems to elevate their action above that of
men not employed in the public service. I have not the slightest
doubt but that railroad enterprises will be just as well con-
ducted without retaining the aid of the speculative element.

TAXES SHOULD BE CERTAIN.

In such an incorporation act we could also provide with cer-
tainty as to taxes. One of the great difficulties of the existing
condition is that although these great, systems are really
national, embracing in their operations a number of States, they
are subject to the varying rules of forty-five different States
as to taxation. In some States the assessment is made at the
assessed value simply of the tracks and the right of way. In
other States the assessment takes into consideration the value
of the franchise.

In some States it is contended that the assessment should be
the combined market value of the stocks and bonds. In addi-
tion to all this the stocks and bonds themselves in the hands of
their holders can be separately assessed and taxed, a form of
double taxation. ’

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11

We have in this country about $12,000,000,000 of rail-
road stocks and bonds. The market value is, say, about
$10,000,000,000. If the highest rule obtains, these railroads
could be assessed for $10,000,000,000, and they would have to
pay an average tax of 13 per cent upon that value, or
$150,000,000.

The railroads to-day are paying $56,000,000 per annum. If
this rule, which has been upheld by the Supreme Court of the
United States, were to prevail throughout the country the taxes
of the railroads would be immediately raised from $56,000,000
to $150,000,000 per annum, an increase of about $100,000,000.

One hundred million dollars is 1 per cent upon the market
value of the entire bonds and stocks of the country. That
would be immdiately taken out of the returns to the stockhold-
ers unless the rates were so increased as to make up the extra
tax charge. So if you raise the taxes from $56,000,000 to $150,-
000,000, the taxes which the public receive, then you must in-
crease the rates to the extent of $100,000,000 so that the corpora-
tions can pay these taxes or else you must take the $100,000,000
out of the profits of the stockholders and diminish their return
to that extent below the normal rate of interest.

But under the existing system the States could not only tax
the railroads themselves $150,000,000 annually, thus trebling
their taxes, but they could assess every bond and stock in the
hands of the holders, for they are, under the laws, regarded as
personal property and subject to taxation. It is true that they
generally escape assessment, but if they were assessed at their
market value, $10,000,000,000, it would mean that $150,000,000
more in taxes could be secured from them.

If this system were carried out to its logical conclusion,
where would there be any security for the stockholders? With
$150,000,000 taken from the corporations of which they are
stockholders and bondholders and $150,000,000 taken annually
from the bondholders and stockholders individually as owners
of these securities, it would be utterly impossible for us to
get people to invest in railway securities; and yet this wide
range of taxation is possible under existing conditions; and it
is a fruitful source of evasion, fraud, and political corruption.

WHY RAILROADS ARE IN POLITICS.

The railroads find it utterly impossible to keep out of politics
simply because their property is between the upper and nether
millstone and can be ground to destruction between the rate-
regulating power and the taxing power of the public. In the
famous case of Munn v. Illinois the doctrine was first asserted
in this country by the United States Supreme Court that where
asperson devotes his property to a public use he grants to the
public an interest in that use and must submit to regulation
by the public; that if he is dissatisfied with the regulation he
can discontinue the use, but so long as he continues the use he
must submit to the regulation. In answer to the objection that
such legislative power could be abused the court stated that
the only remedy for legislative abuses was at the polls. The
railroads have been at the polls ever since. Their taxes are
a matter of political control. Their rates are a matter of polit-
ical control. How can we expect $10,000,000,000 to keep out
of politics when that $10,000,000,000 is completely subject to
political control in every State of the Union?

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12

It is absolutely essential, therefore, for the railroads to be in
politics, and they go into politics as they go into everything else,
in a systematic and businesslike way. There is no sentiment
about it. They go into politics to protect their property, and
they seize as swiftly as they can the entire political machinery
of a State.

It is easier to do that than it is to try to influence the people
at the polls. What chance has a great corporation at the polls
in a contest with the people? They are compelled to be in poli-
tics, but they can only be influential in politics by indirection.
They deem it, therefore, absolutely essential to seize wherever
they can the political machinery of both parties.

With their ramifications, with their army of lawyers, traffic
managers, and agents in every community, and with their
1,200,000 employees—about one-tenth of the effective labor of
this country—they have all the factors of a strong political
machine, for it is evident to one who has had experience in
these matters that although the men employed by the railroads
often have disputes with the railroads regarding their hours
und compensation, yet that whatever their disputes may be
they always stand in with the railroads when the common fund
from which wages and dividends are paid is in danger.

We have had an illustration of that in this legislation.
The employees of the railroads throughout the country have
petitioned Congress against the regulation of rates upon the
ground that it may endanger their compensation; and when-
ever it is known that the man offering himself for a public
office is opposed to a railroad, either upon the matter of tax-
ation or upon the matter of rates, it is not a difficult thing for
the railroad to array all of its employees against such a man.
So the railroads have been invited to go to the polls, and they
are going to the polls in the only effective way, by controlling
the political machinery of local conventions and of State con-
ventions. and even the national conventions themselves.

There is not a man who is familiar with national conven-
tions who does not know how large a factor the railroads
have been in selecting delegates to them. We will find that
to be the case hereafter, when we give this extraordinary and
unrestrained power to'a commission, giving it the full dis-
cretion that Congress itself has, without imposing any rule
whatever of protection to the railroads. We will find them
showing great activity in national politics and in the election
of Presidents, as they have done in the election of mayors, of
boards of supervisors, of county commissioners, of governors,
of boards of equalization, and of State commissions.

It seems to me that that is an additional reason why we
should put in this bill the rule that is to guide the Commission
in its work, for it may be that one of these days this Commis-
sion will be a controlled commission, just as the State com-
missions have been in many instances. We can easily imagine
a contest in either party where two or three men of equal
ability, equal capacity, and of equal popularity are before
a national convention as candidates for the Presidency. We
can imagine how the railroads, massing their power for one
candidate, may secure him the nomination, and we can imagine
how the understanding might be that the railroads would
be consulted as to the selection of this Interstate Commerce

6724
18

Commission. Of course it would be done in the most deli-
cate way; such things are always done in a delicate way;
but when a man receives the support of a great interest in a
convention for so high a nomination and accepts it, the chances
are that his judgment will be in some degree swayed by that
fact. :

Then we will assume that the national conventions of both
parties have met and selected their candidates, the contest
is a close one and the candidates are equally popular before the
country. We can imagine how effective the railroad strength
would be if turned over to one of those candidates, and we can
understand how under such conditions the railroads might not
find it difficult to secure assurances, directly or indirectly, as to
the composition of the Interstate Commerce Commission.

The character of the men appointed might be above re-
proach, but it is easy to understand how in the end the appoint-
ment of men of a certain inertia, inactivity, indisposition to
move or to act, might condemn the Commission to uselessness.
On the other hand it is possible that in periods of excitement
the Commission might be composed of prejudiced and violent
men, who would imperil the interests of investors.

So it seems to me incumbent upon us, in the common interest,
to put in this bill fixed rules governing taxation and return on
capital, so that the law itself will adjust with certainty the re-
lations of the carriers to the public, protecting the carriers from
spoliation and the public from extortion.

Now, Mr. President, in this matter of taxation, to which I was
referring, I think that taxation should be absolutely certain, so
that the railroads will know what they have to pay, so that the
States will know what they are to receive, and in order that the
railroads may be protected from the blackmailers and the
cranks and the honest reformers throughout the entire country,
each of whom is seeking to change the existing system of taxa-
tion in every locality and in every State, some men honest and
probably right in their views, some of them cranks, some of them
joining with the reformers and with the cranks simply for the
purpose of blackmailing. We have recently had evidence of the
kaleidoscopic character of railroad taxation by the States. A
few days ago the Post stated that Governor Dawson of West
Virginia was in Washington making inquiries as to the recent
census valuation of railroads in West Virginia with a view to
tax reform in that State. Similar movements are on foot in
many of the States and the Supreme Court has recently handed
down a decision affirming a recent statute of Michigan which
trebles the existing railroad taxes of that State.

It is too much to demand of human nature to expect the rail-
roads under those conditions to keep out of politics. All of us
who have been familiar with politics know of conventions where
it was whispered around at the very beginning of the ses-
sion that the railroads demanded the tax commission, or the
railroad commission, or both, and where the party managers
knew they had a fight on their hands if they did not accede.
We will find these same conditions extending to national politics
if we do not take care.

A FAIR AND UNIFORM RULE OF TAXATION.

Now, what is a fair rule of taxation? I think it is generally

agreed that the fairest rule is a percentage tax upon gross re-

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14

ceipts. A tax of four per cent upon all the gross receipts of all
the railroads of the country, which now aggregate about $2,000,-
C00,000, would be $80,000,000. A tax of 5 per cent would
yield $100,000,000. ‘The present taxes paid by all the railroads
amount to about $56,000,000,. or about 3 per cent upon their
gross receipts. Here let me say that these railroads, forced
into polities to protect themselves against excessive taxation,
finally end in evading taxation themselves. Having got the
power, having secured the party machinery, having secured con-
trol of the officials who control taxes, they naturally seek to
diminish their own taxes, and so, though originally going into
politics for protection, they remain in politics for profit, and
seek to escape their fair proportion of the burdens of govern-
ment.

As to a gross-receipt tax, a tax of 3, 4, or 5 per cent upon
the gross receipts is mathematically ascertainable. The gross
receipts are published every year by the Interstate Commerce
Commission. There is no way of concealing them. The tux
would be a matter of mere computation, and would not invorve
the exercise of discretion by the taxing officials of the various
States, as the present system does. *

The National Government can, in incorporating interstate
rallroads, either exempt them as national instrumentualities
from State taxation or it can fix the rule for their taxation by
the States.

TAXATION OF NATIONAL INSTRU MENTALITIES—POWER OF CONGRESS TO FIX
RULE OF TAXATION BY STATES.

When the Governmesit condemns for public use or constructs
a post-road, that moment the post-road is free from State taxa-
tion. If the Government buys real estate and builds a post-
office, that moment the real estate and building are exempt from
State taxation. If the National Government should construct
railroads for the purpose of carrying out its granted powers,
such railroads would be exempt from State taxation, just as
post-offices and custom-houses are, and just as post-roads would
be if built. If it intrusts such work to a corporation created by
itself, the corporation is the agent for the purpose of carrying
out governmental powers, and none of its powers or operations
can be taxed by a State. If it selects certain property as the
instrumentality or means through which its powers are to be
exercised, such property would also be exempt from State tax-
ation, for just as the powers and the operations of the Gov-
ernment agent would be exempt from all local taxation, so
also would be the property selected as the chosen instrument
for the exercise of those powers. The powers and operations
would be exempt without any express declaration to that effect
by Congress. A different rule would probably apply to the
property selected as the chosen instrument for the exercise of
a national power. In that case it would be necessary to show
unmistakably that the property was selected .as the instru-
mentality, and that it was the purpose of Congress that it
should be taken out of the domain of State taxation.

The proper organization of a systemyof transportation is
just as essential to the welfare of the people as is the creation
of a proper financial system. In the early history of the country
it was determined to establish a United States bank to promote
the fiscal operations of the Government. The State of Maryland

6724
15

sought to impose a tax upon the notes of a United States bank
in Maryland. The notes were property just as a railroad is
property, and yet the court held that the State of Maryland
eould not in the exercise of its taxing power tax those notes.
It is true that in that case Chief Justice Marshall held that so
far as the bank building was concerned the exemption would
not apply, but he so held upon the ground that the ownership of
the bank building was not essential to the operation of the bank ;
the bank could be conducted upon leased property, and therefore
the bank building could not be regarded as a national instru-
mentality for the purpose of carrying out the powers conferred
by the National Government upon the bank, but all property
absolutely essential to the powers conferred upon the bank, such
as promissory notes, bills of exchange, etc., were exempt from
State taxation.

It should be noted that a railroad is a very different property
from a bank building. The ownership of a bank building is not
essential to the operation of a banking corporation. The owner-
ship of a railroad is absolutely essential to the operation of a
railroad corporation. If Congress, therefore, under the inter-
state-commerce power, authorizes the construction of a railroad,
it makes that railroad the instrumentality for the purpose of
carrying out its power—the means of the exercise of the power
itself. The operation of the railroad can not be segregated from
the right of way, the track, the station buildings, and the gen-
eral equipment of the road. If they belonged to the Government
they would be exempt from State taxation, and if the Govern-
ment selects as its agent a corporation of its own creation and
makes its property the instrumentality for the exercise of gov-
ernmental powers, and unmistakably shows its intention that
this instrumentality shall not be embarrassed by State taxation,
clearly the property selected as the instrumentality must be as
free from taxation as the powers themselves.

In this connection it is proper to say that my contention as to
the right of the United States to exempt a railroad incor-
porated under a national law for interstate commerce, from
State taxation is not urged for the purpose of freeing such
roads from sharing the burden of government, but simply for
the purpose of securing a uniform rule of taxation by the States,
with a view to facilitating the public regulation of railroad cor-
porations in which the fixed charge of taxes is an important
consideration.

Under the rule laid down in Van Allen v. The Assessors (3
Wall., 573), it would be competent for the Congress of the
United States to submit the property of national railroads en-
gaged in interstate commerce to State taxation, first prescribing
the rule by which such property should be taxed. In this way
Congress could secure uniformity and certainty in the taxes,

THE AUTHORITIES.

In Luxton v. North River Bridge Company (153 U. S., 525),
it was held that, under the power to regulate commerce among
the States, Congress may create a corporation to build a bridge
across navigable water between two States, and to take private
land for that purpose, making just compensation. And Mr.
Justice Gray, delivering the opinion of the court, said:

The Congress of the United States, being empowered by the Constitu-
tion to regulate commerce among the several States, and pass all laws

6724
16

necessary «nd proper for carrying into execution any of the powers
specifically conferred, may make use of any appropriate means for this
end. As said by Chief Justice Marshall, ‘‘ The power of creating a cor-
poration, though appertaining to sovereignty, is not, like the power of
making war, or levying taxes, or of regulating commerce, a great sub-
stantive and independent power which can not be implied as incidental
to other powers or used as a means of executing them. It is never the
end for which other powers are exercised, but a means by which other
objects are accomplished.’ Congress, therefore, may create corpora-
tions as appropriate means of executing the powers of government, as,
for instance, a bank for the purpose of carrying on the fiscal operations
of the United States, or a railroad corporation for the purpose of pro-
moting commerce among the States. (McCulloch v. Maryland, 4 Wheat.,
316, 411, 422; Osborn v. Bank of U. S., 9 Wheat., 738, 861-873 ; Pacific
R. R. Removal Cases, 115 U. S., 1, 183; California v. Pacific R. R., 127
U. 8., 1, 39.) Congress has likewise the power, exercised early in this
country by successive acts in the case of the Cumberland or National
road from the Potomac across the Alleghenies, to the Ohio, to authorize
the construction of a public highway connecting several States. See
Indiana v. United States, 148 U. 8., 148. (153 U. S., 529.)

In California v. Pacific Railroad (127 U. S., 1) it was directly
adjudged that Congress has authority, in the exercise of its
power to regulate commerce among the several States, to au-
thorize corporations to construct railroads across the States,
as well as the Territories of the United States; and Mr. Justice
Bradley, speaking for the court, and referring to the acts of
Congress establishing corporations to build railroads across the
continent, said:

It can not at the present day be doubted that Congress, under the
power to regulate commerce among the several States, as well as to pro-
vide for postal accommodations and military exigencies, had authority
to pass these laws. The power to construct, or to authorize indi-
viduals or corporations to construct, national highways and bridges
from State to State is essential to the complete control and regulation
of interstate commerce. Without authority in Congress to establish
and maintain such highways and bridges it would be without author-
ity to regulate one of the most important adjuncts of Congress. This
power in former times was exerted to a very limited extent, the Cum-
berland, or National, road being the most notable instance. Its ex-
ertion was but little called for, as commerce was mostly then con-
ducted by water, and many of our statesmen entertained doubts as to
the existence of the power to establish ways of communication by
land. But since, in consequence of the expansion of the country, the
multiplication of its products, and the inventions of railroads and
locomotion by steam, land transportation has so vastly increased, a
sounder consideration of the subject has prevailed and led to the con-
clusion that Congress has plenary power over the whole subject. Of
course the authority of Congress over the Territories of the United
States and its power to grant franchises exercisable therein are, and
ever have been, undoubted. But the wider power was very freely
exercised, and much to the general satisfaction, in the creation of the
vast system of railroads connecting the East with the Pacific, tra-
versing States as well as Territories, and cupey ine the agency of the
State as well as Federal corporations. (127 U. S., 39-40.)

McCulloch v. Maryland (4 Wheat., 485)—This case_ decided
that a stamp tax on the notes issued by a Federal bank was 4
tax on the operation of a Federal agency and therefore void.
The essence of the decision is the impotency of the States to
burden the operations of the Federal Government.

As to a tax on property as distinguished from operations, the
court said, in conclusion :

The States have no power, by taxation or otherwise, to retard, impede,
burden, or in any manner control the operations of the constitutional
laws enacted by Congress to carry into execution the powers vested in
the General Government. * * *

This opinion * * * does not extend to a tax paid by the real
property of the bank, in common with the other real property within
the State, nor to a tax imposed on the interest which the citizens of

6724
17

Maryland may hold in this institution, in common with other property
of the same description throughout the State. .
Thompson v. Pacific Railroad (9 Wall., 579).—This was a
case of taxation by a State of a railroad acting under a Federal
charter, as well as a State charter. The court said (p. 590) :
We do not think ourselves warranted, therefore, in extending the
exemption established by the case of McCulloch v. Maryland beyond Its
terms. We can not apply it to the case of a corporation deriving its ew-
istence from State law, ewercising its franchise under State law, and
holding its property within State jurisdiction and under State protec-

tion.

In this case the court considered the possibility of what would
happen if Congress should do what it had not done, to wit, ex-
plicitly exempt its agent from taxation. The court said (p. 588) :

We do not doubt, however, that * * * Congress may * * *

exempt, in its discretion, the agencies employed in such service from

any State taxation which will really prevent or impede the perform-
ance of them.

But can the right of this road to exemption from such taxation be
maintained in the absence of any legislation by Congress to that effect?

Throughout this case it will be noted that the court is care-
ful to say that the case did not present the feature of any posi-
tive attempt on the part of Congress to exempt the property
from State taxation, and the inference is clear that in such a
case the exemption would have been operative and the State
tax invalid.

The case emphasizes the difference between property and the
operations of an agent of the Government, as follows (p. 591):

We fully recognize the soundness of the doctrine that no State has a
“right to tax the means employed by the Government of the Union for
the execution of its powers.’ But we think there is a clear distinction
between the means employed by the Government and the property of
agents employed by the Government. Taxation of the agency is taxa-

tion of the means; taxation of the property of the agent is not always,
or generally, taxation of the means.

No one questions that the power to tax all Property, business, and
persons, within their respective limits, is original in the States and has
never been surrendered. It can not be so used, indeed, as to defeat or
hinder the operations of the National Government; but it will be safe
to conclude, in general, in reference to persons and State corporations
employed in Government service, that when Congress has not inter-
posed to pee their property from State taxation, such taxation is
not obnoxious to that objection.

Again obviously intimating a different opinion had Congress
expressly established such exemption. : }

Railroad Company vy. Peniston (18 Wallace, 5).—The case
arose out of the claim on the part of the State of Nebraska of
the power to tax roadbed, depots, wood stations, water stations,
and other realty, telegraph poles, telegraph wires, bridges,
boats, papers, office furniture and fixtures, money and credits,
movable property, engines, etc., of the Union Pacific Railroad
Company. .

The company was created by the act of Congress of July 1,
1862, entitled “An act to aid in the construction of a railroad
and telegraph line from the Mississippi River to the Pacific
Ocean, and to secure to the Government the use of the same for
postal, military, and other purposes.” Various amendments
were made to the original act at later sessions of Congress, but
neither in the original act nor in any amendment was any pro-
vision made by Congress respecting the taxation of it or its
property by the States through which the road might run.

6724 3

 
18

The tax was resisted by the company on the ground that, hav-
ing been incorporated by Congress—

The State of Nebraska has no power to subject to taxation for State
purposes the roadbed, rolling stock, and other property necessary for
the use and operation of the road, such power resting exclusively in the
Government of the United States.

It was distinctly stated by Mr. Chief Justice Strong, who de-
livered the opinion, that— i

The States may not levy taxes the direct effect of which shall be to
hinder the exercise of any powers which belong to the National Gov-
ernment. The Constitution contemplates that none of those powers
may be restrained by State legislation (p. 30).

After referring to the Icgislation creating the Union Pacific
road and adverting to the objects and purposes of that legisla-
tion, the justice further said (p. 32) :

Admitting, then, fully, as we do, that the company is an agent of
the General Government, designed to be employed, and actually em-
ployed, in the legitimate service of the Government, both military and

ostal, does it necessarily follow that its property is exempt from
tate taxation?

Emphasizing the difference between the operations of an agent
and the property thereof, Justice Strong said (p. 33):

It may therefore be considered as settled that no constitutional im-
plications prohibit a State tax upon the property of an agent of the
Government merely because it is the property of such an agent.

Then, after consideration of the various cases bearing upon
the general question, Justice Strong summed up as follows (p.
36-87) :

It ig therefore manifest that exemption of Federal agencies from
State taxation is dependent, not upon the nature of the agents, or
upon the mode of their constitution, or upon the fact that they are
agents, but upon the effect of the tax; that is, upon the question
whether the tax does in truth deprive them of power to serve the Gov-
ernment as they were intended to serve it, or does hinder the efficient
exercise of their power. A tax upon their property has no such
necessary effect. It leaves them free to discharge the duties they have
undertaken to perform. A tax upon their operations is a direct ob-
struction to the exercise of Federal powers.

Eight justices heard this case, and the opinion of the court
upholding the validity of the tax was concurred in by four of
them. A fifth, Justice Swayne, concurred in the judgment, but
said:

I see no reason to doubt that it was the intention of Congress not
to give the exemption claimed. The exercise of the power may be
waived, but I hold that the road is a national instrumentality of such
a character that Congress may interpose and protect it from State
taxation whenever that body shall deem it proper to do so.

So that Justice Swayne would have decided against the ma-
jority of the court had there been exempting legislation. Two
other justices flatly dissented, giving an opinion to the effect
that such State taxation was invalid, even in the silence of
Congress. And the eighth justice merely remarked: “I dissent
from the opinion of the court.”

Thus all that can be claimed from this decision as to the
power of Congress to exempt a corporation from taxation by
affirmative legislation is that the court was evenly divided,
and even this: can not be fairly claimed, for the case of exempt-
ing legislation was not before the court, and the opinions of
the four justices who upheld the tax do not contain a word
which denies the power of Congress to exempt the property
which it expressly declares to be its chosen instrumentality.

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Mr. Justice Bradley, for himself and Mr. Justice Field, de-
livered a vigorous dissenting opinion, in the course of which he
said (p. 47):

The Union Pacific Railroad Company, therefore, being a United States
corporation created for national objects and purposes, and deriving
its existence, its powers, its duties, its liabilities from the United
States alone; being responsible to the United States, now as formerly,
for a whole congeries of duties and observances; being subjected to the
forfeiture of its corporate franchises, powers, and property to the
United States and not to any individual State; being charged with
important duties connected with the very functions of the Government,
every consideration adduced in the cases of McCulloch v. Maryland
and Osborn v. The Bank, would seem to require that it should be
exempt not only from State taxation, but from State control and inter-
ference, except so far as relates to the preservation of the peace and
the performance of its obligations and contracts. In reference to
these and to the ordinary police regulations imposed for sanitary pur-
poses and the preservation of good order, of course, it is amenable to
State and local laws.

As an instrument of national commerce as well as Government op-
erations, it has been regulated by Congress. Can it be further regu-
lated by State legislation? Can the State alter its route, its gauge, its
connections, its fares, its franchises, or any part of its charter? Can
the State step in between it and the superior power or sovereignty to
which is responsible? Such an hypothesis, it seems to me, is inad-.
missible and repugnant to the necessary relations arising and existing
in the ease. Such an hypothesis would greatly derogate from and
render almost useless and ineffective that hitherto unexecutcd power
of Congress to regulate commerce by land among the several States.
If it be declared in advance that no agency of such commerce, which
Congress may hereafter establish, can be freed from local impositions,
taxation, and tolls, the hopes of future free and unrestricted intercourse
between all parts of this great country will be greatly discouraged and
repressed.

Again: ;

But it is contended that the laying of a tax on the roadbed of the
company is nothing more than laying a tax on ordinary real estate,
which was conceded might be done in the case of the United States
Bank in reference to its banking house or other lands taken for claims
due in the course of its business. This is a plausible suggestion, but,
in my apprehension, not a sound one. In ascertaining what is essential
in every case, respect must always be had to the subject-matter. The
State of Maryland undertook to tax the circulation of the United States
branch bank established in that State by requiring stamps to be aflixed
thereto; the State of Ohio imposed a general tax of $50,000 upon the
branch established therein. These taxes were declared unconstititu-
tional and void. They impeded the operations of the bank as a finan-
cial agent. Real estate was not a necessary appurtenant to the exer-
cise of the functions of the bank. It might hire rooms for its office, or
it might purchase or erect a building.

But the primary object of a railroad company is commerce and trans-
portation. In its case a railroad track is just as essential to its opera-
tions as the use of a currency or the issue or purchase of bills of
exchange is to the operations of a bank. To tax the road is to tax the
very instrumentality which Congress desired to establish, and to oper-
ate which it created the corporation.

Besides, all that a railroad company possesses in reference to its
roadbed is the right of way and the right to use that land for the pur-
pose of way. This is a franchise conferred by the Government, and
inseparately connected with the other franchises which enable it to
perform the duties for the performance of which it was created. Any
estate in the land—the soil, the underlying earth—beyond this belongs
to the original proprietor, and that proprietor in the present case is the
Government itself. So that, look at it what way we will, there is no
room for the taxing power of the State. The estate in the soil can not
be taxed, for that remains in the United States; the franchise of right
of way and materials of track can not be taxed, because they are essen-
tially connected with and form a part of the powers, faculties, and cap-
ital by which the national purposes of the organization are accomplished.

If the roadbed may be taxed, it may be seized and sold for nonpay-
ment of taxes—seized and sold in porte and parcels, separated by
county or State lines—and thus the whole purpose of Congress in creat-
ing the corporation and establishing the line may be subverted and de-
stroyed.

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20

In my judgment, the tax laid in this case was an unconstitutional
interference with the instrumentalities created by the National Gov-
ernment in carrying out the objects and powers conferred upon it by
the Constitution (pp. 49-50).

In Van Brocklin v. State of Tennessee (117 U. S., 101), Mt.
Justice Gray, speaking for the court said:

The liability of the property of the Pacific railroad, companies to
State taxation has been upheld on the distinction * * * that,
although the railroad corporations were agents of the United States,
the property taxed was not the property of the United States, and a
State might tax the property of the agents, provided it did not tax the
means employed by the National Government.

And he there quoted with approval the following from the
dissenting opinion of Mr. Justice Bradley in the Peniston case:

The States can not tax the powers, the operations, or the property of
the United States, nor the means which it employs to carry its powers
into execution.

In California v. Central Pacific Railroad Company (127 U.
8., 1) the question of taxation by the State of California of
the franchise of the Central Pacific Railroad Company came
before the Supreme Court in this case, and the court, speaking
by Mr. Justice Bradley, unanimously held that such franchise
was not subject to taxation by the State. In the opinion the
following language is used: '

It seems very clear that the State of California can neither take
them (the franchises held by the company) away, nor destroy nor
abridge them, nor cripple them by onerous burdens. Can it tax them?
It may undoubtedly tax outside visible property of_the company situ-
ated within the State. That is a different thing. But may it tax the
franchises wHich are the grant of ‘the United States? In our judg-
ment it can not. What is a franchise? * * *

Generalized, and divested of the special form which it assumes under
a monarchical government based on feudal traditions, a franchise is a
right, privilege, or power of public concern, which ought not to_be
exercised by private individuals at their mere will and pleasure, but
should be reserved for public control and administration, either by the
government directly or by public agents, acting under such conditions
and regulations as the government may impose in the public interest
and for the public security. Such rights and powers must exist under
every form of society. They are always educed by the laws and cus-
toms of the community. Under our system their existence and disposal
are under the control of the legislative department of the government,
and they can not be assumed or exercised without legislative authority.
No private person can establish a public highway, or a public ferry, or
a railroad, or charge tolls for the use of the same, without authority
from the legislature, direct or derived. These are franchises. * * *
No persons can make themselves a body corporate and politic without
legislative authority. Corporate capacity is a franchise. =

In view of this Eo ie on of the nature of a franchise, how can it
be possible that a franchise granted by Congress can be subject to taxa-
tion by a State without the consent of Congress? Taxation is a burden,
and may be laid so heavily as to destroy the thing taxed, or render it
valueless. As Chief Justice Marshall said in McCulloch v. Maryland,
“the power to tax involves the power to destroy.’ Recollecting the
fundamental principle that the Constitution, laws, and treaties of the
United States are the supreme law of the land, it seems to us almost
absurd to contend that a power given to a person or corporation by the
United States may be subjected to taxation by a State. The power con-
ferred emanates from, and is a portion of, the power of the government
that confers it. To tax it is not only derogatory tc the dignity, but sub-
versive of the powers of the government and repugnant to its paramount
sovereignty. * * * It may’ be added that these views are not in
conflict with the decisions of this court in Thomson v. Pacific Railroad
(9 Wall., 579), and Railroad Company v. Peniston (18 Wall., 5). As
explained in the opinion of the court in the latter case, the tax there
was upon the property of the company and not upon its franchises or
operations. (127 U. S., 40-41.)

Reagan v. Mercantile Trust Company (154 U. 8.. 418).—
While the language in this case is not wholly clear, it seems to
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indicate a belief that Congress might exempt such a railroad
from State taxation. Page 416:

Similarly we think it may be said that, conceding to Congress the
power to remove the corporation in all its operations from the control
of the State, there is in the act creating this company nothing which
indicates an intent on the part of Congress to so remove it. +
It (Congress) must have known that, in the nature of things, the con-
trol of that business would be exercised by the State, and if it deemed
that the interests of the nation and the discharge of the duties required
on behalf of the nation from this corporation demanded exemption in
all things: from State control it would unquestionably have_expressed
such intention in language whose meaning would be clear. Its silence
in this respect is satisfactory assurance that, in so far as this corpora-
tion should engage in business wholly within the State, it intended that
it should be subjected to the ordinary control exercised by the State
over such business.

In Central Pacific Railroad Company v. California (162 U. S.,
125) the court said:

It may be regarded as firmly settled that although corporations may
be agents of the United States their property is not the property of the
United States, but the property of the agents, and that a State may tax
the property of the agents, subject to the limitations pointed out in
Railroad Company v. Peniston, ete.

Of course, if Congress should think it necessary for the protection of
the United States to declare such property exempted, that would present
a different question.

Van Allen v. The Assessors (8 Wall, 70 U. S., p. 573).—The
court in this case considered the act of June 3, 1864, “to
provide a national currency,” etc., which subjected the shares
of bank associations in the hands of shareholders to tax-
ation by the States under certain limitations. It also considered
the act of March 9, 1865, of the legislature of New York, which
taxed such shares but did not tax them by the same rule as
the shares of State banks, and held this statute unwarranted
by the act of Congress and void. The court said (p. 591):

That Congress may constitutionally organize or constitute agencies
for carrying into effect the national powers granted by the Constitu-
tion; that those agencies may be organized by the voluntary association
of individuals, sanctioned by Congress; that Congress may give to such
agencies so organized corporate unity, permanence, and efficiency; and
that such agencies in their being, capital, franchises, and operations are
not subject to the taxing power of the States, have ever been regarded
since those decisions as settled doctrines of this court.

It will be perceived in this case that Congress laid down the
rule under which a State tax could be levied upon the capital
invested in a national incorporation, and, as the rule laid down
by Congress was violated by the State, the tax of the State was
held to be invalid.

From the foregoing authorities it seems clear—

First. That Congress, under the power to regulate interstate
commerce, can create corporations for the purpose of engaging
in such commerce.

Second. That a State can not tax the franchises of such
corporations, nor can it interfere with the operations of a
corporation chartered by the United States for such purposes,
or hinder, impede, or burden such corporations in carrying out
such purposes.

Third. That, while the State may tax the tangible property
of the corporation within its territorial limits, in the absence
of any restriction upon the taxing power of the State contained
in the charter of the corporation, nevertheless Congress may, in
terms, expressly provide against such State taxation by a declar-
ation that all the property of the corporation necessary for the

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22

carrying out of the purposes for which it was incorporated
shall not be subject to State taxation, or it can prescribe the
rule for State taxation. In other words, Congress itself can
declare what shall be regarded as the instrumentalities of gov-
ernment, can define such instrumentalities in the charter itself,
and upon such instrumentalities the States can not levy any tax
if Congress forbids.
TAXATION ACCORDING TO DENSITY OF TRAFFIC.

In laying down such a rule it may be said that sufficient re-
gard would not be had to the density of traffic; that in some
States traffic would be very much more dense .than in others ;
that it would be very unfair to allow to States in which the
traffic is less dense the same tax per mile as to States in which
the trafficis greater. This objection can be met by providing that
each mile of second track should be estimated as one-half mile
of main track, and that each mile of third, fourth, or fifth
track should be estimated as a quarter mile of main track, and
thus the States whose density of traffic is demonstrated by the
existence of second, third, and fourth tracks would receive a
larger amount proportionately per mile of main track than the
States in which the traffic is not so dense and in which such
extra trackage does not exist.

A CERTAIN FACTOR IN RATE FIXING.

The advantage of this method of taxation would be also that
the Interstate Commerce Commission would have another factor
in their determination of rates which would be entirely certain.
As it is, assuming that these railroads are entitled to a fair
return upon a fair valuation, that return can only be ascertained
after computing the gross receipts, then deducting from such
receipts the expenses of operation and maintenance, and finally
deducting the taxes and fixed charges. The balance would
be the income which would be applied as a return upon the value
of the property.

It is, therefore, of the highest importance that the taxes them-
selves should be fixed and certain. If they vary, the whole cal-
culation of the Interstate Commerce Commission must vary, for
the rates must be adjusted in such a way as to yield to the cor-
poration operating expenses, maintenance, and taxes, and a fair
return upon the valuation.

ACCIDENT AND INSURANCE FUND.

A national incorporation act should also provide for an in-
surance fund. We all know that in every State in the Union
the employees of railroads are pushing legislation fixing the
liability of corporations for injuries to employees, even though
caused by the negligence of fellow employees. There is con-
stant warfare between the railroads and their employees
upon this question, and it is another fruitful source of the
activity of railroads in politics. In order to protect themselves,
they are omnipresent in all the legislatures of the country
upon this subject. It seems to me that we should frankly
recognize such liability as a charge upon the transportation
of the country. There should be a fund created to aid those
employees who are disqualified for active service through acci-
dent or old age, by providing that the national corporations
should pay into the national Treasury 1 per cent of their gross
receipts, which, under the present system, would amount to
about $20,000,000 annually.

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23

This fund should be invested by the Interstate Commerce
Commission in interest-bearing securities, and the Interstate
Commerce Commission should frame rules and regulations
with regard to its payment to the disqualified employees. This
$20,000,000 would not be taken from the profits of the stock-
holders, but would be imposed upon the commerce of the coun-
try as part of the operating expenses of the companies. In
this way we would do much to relieve the present hostility
between the corporations and their employees regarding this
matter, and we would do much to protect the men who are
engaged in this public service of an extra hazardous character.

NATIONAL OWNERSHIP OF RAILROADS.

Mr. President, I have already referred to the fact that this
bill is likely to burden the Interstate Commerce Commission
to such an extent that it will prove inert and inactive and in-
capable of accomplishing its purpose. If we establish a rule
that will work automatically, tending toward a gradual reduc-
tion of rates, there will be no difficulty; but if we do not, I
believe there will be a steady and increasing tendency toward
nationalization of all the railroads of the country.

The proposition is a very simple one. The existing railroads
are now, for the most part, embraced in about ten systems, each
of them controlled by a corporation organized under the laws of
a single State. These corporations have outstanding about
$6,000,000,000 of bonds and $6,000,000,000 of stock. It is un-
necessary to consider the bonds, for they can remain as a charge
upon the property when the United States Government seeks to
acquire the railroads, and it can gradually substitute for the
existing bonds, bearing interest at the rate of 4, 44, or 5 per
cent bonds, bearing interest at the rate of 3 per cent, thus
making a gradual reduction of about $100,000,000 annually in
interest charges. It is not necessary for the Government to
condemn the physical property of the corporations. All that it
needs is the interest of the shareholders.

This was done recently in the case of the Panama Railroad,
when a bill passed the Senate, with the approval, I believe, of
all the lawyers, giving the United States power to condemn
shares. of stock in the Panama Railroad that were outstanding.
We could exercise that same power now with our railroads,
and all that we would have to provide for would be the market
value of all the railroad stocks, whose par value is about $6,000.-
000,000. Such market value is, I believe, about $5,000,000,000.

NATIONAL OWNERSHIP EASILY FINANCED.

The statement for 1904 shows that the net income of all the
railroads of the country, after paying operating expenses. taxes,
maintenance, and interest upon debt, amounted to $278,000,000.
Assuming that we had to pay $5,000,000,000 for all the stocks
outstanding, we could issue national bonds at 3 per cent therefor,
and the annual interest charge would not be more than $150,000,-
000. We would have, according to this statement, an excess of
$128,000,000 annually, which could be applied to a sinking fund
or to extensions. The nation could also gradually retire the
existing mortgage bonds bearing interest at about 44 per cent
with 3 per cent bonds, and thus make a sawing in interest of
$100,000,000 more, and thus we would in time accomplish an
annual saving of $228,000,000, which would construct at least
seven or eight thousand miles of railroad annually to keep

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24

pace with all the requirements for new construction in the
future. Or, if new capital should be applied to that, the
$228,000,000 put into a sinking fund would soon retire every
dollar of indebtedness created by the purchase of these rail-
roads. Or we could enter upon national ownership in a very
limited way.

A NATIONAL TRANSCONTINENTAL LINE.

We could acquire simply one trunk line from the Atlantic to
the Pacific by acquiring the Baltimore and Ohio running from
New York, Philadelphia, and Baltimore to Chicago and the
Atchison system running from Chicago to San Diego, Los
Angeles, and San Francisco. We could condemn their stock for
about $450,000,000, leaving the roads subject to a bond issue
of about $500,000,000. ‘The income of those properties would
take care of the interest charges and leave a surplus that could
be applied to a sinking fund or to new construction. Branch
lines of railway could be built from this great central line or
the numerous railroads in the country that are not embraced
in the great systems could connect and cooperate with it. I sug-
gest this line because less money would be required in financing
it than in any other line. :

INCRBASE IN INCOME.

That the income of these railroads is bound to increase largely
under existing conditions is demonstrated by a comparison of
their earnings for 1904 and the earnings for 1897. The gross
earnings for 1904 were $1,975,000,000; for 1897 (seven years
previous), they were $1,122,000,000, an increase in seven years
of about 70 per cent. It is altogether probable that within
the next ten years the present gross earnings of the railroads
now aggregating about $2,000,000,000 will be increased to
$4,000,000,000.

A more favorable showing is made regarding the net income.
In 1904 after deducting all interest charges, operating expenses,
maintenance, and taxes the net incgme was $278,000,000, while
in 1897 it was only $81,000,000. So their net income has been
increased within a period of seven years over 300 per cent.

The nation having acquired the stock of these railroads, their
operation could be continued under their present managers, with
their present employees. The roads could continue to pay their
present taxes to the States, so that no readjustment of revenues
would be necessary, and the members of the Interstate Com-
merce Commission could constitute the directors of these cor-
porations and gradually work out a system of national admin-
istration, just as the Panama Commissioners are now acting as
the directors of the Panama Railroad Company.

If the United States is ever to enter upon the purchase and
nationalization of these roads it could never act at a more
favorable time than now, nor with more justice to the stock-
holders and bondholders of these corporations, for their stocks
have within seven years increased from 25 to 100 per cent in
value.

NATIONAL CONSTRUCTION OF RAILROADS.

But if the United States should be unwilling to condemn ex-
isting properties, which, on the average, are capitalized at
about $65,000 per mile, it could easily enter upon the work of
national construction without interfering seriously with the
operations of any of the existing systems. I imagine it would

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25

not be our wish to imperil the investments of the stock or bond-
holders of existing corporations. and that many would not look
with favor upon a policy which would put the Government in the
attitude of a competitor with private railroads.

But we must remember that new construction is going on at
the rate of about 5,000 miles per annum. There is no reason
why the United States should not take up new construction—
the construction of the future. The railroads are now engag-
ing in it. The Gould system is now being extended into a
transcontinental line. It will be absolutely necessary in the
near future to duplicate and perhaps triplicate the tracks of
some of the existing roads in order to meet the demands of busi-
ness. Why, then, should not the United States construct one
road from ocean to ocean, and operate it as an experiment in
national ownership?

Three thousand miles of railroad would not cost more than
$35,000 per mile. One hundred million dollars would construct
such a railroad. The Geological Survey, with its great force of
topographers and civil, railroad, hydraulic, and construction
engineers, now employed in the Reclamation Service, could
easily undertake the work, and thus the nation would have an
opportunity of contrasting Government construction and opera-
tion with that of private corporations.

The nation could in this way, while leaving the existing
railroads in‘ the enjoyment of their present business, simply
take up the railroad construction of the future. The capi-
talization of such roads would be at the rate of $35,000 a
mile, instead of the existing capitalization of about $65,000 a
mile.

The financial difficulty therefore is not a great one. If we
take hold of all the roads or a chain of roads, like the Baltimore
and Ohio and the Atchison system, the net income would pay
all the interest charges and leave a surplus for a sinking fund or
extensions.

COMPLEXITY OF BXISTING CONDITIONS.

I imagine that the country will respond to such an appeal un-
less we relieve the complexity of the existing conditions. What
is that complexity? We have 2,000 railroad corporations in
this country, combined, for the most part, into eight or ten
great systems. The complexity of the situation is heyond par-
allel. It is almost impossible to get at the facts regarding these
great systems.

Look over the interstate commerce reports and you will find
the Pennsylvania Railroad operating a system. Under its name,
as subsidiary lines, will be eighty or ninety different roads,
and you will find at the side after the name of each road a
note to the effect that this line is a subsidiary line, and that
line is an operating line; in this line the Pennsylvania Rail-
road owns all the stock, in that line the Pennsylvania Railroad
owns a part of the stock; this road is leased; with another
road it has traffic arrangements, etc. Thus you find the
utmost complexity as to title and ownership and the holding of
these various systems, all arising out of the fact that, while
combination is desirable, the laws, whether national or State,
have not provided suitable machinery for its accomplishment.

This complexity is, and will continue to be, a fruitful source
of corruption and fraud. Then we find that there is some

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26

understanding between the New York Central, the Pennsylvania
Railroad, the Baltimore and Ohio, the Norfolk and Western,
and the Chesapeake and Ohio, all of them trunk lines, all of
them occupying the territory of densest traffic, all of them na-
tional in their operations, for they embrace not only the traffic
of the States through which they operate, but the traffic of the
entire Union. The traffic of the Pacific coast, the traffic of the
Southern States, the traffic of the Middle States all go over these
trunk lines, and yet it is impossible for a national commission
to understand what is the relation of these various roads toward
each other.

It finds each of them operating numerous subsidiary compa-
nies, all bound to the parent company by the most complicated
arrangements. Some of these arrangements take the shape of
rentals. How can they tell whether a fair rental is made in
these cases? Suppose the directors of the New York Central
are interested in a railroad which is intended to be taken into
the New York Central system, and they do it through the
medium of a nine hundred and ninety-nine year lease, I ask
whether they are likely to be very rigid with themselves in
fixing the terms of that lease? Whether, if it is a question
between a rental that will yield 4 per cent and one that will
yield 8 per cent, they will not be likely to determine in favor
of the latter, and whether in that case the larger rental will not,
by the contract of parties interested upon both sides, dealing
with each other, be fastened upon the entire commerce of the
country?

INTBRCORPORATE HOLDINGS.

Then these railroads have their intercorporate holdings. The
Baltimore and Ohio owns $30,000,000 of the stock of the Read-
ing Company, a company which owns the stock of the Philadel-
phia and Reading Company and also owns extensive coal mines.
We have also the Lake Shore and Michigan Southern, which is
one of the subsidiary roads of the New York Central, owning
an equal amount, I belleve, about $30,000,000. in the stock of
the Reading Company. Then we have the Pennsylvania own-
ing & large amount of Baltimore and Ohio stock, and we find
some of the subsidiary roads of the New York Central owning
stock in the Chesapeake and Ohio and the Norfolk and Western.
So they are all interlinked with each other. These four railroad
systems constitute the trunk lines of the country over which
almost all the commerce of the country goes, and yet they are
organized under the laws of particular States in whose govern-
ment the people of the nation generally have no share.

I ask whether it is an essential doctrine of State rights that
the State of New York is to create the machine that is to do
the business for the nation; or that the State of Pennsylvania
or the State of New Jersey should create the machine that is
to do the nation’s business? Would it not be very much wiser to
provide for a national incorporation act, under which these
great consolidations can be accomplished and under which they
can be supervised and controlled. The intercorporate holdings
of these railroads to which I have alluded aggregate nearly
three billion dollars—nearly two billion in stock and nearly one
billion in bonds—and of these intercorporate holdings three
hundred millions are holdings in corporations that are not trans-
porting corporations, not railroad companies, but coal companies,
steel companies, companies engaged in production.

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The States furnish the machinery by which production and
transportation can be linked together. I imagine nothing can
be more apparent than the fact that if you give certain men
control of the transportation of the country and also give them
control of the production, through these great trusts and combi-
nations, they will in time absorb all the wealth in the country,
and yet this is permitted under State laws, while the Nation,
whose commerce is three-fourths of all the commerce in the
country, sits idly by and allows the States to frame the charters
under which these great masters of transportation and of pro-
duction can absorb the productive wealth of the country.

ABSORPTION OF STATH RAILROADS BY NATIONAL CORPORATIONS.

Mr. BACON. Will the Senator permit me to make an in-
quiry of him?

Mr. NEWLANDS. Certainly.

Mr. BACON. The Senator is speaking of a condition now ex-
isting. We have in this country some 230,000 miles of railway,
I believe, almost all of which is the property of companies
which have already been chartered by the States——

Mr. NEWLANDS. Yes._

Mr. BACON. And which to-day exist as corporations by
State authority. I should like to know of the Senator, if he
could secure the necessary consent of Congress to carry out his
scheme, in what way could the charters of these hundreds, and
almost thousands, of corporations granted by the States be taken
away from them—nullified, in other words—and national char-
ters substituted therefor, except by the consent of the States
themselves, unless you are going to work a much more far-reach-
ing revolution in the centralization of power than we have ever
had suggested by the most extreme advocate of central power?
In what way would the Senator proceed practically to consum-
mate the purpose which he now suggests, and that is to bring
under Federal control all of these hundreds, if not thousands, of
corporations now existing under State law, with corporate rights
secured under State laws, and all these vested interests built
up under State law? What would be the practical proceeding
which the Senator would recommend to enable him to carry
out his purpose, even if he had the consent of Congress to do it?

Mr. *EWLANDS. I will say to the Senator that in the first
place I would not attempt to do it without the consent of the
States. But I assume that the States would yield their assent
just as readily to the operation of railroads incorporated by the
Nation as to the operation of railroads incorporated by sister
States.

Mr. BACON. I should like to suggest to the Senator

Mr. NEWLANDS. Take the Southern States, for instance——

Mr. BACON. I should like to suggest to the Senator the very
remarkable difference there is between the two. When a cor-
poration is organized by a sister State it does business in an-
other State simply by the comity of that other State and by
the consent of that other State.

Mr. NEWLANDS. Yes.

Mr. BACON. Whereas, if the scheme the Senator from Ne-
vada suggests could be inaugurated, it would not be a matter of
consent on the part of the State. If we have the power to do
what he contends for, it would be a matter of obligation and
compulsion on the part of the State, whether it desired it or

6724

 
28

not. That is a very different thing from the State being willing
to consent to a railroad operating under a charter granted by
some other State, the exercise of whose corporate powers in
that State still continue to be within the control of that State.

Mr. NEWLANDS. I will say to the Senator I have very
much modified my proposition since I first asserted it, in order
to meet the objections of those who fear that it might involve
usurpation of State sovereignty. I have now framed some pro-
visions, which the Senator will find in the appendix to my views
upon this bill when reported from the committee, in which I
take up the question to which he has referred.

I will state that so far as new construction is concerned,
there is no doubt about the power of the National Government
to organize national corporations for the purpose of conducting
an interstate road. If such a road were constructed, the
National Government could lay down the scheme of taxation
for that road.

Mr. KEAN. Without the consent of the States?

Mr. NEWLANDS. Without the consent of the State; abso-
lutely.

Mr. KEAN. Take land and do everything necessary?

Mr. NEWLANDS. Certainly; under the power of eminent
domain.

Mr. BACON. The Senator will pardon the inquiry, as I ask
for information simply. The Senator is contending for a sys-
tem of national taxation to the exclusion of State taxation.
Does the Senator mean now to assert the doctrine that under
the power of interstate commerce the Federal Government can
charter a railroad through a State and deny to the State the
right to tax that railroad, and take to itself the exclusive power
to tax that railroad?

Mr. NEWLANDS. Ido. I would not deem it wise, however,
to exercise that power.

Mr. BACON. I understand the Senator did advocate the
exercise of that power, because the great evil that I understand
him, to be combating is the evil which grows out of State taxa-
tion. The Senator wishes to have uniform taxation, which, he
says, can be accomplished only by the National Government.

Mr. NEWLANDS. But I would not exercise that power by
exempting the property from State taxation. I would exercise
it by providing the rule and the method of taxation.

Mr. BACON. By which the State would levy the tax?

Mr. NEWLANDS. By which the State would levy the tax.

Mr. BACON. But that would imply, of course, the power
to deny to the State the power to tax it.

Mr. NEWLANDS. Yes; I contend for that.

Mr. BACON. The Senator has given very much more
thought to this subject than I have, and I should like to inquire
of him whether his statement that in his opinion it is within
the power of the National Government to authorize the con-
struction of railroad through a State and to deny to the State
the right to tax any of that property is based simply upon his
own reflection or upon the statement or ruling of any court?

Mr. NHWLANDS. Upon both, I will say to the Senator. I
claim, in the first place, that the National Government can itself
construct a railroad—an interstate railroad. It can, if it
chooses, construct a railroad from the Atlantic to the Pacific

6724,
29

Ocean, just as to-day it is constructing the Panama Canal. I
claim, further, that that road—a Government road—after it is
constructed, would be exempt from taxation by the State.

Mr. BACON. The Senator is now speaking of the construction
of a railroad by the Government and not of the granting of a
franchise to a company.

Mr. NEWLANDS. Yes; but I am going to follow it up.

Mr. BACON. The Senator is now speaking of the appropria-
ticn by the Government to its own use of property in the way
of right of way, etc., and upon that constructing a railway, the
title of which shall be in the Government and the ownership of
which shall be in the Government.

Mr. NEWLANDS. Yes.

Mr. BACON. That would be very limited in its operation,
necessarily, if the Senator is speaking of those things which are
practical. As I understand the contention of the Senator it is
that there is such great evil growing out of the multiplicity of
railroads, with different charters, different powers, different
burdens resting upon them, of their own indebtedness, and of
differing systems of taxation and rates of taxation, that it is of
the highest importance that all this vast system shall be unified
in such a way that there shall be uniformity of burden upon the
railroad companies, in the way of taxation particuiarly. When
the Senator suggests the construction of a road by the Govern-
ment, of course he has to engraft that upon a system which
already has 230,000 miles of railway.

So in dealing with the question practically, for the purpose of
meeting the evil which the Senator contends exists, it seems to
me the matter to which our attention should be directed is the
question how shall this vast system be unified, and not how it
would be practicable to build one railroad. While I do not agree
with the Senator on his contention in regard to that proposition,
I do not think he meets the question, even if the correctness of
his proposition were conceded.

Mr. NEWLANDS. I will say to the Senator that I was
simply giving him the process of reasoning by which I arrived
at the conclusion that a railroad incorporated by the national
Government as an instrumentality, for interstate commerce
could be exempted by the National Government from taxation,
and so I started by assuming that if the National Government,
in the exercise of its power over interstate commerce, should
conclude to build a road from the Atlantic to the Pacific Ocean,
with all its branches, etc., it could exempt that railroad from
State taxation.

Then I assume next that if the National Government, in-
stead of building the railroad itself, concludes to put the con-

, struction in charge of an agent, a corporation which it has
itself created, it can also stamp that road as a national instru-
mentality and exempt it by express enactment from State tax-
ation; and that if it can do that, it can prescribe the rule by
which the State can tax that particular property. My reason-
ing thus far extends only to the case of a Government-owned
railroad or a Government-incorporated railroad. Now let us
take up——

Mr. HEYBURN. Mr. President——

The VICE-PRESIDENT. Does the Senator from Nevada
yield to the Senator from Idaho?

6724
30

Mr. NEWLANDS. [ should like to get through with my
reply to the Senator from Georgia.

CAN CONGRESS RELINVE THE RAILROADS FROM STATH TAXATION?

Mr. HEYBURN. Before the Senator leaves that question I
should like to ask whether, in his judgment, it is competent for
Congress to relieve this property from taxation in the States?

Mr. NEWLANDS. I think so.

Mr. HEYBURN. Then, I should like to make this suggestion
to the Senator: In some counties in my State the railroads
pay from sixty to seventy per cent of the taxes that go to
the maintenance of the local government. I suppose there are
such instances in Nevada. Would the Senator regard as rea-
sonable any law which would exempt those railroads from con-
tributing to the expenses of the government that affords them
protection?

Mr. NEWLANDS. I would not, and I do not propose to
exempt them.

Mr. HEYBURN. I think there are counties in the Senator’s
State where the railroads pay as much as 80 per cent of the
expense of maintaining local government. If you are going to
exempt the railroads from taxation within the States, where is
the substitute to be found for maintaining the local govern-
ment—schools, roads, etc.?

Mr. NEWLANDS. I will say to the Senator that I do not
propose to exempt the railroads from State taxation. On the
contrary, I propose to subject them to State taxation.

Mr. HEYBURN. I misunderstood the Senator.

Mr. NEWLANDS. I propose that the National Government
shall fix the rule by which the roads shall be taxed, providing
they are railroads under national incorporation, created as
national instrumentalities for the purpose of carrying out a
national power.

Mr. HEYBURN. I should like to ask the Senator whether he
thinks Congress can do that?

Mr. NEWLANDS. I think so.

Mr. HEYBURN. Can project a railroad into a State, which
railroad enjoys the protection of State laws, and the State be
able to tax the railroad only under the rule established by the
Government, without any State control over it at all?

Mr. NEWLANDS. I do not propose that the National Govern-
ment shall tax the railroads at all, but that the National Goy-
ernment shall fix the rule by which the States shall tax them.

Mr. HEYBURN. What is the difference between fixing the
rule under which the railroads shall be taxed and taxing them,
because if the Government could fix the rule it could limit it
without regard to the necessities of the State? It seems to me.
a difficulty would arise there.

Mr. NEWLANDS. So far as the power is concerned—we
have that already illustrated in the action of the National Gov-
ernment with reference to national banks. The National Gov-
ernment fixes the rule by which national banks shall be taxed.

Mr. HEYBURN. I suggest that is in the nature of tangible
property——

Mr. NEWLANDS. No.

Mr. HEYBURN. And the other is a class of property that
taxes possession of the soil, occupies a part of the territory.

6724
31

Mr. NEWLANDS. The National Government fixes the rule
by which the capital stock of national banks may be taxed in
the States.

Mr. HEYBURN. That is tangible property.

Mr. NEWLANDS. It is true it does not relieve the real es-
tate of the banks from taxation, but it does fix the rule that
shall apply to the capital stock of the bank.

Mr. HEYBURN. But not to the building.

Mr. NEWLANDS. It does so upon the ground that the
national bank is a national instrumentality, and that the State
will not be permitted to put a burden upon that national instru-
mentality which may destroy it.

Mr. HEYBURN. I would ask the Senator.

Mr. NEWLANDS. If the Senator will permit me, in this case
the national instrumentality is the road itself—the rails and the
equipment and the appurtenances—that is, the property, the
instrumentality by which transportation is conducted and
through which interstate commerce is conducted, and the rea-
soning, therefore, applies to that instrumentality.

M’CULLOCH Vv. MARYLAND.

In the case of McCulloch v. Maryland, with which the Sena-
tor is familiar, the Supreme Court held that the State of Mary-
land could not tax the notes of a national bank, and it held it
could not upon the ground that the bank was a national instru-
mentality, and the sovereignty of the Nation could not permit
the sovereignity of the State to put a burden upon a national
instrumentality which might destroy it. It is true that in that
ease the court said that the exemption would not apply to the
real property upon which the bank was located.

Mr. HEYBURN. I was going to ask that question.

Mr. NEWLANDS. But recollect in that case the property of
the bank was not exempted by statute at all—none of it—and the
Supreme Court held in that case that by implication the prop-
erty to which I have referred was exempt from taxation be-
cause it was necessary in the exercise of the powers of the
National Government. The ownership of the bank building is
not. They could conduct their bank in a leased building But,
so far as all of the instrumentalities necessary to exercise the
power, they are exempt.

In this particular case the railroad is the thing. It is the
instrumentality itself—the railroad, its appurtenances, and its
equipment—and I urge that if that railroad is in the owner-
ship of the Government the Government can exempt it from
taxation, and if it is in the ownership of a corporation created
by the Government, it can exempt it. I admit, as to the law
of the case, that that matter has not been finally determined
by the Supreme Court, but I have already shown that in the
Peniston case the court stood ‘four to four upon it, and the
only reason why the judgment was rendered against the exemp-
tion in that case was that one of the four judges, who held that
the power to exempt could apply to the railroad, claimed that
the exemption had not been declared in the statute and that
unless it was declared in the statute, it was clearly not the in-
tention of Congress that the property should be exempt. So the
case stands four to four in that decision.

But upon the reasoning of the case, the logic of the case, if a
uational railroad, incorporated by the United States Govern-

6724

 
32

ment, was constructed by an agent of the United States Govern-
ment, and if it is declared to be a national instrumentality, and
declared by the national Government to be exempt from taxa-
tion, then under the case of McCulloch v. Maryland, and by rea-
soning and analogy, it is clear the exemption will be sustained.

As to the policy of exempting it, that is another thing. All I
insist upon is a fair rule of taxation. I do not propose to dimin-
ish the existing taxes an iota, but I want to propose a rule which
will make these taxes mathematically precise, in order in the
future to keep the railroads out of politics upon this question,
and to aid in the determination of rates by securing a definite
factor in the calculation of fixed charges.

Mr. HEYBURN. I should like to ask the Senator from Ne-
vada a question.

The VICE-PRESIDENT. Does the Senator from Nevada
yield to the Senator from Idaho?

Mr. NEWLANDS. Certainly.

Mr. HEYBURN. I should like to ask the Senator whether,
in his judgment, if the railroad was the property of the United
States, it could be taxed at all by a State? And I will say, in
connection with that question, that the strongest argument
against Government ownership of railroads is that the States
could not tax the property of the Government of the United
States, and would therefore be deprived of the support that they
naturally should have in the way of taxation.

MERGER.

Mr. NEWLANDS. I know that is urged as a reason. In
reply to the Senator from Georgia, who asked me how we
would, under a national incorporation act, secure the merger of
these State corporations into a national corporation, I will say,
in the first place, that I do not propose in my bill that that shall
be done without the consent of the States. But if the Senator
will look at the legislation of some of the States, particularly
the Southern States, he will find that the States have not been
loath to allow a foreign corporation to enter their borders and
to Construct and operate railways. Take the ten Southern
States south of Pennsylvania and of Ohio.

Almost the whole of the transportation facilities of those
States to-day are under the control of two great systems. One
is the Southern Railway system and the other the Atlantic Coast
system. Each of these systems operates about 10,000 miles.
The Southern Railway Company is incorporated under the laws
of Virginia. The Atlantic Coast Railroad Company was origi-
nally incorporated under the laws of Virginia, I believe, but its
stock has now passed into the hands of the Atlantic Coast Com-
pany, which is incorporated under the laws of Connecticut. So
we find that one of the systems of railway traversing the entire
South is incorporated under the laws of Virginia and the other
practically incorporated under the laws of Connecticut.

How is it that those railroad companies operate in those
States? With the consent of the States, expressed in legisla-
tion. And the Senator will find that in one or more of the
States in the South they have laws now upon the statute books’
which permit merger with any connecting railroad, whether
incorporated under the laws of another State or under the laws
of the United States. I imagine they will have no more objec-

6724 .
33

tion to merger with a corporation organized under the laws of
the United States than they will have to a merger with a cor-
poration organized under the laws of a State.

Mr. BACON. Mr. President——

Mr. NEWLANDS. Particularly if, as in this case, the law
incorporating the national corporation absolutely disclaims any
intention of interfering with the police power of the State and
provides that it shall only acquire an existing railroad in any
State with the consent of that State.

The VICE-PRESIDENT. Does the Senator from Nevada
yield to the Senator from Georgia?

DUAL SOVERBIGNTY.

Mr. NEWLANDS. If the Senator will just let me close this
thought. Here are two sovereigns, one the great national sov-
ereign, exercising sovereignty under the granted powers over the
territory occupied by all the States of the Union, the other sov-
ereign each of the 45 different States. The State has control
over State commerce. The nation has control over interstate
commerce. The same machine must do the business of both.
Now, if the State can create the machine that is to do interstate
commerce the ration can create the machine that is to do State
commerce.

Mr. BACON. Mr. President——

Mr. NEWLANDS. If the Senator will permit me, the States
can not authorize corporations to do interstate commerce without
the approval of the nation, and the nation can not authorize
corporations to do State commerce without the approval of the
States; but I imagine that consent would be forthcoming in
both instances. Now I yield to the Senator from Georgia.

Mr. BACON. The reason why I sought to interrupt the
Senator was because he was passing away from the point on
which I wished to reply to him. I want to say, however, that
I have no disposition to unduly interrupt the Senator, and my
only purpose in the first interruption was to get his views as
to how he proposes practically to accomplish that which he
argues so effectively theoretically.

Mr. NEWLANDS. I am very glad to yield to the Senator.

RAILROAD SYSTEMS IN THE SOUTHERN STATES.

Mr. BACON. The Senator, though, in speaking of the ques-
tion of probably securing the consent of the States mentions the
fact that in the Southern States, using them as an illustration,
most of the railroads are owned by two or three systems, and
that being operated successfully in States making no special
objection to that fact they would equally consent that there
should be systems operated under Federal charter, the systems
now being operated there having as they do charters of other
States.

I wish to make a statement to the Senator, and I do not pro-
pose to pursue the discussion further or to interrupt him in the
regular course of his remarks. There is a vast difference be-
tween the two. The purpose of the Senator, if accomplished by
Federal incorporation, would be entirely different in its opera-
tion from that wltich is now accomplished by railroads operated
as they are under charters from other States.

The purpose of the Senator is to take away from the States
the right to assess and collect taxes, and if his scheme could be
earried out under national incorporation the large systems of rail-

6724——3
34

roads operated under Federal charters would have as their chief
characteristic or feature the fact that their taxes were assessed
and perhaps levied by the Federal Government; if not levied
certainly assessed. In other words, the State would entirely
lose the right of assessing taxes and be remitted under the Sen-
ator’s scheme purely to the work of collection, whereas as it now
exists, while it is true that the railroads are chartered in a
large measure (it is not altogether so in my State by any
means) by States other than those through which they run,
nevertheless in all those cases and in all those States the power
of assessing and levying taxes is as perfectly preserved by the
State as if the road was chartered within that State and oper-
ated solely by an authority or franchise received from it.

As I said, I do not desire to break up the Senator’s speech
with a colloquy, but I really interrupted him for the purpose
of getting his view, if the Senator’s theory is a correct theory,
and if Congress could be gotten to consent to it and to attempt
to put it in execution, in what way would the Senator seek to
bring under this general control the 230,000 miles of railroad
now being held under charters granted by States and not by
the Federal Government. The Senator has already expressed
his view as to how that was to be done, and I simply repeat
it for the purpose of disclaiming any purpose to enter into
any general discussion with him on the subject.

Mr. NEWLANDS. Mr. President, I am glad to have the Sen-
ator put me any inquiry that he sees fit, and I am only too glad
to answer.

I will state to the Senator that it is not absolutely essential
that a national incorporation act should provide for a scheme
of taxation. I assume that Congress could not, in framing a
national incorporation act, provide a scheme of taxation unless
it presented obvious advantages—advantages which the repre-
sentatives of every State in the Union would see.

ADVANTAGES OF UNIFORM TAXATION.

Now, those advantages are that if we have a fixed tax, mathe-
matically ascertained, it will yield as much and more than the
States now get. It also takes the railroads out of politics as to
taxation, and I regard that as very desirable. Second, it results
in a certain factor for the regulating of commerce, both national
and State, because then taxes can be definitely and mathematic-
ally ascertained as ‘one of the fixed charges of the company,
whereas if they are left in the elastic form to which I have
already alluded, ranging possibly all the way from the present
tax of $56,000,000 in the aggregate to $150,000,000, and involving
possibly in addition a tax of equal amount upon the stockholders
and bondholders all certainty regarding taxes as a factor in the
regulation of railroad rates will be lost.

I would expect, of course, in the consideration of such legis-
lation that the members from the different States represented
in Congress would not permit any provision to go in, regarding
taxation, unless they felt it was a beneficial provision—bene-
ficial to the States themselves and beneficial to the entire na-
tion. It is not essential, however, to national incorporation, in
fact, it is rather extraneous to it. The main purpose to be ac-
complished by national incorporation is the control over capital
and also the control over the return upon capital. :

6724
35

COMITY OF THH STATES TO THE NATION,

The Senator seems to doubt that the States would pursue the
same rule of comity toward a national corporation that they
follow with reference to a corporation organized under the laws
of a sister State. I admit that at the start there may be a feeling
that here is the great national sovereign proposing to domi-
nate the transportation in a particular State. But then I would
expect the people of the State and their representatives to reflect
upon the utter inadequacy of existing State law to shape a
machine that can do this work properly.

Mr. BACON. If the Senator will pardon me there, I will try
not to interrupt him again.

Mr. NEWLANDS. Certainly.

Mr. BACON. I understand that while it would be the Senator’s
plan to secure the voluntary action and consent of the State,
nevertheless he does contend that in the absence of such consent
it would be within the power of the Federal Government with-
out that consent to convert all these charters into Federal
charters.

Mr. NEWLANDS. No, I do not contend that.

Mr. BACON. Does not the Senator recognize that of all the
schemes—and I use the word “scheme” not in any disparaging
sense—of all the plans that have been suggested, short possibly
of the Government ownership of the 230,000 miles of railroad
in this country, there has never been a scheme which would so
eertainly result in the far-reaching and fast-binding of the cen-
tralizing power and authority of the general Government as
would this scheme.

Mr. NEWLANDS. I think not. I do not think it would cen-
tralize power in the National Government any more than the
present system centralizes power in the hands of outside States.
We must locate power somewhere, and under the existing sys-
tem of combination and consolidation the great corporation
which controls the transportation of ten or fifteen States, and
through them the commerce of all the Union passing over those
roads, is centralized in a particular State, like the State of Vir-
ginia, or the State of New Jersey, or the State of New York. I
imagine that if this transportation system is to be under the
control of a foreign corporation, the States affected would rather
have the control in the Federal Government, in whose legisla-
tion every State has a share, than in a State in which the people
of no other State have any share.

in examining the statutes of some of the States I find they
expressly provide for the merger of railroads organized under
the laws of that State with railroads organized under the laws
of other States, or of the United States. So there is the evi-
dence right upon the statute books that there is no objection to
accepting the National Government as the creator of the corpo-
ration that is to merge these great systems. Let me call the
Senator’s attention to the loose legislation that has prevailed in
States upon this matter.

Mr. BACON. If the Senator will pardon me, before he goes
on to that, just as a mere suggestion, I will revert to the fact
that not only the State’s control over the railroads thus merged,
of which he speaks, is in the right of assessing and collecting
taxes, but the right to control in every particular—every matter
of police, every matter of taxation, every matter of the regula-

6724
36

tion of rates is still within the power of the State. Under the
Senator’s system the matter of police and the matter of regula-
tion and the matter of the regulation of rates would be sur-
rendered to the General Government, as well as the matter of
assessing taxes.

Mr. NEWLANDS. Let me read to the Senator the section
which I have prepared upon that subject. It is headed:

STATE POLICE AND STATH RATES.

Src. 18. Nothing herein contained shall be construed as interfering
with the police laws of any State regarding railroads incorporated
under this act and operating in such States, nor shall anything herein
contained be construed as affecting the right and power of each State
to regulate purely State commerce on railroads organized under this act.
But the Interstate Commerce Commission may hold conferences from
time to time with the regulating power of any State with a view to
‘such harmonious adjustment and regulation of State commerce and
interstate commerce as will protect the public against abuses or extor-
tion, and the railroads against inadequate returns upon their invest-
ment, and promote the efficiency of such corporations as common
carriers. ib

Mr. BACON. The Senator must necessarily recognize the
fact that the success of his scheme would involve the permanent
surrender by the States thereafter to control any of those mat-
ters, and while we might pass that statute now, another statute
might be passed to-morrow and the right to regulate the rates
in a State, even as to the matter of rate or any question of
liability for damages of any kind or under a contract of any
kind or any other matter of police, taxation, or the regula-
tion of rates, would be forever gone from the State and there-
after permanently vested solely in the United States.

If the Senator thinks that the States would voluntarily for
all time surrender such rights as those, the Senator is very
much more sanguine than most of us would possibly be under
such circumstances. I think that so far from being ready to
surrender for all time such rights as those it would create
somewhat of a spirit of resistance, if there was an attempt to
force it upon them. The Senator, I understand, of course,
does not contemplate that, but I simply speak of it as a matter
of contrast.

Mr. NEWLANDS. I will state that no surrender whatever
of the rights of any State is involved, in my judgment, in this
proposed act. The States have absolute control over purely
State commerce. The Federal Government has absolute con-
trol over interstate commerce. The same instrumentality is
used for both State commerce and interstate commerce.

Now, the only question is, which sovereignty shall create that
instrument? After the instrument is created nothing will inter-
fere with the powers of the State over State commerce or with
the power of the National Government over interstate commerce.
The Senator might as well insist that if we permit the instru-
ment that is to do the interstate commerce we thereby abso-
lutely surrender to the State all power over interstate commerce.
The Senator will not contend that.

On the contrary, although Congress has permitted the State
to create the instrument of interstete commerce, we are regulat-
ing that instrument by all the statutes which we have upon that
subject. We have regulated the State instrument as to safety
appliances, as to rebates and preferences, and we propose now to
regulate it as to rates, but only in relation to interstate com-

6724
37

merce. So also, if a national corporation were created, that
corporation, so far as interstate commerce is concerned, would
be subject to the laws of each particular State; and in the ab-
sence of any provision exempting the corporation from taxation,
or prescribing the rule for taxation, it would be subject to the
laws of that State with reference to taxation.

Now, the Senator seems to view with apprehension the possi-
bility that hereafter we might seek to change this law, but
recollect this law can only be changed by the Representatives
in this body and in the House of Representatives of the various
States affected. Everyone of them bas a voice here and a voice
in the House of Representatives. and I suggest to the, Senator
whether it is not better, if the instrument is to be create d that is
to conduct both State and interstate commerce to have that in-
strument created by a sovereign in whose action the people of
every State can participate rather than in the sovereignty rep-
resented by a single State like the State of Virginia, or New
York, in which the people of outside States have no representa-
tion or voice whatever.

THE INCORPORATION OF THE SOUTHERN SYSTEMS.

Let us see what this present system fastens upon the entire
nation as a whole and upon States whose transportation is
conducted by corporations organized outside of that State. The
two lines to which I have referred—the Atlantic Coast line and
the Southern Railway line—each control about 10,000 miles of
railways in the South. Each of those lines is composed of many
different roads, organized under State laws, and each one of
those was probably the result of antecedent consolidations, so
that probably each of the present systems represents an aggre-
gate of two or three hundred corporations.

Now, let us look at the law which provided for this. The
Southern Railway Company is the successor of the Richmond
and Danville. The Richmond and Danville road was a small
railrond company operating about 300 miles of railroad in Vir-
ginia. It got into difficulty and went into the hands of a re-
ceiver. It was purchased by certain parties, and they evidently
determined to make it the nucleus of a great national sys-
tem, for that is what the Southern Railway system & to-day.
they applied to the Virginia legislature, and a law was passed
which provided that the purchasers of that road could organize
a corporation by whatever name they chose, and that the pur-
chasers could make the capital stock of that covporation
$250,000,000. There was no limit whatever as to bonds. The
stock, however, was limited to $3850,000,000. The Senator can
look over that law, and be will find that there were no guards
whatever attached against excessive capitalization, it being
quite possible for that corporation to issue shares for a dollar
a share, thcugh the par value is $100; and the act provides
that whatever may be paid for the stock, the stock shall be
thereafter regarded as full-paid stock.

That act gave the most ample powers without any restriction
or restraint or control of any supervising body. I can under-
stand how it was done. The people were anxious to have the
railroad system of the South built up, and they were glad to
have the cooperation of any body of capitalists who would do it.
So this extraordinary charter was given. As I stated, it allows

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this little 300-mile railroad to issue $350,000,000 of stock. It
does not provide that that stock shall be issued only for money
paid or for property at its value, but under those provisions
watered stock to almost any extent can be given out.

As I have stated, stock could be given for a dollar a share,
and yet afterwards it would be regarded as full-paid stock at a
hundred dollars a share. Unlimited power is given with refer-
ence to bonds, and then it gives the power to “ lease, use, oper-
ate, consolidate with” * * * “any railroad or transporta-
tion company now or hereafter incorporated by the laws of the
United States.” y

'The State of Virginia had no objection to consolidating with
any corporation organized under the laws of the United States.
There is the sanction now, so far as Virginia is concerned, to this
very proposition—" or of any of the States thereof, or any one
or more of such railroad or transportation companies.”

There are liberal provisions of this kind which I shall insert
in the Recorp. The power is given to purchase, hold, and own
bonds or stocks of other corporations, and also the power to
purchase and guarantee “the stocks and bonds, or either, of
hotel, lighterage, wharf, elevating, and other such enterprises
convenient in connection therewith or as a part thereof.” The
company may classify its stock as it chooses and give prefer-
ences as it chooses, and then comes the following clause:

Such new corporation may borrow money and issue bonds or other
evidence of indebtedness therefor, and may secure the same from time to
time by mortgage or deed of trust upon any or all of its property and
franchises; and such new corporation, from time to time, may issue
and sell its bonds and its capital stock at such prices and on such
terms as shall be specified in said plan of organization, or as a ma-
jority in amount of the stockholders shall approve at any meeting, and
may receive in payment therefor property, securities, or shares in any
corporation mentioned in this act; and any stock so issued shall be
deemed fully paid and free from any liability.

Now, the Atlantic Coast Line was incorporated under a similar
law. Contrast that law with the State of Texas, where they
will not permit consolidation with any corporation outside of
the State, and where in the State itself consolidation is abso-
lutely controlled by the regulating commission. Contrast it
also with the laws of Texas, which provide that there shall be
no issue of bonds or stocks except for money paid or property
delivered at its actual value, and that there shall be no issue of
either bonds or stocks without the approval of the railroad
commission of that State. Contrast it with the laws of Massa-
chusetts, which equally guard against overcapitalization and
provide that bonds shall only be issued for money actually re-
ceived or for the property delivered at its value and also provide
that there shall be no issue of bonds or stocks without the ap-
proval of the railroad commission.

In both of those States you have absolute guards against over-
capitalization; but these great combinations in seeking the
power for combination, seek the States, the laxity of whose laws
puts a premium upon consolidation and combination. They
turn to Status such as New Jersey and New York and Penn-
sylvania, whose legislation is almost altogether controlled by the
railroads. :

Mr. BACON. But no single one of the corporate powers
given by either of those States can be exercised beyond the

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limits of the particular State thus granting the franchises,
without the consent of the State in which it is to be exercised.

Mr. NEWLANDS. That is true.

Mr. BACON. But by the legislation which the Senator con-
templates a railroad would have the right to exercise such fran-
chises regardless of the consent of the States.

Mr. NEWLANDS. So far as interstate commerce is con-
cerned.

Mr. BACON. Well, if they are interstate railroads, if the
suggestion of the Senator is a tenable one, they would neces-
sarily be roads which run from one State into another, and
through States into other States, and throughout their whole
length they would be interstate commerce roads.

Mr. NEWLANDS. So far as interstate commerce is con-
cerned, they ought to be free from the control of the States.
They are now free from control of the States.

Mr. BACON. The Senator misunderstands me.. I mean so
far as the exercise of corporate franchises is concerned. As it
now is, no railroad company chartered in one State can exercise
corporate franchises in another State without the consent of
that State; and under the Senator’s scheme, if it is to be oper-
ative, of course it would not be a matter of consent on the part
of the State.

Mr. NEWLANDS. So far as the acquisition of existing lines
is concerned my proposition does not involve acquisition with-
out the consent of the States, and the States may impose any
condition they choose upon that consent, just as they would in
the case of a corporation organized under the law of a sister
State.

There is another section which I have drawn here regarding
the acquisition of interstate railroads. It is as follows:

Sxc.*19. Such corporation may, with the consent of any State, upon
the approval of the Interstate Commerce Commission, acquire the rail-
road of any ‘corporation now organized under the laws of such State,
and may issue for the purchase thereof such amount of bonds and stock
as may be authorized by the Interstate Commerce Commission ; but such
authorization shall only be made after a public hearing, at which the
Attorney-General shall appear, either personally or by one of his assist-
ants, and no issue of bonds or stock therefor shall exceed the value of
such road as ascertained by said Commission.

With the consent of the State under which any railroad corporation {fs
or may be organized, merger between such corporation and a corpora-
tion organized under this act may be accomplished under this act, and
bonds and stock may be issued by any corporation organized under this
act for such purpose, provided such proposed merger is approved by the
Interstate Commerce Commission and the bonds and stock issued in the
accomplishment of such merger are also approved by such Commission.

So the rights of the States are protected just as much as
where a corporation, organized under the laws of a foreign
State, is conducting the transportation of a particular State.
The difficulty about the present system is, as I have already
stated, that these corporations uniformly resort for their char-
ters to the States whose laws are most lax, and the result is
overcapitalization, which is injurious to the entire country.

It may be said that this overcapitalization is not to be consid-
ered in the matter of the regulation of rates; and yet, as a
matter of fact, it should be. These bonds and stocks are put out
upon the country. The railroads make strenuous efforts to
secure an income that will pay an interest upon them. They
finally get a place and a value in the markets of the country;
they fall into the hands of the purchasing public; and there is

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40

not a regulating board in the country that will not consider the
value that has been built up in this way, and justly so, because
society has stood by and allowed these values to accumulate
without taking action to prevent it.

Upon this question of capitalization, I should say that even if
we do not frame a national incorporation act, we should put a
provision in this bill declaring that no corporation engaged in
interstate commerce shall hereafter issue bonds and stocks
without the approval of the Interstate Commerce Commission.

Mr. KEAN. Does the Senator offer that as an amendment to
this bill?

Mr. NEWLANDS. I shall offer it.

Mr. President, I ask permission to incorporate in my remarks
some quotations from the laws of various States regarding the
control of capitalization and also some authorities.

The VICE-PRHSIDENT. Without objection, permission is
granted. ‘

Mr. NEWLANDS. I now wish to call attention to the great
advance that is being made in the value of these securities, and
unless we arrest it by providing for the control of capitalization
by the Interstate Commerce Commission and the control of the
return on their capital, we will find that this advance will in-
crease in the near future. Thus, for instance, in 1896 the lowest
quotation for New York Central was 88; in 1900 it was 125; in
1905 it was 1564. The highest quotation for these years was in
1896, 994; in 1900, 1453; in 1905. 1672.

Mr. GALLINGER. Mv. President——

The VICE-PRESIDENT. Does the Senator from Nevada
yield to the Senator from New Hampshire?

Mr. NEWLANDS. I do.

Mr. GALLINGER. Has the Senator the quotations for the
years 1893 to 1897? ’

Mr. NEWLANDS. I have not.

Mr. GALLINGER. I think they would be illuminating.

Mr. NEWLANDS. I imagine the quotations were then lowe?.

Mr. GALLINGER. Yes; very much lewer.

Mr. NEWLANDS. For Pennsylvania, the lowest quotation in
these three years was in 1896, when it was 993; in 1960, 1242;
in 1905, 1314. The highest quot:tion in these years was in 1896,
1094; in 1900, 149%; in 1905, 1433.

In the case of the Northern Pacific, the lowest quotations in
these three years were as follows: In 1896, 124; in 1900, 5%;
in 1905, 165; and for the same years the highest quotations
were: In 1896, 148; in 1900, 864; in 1905, 2163.

In the case of the Great Northern. the lowest quotations were:
In 1896, 1083; in 1900, 1443; in 1905, 236. The highest quota-
tions were: In 1896, 122; in 1900, 1914; in 1905, 335.

Let me say here, that the consolidation of the Great North-
ern and the Northern Pacific was broken up by the Northern
Securities decision. There can be no doubt that most-of
these mergers which have been accomplished are subject to
the same legal objections to which that merger was subject;
but they have not been tested in the courts. It would be a
great misfortune to the country if these consolidations were
broken up; I believe that consolidation is beneficial to the
country. The burden imposed by consolidations arises from the
fact that they are uncontrolled—uncontrolled as to capitaliza-

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tion and uncontrolled as to return on capital. From present
indications, from the returns of these various companies, I have
not the slightest doubt that after this rate legislation is over,
unless national machinery for consolidation with proper guards
is provided, these railroads will combine with a capitalization
greater than ever has been known in the history of the country.

I shall print in my remarks the pertinent sections of a bill
for national incorporation, which I am preparing, and shall
close my remarks to-morrow.

The sections referred to are as follows:

Suggestions as to leading provisions of a national incorporation act for
railroads.

FORMATION.

Szcrion 1. Any number of persons not less than fifteen may, under
this act, form a corporation for the purpose of constructing, maintain-
ing, and operating an interstate railroad, or for the purpose of ac-
quiring and operating a railroad or railroads, already constructed and
engaged in interstate commerce.

* 4 ca * * * * *

CAPITALIZATION,

Suc. 8. Such corporation shall issue only such amount of bonds and
stock as may be necessary for the construction, purchase, and equip-
ment of the railroads constructed or acquired. No bonds or stock shall
be issued except for money paid or for property acquired at its actual
value. The amount of such issue of stock or bonds shall in every case
require the approval of the Interstate Commerce Commission, which
shall grant public hearing regarding the same, to which all parties in-
terested shall by public notice given by the Commission be invited.
The United States shall be represented at such hearing by the Attorney-
General or one of his assistants. The Commission shall certify in
writing to the incorporators or to the corporation its determination,
and shall record the same in its records, and all bonds and stock not is-
sued in compliance with such determination shall be void as against
such corporation.

% oe * oe * Ca ae

. REPORTS,

Suc. 14. All corporations formed under this act shall make to the In-
terstate Commerce Commission such reports as are now by law required
to be made to said Commission, and such further reports as the rules
of said Commission shall from time to time require.

* * * * * * Eg

TAXATION,

Sec. 17. National corporations duly organized under this act are
hereby declared to be military and post roads and instrumentalities for
the regulation of interstate commerce. The franchises, stocks, bonds,
fixed evidences of indebtedness, operations, and traffic, and the corpora-
tion itself, shall be exempt from all taxation by any State or Territory
other than as provided in this act, but the property of such corporation,
including its right of way, track, real estate, stations, office buildings,
and equipment, shall be subject to assessment and at such average per-
centage of their actual value as shall be customary with reference to
other property in such State or Territory. In lieu of such tax any
State or Territory may impose a tax not exceeding 4 per cent on such
proportion of the gross receipts of such corporation as the number of
miles of track in such State or Territory bear to the total miles of track
operated by such corporation. In estimating the miles of track, each
mile of second track shall be regarded as equal to one-half: mile of track,
and each mile of third or fourth track or siding shall be estimated as
equal to one-third of each mile of main track. For the purpose of com-
putation by each State the Interstate Commerce Commission shall cer-
tify to the taxing authorities of each State or Territory the gross re-
eeipts for the preceding year of the total mileage, as aforesaid, and the
proportion of such total mileage operated in such State or Territory.

STATD POLICD AND STATH RATES,

Suc. 18. Nothing herein contained shall be construed as interfering
with the police laws of any Stute regarding railroads incorporated
under this act and operating in such States, nor shall anything herein
contained be construed as affecting the right and power of each State
to regulate purely State commerce on railroads organized under this

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act. But the Interstate Commerce Commission may hold conferences
from time to time with the regulating power of any State with a view
to such harmonious adjustment and regulation of State commerce and
interstate commerce as will protect the public against abuses or ex-
tortion, and the railroads against inadequate returns upon their invest-
ao and promote the efficiency of such corporations as common Car-
riers.
ACQUISITION OF STATD RAILROADS.

Suc. 19. Such corporation may, with the consent of any State, upon
the approval of the Interstate_Commerce’ Commission, acquire the rail-
road of any corporation now organized under the laws of such State,
and may issue for the purchase thereof such amount of bonds and
stock as may be authorized by the Interstate Commerce Commission ;
put such authorization shall only be made after a public hearing, at
which the Attorney-General shall appear, either personally or by one of
his assistants, and no issue of bonds or stock therefor shall exceed the
value of such road as ascertained by said Commission.

With the consent of the State under which any railroad corporation
is or may be organized, merger between such corporation and a cor-
poration organized under this act may be accomplished under this act,
and bonds and stock may be issued by any corporation organized under
this act for such purpose, provided such proposed merger is approved
by the Interstate Commerce Commission and the bonds and stocks
issued in the accomplishment of such merger are also approved by such
Commission.

ACCIDENT AND INSURANCH FUND.

Sec. 20. It shall be a condition of the grant and continuance of any
franchise to do business under this act that the corporation holding
such franchise shall set aside annually 1 per cent of the gross receipts
of said corporation, to be held as a fund in the Treasury of the United
States for the payment of pensions to the employees of such corpora-
tion who shall have been disqualified for active service either by in-
jury in the service or by age. The amount and time of payments, the
investment of the fund, the disbursing of the same, and the entire
management thereof, shall be under rules and regulations to be made
and from time to time altered by the Interstate Commerce Commission.

BOARD OF CONCILIATION.

Suc. 21. The Interstate Commerce Commission is hereby empowered
and directed to act as a board of conciliation between corporations or-
ganized under this act and their employees as to any dispute arising
between said corporation and its employees in the matter of compensa-
tion, hours and conditions of labor, the protection of life and limb of
said employees, and such power shall be exercised by such Commission
in accordance with rules and regulations to be made, and from time to
time altered, by said Commission.

ei PENALTIES.

Suc. 22. Any officer, director, or agent of such corporation who shall
be engaged in promoting or opposing any legislation or governmental
action, either national or State, shall from time to time make oath to
the Interstate Commerce Commission to a statement of his expenditures
made in that behalf. No corporation organized under this act shall
make any expenditure whatever for the purpose of aiding or defeating
any political party or candidate for office, and for every such offense
ue corporation shall, on conviction, be subject to a fine of

ollars.

Any officer, director, or agent of such corporation who shall willfully
and knowingly make, assist in making, cause or direct to be made any
false statement, material misrepresentation, or false entry in any book,
report, return, account, or certificate required by the act to be kept,
made, or filed, shall be, upon conviction, subject to a fine of not more
than dollars, or to imprisonment for not more than one year, or
both, and shall furthermore be liable in a civil action for damages
caused to any creditor or stockholder thereby.

Any officer, director, or agent of such corporation who shall willfully
refuse or neglect to perform any duty imposed ED him by this act
for which refusal or neglect a penalty is not therein otherwise ex-
pressly provided, shall be subject, upon conviction, to a fine of not more
tae dollars, or to imprisonment for not more than one year, or

oth,

All fines under this act shall be paid into the accident and insurance
fund aforesaid.

 

 

DIVIDENDS.

Suc. 23. No such corporation shall pay or distribute to its stock-
holders in any form during any one year a dividend or dividends ex-
ceeding in total amount 5 per cent upon the entire capital stock. If

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43

after the payment by such corporation of its operating expenses, main-
tenance, improvements, and betterments, its taxes, its interest on bonded
or other indebtedness, and its contribution to the accident and in-
surance fund, there shall be a surplus over and above the amount nec-
essary to pay such dividend of 5 per cent per annum, the surplus shall
be apportioned as follows: One-half thereof shall be paid into a guar-
anty fund in the Treasury of the United States for future dividends
in case of a slackening of business, such fund to be controlled and
invested by the Interstate Commerce Commission, and one-half thereof
ere be paid into the accident and insurance fund provided for by this
act.

No reduction of rates as to any given railroad shall be made or or-
dered by the Interstate Commerce Commission, or by any other gov-
ernmental agency, which shall make it reasonably probable that such
5 per cent dividends can not be earned upon the total capital stock of
the corporation.

JURISDICTION OF SUITS BY AND AGAINST RAILWAY COMPANIMS,

Sec. 24. All national railway companies incorporated under the laws
of the United States shall, for the purpose of all actions by or against
them, whether at law or in equity, be deemed citizens of the States in
which they are respectively operating, and in such cases United States
circuit and district courts shall not have jurisdiction other than such
as they would have in case such corporations were individual citizens
of such States, respectively. Tbe provisions of this section shall not
be held to affect the jurisdiction of the courts of the United States in
eases in which the United States is a party or cases for winding up
the affairs of any such corporation.

RULES.

Suc. 25. The Interstate Commerce Commission may make rules nec-
essary for the complete enforcement of the provisions of this act, and
from time to time alter, amend, or repeal the same.

AMENDMENT OR REPHAL,

Sc. 26. This act shall be at all times subject to amendment, altera-
tion, or repeal by act of Congress.

Thursday, April 5, 1906.

Mr. NEWLANDS. Mr. President, in my remarks of yester-
day I briefly answered the inquiries made by the Senator from
Idaho [Mr. Hrysurn] and the Senator from Georgia [Mr.
Bacon], both of whom'hid some misapprehension regarding the
purpose of my proposed amendment providing for the national
incorporation of railways.

The Senator from Idaho seemed to be under the impression
that it was proposed to exempt these national corporations
altogether from State taxation. I wish to say that that was not
my purposes. My purpose was simply to provide a method of
taxation which would be uniform throughout all the States in
the Union and would result in a tax which would be mathe-
matically exact, thus relieving the railroads of the necessity
of interfering in politics, as they do in every State in the Union,
upon the subject of taxation, and also making the tax a fixed
and certain factor in the calculation of rates.

MERGER—HOW ACCOMPLISHED.

Then, as to the inquiry of the Senator from Georgia, who
asked how I proposed to have the merging of State corporations
with national corporations accomplished, I have to say that I
propose that merger shall be accomplished in the same way that
the merger of the corporations organized in different States is
now accomplished. :

As it is, Mr. President, we find that the 2,000 or more rail-
roads of this country are already practically merged into ten or
twelve systems, and that each one of these systems is incor-
porated under the laws of a particular State. Now, how is it

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44

that this merger has already been accomplished? It has been
accomplished under laws passed in the different States per-
mitting such merger. These laws vary in their character and
in their expression, but they all have a common purpose,
which is to permit the consolidation of existing lines, the con-
solidation of State roads with roads organized under the laws
of other States. Some of these laws simply permit consolida-
tion with corporations created under State laws. Others also
permit consolidation with corporations created under United
States laws.

As to the bonds, the process is easy. Each railway system
would organize a national corporation under the national law
and would transfer all its property to such corporation subject
to the existing bonded indebtedness. As the existing bonds
matured they would be retired by an issue of the bonds of the
new company, and thus in the end the bonds of the new national
corporation would be substituted for the bonds of the constitu-
ent State corporations. As to the stock, the process would be
no more difficult than that frequently gone through with in
existing consolidations of State corporations. The stock of the
old companies would be surrendered and the stock of the new
company substituted. Of course, the stock issue of the new com-
pany must be subject to the appreval of some tribunal, such as
the Interstate Commerce Commission, in order to avoid over-
enpitalization. But I take it that a fair method of valuation of
the stock of the existing ro2d could be secured. Individually I
should favor a very liberal adjustment. I should recognize the
market value of existing stocks, whether watered or not. The
watering of stock in the past has had many causes, among them
the difficulty of promoting such enterprises without giving in-
vestors some speculative chance. The railroads have been
oblised to work out their own salvation, unaided by wise laws,
and-while possibly some of these exaggerated stock issues have
been the creation simply of stock speculators many of them have
been necessitated by financial exigencies. At all events. the
stoeks are now in the hands of the investing public and have
largely gone out of the hands of those who originally issued
them. If we can only guard the steck and bond issues of the
future and prevent overcapitalization—all of which is provided
for by my proposition—we can easily afford to validate much
of the overenpitalization of the past.

The amount of stock which shuld be issued in new national
corporations to the stockholders of the old constituent coin-
prnies could be determined by the Interstate Commerce Com-
mission.

The merger is accomplished by various methods. The stock
is often interchanged. The company which desires to accom-
plish the merger of a railway in another State provides for the
issue of stock, which is issued to the stockholders of the
merged railroad in exchange for their existing stock,

Merger can be accomplished through a national corporation
as well as through a foreign State corporation. The method
is perfectly simple. It is a method which has been worked
out in years of financiering. If the railroads wish to come under
this national system, there will be no ditheulty about their se-
curing the consent of the States in which they at present oper-
ate, and there will be no difliculty about their financing the
operation.

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45

The advantage of a national incorporation act is that instead
of allowing the capitalization to be, as at present, unrestricted,
subject only to the judgment or caprice of those financially
interested, the Government of the United States, through its
Interstate Commerce Commission, will sit in judgment upon
the capitalization and determine it justly and fairly.

The Senator from Georgia seems to assume that the States
will be unwilling to give their consent. Do they not at pres-
ent give their consent to unrestrained and unrestricted con-
solidation? Have not the States in the South, ten or twelve
in number, permitted the merger of their two or three or four
or five hundred railroads, as they existed originally, into two
great corporations, each of them foreign, one organized under
the laws of Virginia and the other organized under the laws of
Connecticut? Has there been any difficulty there in obtaining
consent? If you go to the statutes of these States, you will
find consent expressly given; and in all of the laws of Virginia
you will find consent given not only to merger with corporations
organized under the laws of the State, but consent given to
merger with corporations organized under the laws of the
United States.

Now, are the people of the United States in earnest in de-
manding that capitalization shall be restricted? Does the
Sehator from Georgia doubt that? Does he doubt that the
people of the United States insist that there should be some
restriction of the capitalization of these great systems, or does
he think that the people are content to allow these great pro-
moters to juggle with the matter, unrestrained and uncon-
trolled?

I take it the people of the United States are in earnest
upon this question; I take it that the people of the Southern
States are in earnest upon this question; and if a method is
pointed out through national incorporation by which capitaliza-
tion can be restrained (and under the existing system of State
corporations overcapitalization is not restrained) I submit that
as a choice between two foreign corporations, one the corpora-
tion organized under the laws of a sister State in whose legis-
lation they have no share, and the cther organized under the
laws of the United States in whose legislation they all share,
they will seek the shelter of the latter.

TAXATION BY STATES.

The Senator also objects upon the ground that this system
involves the surrender of the power of taxation by the States.
Mr. President, it is not essential to this plan of national incor-
poration that we should include in it a scheme of taxation of
railroads. It is not at all essential. It is desirable, but it
may be left out if it is the judgment of the Senate and the
House that it should be.

I point out its desirability simply because of the great powers
of discretion now given to local assessing and taxing bodies,
powers of discretion which involve the assessment of these
properties at from $10,000 a mile—the mere cost of their rails
and the right of way—up to $75,000 and $100,000 a mite, in-
cluding their franchises and valuations based upon the market
value of their stock and bonds.

The scheme of taxation also involves the possibility of double
taxation, for the bonds and stocks in the hands of individual

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46

holders may also under existing conditions be assessed and
taxed.

It is this very uncertainty that keeps these railroads in
politics. They are obliged to be in politics, because they have
a property value of $10,000,000,000 subject to the discretion of
these various taxing bodies, subject to the passion and the
caprice of different localities, and subject to the legislation of
reformers and cranks and blackmailers. Can we expect them
under such conditions to keep out of politics? I want to keep
them out of politics by providing a fair and uniform system of
taxation that will be absolutely certain in its mathematical
calculation, that will leave nothing to the discretion of the
taxing officers.

When we do that we accomplish two purposes. We keep the
railroads out of politics on the subject of taxation, and we also
secure an additional factor of certainty in the determination of
rates, which involves the ascertainment of the gross receipts,
the operating expenses, and the taxes, and a fair return upon
capital. The taxes, therefore, are a factor in the determination.
We now have varying taxes, which may be this year one-third
of what they will be next year, as in the case of Michigan, for
recently by a new system of taxation the taxes of the railroads
in that State have been trebled in amount. So all over the
United States we may have this varying taxation, which tends
to uncertainty in the determination of rates.

Mr. President, I have already stated that it is not necessary
to put in this bill a scheme of taxation, for the main purpose of
national incorporation would be to control capitalization and
interest return as factors in rate fixing, but it is desirable;
and I believe on an appeal to the common sense of the American
people upon this proposition Congress can declare that these
railroads, incorporated under a national incorporation act are
national instrumentalities in the exercise of the great national
powers of the common defense, of the establishment of post-
offices and post-roads, and of the regulation of interstate com-
merce, and when it declares them to be instrumentalities of the
National Government it can, if it chooses, absolutely exempt
them from taxation. I do not propose it shall do that, but if
it can do the greater thing it can do the less. It can then pre-
scribe the method of taxation and the rule of taxation by the
various States.

Under the method which I suggest, a tax of a certain per-
centage upon the gross receipts of national railroads, to be
levied by the States according to mileage, we have a tax that
may be mathematically fixed, that will be just to the railroads,
that will be just to the States, and will retain for them the
revenues which they now have and possibly secure them greater
revenues than they now have, and at the same time secure a cer-
tain factor in the regulation of rates which will be of incalcu-
lable benefit both to the State boards and to the national board.

RATH MAKING A GUBSS.

At present rate fixing is a guess. Ask any member of the
Interstate Commerce Commission that question and he will say
it is a guess. It is true that the Supreme Court has endeavored
to reduce it to something of a science by saying that the Com-
mission must have regard to value, to cost of construction, to
the original cost, to the market value of the stocks and bonds,

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47

and to a fair return upon the valuation after considering all
these factors. But these factors should be as certain as pos-
sible.

We must have a valuation. First, I prefer to see a valuation
represented in the stocks and bonds fairly and not in an exag-
gerated form, and so I urge national incorporation as a means
to that end.

But at all events it seems to me that the Congress of the
United States in parting with its legislative discretion on this
subject and turning over the regulation of rates to the Inter-
state Commerce Commission is bound to fix a rule by which
that Commission shall proceed; it is bound to provide for valu-
ation, and it is bound to provide for a fixed return in the shape
of interest upon that valuation. Then it will leave to the
Commission only the mathematical process of working out
the calculation and distributing the burdens of transportation
within the rule established by Congress upon all the various
industries and commerce of the country.

Mr. HEYBURN. I should like to ask the Senator a question.

The VICH-PRESIDENT. Does the Senator from Nevada
yield to the Senator from Idaho?

Mr. NEWLANDS. Certainly.

Mr. HEYBURN. Do I understand the Senator to say that
we are bound to fix a rate of return upon the valuation in fixing
rates?

Mr. NEWLANDS. Yes; we ought as a matter of duty to do
so. What I meant to say was that we are now turning over to
the Interstate Commerce Commission the power to fix just and
reasonable rates; that that is all the power that Congress has.
It could not give to the Commission the power to fix unjust and
unreasonable rates. Under the limitations of the Constitution
all that Congress can do is to fix just and reasonable rates, and
when we turn over that power to the Commission we turn over
all the power we have.

Mr. HEYBURN. Right there I should like to ask the Senator
a question.

Mr. NEWLANDS. If the Senator will permit me further, I
think in order to fix the constitutionality of this legislation
beyond a doubt we ought in this very act to fix the rule, the
standard, by which this Commission should act.

Mr. HEYBURN. The measure?

Mr. NEWLANDS. The measure.

Mr. HEYBURN. The measure of what constitutes a just and
fair return?

Mr. NEWLANDS. Yes. .

Mr. HEYBURN. Would the Senator think we could go so far
as to say it should not be more than a certain per cent upon
the value?

Mr. NEWLANDS. I do. Not more and not less than a cer-
tain per cent.

Mr. HEYBURN. Then I will renew the question I submitted
the other day. Would that not be for the Government to guar-
antee a given income upon the investment of any transportation
company?

Mr. NEWLANDS. Not at all.

Mr. HEYBURN. If we say that they shall be entitled to earn
6 per cent, does that not give them the right to charge such tolls
as will result in producing 6 per cent on their investment?

6724
48

Mr. NEWLANDS. Of course it does and it ought, if that is
the return fixed by Congress as a reasonable return.

Mr. HEYBURN. Would it not result, then, in this, that the
Government, by legislation as directly as the Government can
act, guarantees a given fixed rate of income upon the investment
represented by the stock and bonds of every transportation com-
pany in the land? Does it not amount to that?

Mr. NEWLANDS. Not a legal guaranty, Mr. President. It
simply involves nonreduction by the Commission of the rates of
a corporation as long as they produce only the return fixed by
law.

Mr. HEYBURN. If we say that a reasonable rate shall be
fixed and that 6 per cent shall constitute a reasonable rate of re-
turn to the company, why is not that true? And if it is true, do
we want to do that?

Mr. NEWLANDS. I will say, in reply to that, that the fixing
of a limit or percentage which these railroads shall receive upon
a valuation fairly ascertained is not a guaranty of that per-
centage, and it never has been so regarded in the legislation of
this country.

Mr. HEYBURN. Is that an authorization? I should like to
substitute the word “authorization” to the company to fix its
tolls so that they would insure a return of that percentage.

Mr. FULTON. Mr. President——

The VICE-PRESIDENT. Does the Senator from Nevada
yield to the Senator from Oregon?

Mr. NEWLANDS. Certainly.

Mr. FULTON. I should like to ask the Senator from Idaho
[Mr. Hrysurn], a question, with the permission of the Senator
from Nevada [Mr. NEwLANps].

Mr. NEWLANDS. Certainly.

Mr. FULTON. Suppose Congress should enact a law provid-
ing that no corporation created pursuant to an act of Congress,
incorporated by virtue of a national incorporation act or law
of Congress, should be permitted to realize over 4 or 5 or 6 per
ceat,, would that be a guaranty that they should realize that
amount?

Mr. HEYBURN. Not unless it was coupled with the other
suggestion that I understood the Senator from Nevada [Mr.
New.Lanps] to make, that we were authorized to say what
should constitute a fair and reasonable return, and that having
determined that the corporation was entitled to earn it, of
course it naturally follows that it would be entitled to adjust
its tariff rates in such a way as to produce a result of that
kind, taking the two propositions together.

Mr. NEWLANDS. In reference to that I would say, of
course a corporation has a right to adjust its rates so as to
produce the return fixed by Congress, and the Interstate Com-
merce Commission, in exercising its supervisory power over
rates, would be compelled to have in view the return fixed by
Congress; and it is only fair that the corporation should have
that return, if it is possible for the corporation to get it out of
its business.

Mr. HEYBURN. If I do not annoy the Senator by an m-
terruption, I should like to inquire if there is any other depart-
ment of the business world where the Government undertakes
to insure to the investor any return whatever? Why not as

6724
49

well the manufacturer demand the same rights as the trans-
portation company? What difference is there in the relation
which they bear to the economic system of our Government?

. Mr. NEWLANDS. The shortest answer to that is that the
Government does not insure. The Senator might as well insist
when we pass usury laws in the States of the Union providing
that the lawful rate of interest shall not exceed, say, 6 per cent,
that we guarantee every investor that he will receive 6 per cent
upon his money. This limitation of return is no new thing in
legislation. The United States Government has done it in pre-
vious legislation. When Congress incorporated the Union Pa-
cific Railroad or the Texas Pacific—I forget which—it provided
that the rates should not yield a return of more than 10 per
cent upon the investment.

Ten per cent was then the going rate of interest, just as 4 or
5 per cent is the going rate of interest now. The Government
gave that corporation the power to fix rates that would yield
it 10 per cent, and provided that the regulating power of Con-
gress should be only applied in case the return exceeded 10
per cent. That is a case in the history of our legislation where
the return was absolutely fixed by the act of Congress.

In the State of Massachusetts I understand the returns to
all the electric railroad companies are fixed by law. No cor-
poration of that character there can declare any dividend of
over 6 per cent. All profits over that amount are divided, one
half going to the State and the other half going to the corpo-
ration.

The result is that none of these companies ever return more
than 6 per cent. They keep down their rates. They expend
their income in new investments, in extensions of their lines,
and in the betterment of their roads.

I repeat, this is not at all a new thing in legislation. I call
the attention of Senators to one thing, which is that the Su-
preme Court has said that fixing rates is not to be a matter
of guesswork; that the railroads are entitled to a fair return
upon a fair valuation. If that is so, it seems to me that it is
the duty of Congress to provide for the valuation. It is an
essential. The railway commissioners of all the States have
been in session recently in Washington, and you will find in
the morning’s paper that they have adopted a resolution call-
ing upon Congress to provide for the valuation of railroads,
their appurtenances, and their equipment in every State of the
Union. That is to be done not by the local commissions, but by
the national commission.

These men, experienced in the business of regulating railroads,
know how adrift they are under present conditions; they know
that they can not regard simply the capitalization of these
roads. In some cases such roads are undercapitalized, and in
many other cases they are overcapitalized. Nor can they
always take into consideration the market value of the securi-
ties in determining the value of their property, because these
securities are up and down. I read some quotations yesterday
to show that the stock of certain roads had increased in value
from 300 to 600 per cent in ten years. So this association of
State railway commissioners has asked Congress to provide for
the valuation of these properties, and it seems to me their recom-
mendation is entitled to some consideration here.

67244
50

What valuation would a national corporation act provide for?
It would provide for an initial valuation at the very time when
the company was organized. When the company was organized
and presented its scheme of consolidation to the Interstate Com-
merce Commission, it then would have to state to that Com-
mission the amount of bonds and stocks that were to be issued.
The Commission then would make an inquiry as to the value
of the property, in order to determine upon the amount of its
capitalization, either approving the amount submitted or re-
ducing it if the circumstances warranted it, and that corpora-
tion would then be allowed to issue only the amount of stocks
and bonds so approved. From that time on we should have a
permanent valuation of the property of that corporation. To
that may be added from year to year the amount expended in
improvements and betterments, less the depreciation that takes
place. Thus throughout the years we should have a constant
valuation of these properties accomplished by the aid of the
legislation which I suggest, and the value would be represented
in the capital, in the stocks, and bonds.

This system would make these railroad securities the best
securities in the country, and railway bonds could be negotiated
at 3 per cent under such a system. As to the stocks, instead of
being variable, as they are now, they would be fixed and cer-
tain in value and go into the hands of the investing public, in-
stead of being controlled and manipulated, as they are now, by
the stock speculators,

Mr. HEYBURN. Mr. President——

The VICH-PRESIDENT. Does the Senator from Nevada
yield to the Senator from Idaho?

Mr. NEWLANDS. Certainly.

Mr. HEYBURN. If the Senator will permit me, before leav-
ing that subject I will ask may not this investigation and sift-
ing down of the values of corporate property for the purpose of
arriving at a basis upon which to estimate what would consti-
tute a fair return be as well accomplished without the national
incorporation feature suggested by the Senator?

Mr. NEWLANDS. As I suggested in my remarks yesterday,
if we do not conclude to provide for national incorporation in
this bill we should at least provide for a valuation of these
railroads engaged in interstate commerce.

Mr. HEYBURN. I will say to the Senator that I am in
hearty accord with him in regard to that matter. I have en-
deavored to cover it by a bill already introduced and before the
committee, providing for just as stringent an investigation as
is suggested by the Senator, to be had not through the means
of national incorporation, but allowing the corporations to exist
under the statutes as we find them, and doing it through a
board of interstate-commerce commissioners, and arriving at
this information annually, for the purpose of having a correct
basis of value upon which to estimate what would constitute a
fair return.

I do not believe that the Senator will meet with any oppo-
sition in this body or elsewhere if he confine his amendment to
that proposition by providing a method of determining real
values, because it is essential that we should have a method of
determining them. It is obvious, I think, to every Senator that
before you can determine what would constitute a fair and just
return you must know upon what that return is to be based.

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51

OPPORTUNITY FOR AMENDMENT.

Mr. NEWLANDS. I am very glad to know that the Senator
from Idaho has introduced such a bill; but let me make,a sug-
gestion to the Senator from Idaho, and that is that he put his
bill in the shape of an amendment to this bill, for experience
shows that legislation upon the subject of interstate commerce
is very rare and infrequent. We have now reached a crucial
point in that legislation; we have a bill before us to which
any amendment in the line of reform can be attached, and I
suggest to the Senator that he frame an amendment to this bill,
for otherwise I should very much fear that the valuation which
he calls for will be indefinitely postponed.

Mr. HEYBURN. Mr. President, I would say, in reply to that
suggestion of the Senator, that it has not occurred to me that
we have reached a point in the consideration of this bill where
it is necessary to formulate every suggestion that may occur
to the minds of Senators in the shape of amendments. I think
we are from day to day gathering new light upon the scope and
effect of this legislation. I have in my desk, with a view to
considering the propriety of introducing it as an amendment, a
provision along the line suggested in the remarks that I have
made; but I do not feel that the time is ripe yet or that the
necessity has arisen for introducing it. I am not at all appre-
hensive that a vote will be reached upon this bill with such
unexpected haste as to make it dangerous to defer the consid-
eration of these measures until we are quite sure that our minds
are clear as to exactly what we want to do.

Mr. NEWLANDS. If the Senator will review the history
of legislation upon the subject of interstate commerce, he will
find that Congress has not very often awakened from a condi-
tion of apathy and inertia and indifference upon the sub-
ject. Interstate commerce was given over without let or
hindrance to the railroads of the country until 1887. Then it
was only after a very severe struggle, in which the Senator
from Illinois [Mr. CuLLom] took so prominent a part, that the
people were successful in securing the passage of legislation
that brought them only some degree of regulation and control.

Mr. HEYBURN. Yes; but I will suggest, if I may, that it
took eight years to reach any conclusion on the question of
interstate commerce. :

I remember—that is, if my memory serves me correctly, and I
think it does—hearing a Member of the House of Representa-
tives from Texas at that time, Mr. Reagan, introduce the
original interstate commerce bill in that body. I listened to its
discussion through several winters from the gallery, looking
down upon it, and I followed it through the public press through
all the years while it dragged along; and it took, I believe,
about eight or nine years to arrive at any conclusion whatever
on the subject. Then, after an interval of about that many
more years, Congress attempted to resume the consideration of
it. So, I repeat that I have no fear of such a hasty determina-
tion of the conclusion of this question in this body as to make
it dangerous to postpone the introduction of amendments.

Mr. NEWLANDS. Of course, if the Senator thinks that ten
or twelve years is a mere trifle in the consideration of the ques-
tion of this reform, my appeal to him will have no weight; but,
I repeat, if the Senator will review the history of legislation
upon this subject, he will find that it has been very difficult to

6724
52

wake Congress from indifference and apathy. It was not until
1287, after eight years of agitation, that the meager bill which
was passed upon this subject found a place in the statute book.
Years and years were involved in the discussion of rebates and
preferences, but it was not until the great trunk lines of the
country, headed by the Pennsylvania Railroad Company three
years ago, came to the conclusion that it would be an advisable
thing to have legislation upon the subject that legislation was
enacted.

Since then Congress has rested upon its oars, and Congress will
probably rest for five or ten years more upon its oars after this
bill is enacted. I warn every friend of reform upon this ques-
tion, every man who views with apprehension the growing
power of these railroads, who views with apprehension their
increasing capitalization, who views with apprehension their
activity in politics—I warn them that if they wish legislation
looking to reform upon this subject put upon the statute book
now is the time and this bill is the place.

POLICH POWERS OF THE STATES.

Mr. President, I wish to state that my suggestion involves
no interference with the police powers o. the various States.
This idea of national incorporation fully comprehends the fact
that there are two sovereigns that are dealing with the question
of commerce—the great national sovereign and the lesser State
sovereign, each supreme within the limits of its jurisdiction;
the National Government, absolutely supreme upon every inch
of American soil, regardless of State lines, within the powers
granted to it by the Constitution, and the States, absolutely
supreme in all the powers relating to sovereignty outside of the
powers granted to the nation. Here we have machines called
“railroad corporations” running railroads on American soil
through American States, used for State commerce and for
national commerce—State commerce under the control of the
States, and national commerce under the control of the United
States.

“It is simply a question of judgment between us as to whether
we shall leave such machines to be created by the State sover-
eignty under its powers as to State commerce or whether we
shall permit them to be created by the national sovereignty
under its powers as to interstate commerce. These railroads
have grown from mere loca] systems into great national sys-
tems. I believe it will be a proper thing for the great national
sovereignty to create the charters for these railroads. I do
not propose to force them into a national incorporation. I hope
it will be so just and so fair, and relieve them of so many com-
plications, political and otherwise, that they will gladly seek the
shelter of national incorporation. At the same time, I do not
propose to interfere with the police or taxing powers of the
States, except so far as is necessary to establish a uniform rule
of taxation, which will operate to the advantage of every State
in the Union.

Mr. SPOONER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Nevada
yield to the Senator from Wisconsin?

Mr. NEWLANDS. Certainly.

Mr. SPOONER. If the Senator’s theory of Federal incorpo-
ration were adopted, and every railroad corporation in the
Tinited States engaged in interstate commerce and also in State

6724
53

commerce were a Federal corporation, does the Senator contend
that that would oust the regulatory power of the State?

Mr. NEWLANDS. Not at all.

Mr. SPOONER. Then what would be gained? Although
railroads are State corporations, so far as interstate commerce
is concerned Congress now has the power to control them.
The States can not control them. The States control intrastate
commerce. How would that change the situation essentially?

Mr. NEWLANDS. I will say that when I said ‘“ not at all”
I meant that the bill which I have submitted does not affect
the regulatory power of the States over intrastate commerce.
As to whether a law could be so framed as to affect that, I will
not discuss at present. I have been inclined to think that if
the National Government should create a national corporation
tor interstate commerce it might possibly be regarded that any
attempt by the State to regulate the State commerce carried
upon that road would be regarded as burthening a national
instrumentality and as such involving possibly the power to
destroy it. The courts might possibly uphold a provision in a
national law which forbade the State to regulate State com-
merce on a national railroad.

Mr. SPOONER. The question, Mr. President, which the Sen-
ator makes as to the power to destroy would obviously arise
ae as to the exercise by the State of its power of taxation,

uu

Mr. NEWLANDS. The decisions thus far relate entirely to
taxation.

Mr. SPOONER. Yes; to taxation; but it is undeniable that
to-day Congress has the power to create Federal corporations
for conducting interstate commerce. In the Senator’s idea,
which is a very large and far-reaching one, there is much of
merit; but my question really goes to this, whether. without an
amendment of the Constitution, what the Senator has in mind
could be effectively, in any large degree, carried into operation.
It is utterly impossible, I take it, under the existing Constitu-
tion, for Congress to create a railroad corporation to engage
in interstate commerce, which it may do, which could oust the
States of their regulatory power of purely intrastate commerce.
So that we would still have what the Senator deplores, Fed-
eral regulation of interstate commerce and the State regulation
of purely domestic or State commerce. That would be far
away from what the Senator wants to accomplish.

Then, as to the power of taxation, is the Senator certain at
all that the States in taxing private property—for a railroad
chartered by the Federal Government would be private property
within the boundaries of a State—can be made to enforce a
rule of taxation which is created by Congress? The States
exercise their taxing power under their own constitutions. Is it
competent for Congress, under the existing Constitution, to
take away from a State in any degree the power to tax property
within its own limits, its own boundaries?

The Senator’s plan is one entitled to great respect and con-
sideration. There are large views in support of it, but what has
troubled me about it is the constitutional power to really effi-
ciently carry it into effect by any bill which we can enact.

Mr. NEWLANDS. Mr. President, I will endeavor to answer
both propositions to which the Senator has referred, namely——-

Mr. SPOONER. They are questions, not propositions.

6724

 
54

Mr. NEWLANDS. As to whether we can legislate in such
a way as to deprive the State of its regulatory power over
intrastate commerce, and, second, as to whether we can legis-
late in any way as to affect the State’s power of taxation over
railroad property within the State.

As to the first proposition, I will say that there is no effort
made in the measure which I propose to affect the power
of the State over purely State commerce. That would remain;
but I call the Senator’s attention to the fact that, whilst it is,
of course, inconvenient to have forty-five State commissions act-
ing &at the same time with one national commission upon the
subject of these rates, and whilst it would be very much better.
in my judgment, to have one national commission that would
regulate the rates of both State and interstate commerce, when
that commerce is conducted by the same road, yet as to rates the
ultimate control is in the United States Supreme Court. If the
rates are fixed by a State commission unfairly and unjustly and
in such a way as to deprive the corporation of a fair revenue, the
corporation can take that case into the United States courts and
to the Supreme Court and they will be adjudged invalid. So
that, in the end, the power of the United States is exerted in one
form or the other, either through the legislature or the courts
upon commerce, both State and national.

As to the power of taxation, I admit that it is an open
question, not yet fully determined by the courts; but I submit
that all the decisions indicate clearly that if the United
States incorporates a railroad as a national instrumentality
and declares it exempt from State taxation, the court will
enforce the exemption. There is a case in which the question
of the exemption from State taxation of a railroad organized
under a national charter has been considered, and that is the
case of Railroad Company v. Peniston (18 Wall. 5), where
the Union Pacific Company, a national corporation, operating
under a national charter, but without any exemption asserted
in the statute from its liability to State taxation, claimed that
because it was a national corporation and a national instru-
mentality its property was by implication exempt. There were
eight judges who sat in that case. Three of the judges de-
clared that without any express exemption in the statute the
entire property of the railroad company as a national instru-
mentality was exempt from State’ taxation. As ‘to the other
five judges, four declared that the exemption would apply only
to the powers and operations of the national instrumentality
and not to the property used by the agent in charge of it. But
the three judges who held the other way deelared that the
railroad itself was the instrumentality for carrying out the
power, and that therefore it was exempt. The fifth judge was
between the two. He held that such property could be exempted
by Congress from taxation, but that it was clearly the inten-
tion of the statute not to exempt it. So he held in that case
that the property was subject to taxation. If the statute in that
case had expressly declared that the railroad property should
be exempt from State taxation, the court would have stood
four to four upon that proposition. In the decisions since that
time the Supreme Court has expressly reserved that question
as an open question for the future. ~

Mr. TELLER. Mr. President——

6724
55

The VICH-PRESIDENT. Does the Senator from Nevada
yield to the Senator from Colorado?

Mr. NEWLANDS. Certainly. a

Mr. TELLER. I would ask the Senator if he thinks there is
no distinction between that case and a case where the Govern-
ment chartered a road running through a State or attempted to
do so? The line to which the Senator has referred, as he must
know, was chartered to run through the Territories of the
United States and not through the States. It commenced in a
Territory, ended in a Territory, and ran only through Territo-
ries.

Mr. NEWLANDS. That is true, Mr. President. There was
only one of the Pacific railroads, I believe, which ran from a
point in one State to a point in another, and that was the
Texas Pacific Railroad. But the court does not take that into
consideration at all, as the Senator will see.

Mr. SPOONER. The Senator is mistaken about that. The
Northern Pacific is another.

Mr. NEWLANDS. I was not aware of that. I thought it
was entirely constructed through Territories.

Mr. SPOONER. No; not at all. ’

Mr. TELLER. I want to call the attention of the Sen-
ator—

Mr. NEWLANDS. I will read the language——

Mr. TELLER. I want to call the attention of the Senator
to the fact that in the litigation of which he speaks—the Union
Pacific litigation—the parties claimed that in the act the road
was exempted from taxation. It was in the power of Congress
to have exempted that property from taxation, if it saw fit.
Why? Because it was to run through a territory absolutely
under the control of the General Government. While the
power to exempt it in a Territory exists, it might not exist, and
I do not think it does exist, in a State.

Mr. NEWLANDS. The Senator is mistaken in his assump-
tion that the counsel claimed in that case that the statute it-
self exempted the property from taxation. It was admitted on
poth sides that it did not.

Mr. TELLER. No; I did not mean to say it exempted it in
words, but in principle, because it was performing a duty for the
General Government and had a charter from the General Gov-
ernment.

Mr. NEWLANDS. But the question as to its being a Terri-
tory was not considered, for it must be recollected that the Ter-
ritories had given way to States, and they were complaining
then of State taxation. I will read from the opinion of Judge
Bradley, who wrote the dissenting opinion, and who states the
case also for Mr. Justice Field:

The Union Pacific Railroad Company, therefore, being a United
States corporation, created for national objects and purposes, and de-
riving its existence, its powers, its duties, its liabilities, from the
United States alone; being responsible to the United States, now as
formerly, for a whole congeries of duties and observances; being sub-
jected to the forfeiture of its corporate franchises, pores and prop-
erty to the United States and not to any individual State; being
charged with important duties connected with the very functions of the
Government, every consideration adduced in the cases of McCulloch v.
Maryland and Osborn v. The Bank would seem to require that it should
be exempt not only from State taxation, but from State control and in-

terference, except so far as relates to the preservation of the peace and
the performance of its obligations and contracts. In reference to these

6724
56

and to the ordinary police regulations imposed for sanitary purposes
and the preservation of good order, of course, it is amermble to State
and local laws.

As an instrument of national commerce as well as Government opera-
tions, it has been regulated by Congress. Can it be further regulated
by State legislation? Can the State alter its route, its gauge, its con-
nections, its fares, its franchises, or any part of its charter? Can.the
State step in between it and the superior power or sovereignty to
which it is responsible? Such an hypothesis, it seems to me, is in-
admissible and repugnant to the necessary relations arising and ex-
isting in the case. Such an hypothesis would greatly derogate from
and render almost useless and ineffective that hitherto unexecuted
ower of Congress to regulate commerce by land among the several

tates. If it be declared in advance that no agency of such commerce,
which Congress may hereafter establish, can be freed from local im-
positions, taxation, and tolls, the hopes of future free and unrestricted
intercourse between all parts of this great country will be greatly
discouraged and repressed.

Again:

But it is contended that the laying of a tax on the roadbed of the
company is nothing more than laying a tax on ordinary real estate,
which was conceded might be done in the case of the United States
Bank, in reference to its banking house or other lands taken for
claims due in the course of its business. This is a plausible suggestion,
but, in my apprehension, not a sound one. In ascertaining what is
essential in every case, respect must always be had to the subject-
matter. The State of Maryland undertook to tax the circulation of the
United States bank established in that State, etc.

Mr. Justice Bradley goes on to state the case with reference
to the United States bank, and then continues:

But the primary object of a railroad company is commerce and
transportation. In its case a railroad track is just as essential to its
operations as the use of a currency or the issue or purchase of bills of
excbange is to the operations of a bank. To tax the road is to tax the
very instrumentality which Congress desired to establish, and to operate
which it created the corporation.

Such is the opinion of three of the eight justices who sat in
that case.

The opinion of four of the justices was delivered by Mr. Jus-
tice Strong, who, after referring to the object and purpose of
the legislation creating the Union Pacific Railroad, said (p. 82) :

Admitting, then, fully, as we do, that the company is an agent of the
General Government, designed to be employed and actually employed
in the legitimate service of the Government, both military and postal,
oe ecessarily follow that its property is exempt from State taxa-

100 ¢

Emphasizing the difference between the operations of an agent
and the property thereof, Justice Strong said (p. 33) :

It may therefore be considered as settled that no constitutional im-
plications prohibit a State tax upon the property of an agent of the
Government merely because it ig the property of such an agent.

Then, after consideration of the various cases bearing upon
the general question, Justice Strong summed up as follows
(pp. 86-37) :

It is, therefore, manifest that exemption of Federal agencies from
State taxation is dependent not upon the nature of the agents, or upon
the mode of their constitution, or upon the fact that they are agents,
but upon the effect of the tax; that is, upon the question whether the
tax does in truth deprive them of power to serve the Government as
they were intended to serve it, or does hinder the efficient exercise of
their power. A tax upon their property has no such necessary effect. It
leaves them free to discharge the duties they have undertaken to per-
form. A tax upon their operations is a direct obstruction to the exer-
cise of Federal powers.

Hight justices heard this case, and the opinion of the court
upholding the validity of the tax was concurred in by four of

6724
57

oe A fifth, Judge Swayne, concurred in the judgment, but
said:

I see no reason to doubt that it was the intention of Congress not to
give the exemption claimed. ‘The exercise of the power may be waived,
but I hold that the road is a national instrumentality of such a char-
acter that Congress may interpose and protect it from State taxation
whenever that body shall deem it proper to do so.

So that Judge Swayne would have decided against the major-
ity of the court had there been exempting legislation. Two
other justices flatly dissented, giving an opinion to the effect
that such State taxation was invalid, even in the silence of
Congress. And the eighth justice merely remarked: “I dissent
from the opinion of the court.”

All that can be claimed from this decision as to the power of
Congress to exempt a corporation from taxation by affirmative
legislation is that the court was evenly divided, and even this
can not be fairly claimed, for the case of exempting legislation
was not before the court, and the opinion of the four justices
who upheld the tax does not contain a word which denies the
power of Congress to exempt the property which it exp¥essly
declares to be its chosen instrumentality.

So out of eight justices four expressly declared that Congress
could exempt the property of a national instrumentality in the
hands of a national agent from State taxation, and the question
therefore is an open one to be determined in the future.

Mr. TELLER. In that case the court did not hold what the
Senator says it did. It simply held that in that particular case,
where the company had been chartered by the general authority
of the Government in a Territory, it was within the power of
Congress. That is all it did hold. I am very familiar with that
case.

Mr. NEWLANDS. Of course the decision was with reference
to that particular case.

Mr. TELLER. I do not want to discuss it with the Senator,
but I will say to him that the court was dealing with the par-
ticular case of the railroad which was brought before them,
and they took that charter and were simply saying what Con-
gress might have done, but what Congress did not do. That
ease is pretty well understood, and the Senator can find in it
no support for his contention. Of course, if the Senator de-
pends upon the law of the minority, he can find a good deal of
law that is not recognized as the law. A man may sometimes
think it is pretty good sense, but the law is what the majority
holds.

Mr. NEWLANDS. Undoubtedly the law is what the majority
holds, namely, that where a statute does not exempt property
employed by a national corporation in the exercise of its pow-
ers, that property is not impliedly exempt from State taxation.
But four of the judges expressly held that where the statute
does exempt, the property would be exempt from State taxation.

Mr. TELLER. In that particular case.

Mr. NEWLANDS. And hence I submit I am justified in the
statement that the question is an open one. I think the logic
and the reasoning are entirely with the four judges who de-
clared that the National Government, creating a corporate
agent for the purpose of carrying out a national power, stamp-
ing the property of that agent as an instrumentality for the
exercise of that power, can protect it from destruction by an-

6724
58

other sovereignty upon whose soil it has a right to operate.
There can be no question of the power of a national corporation
to enter any State without the consent of that State, and to
build a railroad and to exercise the power of eminent domain
and to take part in interstate commerce. The National Govern-
ment itself can do it, and if the National Government can con-
struct a railroad, would it be held for a moment that that rail-
road would be subject to State taxation?

The National Government, under the power to establish post-
offices and post-roads, builds post-offices in the States. Do we
have to ask the State to exempt them from taxation? No.
Years ago it was thought necessary to obtain a special State
statute exempting such buildings from State taxation. Now
it is the universally recognized doctrine that the public build-
ings put up by the National Government in a State in the
exercise of its governmental functions can not be taxed.

Mr. SPOONER. Will the Senator allow me to ask him a
question?

Mr. NEWLANDS. Certainly.

Mr. SPOONER. Aside from the question of law, aside from
the question whether Congress has power to exempt such prop-
erty in the States, does the Senator think the States would
ever for a moment submit that railroad property within their
borders should not be subject in any degree to local taxation?

Mr. NEWLANDS. No; I do not think they would. It is im-
possible to get through such a bill, and I would not ask to have
it passed. All that I wish to accomplish is to have a uniform
rule of taxation that will make the taxes of railroads a cer-
tainty, so that they will keep out of politics upon this subject,
and so that we will have a definite factor in the determination of
rates.

Mr. SPOONER. Do not the railroads get into politics more on
the question of regulating rates than on the question of taxa-
tion?

Mr. NEWLANDS. No; I think they are in politics upon
poth; and they have to be.

Mr. SPOONER. The Senator would leave them in politics as
to the one?

Mr. NEWLANDS. Because I can not help it. But still as
to that the Senator must recollect that they have the protection
of the national courts, which are bound to see to it that no
State regulation deprives the company of a fair return upon its
property. The courts have modified very much the doctrine
asserted in the case of Munn v. Illinois, where it was declared
that the power to regulate was a legislative power; that it was
no objection to the power to say that it would lead to legisla-
tive abuse; that the only remedy for legislative abuse was a
resort to the polls. That was a poor remedy given to the cor-
porations by that decision, for we know how ill any corpora-
tion would fare at the polls in seeking a redress of injuries.
But we do know that since that time that doctrine has been
seriously modified, and the courts have now taken the property
of these corporations within their protection and have given
them ample protection. They do not simply protect them
against confiscation, but they protect them in a fair and reason-
able return upon their property and in a fair and just compen-
sation for the services which they perform.

6724
59

Mr. President, I have, at the risk of being tedious, gone quite
fully into the principles which should, in my judgment, govern
the regulation of rates. I believe that it is our duty to provide
for a valuation of railroads engaged in interstate commerce and
to fix the returns which the corporations are to receive on such
valuation. If these two factors are established the whole sys-
tem will tend automatically toward a reduction in rates as the
business of the railroads increases.

AUTOMATIC ADJUSTMENT.

A system of national railway corporations strictly controlled
as to capitalization, limited as to their returns to a certain per-
centage, with taxes mathematically certain, with a proper allow-
ance for an insurance and pension fund, with proper provisions
for conciliation of disputes between employees and the rail-
roads, would result in an automatic adjustment that would do
away gradually with excessive rates and all the abuses arising
from preferences and discriminations as to individuals or locali-
ties. The tendency would be to equality and reasonableness
of service. If we enter upon a system of proper capitalization
of these roads, involving a fair and fixed return in the shape of
dividends, the Interstate Commerce Commission will hardly
ever have cause to act, and, automatically, the entire adminis-
tration of these roads will tend toward impartiality in place of
partiality, and reasonable rates instead of unreasonable rates.
to the betterment of the roads instead of exhausting the roads
with a view to paying dividends on watered capital.

NATIONAL OWNERSHIP.

The people will look for simplicity in whatever plan of relief
is proposed, and unless.we unify and simplify the control of
transportation in a few thoroughly regulated great national cor-
porations, whose finances and operations can be easily under-
stood, and whose functions will be entirely taken out of politics,
they will drift into national ownership as the easiest solution.

The argument in favor of national ownership is an attractive
one. Outside of the United States three-fifths of the world’s
trackage is in national ownership, and not a single nation that
has entered upon national ownership is inclined to withdraw
from it. Japan, only recently coming out of the stress and
strain of a great war, has passed an act for the purchase of all
private railroads in Japan, at a cost of $250,000,000.

The plan of acquiring national ownership would not be diffi-
eult. It would not involve the entire readjustment of the
present system. It would be easy to authorize the Interstate
Commerce Commission to institute suit and condemn the shares
of stock of all the railroads in the country engaged in interstate
commerce, leaving the bonds outstanding as a lien upon the
property. Thus the interests of.the stockholders would be
purchased by the nation and the Interstate Commerce Commis-
sion could step into the position of director of the various cor-
porations, with their present organization of officials and em-
ployees, and could gradually work out a method of national
administration.

The present gross revenue of all the railroads would be
amply sufficient to pay all the fixed charges of the companies
and the low rate of interest upon the Government bonds issued
for the purchase of stock and produce a surplus which would

6724
60

make ample provision for betterments and extensions, and also
provide a sinking fund which would extinguish the debt be-
fore many years.

Or, should the country determine to take hold simply of the
new construction of the future, leaving the existing railroads
in the hands of their present owners, the Government could
easily build a railroad of 3,000 miles across the continent from
the Atlantic to the Pacific, which would become the spinal col-
umn of a great governmental system.

Government ownership presents no difficulties, either constitu-
tional or practical, and the country will certainly drift to it
unless the existing abuses of uncontrolled monopoly, of over-
capitalization, of accomplished union between the producing
and transportation interests of the country, of political control,
and of unjust preferences and discriminations are done away
with. Even assuming that the government management may
not be economical, the time may come when the people will
regard equality of service as of more importance than economy
of service. But the plan of national incorporation would give
the country the benefits of government ownership with none
of its dangers. It would abolish the evils which have arisen
from unrestricted monopoly, automatically bring about a reduc-
tion in rates, put the railroads out of politics, and retain the
management of the able men whose genius created our present
efficient system of transportation. No complaint can be made
as to this efficiency; no complaint can be made as to consolida-
tion properly controlled in its capitalization. No attempt
should be made to raid the property of railroad investors. No
attempt should be made to destroy or impair the existing values
of their securities. Unity of control, simplicity of organization,
certainty in valuation of railroad property and in return upon
such valuation to the stockholders, certainty in taxes, fair
recognition of the dangerous character of the service of the em-
ployees, proper provision for insurance against accidents and
old age, conciliation of disputes between the carriers and their
employees, are parts of the full and comprehensive legislation
which this subject requires and which would differentiate our
legislation from the incomplete and fragmentary legislation in
which Congress has thus far indulged regarding interstate trans-
portation.

6724

O
Regulation of Railroad Rates.
SPEECH

HON. LEE 8S. OVERMAN,

OF NORTH CAROLINA,
IN THE SENATE OF THE UNITED STATES,
Monday, March 26, 1906.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled ‘‘An act to regulate commerce,” approved Feb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the pow-
ers of the Interstate Commerce Commission—

Mr. OVERMAN said:

Mr. PResipeNT: This great question of rate making, perhaps
one of the greatest which has ever come before the Congress to
solve, is soon to be settled. So far as my vote is concerned
it shall be settled in favor of all the people, and this will include
the railroads, for they, as well as the people, in the end will be
benefited. I shall give my hearty support to the pending bill,
which is known as the ‘‘ Hepburn-Dolltiver bill,” as it came from
the House of Representatives, with some amendments which,
in my judgment, are necessary and which will strengthen it
and render it less open to constitutional objections. This ques-
tion, I admit, Mr. President, is bristling with many serious,
intricate, and important legal propositions; but, so far as I am
concerned, I am willing to pass it up to the Supreme Court and
let that high tribunal settle these questions, if it has not already
done so. I am not one of those who believe or have even the
remotest suspicion that any railroad lawyer had anything what-
ever to do with framing this bill, but I am convinced and have
no doubt in my mind that it was framed by brave, high-minded
men, with the purest and most patriotic motives, and who were
moved only with an eye single to the happiness of the people
and the welfare of the country. The principles of law arising
out of the question have been most ably and exhaustively dis-
cussed by some of the ablest lawyers in this body, and it is a
most remarkable fact and worthy of mention that no two law-
yers seem to agree on all of the legal points involved. But this
is not passing strange when we consider that the Supreme Court
of the United States itself, in many of the cases cited as author-
ity upon these questions, is divided upon some one or more
of the great legal propositions. I believe in the Minnesota case
(184 U. S., p. 418) Justices Bradley, Lamar, and Gray dissent
from the opinion of the court, and Justice Miller in his con-
curring opinion does not ‘hesitate to tell the profession that he
does so with many misgivings.

We are gravely told that we have no power to establish a
standard and delegate to a commission, or some other tribunal,

6654
2

as an administrative body, the authority, when complaint is
made, to fix a just and reasonable rate in accordance with this
standard, and thus carry out the will of Congress. Is it possi-
ble that this can be so, Mr. President? If so, there is coming
soon, and is bound to come, an irrepressible conflict between
the rights of the people and the railroads which will not down
and will not likely be terminated until we shall have a consti-
tutional amendment or, what is worse, the government owner-
ship of all the railroads. Forbid that this day will ever come.
Pass this bill and enforce the law as it is written, and I pre-
dict there will be no need of any drastic legislation, no demand
for government ownership. With us the rights of the people are
sacred, sacred as Holy Writ, and even so are sacred the just
rights of the corporations. All must have the equal protection
of the law. The people of this country believe in fair play.
They do not desire, Mr. President, the services of the railroads
without giving just compensation for the service performed.
Neither do they desire that the courts be denied to any ; but
they will insist that the courts shall be opened at all times to
pass upon the rights of everybody alike, to the humblest and
the greatest, to the rich and the poor, to the shipper and the
great corporations, without sale, denial, or delay.

In a free government almost all other rights would become utterly
worthless if the government possessed an uncontrolled power over the
private fortunes of every citizen. One of the fundamental objects of
liberty and government must be a due administration of justice, and
how vain it would be to speak of such an administration when all
property was subject to the will or caprice of the legislature and the
rulers. (Story on the Constitution.)

The people do not desire in any respect to cripple the rail-
roads, but they do demand that the rates be just and reason-
able. They do demand that the small shipper shall not be dis-
criminated against in favor of the large shipper. They demand
that one community shall not be pulled down and destroyed for
the upbuilding of another. They do demand that no special
privileges in the way of rebates or preferentials shall be granted
to the favored few to the detriment and injury of the many, tu
the-destruction and wiping out of all competition.

We are told there is no demand for this law. The President
in two annual messages has recommended and urged it in the
strongest terms. In his last annual message he says:

The immediate and most pressing need, so far as legislation is con-
cerned, is the enactment into law of some scheme to secure to the
agents of the Government such supervision and regulation of the rates
charged by the railroads of the country engaged in interstate traffic
as shall summarily and effectively prevent the imposition of unjust or
unreasonable rates. It must include putting a complete stop to re-
bates in every shape and form. * * *

The first consideration to be kept in mind is that the power should
be affirmative, and should be given to some administrative body created
by Congress. * * *

In my judgment the most important provision which such law
should contain is that conferring upon some competent administrative
body the power to decide, upon the case being brought before it, whether
a given rate prescribed by a railroad is reasonable and just, and if
it be found to be unreasonable and unjust, then, after full investiga-
tion of the complaint, to prescribe the limit of rate beyond which it shall
not be lawful to go—the maximum reasonable rate, as it is commonly
called—this decision to go into effect within a reasonable time and
to remain from thence onward, subject to review by the courts. * * *

Three times tha.great Democratic party in convention assem-
bled has in its platform declared for it. The House of Repre-
sentatives, fresh from the people. has passed the bill by an

665-4
3

almost unanimous vote. State legislatures, chambers of com-
merce, business organizations, and the press have urged its
passage. Nay, the demand is universal. The whole country is
aroused upon this subject, and aroused as it has seldom been
before. The time has come, Mr. President, when there must
be wise legislation along this line, legislation which shall ac-
complish the result sought for, legislation which is conservative,
yet such legislation as will speak out in the most positive, the
strongest, and most unequivocal terms.

Mr. President, during the eighties, and perhaps as far back
as 1878 to 1889, from one end of the country to the other, there
was great agitation upon the subject of rate regulation. It was
then said and believed that the railroads were charging ex-
cessive and exorbitant rates, that they were discriminating
against localities and giving rebates. A commission of Con-
gress found this as a fact, and in response to this demand many
of the States established railroad commissions, and in 1887 Con-
gress enacted what is known as the “ interstate-commerce
law,” which this bill proposes to amend. In 1883, being a mem-
ber of the State legislature, I introduced a bill for the creation
of a railroad commission for North Carolina. It failed to pass,
but in 1889 a law was enacted in that State creating a commis-
sion which has administered the law in a satisfactory manner
both to the railroads and to the people. It was then claimed,
as it is claimed to-day, that such legislation would bring dis-
aster, would cause the shrinkage of securities; that it would
stop the wheels of progress, retard the building of railroads,
and that dire calamity would follow. Then, too, it was denied
that the legislature could delegate its power to an administra-
tive body or to any other tribunal to fix rates.

Mr. President, none of these predictions came true. Other
States have had the same experience. In many of them the
commissions were enjoined by the courts and much litigation
was had growing out of this legislation. And it was then
finally held by the highest courts in the States, without, perhaps,
a single exception, that in the absence of special constitutional
restraint it was competent for the legislature of the State, in
the exercise of its police power,.to regulate the tolls and
charges of the railroad companies, all quasi public corporations,
and could even regulate the business of individuals who were
carrying on any enterprise affecting the public interest. Many
of these decisions, upon a writ of error, were carried to the
Supreme Court of the United States and affirmed. In the
Granger cases (116 U. S.) and in a long line of cases since
that time it has been so held, until it can no longer be a question
of any doubt that the States have this power. In one of these
cases, Munn v. Illinois (94 U. S., 118), Mr. Chief Justice Waite,
delivering the opinion of the Court, says:

Under these powers (the police power) the Government regulates
the conduct of its citizens one toward another and the manner in which
each shall use his own property, when such regulations become neces-
sary for the public good. In their exercise it has been customary in
England from time immemorial, and in this country from its coloniza-
tion, to regulate ferries, common carriers, inns, hackmen, bakers, ete.,
and in so doing to fix a maximum of charge to be made for services
rendered. accommodations furnished. and articles sold.

In 1887 Congress, in response to this great demand, established
the Interstate Commerce Commission, investing it with certain
powers, and among these powers so granted it was construed

6654
4

py this Commission, presided over by Judge Cooley, one of the
greatest lawyers in this land, that there was in the act the im-
plied power to fix rates, and they proceeded to exercise 1t. For
ten years they acted upon this construction, until it was held in
the Cincinnati case, Commerce Commission v. R. R. (— U. S.,
479), that they had no such power. During those ten years, not-
withstanding the many predictions that dire calamity would fol-
low such legislation, this country prospered as it never had be-
fore. Thousands of miles of railroads have been built, until
now several great trunk lines cross and recross the continent,
binding ocean to ocean with bars of steel, and briuging the peo-
ple of the different sections of the country and communities
widely separated into the closest business relations.

But, Mr. President, while it is conceded that the States un-
doubtedly have this power, it is seriously doubted and most
strenuously contended upon this floor, and it has been most ably
argued, that Congress can not delegate to any other body than
itself the power to fix rates. When I was a young lawyer,
twenty years ago, I brought suit for a client to recover a penalty
denounced by the statute of my State against a railroad for
charging more for a shorter distance over the same line to a
point in another State. I lost the suit, it being held by the court
of last resort that the statute was void as to shipments made out-
side of the State, and that this was a matter wholly within the
power of Congress under the commerce clause of the Constitu-
‘tion. And ever since that time I have bowed to the decisions
‘of the court and had no doubt that Congress had the right to
regulate interstate commerce, to control it fully, even to the
‘extent of appointing a commission to fix rates.

The very purpose for which railroads are incorporated and
operated is to carry on commerce, both domestic and interstate,
to serve the public by the transportation of freight and passen-
gers in and through the States; and while, as I have said,
under the police power of the States, there is an inherent power
‘to regulate commerce, there is no police power in the Federal
Government to regulate commerce between the States. This is
one thing which caused trouble among the colonies, the most
serious trouble, and was one of the first reasons and the moy-
‘ing cause for the adoption of the Constitution. The States
surrendered to the General Government, as it is written in the
Constitution itself, and specifically granted in so many words,
the power to regulate interstate commerce between the States
and foreign nations. In the case of The Wabash Railroad v.
Illinois (118 U. S., p. 557) Justice Miller uses this language:

It can not be too strongly insisted upon that the right of continuous
transportation from one end of the country to the other is essential in
modern times to that freedom of commerce from the restraints which
the States might choose to impose upon it—that the clause was intended
to secure. This clause, giving to Congress the power to regulate com-
merce among the States and with foreign nations, as this court said
‘before, was among the most important of the subjects which prompted
the formation of the Constitution.

In this case the facts were these: The railroad charged for
transporting a carload of goods from Peoria, Ill., to New York
$39, when, on the same day, it charged for shipping a carload of
the same class of freight from Gilman, IIl., to New York the
sum of $65—the carload from Peoria being carried 86 miles
farther in the State of Illinois than the other carload. It was
a suit for a penalty for unjust discrimination, and the court

6654
.

5

says, in reversing the judgment of the State court for the
penalty :

Of the justice and propriety of the principle which lies at the founda-
tion of the Illinois statute it is not the province of this court to speak. |
* * * As restricted to a transportation which begins and ends
within the limits of the State, it may be very just and equitable, and it
is certainly the province of the State legislature to determine that ques-
tion. * * * That this species of regulation is one which must be,
if established at all, of a general and national character and can not
be safely and wisely remitted to local rules and local regulations we
think is clear. * * ™* And if it be a regulation of commerce, as
we have demonstrated it is, and as the’ Illinois case concedes it to be,
it must be of that national character, and the regulation can only ap-
propriately exist by general rules and principles which demand that it

‘should be done by the Congress of the United States under the com-

merce clause of the Constitution.

This general ‘doctrine is established by a long line of cases,
and nothing is more clearly established than that the transporta-
tion by common carriers of freight and passengers between the
States is interstate commerce, which the Congress undoubtedly
has the right to regulate without any limitation, except that no.
man’s property can be taken without due process of law and
without just compensation. ;

It has never been seriously contended that Congress itself could
from a practicable standpoint actually fix rates. It is not only
impracticable but impossible. It can fix the standard that the
rates shall be just and reasonable, and then remit to an admin-
istrative body authority to fix a rate upon that basis. While we
have no direct decision of any court upon this subject predi-
cated upon the same state of facts, this is the common sense of
it; and, reasoning by analogy, it is just what the court has inti-
mated, if it has not definitely decided. No court, in my opinion,
will decide otherwise. In Field v. Clark (143 U. S., p. 649),
while not directly in point as to the facts, the following language
used by the court is in point and there can be nothing plainer.
The language is taken from Lock’s appeal (72 Pa. State, 491),
and is quoted by the Supreme Court, by Justice Harlan, with
approval:

The legislature can not delegate its power to make a law, but it can
make a law and delegate a power to determine some fact or state of
things upon which the law makes or intends to make its own action
depend. To deny this would be to stop the wheels of government.
There are many things upon which wise and useful legislatic must
depend which can not be known to the lawmaking power, a: 1 must

therefore be a subject of inquiry and determination outside of the halls
of legislation.

Also, in Butterfield v. Stranahan (192 U. S., 496), wherein
was involved the construction of the law of Congress appointing
a board of seven meimbers, who were to prepare and submit to
the Secretary of the Treasury samples of tea, and upon their
recommendation the Secretary of the Treasury was authorized
to fix and establish a uniform standard of purity, quality, and
fitness for consumption of all kinds of tea, the court says:

This case is within the principles of Field against Clark, where it was
decided that the third section of the tariff act of October 1, 190,
was not repugnant to the Constitution as conferring legislative and
treaty-making power on the President, because it authorizes him to
suspend ihe provisions of the act relating to the free introduction of
sugar, etc. Wt may say of the legislation in this case that it does
not in any real sense invest the administrative officials with the power
of legislation. Congress legislated on the subject as far as was rea-
sonably practicable, and from the necessities of the case was compelled
to leave to executive officials the duty of bringing about the results
pointed out by the statute. To deny the power of Congress to dele-
gate such a duty would in effect amount but to declaring that the

6654
6

plenary power vested in Congress to regulate foreign commerce could
not be efficaciously exerted.

Messrs. Prentice and Eagan, in their valuable work on the
commerce clause of the Federal Constitution, on page 31, also
say, in summing up the whole matter:

The test determining the validity of a delegation of discretionary
power therefore appears to be that, if a controlling rule is fixed by the
egislature and the power delegated is to apply this general rule to
specific facts, or to determine some fact upon which the legislature
makes its action depend, then the law is valid.

Fixing the standard, and then upon that basis fixing the rate,
is purely a legislative function. It only becomes a judicial
question when the rate is fixed which enables the court then to
enjoin the enforcement of these rates so fixed, which may be
confiscatory, and hence repugnant to the fourteenth amendment
of the Constitution. I think this is what really is decided in the
Reagan case, supra.

A commission invested by Congress with this authority is
just as competent—vastly more competent—to make a rate than
a rate-making board employed by the railroads. Both are to
adjust rates. One is a partisan board acting for the railroads.
The other is nonpartisan, free from bias, with a great public duty
to perform, sworn to do their duty, acting for the people as well
as for the railroads, sworn to do what is right and just between
man and man, unmoved by any desire for pecuniary gain. One
acting from a selfish motive, will, as a matter of course, make
the rates which will be most advantageous to the railroads, with
a view to making large dividends for their employers. The
other will act only when a complaint is made that the rates are
excessive and unreasonable; and not till then will make such
a rate, after a full hearing is had upon the whole matter, as is
just and reasonable, moved only by a sense of high public duty.
The partisan board makes all the rates. The nonpartisan or
Congressional board adjusts the rate already in execution which,
in their judgment, is inflicting a wrong upon the people. The
one is paid by the railroads. The other is paid by the Gov-
ernment. The railroads employ only such experts for this
purpose as can make the best rates in the interest and for the
benefit of the railroads. It is not probable that the President
would appoint or that the Senate would confirm any person on
this board who is not a man not only of experience and ability,
but who is conservative, patriotic, broad minded, liberal, and
just.

Under present conditions, if the rates are excessive and exor-
bitant, where can the shipper go for the redress of his wrongs?
I have a letter from a citizen in my State, in which he
says that he paid $40.84 on a carload of corn from Cincin-
nati, Ohio, to Kelley, Va., about 1,500 miles, and from Kelley
to Rich Square, N. C., a distance of 47 miles, he had to pay
$52.44. Think of it, $40 for 1,500 miles and $50 for 47 miles.
This is only one of a thousand such instances. Is it right that
this man, or these men, shall have no relief? Wherever there
is a wrong the remedy should be provided. But in such a case
there is no practical and effective redress provided. Shall they
be required to bring suit in the Federal court? This is prepos-
terous. To do so would mean bankruptcy and ruin to them.
They simply have to grin and bear it. Why, Mr. President,
I ask, if the rates are reasonable and not excessive, should -
the railroads complain? Why all this clamor and these predic-

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tions of ruin? If they are carrying on their business in such a
way as not to injure the public the Commission can not affect
them, but if they are not the people have a right to complain,
and it is the duty of Congress to redress their wrongs, to ap-
point a tribunal to whom they can make their complaints and
be heard. The railroads come in touch with more people and
more people have business with the railroads than any other
person or corporation in the world. They are a great conven-
ience to our people. I would neither deprive them of their
rights in the courts nor anywhere else. But the truth is, Mr.
President, and we might as well speak it out, the railroads,
acting under their chartered rights, are levying a tariff upon .
the people in the way of tolls and charges that we are told are
not just; that do not bear fairly and equally on all alike. It
is charged that they, by way of rebates and otherwise, make the
rates easy for the rich and at the same time make them high
for the poor and small shipper, the small manufacturer, and the
great mass of producers and consumers in our country, driving
many of them out of business.

Mr. President, I have introduced a proposed amendment to the
bill, after the word “jurisdiction,” in line 9, page 10 of the bill,
which provides that no writ of injunction or interlocutory order
shall be granted by any district or circuit court without first
giving five days’ notice to the adverse party or his attorney of
the time and place of moving for the same, and not until peti-
tion and answer are filed and hearing thereon is had. To adopt
an amendment something like this, I think, Mr. President. will
not only aid in removing the constitutional objection, which has
been raised to this section of the bill, but it is intended to pre-
vent much of the trouble which it is predicted will come, and
which will undoubtedly come if the railroads, simply upon an
ex parte petition, could go into the courts and obtain an inter-
locutory decree or injunction against the rate going into effect
upon constitutional grounds. This would mean practically to
nullify the order of the Commission and practically to nullify
the very will of Congress, thereby bringing the whole thing into
ridicule and contempt. ‘“ Justice delayed is justice denied.”

It seems from the decisions of the Supreme Court that Con-
gress can absolutely take away from the courts, except the
Supreme Court, their equity jurisdiction. The Supreme Court
derives its equity jurisdiction from the Constitution itself, but
the subordinate courts are purely creations of statute and derive
their power and jurisdiction from Congress. The third article
of the Constitution declares that ‘the judicial power of the
United States shall be vested in one Supreme Court, and such
inferior courts as the Congress shall from time to time ordain
and establish.” Inferior courts have been established from time
to time, and some by the statute have been given equity jurisdic-
tion, as the circuit courts; and also some have not, but have been
denied this jurisdiction, as, for example, the Court of Claims.

No one will contend that Congress can not, if it so desired,
abolish every inferior court of the United States, and I want to
say here that I agree with the Senator from Wisconsin [Mr.
Spooner], that if we did abolish them, it would be our sworn
duty to reestablish them. If Congress can create these courts
and abolish them at will, it would seem that they could limit their
jurisdiction and take from them some of the jurisdictional

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powers they now have. In Sheldon v. Sill (8 Howard, p. 449)
Justice Grier, in delivering the opinion of the court, says:

Congress may withhold from any court of its creation jurisdiction of
any of the enumerated controversies. Courts created by statutes can
have no jurisdiction but such as the statute confers. o one of them
can assert a just claim to jurisdiction exclusively conferred on another
or withheld from all.

Again, in Turner v. The Bank (4 Dall., p. 1):

The notion has frequently been entertained that the Federal courts
derive their judicial power immediately from the Constitution, but the
political truth is that the disposal of the judicial power (except in a
few specified instances) belongs to Congress. If Congress has given
the power to the court, we possess it; not otherwise; and if Congress
has not given the power, * * * it still remains at the legislative

* disposal. ;

There is much force in the suggestion, I admit, Mr. President,
that the court, being created and given jurisdiction of the sub-
ject-matter, it might be held, in order to administer justice or
to decide upon any constitutional rights that the suitor would
have, and in order to administer his right and preserve his prop-
erty from irreparable damage, and to hold it in statu quo during
the determination of these rights. that the court could by the
natural right of equity assume this equity jurisdiction. But,
after investigation, I am of the opinion that we could limit the
equity jurisdiction of the court in this case. I am certain that
we could limit its practices and procedures. Congress has done
so by statute twice in the past, and can do so again. Section
720 of the Revised Statutes of the United States is as follows:

The writ of injunction shall not be granted by any court of the
United States to stay proceedings in any court of a State, except in
eases where such injunction may be authorized by any law relating to
proceedings in bankruptcy.

Will anyone contend that this is not a limitation upon the
equity courts by Congress? My friend the distinguished Sena-
tor from Wisconsin, in his great speech-—and I measure my
words when I say “a great speech and a great argument ”—
cited as an authority the case in 193 United States, The Central
Trust Company v. Julian, with which I was acquainted, having
been an attorney in the case. I mention this case to show what
a partisan judge can do, unless he is restrained by Congress, and
while that case is an authority for the Senator from Wisconsin,
it is also authority for me.

This is a remarkable case, Mr. President. There was a suit
brought against a railroad in North Carolina and a judgment was
rendered for $26,000 against a railroad company that had been
sold out under a second mortgage to the Southern Railway Com-
pany. We contended that that railroad was still a domestic cor-
poration, inasinuch as it had only been sold under a second mort-
gage; that the first mortgage being still outstanding, the State
had never lost its visitorial power over that corporation, and
inasmuch as the State when it grants a charter parts with a
portion of its sovereignty, a foreign corporation could not come
into a State and take away the visitorial power of the State
over that domestic corporation. It was fought out in the State
courts, and finally went to the court of last resort, which said
that this road was liable for this money under execution. Then
the parties went into court and asked for a receiver in order to
collect their money. Then comes the iron hand of the Federal
court, without giving any notice whatever to the parties, and
enjoins not only the plaintiff, but enjoins every lawyer in the

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case, and not only every lawyer in the case, but enjoins the court
itself. Then, Mr. President, we fought it out in the Federal
court; and the circuit court of appeals dissolved the injunction
as to these.parties and said they could proceed as they were
advised. They then caused execution to issue in the State court
and put it into the hands of the sheriff. The property was adver-
tised for sale in thirty days, and the matter waited until the night
before the sale, when here comes another injunction enjoining the
sheriff, enjoining the lawyers, and enjoining everybody from
selling that property. The costs in this case were over $900,
and I mention this to show that in many cases, if not all, the
poor man can not afford to litigate in the Federal courts.

Mr. TILLMAN. Will the Senator state what judge that was?

Mr. OVERMAN. It was a South Carolina and a North Caro-
lina judge—one a circuit and one a district judge. I do not care
to mention the names.

Mr. TILLMAN. They were Federal judges, of course?

Mr. OVERMAN. They were Federal judges, of course.

Mr. TILLMAN. I do not see why the Senator should object
to giving the names. I am responsible for asking for it.

Mr. OVERMAN. I say one was a North Carolina judge.

Mr. TILLMAN. District or circuit?

Mr. OVERMAN. The circuit judge was a South Carolina
judge. He is dead, and I do not desire to mention his name.
The Senator knows to whom I refer.

Mr. TILLMAN. I had the misfortune, I suppose it was, to
criticise the judiciary here the other day, and to make—I will
not say a charge, but an assertion of my belief—that the reason
why this particular point is being fought out so bitterly on the
part of some of us is because the people have lost faith in the
honesty and integrity of some of the Federal judges, and two
Senators took issue with me in regard to the high character,
ability, and honesty of purpose of the judges with whom they
had had to deal, and another jumped in with the proposition
that I must allude to some particular judge. I want to get a
catalogue of the fellows who have been doing that kind of work.

Mr. OVERMAN. The Senator will see that it is a delicate
matter. The Senator knows to whom I refer, and I do not care
to mention names and have them put into the public records of
the Senate.

The Senator from Wisconsin [Mr. Spooner] argued the ques-
tion of the power that is vested in the court by the Constitution.
Well, what is the judicial power? All legislative power is vested
in Congress, all executive power is vested in the Executive, and
all judicial power is vested in the judiciary.

Right here in passing I want to say for the benefit of the
Senator from South Carolina that the reporter mentions a very
interesting fact in this case from which I am about to quote—
Osborn v. Bank of the United States (9 Wheaton, 738). It
seems that Webster and Clay both appeared in that case and
that Andrew Jackson was then President. President Jackson
contended that in legislating Congress was not bound to obey
the will of the Supreme Court even when an act had been
declared unconstitutional, because Congress and the judiciary
act independently of each other; that each member of the
Senate or the House of Representatives is bound by his own
construction of the Constitution; and because the Supreme
Court is a coordinate branch of the Government that Congress

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10

is no more bound by the opinion of the judges of the Supreme
Court than Congress and the Supreme Court would be bound
by his actions or the opinion of a Senator.

Now, Mr. President, I call the attention of the Senator from
Wisconsin to the question of judicial power. What does it
mean? The Senator, as I understand, contends that whenever
a court is established under this judicial power the court so es-
tablished has the right, when the subject-matter is given to the
court, to invoke all the ancient remedies—not the common-law
remedies, but the ancient remedies in equity—in order to save
the property of the litigant from irreparable damage and-keep
it in statu quo until his rights can be finally determined.

What is judicial power? I have looked through the diction-
aries, but I find that Justice Marshall, in this very case, has
given the very best definition of it. If his definition is correct
and also his reasoning, it seems to me that Congress has the
right to limit the jurisdiction of any court that it establishes.
In this case the great Chief Justice said as follows:

Judicial power, as contradistinguished from the power of the laws.
has no existence. Courts are the mere instruments of the law an
can will nothing. When they are said to exercise a discretion it is
a mere legal discretion, a discretion to be exercised in discerning the
course prescribed by law; and when that is discerned it is the duty
of the court to follow it. Judicial power is never exercised for the
purpose of giving effect to the will of the judge; always for the pur-
pose of giving effect to the will of the legislature, or, in other words,
to the will of the law.

Along this line I will read the great case of Chisholm v.
Georgia—the case that produced almost a revolution in this
country, and caused the adoption of the eleventh amendment
to the Constitution. The opinion in that case was delivered
by Judge Iredell of my State, one of the greatest judges that
ever sat upon the Supreme Court of the United States.

In that case, Mr. Randolph, the attorney-general, was argu-
ing along the line of the Senator from Wisconsin’s idea of the
judicial power, that when the court was created, that minute
it had in it power to invoke all these remedies of which we
have been talking. Let us see what he says:

The attorney-general has indeed suggested another construction, a
construction, I confess, that I never heard of before, nor can I now
consider it grounded on any solid foundation, though it appeared to
me to be the basis of the attorney-general’s argument. His construc-
tion I take to be this: “‘ That the moment a supreme court is formed
it is to exercise all the judicial power vested in it by the Constitution,
by its own authority, whether the legislature has prescribed methods
of doing so or not.” My conception of the Constitution is entirely
different. I conceive that all the courts of the United States must
receive not merely their organization as to the number of judges of
which they are to consist, but all their authority as to the manner
of their proceeding from the legislature only. This appears to me to
be one of those cases, with many others, in which an article of the
Constitution can not be effectuated without the intervention of the
legislative authority. There being many such, at the end of the special
enumeration of the powers of Congress in the Constitution is this
general one:

This is the power of Congress—

“To make all laws which shall be necessary and proper for carrying
into execution the foregoing powers, and all other powers vested by
this Constitution in the Government of the United States, or in any
department or officer thereof.” None will deny that an act of legis-
lation is necessary to say at least of what number the judges are to
consist. The President, with the consent of the Senate, could not
nominate a number at his discretion. The Constitution intended this
article so far, at least, to be the subject of a legislative act. Having a
right thus to establish the court, and it being capable of being estab-

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lished {n no other manner, I conceive it necessarily follows that they
are also to direct the manner of its proceedings.
* * * * * * *

Upon this authority there is, that I know, but one limit—that is,
“that they shall not exceed their authority.” If they do, I have no
hesitation to say that any act to that effect would be utterly void,
because it would be inconsistent with the Constitution, which is a
fundamental law, paramount to all others, which we are not only bound
to consult, but sworn to observe; and therefore where there is an in-
terference, being superior in obligation to the other, we must unques-
tionably obey that in preference. Subject to this restriction, the whole
business of organizing the courts and directing the methods of their pro-
ceeding, where necessary, I conceive to be in the discretion of Con-
gress. If it shall be found, on this occasion or on any other, that the
remedies now in being are defective for any purpose it is their duty
to provide for, they no doubt will provide others. It is their duty
to legislate so far as is necessary to carry the Constitution into effect.
It is ours only to judge. We have no reason nor any more right to
distrust their doing their duty than they have to distrust that we all
do ours. There is no part of the Constitution that I know of that
authorizes this court to take up any business where they left it, and
in order that the powers given in the Constitution may be in full
activity supply their omission by making new laws for new cases, or,
which I take to be the same thing, applying old principles to new
cases materially different from those to which they were applied before.

With regard to the Attorney-General’s doctrine of incidents, that was
founded entirely on the supposition of the other I have been considering.
The authority contended for is certainly not one of those necessarily in-
cident to all courts merely as such.

If, therefore, this court is to be, as I consider it, the organ of the
Constitution and the law, not of the Constitution only, in respect to the
mInanner of its proceeding, we must receive our directions from the leg-
islature in this’ particular, and have no right to constitute ourselves an
officina brevium, or take any other short method of doing what the Con-
stitution has chosen, and, in my opinion, with the most perfect pro-
priety, should be done in another manner.

Mr. BACON. Will the Senator please state what was the di-
rect point at issue upon which that ruling was made?

Mr. OVERMAN. One State suing another.

Mr. BACON. Of course that is the foundation of the suit;
but what was the particular question to which that language
was applied?

Mr. FULTON. Mr. President——

The VICE-PRESIDENT. Does the Senator from North Car-
olina yield to the Senator from Oregon?

Mr. OVERMAN. Certainly.

Mr. FULTON. My recollection, if the Senator will permit me,
is that it was not a question of one State suing another, but of
an individual suing a State.

Mr. BACON. It was the case of an individual suing a State.

Mr. OVERMAN. Of an individual suing a State; that is right.

Mr. FULTON. I will say, while I am on my feet, that it is
my recollection that the majority of the court was against the
doctrine announced by the justice from whose opinion the Sen-
ator has read.

Mr. OVERMAN. I did not so read it. Justice Jay, I be-
lieve, and all the judges wrote opinions in the case on account
of its great importance.

Mr. FULTON. Each of the judges in that case, as I recall,
delivered an opinion, and the majority were against the conclu-
sion reached by the justice from whose opinion the Senator has
read.

Mr. OVERMAN. I do not so construe it; and I think the
judge is right. All the other decisions I have cited and from
which I have quoted clearly sustain him in this conclusion.

Mr. FULTON. I would not say that the other opinions are

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12

based on doctrines differing necessarily from the particular
portion quoted by the Senator; but now I would ask the Sen-
ator if he does not make a distinction between the power of
Congress to vest jurisdiction in a court in a particular case, and,
on the other hand, the power of Congress to state how that case
shall be decided?

Mr. OVERMAN. What is judicial power? I have shown
what Judge Marshall says it is. It really means, as against
legislative power, nothing. But, another thing: What is this
power when the court is established? It is such a power as IS
given to it by the Constitution and the law.

Mr. FULTON. Let me ask the Senator, then, if judicial
power that is spoken of in the Constitution, where the Consti-
tution says that the judicial power is vested in a Supreme Court,
does not include jurisdiction? Jurisdiction is only one element
of that judicial power. Judicial power is more than jurisdiction
in a cause.

Mr. OVERMAN. Power to enforce its orders.

Mr. FULTON. When the legislature gives a court jurisdic-
tion of a certain cause——

Mr. OVERMAN. In answer to the Senator I want to read

Mr. FULTON. Judicial power vests in the court to determine
that cause, and becomes constitutional.

Mr. OVERMAN. In answer to the Senator from Oregon, I
read again from Marshall’s Complete Constitutional Decisions
in the case of Ex parte Swartout, who, as a basis for his de-
cision, lays down this proposition in the very beginning of his
opinion :

As preliminary to any investigation of the merits of this motion, this
court deems it proper to declare that it disclaims all jurisdiction not
given by the Constitution or by the laws of the United States.

Courts which originate in the common law possess a jurisdiction

which must be regulated by their common law until some statute shall
change their established principles—

Then, if we limit it, there is a statute limiting the old com-
mon-law remedy, or the remedy in equity—

but courts which are created by written law, and whose jurisdiction is
defined by written law, can not transcend that jurisdiction.

That is what the great Marshall says. Can anything be
plainer than that?

Mr. FULTON. Will the Senator, then, tell us what is juris-
diction?

Mr. OVERMAN. I have no legal definition. I wish I did
know. I should like the Senator to give me the legal definition.

Mr. FULTON. I was asking a question; I was not proposing
to answer it.

Mr. OVERMAN. Jurisdiction is the right of a court, legal
authority, either conferred by the Constitution or by the laws
to do some particular thing, or to invoke to its aid some ancient
remedy, in passing upon the rights or wrongs of the people. I
should say that is a horseback definition. That is about what
I think it is. I doubt whether anybody could define it properly ;
but I know the court says you can limit the jurisdiction.

In chapter 22, section 5, United States Statutes at Large,
there is a special prohibition that writs of injunction shall not
be granted without reasonable notice to the adverse party or his
attorney. And in the case of New York v. Connecticut (4 Dall.,
p. 1) the Supreme Court held that this prohibition extends not

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13

only to the circuit court, but to the Supreme Court itself, whose
equity jurisdiction is given by the Constitution. ;

Then if we can impair it for one day or two days or three
days, we can impair it forever. It is certainly decided in this
ease that you can impair it. Jurisdiction does not attach—
the court is deprived of it unless notice is given. Then if we
ean prohibit it for a day by the required notice to be given, why
not prohibit it forever? Has time anything to do with it?

That is the point I make. I am in favor of allowing these
corporations to have their day in court just the same as an
individual, I am in favor of giving them the same rights that
the individual -has. This amendment which I have proposed
is constitutional. The court has so decided it, and from all
the cases I have cited here, after we decide what “ judicial
power ”’ means, in the language of Judge Marshall, if we are
satisfied on that point there is nothing clearer to my mind than
that we can limit the entire jurisdiction of the court as to the
equity practice, and we certainly can limit it as to the time
when the notice shall be given and the complaint filed.

To repeat, in chapter 22, section 5, United States Statutes at
Large, there is a special prohibition that writs of injunction
shall not be granted without reasonable notice to the adverse
party or his attorney. And in the case of New York v. Con-
necticut (4 Dall. p. 1) the Supreme Court held that this pro-
hibition extends not only to the circuit court, but to the Supreme
Court itself, whose equity jurisdiction is given by the Consti-
tution. :

Here are two precedents of Congress, one where there is a
limitation upon the equity jurisdiction of the courts, and the
other a limitation upon the practice and procedure of issuing
interlocutory decrees. But I want to say right here, let the
courts of the land be open at all times to the rich and poor
alike, to the individual and corporation, and let justice be
administered freely, completely, and without delay; but the
point I make is this, that the amendment suggested will in
nowise abridge or limit the right of the railroad, the shipper,
or anyone else. It is only a limitation upon the procedure and
practice of the courts when injunctive relief is sought in this
particular case. Limit as to the time when, the place where,
and the notice to be given is no limitation upon the constitu-
tional or any other right the petitioner or complainant might
have.

Mr. President, I have heard it said during this debate that the
law must bear equally upon all alike, and not to make this limi-
tation apply in all cases would be class legislation, and therefore
unconstitutional. I contend that it is not special legislation
as to a particular class. It does not apply to one railroad,
but to all railroads. Taxation by the State upon the gross
incomes of the railroads, the fellow-servant act, the mechanics’
lien law, and many laws of this special character have been
upheld by the Supreme Court of the United States. This court
says in Missouri Railroad Company v. Mackay (127 U. S., p.
209) :

The objection that the law of 1874 deprives the railroad companies of
equal protection of the laws is even less tenable than the one consid-
ered. It seems to rest upon the theory that legislation which is special
in its character is necessarily within the constitutional inhibition; but

nothing can be further from the fact. The greater part of all legisla-
tion is special, either in the objects sought to be attained by it or in

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extent to its application. * * * And when Mee aietien applies to
particular bodies or associations, imposing upon them additional Mla-
bilities, it is not open to the objection that it denies to them the equal
protection of the laws, if all persons brought under its influence are
treated alike under the same conditions. A law giving to mechanics a
lien on buildings constructed or repaired by them for the amount of
their work, and a law requiring railroad corporations to erect and main-
tain fences along their roads, separating them from lands of adjoining
proprietors, so as to keep cattle off their track, are instances of this
kind. Such legislation is not obnoxious to the last clause of the four-
teenth amendment, if all persons subject to it are treated alike under
similar circumstances and conditions in respect both of the privileges
conferred and the liabilities imposed. It is conceded that corporations
are persons within the meaning of the amendment.

This, of course, refers to legislation in the States as applied
to the fourteenth amendment. I only cite this by way of illus-
tration.

But Mr. President, it is clear to my mind that this amend-
ment is constitutional upon the common-sense view of it
and the sound reasoning of this opinion. This amendment,
taken in connection with the other provisions of the bill,
if not in express words, certainly by implication will give the
court of review, which has been so earnestly contended for.
The rate is fixed by one administrative body carrying out the
will of Congress. If it is confiscatory and if this rate will take
away the property of the railroads without just compensation,
or if it is claimed their property is taken without due process
of law, the way to the courts for injunctive relief is open.
Notice is given to the adverse party, the petition is filed, the
answer is filed, full hearing by both sides is had, and decree is
made suspending the rate or the petition is dismissed and an
appeal is allowed.

Furthermore, Mr. President, is it fair to the people or the
Commission, which is to be composed of seven men—some
learned in the law, and men of unusual ability and business ex-
perience, who have heard the case and given a patient and care-
ful bearing before fixing the rate, have heard all the testimony,
have heard the attorneys on both sides, and made their order
after deliberation and consideration—I repeat, is it fair to
them to have their action arbitrarily set aside by a partisan
judge by injunction, when the adverse party had no oppor-
tunity to be heard? Why should a judge who is unfamiliar
with these intricate problems, who may know the law, but who
is not expected to be acquainted with the business of fixing
rates, and without hearing the testimony for the complainant,
why should he be permitted simply upon an ex parte affidavit
of the petitioner to order the injunction to issue? The Com-
mission in a judicial sense is not a court, but it has all the pro-
cedure given it that a court exercises. There is the notice
served, the complaint made, the answer filed, the testimony
taken on both sides, and the order, which is the same thing as
the judgment, is made. This looks very much like due process
of law. The only thing absent is the judge holding his office
for life created by Congress. That is the only difference. I
know in the Reagan case they held it was not a court and that
it was not due process of law.

I confess, Mr. President, I do not like some of the verbiage of
the bill. I do not like the words “fairly remunerative,” and
these words added to the words “just and reasonable.” The
language of the bill is, “‘shall prescribe what will be a just,.

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reasonable, and fairly remunerative rate or rates.’ Why use
so many adjectives to describe the rates to be fixed? Why not
use the plain words of the Constitution, “ just compensation?”
To say that it would be fairly remunerative would, in my judg-
ment, involve the question unnecessarily. What would be a
fairly remunerative rate for the amount invested coupled with
the direction to fix a just and reasonable rate, according to the
rule laid down in the Nebraska case, would present a very trouble-
some question to the Commission. The man from Texas, where
the legal rate of interest is 10 per cent; from South Carolina,
where it is 8 per cent; from North Carolina, where it is 6 per
cent, and in some other States, where it is 4 per cent, all would
have a very different idea as to what constitutes a fair and re-
munerative rate. What is just compensation for services per-
formed is easily understood and easily arrived at, or to use the
words “ just and reasonable” would be equally satisfactory.

Mr. President, when, in 1887, there was a demand for this
kind of legislation there were hundreds of competing lines of
railroads in this land. Since that time there has been a most
wonderful evolution in the railroad world. Competition has,
to a great extent, been eliminated and practically destroyed.
Consolidation has gone on and on in the face of all opposition,
even in the face of legislative and judicial opposition. It has
gone so far that we will never see again the old discarded
method of small competing lines. This consolidation has con-
tinued until we see 95 per cent—practically all the railroads of
the entire country—organized and consolidated into six great
groups: First, the Vanderbilt group, speaking in round numbers,
with its 22,000 miles and with a capitalization of more than a
billion dollars; second, the Pennsylvania group, with its 20,000
miles and its capitalization of $2,000,000,000; third, the Morgan-
Hill group, with its 47,000 miles and its capitalization of
$2,000,000,000; ‘fourth, the Gould-Rockefeller group, with its
28,000 miles and its capitalization of $1,300,000,000; fifth, the
Harriman group, with its 23,000 miles and its capitalization
of $1,300,000,000; sixth, the Moore group, with its 25,000 miles
and its capitalization of $1,000,000,000. I ask that I be permit-
ted to add in the Recorp a statement showing the mileage and
capitalization of these groups.

But, Mr. President, not only is this enormous percentage of
railway property controlled by these six groups, but there ex-
ists a community of interests between them, and the groups
themselves are linked together, and the interests which con-
trol one overlaps the other. They are banded and bound to-
gether by the closest commercial and industrial ties for the
purpose of mutual advantage. It is in effect one gigantic entity,
collecting more than $2,000,000,000 annually out of the people
in tolls and charges. Some of them have gone out beyond their
legitimate business, have violated their charters and the law of
the land, have monopolized the coal mines, and have invested
their money in other business outside of the legitimate busi-
ness for which they were chartered, until the Supreme Court
has lately denounced this unlawful departure and said they were
acting beyond the scope of their charter rights. Legislation to
prevent it is now pending in this body. If it was necessary for
the welfare of the country to enact legislation for the regula-
tion of rates in 1887, how much more important is it to do so

6454
16

now. It is not only imperative, but it is suicidal not to do so,
and the party most to suffer will be the railroads themselves.
You may amend this bill so as to destroy its efficiency, you may
emasculate its provisions, it may be decided by the courts to be
unconstitutional, but the demand for government regulation
will not down; it will come again, and when it does come the
demand will be louder, stronger than ever before; and, like a
mountain torrent, it will come with such force that it can not
be resisted ; it will sweep away and engulf all opposition.

The cotton crop, Mr. President, last year was in the neigh-
borhood of 11,000,000 bales. The high-salaried rate-making
experts for these six groups of railroads, acting only for the
master and with a selfish purpose, could have met in the early
fall and, by putting on an additional 10 cents freight on each
bale of cotton, have added to their annual receipts more than a
million dollars, and at the same time have taken that much
from the pockets of the people. And by the same process, by
making an additional 10 cents per hundredweight freight over
the old rate on the agricultural products of the entire country,
their illegitimate gains would have mounted into the hundreds
of millions. Shall this power remain in this gigantic, central-
ized, powerful, and uncontrolled organization? Who is it that
would pay this enormous sum? It is not the shipper nor the
middleman, but it is always paid by the producer and con-
sumer. These are they who, after all, suffer from unreasonable
and discriminating charges. They pay the freight, but they can
not recover the unjust excess. They are helpless, and it is this
great mass of our people which will be mostly benefited by this
legislation. For fifty years the common carriers have been reg-
ulating the tolls and charges to suit themselves without let or
hindrance. Now let the people have a place where they can go
and be heard and be protected from unjust, discriminating, and
unequal rates. These paid experts are human; they want all
they can get; they are paid by the master. A little here and a
little there added to the present rate, a classification here and a
reclassification there, may make a difference of many hundred
thousands of dollars. This difference is not likely to be made
in favor of the shipper. The people have no unjust demand to
make; they are always on the side of justice, equality, and
truth. Pass this law, and if it shall stand the test of the courts,
as I believe it will, all bitterness will pass away; prejudice will
give place to confidence ; the people will know that they have a
forum where they can make their complaints and be heard.
The railroads will also be heard; the courts will be opened to
all, Railroad building will net cease, calamity will not come,
the wages of the employees will not be lowered, progress will go
on, even-handed justice will be meted out to all alike, and the
cause of the people will be triumphant.

6654

O
RAILWAY RATE LEGISLATION.

SPEECH

OF

HON. N. B. SCOTT,

OF WEST VIRGINIA,

IN THE

SENATE OF THE UNITED STATES,

WEDNESDAY, Marcu 7, 1906.

we

WASHINGTON.
1906,
SPEECH

HON. N. B. SCOTT.

REGULATION OF RAILROAD RATES.

Mr. SCOTT. Mr. President, I ask that what is commonly
known as the “ railroad rate bill” be laid before the Senate.

The VICE-PRESIDENT. The bill will be read by its title.

The Secretary. A bill (H. R. 12987) to amend an act en-
titled “An act to regulate commerce,” approved February 4,
1887, and all acts amendatory thereof, and to enlarge the powers
of the Interstate Commerce Commission.

Mr. SCOTT. Mr. President, the subject that has been upper-
most in the minds of the masses of the people of this country
for some time has been this great question of railroad rate legis-
lation. Senators have been criticised for not promptly concur-
ring and passing some kind of a rate bill without giving it care-
. ful and mature deliberation. I believe that it is the desire of
every member of this body to enact a law that will be for the
greatest good to the greatest number of people, and in order to
accomplish that I feel it is the duty of every man to give this
question careful investigation and conscientious thought. And
in line with this belief I have, since last October, given as much
eareful study to this question as it is possible for me with my
limited capacity to do. That there are railroad evils to be rem-
edied, I for one shall not deny. That many complaints made
against these corporations are just, I shall not gainsay. As a
consequence we have had before this body, as well as the House
of Representatives, many measures presenting as many methods
of relief. Of these I shall not speak. I desire only to address
myself to the theory advanced by many reforiners—that of gov-
ernment ownership or control. In this connection I want to state
that I place under the head of government ownership the control
of rates by the Government; for while the two propositions
may differ somewhat, it is a difference in degree, not in quality.
Neither shall I attempt to discuss the authority of Congress to
eontrol in any way the operations of the railroads of this
eountry. I shall content myself with the fact that it has ex-
ercised such power in the past, and is now asked to exercise
the same power in a greater degree than ever before.

From an intimate relationship with railroads as a shipper
for nearly thirty years, I have given this subject my considera-
tion. As a Senator of the United States I have tried to study
the subject of government control from the broader standpoint
of the roads and all shippers. As a consequence, I am forced
to the conclusion, from every standpoint, that the roads are
better able to fix rates in accordance with the laws of trade
than a government.

2 6603
3

As was stated more elearly and more eloquently than I can
possibly hope to do by the senior Senator from Massachusetts
in his address opening the debate in the Senate on this subject,
the working of government ownership of railroads and the
control of rates are open to the inspection of all, as both exist.
A careful study of the railroad situation in the countries where
government control obtains—aye, a superficial examination—
will show to anyone the evils resulting from the system and
force the belief that governments can not make railway rates
that will meet the needs of expanding trade and industry.

The study of railway transportation in this country is the
examination into the workings of trade and commerce in the
greatest and richest market of the werld. It is a review of the
history of the last half century of our country, of her marvel-
ous growth, her wonderful transformation and her magnificent
prosperity. While the tariff has been the wall which has
bounded our land, the railroads have been the means of nearly
annihilating space. The tariff furnished the occasion and the
railroads cemented the States into one—from a commercial
standpoint. And this fact should be borne in mind in determin-
ing the influence, the rights, and the future of the railroads. It
should not, it must not, be forgotten that the railroads have
welded the country into one; that the railroads have made it pos-
sible for the products of one section to be the home products
of all; that the railroads have been able to stamp out the mon-
strous doctrine of natural advantage—the idvantage of loca-
tion; that the railroads have with their radiations joined the
North, the South, the East. the West into one grand whole of
commerce, with a center everywhere.

It would seem that such a benefactor as the railroad has been
should be accepted as such and treated as such. But human
nature is human nature, the same to-day as it was over one hun-
dred years ago when the Constitution was adopted. The same
to-day as it ever has been in all the past, ready to criticise,
ready to find fault, ready to cry out. Trading ‘between indi-
viduals is the same as trading between communities, as the
latter is the same as trading hetween countries; any difference
lies only in amount. In each case the individual, the commu-
nity, the country seeks the greatest advantage. The loser is the
one who objects, who complains, who at last cries out. The
force of his outery depends on the number of voices which echo
it, and it may finally lead to serious results. Nor does it matter
whether his complaint be founded on justice—if he can com-
plain loud enough others will take up the cry without examin-
ing into its merits. So it can easily be seen how a shipper
thinking himself unfairly treated by a railroad, a community
tearing itself unfairly bandled, a locality judging itself dis-
criminated against, may clamor for redress when the general
good of all the individuals, of all the communities, of all the
tocalities comprising the country has been best advanced. This
is the doctrine of the greatest good for the greatest number, and
this doctrine must never be Jost sight of in trying to justly
serve the people and justly handle the railroads.

The individual and the community or the locality stand for
the classes of railroad discrimination which are charged; per-
sonal discriminations. the discrimination in favor of localities,
and, as a consequence of these two, the fairness of the rates
themselves. Of these I desire to speak in their inverse order.

6603
4

First, as to the reasonableness of rates themselves. No un-
reasonable rates—that is, rates extortionate of themselves—seem
to exist in this country now. There is but little complaint on
this point. In the annual report of the Interstate Commerce
Commission for 1898 this statement is made:

It is true, as often asserted, that comparatively few of our railway
rates are unreasonable in and of themselves—that is, without reference
to other charges made by the same carrier, or to those of other car-
riers. * The cases are exceedingly rare in which ' nreason-
ableness has been found merely from the amount of the rate itself as
laid upon the particular traffic and the distance it was carried.

In March, 1898, the chairman of the Interstate Commerce
Commission testified that the question of excessive railroad
charges—
that is to say, railroad rates which in and of themselves are extortion-
ate—is pretty much an obsolete question.

It is true, though, that much discussion has arisen concerning
the increase in railway freight charges made by the railway
companies in the past year or two. And there has been a fear
held by many that there is danger lest recent consolidations
have raised charges. There is still the further fear that con-
solidations in the future may finally lead to absolute monopolies
and extortionate rates. But this is a subject which belongs to
another aspect of the case, and which Congress has taken in
hand in other laws which it has passed. The life of commerce
in this country, as well as others, must find its very existence in
competition. Should railroads by merger attempt to limit com-
petition and thereby lessen the opportunities for commerce, I,
for one, would insist on radical action.

Having thus shown that it is the general belief that railroad
rates are reasonable, I come to the next point, the charge of
the existence of discrimination in rates in favor of localities,
and this really is the subject proper. Briefly stated, the ques-
tion is whether the Government should exercise the power to
prescribe railway rates for the purpose of guaranteeing the
relative reasonableness of the rates made by the railways
leading from rival purchasing and distributing centers to com-
mon “markets and to rival markets. There is but one way of
approaching this question, and that is along the path of
experience to the field of results.

Europe being composed of older countries than the United
States gives an opportunity of studying the railroad proposition
from the standpoint of a populated and developed territory,
while the experience of the United States and Australia will
show the results from the standpoint of new and developing
lands. Naturally the railroads found in Europe a developed
commerce.

Highways had been built connecting cities, over which the
local traffic of that part of the world was largely carried. The
rivers were made use of, and thus commerce was carried be-
tween various cities and various commercial and trading cen-
ters. From necessity “natural advantage”—the advantage
of location—was the basis of supremacy. The city which had a
seaport or a water communication of some kind was favored
above all others. It became the home of the trader and the
shipper ; it was the point of concentration from which the high-
ways led into the interior and to less fortunately situated
cities and towns. From the beginning the railroads were forced

6603
5

to make low rates to towns with water transportation in order
to meet the water competition. To interior points, which before
this had been reached only by the public highways, higher rates
were made, and as a consequence there was a public outcry
against discrimination. Various local interests, which were
fighting each other for local supremacy, held that the only
remedy for the discrimination complained of was government
ownership of the railroads, and Prussia, in 1879, took the first
step toward this end. In a short time all the private rail-
roads of the German Empire were bought by the Government
and the experiment of a government making rates was begun
on a fixed scheme of charges which imposed a terminal charge
for loading and unloading, combined with a haulage charge of
a fixed sum per ton-mile; and in no country has the system been
carried to such an extent, tested in every way.

For example, upon raw materials there is a terminal charge
plus haulage charge of nine-tenths of a cent per ton-mile for dis-
tances up to 624 miles, and a trifle over three-fourths of a cent
for every mile beyond that limit. By this system of distance
rates Germany was not only to solve the discrimination problem,
but at the same time was to develop each section of the Empire
and decentralize the trade of the country. The centralization
of trade was one of the complaints made by the public at large—
that is, that the trade of the country was centered in a few
cities. By a distance or mileage rate scheme each town would
have its own rate, which was to be fair and only for the dis-
tance hauled. In this manner the large and strong cities were
to give up some of their trade and population, and the interior
of the Empire was to be developed. It is my purpose to show
briefly whether this result has been obtained.

Broadly speaking, after twenty-five years of experiment and
trial, the situation in Germany as regards discrimination and
the centralization of trade and commerce has changed only for
the worse. The scheme has been a failure; commerce and
trade have more effectually been centered in certain favored
cities than ever before and discrimination has been increased
instead of decreased. Sectional interests and trade interests
are at swords’ points concerning the preservation of established
trade and industry, and use any means to prevent that, increase
of competition between rival purchasing and distributing cen-
ters, which was inevitably good with the development of long-
distance traffic. Railroad rates are in politics. No great State
measure in the German Empire can be carried through without
a coalition of discordant interests on the railroad question. So
bitter is the feeling, so intense the rivalry, that the German Gov-
ernment has been forced to go into the canal-building business
on a most extensive scale; has been forced to grant export
bounty duties, levy import duties, and in every way possible try
to placate diverging and sectional interests. Virtually, freight
or traffic barriers have been built around section after section of
that Empire, until each section stands to-day by itself, fighting
for commercial interests.

As an illustration of the centralization of trade, the iron and
steel business can be taken. The Rhur district and the Saar
district produce, respectively, 39 and 36 per cent of the pig-iron
product in Germany. In a word, they are iron producers of
equal importance. Yet. so far as trade depends on railways, the
Saar district is almost shut out from northern, central, and

6603
6

eastern Germany, while, on the other hand, it has practically a
monopoly of the iron and steel trade with suuthern German and
Switzerland. The reverse is true of the province of Silesia,
which has a monopoly of the trade of that province, parts of
east Prussia, and the foreign territory lving immediately to the
east of Silesia.

In this way the iron and steel trade of Germany is appor-
tioned to these three producing and distributing centers. Many
efforts have been made to have the railway rates lowered be-
tween these great producing centers, but they have been unsuc-
eessful. The Government has claimed that a reduction in.
rates given to one interest or locality must be followed by
counterbalancing reductions to others. As a result of this re-
fusal to lower transportation charges and the inability of these
three districts to interchange ores it is estimated by one of
the foremost authorities of the German iron and steel indus-
tries that the transportation charges constitute 28 per cent of
the total cost of iron making in that Empire, as against 10 per
eent in Great Britain, Germany's principal competitor. This
same condition applies to the traffic in all other bulky and com-
paratively low-priced articles of trade, and has done much to
make more sectional than ever the sections of Germany.

Then, too, the effect of the mileage rate on cities is shown
in the example of Bremen and Stettin. Prior to 1877, under
the private ownership of railroads, Bremen had a virtual monop-
oly of supplying Germany with petroleum imported from the
United States, but now, owing to the cheap water transporta-
tion, Hamburg has captured all that trade and the railroad de-
partment is powerless with its inelastic rates, and Bremen must
suffer. Bremen is as near the center of the beet-sugar indus-
try as Hamburg, but it has practically no export sugar trade,
because the railroad is powerless to aid in meeting the rates of
the river vessels. Stettin is the only Prussian port of im-
portance, and it has of late years been losing trade to Ham-
burg, and the Government is powerless to keep up the business
of its one port by reduced freight charges. But it seeks to
remedy this condition by the building of canals at an immense
expense, and this is the only remedy that Germany has found
for its present vexatious problem of freight transportation and
the centralizing of trade in a few cities. This agency may be,
and is, a greater evil than those complained of under the private
ownership of railroads, for it has increased local jealousies and
made discriminations in favor of cities and districts more posi-
tive than ever shown by a private railroad. And as these rivers
are deepened and the canals widened to float larger vessels the
discrimination in favor of the cities and the districts reached
becomes more marked and more cruel.

It might be interesting for a moment to glance at the condi-
tion of the railway properties of Germany from an effective
standpoint. They have not advanced in capacity to handle
trade, in roadbed, or in any other way in which the modern
railroads of America have grown to be such marvels of me-
chanical genius. So it is not strange that the State railroads of
Germany have done little toward helping that country to adjust
itself to the general world-wide fall of prices. Professor Meyer,
in his work on railway rates, states, on German and American
authority, that in Germany for the entire period of 1880 to 1899
prices fell 17.6 per cent and railway charges 14.7 per cent. In

6603
7

the United States, however, prices fell 24.3 per cent and rail-
way charges 41.7 per cent.

It is true that in the matter of personal discrimination the
German Government has been fairly successful in limiting it
upon railways. Indeed, in the American sense of the term there
is no personal discrimination effected by means of secret rates.
But the Government found upon taking charge of the private
railways that certain commodities were given a special or
preferential rate, and it has increased these to such an extent
that it is estimated that 80 per cent of the freight of the Empire
is carried by these rates.

This brief review of the situation in Germany shows that the
government ownership of railroads and the government making
of railroad rates has failed in the two most important features—
the decentralizing of trade and the abolishing of discrimina-
tion. In a word, we find that the commercial freedom of trade
intercourse within the borders of the German Empire is far
from what it would have been bad the making of railroad rates
been based upon the economic principles of the demands of
trade.

A similar condition exists in Austria-Hungary; and in Austria-
Hungary and the Danubian provinces local jealousies and local
rates have made it almost impossible for the products of these
countries to compete anywhere. So it is in Russia. The great
Siberian region could be opened up, as was the great West of
this country, for wheat growing. The wheat growers of Siberia
would use the manufactured articles of southern Russia; but
the wheat growers of Russia whose lands lie between Siberia
and the Baltic or Black Sea object on the ground of nearness to
markets; as a result there is but little wheat grown in Siberia.
In Russia, as in Germany, hard and fast rates have driven
transportation to the waterways, and thus increased the discrim-
ination in favor of natural locations.

Australia shows a different aspect. There the several rail-
ways compete on a mileage rate for the traffic of the great wool-
producing center of Australia—the Riverina. It would be an
easy matter for the railway managers to agree upon a division
of the Riverina, but the government will not permit it; as a
consequence the trade and commerce of the government of
Australia centers in the three towns of Melbourne, Sydney, and
Adelaide. There are no small basing or distributing centers
seattered throughout the country. For example, when the rail-
roads of Victoria were extended to Ballarat, 100 miles in the
interior, that town had a considerable wholesale trade, but this
was lost on the mileage-distance scheme when the railroad was
farther extended. As a consequence there is an extraordinary
concentration of the people of Australia in a few cities, and
these cities make the laws of a country whose resources are
mainly agricultural and pastoral. But a more comprehensive
review of the entire situation is found in an interview given
by Gen. H. C. Corbin, of our Army, published in the Army and
Navy Journal of February 24, 1906. He had just returned from
a trip to New Zealand and Australia, and in speaking of the
former country, said:

The government owns all the railroads, life and fire insurance, tele-

phone, as well as telegraph lines: savings banks are the property of
the government; yet the railroad rates and fares are mucb greater than

6608
8

in the United States. This is also true in Australia, where all the
railroads are owned and operated by the state. In neither is the
service anything like as good as at home.

Having thus briefly outlined the situation as my investigation
has led me to find it in Europe and Australia, I come to the
situation in the United States, where there has been full sway to
competition of commercial forces. What is the result? The
most expeditious and efficient system of railroad transportation
of any nation of the earth; a system that has a mileage which
has increased from 76,808 miles in 1876 to 217,250 miles on
January 1, 1906—an increase of 182 per cent; a system that in
1882 carried 360,490,375 tons of freight and in 1904 carried
1,275,321,607—an increase of 254 per cent; a system that as a
result of improvement in railway equipment, etc., is vastly more
efficient than that of even twenty years ago; a system that has
decreased the average rate for carrying freight from 1.24 cents
per ton-mile in 1882 to 0.77 of a cent per ton-mile in 1904—a cut
of 38 per cent; a system which has decreased the rate per ton
charge from 1887 to 1905 24 per cent. Compared with the expe-
rience of Germany this should, in my opinion, settle forever the
result of government rate making. It will be proper, however,
and perhaps enlightening to study somewhat in detail the con-
ditions which have produced these results.

The civil war left the various industries of the United States
in a most unsettled condition. The great wave of immigration
from 1867 to 1873 and the great panic of the latter year led to a
most wonderful change of population and most remarkable
migration to the cheap farming lands of the West. The great
grain-growing and wheat-raising States west of Pennsylvania
increased their area under corn and wheat by 39,000,000
acres—the equivalent of 70 per cent of the increase of the area
under crops of all kinds in the United States. At once the
economic conditions of the country were faced with the prob-
lem of consuming the wheat that was being raised in this won-
derful ney development of the West. So far did this great
American granary lie from the Atlantic seaboard that it was
held that the distance alone would preclude its exportation to
Europe. More wheat was being raised than could be consumed
in the East, and nothing but ruin stared the western farmer, the
eastern farmer, and the eastern manufacturer in the face. But
the competition of the railroads, competition based on the de-
mands of trade and not on the hard and fast lines of a govern-
ment mileage rate, solved this problem.

In the development of this great western section people and
localities suffered, but the progress went on—the greatest good
for the greatest number. The courts were hampered with peti-
tions that the rates on grain be fixed on a mileage basis, since
any other adjustment of rates destroyed the advantage of prox-
imity to market. The protestants failed to appreciate that the
commerce of the United States was growing outside of State
limits, that the manufacturers of the Eastern States would have
a market in the great West for their products, and that the
whole was being far advanced. Judging from European ex-
perience, which I have tried to point out, had they been suc-
cessful the buffalo to-day might still be roaming through the
wild grass of the West, and the trade of this country centered
in a few cities of natural location.

6603
9

This development was brought about by discrimination, or, in
other words, by the demands of trade. As late as 1868 the Brie
Canal dominated the grain situation and directed the bulk of
this traffic to New York City. By 1874 the Pennsylvania and
the Baltimore and Ohio railroads had reached Chicago and com-
menced a series of rate wars with the New York Central to
secure to each of them a share on the shipments of grain to
Europe. But the ocean freights between Philadelphia and Bal-
timore and Europe were necessarily higher than the ocean
freights between New York and Europe, therefore the railway
charges between Philadelphia and Baltimore and the interior
had to be, and still must be, lower than the railway charges
between New York and the interior. These two roads were
finally successful in securing a differential which enabled them
to handle grain in competition with New York. That arrange-
ment did not suit New York then, and does not suit her now.
She claims the right of natural advantage, has petitioned Con-
gress time after time, and has been opposed to the differential
ever since. On a hard and fast system of mileage rate—such
rates as Germany has—New York would to-day handle the
bulk of the grain trade.

Consequent upon this rate war is another illustration of the
benefit of competition based upon the demands of trade. In
1870 the interior cities of the country solicited Congress to au-
thorize the transportation of imported goods in bond from the
Atlantic ports to Chicago, St. Louis, Cincinnati, Memphis, and
other cities. The railroads were able to haul these goods at
moderate rates, since they gave an opportunity to load the empty
ears which had carried the grain east. As a result of favorable
action by Congress, these interior cities began a career as dis-
tributing points and captured a great part of the jobbing trade
that had formerly gone to the larger Atlantic cities. This sys-
tem aided in the inevitable result of the growth of population
and wealth in the interior. The jobbing trade of the Atlantic
cities was not satisfied with this competition and complained.
It is not satisfied with it to-day, but the greatest good to the
greatest number has been obtained.

This competition which has built up this great western terri-
tory in every case protects each section. There are ten great
concentrating grain markets from which radiate roads in all
directions. The traffic is watched from day to day and a rate
war is the final arbitrator of differences that can not otherwise
be settled. So in every case the rates are a compromise be-
tween rival interests. As a compromise they perhaps please
no one, but they are for the general good, and are the result
of free, unhampered trade competition.

I desire, Mr. President, at some little length to call attention
to the study of one more of the discriminations of the railroads
which has decentralized trade in this country and established
distributing points of importance all over the land—the basing-
point system. This is a system which the long and short haul
of the interstate-commerce act was, in the opinion of the Inter-
state Commerce Commission, to do away with. The Commission
itself admits that the system has been a material benefit in
some cases. (Holdskom v. Michigan Central Railroad Company
et al.) It admitted that the system resulted in cheaper prices
for the people, and that no near-by city was injured, but yet it

6603
10

holds that it-is not right. That the system has decentralized
trade is further shown by the action of several State railroad
commissions, all bearing testimony to this effect.

My attention was called a few days ago to an article in the
Review of Reviews, written by Mr. D. K. Redmonds, editor of
the Baltimore Manufacturers’ Record, showing the astonishing
growth and development of the South. I desire to use a few of
his figures to illustrate the point I am now discussing. Between
1880 and 1905 the South increased the number of its cotton
spindles from 667,000 to 9,205,000 and the consumption of cotton
in its mills from 225,000 to 2,163,000 bales. To appreciate these
figures it must be remembered that New England and all the
country outside of the South in 1880 consumed 1,350,000 bales, or
six times as much as the South, and in 1905, 2,282,900 bales, or
but a few thousand bales more than the South. In its 777 mills
the South has $225,000,000 invested, and the room for the expan-
sion of this industry is limited only by the South’s inability to
supply labor and capital. Of her coal and iron developments the
mind of man can scarcely grasp the full conception. The South
has a total of 62,957 square miles of rich coal lands against a
combined total for Great Britain and Germany of 12,600 square
miles. In timber also the wealth of the South is fabulous and
practically untouched, and on top of all comes the South’s agri-
cultural productions, with a total value of $1,750,000,000, of
which cotton furnished about $600,000,000. It includes also
496,000,000 pounds of tobacco and 2,500,000 barrels of sugar.

All this great development, Mr. President, has been accom-
plished by the aid of the basing system, which results from the
competition between the railways themselves, between the rail-
ways and the coast vessels, and between the railways and the
river steamers. I can not do better at this point than to repro-
duce the description of the method of the adjustment of rates
under this basing system made before the Industrial Commission
by Mr. M. C. Markham, assistant traffic manager of the Illinois
Central Railroad. Mr. Markham stated that the Mississippi
River fixed the rates between New Orleans and St. Louis. He
then added that while Mobile, situated 140 miles east of the Mis-
sissippi River, had not the competition of a river to force down
railroad rates it had railroads which were interested in enabling
Mobile merchants and manufacturers to compete in common
markets with the merchants and manufacturers of New Orleans.
One hundred and eighty miles farther to the northeast lie
Montgomery and Selma, trade centers on the Alabama River.

The railroads reaching Montgomery and Selma had no inter-
est in New Orleans or Mobile, and tried to get all the traffic
they could to and from Montgomery and Selma by putting these
towns on a fair plane respecting rates with Mobile and New
Orleans. Still farther inland lie Meridian and Jackson, Miss.,
Birmingham and Gadsden, Ala., and Chattanooga, Tenn., on the
one side, and Columbus, Rome, Atlanta, Athens, Macon, and
Augusta, Ga., and other towns of importance, on the other side,
all asking of the railroads which served them such rates as
would enable them to do business in common territory in com-
petition with New Orleans, Mobile, Montgomery, and Selma, as
well as in competition with one another.

In the same way Galveston, 360 miles west of New Orleans,
had no river advantages, but the railroads serving it enabled
its merchants and manufacturers to compete in northern com-

6603
11

mon markets with New Orleans merchants and manufacturers.
The adjustment of rates the Galveston roads had to make for
that purpose ultimately was extended to the outlying and inter-
mediate towns between Galveston and the Missouri River and
between Galveston and the Mississippi River north of Vicks-
burg, all of which had to have the concessions which the forces
of trade warranted.

Finally, the low rates made by the railways from St. Louis
to Memphis and New Orleans on account of the Mississippi
River had to be met by the railroads from Chicago, Cincinnati,
and many other points. in order to enable the industries of the
last-named cities to hold their own with the industries of St.
Louis. In this way, said Mr. Markham, the low rates which
were made in the first instance to meet the competition of the
Mississippi River finally were extended, wholly or in part, t&
the entire northern, southern, and southwestern portions of the
United States.

It must be plain to every hearer that the consumer was finally
the man who profited, for by this working of competition it is
the consumer who gained by this vast basing system.

In addition to decentralizing trade, and in that way building
up various wholesale interests all over the country, the principle
of making low rates to competitive points has been a great
economy in the interest of transportation. Freight that moves
in large quantities and at regular intervals is handled much
more cheaply than freight which comes in small and intermit-
tent quantities. Were there no basing points freight would
have to be carried over long distances from the source of supply
in comparatively small and irregularly flowing quantities. The
establishment of these basing points has made the railroads of
the United States what they are to-day. To meet the efforts of
their rivals, roads have been forced into large expenditures for
the betterment of their lines, in their rolling stock, and all other
things relative thereto. With rates fixed to competitive points
and on a low basis the Baltimore and Ohio road, for instance,
has been forced within the past five or six years to enter into a
most expensive system of roadbed, straightening out curves,
the laying of heavier rails, the purchase of greater power
locomotives and heavy rolling stock.

And the example of the Baltimore and Ohio is only an illus-
tration of what other roads have done. Had not the railroads
of this country been permitted to avail themselves of the
economies of the basing-point system their growth would have
been much slower. To illustrate this point further, a glance
at the Australian system will aid. There, as I have shown be-
fore, there is no basing-point system. In 1902 the average train
load in New South Wales was 66 tons and in South Australia 69
tons. Such loads mean high running expenses, and are ridic-
ulous when compared with the hauling capacity of a modern
American railroad.

It is unnecessary to illustrate this system further. The story
of the distribution over the West of the merchandise and manu-
factures of the East is only a story of the basing-point system
of the South. The railways pursued the same course in the
West as in the South; they developed first the most promising
resources, and then turned to the least promising. Thus they
discriminated. But in all cases the railways were operated
with the one point in view—of making a profitable investment—

6603
12

and to do this they were forced to cooperate with the American
people, promoting their immediate as well as their permanent
interests. They did not go contrary to the interests of the
people. The policy of the railways in making rates was not
governed by a fixed rule, such as the mileage tariff, and the
rates were made as cases arose, so as to meet the demand of the
occasion, and they manifested then, as now, one overruling prin-
ciple, the development of industry and trade wherever such
development was practicable. In this way they have made the
United States a great commercial whole.

In regard to the third class of discrimination charged, that of
personal discrimination, it is necessary to say but little. Dis-
crimination between individuals apart from competition—that
is, giving to one man or one interest a rate for the sole purpose
of favoring the business of that man, or injuring the business
of another man or another interest—scarcely exists in this coun-
try. The Interstate Commerce Commission says it does not
exist. No proceeding is pending now, or has been pending, upon
any such charge, though it is an offense under the interstate-
commerce act. The chairman of the Interstate Commerce Com-
mission has testified, under oath, that there has never been
brought to his knowledge a rate made in bad faith—that is, for
the sole motive of helping one man’s business and hurting an-
other. Rebates, general tariffs with short terminal lines, and
dealings with refrigerator and other car lines are another
matter. While for convenience they may be classed under the
general head of personal discrimination, they stand upon a
really different basis. Rebates are a method of cutting the pub-
lished rate, the result of competition.

A shipper has a large amount of freight to be carried, several
competing railroads want the business, none of the companies
can openly change their published rate, but one of them can
secure the business, and at the end of the month, or in the reg-
ular course of business, send a check to the shipper for a reduc-
tion agreed upon by each of them. This is forbidden by the
interstate-commerce act; it is a kind of competition which is
very dangerous and ought not to be allowed. I can appreciate
the desire of a railroad company to give the man who ships
1,000 tons of freight a month a better rate than the one who
ships only 100 tons; but it is wrong; it is dangerous, and I will
gladly join in any effort that will stamp it out.

But there is also another evil under the head of “ personal
discrimination,” which has come to light within the past few
years, and that is a discrimination in favor of handling one
shipper’s product at the expense of another; the refusal of a
railroad company to carry at all the product of a certain ship-
per. This, to me, Mr. President, is one of the worst evils of
railroad management to-day; is one which should be met and
dealt with most severely; is one that should be eradicated,
stamped out, even if the most stringent measures are necessary
to accomplish this end. The railroad, as a common carrier,
must and ought of right give to each shipper his fair share of
the facilities the road has to offer for the advancement of com-
merce. I may digress here for a moment to speak of the great
coal interests of the country, and to express my belief that it
is a most dangerous course for a railroad to pursue, to be found
as the owner of, or participating in the profits of, any great
tract of coal lands. This I would hold true with any of the

6603
13

other great necessities of life. and believe that the railroad in
the future, as in the past, should devote itself entirely to its
duties as a public carrier.

The problem of rate making is the problem of commerce; is
the problem of compromising the daily struggles going on be-
tween the different trade centers of the country. It extends
further than to the mere settlement of the price to be charged
by one railway in carrying a ton of freight; it enters into the
very essence of our happiness and prosperity as a country.
The more it is studied the more complicated the problem seems
to be, and the more sure I am that the rate-making power is
safer in the hands of the railroads than it is in any body of men
appointed for that purpose.

I have tried to show the evils of rate making by Government
ownership and by Government control. The invariable result
in those countries where such system exists has been to trans-
fer the field of business to the field of politics, with disastrous
results. Under the Government ownership of railways in Ger-
many the state railway department is not allowed to make a
railway rate that will permit the surplus product of one section
to compete in another section of the country. It has been
forced to expend immense amounts of money to build canals to
assist certain sections. It has hampered its own industries
and has fostered jealousies. In Russia the same paralysis of
the railways exist through trade jealousies with the resulting
recourse to transportation by river. In Australia trade jeal-
ousies force each colony to refuse to cooperate with its neigh-
bor. And in England and France almost the same condition
exists.

On the other hand, the example furnished by the United States
speaks more eloquently than any words I can use, of the bene-
ficial results of railroad rates based on the requirements of the
economies of trade. I have pointed out the benefits of the bas-
ing-point system and of the free play of competition. I have
shown how trade has been decentralized and the whole country
welded into one great commercial whole. I have tried to show
that the railroads by their virtual annihilation of space have
made this result possible, and I can see, for myself, no reason
why we should change.

But it may be claimed that no measure now before this body
would place the rate-making power on a system which would
follow so obvious a commercial failure as that off European gov-
ernments. In reply, I can only say that we must judge of what
will be done by what has been done. In 1887 the Interstate
Commerce Commission was established for the avowed pur-
pose of regulating trade, doing away with discriminations and
the many other faults complained of by certain interests in the
United States. Since that time they have had many cases be-
fore them, and seemingly from the start laid down as a basic
principle that railway rates may not be adjusted to each other
on commercial considerations, but that such adjustments must
conform strictly to differences in the cost of the service for
which the respective rates were made, in other words, that
there must be a mileage tariff.

These cases have been all appealed to the Supreme Court and
the basic principles laid down by the Interstate Commerce Com-
mission in nearly every case haye been overruled. The Inter-
state Commerce Commission held that competition by water-

6603
14

way was the only commercial consideration that should be
taken account of in making a competing rate to a competing
point. They have repeatedly condemned the great American
rate practices, by which the various sections of the country
have been built up into one great whole, without seemingly
studying the various conditions that have caused the establish-
ment of such rates. They have held that a rate principle might
be unlawful though no location or community could say that
they were injured by it. No rate principle was right that was
not based on a mileage tariff. The Interstate Commerce Com-
mission has construed the act to regulate commerce on this
mileage-tariff plan. It has construed the phrase ‘“ under sub-
stantially similar conditions and circumstances” to mean but
one thing—a mileage tariff.

For instance, in 1893 the Interstate Commerce Commission
held that rates made by certain railroads to Troy, Ala., were
relatively unjust when compared with those to Montgomery,
Ala., attacking the basing-rate system, the benefits of which I
have tried to illustrate at some length. The Commission held
that the conditions were similar at Montgomery, Ala., to those
at Troy, and held that the fact that Montgomery was situated
upon a navigable stream did not of itself justify the lesser
charge for the longer haul. The Supreme Court, however, in
reversing the decision of the Commissioners took into account
the fact that the volume of population and business at Mont-
gomery is many times larger than it is at Troy, and that there
were more railroad lines running to and from Montgomery con-
necting with distant markets; that the Alabama River was
open all the year, and was capable of bearing to Mobile, on the
sea, the burden of all the goods of every class that passed to
and from Montgomery. It took all these matters into consid-
eration and decided that the railroads, subject to the two lead-
ing prohibitions, that their charges shall not be unjust or un-
reasonable—
are better qualified to act in such cases than is any commission or
board of public administration, and, within the limits suggested, it is
safe and wise to leave to their managers the adjusting of dissimilar
circumstances and the conditions to their business.

Another doctrine developed by the Interstate Commerce Com-
mission is that no place may be deprived of the advantages
accruing to it by reason of its geographical situation. The
monstrousness of this doctrine can readily be seen; and it is on
the opposite of this that the railroad systems of this country
have based their rates for the past forty years. The result of
“the natural-advantage” doctrine has been shown in the rail-
road history of Europe and Australia. The advantage of the an-
nihilating of space, the building of this country into one, with
its basing centers, and its sections brought into close connection,
has been shown in the wonderful growth and development of
this land since the civil war.

So, Mr. Presivlent, judging from the past. I am led to the con-
clusion that the Interstate Commerce Commission would, if it
had the power, establish at once the principles of the mileage
tariff and of natural location. Therefore I can not agree that a
political commission appointed by a President, open to change
at every general election; should have the power to fix railroad
rates on any such theories. Neither do I think, Mr. President,

6603
15

that the country wants such a system of rate making, for I do
not think that rate making is the remedy for the evils which
exist. That there are evils I have tried to point out, and I
believe that it is the duty of Congress to eradicate them; to
make it plain that the railroads must be public carriers, free
to all; that one man’s product must be hauled as rapidly and
freely as another; that there must be no rebates, no personal
discriminations, no ownership of the great necessities of life.
These are evils that are to be met and remedied. The small
operator, the small business man, must have the right of hay-
ing his product expeditiously and freely handled. In my own
State a case of a railroad refusing to make a switch connection
has been given much publicity. Our own State laws have in
similar cases compelled railroads to make these connections.

But to give all the States the benefit of our experience I would
have any bill prepared so that it would protect the small oper-
ator, whatever his business may be, force railroads to make con-
nections with lateral roads and thus give to all free and unre-
stricted transportation to all markets. Should the bill now
before the Senate pass without amendment, I think the people
of the United States within a very few years would find that it
remedied none of the evils it was supposed te cure. I want the
bill amended so that the coal operator of West Virginia can open
up his mine, have that mine connected with a railroad, have his
just share of cars, and thus have his product carried to the best
market. I want the bill amended so that the farmer of the
West can ship his surplus grain; so that the planter of the South
ean dispose of his cotton, and the lumberman of the North of his
timber, and that these in turn can take their share of the manu-
factures of the Hast. I want the bill amended so that it will be
plain that the railroads shall not be owners of coal lands, grain
lands, or any business enterprises, and that the small producer
shall have an equal chance with the large.

In trying to treat fairly and justly the railroads, as well as the
people, we must bear in mind that the railroad growth of the
last half century has been reached only through enormous ex-
penditures of money. The railroads have spanned a wilderness,
with no immediate financial returns in prospect, and the wil-
derness has blossomed as the rose. The railroads climbed
through the mountains and hills of West Virginia at a great
expense and waited long before the development of her mineral
resources startled the world. In most instances the railroads
have been built as business enterprises, entered into from
purely business motives. Their success has always been iden-
tical with the growth of the country. So, Mr. President, we
should strive to correct the evils which do exist.

So along the lines of correcting the evils I have pointed out I
think the Interstate Commerce Commission could properly work.
I also believe that the Interstate Commerce Commission may
judge of the unjustness of certain rates, but it should bear in
mind that the railroads are not all bad, and its conclusions
should be based on the free competition of Ail trade economies,
not on a mileage scheme or a scheme of natural location. I do
not want to see railroad rates the general political question of
this country. I do not want to see Congress arrayed into sec-
tions trading with each other for some seeming advantage. I do
not want to see the great con merce of this country centered in a
few cities favorably located on natural waterways.

6603 ;
16

I want to secure to the greatest number the greatest good,
and this can be done, in my opinion, better by trained railroad
men who have made this question of rates a lifetime study, and
acting under the restrictions proposed before, than by any com-
mission.

I realize, however, that there is a demand that the Interstate
Commerce Commission should be given authority in the mat-
ter, and that power will probably be given it to fix rates when
conditions require it. I am opposed to giving them that power,
certainly without a provision for a broad and general court
revision, to which the shipper and carrier can appeal when the
rate designated is unfair to either. I hold to such a revision by
the court since the history of the Interstate Commerce Commis-
sion has shown to my mind that the power of the court to review
their decisions has simply saved this country from the experience
of European countries. That experience has shown that dis-
criminations of a more serious nature than we have exist, and
prove conclusively that the results coming to us, had the Inter-
state Commerce Commission the powers to enforce its decisions,
would have been disastrous beyond comparison.

6603

O
REGULATION OF RAILROAD RATES,

SPEECH

OF

HON. F. M. SIMMONS,

OF NORTH CAROLINA,

IN THE

SENATE OF THE UNITED STATES,

Tuesday, March 13, 1906.

abe
“~

WASHINGTON.

1906.
6628
SPEECH

F

HON. F. M. SIMMONS.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled ‘“‘An act to regulate commerce,” approved Feb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. SIMMONS said:

Mr. PresImpENT: Practically all the arguments which have
been made against legislation giving the Interstate Commerce
Commission power to substitute a reasonable rate for one
found to be unreasonable are based upon three general propo-
sitions—

First. That with the exception of abuses arising out of rebates
and discriminations, there are no grievances growing out of
present transportation conditions which can not be remedied
with as much expedition as safety to the legitimate interest
involved will allow under laws now in force.

Second. That the proposed legislation would be disastrous to
the railroads and to the country.

Third. That it would be unconstitutional.

It is obvious, if these several propositions or any of them are
sound, there is either no necessity for this legislation, or, if
needed, it would be ineffective because unlawful.

No Senator has defended or will, I presume, defend rebates
and discriminations. All will agree, I suppose, that if present
laws are insufficient to remedy these evils they should be ade-
quately amended.

I shall therefore give no attention to the features of the meas-
ure under consideration which relate to these practices, but shall
confine myself to the proposition to confer upon the Interstate
Commerce Commission power to fix rates under rules and stand-
ards prescribed by Congress.

Mr. President, J think I may assert as a general proposition,
the soundness of which every public man’s knowledge and ex-
perience will confirm, that the American people as a whole are
not only conservative and tenacious in their adhesion to estab-
lished policies, but that they frequently exhibit a degree of
patience and forbearance with evils affecting their vital interests
which are hampering and burdensome not equaled by any other
people in the world. We have here, as they have everywhere,
individuals and factions who raise a tumult over fancied
wrongs, but our people never lend themselves to false clamor and
are seldom misled by it. Whenever, therefore, the great mass
and body of our people, without regard to section, vocation, or

‘party alignment, are practically united in denouncing an exist-
ing system or condition as unjust and oppressive and in demand-
6628 3
4

ing a specific remedy, their protest and demand present an argu-
ment which, to a public servant at least, is or should be persua-
sive. This I believe to be the present attitude of a vast majority
of the people of this country with respect to this rate question
and the remedy proposed.

More than this, Mr. President, these protests and demands
present in themselves a mass of evidence—an overwhelming
aggregation of facts—growing out of the daily experience of
80,000,000 people with an existing business condition showing
that the evils of which they complain are actual and militant.

In support, therefore, of the contention that existing trans-
portation rates are in many instances unjust and unreasonably
high, and that unfair and ruinous discriminations are prac-
ticed against individuals and localities, I wish here and now to
put in evidence the almost innumerable petitions, memorials,
and resolutions which have come to us from the legislatures of
great States, from associations of bankers, merchants, live-
stock men, farmers, and laborers, as well as the complaints and
demands of the great mass of producers and consumers from
every part and section of the country which have found utter-
ance through the press.

Mr. President, the railroads deny the justice of these com-
plaints of the people and rely upon three general statements
with reference to railroad rates and profits to show that they
are unfounded:

First. They allege that their tariff schedules show that there
has been little, if any, change in recent years in the rates
charged against the six great classes into which for that purpose
freights are subdivided.

Second. That statistics show that there has been practically
no increase, if not in fact a small decrease, in recent years in
the average rate per ton-mile.

Third. That profits on railroad investments are small.

These statements may be or they may not be true, but
whether true or false the conclusions sought to be drawn from
them are not only misleading but they are false.

The fact, Mr. President, if it be a fact, that the specific sched-
ules of the six great classes into which most subjects of trans-
portation are segregated and to which a common charge is ap-
plied have not been increased would not show, nor would it tend
to show, that the freights actually paid by producers and ship-
pers have not been increased. What it would show, and all
that it would show, is that if rates have been increased they
have not been increased by the open and above-board process
of raising these class charges. As a matter of fact, shown by
railroad statistics themselves, as well as by the reports of the
Interstate Commerce Commission, railroad rates have been in-
creased and largely increased during the last six years not by
the process of raising the specific rate of schedule or commodi-
ties, but by the more insidious method of commodity reclassi-
fications.

Beginning with the year 1900, hundreds and even thousands
of articles have been reclassified by raising them from a lower
to a higher priced class in the various orders promulgated by
the railroads in the several divisions into which they have di-
vided for this purpose the whole country. In one classification,
known as Order No. 20, issued early in that year and applying

6628
5

to northern and eastern traffic, there were nearly 600 reclassifi-
eations, of which 572 were increases and only 6 reductions.
By another reclassification order made in the same year and
known as Order No. 30, and applying to western business, 257
reclassifications were made, of which 240 were increases and
only 17 reductions, while by Order No. 25, applying to southern
traffic, made in same year, out of 636 reclassifications 531 were
increases.

Mr. President, candor requires that I should say that as to
some of these orders there are more reductions than there are
increases, and that, considering all reclassifications made during
these years, it may be that the number of articles actually raised
did not greatly exceed the number nominally reduced; but, Mr.
President, the relative number of articles raised or reduced is
comparatively unimportant. The significant fact is the commer-
cial importance of the articles so raised or reduced and the
resultant increase or decrease in the cost of their transporta-
tion. Now, Mr. President, an examination will conclusively
show that during these years the commodities reduced compared
with those increased are not only relatively of little commercial
importance, but that the percentage of the reduction in rates on
articles reduced is far below the percentage of increase in rates
on articles increased.

For example, as a result of these reclassifications, in 1900
hay was raised from the sixth to the fifth class, and the
freight on it thereby increased 80 cents per ton. In 1903, by
the same process, the rate on iron and steel was advanced 20
cents, that on coal 10 cents, and that on lumber 40 cents.

These and like commodities which have been advanced by this
process are articles of enormous production and consumption,
constituting in the aggregate a large per cent of the total rail-
road tonnage of the country. It is obvious, therefore, Mr. Presi-
dent, that an increase in the rates charged on a few articles of
this character more than offsets many hundreds of reductions
on commodities of lesser commercial importance.

I have in my hands a letter from the chairman of the rail-
road commission of my own State, a lawyer of great ability,
who has devoted the last six years of his life almost exclusively
to the study of questions connected with his official duties, in
which he says that the railroads of that State in 1902 attempted
a sweeping reclassification of the subjects of transportation
which, had it not been prevented by the commission over which
he presides, would have raised rates upon domestic traffic in
that State at least 334 per cent.

Mr. President, I have often thought if every commodity of
commerce had attached to it a label showing the difference in
its cost to the final purchaser on account of our high tariff
schedules, the rankest “ stand-patter ” in Congress would be un-
able to resist the overwhelming demand which would come to us
for a reduction of these schedules. Likewise as overwhelming
is the present demand for Government interference to protect
the people against excessive railroad rates. I have no doubt
the substitution of the reclassification method of rate advance-
ment for the more open method of raising specific rates of
schedules and commodities has served the railroad well and
operated to both postpone and lessen the force of the present
demand for relief, but, as in the case of the tariff, so in the

6628
6

ease of the railroads, the truth is being forced home to the
people by the heavy drafts made upon their earnings, and their
mutterings of discontent grow louder and louder day by day.

Mr. President, the argument made by the railroads and in
their behalf, based upon a comparison of the present average
rate per ton-mile with that of a few years ago, is, as I said
before, misleading, but even if the contention of the railroads
that there has been no increase in this rate should be admitted,
it would not justify the conclusion sought to be drawn from it,
that there has been no material increase in the rates actually
paid and collected. A superficial analysis of the problem will
suffice to show that the average rate per ton-mile paid during
two different periods, obtained by a calculation of total freights,
number of miles it was hauled and charges actually paid for
hauling it in two given periods, may be and are ‘n certain cir-
cumstances of but little or no value in determining the actual
difference in the transportation charges of these respective
periods.

It is obvious if the high-grade commodities on which high
rates are charged are mixed indiscriminately with low-grade
commodities upon which lower rates are charged the average
cost per ton-mile will be influenced to a far greater extent by
the amount of tonnage hauled than by the rate charged. In
other words, if the volume of low-grade cominodities is in-
creased while the volume of the high-grade commodities is sta-
tionary, or if the volume of the former is increased out of
proportion to that of the latter without changing the specific
charges against either, the average per ton-mile will be reduced
or e converso raised. To illustrate: If two given sums of money
are loaned, one at a higher and the other at a lower rate of
interest, the average return from each dollar so loaned will be
less than the higher and more than the lower rate charged.
Now, it is plain if the amount let at a lower rate is greatly
increased while that let at a higher rate is not increased at
all, or if the former is increased out of proportion to the latter,
the average return from each dollar so let will be reduced or
e€ converso increased.

Now, Mr. President, it is a fact of common knowledge,
shown by statistics and verified by the reports of the Inter-
state Commerce Commission, that during the period of our great
prosperity and business activity there has been an increase in
the volume of low-grade freights aatogether out of proportion to
the increase in volume of high-grade freights, and that this
fact has held down the increase in the average rate per ton-
mile. ;

For instance: Manufactures, which are high grade and high
price commodities, constituted, in 1890, 13.52 per cent of the
total railroad tonnage of that year originating on all roads, and
in 1904 only 13.41 per cent of that tonnage. Merchandise, also
high grade and high price commodities, constituted, in 1890,
4.73 per cent of the total railroad tonnage of that year origi-
nating on all roads, and in 1904 only 4.83 per cent of that ton-
nage—practically no increase in relative percentage. On the
other hand, coal and ore and other products of the mines, which
are low grade and low price products, constituted, in 1890, only
47.32 per cent. while in 1904 they constituted 51.56 per cent of
our total railroad tonnage, or, stated in figures, these products

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7

constituted in 1890, only 129,000,000 out of a total tonnage in
that year of 274,000,000, while in 1904 they constituted 330,000,-
000 out of a total tonnage of 641,000,000 originating on all rail-
roads. Lumber and other products of the forest, also low grade
and low price products, constituted in 1889 only 10.89 per cent.
and in 1904, 12.53 per cent of the total railroad tonnage of that
year, or, stated in round figures, these products constituted in
1889 only 48,000,000 out of a total tonnage in that year of 441,-
000,000, while in 1904 they constituted 80,000,000 out of a total
tonnage in that year of 641,000,000 originating on all railroads.
On this estimate, to avoid the duplication necessarily involved,
I do not include tonnage received from connecting roads.

With practically no increase during these years in the ton-
nage of manufactures and merchandise and other like high
grade and high price commodities, contemporaneously with this
enormous increase in the products of the mine and forest, and
other like low grade and low price commodities, is it not uppar-
ent if there had riot been a great increase in specific rates there
would of necessity have been not a small but a large decrease
in the average rate per ton-mile?

But, Mr. President, if, for the reasons I have just stated,
there has been in recent years no increase in the average rate
per ton-mile, the records of the railroads themselves show that
there has undoubtedly been during this time a decidedly large
increase in the average rate per ton.

For the year ending June 30, 1901, the increase in this aver-
age over the year ending June 30, 1899, was 7.49 cents per ton,
the aggregate increase in revenue to, the railroads from this
cause in that year being, in round numbers, $80,000,000. For
the year ending June 30, 1903, the average rate per ton was
nearly 12% cents greater than in the year ending June 30, 1899,
the aggregate increase in revenue to the railroads from this
cause in that year being over $150,000,000.

Now, is it not plain, in these conditions, if there had been no
increase in specific rates the average rate per ton as well as the
average rate per ton-mile would of necessity have been reduced,
and the fact that this general average per ton-mile was not
materially reduced, while that per ton was increased, as I have
shown, from 7 to 12 cents in five years shows to the point of
demonstration that specific rates have been largely increased in
that time?

Again, Mr. President, it is not true that profits from capital
invested in railroads in this country are relatively small. Asa
matter of fact, as I shall show, legitimate railroad profits have
greatly increased in recent years. Of course, the average per-
centage of profits could not be expected to be large upon a capi-
talization including millions, and even billions, of dollars, based
not upon cost of physical properties nor upon tangible values at
all, but based mainly upon estimated earning capacity.

By this process of capitalization, which a few years ago under
the initiative of a great financier became a fad in circles of
frenzied finance, a large part of our 215,000 miles of railway
and over 800 independent lines have been organized and recapi-
talized.

There is a railroad in my own State whose stock sold at one
time since the war at $40 per share of the par value of $100.
This road has recently been taken into a consolidated system,

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8

two shares of preferred stock and two shares of common stock,
of the par value of $100 each, being issued for each and every
share of the original company, and this railroad is to-day on
this basis of four to one, earning dividends and carrying each
year a snug sum to surplus profits.

This is given as a striking example of the way in which a
large part of our more than 800 independent lines have in a few
vears been reorganized and recapitalized into the six or eight
groups which now control the entire railroad mileage of the
country.

Notwithstanding this false and fictitious capitalization, on
account of the enormous earning capacity of our railroads the
percentage of railroad stocks paying dividends and the earning
capacity of railroads has materially increased in recent years
and is still increasing.

In 1883 the percentage of railroad stocks paying dividends
was only 38.56 per cent, and the average rate of dividend paid
on these stocks was only 5.38 per cent; the amount paid in divi-
dends in that year being only a little over $80,000,000. In 1904
the percentage of railroad stocks paying dividends had increased
to 57.47 per cent, and the average rate of dividends on these
stocks had increased to 6.09 per cent—the amount paid in divi-
dends in that year exceeding the enormous sum of $220,000,000.

But, Mr. President, dividends do not correctly measure the
profits of railroad investment. The true measure of these prof-
its is the balance left after payment of operating expenses,
interest charges, and taxes. In 1890 the sum of this balance,
including all railroads, was, in round figures, $74,000,000, while
in 1°04 it aggregated the great sum of $327,000,000.

In 1887 the amount of railroad earnings per mile was $6,362 ;
in 1904 they were $9,306, an increase in that time of about
$3,000 per mile. In 1889 the average revenue per train mile,
including all trains, was $1.22, and in 1904 it was $1.93, a gain
of 71 cents per mile. In 1889 the average cost of operating a
train 1 mile, including all kinds of trains, was 81 cents per mile,
and in 1904 it was $1.31, a difference in cost of 50 cents, show-
ing a net increase in profits for this time of 21 cents per train
mile, including all kinds of trains.

This increase of 18.91 per cent in dividend-paying stocks, of
$253,000,000 in net profits, of $3,000 per mile in earnings, and
of 21 cents in profits per train mile shows undisputably that
there has been during the Jast ten or fifteen years not only a
steady, but a large increase in the profits of railroad invest-
ments.

Mr. President, what reason is there to justify the contention
of the railroads that this legislation will bring disaster to them
or to the country?

Is it true, as contended, that our railroads can not make
money and prosper unless they are permitted, without outside
interference, to make and enforce their own rates without re-
gard to the interest and the rights of the people?

For many years past and to-day our railroads have not had
altogether a free hand in fixing their tariff charges on intra-
State business. In twenty-five States to-day, and in most of
that number for years past, rates on all domestic traffic (and
this traffic constitutes 20 per cent of the entire transportation

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9

business of the country) have been fixed either by local com-
missions or by railroads under their control and supervision.

The statement that for many years past and to-day our rail-
roads have not had a free hand in fixing their tariffs is also
true as to,a large part of interstate as well as of domestic
business.

It is a well-known fact that within this time certain combina-
tions have monopolized many of the prime commodities of in-
dustry and commerce, and, through the enormous volume of
business they can give or withhold, aided by the devices of
private switches, cars, refrigeration, ventilation, and icing, have
for some time past compelled, and to-day in many instances
compel, the railroads to accept such compensation as they are
willing to pay for the transportation of commodities in which
they deal or for the traffic which they control.

This control of the big shippers includes not only the oil and
fresh-meat business of the country, but it extends to the fruit
business, the dairy business, the truck business, and the brewing
business, as well as to other important lines of business. This
traffic, added to the domestic traffic of the States having com-
missions with rate-fixing powers, constitutes no inconsiderable
portion of the total freightage of the country, with respect to
which the railroads do not now and have not for a long time
past exercised a free hand over rates.

This interference with their control] over rates on this large
portion of their business has not proven disastrous to the
railroads; it has neither bankrupted them nor prevented them
from making money and paying dividends on stocks largely—in
some instances several times—in excess of the value of their
tangible properties. :

Mr. President, I do not wish to be misunderstood about this
matter of rates. While I believe—indeed, while I am sure~
that rates have been greatly increased since the beginning of the
year 1900, I do not believe that all rates, or even the larger part
of them, are to-day unreasonably high, or that at present the
trend of rates is upward. I believe that to a considerable degree
commercial conditions are allowed to control in adjusting rates,
and that when these conditions control they are generally ad-
justed fairly.

My contention is that most of the evils of which the people
complain, and have a right to complain, and which demand
remedy at our hands at this time, grow out of the abnormally
high rates arbitrarily fixed by many railroads in disregard and
defiance of these commercial conditions, and the abnormally low
and discriminatory rates forced upon the railroads by the big
shippers in the way and manner I have described.

The remedy for these evils, in my judgment, Mr. President,
consists not so much in Government rate making, since to the
extent the railroads fix their tariffs in response to commercial
conditions there ig little need for Government interference, as
in effective governmental control] and regulation with inci-
dental power to fix rates and enforce them where it is found
necessary to do so in order to protect the people on the one
hand against these unreasonable and extortionate rates, rooted
in the greedy scramble of railroads for more and higher divi-
dends, and on the other hand to protect both the railroads and
the people against the “ hold-up” of these monopolistic combi-
nations of shippers.

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If the bill under consideration shall pass and can be and is
enforced in the intendment of its friends, it will give the Inter-
state Commerce Commission power to restrain the indecent
rapacity of both these offending railroads and these big ship-
pers. When this is done, Mr. President, rates will, I believe, as
a rule adjust themselves to commercial conditions and there
will be but little further necessity for governmental interfer-
ence.

A consideration of the effects upon the railroads of super-
vision of rates in the past, both by the Government and the
States, will demonstrate, I think, that the predictions made by
the railroads and on their behalf of injury likely to follow from
the enactment of this legislation are unfounded.

Mr. President, during the ten years from 1887 to 1897, in
which the Interstate Commerce Commission actually exercised
the power of fixing rates, 45,000 miles of railway were con-
structed in this country. There is nothing in the railroad and
business history of those years attributable to the exercise by
the Commission of this power, which, in my opinion, justifies
these predictions of disaster should Congress now give the Com-
mission the powers exercised by it during these early years of
its existence.

The fact that in eight years the railroads did not judicially
challenge the power of the Commerce Commission to fix rates
under the act of 1887, despite the fact that that power, if
conferred at all, was conferred only by implications taken in
connection with the fact that in over 400 answers filed to
complaints in proceedings before the Commission during this
time this power of the Commission was not challenged, strongly
confirms the conclusion that they did not find themselves seri-
ously hampered or crippled by the right of rate supervision
then claimed and exercised.

Twenty-five years ago the States began to assert their in-
herent powers over transportation charges, and to create com-
missions vested with control over rates on all domestic business.
To-day, and in the case of many of them for many years past,
twenty-six States have commissions exercising powers over
domestic business far more plenary than those it is now pro-
posed to give to the Commerce Commission over traffic between
the States.

There is nothing in the history of these States in these years
which shows or tends to show that the railroads or the people
have suffered as a result of this supervision and control, or
that this power has been exercised vexatiously, arbitrarily, or
oppressively. On the contrary, their railroad, agricultural, in-
dustrial, and commercial progress compares favorably with that
of the States in which the railroads have been given a free
hand in adjusting rates, and in many of them the development
along these lines has been so far above the general average as
to attract widespread attention.

In support of this’ statement I call attention to the fact that
of the nineteen States and Territories in which railroad mileage
was increased over 100 miles in the fiscal year ending June 20,
1904, fourteen were States which had commissions with rate-
making powers.

There can be no stronger confirmation of these statements,
and there can be no stronger refutation of the calamity argu-

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ments against Government interference with rates than that
afforded by results in my own State. Since 1891 North Caro-
lina has had a commission with full rate-emaking power. When
this law was passed we had only a little over 3,000 miles of
railroads. We now have about 4,000 miles, an increase of about
900 miles, while to-day at least a dozen new lines are in process
of construction, with several more projected. Some of these
roads are being built by our own people, some by Rockefeller
and his associates, and some by rich New England and northern
syndicates. All the capital needed for the purpose can be had
inside the State or outside by the mere asking.

When this law was passed in 1891, several railroads in my
State were in the hands of receivers. Now there is not one in
the hands of a receiver. When it was passed, gross receipts
from railroad operation in the State were, in round numbers,
$8,600,000 ; net receipts, $3,100,000. In 1904 gross receipts were
$20,300,000; net receipts, $7,500,000.

Not only in North Carolina, but in Georgia, in Mississippi, in
Minnesota, and in a number of other States having commissions
with rate-making powers, railroad mileage, the value of manu-
factured products and of farm property has increased at a
rate so rapid as to attract general attention and comment.

In this connection I want to read an extract from a letter
from Hon. Franklin McNeill, chairman of the railroad commis-
sion of North Carolina. It furnishes a striking argument
against the objection to the proposed legislation so persistently
urged that under the power to revise and correct a challenged
rate the Commerce Commission will put its hand upon every
schedule and in the end take over the whole rate-making power
and render scientific and equitable rate adjustment by the rail-
roads difficult, if not impossible. It sustains, by way of prac-
tical example, the contention of the friends of this legislation
that the possession by the Interstate Commerce Commission of
effective power over rates will render the use of that power in
a large measure unnecessary, and will operate to coerce the rail-
roads to correct upon their own initiative the inequalities and
injustices of which the people complain. In this letter Mr. Mc-
Neill, speaking of rate making by the commission over which he
has for eight years presided, says:

While we have full rate-making powers, we have not attempted to
supersede traffic managers of railroads; on the contrary, we have
adopted tariffs made by them and only changed rates on certain com-
tmodities as they appeared to be upreasonable or unjust. This has not
been frequent; the fact that we had the power rendered it unnecessary.

It is customary, Mr. President, to stigmatize rate making by
government boards as political rate making, and to charge that
either through ignorance or in response to popular clamor these
boards can not be trusted to deal wisely and fairly with the
interests of the railroads. Much is attempted to be made in
this connection out of the number of times the Interstate Com-
merce Commissfon has been overruled by the courts as tend-
ing to show ‘gnorance or bias. Much is attempted to be made
out of the fact that out of 45 cases appealed to the courts
the Commission has been reversed in 29. During the period
of these 45 appeals the Commission tried and disposed of 327
cases. In over 280 of these cases the railroads did not appeal.
thereby admitting their justice, fairness, and soundness. To
say that the Commission has been overruled in 29 cases out of

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12

a total of 45 is not, therefore, a correct statement of the case.
A correct statement will show that out of a total of about 327
decisions the Commission was overruled in only 29. More than
that, Mr. President. a proper consideration of these cases will
show that the Commission has not made as many mistakes as
the tariff managers whose rates they have changed because they
were found to be unreasonable, and therefore unlawful.

Mr. President, all laws must of necessity be interpreted and
administered by men, and the argument that the public can not
trust those delegated to administer the law is not an admissible
argument in a Government like ours. If the personnel of a
Commission is unfit, the unworthy members should be removed,
but to refuse to legislate where legislation is needed for the
public welfare for fear that worthy and fit men can not be
found to administer the law is to attack the very fundamentals
of our system and question the capacity of our people for self-
government.

We had as well look the fact in the face. The plain truth in
this contest between these corporations and the people is that
the railroads want the laws affecting them administered by tri-
bunals composed of men appointed for life and whose amena-
bility to the people is therefore remote. They are not opposed
to trusting the powers conferred by this legislation in the Com-
merce Commission, because they do not believe competent and
impartial men will at all times compose that Commission, but
because they fear that the power of the people to quickly call
them to account for any forgetfulness of their interest will lead
them to put the public weal above that of special privilege. Of
the score or more State commissions which for twenty-five years
have exercised power over domestic rates, not one, so far as I
know, or have ever heard, is amenable to the charge of having
sacrificed the legitimate interest of a railroad to public clamor.
They have made mistakes and committed errors, no doubt, but
so have the courts and all other human tribunals.

All of our laws, both State and national, providing for super-
vision or regulation of great private enterprises affected with a
public use or duty are administered by officers, boards, com-
missions, or tribunals whose functions are administrative or
executive. I know of no reason why the proposed regulation of
the business of the railroads, made necessary by conditions for
which they are solely responsible, can not be safely adminis-
tered in the same way. I know of no reason which entitles
thein to the exemption which they claim and assert with such
confident persistency.

Mr. President, I have no objection to such right of review by
the courts as does not in effect either interfere with the rightful
authority of Congress in this matter of rates, or so hamper it in
the discharge of these powers through its Commission as to de-
feat or render ineffective in whole or in part its lawful purposes
with respect to this subject. :

Within these limitations the right of review by the courts
ought not to be denied, and if it does not already exist it ought
to be conferred; but, Mr. President, I submit that the courts
already have without further legislation all the authority and
power over this subject which they can exercise without substi-
tuting their judgment for that of Congress in a matter intrusted
by the Constitution to the exclusive judgment of Congress.

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13

In saying the courts have this power I am not unmindful of
the fact that all Federal courts of original jurisdiction are statu-
tory courts in the sense that Congress, acting under constitu-
tional injunction, created them and defined their jurisdiction;
but, sir, when these courts were created and given jurisdiction
over certain specific subjects they became eo instanti, without
constitutional grant to that effect, invested with all the judicial
powers of the Constitution over and pertaining to that subject.

When Congress invested these courts with jurisdiction over
the property rights with which this legislation deals, as it un-
doubtedly did, the Constitution did the rest by imposing upon
them the duty of safeguarding these rights against any and all
unconstitutional acts of the legislative and executive branches of
the Government and all their agencies. In the discharge of
these great powers and these great duties these courts are
clothed with all equitable jurisdiction necessary for their exer-
cise and performance.

Under the law as now written the courts, by virtue of their
general powers, can set aside, at the instance of the carrier, a
confiscatory rate, and perhaps at the instance of the shipper, an
extortionate rate, but under this bill the courts will not have,
and they ought not to have, the right to interfere with and set
aside a just and reasonable rate fixed by the Commission.
They will not have that power and they ought not to have it,
because the establishment of rates is a matter which the Con-
stitution intrusts to the judgment of Congress and such adminis-
trative agencies as it may employ to carry out its will.

My chief apprehension concerning this measure is that while
the courts have not the constitutional right, as I see it, to re-
view a lawful rate fixed and ordered by the Commission, and
while this bill by not conferring it denies to them that right,
still in actual practice, by means of interlocutory orders based
upon ex parte showings of unreasonableness, these orders may
be suspended pending litigation, and in this way many unre-
viewable as well as reviewable orders of the Commission will
be held in abeyance until final decree.

It is probable that the only escape from this danger will be
found in taking from the courts the right to suspend the orders
of the Commission in any and all cases. If Congress can do
this. would it be right to do it, would it be good policy to do it?
Whether good or bad policy, if it would be wrong or unjust to
do it we can not, as individuals or as a nation, afford to do it
for mere profit’s sake.

In all history there is no grander utterance than that of
Aristides when, on a memorable occasion, he said to the
Athenian people, “ What Themistocles proposes would be
greatly to your advantage, but it would be unjust.”

In opposition to this suggestion it is said in behalf of the
earrier that the Constitution guarantees him against the tak-
ing of his property by the shipper without due process and
without just compensation, and that if the rate fixed by the
Commission can not be enjoined pendente lite he will be denied
the ful] benefit of this guaranty in case he is successful in his
suit, and left without remedy as to that part of his property
taken before final decree.

The force of this argument is obvious, but, Mr. President,
the law and the Constitution also guarantees the shipper

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14

against the taking of bis property by or for the benefit of the
earrier without due process and without compensation. Now,
if the rate established by the carrier is unreasonable, it is, for
that reason, unlawful. If it is extortionate, to that extent it
would be a taking by the carrier of the property of the shipper
without due process and witbout compensation. If, therefore,
the order of the Comimission is restrained pendente lite, the
shipper would be denied the full benefit of the law and of this
constitutional guaranty and left without remedy as to that
part of his property taken by the shipper between the time of
its suspension and the final decree.

If, in answer to this argument, it be said on behalf of the
earrier that the writ of restraint can only issue upon a prima
facie showing under oath that the order unconstitutionally
takes his property without compensation, the reply on behalf of
the shipper is that the order protecting him is based on the
finding of the Commission made not on an ex parte showing,
but after full hearing and investigation, that his property has
already been unlawfully and unconstitutionally taken for the
benefit of the carrier and will, until the final decree, continue
to be so taken if it is suspended, not only without compensation
or due process, but without any process whatever.

In these conditions it will be seen, therefore, if the order is
not suspended pendente lite, and the carrier succeeds in his
suit, his property will be unlawfully taken, and if it is so sus-
pended and the Commission is sustained the shipper’s property
will be unlawfully taken. It is a case in which necessarily
one or the other, the shipper or the carrier, must suffer. Which
shall it be—the master or the servant? The answer, I believe,
will largely be found in the inquiry as to which, in balancing
probabilities as to the final result of the controversy, is entitled
to the greater weight, a finding based on an ex parte hearing
without argument of opposing counsel or a finding after full
hearing with both parties to the controversy present and speak-
ing through their witnesses and attorneys, by a board created
by the law to make that finding.

In these conditions the impartial mind—and the legislative
mind should be impartial—will, I think, conclude that the find-
ing of the Commission so reached raises a stronger probability
that the rate supplanted was unreasonable or extortionate, and
will on final hearing be so found and adjudged, than that the
ex parte showing of the carrier raises that the substituted rate
is confiscatory and will be so found and adjudged on the final
hearing.

Undoubtedly it is the duty of the legislator to protect the
shipper and his rights, as much so as it is his duty to protect the
earrier and his rights.

Can this be done; and if so, how? Ordinarily in such cases
mutual bonds afford reasonable protection. In this case it is
apparent that such bonds will be of little or no practical value.
impounding the difference between the rate supplanted and that
substituted will help, and this should be done if nothing better
can be done. But manifestly this would be a mere makeshift,
and at best would fall short of adequate protection even to the
middleman, and would be practically none at all to the man
upon whom the loss would, in the final analysis, chiefly fall.

If there is any way to secure protection to each of these con-
flicting interests without abridging the equity jurisdiction of the

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15

courts, that way ought to be found and incorporated in this bill.
The situation would seem to devolve the duty of finding that
way upon those who insist that this function of the courts
should not be impaired, but, on the contrary, should be in ex-
press terms reasserted and affirmed in this bill. But however
this may be, if no way can be found to accomplish this end—and
I greatly fear none can be—I have reluctantly reached the con-
clusion that we should, if we have the power, employ it to pre-
vent the suspension, pending suit and before final hearing, of the
rate prescribed by the Commission.

Can Congress do this? Undoubtedly Congress has large regu-
latory and supervisory power over these courts, their procedure,
and the remedies they may use in the enforcement and protec-
tion of rights, whether they be statutory rights or rights con-
stitutionally derived and protected.

The proposition that Congress can say to the courts in these
conditions, in this case, ‘ Your writ, while affording protection to
the carrier, would deny the same or equal protection to the ship-
per, and as the law, as it is at present written, does not afford him.
this protection, and as we are unable to otherwise provide for
him this protection, you must not and you shall not interfere, ex-
cept to administer the rights of the litigants as you may find
them when you are ready to pronounce your final conclusion as to
them,” presents to my mind a very serious question, with regard
to which I frankly confess I have grave doubts and misgivings,
and concerning which I do not care to venture a confident
opinion without further investigation and reflection. All I am
prepared to say at this time is if we have the power to do this—
and I am strongly inclined to think we have this power—and
no way can be found to give to the shipper the same protection
in this behalf which a suspension of the rate would give to the
earrier, then, and in that case, in my opinion it would be our
duty to exercise this power in such a way as it may lawfully be
exercised to accomplish this result.

Mr. President, the evils with which we are confronted are
not such as can be remedied through the courts, either upon the
initiative of the individual sufferer or the Government on be-
half of the complaining public. Any law regulating or attempt-
ing to regulate the great corporated business enterprises of the
country, affecting the interests of the whole people, over which
the Government has the right of supervision in the interest of
the public, which can only be enforced through the courts, is,
so far as the accomplishment of adequate results is concerned,
doomed to failure from the beginning; not because of any
weakness or corruption of the personnel of the courts—for our
judges are rarely subject to that criticism—but because of the
inadequate machinery and powers of the courts to quickly.
efficiently, and comprehensively exert and apply the law and
its remedies in enforcing obedience and punishing disobedience
to its commands and requirements.

The futility of any attempt to regulate these great corporated
enterprises through the medium of the courts is exemplified in
the open defiance arid contempt displayed by the trusts of our
antitrust laws, which the courts have declared ample in pro-
vision and scope, at least, to remedy the evils they denounce. In
spite of these laws and the courts, these great monopolies con-
tinue in the light of day and within the knowledge of everybody,
organizing and extending their corporate combinations and in-

6628
16 ;

creasing their levies and exaction upon the people. If we had
a commission from which corporations engaged in interstate
business had to secure a license, with power to withhold or re-
voke them whenever it was shown, after full hearing, that they
were violating these laws, some wrong might be done these
corporations, but the wrongs done them would not be one-tenth
as great as the wrongs daily suffered by the people at their
hands as the result of the insufficiency of the courts to ade-
quately administer the remedial provisions of these antitrust
and antimonopoly laws. So a commission with power to regu-
late railroad rates will doubtless commit some errors which will
infiict some injury upon the railroads, but the wrongs thus
done will not be one-tenth as great as the wrongs now daily
suffered by the people at the hands of the railroads because
of the inadequacy of the powers of the Commission under
present laws to stay their unjust and discriminating exactions.

Mr. President, I am not disturbed by the arguments assailing
the constitutionality of this legislation. During the twenty-
odd years in which Congress and the States have assumed con-
trol over rates, no court in this country has pronounced against
the right of these sovereignties to exercise their powers of con-
trol over rates of common carriers through commissions. Upon
the initiative of the railroads the Supreme Court has, it is true,
decided that Congress did not, by the act of 1887, confer the
power to fix rates upon the Interstate Commerce Commission,
but no judgment has been invoked or rendered during this
time against the constitutional right of Congress to confer this
power upon the Commission, should it decide to do so and em-
ploy language adequate for the purpose.

The contention of those who sustain the constitutional right-
fulness of this legislation is that the power now sought to be
conferred upon the Commission to condemn an existing rate
and to fix a future rate is essentially administrative, and that
if, in the exercise of these powers, functions in any degree leg-
islative or judicial are involved, they are involved only inci-
dentally, as appertaining to the mental process which the mind
undergoes in reaching a conclusion in doing an administrative
as well as a judicial and legislative act, and does not deprive
the powers exercised of the essential character of an administra-
tive function, within the sense and meaning of the constitutional
provisions divorcing the three great coordinate departments of
the Government. :

It is true that the powers conferred upon the Interstate Com-
merce Commission by the existing law and in the Hepburn bill
to condemn as unreasonable a challenged rate, involves the exer-
cise of quasi judicial functions, but they are not in essence and
in fact judicial functions, because neither under the present law
nor in the proposed enactment is the Commission vested with
the power to enforce its determinations by any decree, mandate,
order, or proceeding deriving its efficacy from any authority
lodged by law in it.

Under the present law the Commission may, it is true, go
into court, and if its contention is sustained obtain a decree
and mandate to enforce it; but this decree derives its efficacy,
not from any power invested by the law in the Commission, but
solely from that of the court making it.

Under the Hepburn bill it is also true that if the orders of the
Commission are not obeyed obedience to them may be enforced

6628
17

by the imposition of compelling fines and penalties; but this
obedience can not be enforced in virtue of any power it is pro-
posed to invest in the Commission or by any writ deriving its
authority from any power it is proposed to invest in it. That
can be done only by the imposition of punishments prescribed
by Congress or by a resort to the courts, as provided in the act.

Mr. President, undoubtedly the power to fix future rates of
hire of common carriers by rail is a legislative power, and as
such is invested solely in Congress. If Congress should attempt
to delegate that power in all its fullness and completeness to
the Interstate Commerce Commission, that would remit to the
Commission the whole power of Congress over this subject, and
clothe it with the right to settle not only the amount of toll a
carrier might exact, but the policy and principle which should
govern in the determination of these charges. Such an attempt
would contravene the constitutional inhibition to which I have
just alluded and would be nugatory. The Hepburn bill makes
no such attempt. It settles and declares the legislative policy
with respect to this question by prescribing the rule and stand-
ard of rates, and simply directs the Commission to find the facts,
apply to them this rule and standard, and declare the result.

With that policy the Commission has absolutely nothing to
do. Its duty is confined to ascertaining and declaring what is
an unreasonable and what is a reasonable, what is a fair and
what is an unfair compensation for specific service. It can not
say the public welfare would be subserved by this or that policy
with reference to rates. It can not say, for instance, that the
public welfare would be subserved by a 2-cent passenger fare.
It can not say, for instance, that a lower freight rate, by en-
couraging production and increasing traffic, might redound alike
to the benefit of the people and the roads. It can not say, for
instance, that public interest would be promoted by a lower
rate upon one line of commodities and a higher upon another.
It can not say, for instance, that the exigencies of our foreign
trade require that the railroads be permitted to charge a higher
rate for the transportation of products for domestic consumption
than for the transportation of products for export. And it can
not say, for instance, that here is a vast undeveloped section of
the country, rich in natural resources, and its speedy settlement
and development would be advanced and the interest of the
country at large, and especially that portion of it, would be
promoted by prescribing a different rule of rates for it from
that prescribed for older and more populous regions.

The Commission can not establish or vary rates upon condi-
tions such as these, as Congress might undoubtedly do, but it
must apply to all railroads in all sections of the country and
in all conditions the same rigid rule and principle, by requiring
that they shall charge only a just, reasonable, and fairly re-
munerative compensation for the service performed under the
conditions of its performance.

In fixing these rates it may employ experts; it may have
recourse to all known sources of information and consider ali
elements that fairly enter into the problem; but with the legis-
lative questions of expediency and policy it has nothing to do.
That is enunciated in the rule which declares broadly for the
principle of equality in rates by decreeing that the fundamental
consideration in their determination shall be in all cases fixed
upon the basis of fair remuneration for the service performed.

6628——2
18

The question of what is a fair consideration for hauling a car-
load of coal or coke or iron is no more a legislative function
than the question of what is a fair compensation for a day’s
work or for building a ship or constructing a building is a legis-
lative question. In determining what is a fair compensation
for a day’s work, whether in the field or the factory or at one
of the desks in the great Departments of this Government,
many considerations are involved, such as the cost of living.
the prevailing price for similar service, the efficiency of the
laborer, his training, skill, and the market value of the usu-
fruct of his labor. The problem of determining what is a fair
compensation for hauling a load of coal or coke or iron a given
distance may be more difficult and more complex than that of
determining the fair price of a day’s labor or for building a
house or ship, but the character and quality of the act is the
same. It is a mere calculation and the application of a prin-
ciple which is applied in the daily business of the people to
every transaction of barter and sale, viz: What did the thing
cost in labor and money, and what, under all the circumstances,
is a fair profit on that investment in labor and in money?

Mr. President, it does not seem to me necessary to greatly
elaborate the arguments in favor of the constitutionality of the
powers conferred upon the Commission by the bill under con-
sideration, because, in addition to the reason of the thing, which
I think clearly sustains the power, in my judgment the Su-
preme Court of the United States has decided the identical
question at issue in favor of the power in what is known as
the “ Mississippi case.”

I admit the plausibility of the contention that the powers of
the States over this question are broader than those of the
General Government, but I confidently believe that argument is
essentially unsound and untenable. It is true, as contended,
that whatever powers the General Government has over this
subject are derived from its powers to regulate commerce be-
tween the States, and that this power of regulation is confined
to commerce.

What is and what is not commerce has been the subject of
judicial discussion and decision since the beginning of the
Government. The Supreme Court has made many deliverances
upon the subject. In the interpretation of no provision of the
Constitution, except, perhaps, the general-welfare clause, has
this court shown a greater disposition to give to it an intend-
ment which would meet the exigencies of new and uncontemn-
plated conditions than in its interpretation of the clause under
discussion. It has held that navigation is commerce and that
all the instrumentalities and agencies of transportation, whether
by rail or water, are commerce.

It is inconceivable to me that the thing which is transported
from State to State and that the vehicles in which it is con-
veyed are commerce, subject to the regulating control of the
Government in the interest of the people, but that the price
exacted for the service of transportation is not commerce sub-
ject to the regulating control of the Government in the same
interest. Mr. President, the commodities in which men traffic,
the things which they buy and sell and exchange, constitute the
corpus, so to speak, of commerce; but, sir, the life and soul of
commerce is the profit accruing from the sale and exchange of
commodities.

6628
19

Figuratively speaking, profit is the center around which all

commerce revolves. It is the power which brings commerce
into being and sustains it. Where it begins, commerce begins;
where it ends, commerce ends.
: Now, the profits of commerce depend in some cases entirely,
in many cases largely, and in all cases to a more or less degree
upon the price of transportation. This is true to a certain ex-
tent of all commerce not purely local, but it is especially true of
all commerce between widely separated sections. The Supreme
Court has never held, and I can not believe it will ever hold,
that the Government may regulate, in the interest of the people,
everything connected with commerce except the thing out of
which commerce originates, except the thing which created it,
which sustains it, and which is to it the very breath of life.

If Congress has the power to fix and regulate charges of
transportation of interstate commerce at all—and I do not
doubt that it has—its powers in this regard, though they be
delegated powers, are both exclusive and plenary, and there
is nothing to differentiate them from the powers of the several
States over domestic traffic, unless there is a difference in
constitutional provisions affecting them.

If therefore, Mr. President, the power of the legislature of
Mississippi to fix rates on domestic commerce through a com-
mission was presented and decided by the Supreme Court of
the United States, in the case I have referred to from that
State, this decision is direct authority upon the question now
under consideration, unless the provisions of its constitution
affecting the power of its legislature over rates are at variance
with like provisions of the Federal Constitution. The only
provisions of the Federal Constitution, except the commerce
clause, which I have already discussed, affecting the exercise
of that power in the manner proposed in this bill is the provi-
sion with reference to the separation of the coordinate depart-
ments of the Government and the provisions guaranteeing equal
protection of the laws, and that private property shall not be
taken without due process of law, unless the preferential-port
clause applies, and I do not think it does, though I shall not
now attempt a discussion of that question.

I have examined the constitution of Mississippi, and I find
no substantial difference between it and the Constitution of the
United States in the several respects enumerated. It provides,
as does that of the United States, for the separation of the
coordinate branches of the Government; it guarantees, as does
the Constitution of the United States, the equal protection of
the laws, and it provides, as does the Federal Constitution,
against taking of private property without due process of law.

An examination of the decision rendered by the Supreme
Court in the case referred to, known as “ Stone v. The Farmers’
Loan and Trust Company,” reported in 116 United States, pages
307-347, shows that the question of the power of the State of
Mississippi to fix and regulate rates through a commission was
presented to the court and a decision rendered aflirming the

ower.

This case arose out of a proceeding instituted by the railroad
named to enjoin a rate fixed by the railroad commission of that.
State, under the act of the legislature of the State conferring
upon it rate-making powers. In the statement of the case Chief
Justice Waite gives in numerical order the contentions ad-

6628
20

vanced and relied upon by the railroads. He states the one
pertinent to the issue under present discussion in the following
terms:

Fourth. That it [meaning the Mississippi statute] confers both
legislative and judicial powers on the commission, and is thus repug-
nant to the constitution of Mississippi.

After answering the several antecedent contentions of the
railroad, he disposes of the fourth contention as follows:

4. The supreme court of Mississippi has decided in_the case of
Railroad Commission v. Yazoo and Leste Railroad Company, and
Railroad Commission v. Natchez, Jackson and Columbia Railroad Com-
pany, not yet officially reported, that the Mississippi statute is not
repugnant to the constitution of the State “in that it creates a com-
mission and charges it with the duty of supervising railroads.” To
fe we Agree, and that is all that need be decided in this case. (166

To the same effect is the decision in the case of Reagan 1.
Farmers’ Loan and Trust Company (154.U. S., p. 392). This
was a proceeding to enjoin an order as to rates made by the
Railroad Commission of Texas under an act of the legislature
of that State conferring on it that power over rates of carriers.
The Supreme Court of the United States, speaking through
Justice Brewer, says, after discussing a preliminary jurisdic-
tional question:

Passing from the question of jurisdiction to the act itself, there can
be no doubt of the general power of the State to regulate the fares and
freights which may be charged and received by railroads or other car-
riers, and that this regulation can be carried on by means of a
commission. Such a commission is merely an administrative board,
created by the State for carrying into effect the will of the State
as expressed by its legislation.

Mr. President, while the decision in the maximum rate case,
reported in 167 United States, and decided in 1896, probably does
not, strictly speaking, decide anything except that the Com-
merce Act of 1887 did not confer upon the Interstate Commerce
Commission power to fix a future rate, yet it is impossible to
read that decision without feeling that the court meant to con-
cede the power of Congress to confer upon the Commission
this authority had it used language adequate for that purpose.
A few extracts from that decision will suffice, I think, to confirm
this statement. In speaking of the powers of Congress over
the subject of transportation charges and the regulation by
it, Justice Brewer used this language:

There were three obvious and dissimilar courses open for considera-
tion. Congress might itself prescribe the rates, or it might commit to
some subordinate tribunal this duty; or it might leave with the com-
panies the right to fix rates, subject to regulations and restrictions, as
well as to that rule which is as old as the existence of common car-
riers, to wit, that rates must be reasonable.

Then the court, through Justice Brewer, proceeds to discuss
the question of whether Congress had used language sufficient
to confer this power over future rates upon the Commission,
and in that connection observes :

The language by which the power has been so often used and was so
familiar to the legislative mind is capable of such definite and exact
statement that no just rule of construction would tolerate a grant of
such power by mere implication. Administrative control over railroads
through boards or commissions was no new thing. It had been resorted
to in England and in many of the States of this Union. It will be
interesting to notice the provisions in the legislation of different States.

Then follows a recital of the language employed in many
State statutes in conferring this power, with significant com-

6628
21

ments upon Congress’s failure to employ any of these or any
language of similar import.

The irresistible conclusion from this discussion is that the
court conceded, though it may not have decided, that Congress
possesses control over charges of common carriers and that it
could commit that power to the Interstate Commerce Commis-
sion, but that it had failed to do so in the act of 1887, because
it had not employed language fit and appropriate to accomplish
that purpose.

Mr. President, railroads are in their nature monopolies, but
as long as these monopolies were independent of each other
competition between them was sufficient to protect the people
against monopolistic charges. The consolidation in recent years
of practically all of our railroads into a half dozen systems or
groups, which have partitioned the whole country between them,
has brought every citizen in the nation face to face with a gi-
gantic entity, possessed with power to levy tribute upon his
earnings such as no feudal sovereign of the middle ages ever
possessed and such as no civilized government of to-day pos-
sesses. Acting under an unmistakable mandate from the peo-
ple, the Congress and the courts have been active in their efforts
to break the power and the hold of these monopolies over the
people and to prevent their further extension. ~

Despite these joint efforts the process of monopolization has
from year to year gone steadily on, and the hold of the monopoly
has been strengthened rather than weakened. It may be possi-
ble, under constitutional limitations, to dissolve and prevent
these consolidations, but the way and the method to accomplish
that result have not yet been discovered, and there are those
who doubt the adequacy of any legislation to this end which is
not in itself dangerously radical or subversive of principles held
to be fundamental in our political structure.

Mr. President, if neither Congress nor the courts can ef-
fectually dissolve and prevent these monopolistic combinations,
Congress can, by the exercise of its admitted powers over inter-
state commerce, at least render ineffectual the main purpose of
their organization. The power of Congress under the Constitu-
tion to do this is ample, and the method simple and effective.
If the Government will employ its undoubted powers over
charges of transportation to the extent of seeing that unjust
and unreasonable rates are not collected, the power for evil of
these overgrown combinations will be effectually neutralized if
not wholly destroyed. Why should not Congress employ this
power, at least to the limited extent proposed in this bill? We
know that the people are behind the futile laws we have passed
to dissolve, prevent, and punish these illegal combinations.
Why, then, should we doubt that the people will approve and
applaud effective legislation to defeat their sinister and unlawful
purposes?

Why should Congress hesitate? Railroads are creatures of
the law, created primarily to serve the public. In assuming
such control no right of the railroads, grounded either in law or
contract, will be violated, since the reserved right of the Gov-
ernment to fix rates, either partially or wholly, is as much a
part of the law creating them as if it were expressly written in
the charter authorizing their incorporation. If they are now
fixing these rates without interference from the Government, it

6628
22

is not by virtue of an exclusive right, but by way of privilege
and at sufferance. It is not, therefore, a question of right, but
a question of policy which confronts us—a question of whether
the exigencies of the situation require, in the interest of the
public, that these privileges should be circumscribed.

Mr. President, the evils of which the people complain are
militant and tangible; they exist in the experience and knowl-
edge of every man whose business interests are affected by
excessive transportation tolls. The complaints which fill the
press and which come to us in countless petitions, memorials,
and resolutions are based upon statements within the knowl-
edge and experience of the complainants as to things that have
happened and are happening every day under the system which
Congress is asked to change. These complainants come to us
and say: “Here is an evil, portentous and all-pervading, and
here is the remedy. You have the power to apply the remedy,
a power given you in trust for our benefit; we demand that you
use it.”

On the other hand the railroads who resist this legislation
and insist that the people who created them and who support
them shall have no share in fixing the tolls and exactions which
they are required to pay, come to Congress with arguments and
theories; with deductions and prophecies not based upon actu-
alities; not based upon what has been and what is, but upon
statements of their belief and fears of what will result to their
interest and that of the country from this legislation. For my
part I think it is safer to act upon facts than upon theories,
upon actualities than prophecies, upon conditions existant than
upon conditions predicted—predicted conditions which have
never in our experience resulted from similar causes and will
not probably happen in the future.

Mr. President, the past is certain, the present is reasonably
so, the future is nebulous; but it is a darkness illumined by
streaks of light, reflected from our experience in the past and
the present. There is nothing in this experience to admonish us
against this legislation, but much to cheer the hope of the people
that“it will afford relief from conditions which now handicap
with unequal exactions the industry and commerce of the
country.

6628

O
REGULATION OF RAILROAD RATES.

SPE EC

OF

HON. JOHN C. SPOONER,

OF WISCONSIN,

IN THE

SENATE OF THE UNITED STATES,
Thursday and Friday, March 22 and 23, 1906.

WASHINGTON.

1906.
6655
SPEECH

OF

HON. JOHN C. SPOONER.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled “An act to regulate commerce.” approved Feb-
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the pow-
ers of the Interstate Commerce Commission—

Mr. SPOONER said:

Mr. PrEsiIpENT: It is embarrassing to ask the Senate to turn
from the eloquent periods uttered by the Senator from Massa-
chusetts [Mr. LopeE] to what I am conscious will at best be an
unsatisfactory discussion of what is purely a question of con-
stitutional law, for I do not rise to discuss anything contained
in the “rate bill,” so called, save as to a single phrase in it.

Some days since the distinguished Senator from Texas [Mr.
BalLey], whose absence to-day I lament, not only because I am
compelled without his presence to discuss a portion of the
amendment which he has submitted, and to reply somewhat to
the speech which he made upon it, but also for the sorrowful
event which compels his absence, expressed the opinion that
Congress may constitutionally incorporate in this bill, in con-
nection with a provision for judicial review of an order of the
Interstate Commerce Commission fixing rates, a clause prohib-
iting the circuit courts of the United States in such cases to re-
strain by injunction the enforcement of the order before final
decree. This raises, obviously, a question of very grave import.

I entertain the profoundest respect and admiration for the
Senator from Texas, not only for his great ability and learning
as a lawyer, but for his high character, independence, and
patriotism in the discharge of public duty. When I find myself
differing from him upon a constitutional question which has
received his attention it is with a distrust of my own opinion
which leads me to a careful reexamination of the subject.

The Senator from Maryland [Mr. RayNer], in a very eloquent
speech upon the pending measure, seemed to attach great sig-
nificance to the words “or be suspended or set aside by a court
of competent jurisdiction,” in the clause relating to the time of
taking effect of an order of the Commission fixing rates. To
my mind these words are quite insignificant. They confer no
jurisdiction upon any court of the United States not already
possessed by it. They are mere recognition of existing jurisdic-
tion, which can not constitutionally be withdrawn, and if they
were stricken from the bill they would not in anywise affect
the power of the circuit courts on a proper bill in equity to
restrain by interlocutory or final decree the order affecting the

9

6655 : 3
4

rate or rates involved. To accomplish that object. if it be pos-
sible to accomplish it, it is necessary that there shall be a change
in existing law governing jurisdiction of the circuit court in
equity. The Senator from Texas fully realized this, and hence
his proposition that the bill shall contain a prohibition against
suspension of the order prior to final decree.

Mr. President, I am not able to agree with the Senator from
Texas and others as to the power of Congress to so legislate.
I have little doubt that if the bill when enacted shall contain
such a prohibition it would be unconstitutional] in that respect.
and fear it will be regarded as so intertwined with the part of
the bill authorizing the fixing of rates as to endanger it.

Many of us think the pending measure is in more than one
respect of doubtful constitutionality, to say the least of it. I
think I may justly say that many of us regard it as unconstitu-
tional in one or two important particulars.

It is our duty, as it is justly to be expected of the Senate,
that we shall give to the perfection of the measure, which is of
the highest importance, the utmost of our ability, care, and
industry. I should greatly dislike, Mr. President, not simply
for myself, but for the body, of whose just fame I am as jealous
and proud as any Senator can be, that this measure when it
shall have passed the Senate, should fail in the courts for any
want of constitutionality which we can remedy. It may con-
tain some provisions as to the constitutionality of which many
of us have doubt, but that danger should be limited to those pro-
visions only which ought to be incorporated in it if they can
constitutionally be incorporated in it, and in order that their
constitutionality may be presented to the highest tribunal for
determination.

The time has certainly come when the scope of the commerce
clause of the Constitution in respect of interstate transporta-
tion should be determined by the Supreme Court. This can only
be done by the enactment of a statute raising the question.

The weakness, if there be one, in the proposition and in the
argument made in support of it—that this proposed provision
may constitutionally be enacted—seems to rest in a failure to
distinguish between jurisdiction and judicial power. The Con-
stitution, Article III, section 1, says:

The judicial power of the United States shall be vested in one Su-
preme Court and in such inferior courts as the Congress may from
time to time ordain and establish, * * *

Src. 2. The judicial power shall extend to all cases in law and
equity arising under this Constitution, the laws of the United States,
and treaties made, or which shall beymade, under their authority; to
all cases affecting ambassadors, othet public ministers and consuls;
to all cases of admiralty and maritime jurisdiction; to controversies
to which the United States shall be a party; to controversies between
two or more States; between a State and citizens of another State:
between citizens of different States; between citizens of the same State
claiming lands under grants of different States, and between a State
or the citizens thereof, and foreign States, citizens, or subjects. :

In all cases affecting ambassadors, otber public ministers, and con-
suls, and those in which a State shall be party, the Supreme Court
shall have original jurisdiction. In all the other cases before men-
tioned the Supreme Court shall have appellate jurisdiction, both as to
law and fact, with such exceptions and under such regulations as the
Congress shell make.

I concede, under the decisions, of course, that the circuit and
district courts of the United States are statutory courts: that
they do not derive their jurisdiction immediately from the Con-

6655,
5

stitution. They are created by the Congress. Their jurisdic-
tion is to be found in the legislation of Congress. For many
years Congress withheld from their jurisdiction a large number
of cases or controversies enumerated in the Constitution. That
Congress could lawfully do this I do not question.

Mr. President, the framers of the Constitution manifestly did
not intend to create a judicial department that was to be de-
pendent in the exercise of judicial power upon the will of Con-
gress. They had painful memories of the history of jurispru-
dence in England. They knew that the bar of England and the
fearless judges of England had done more for personal liberty
than all the other forces of England could do. They knew, too,
that judges of England, holding office by favor simply of the
King, and therefore dependent upon his will, had perpetrated
wrongs and tyrannies indescribable; for there is no tyranny any
worse than the tyranny of a lawless judge. They knew, too,
that out of the confusion of legislative and judicial functions
in the English systera had arisen intolerable abuses. They
intended by the Constitution to create, and did create, three
coordinate and independent branches of the Government, to
each of which was assigned its proper function, clothed with
the power essential to their proper discharge. They intended
that each should be in its sphere absolutely free from inva-
sion by the others. They created the legislative department
to enact rules of action, the executive department to admin-
ister the laws, the judicial department (the weakest of all in a
way) to hold each of the others, the legislative and the execu-
tive, strictly to the limitations of the Constitution. Hach was
to be permanent as the Government itself until changed by the
people.

They clearly contemplated a Federal judicial system. They
secured the independence of the judges by making their tenure
of office dependent only on good behavior and by preventing the
legislative department from starving them into weakness by
diminution of their compensation.

It was not intended to create a judicial department that should
be defenseless against the passion or unwisdom of the legisla-
tive department. They vested, by the same language with which
they clothed the other two departments with their functions of
government, the judicial power of the United States in one
Supreme Court and in such inferior courts as the Congress
may from time to time ordain and establish. The Supreme
Court, of course, could not have existed without legislation by
Congress. The constitutional provision was not self-executing,
but it laid a mandate upon Congress to organize the Supreme
Court and inferior courts. For Congress to have omitted the
organization of the Supreme Court would have been revolu-
tionary. For Congress to have omitted the organization and es-
tablishment of inferior courts would have been equally revolu-
tionary. The result would have been that the Government as
it was made would have failed of organization, for where the
Constitution provided for three departments there would have
been but two, in fact.

Congress, in obedience to the constitutional mandate, organ-
ized the Supreme Court, and the Constitution placed it beyond
reach of any subsequent Congress, save to increase or possibly
to reduce its numbers. Its jurisdiction is original in but two
cases; in all others it is appellate.

6655
6

My proposition is: That when the Congress confers jurisdic-
tion upon the inferior courts of the United States over any
one of the cases or controversies enumerated by the Constitu-
tion the judicial power, ex necessitate rei, goes with it, including
the instrumentalities which inhere in the jurisdicton and are
necessary to its efficient exercise.

It never could have been in the minds of the framers that
there could come a time when there would be life judges of the
inferior courts without inferior courts.

It is insisted by some that Congress may destroy these in-
ferior courts, and as the greater includes the lesser, it may limit
as it sees fit the exercise of judicial power where jurisdiction
exists. I do not know what may be the opinion of the Senator
from Texas as to the power of Congress to destroy the inferior
courts without substituting other inferior courts in their places,
but justice to him in his absence requires it to be said in this
connection that he did not base his argument for the power of
Congress to limit the issue of injunctions as proposed upon any
such ground.

I find support, Mr. President, for the proposition for which IT
am contending in an illuminating opinion upon the judicial
clauses of the Constitution, delivered by Mr. Justice Story, of the
Supreme Court, in the case of Martin v. Hunter’s Lessee (1
Wheaton, 304). His reasoning is worth rereading many times.
It was dissented from only by one justice, and not by any as
to the portion of it which declares specifically the law to be as
I am contending for it. It is so important and complete that I
beg leave to read it. Speaking for the court, he says, after
quoting the third article:

Let this article be carefully weighed and considered. The language
of the article throughout is manifestly designed to be mandatory upon
the legislature. Its obligatory force is so imperative, that Congress
could not, without a violation of its duty, have refused to carry it into
operation. “The judicial power of the United States shall be rested
[not may be vested] in one Supreme Court, and in such inferior courts
as Congress may, from time to time, ordain and establish.”?’ Could Con-
gress have lawfully refused to create a Supreme Court, or to vest in
it the constitutional jurisdiction? ‘The judges, both of the Supreme
and inferior courts, shall hold their offices during good behavior, and
shall, at stated times, receive, for their services, a compensation which
shall not be diminished during their continuance in office.” Could
Congress create or limit any other tenure of the judicial office? Could
they refuse to pay, at stated times, the stipulated salary, or diminish
it during their continuance in office? But one answer can be qaiven to
these questions; it must be in the negative. The object of the Con-
stitution was to establish three great departments of government; the
legislative, the executive, and the judicial departments. The first was
to pass laws, the second to approve and execute them, and the third
to .expound and enforce them, Without the latter, it would be im-
possible to carry into effect some of the express provisions of the Con-
stitution. How, otherwise, could crimes against the United States
be tried and punished? How could causes between two States be
heard and determined? The judicial power must, therefore, be vested
in some court, by Congress; and to suppose that it was not an obliga-
tion binding on them, but might, at their pleasure, be omitted or de-
clined, is to suppose that, under the sanction of the Constitution, they
might defeat the Constitution itself. A construction which would
lead to such a result can not be sound.

The same expression, “shall be vested,’ occurs in other parts of the
Constitution in defining the powers of the other coordinate branches of
the Government. The first article declares that “all legislative powers
herein granted shall be vested in a Congress of the United States.”
Will it be contended that the legislative power is not absolutely vested?
That the words merely refer to some future act and mean only that the
legislative power may hereafter be vested? The second articie declares
that “the executive power shall be vested in a President of the United

6655
7

States of America.” Could Congress vest it in any other person; or
is it to await their good pleasure whether it is to vest at all? It is
apparent that such a construction in either case would be utterly inad-
missible. Why, then, is it entitled to a better support in reference to
the judicial department?

If, then, it is the duty of Congress to vest the judicial power of the
United States, it is a duty to vest the whole judicial power. The
language, if imperative as to one part, is imperative as to all. If it
were otherwise, this anomaly would exist, that Congress might suc-
cessively refuse to vest the jurisdiction in any one class of cases
enumerated in the Constitution, and thereby defeat the jurisdiction as
to all, for thé Constitution has not singled out any class on which
Congress are bound to act in preference to others.

The next consideration is as to the courts in which the judicial power
shall be vested. Jt is manifest that a Supreme Court must be estab-
lished; but whether it be equally obligatory to establish inferior courts
is a question of some difficulty. If Congress may lawfully omit to es-
tablish inferior courts, it might follow that in some of the enumerated
cases the judicial power could nowhere exist. The Supreme Court can
have original jurisdiction in two classes of cases only, namely, in cases
affecting ambassadors, other public ministers, and consuls, and in cases
in which a State is a party. Congress can not vest any portion of the
judicial power of the United States, except in courts ordained and
established by itself; and if in any of the cases enumerated in the Con-
stitution the State courts did not then possess jurisdiction, the appel-
late jurisdiction of the Supreme Court (admitting that it could act on
State courts) could not reach those cases and, consequcntly, the in-
junction of the Constitution, that the judicial power “ shall be vested,”
would be disobeyed. It would seem, therefore, to follow that Congress
are bound to create some inferior courts in which to vest all that juris-
diction which, under the Constitution, is exclusively vested in the
United States, and of which the Supreme Court can not take original
cognizance. hey might establish one or more inferior courts; they
might parcel out the jurisdiction among such courts from time to time
at their own pleasure. But the whole judicial power of the United
States should be at all times vested either in an original or appellate
form in some courts created under its authority.

* * * * * * *

It being then established that the language of this clause is impera-
tive, the next question-is as to the cases to which it shall apply. The
answer is found in the Constitution itself. The judicial power shall
extend to all the cases enumerated in the Constitution. As the mode
is not limited, it may extend to all such cases, in any form, in which
judicial power may be exercised. Jt may, therefore, extend to: them in
the shape of original or appellate jurisdiction, or both: for there is
nothing in the nature ef the cases which binds to the exercise of the
one in preference to the other.

* * ~ te *— * * *

BUT EVEN ADMITTING THAT THE LANGUAGE OF THE CONSTITUTION IS
NOT MANDATORY AND THAT CONGRESS MAY CONSTITUTIONALLY OMIT TO
VEST THH JUDICIAL POWER IN COURTS OF THE UNITED STATES, IT CAN NOT
BE DENIED THAT WHEN IT IS VESTED, IT MAY BE EXERCISED TO THE UT-
MOST CONSTITUTIONAL EXTENT.

The judicial power of the Constitution extends to all cases
in law and equity arising under the Constitution, etc. The
words “law and equity,” as used in the Constitution, were not
used without definite meaning. As to equity, they referred to
a system of jurisprudence which had long been established in
England and was administered in this country prior to the
adoption of the Constitution. ;

In Pennsylvania v. Wheeling Bridge Company (13 How., 562)
the court says:

In exercising this jurisdiction the courts of the Union are not
limited by the chancery system adopted by any State, and they exer-
cise their functions in a State where no court of chancery has been
established. The usages of the high court of chancery in Fngland,
wherever the jurisdiction is exercised, govern the proceedings. This
may be said to be the common law of chancery, and since the organi-

zation of the Government it has been observed.
* * * * * * =
Under this system, where relief can be given by the English chan-
cery similar relief may be given by the courts of the United States.
6655 .
8

The word “law” was used in contradistinction to equity and
admiralty and maritime jurisprudence. They referred not sim-
ply to the suits which the common law recognized among its
old and settled proceedings, but suits in which legal rights were
to be ascertained and determined in contradistinction to those
where equitable rights alone were recognized and equitable
remedies were administered.

Upon the demand of the States, after the adoption of the
Constitution, an amendment was adopted declaring that in suits
at common law where the value in controversy shall exceed
$20 the right of trial by jury shall be preserved, etc., and this
meant the jury of the common law.

It is quite plain that the distinction between law and equity
expressly recognized in the Constitution can not be abolished.
(Parsons v. Bedford, 3 Peters, 443. See also Fenn v. Holme,
21 Howard, 481.)

In equity an issue may be sent to the jury, but the verdict is
only advisory. The function of the common-law jury and the
effect of its verdict is different.

The preventive relief afforded by equity through injunctions
is an essential part of the equity jurisprudence. That juris-
prudence came into being only because of the inability of the
common law to furnish more than redress for wrongs. It could
award damages, but there were an infinite number of cases
which its rules and processes did not embrace. The main
necessity which called it into existence was the power to afford
preventive relief. A bill for permanent injunction was one of
the main elements of the system. To strike out of the juris-
prudence the bill for injunction would be to destroy the har-
mony and utility of the jurisdiction. If the power to grant a
preliminary injunction, where the efficient exercise of the judi-
cial power in equity demands it, were taken away, the system
would be unrecognizable.

In a vast number of cases, Mr. President, the permanent in-
junction would be fruitless but for the preliminary injunction.
It would be an idle thing to decree a permanent injunction to
prevent some irremediable wrong if the court did not possess
the power in proper cases to prevent the doing of that wrong
pendente lite. The first bill in equity I ever drew was for in-
junction to restrain the negotiation of promissory notes ob-
tained by gross fraud from a farmer and secured by a mortgage
on his farm. What relief would equity afford in such case with-
out the preliminary writ, and that, too, without notice? In-
numerable cases occur to any lawyer of experience, and are
noted in the books, and it has been so from the beginning, in
which without preliminary injunction the judicial power of
equity to permanently enjoin would be as idle as the wind that
blows.

I have not seen a criticism of the reasoning and conclusion of
Mr. Justice Story which I have read. Mr. Justice Field, in the
ease of Taylor v. Hammond (4 Wallace, 411), thus refers to it:

How far this judicial power is exclusive, or may, by the legislation
of Congress, be made exclusive, in the courts of the United States has
been much discussed, though there has been no direct adjudication upon
the point. In the opinion delivered in the case of Martin v. Hunter's
Lessee (1 Wheat., 334) Mr. Justice Story comments upon the fact
that there are two classes of cases enumerated in the clause cited
between which a distinction is drawn; that the first class includes
eases arising under the Constitution, laws, and treaties of the United

6655
9

States, cases affecting ambassadors, other public ministers, and con-
suls, and cases of admiralty and maritime jurisdiction; and that, with
reference to this class, the expression is that the judicial power shall
extend to all cases; but that in the subsequent part of the clause,
which embraces all the other cases of national cognizance and forms
the second class, the word “all” is dropped. And the learned justice
appears to have thought the variation in the language the result of
some determinate reason, and suggests that, with respect to the first
class, it may have been the intention of the framers of the Constitu-
tion imperatively to extend the judicial power either in an original or
appellate form to all cases, and, with respect to the latter class, to
leave it to Congress to qualify the jurisdiction in such manner as
public policy might dictate.

Mr. Justice Field further says:

Many cogent reasons and various considerations of public policy are
stated in support of this suggestion. The vital importance of all the
cases enumerated in the first class to the national sovereignty is men-
tioned as a reason which may have warranted the distinction and
which would seem to require that they should be vested exclusively in
the national courts—a consideration which does not apply, at least with
equal force, to cases of the second class.

Mr. Justice Miller seems to take much the same view. (Miller
on the Constitution, p. 312 et seq.)

Now, Mr. President, let me repeat, although I have repeated
much, how is it possible that the Congress, having conferred
jurisdiction in equity upon an inferior court over one of the
cases or controversies named in the Constitution, can withhold
in that case the judicial power of the Constitution? If it may
do so in part, it may do so altogether. If it may prohibit, al-
though necessary to the exercise of the judicial power, the right
to issue in a proper case a preliminary injunction, why may it
not withhold the power to decree a permanent injunction?
Whether when the jurisdiction exists the efficient exercise of
the judicial power requires the issue of a preliminary injunc-
tion would seem to be a question for the judge—a judicial anc
not a political question—and if Congress may say that, what-
ever the showing may be, the court having jurisdiction of the
suit shall not, although it be, in the opinion of the court, de-
manded, issue a preliminary injunction, does not the Congress
rather than the court really exercise the judicial power? Is it
not a commingling of the legislative with the judicial functions?
Is it not an emasculation of the judicial power, and an invasion
by one department of the Government of the power of another?
If the distinction between the jurisdiction which the Congress
may withhold and the exercise of the judicial power where
jurisdiction exists is destroyed, and the Congress may regulate
by act the exercise of the judicial power itself, is this the Gov
ernment which the framers of the Constitution intended to
create? ;

Is the judiciary an independent department of the Govern-
ment, which the Constitution intended it to be? If the power
exists m any degree to interfere with the exercise of judicial
power, except by regulating procedure and practice, it is for
Congress alone to say how far that power shall be exercised.
It is inconceivable that the judiciary, whose function under the
Constitution it is to see to it, among other things, that the ex-
ecutive department and the legislative department keep within
the limitations of the Constitution, overturn acts when, in their
judgment, they are violative of the fundamental charter, can
be, to the extent involved in the amendment here, subject to
Congressional control.

6655
10

It is the function of the Supreme Court and tne inferior
courts to secure to the citizens the guaranties of the Constitu-
tion of life, liberty, and property. It certainly could not have
been in the contemplation of the framers that their power to
discharge this function should be, exercised in given cases not
according to the judgment of the court, but according to the leg-
islative will.

It is said by Mr. Justice Baldwin in ex parte Crane (5 Peters,
190-202) :

Though the courts of the United States are capable of exercising
the whole judicial power as conferred by the Constitution, and though
Congress ave bound tu provide by law for its exercise in att Cus s LO
which that judicial power ertends, yet it bas not been done, and much
of it remains dormant for the want of legislation to enable the courts to
exercise it, ié having been repeatedly and uniformly decided by this
court that legislative provisions are indispensable to give effect to a
power to bring into action the constitutional jurisdiction of the supreme
and inferior courts.

There is no question about that.

It is said that in the judiciary act there are prohibitions
upon the power of the circuit courts of the United States
in equity. That is true. There is a prohibition in the judi-
ciary act that the court shall not have jurisdiction where
there is a plain and adequate remedy at law. That is declara-
tory of the law as it was before the adoption of the Constitu-
tion. That is one of the fundamental principles of jurisdiction
in equity.

Mr. MORGAN. That is the law now, is it not?

Mr. SPOONER. That is the law now.

Mr. MORGAN. Under the Constitution?

Mr. SPOONER. Under the Constitution, and it was the law of
the English chancery before the Constitution. Wherever redress
could be afforded at the common law those who were wronged
were remitted to the common law; wherever the common law
would not and could not afford relief, recourse was had to the
courts of chancery if the case were such as to render it pos-
sible—a splendid system of jurisprudence, Mr. President. If
one will read the maxims of equity, he will find that they are
golden lines. There will never come a civilization which they
will not fit; they seem almost the “‘ perfection of human wisdom,”
and how splendidly, all in all, they have been administered by
the courts of the United States.

The Supreme Court, sitting here at the capital, removed from
the passions of the multitude, far above the prejudices ex-
cited among the people, however strong the clamor, however
unpopular the litigant, however they may be threatened from
without, has gone on in that calm, quiet way which the Consti-
tution contemplated in the discharge of judicial duty. It has
done more to assert the vital principles of the Constitution and
to protect the people of the United States against wrongs exist-
ing and wrongs threatened in a large way than all the Con-
gresses that have convened.

Mr. RAYNER. Will the Senator submit to an interruption?

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Maryland?

Mr. SPOONER. Certainly; although I know I am making a
very disjointed argument.

Mr. RAYNDR. It is a highly instructive one to me, but I
understand the proposition is that under the Constitution Con-
gress has the right to ordain and establish inferior courts.

6655
11

Mr. SPOONER. Yes.

Mr. RAYNER. Suppose Congress had never ordained or es-
tablished any inferior courts?

Mr. SPOONER. Suppose Congress had never established the
Supreme Court of the United States.

_Mr. RAYNER. No; inferior courts; the Constitution pro-
vides for the organization of the Supreme Court. Suppose that
Congress—because this is right at the threshold of this inquiry—
had never established or ordained an inferior court of the
United States, is there any way on earth by which Congress
could have been compelled to ordain or establish inferior courts?

Mr. SPOONER. Certainly not.

Mr. RAYNER. Well, now, one moment. There is no power
by which you could have compelled Congress to ordain and es-
tablish an inferior court?

Mr. SPOONER. No.

Mr. RAYNER. It did establish and ordain inferior courts?

Mr. SPOONER. Yes.

Mr. RAYNER. If there is no way to compel it to establish
or ordain an inferior court, why can not Congress destroy an
inferior court—abolish an inferior court?

Mr. SPOONER. There are two or three answers to the Sena-
tor. There was no way to compel Congress to organize the
Supreme Court of the United States. No bill for specific per-
formance would anywhere lie. There was only one power
under the bending sky by which that mandatory duty could have
been enforced and that is the power in whose interest we are all
working here jf we are faithful; that is the power of public
opinion; that 1s the power of the people. ‘To have failed to or-
ganize it would have been a monumental piece of treason to the
Constitution ; and it is not to be supposed or imputed to Congress,
as the predicate, I beg to say to my friend, of any argument on
that subject, it seems to me. :

Mr. RAYNER. I am not now speaking of treason or anarchy.
I am speaking of constitutional power. I am aware of the fact
that if Congress destroyed the courts we would have a condition
of anarchy.

Mr. SPOONER. Yes.

Mr. RAYNER. The organization of the Supreme Court is
provided for by the Constitution.

Mr. SPOONER. But it required legislation, did it not?

Mr. RAYNER. It required legislation.

Mr. SPOONER. Suppose Congress had not legislated?

Mr. RAYNER (reading) —

The judicial power of the United States shall be vested in one Su-
preme Court

Mr. SPOONER. “And ’”——

Mr. RAYNER. One moment—
and in such inferior courts as the Congress may from time to time ordain
and establish.

After vesting the power, the next article provides that—

In all cases affecting ambassadors, other public ministers and consuls,
and those in which a State shall be party, the Supreme Court shall have
original jurisdiction.

Here is the Constitution vesting in the Supreme Court orig-
inal jurisdiction, and it is giving Congress the right to establish
and ordain inferior courts. What do you do with the decision

6655

 
12

which I referred to before here, in which a unanimous court, in
construing that provision, says:

It must be admitted that if the Constitution had ordained and estab-
lished the inferior courts and distributed to them their respective pow-
ers, they could not be restricted or divested by Congress. But as it has
made no such distribution one of two consequences must resn}t—either
that each inferior court created by Congress must exercise all the judi-
cial powers not given to the Supreme Court or that Congress, having
Tne Power to establish the courts, must define their respective jurisdic-

You do not object to my interrupting you?

Mr. SPOONER. No; if it is not too long.

Mr. RAYNER. There are only three or four lines more.

Mr. SPOONER. Go ahead.

Mr. RAYNER. Very well.

The first of these inferences has never been asserted, and could not
be defended with any show of reason, and if not, the latter would seem
to follow as a necessary consequence. And it would seem to follow
also that, having a right to de Congress may withhold from
any court of its creation jurisdiction c any of the enumerated contro-
versies. Courts created by statute can have no jurisdiction but such
as the statute confers. No one of them can assert a just claim to
jurisdiction exclusively conferred on another or withheld from all.

Mr. SPOONER. I adnitted that within fifteen minutes after
I began this wearisome address.

Mr. RAYNER. You admitted it?

Mr. SPOONER. I admit it now.

Mr. RAYNER. But your argument is dead against the case.

Mr. SPOONER. That begs the question. My argument is
not in the slightest degree, with due deference to my friend from
Maryland. =

Mr. RAYNER. I beg your pardon.

Mr. SPOONER. Contrary to the decision or its reasoning.

Mr. RAYNER. Now, before the Senator goes to that, let me
ask just one question, because it seems to me that the lines of
opposition are converging and we want to get to some practical
understanding if we can.

I understood you to say, in the course of your argument, that
you did not object to a provision in this bill that before the sus-
pending orders are issued, either the Interstate Commerce Com-
mission or the shipper should have some notice of the issuance
of the orders. Did I understand you to say that you did not
object to that?

Mr. SPOONER. Whether I said it or not, I say it now.

Mr. RAYNER. Then let me say

Mr. SPOONER. That simply regulates the practice.

Mr. RAYNER. It is a matter which goes right to the heart
of the bill.

Mr. SPOONER. Let me answer the Senator’s question.

Mr. RAYNER. It is a matter which goes to the heart of the
controversy.

Mr. SPOONER. That is an afterthought. The argument
that has been made here and splendidly made, which I am at-
tempting to controvert, was not upon the question whether Con-
gress can regulate the practice of issuing injunctions so as to re-
quire notice; not at all. The judiciary act did that. It was pro-
vided in the judiciary act that no injunction should be issued by
a Federal court without reasonable notice. It was provided
in 1872 that no injunction should be issued by a Federal judge
without notice. But the Federal judge was authorized, where,

6655

 

 
18

in his judgment, it was necessary to do justice, at the time of
issuing the order to show cause, to grant a restraining order.
Nobody disputes that. But it is a far, far cry from that to
the proposition that the Congress can prohibit a court of equity,
clothed by its legislation with jurisdiction and with the judi-
cial power of the Constitution in equity, from granting a pre-
liminary injunction even with notice. Now, to come back

Mr. RAYNER. I never made any such argument as that.

Mr. SPOONER. I am not arguing this bill. I am discussing
this question. I may be wrong about it. This is what troubles
me. however: Does the power exist in Congress to confer juris-
diction upon a court to exercise the judicial power of the Consti-
tution in equity, and at the same time has it the power to chip
off the judicial power as it chooses, to give power to a court of
equity to entertain a bill for specific performance, and yet deny
the court the power to issue the writs essential to carry that
jurisdiction into effect?

If the broad claim rather argued by the Senator just now,
far beyond this matter of notice, is the law in this country, the
people of the United States may well beware, because in the
last analysis the protection of the people of the United States
in the enjoyment of all the personal guaranties of the Constitu~
tion is to be found in the courts of the United States. It is not
to be found in the Congress. It is not to be found in the White
House. It is to be found in the courts.

The preservation of the Constitution itself is to be found in
the courts. The last refuge of liberty, of property rights, large
and small is in the judiciary of the United States. If you will
draw the distinction between jurisdiction and judicial power, I
am content. What does the Senator say about that?

Mr. RAYNER. I say, if the Senator will allow me, that
this goes back to the proposition upon which I respectfully agree
with the Senator from Wisconsin. If you were to take the
words “or be suspended” out of this bill, a court of equity
would still have the power to issue a preliminary injunction.
That is the statement of the Senator—if those words were out
of the bill?

Mr. SPOONER. Yes.

Mr. RAYNER. I think most of us agree with the Senator.

Mr. SPOONER. The courts could do so with them in the
bill or out of the bill.

Mr. RAYNER. Why, then, do you put them in the bill?

Mr. SPOONER. I did not put them in the bill.

_ Mr. RAYNER. Why do you object to taking them out of the
bill?

Mr. SPOONER. I do not object.

Mr. RAYNER. Then we are getting very close together.

Let me ask the Senator this: If the words “ or be suspended ”
were taken out of this bill—this is a practical proposition

Mr. SPOONER. Let us have the question.

Mr. RAYNER. I will get to the question as quickly as I
ean. The bill reads:

Unless the same shall be suspended or modified or set aside by the
Commission or be suspended or set aside by a court of competent juris-
diction.

If the words “or be suspended” were eliminated from the
bill, courts of equity would still have a right to issue prelimi-
nary injunctions?

6655

 

 
14

Mr. SPOONER. Yes.

Mr. RAYNER. Why did you put them in the bill? That is
the question.

Mr. SPOONER. I do not object to striking them out.

Mr. RAYNER. If the Senator does not object to their being
stricken out, does the Senator object to adding: ‘

The courts shall not issue preliminary or temporary injunctions with-
our notice to the Interstate Commerce Commission.

Mr. SPOONER. Oh, Mr. President

Mr. RAYNER. That is the point in controversy. You may
call it practice or not; that is, that the inferior courts of the
United States shall not issue injunctions against a decision by
the Interstate Commerce Commission without giving the Inter-
state Commerce Commission the right to be heard in answer to
the bill for an injunction. You may call it practice or not.

Mr. SPOONER. The Senator can not make any issue with
me on that; not at all. His argument the other day, which was
quite elaborately based on the words which he recites, was
based on nothing if he thinks to-day those words mean noth-
ing whether they are in or taken out. I think they mean noth-
ing in the bill. If they are not in the bill the court would have
the power to grant preliminary injunctions. If they are left
in the bill, with some other language there, perhaps the court in
almost every instance would be obliged to grant a preliminary
injunction. I have been in favor of taking them out of the bill.
They serve no useful purpose there, it seems to me.

Mr. RAYNER. I agree with you.

Mr. SPOONER. But I have understood Senators on the
other side, at any rate the Senator from Texas and some others,
not to be content with taking those words out of the bill, but to
insist that there shall be put in the bill a provision preventing
the granting by interlocutory order of any injunction.

Mr. RAYNER. I understood -that fully.

Mr. SPOONER. What is the Senator’s opinion about that?

Mr. RAYNER. The Senator’s opinion is that you are deliver-
ing a very instructive argument upon that proposition, and that
there may possibly be some question about it. My argument the
other day was based upon the proposition that a suspending order
without notice was not a constitutional incident; that to give
the court the right to issue a suspending order without noti¢e
to the Interstate Commerce Commission was not a constitutional
incident under the fifth amendment. I think the lines of oppo-
sition are gradually converging on this matter. Would the
Senator agree to an amendment here saying that the courts
shall issue no suspending order without notice to the Interstate
Commerce Commission? That is the point.

Mr. SPOONER. I am not in charge of this bill.

Mr. RAYNER. Would you agree to that?

Mr. SPOONER. I have said that twice. I speak only for
myself.

Mr. RAYNER. Then we are getting pretty close together.

Mr. SPOONER. It seems, from the Senator’s present state-
ment, that I have been rather close to him all the time. I did
not know it.

Mr. RAYNER. I am very glad to have you. You are a very
good man to be close to.

Mr. SPOONER. I am obliged to the Senator. But the propo-
sition he is making——

6655

 
15

Mr. BACON. Will the Senator from Wisconsin let me ask
him a little side question, as it were?

Mr. SPOONHR. Certainly.

Mr. BACON. What does the Senator mean—he has repeated
it several times and that is the reason why I make the in-
quiry—when he says Senators ‘on the other side.” referring to
this side?

Mr. SPOONER. I understood the Senator from Maryland
the other day to speak for Senators on the other side.

Mr. RAYNER. I especially refrained from doing that. I
said three times, and if the Senator will be kind enough to read
what I said he will find it, that I spoke for no one except myself,
and the Senator from Texas also said he spoke for no one but
himself. I am in favor of the amendmeént of the Senator from
Texas, and I intend to vote for it if it has no other vote in the
Senate. I think there may possibly be some question about
the proposition, but I never have thought for a moment that
there was any doubt about the proposition that when a rate
is fixed by the Interstate Commerce Commission no carrier
should have the right to go into court and obtain an order sus-
pending that rate without giving the Interstate Commission
notice of its application to the court.

Mr. SPOONER. Mr. President——

Mr. RAYNER. One moment. Speaking now for myself——

The VICE-PRESIDENT. The Chair understood the Senator
from Wisconsin to yield to the Senator from Georgia. ‘The
Chair recognizes the Senator from Georgia.

Mr. BACON. I wish to apologize to the Senator from Wis-
consin for somewhat diverting his attention from the line of
his argument. But this is a question upon which, so far as I
know, there is not a division on party lines.

Mr. SPOONER. That is true.

Mr. BACON. Therefore I think it is rather inappropriate
for the Senator, as he has done several times in his argument,
to refer to the position of Senators “on the other side.” Some
of us have not yet exactly indicated what our position may be
on some of these law points, although we heartily favor the
bill in its substance.

Mr. SPOONER. I thank the Senator. It is always a great
pleasure to me to be able to agree with him, and I do agree
with him that it was an inappropriate thing for me to say.

Mr. RAYNER. Mr. President

The VICE-PRESIDENT. Does the Senat.r from Wisconsin
yield to the Senator from Maryland?

Mr. SPOONER. Certainly.

Mr. RAYNER. The point is that I think we are closing up
a part of the controversy.

Mr. SPOONER. No.

Mr. RAYNER. We are getting pretty close to it on suspend-
ing o¥ders.

Mr. SPOONER. No; we are not.

Mr. RAYNER. You and I are.

Mr. SPOONER. No; you and I are not.

Mr. RAYNER. Why not?

Mr. SPOONER. Because you will vote for a proposition pro-
hibiting the court from granting an interlocutory injunction.

Mr. RAYNER. I will.

6655

 
16

Mr. SPOONER. I will not. :

Mr. RAYNER. If that is defeated, and if the Senator will
offer an amendment that the Commission shall have notice be-
fore the granting of an interlocutory injunction, I will vote for
the amendment. I will vote for the amendment if you will
give the Commission a right to be heard and not go with your
orders before a Federal judge and have the rate enjoined
without notice.

Mr. SPOONER. It would be as much the Senator’s rate as
mine.

Mr. RAYNER. How?

Mr. SPOONER. You said “ your orders.”

Mr. RAYNER. I am talking about the orders of the Com-
mission.

Mr. SPOONER. I understand the position of the Senator
frem Maryland, and in order that there may be no mistake
about it I will restate it. He is in favor of an amendment pro-
hibiting, no matter what the bill may show, no matter what the
exhibit may show, the granting of an interlocutory injunction by
the circuit courts of the United States to suspend, pending hear-
ing of all parties, the order. I am not, for I believe it would
make the bill unconstitutional.

The Senator, secondly, is in favor, if he can not get that, of
prohibiting the issue of an injunction without notice to the In-
terstate Commerce Commission. I am not in the slightest op-
posed to that. So that so far as the Senator and I are con-
cerned we understand each other at last. The amendment, or
the only part which I am discussing, is this:

Provided, That no rate or charge, regulation or practice prescribed

by the Commission shall be set aside or suspended by any preliminary
or interlocutory decree or order of the court.

Mr. TILLMAN. Mr. President

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from South Carolina?

Mr. SPOONER. Certainly.

Mr. TILLMAN. As I said the other day in making a report
on thfs bill, I spoke for no one but myself. Unfortunately, I
am not in a position to confer with the majority of the Com-
mittee on Interstate Commerce and get a united opinion of such
majority to represent that committee in indicating what its
wishes are. Therefore, I again speak only for myself when I
say, without any pretense of knowing anything about the law or
these constitutional refinements, that if the Supreme Court shall
hold that Congress has no power to control these courts which
it has created, in an attempt to give the people the relief which
is sought in regard to railroad rates and other regulations of
railroads, I believe the people will send to Congress men who
will give them relief, if they have to do it in the way that Con-
gress once before notified the court, by reason of public opinion,
that the legal-tender acts, which had been declared unconstitu-
tional, had to be declared constitutional, and the court was re-
formed in some way so that it discovered that they were con-
stitutional.

I predict that sooner or later these refinements will all be
brushed aside by a Congress which will enact a law pro-
hibiting any inferior judge from suspending the order of the
Commission which has given the people relief.

6655

 
17

Mr. SPOONER. I never derive very much information or
benefit from the advice of a man who prefaces his remarks
by saying that he does not know anything about the subject.

The Senator from South Carolina is an honest man. He
wants the right thing done about this bill. He wants it, wher
it passes the Senate, to be a constitutional bill. He does not
want it emasculated. Neither do I. He does not want it to
contain a taint which would make it a failure after it is
enacted. But the Senator must not assume that he is more
patriotic than the rest of us. He must not assume that those
of us who have spent our lives in the study of the law are
not better advised than those who have not as to what is safely
and what is not safely within the Constitution. The Senator
said the other day that he is a “ cornfield” lawyer.

Mr. TILLMAN. I repeat it.

Mr. SPOONER. I have had many “cornfield” lawyers come
to me and pay me, to get the opinion and advice of a lawyer
who had studied and practiced the law.

Mr. TILLMAN. Nevertheless the Senator can not refine
away this cornfield common sense, that whatever you can
create you can control.

Mr. SPOONER. There it is—" cornfield common sense.”
If the Supreme Court of the United States does not square its
decisions with the cornfield common sense of the Senator
from South Carolina, he would reform the Supreme Court of
the United States: and if the Supreme Court of the United
States did square its decisions with some of the cornfield
common sense of thé Senator from South Carolina, the people
of the United States would need to reform the court.

Now, what does the Senator mean? We want the same thing
that the Senator wants. Does not the Senator believe—perhaps
he would call that a refinement—that the dropping out of the
present law of the jury trial provided for by the Constitution,
helps this bill any?

Mr. TILLMAN. No; I want it put back.

Mr. SPOONER. Did you learn that in the cornfield——

Mr. TILLMAN. Yes.

Mr. SPOONER. Or from lawyers?

Mr. TILLMAN. I got it from my little knowledge of English
jurisprudence and American liberty which I inherited with my
mother’s milk.

Mr. SPOONER. All right.

Mr. TELLER. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Colorado?

Mr. SPOONER. Certainly.

Mr. TELLER. The Senator from Wisconsin can not conclude
to-night.

Mr. SPOONER. I only want to say this

Mr. TELLER. I thought perhaps he would like to quit now
and resume in the morning. We want him to go on and finish
his speech—everybody does—and I know there are several
points on which he can not touch to-night, and I think he in-
tends to touch upon them. Otherwise he would not do justice
to the case.

Mr. SPOONER. I have not done justice to the case.

§655——2

 
18

Mr. TELLER. So far as you have gone we do not find any
fault. I should like to give the Senator an opportunity to post-
pone his remarks until to-morrow, if he wants it.

Mr. SPOONER. I hope the Senator from South Carolina
will acquit me of any purpose to offend him.

Mr. TILLMAN. I have never found the Senator to be ma-
licious,

Mr. SPOONER. The Senator will permit me. I appreciate
his ability and aptitude for the discharge of public duty here,
his patriotism, his industry. I appreciate his friendship. I
would not want it if I did not appreciate him as an honest
man. But the Senator from South Carolina is a little apt, with-
out knowing it, by innuendo to impugn the good faith of men
who believe in him and who are as faithful to the public serv-
ice as he can be. The Senator ought not, because I am dealing
with a question of great importance and dealing with a question
of constitutional law, to assume, as he seems to do, that this is
simply the legal refinement of the lawyer. Does the Senator
think for one moment that we are not trying here to make a
good bill of this?

Mr. TILLMAN. I have not said so.

Mr. SPOONER. Does the Senator think that those of us
who as lawyers have studied this bill are not doing it as a mat-
ter of public duty to help the people in this legislation?

Mr. TILLMAN. I have not said so.

Mr. SPOONER. The Senator from South Carolina would not,
if it were left to him, want to have the responsibility of this
bill as it came from the House?

Mr. TILLMAN. No; I never would have put in it a third that
there is in it.

Mr. SPOONER: The Senator would have left some things
out of it that ought to be in it, as the House left some things
out of it that ought to be in it; and the Senator may very
well be glad, on this complicated and intricate subject, to have
the advice and assistance of the lawyers of this body, a class of
men a part of whose habit of life it is to be loyal in the dis-
charge of duty to a client, if it be a client; to the people, if
they are in the public service.

_Mr. TILLMAN. The Senator from Wisconsin does me wrong
when he imagines for a moment that I assume that I am any
better than any other Senator here in my devotion to the people.
I do not claim that. I do not pretend any such. thing.

Mr. SPOONER. I know in your sober moments you do not.

Mr. TILLMAN. I am as sober now as I ever was in my life.
The Senator has not made me as drunk to-day as he usually
does.

, Mr. SPOONER. The other day the Senator from South Caro-
lina challenged the Senator from Pennsylvania.

Mr. TILLMAN. On what point?

Mr. SPOONER. As being an attorney for the Pennsylvania
Railroad——

Mr. TILLMAN. I had every reason to believe it, because it
had been sent broadcast by the Associated Press and all the
newspapers. :

Mr. SPOONER. As being a man with whom the President
could not safely advise on matters of this kind.

6655
19

Mr. TILLMAN. I say I had seen it. I do not want to have
anything to say in regard to the Senator from Pennsylvania,
but if the Senator from Wisconsin wants to challenge me——

Mr. SPOONER. No.

. Mr. TILLMAN. I will bring out the evidence upon which 1
based that statement.

Mr. SPOONER. I do not challenge, but the Senator ought to
know that he is not to take everything for granted. I have
seen things in the newspapers about the Senator from South
Carolina. Does the Senator think I would believe them?

Mr. TILLMAN. I did not say I believed these other reports.

Mr. SPOONER. Does the Senator think I would tell them
in public as statements which I believe? Not at all.

Mr. TILLMAN. I simply stated about the Senator from
Pennsylvania what has been common property to every man who
reads newspapers in the United States, and I-said it right here
where he could hear it. ;

Mr. SPOONER. The Senator from Pennsylvania—and that is
the wickedness of this whirlwind of detraction—a great lawyer,
opposed for confirmation (so long ago I dare say it now) upon
the theory that he had been in the employ of corporations, has
done more, and did do more during his tenure of the Attorney-
General’s Office to enforce the antitrust law and to carry to
successful decision in the highest courts the laws enacted by
Congress to protect the people against unlawful combinations
than all the men who have been in the Attorney-General’s Office
for twenty years. I say that without reflection upon his prede-
cessors.

Mr. TILLMAN. Do not let us go off on the Senator from
Pennsylvania. I do not want to drag him in.

Mr. SPOONER. It is the principle of the thing.

Mr. TILLMAN. And the Senator brings it up, too, in an
unpleasant connection. Why do you not go back to this propo-
sition of cornfield law that the courts of the United States,
except the Supreme Court, being statutory courts created by
Congress, can be controlled by Congress?

Mr. SPOONER. What does the Senator mean by “ control?”

Mr. TILLMAN. Anything; “control” means everything.

Mr. SPOONER. That is the control the Senator would have
Congress exercise over the courts. The Senator from Maryland
says, sotto voce, “to destroy.” The Senator from Maryland is
an orator and a lawyer of extraordinary ability-——

Mr. TILLMAN. Yes; and you two great lawyers are right
here pulling wool over these little technicalities, and when I
give you the law you will not take it. [Laughter.]

Mr. SPOONER. When the Senator from Maryland and I are
in conflict on legal propositions it is the place of a cornfield law-
yer to keep out of the controversy. [Laughter.]

Now, the Senator from Maryland said it could destroy. Does
the Senator from Maryland mean that? Does the Senator
from Maryland mean that under the Constitution Congress may
pass a law destroying the circuit courts of the United States
and the district courts of the United States, putting no inferior
tribunal or tribunals in their place in which shall be vested the
judicial power of the Constitution?

Mr. RAYNER. I will answer, if the Senator will allow me.

Mr. SPOONER. Does the Senator mean that?

6655
20:

Mr. RAYNER. If you pass a law here and have no court to
review the decision, so that you can not execute the fifth
amendment, that law would be void. That is an answer to
the question. The law itself would be void. For instance, if
there is no court now in existence with any right to review the
order of the Interstate Commerce Commission under the [Jep-
burn bill, then the very law proposed to be passed here would,
under the Minnesota case, be void. I agree with the Senator
upon that proposition.

Mr. SPOONER. Does the Senator think that Congress has
the constitutional power to obliterate all the inferior courts of
the United States by a valid act which does not itself substitute
some inferior tribunal in their place?

Mr. RAYNER. I believe that if Congress were to-day to
abolish either the district courts or circuit courts

Mr. SPOONER. Either of them?

Mr. RAYNER. Allow me to finish my answer. If Congress
to-day should pass an act abolishing the circuit courts or the
district courts either, while that act might be anarchy, there is
nothing unconstitutional about it, and nothing the Senator from
Wisconsin has said has satisfied me that there would be any-
thing unconstitutional about it. Weare not discussing anarchy
and we are not discussing treason. I say if there were a law
here now before us abolishing the district courts of the United
States, there would be nothing unconstitutional in that act.

Mr. SPOONER. The Senator from Maryland concedes my
contention. He answered my question as I expected a lawyer
like him to answer it. He dared not, as a lawyer, answer it
affirmatively, and he did not. He would not here say that it is
in the constitutional power of Congress to obliterate the in-
ferior courts of the United States, the courts of equity, the
eourts of law, the courts in which all offenses against the laws
of the United States are tried, the courts, Mr. President, which
protect life, liberty, and property under the Constitution, putting
none in their place. He would not claim that.

Mr. RAYNER rose.

Mr. SPOONER. Wait a moment. That would be anarchy.
That would be hoisting the red flag of revolution.

My. RAYNER. I admit all that.

Mr. SPOONER. That would be Jacobinism.

Mr. RAYNER. I admit that.

Mr. SPOONER. That would be treason to the Constitu-
tion. The Senator would not say Congress could do that. But
the Senator did say that the Congress could obliterate the dis-
trict courts of the United States or the circuit courts of the
United States. Probably so; but that is not all. That would
leave the great equity tribunal on the one hand or it would
leave the great law tribunal on the other.

But I want to say to the Senator, as he has met me half
way. he ought to qualify his proposition and say that the Con-
gress could wipe out the district court or the circuit court if
by the same act it clothed the survivor with the law power and
the equity power of the Constitution, as the case might be.

Judge Story was not wrong. The mandatory language of
the Constitution, that the judicial power of the United States,
in law and equity. ‘shall be vested in one Supreme Court and
in such inferior courts as the Congress may from time to time

6655

 
21

ordain and establish,” meant something. Out of the exercise
of that power, or the execution of it, came the judiciary act,
drawn by Oliver Ellsworth in the main, a very important man in
the Constitutional Convention. afterwards Chief Justice of the
Supreme Court of the United States, and from that day to this,
Mr. President. for over a hundred years, we have had the cir-
cuit courts and the district courts created by the Congress under
the Constitution exercising these functions, and never until
now——

Mr. RAYNER. Mr. President, the Supreme Court has said
three times that we had absolute control over the inferior courts
of the United States, in the case in 8 Howard, another case in 18
Wallace, and the case in 147 U. S., and from that propo-
sition and these premises they have argued the right to regu-
late them. Now, I do not pretend to say that it would not be
anarchy, and chaos, and Jacobinism to abolish them, but the
constitutional right of Congress to destroy what the Constitu-
tion has given it the right to ordain and establish is unquestion-
able in my mind. States can destroy the courts, if they want to.
Suppose a State should fail to provide by statute for the crime
of murder or any other crime; what would that be? Would
that be unconstitutional? It would be anarchy; it would be
chaos; it would be Jacobinism, or anything else you may call it;
but we are arguing now the constitutional question whether Con-
gress, having the right to ordain and establish, has not the right
to destroy. The Constitution gives it the right to ordain and
establish. It never would destroy our judicial system; there is
not the remotest danger of doing it; the question is utterly im-
practical and a visonary question, but that it has the constitu-
tional right to do it I never heard questioned by anyone except
the Senator from Wisconsin.

Mr. SPOONER. The argument of the Senator is, on the as-
sumption Congress has the power to destroy these courts, sub-
stituting none other for them, that Congress has the power, the
courts remaining as they are, clothed with the jurisdiction in
equity and law, to emasculate that jurisdiction in special cases.
That is the argument. The greater includes the lesser. The
predicate in the last analysis upon which the contention rests
that Congress may take away from a court of equity the power
to grant an interlocutory injunction is the power of Congress
to revolutionize the country, to destroy these courts.

Mr. RAYNER. Let me say a word to the Senator before he
closes.

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Maryland?

Mr. SPOONER. I yield.

Mr. RAYNER. There has not been one word said upon this
side—I will speak of this side now—in opposition to giving the
courts a full review over the decision of the Interstate Com-
merce Commission.

Mr. SPOONER. I am not talking about that.

Mr. RAYNER. But the Senator’s argument tends in the di-

_rection that we here were willing to destroy the inferior courts
of the United States.

Mr. SPOONER. I am not talking about that, nor do I think
it of anyone here.

6655
22

Mr. RAYNER. The amendment of the Senator from Texas
{Mr. Bartey] proposed the proposition to give the courts a full
review—to let the case go up to the courts and give them the
right to try the case over again—and the controversy between
us was whether or not suspending orders ought to be issued
without limitation, without qualification, and without giving
notice to the Interstate Commerce Commission of the issue.

Mr. SPOONER. The Senator is making the same observa-
tions he has made several times this afternoon. They mean
now what they did on each occasion, nothing more and nothing
less. I am not discussing this bill, nor whether it is necessary
to its constitutionality that there be incorporated in it a provi-
sion for a review. I think it is necessary; but I am not discuss-
ing that. I am discussing simply the validity of a proposition
which has been offered and which I read for myself, and which
I think is as I read it. That is what I am discussing, and not
the question to which the Senator alludes.

Mr. TELLER. I am glad the Senator from Wisconsin will
go on to-morrow. The Senator says he has spoken under some
embarrassment. I think it is pretty difficult for a man to make
a legal argument when he does not occupy the floor more than
half the time. There are some points that some of us lawyers
in this body would like to hear the Senator upon. I should
hope that to-morrow when the Senator takes the floor Senators
who may not agree with him will wait until he has a fair
opportunity to present his views of the law. There are several
points in the bill that any lawyer who has read it must have
trouble with. As has been said, it is not a political question.
It is an economical question, a question that the people are
concerned in and that the property of the country is concerned
in. I think we should give the Senator a fair opportunity to
present his case, and if anyone wants to challenge it he should
challenge it later.

I have heard the Senator say that he thought there are some
unconstitutional provisions in the bill. That is what I want
to hear him address himself to to-morrow.

Mr. SPOONER. I have been in the habit generally of out-
lining my own observations.

Mr. TELLER. Yes; I expect the Senator to do that.

Mr. SPOONER. I intend later to discuss the bill, but I have
not intended to do so to-day. I do not object to interruptions.
I came here ill, and that is what I referred to as an embarrass-
ment.

Mr. RAYNER. I was interrupted a number of times myself.

Mr. SPOONER. I do not object to that at all. I intend to
confine myself to a discussion of this one proposition. I wish
to discuss the proposition to-morrow that, admitting, for the
purposes of the argument, the power of Congress generally to
deprive the circuit courts of the United States of the power to
grant interlocutory injunctions, to do it in this bill would be
upon grounds peculiar to itself unconstitutional.

Mr. TELLER. Of course, I did not intend to intimate that
I was going to direct the Senator. :

Mr. SPOONER. I know that.

Mr. TELLER. But, knowing something of his views, I want
to hear him on two or three other points in the bill. I have an
inquiring mind on those questions; and I should like to hear

6655
23

some man upon them who is a recognized authority, as is the
Senator from Wisconsin. I should like to hear him discuss
those questions.

- I do not mean to say that I agree with everything the Senator
said here to-day, but I have felt inclined to let him complete
his remarks, and if I had any difference of opinion with him I
would express it on another day. I know it is not quite easy
for a Senator to lay out a plan for the discussion of a legal ques-
tion and then be diverted by questions that sometimes are not
strictly appropriate and proper to what he is discussing. That
is what I meant to suggest to the Senator. I meant nothing else.

Mr. SPOONER. I am certain of that.

Mr. SCOTT. Mr. President, there are many of us who are not
constitutional lawyers, and not even “cornfield” lawyers, and
we would really be glad to listen to the Senator from Wisconsin
or any other Senator on constitutional questions and on law
with the hope that he may enlighten us so that we can vote
intelligently upon the bill that is before us.

Friday, March 23, 1906.

Mr. SPOONER. Mr. President, I acknowledge my obligation to
the Senate for the courtesy which permits me to resume the dis-
cussion of this subject to-day. I could not have finished it yes-
terday. I am extremely anxious to be through with it; but with
leave of the Senate, to prevent any misunderstanding which
mmay have arisen from irrelevant interruptions or from any
misrepresentation, I wish to restate in a few words the proposi-
tion for which I contend.

In the Sewing Machine cases, in 18 Wallace, it is said:

The circuit courts do not derive their judicial power immediately
from the Constitution as appears with sufficient explicitness from
the Constitution itself, as the first section of the third article pro-
vides that ‘the judicial power of the United States shall be vested
in one Supreme Court, and in such inferior courts as the Congress
may from time to time ordain and establish.’ Consequently the juris-
diction of the circuit court in every case must depend—

The jurisdiction of the circuit court—
upon some act of Congress, as it is clear that Congress, inasmuch as it
poseesscs the power to ordain and establish all courts inferior to_ the

upreme Court, may also define their jurisdiction. Courts created by
statute can have no jurisdiction in controversies between party and
party but such as the statute confers. Congress, it may be conceded,
may confer such jurisdiction upon the circuit courts as it may see fit,
within the scope of the judicial power of the Constitution, not vested in
the Supreme Court, but as such tribunals are neither created by the
Constitution nor is their jurisdiction defined by that instrument, it fol-
lows that inasmuch as they are created by an act of Congress it is
necessary, in every ee to define their power, to look to that source
as the means of accomplishing that end. Federal judicial power, be-
yond all doubt, has its origin—

That is italicized in the opinion of the court—
in the Constitution, but the organization of the system and the distri-
bution of the subjects of jurisdiction among such inferior courts as Con-
gress may from time to time ordain and establish within the scope of
the judicial power, always have been, and of right must be, the work of
the Congress. (Case of the Sewing Machine Companies, 18 Wall.,

p. 577.)

Upon that basis. Mr. President. I am making the contention
which rests entirely upon what I conceive to be a clear distinc-
tion between jurisdiction and judicial power.

6655
24

What is the judicial power of the Constitution, Mr. President?
Mr. Justice Miller has defined it, taking the definition from the
Supreme Court:

What is judicial power? It will not do to answer that it is the
power exercised by the courts, because one of the very things to be
determined is what power they may exercise. It is, indeed, very diffi-
cult to find any exact definition made to hand. It is not to be found
in any of the old treatises of any of the old English authorities or
judieial decisions, for a very obvious reason. While in a general way
it may be true that they had this division between legislative and
judicial power, yet their legislature was, nevertheless, in the habit of ex-
ercising a very large part of the latter. The House of Lords was often
the court of appeals, and Parliament was in the habit of passing bills
of attainder as well as enacting convictions for treason and other
crimes.

That system, Mr. President, was not brought from the other
side by the fathers into our Constitution, but fundamental and
well carried out was their purpose to draw clear and distinct
the line which would separate the legislative power from the
executive power, and both from the judicial power.

Judicial power is, perhaps, better defined in some of the reports of
our own courts than in any other place, and especially so in the Su-
preme Court of the United States, because it has more often been the
subject of comment there, and its consideration more frequently nec-
essary to the determination of questions arising in that court than
anywhere else.

What is it?

It is the power of a court to decide and pronounce a judgment and
carry it into effect between persons and parties who bring a case before
it for decision. a

My proposition is, Mr. President, that when jurisdiction over
any one of the enumerated cases is conferred upon the court, the
judicial power of the Constitution goes with it, and that it is
not in the power of Congress, while it might have withheld the
jurisdiction, to invade at all the judicial function of hearing and
determination and the exercise of those powers—incidental, if
you please—essential to carrying into effect its decisions.

Given the jurisdiction, Mr. President, over the subject-matter
and,the parties, how the judicial power shall be exercised can
not lawfully be controlled in any degree by the legislature. Dic-
tation to courts and judges as to the decisions which they shall
make, by legislature or executive, is not to be tolerated. When
the chancellor decides that a just exercise of judicial power,
which he is sworn to administer, demands a relief which is
part of the judicial power, an appellate court, if he errs, may
correct him. The legislature can not reverse his decree or ex-
ercise the judicial power for him, in whole or in part. Courts
do not sit to execute legislative judgments or decrees. If it
were otherwise, we would not be living under the Government
which our fathers created, or in the times in which we live, but
would be carried back a century and more, when Parliament
passed bills of attainder, bills of pains and penalties, and the
like.

It is well to recall what Mr. Webster said, in his great argu-
ment in the Dartmouth College case (4 Wheat., 518) in regard
to the power of the legislature in this connection. He said:

It shall not judge by act. It shall not decide by act, but it shall
leave all these things to be tried and adjudged by the law of the land.
Everything which may pass under the form of an enactment is not,

therefore, to be considered the jaw of the land. Such a construction
would render constitutional provisions of the highest importance com-

6655
25

pletely inoperative and void. Jt would tend directly to establish the
union of all powers in the legislature. There would be no general per-
manent law for courts to administer, or for men to live under. he
administration of justice would be an empty form, an idle ceremony.
Judges icould sit to execute legislative judgments and decrees, not to
declare the law or to administer the justice of the country.

Happily we have been very free from attempted Congres-
sional usurpation of judicial power, but not absolutely so. The
Congress attempted, Mr. President, in one instance to dictate
to the Supreme Court in what manner the judicial power vested
in it by the Constitution and laws should be exercised. It is
an instructive case, and brings into bright light the distinction
between judicial power and jurisdiction. It will be remembered
that the Constitution gives to the Supreme Court ‘ appellate
jurisdiction both as to law and fact, with such exceptions and
under such regulations as the Congress shall make.” By this
language the Congress is invested with quite unrestricted power
over the appellate jurisdiction of the Supreme Court.

The case of the United States 7. Klein (13 Wall., 128) arose
under the captured and abandoned property act. To make
a short statement of the case, it had been held by the Supreme
Court that the pardon granted by the President had blotted out
the offense of giving aid and comfort to the enemies of the Re-
public, and the proof of loyalty, therefore, was not necessary to
entitle the suitor to recover proceeds of the sale of captured and
abandoned cotton which had belonged to him, and the proceeds
of which the court had determined were held in trust for the
benefit of loyal owners. Judgment had gone in favor of the
claimant in the Court of Claims, from which appeal was per-
mitted by Congress to the Supréme Court of the United States.
In the meantime Congress passed an act epitomized by the Su-
preme Court as follows:

The substance of this enactment is that an acceptance of a pardon
without disclaimer shall be conclusive evidence of the acts pardoned,

put shall be null and void as evidence of the rights conferred by it, both
in the Court of Claims and in this court on appeal.

Of this act the court said:

Undoubtedly the legislature has complete control over the organiza-
tion and existence of that court and may confer or withhold the right
of appeal from its decisions. And if this act did nothing more, it
would be our duty to give it effect. If it simply denied the right of ap-
peal in a particular class of cases, there could be no doubt that it must
be regarded as an exercise of the power of Congress to make “ such ex-
ceptions from the appellate jurisdiction ”’ as should seem to it expedient.

ut the language of the proviso shows plainly that it does not in-
tend to withhold appellate jurisdiction except as a means to an end.
Its great and controlling purpose is to deny to pardons granted by the
President the effect which this court had adjudged them to have. The
proviso declares that pardons shall not be considered by this court on
appeal. We had already decided that it was our duty to consider them
and give them effect, in cases like the present. as equivalent to proof of
loyalty. It provides that whenever it shall appear that any judgment
of the Court of Claims shall have been founded on such pardons, with-
out other proof of loyalty, the Supreme Court shall have no further
jurisdiction of the case and shall dismiss the same for want of juris-
diction. The proviso further declares that every pardon granted to
any suitor in the Court of Claims and reciting that the person par-
doned has been guilty of any act of rei.-llion or disloyalty shall, if ac-
cepted in writing without disclaimer of the fact, recited, be taken as
conclusive evidence in that court and on appeal of the act recited; and
on proof of pardon or acceptance, summarily made on motion or other-
wise, the iurisdiction of the court shall cease and the suit shall be
forthwith dismissed. ‘ : .

It is evident from this statement that the denial of jurisdiction to
this court. as well as to the Court of Claims, is founded solely on the

6655,
26

application of a rule of decision, in causes pending, prescribed by Con-
gress.

The court has jurisdiction of the cause to a given point; but when it
ascertains that a certain state of things exists, its jurisdiction is to
cease, and it is required to dismiss the cause for want of jurisdiction.
It seems to us that this is not an exercise of the acknowledged power
Mi Sati to make exceptions and prescribe regulations to the appel-
ate power.

The court is required to ascertain the existence of certain facts and
thereupon to declare that its jurisdiction on appeal has ceased by
dismissing the bill. What is this but to prescribe a rule for the:decision
of a cause in a particular way? In the case before us the Court of
Claims has rendered judgment for the claimant and an appeal has been
taken to this court. We are directed to dismiss the appeal, if we find
that the judgment must be affirmed, because of a pardon granted to the
interstate of the claimants. Can we do so without allowing one party
to the controversy to decide it in its own favor? Can we do so without
allowing that the legislature may prescribe rules of decision to the
judicial department of the Government in cases pending before it?

We think not; and thus thinking, we do not at_all question what was
decided in the case of Pennsylvania v. Wheeling Bridge Company. (18
How., 429; S., XV, 436.) In that case, after a decree in this
court that the bridge, in the then state of the law, was a nuisance and
mnust be abated as such, Congress passed an act legalizing the structure
and making it a post-road; and the court, on a motion for process to
enforce the decree, held that the bridge had ceased to be a nuisance
by the exercise of the constitutional powers of Congress, and denied
the motion. No arbitrary rule of decision was prescribed in that case,
but the court was left to apply its ordinary rules to the new circum-
stances created by the act. In the case before us no new circumstances
have been created by legislation. But the court is forbidden to give
the effect to evidence which, in its own judgment, such evidence should
have, and is directed to give it an effect precisely contrary.

We must think that Congress has inadvertently passed the limit
which separates the legislative from the judicial power.

It is of vital importance that these powers be kept distinct. The
Constitution provides that the judicial power of the United States
shall be vested in one Supreme Court and such inferior courts as the
Congress shall from time to time ordain and establish. ‘The same
instrument, in the last clause of the same article, provides that in all
eases other than those of original jurisdiction ‘‘the Supreme Court
shall have appellate jurisdiction both as to law and fact, with such
exceptions and under such regulations as the Congress shall make.”

Congress has already provided that the Supreme Court shall have
jurisdictién of the judgments of the Court of Claims on appeal. Can it
prescribe a rule in conformity with which the court must deny to itseif
the jurisdiction thus conferred, because, and only because, its decision,
in accordance with settled law, must be adverse to the Government and
favorable to the suitor? This question seems to us to auswer itself.

I need not pursue it. It was for Congress to permit or deny
the appeal to the Supreme Court of the United States. It had
entire control] over that matter. It could do either, but it could
not do both. It could not grant a conditional appeal, nor could
it use the power which it possessed to grant an appeal to con-
trol the judicial power possessed by the Supreme Court under
the Constitution. It could not do this in the slightest degree.
Here is the true distinction, and it is vital, Mr. President.

Congress may withhold, or might have withheld, jurisdiction
from the circuit courts in certain cases. They did it for many
years, and we may admit they may now withhold jurisdiction
from the circuit and district courts; but, Mr. President, so long
as they do not deprive the court of jurisdiction, so long as looking
into the statute the court can see that it is given jurisdiction of
the subject-matter, Congress can not be permitted, on principle—
a principle which this people never must suffer to be invaded or
abrogated—to dictate to the court the manner in which it shall
exercise this judicial power. That would be to emasculate the
courts of justice: that would be to obliterate the line which the
Constitution has drawn between the coordinate and independent

6655
27

branches of the Government. Under that theory the judicial
department of the Government would cease to be an independent
department of the Government, and a blow would be siruck at
the best work of the fathers.

The Senator from Texas [Mr. CuLperson], in the very able

-and lawyer-like argument which he delivered here the other
day, noted clearly and approved the distinction for which I am
contending between jurisdiction and judicial power.

Mr. Justice Miller, a great judge, whose career as a justice of
the Supreme Court added greatly to the just fame which
throughout the world that tribunal has achieved for itself dur-
ing its existence, said a word in his lectures on the Constitution
upon the subject of the abolition of the inferior tribunals. Of
course, he announced that it is beyond the power of Congress,
as all concede, to destroy the Supreme Court of the United
States, for that was directly created by the Constitution, al-
though organized of necessity by the Congress. He says:

It can not be abolished nor its judges legislated out of existence,
although it has been forcibly argued, and probably with truth, that all
the other courts can by legislative act be abolished and their powers
conferred on other courts or subdivided in different modes.

It is said that the circuit courts and district courts of the
United States were prohibited by the judiciary act from grant-
ing injunctions. In one case, yes—to restrain proceedings in
State courts—and it is claimed that that is a contemporaneous
construction of the Constitution and supports the power of Con-
gress contended for now, while the jurisdiction in equity exists
to whittle away the judicial power of the Constitution in equity.
The exception to that prohibition was in bankruptcy cases. It
may be said about that prohibition that under our system of Gov-
ernment, different from the government in which grew up the
English chancery system, there were good reasons and strong
reasons peculiar to our form of Government which led the Con-
gress of that day, to prohibit injunctions to restrain proceedings
in State courts, because we have States.

Mr. MORGAN. And they have sovereignty.

Mr. SPOONER. Yes; imperium in imperio. There is the sov-
ereignty of the United States and the sovereignty of the States.
The Constitution recognizes, of course, their sovereignty ; and in
order to avoid friction between the courts of the Union and the
courts of the States it was wise, and in no degree diminished the
chancery power which came to us through the Constitution,
that the Congress should not permit unlimitedly the circuit and
district courts of the United States to enjoin proceedings in the
State courts.

This provision, enacted in 1793, is still the law. It is section
720 of the Revised Statutes and is as follows:

The writ of injunction shall not be granted by any court of the
United States to stay proceedings in any court of a State, except in
eases where such injunction may be authorized by any law relating to
proceedings in bankruptcy.

But the Supreme Court of the United States has decided more
than once that, notwithstanding this plain prohibition to pre-
vent friction between the courts of the United States and of the
States, it possesses power to enjoin proceedings in the State
courts not in bankruptcy, where such injunction is essential to
the protection and exercise of its jurisdiction and to the giving
effect to its decrees.

6655
28

Mr. MORGAN. May I take the liberty of making a sugges-
tion to the Senator from Wisconsin——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Alabama?

Mr. SPOONER. Certainly.

Mr. MORGAN. The Senator from Wisconsin, as I under-
stand, has contended that the power of injunction is one of the
constituent powers of a court of equity and has been ever since
such courts were founded. The powers of a court of equity
are judicial. They are not political. The power that was men-
tioned and restrained in the judiciary act was a political power.
and the purpose was to prevent the court from exercising
political power over the coordinate sovereignties of the United
States.

Mr. SPOONER. Certainly. In the same way and following
the line of suggestion which the Senator from Alabama makes,
the judiciary act conferred upon the courts of the United
States the power to grant all writs necessary to the exervise of
its jurisdiction. That did not, and never has been held, to
authorize the inferior courts of the United States to issue writs
of mandamus in all cases.

The writ of mandamus at the common law was a high pre-
rogative writ. It has become in later years—

More and more assimilated to an ordinary remedy to the use of
which the parties are entitled as of right. It was in this sense that
Tawney, C. J., characterized it in modern practice as nothing more than
apn action at law between the parties. (24 Howard, 66.)

It is still an extraordinary remedy at law, in the same sense that
injunction is in equity. The injunction is preventive and conservative,
its object being to preserve matters in statu quo. Mandamus is reme-
dial, tending to compel action and redress past grievances.

The Congress was not willing, nor was it needful, to confer
upon the United States circuit courts by the judiciary act the
general power to grant writs of mandamus. It has been so held.
But they did confer the power to grant it wherever necessary to
the efficient exercise of the judicial power vested in the courts.
It is a necessary writ oftentimes for the control of the inferior
tribunals.

Returning to the matter of the injunction, of which I was
speaking when interrupted by the Senator from Alabama with
a valuable suggestion, I call attention to the case of Julian v.
The Central Trust Company (193 United States, 94). The sylla-
bus sufficiently states the case:

A purchaser of property sold under a decree of foreclosure in a Fed-
eral court in cases where the Federal court by its decree retains juris-
diction to settle all liens and claims upon the property, and who is in
possession of the property under an order confirming the sale, can main-
tain an action in the same court to restrain the holders of judgments
obtained in State courts against the former owner in actions to which
the purchaser was not a party from levying upon and selling the prop-

erty described in the decree of foreclosure and the order confirming the
sale thereunder.

The courts say:

If the sheriff is allowed to sell the very property conveyed by the
Federal decree such action has the effect i annul and act it Eide,
because in the view of the State court it was ineffectual to pass the
title to the purchaser. In such cases we are of the opinion that a sup-
plemental bill may be filed in the original suit, with a view to protect-
ing the prior jurisdiction of the Federal court, and to render effectual
its decree. (59 Fed. Rep., 385; 88 Fed. Rep., 815; 110 Fed. Rep., 10.)

In such cases where the Federal court acts in aid of its own juris-
diction and to render its decree effectual, it may, notwithstanding sec

6655
29

tion 720, restrain all proceedings in a State court tohich would have the
effect of defeating or impairing its jurisdiction. (Sharon v. Terry, 36
Fed. Rep., 337, per Mr. Justice Field; French v. Hay, 22 Wallace, 250;
Dietzsch v. Huidekoper, 103 U. S., 494.)

In cases of concurrent jurisdiction it has always been held
that the court whose jurisdiction first attached held it, and it
has been repeatedly decided that in such case the Federal court
may issue the writ of injunctidn in order to protect its jurisdic-
tion and to enable it to exercise efficiently the judicial power
vested in it by the Constitution.

Mr. OVERMAN. May I interrupt the Senator from Wis-
consin?

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from North Carolina?

Mr. SPOONER. Certainly.

Mr. OVERMAN. I desire to say, on another point, that I
myself brought that suit to the Supreme Court of the United
States.

Mr. SPOONER. I know it, and I was going to refer to that
fact.

Mr. OVERMAN. I desire to say that I have seen the abuses
and felt the iron hand of a judge who grants an injunction
without notice. I have twice been enjoined at midnight——

Mr. SPOONER. That is another thing.

Mr. OVERMAN. And the State court itself was enjoined
without any notice. I merely wanted to illustrate it, that is all.

Mr. SPOONER. That is another thing. The Senator from
North Carolina, I understand, has introduced an amendment to
the pending bill, prohibiting the granting of an injunction with-
out notice in suits brought under the proposed act to enjoin the
enforcement of the Commission’s order. That goes to a regu-
lation of practice. That does not deny in any sense the right
of the court to exercise the judicial power which inheres in
the jurisdiction. There is a clear distinction between the two
things. Congress for many years prohibited the Federal courts
from granting an injunction without reasonable notice, as I
have said.

Mr. OVERMAN. I understand that that decision held that
the United States court having acquired jurisdiction of the
subject-matter, although the case had gone off the docket, in
order to protect its own decree it had the right to enjoin the
State court.

Mr. SPOONER. That is the very point. Notwithstanding
the prohibition that no injunction shall be issued by a Federal
court to stay proceedings in a State court except in bankruptcy
cases, it has been repeatedly decided that to effectuate the judi-
cial power of the Federal court, to give force to its decrees, and
to protect its jurisdiction in the very nature of the thing the
court must exercise this power.

Mr. OVERMAN. And protect the title of those who bought
under the decree.

Mr. SPOONER. That is giving effect to their decree; that
is all.

Mr. President, without the power to protect its jurisdiction.
without the power to exercise the functions essential to the
jurisdiction, what would a court be? And to say that jurisdic-
tion admitted, the Congress can hamper the court in the exer-

6655
30

cise of its judicial power, chop off a piece of it here and a piece
of it there, is something which is not to be tolerated under our
system of government, in my judgment.

Mr. President, I put against all comers on this question the
statement of Mr. Justice Story in the case to which I called at-
tention yesterday—Martin v. Hunter, reported in 1 Wheaton—
at the end of an elaborate argument on the construction of the
judicial clauses of the Constitution:

But even admitting that the language of the Constitution is not man-
datory and that Congress may constitutionally omit to vest the judicial
power in courts of the United States, it can not be denied that when it
is vested it may be exercised to the utmost constitutivnal extent.

That was one of the first opinions of the Supreme Court
in the construction of the judicial clauses of the Constitution.
It found its way in extenso into Judge Story’s Commentaries
upon the Constitution. No one of the great judges who sat with
him on that bench, save Mr. Justice Johnson, criticised anything
in that opinion. It is not to be supposed that Chief Justice Mar-
shall was not familiar with it; that Mr. Justice Washington was
not familiar with it; that Mr. Justice Livingston was not fa-
miliar with it; and had it not met their concurrence it is sure,
from the practice of the judges of that day, that the dissent
from its argument, even if its conclusions were approved, would
have found its way into the reports. Mr. Justice Johnson criti-
cised a portion of the opinion, although not that portion of it.

Now, I have found nothing in any utterance of the Supreme
Court of the United States since that day which warrants me,
Mr. President, in the belief that this distinction between juris-
diction and judicial power under the Constitution is not an abid-
ing one, firmly embedded in the jurisprudence of the United
States. It is that principle which makes the courts independent
of Congress; it is that principle—the power to hear and deter-
mine and to carry into effect its decrees and judgments inde-
pendent of popular clamor, independent of prejudice—that has
made the court always, and so it will always be, the rock upon
which this constitutional Government finds its sure and safe
foundation. Break away from it and admit the power to strike
down this function and that function of the chancellor; give him
jurisdiction to grant a permanent injunction; deny him the
power in the exercise of that jurisdiction by preliminary in-
junction in a proper case to prevent the doing of the irremedi-
able wrong which the suit is brought to prevent and what is
left of the courts? Only what Congress may see fit to leave
of the court.

I agree that, so far as the power of Congress over the inferior
courts of the United States is concerned, there is probably no
distinction between the courts of equity and the courts of law.
I do not see that there is. If the Congress can destroy one.
directly or indirectly, I see no reason why it might not destroy
the other.

I will go briefly over the cases cited as contravening my
contention. I first note Connecticut v. New York (4 Dallas).
What was held in that case was simply this: .

The prohibition contained in the statute that writs of injunction shall
not be granted without reasonable notice to the adverse party or his
attorney, extends to injunctions granted by the Supreme foarte or the
circuit oy as well as those that may be granted by a single judge.
31

That may be admitted. It has nothing to do with this ques-
tion.

It was held in the same case:

An injunction will not be granted to stay proceedings in common law
suits, at the instance of a State not a party thereto nor interested in
their decision.

This was obviously rightly decided and is far away from any
question involved here.

Turner v. The Bank (4 Dallas) was rightly decided. The ju-
diciary act had provided that the Federal courts should not have
jurisdiction of a suit brought by the assignee of a chose in ac-
tion where it would not have had jurisdiction if the assignor
had brought the suit. I can conceive of two reasons, both
founded in wisdom, why that provision was incorporated in the
judiciary act. However, it affected the question of jurisdiction
only ; not the question of judicial power. But for that prohibi-
tion, constant fraud could have been perpetrated on the Federal
jurisdiction and great hardship could have been perpetrated on
debtors. If one by the mere assignment of a note to a per-
son in another State could force the debtor from the local
jurisdiction into a foreign jurisdiction, with the added bur-
den of trouble and expense, it would have been a wrong to
the citizen of the State; it would have been a fraud upon the
jurisdiction of the Federal court. Colorable assignments for
purposes of jurisdiction could have been prevented in no other
way, but what has that to do, I beg to ask, with the question
I am discussing? I think nothing.

In United States v. Hudson (7 Cranch) it was held:

The courts of the United States have no common-law jurisdiction—
It was a question of jurisdiction—

in cases of libel against the Government of the United States; but they
have the power to fine for contempt, to imprison for contumacy, etc.

The court held that jurisdiction had not been conferred.
That case was questioned by several of the judges of the Su-
preme Court of the United States in the case of the United
States v. Coolidge (1 Wheaton, 415), and the syllabus in that
ease upon the same subject starts with a “ quaere.”

In McIntire v. Wood (7 Cranch, 504) the syllabus correctly
sets forth the question involved and the determination of the
court, thus:

The power of the circuit courts of the United States to issue the
writs of mandamus is confined exclusively to those cases in which it
may be necessary to the exercise of their jurisdiction.

The application was for a writ of mandamus to the regis-
ter of the land office in Ohio, commanding him to issue final
certificate of purchase to the plaintiff for certain lands in that
State. The court held that the judiciary act had not conferred
upon the circuit courts of the United States the power to issue
writs of mandamus in all cases, but, on the other hand, con-
fined that power exclusively to those cases in which the writ
was necessary to the exercise of their jurisdiction. I have said
in another part of my argument all that needs to be said of this
case. It certainly does not bear in the slightest against the
argument and conclusion of Mr. Justice Story, or upon the
matter in controversy.

6655
32:

I am unable, saying it with great deference, to find in the de-
cision in Cary v. Curtis (83 Howard, 236) anything, either in the
question decided or in the opinion, sustaining the proposition
that Congress, having vested the jurisdiction in equity over a
case or controversy to which the judicial power extends under
the Constitution, can deprive the court of any authority inhering
in the judicial power over the subject-matter or essential to its
exercise. The case was in assumpsit against Curtis, as col-
lector of the port of New York, for duties alleged to have been
illegally exacted. It had’ been held in the case of Elliott v.
Swartwout (10 Peters, 158) that—

Where money is illegally demanded and received by an agent he can
not exonerate himself from personal responsibility by paying it over to
his principal.

And in the case of Bend v. Hoyt (13 Peters, 267) that—

There is no doubt the collector is generally liable, in an action to
recover back an excess of duties paid to him as collector, where the
duties have been illegally demanded and a protest of the illegality has
been made at the time of payment, or notice then given that the party
means to contest the claim, whether he has paid over the money to the
Government or not:

This decision was based upon the assumption that, by notice
to the collector or by protest aginst payment, the personal lia-
bility for the duties actually paid attaches, and that for his
protection the correspondent right of retainer ix created on his
part in order to protect himself against the liability.

The Congress then passed an act providing that from and
after its passage all money paid to any collector of customs, etc.,
for unascertained duties, or for duties paid under protest against
the rate or amount of duties charged, should be placed to the
credit of the Treasurer of the United States, kept, and disposed
of as all other money paid for duties, as required by law or by
regulation of the Treasury Department, and that it should
not be held by said collector to await any ascertainment of
duties or the result of any litigation in relation to the rate or
anount of duty legally chargeable and equitable, but that wher-
ever it should be shown to the satisfaction of the Secretary of
the Treasury that, in case of unascertained duties or duties
paid under protest, more money bad been paid to the collector
than the law required should have been paid, it should be the
Secretary’s duty to draw his warrant upon the Treasurer in
favor of the person or persons entitled to the overpayment,
directing the said Treasurer to refund the same out of any
money in the Treasury not otherwise appropriated.

The question was whether this act of Congress had so
changed the situation as to render the collector no longer liable
in assumpsit, upon the authority of the cases of Blliott v.
Swartwout and Bend v. Hoyt. The court held that it had, for
two reasons. First, that the Treasurer no longer possessed the
right to retain the money to protect himself against a suc-
cessful action in assumpsit; that by forbidding him to retain
for unascertained duties the moneys paid he had become “ by
law the mere instrument or vehicle to convey the duties paid
into his hands into the Treasury: ” that the payment was with
notice of the law, and that no implied promise on the part of the
officer upon which assumpsit could be based could arise where
the law expressly made it his duty to pay the money at once to

6655
33

the ‘Treasurer and forbade his retaining it to indemnify himself
against loss through litigation. The court held, moreover,
that—

__ In devising a system for appraising and collecting the public revenue,
it was competent for Congress to designate the officer of the Govern-
ment in whom the rights of that Government should be represented in
any conflict which might arise and to prescribe the manner of trial.

The court held, moreover, that the claimant was not without
other modes of redress had he chosen to adopt them; that he
might have asserted his right to the possession of the good
or his exemption from the duties demanded, either by replevin
or in an action of detinue, or perhaps by an action of trover,
upon his tendering the amount of duties admitted by him to be
legally due. :

The court held, also, that it was entirely competent for the
Governnent to refuse to consent to be sued in its own courts.

The language of the opinion that it was competent for the
court to deprive a citizen of the right to maintain an action in
assumpsit against the collector under the circumstances is far
away from holding that if the assumpsit had been permitted
Congress could have regulated the exercise of the judicial
power in the trial of the cause. The language of the opinion,
of course, is to be read with reference to the case and the
questions involved in it. After using the language which is
quoted against my contention, the court says:

Perfectly consistent with such an admission is the truth that the
organization of the judicial power, definition, and distribution of the
subjects of jurisdiction in the Federal tribunals, and the modes of their
action and authority, have been, and of right must be, the work of the
legislature.

It was a question of jurisdiction. The Congress had seen fit
in the exercise of undoubted power to clothe the Secretary of
the Treasury instead of the courts with the investigation and
determination of such cases.

The case falls fairly within the language of Mr. Justice Cur-
tis in the case of Denn v. The Hoboken Land and Improvement
Company (18 Howard, 272) :

To avoid misconstruction upon so grave a subject, we think it proper
to state that we do not consider Congress can either withdraw from
judicial cognizance any matter which from its nature is the subject of
a suit at the common law or in equity or admiralty; or, on the other
hand, can it bring under the judicial power a matter which from its
nature is not a subject for judicial determination. At the same time
there are matters involving public rights which may be presented in
such form that the judicial power is capable of acting on them, and
which are susceptible of judicial determination, but which Congress
may, or may not, bring within the cognizance of the courts of the
United States as it may deem proper. Equitable claims to land by the
inhabitants of ceded territories form a striking instance of such a
class of cases, and as it depends upon the will of Congress whether a
remedy in the courts shall be allowed at all in such cases, they may
regulate it and prescribe such rules of determination as they may think
just and needful.

In Sheldon v. Sill (8 Howard) it was held:

Where the mortgagor and mortgagee resided in the same State and
the mortgagee assigned the mortgage to the citizen of another State,
this assignee could not file his bill for foreclosure in the circuit court of
the United States.

Affirming Turner v. Bank, McIntire v. Wood, and some other
cases. I have already sufficiently referred to them.

The Sewing Machine cases, so often referred to here, an ex-
tract from which. I read this morning, involved simply the

6655. 3

 
34

question whether that case was removable from the State
court to the Federal court under the removal act of Congress,
and the court held it was not. That was a question of jurisdic-
tion; only that and nothing more. :

The case of Insurance Company v. Dunn (19 Wallace) _is pre-
cisely the same case. It arose upon the challenged right of
removal, and the court held that under the act of Congress it
could not be removed. Only a question of jurisdiction. The
right of removal of a case or suit from the State court is a
statutory one.

I find nothing in the case of Fink v. O’Neil (106 U. S., 272),
which to my mind affects the question. In that case the United
States as plaintiff obtained a judgment in a common-law cause
in the circuit court of the United States for Wisconsin against
O’Neil. Execution was issued, and the marshal levied it upon
property, which under the constitution and laws of Wisconsin
was exempt from sale on execution. A bill was filed by the de-
fendant to restrain the marshal from further proceedings under
the execution. The Supreme Court sustained the bill on de-
murrer. The statutory exemption had been enacted—

In compliance with a constitutional injunction wherein it was de-
clared, in the seventeenth section of the Bill or Rights, that “ the priv-
ilege of a debtor to enjoy the necessary comforts of life shall be recog-
nized by wholesome laws.” ‘

It had been the constant policy of the State in such legisla-
tion, as construed by the Supreme Court, to favor by liberal in-
terpretation exemptions in favor of the debtor. The court had
stated—

For it can not be denied that in all the enactments found in our stat-
ute books in regard to homestead exemption the most sedulous care is
manifest to secure the homestead to the debtor and to his wife and
family against all debts not expressly charged upon it.

The law of the United States required the practice, pleadings,
forms and mode of proceeding in civil cases other than equity
and admiralty causes in the circuit and district courts to con-
form as near as may be to the practice, pleadings, and forms and
modes of proceeding existing at the time in like causes in the
courts of record of the State within which such circuit or dis-
trict courts were held, any rule of the court to the contrary not-
withstanding. The same act—Revised Statutes, section 916, pro-
vided that the party recovering a judgment in any common-
law cause in any circuit or district court—

Shall be entitled to similar remedies upon the same by execution or
otherwise to reach the property of the judgment debtor as are now
propied in like causes by the laws of the State in which such court is

eld, or by any such laws hereafter enacted which may be adopted by
general rules of such circuit or district court, and such courts may from
time to time by general rule adopt such State laws as may hereafter be
enforced in such States in relation to remedies upon judgments as
aforesaid, by execution or otherwise.

The main question in the case was, whether the Government,
being the suitor, it could be held bound by the law, even if
private suitors were bound by it. The court held, to state it
briefly—

That, as the statute of Wisconsin exempting homesteads from levy
and sale upon execution was in force at the time the act of Congress
of June 1, 1873, took effect, and has remained so continuously from
that time, it also follows that the exemption has thereby become the
law of the United States within that State, and applies to executions
issued upon judgments in civil causes recovered in their courts in their
own name and behalf equal with those for judgments rendered in favor
of private parties.

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85

It was clearly competent for the Congress to regulate the
practice in the Federal courts and to make them conform as
nearly as practicable in the common-law cases to the practice
and procedure, including final process, of the several States.
This was a wise exercise of Congressional power, as it enabled
the bar, accustomed to the trial of causes under codes of proce-
dure, or under the common-law practice, or civil-law procedure,
as the case might be, to conduct the proceedings in the Federal
courts as they were daily accustomed to conduct them in the
State courts.

Upon high grounds of public policy, to prevent friction and
promote justice and equality within a State, the Congress wisely
adopted the beneficent homestead exemption laws of the States.
It would have been almost intolerable that a homestead should
be exempt from sale and seizure under process issued by State
courts and be subject to seizure and sale under process issued
by Federal courts sitting in the same State.

It is one thing for Congress to respect the exemption laws of a
State. It is an entirely different thing to assert that this in-
volves the proposition that Congress may, having created Fed-
eral tribunals, prohibit them from issuing any process to carry
into effect their judgments and decrees. The one respects the
policy of the States; the other would knock the foundation
out from under the court itself. Without such an act of Con-
gress a result would come about deplorable and in every way to
be avoided. It is thus stated by the court:

If a contrary construction to the process acts should be given, on the
ground that they do not include the United States, which, although a
litigant, continues nevertheless to exercise the prerogatives of a sov-
ereign, it would follow that they might resort to any writ known to
the common law, however antiquated or obsolete, and, in defiance of
the progress of enlightened legislation on that subject, revive all the
hardships of imprisonment for debt, even without liberty of local statu-
tory jail limits.

In Ex parte Robinson (19 Wallace) the court decided that—

The power to punish for contempts is inherent in all courts. Its.
existence is essential to the preservation of order in judicial proceed-
ings and to the enforcement of the judgments, orders,.and writs of the
courts, and consequently to the due administration of justice. The mo-
ment the courts of the United States were called into existence and
invested with jurisdiction over any subject they became possessed of
this power.

The court, however, says in that case that happily the Con-
gress has regulated the exercise of the power. Congress, by
the act of 1831, drew a distinction between direct and construc-
tive attempts and regulated the procedure. Still, under that
law, ever since it was enacted the courts of the United States
have possessed the power to punish summarily for contempt,
contempt in the court room, contempt in disobedience to law-
ful orders and decrees, the procedure in one case differing a
little from the procedure in the other. But to this matter of
contempt as to procedure and punishment the relation of the
United States is peculiar. The contempt of court is not a
personal offense against the judge. If it were a personal of-
fense against the judge, no judge could punish a contempt,
for he would be sitting in judgment in a matter involving
his own person and his own dignity. Contempt of court
is an offense against the court. It is an offense against
the United States. It is an offense which can be pardoned
by the President. It is more than a mere process like in-

6655
36

junction or execution, and being an offense against the United
States, being subject, as other offenses, to pardon by the Presi-
dent, being triable by the judge in whose presence the offense
is committed, it is sui generis considered with reference to the
other matters to which I have alluded.

Now, because the Congress passed a law regulating the pro-
cedure in cases of contempt, will it be argued by anyone that
it follows that the Congress may pass a valid enactment pro-
hibiting any court of the United States from punishing for
contempt? Does any Senator claim that? That would be to
bring the courts into contempt. That would be to destroy the
courts. That is a power which, in the Debs case, Mr. Justice
Lrewer declares to be inherent in a court.

He quotes, with approval, the following:

The summary power to commit and punish for contempt tending to
obstruct or degrade the administration of justice was inherent in
courts of chancery and other superior courts as essential to the execu-
tion of their powers and to the maintenance of their authority, and is
part of the law of the land, within the meaning of Magna Charta
and of the twelfth article of our Declaratfon of Rights. (In re Debs,
158 U. S., 577.)

There can be no court without it, and while it may be regu-
lated as to the matter of procedure, I do not doubt if the
Congress should pass a law prohibiting the courts of the
United States from punishing for contempts in any case, the
courts would not hesitate to declare it beyond the _legis-
lative power. The courts are the judges of their own juris-
diction. The courts would be justified in saying, “‘ Destroy the
court in a manly, straightforward way, if you have power;
you will answer to the people for that; but so long as the courts
exist, so long as they are clothed with jurisdiction to exercise
the judicial power, you can not destroy the inherent power of
the court to maintain order in the court room and to punish
violation of its lawful orders and decrees.””’ One might as well
claim the existence of power growing out of this assumed power
of life or death to prohibit all the courts of the United States
from granting injunctions, all the courts of the United States
from issuing executions, all the courts of the United States
from granting the writ of mandamus, because, as I have said, if
the power exists the extent to which it shall be exercised is a
matter resting entirely in the discretion of the Congress.

Mr. SIMMONS. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from North Carolina?

Mr. SPOONER. I do, if the Senator only wants to ask me
a question.

Mr. SIMMONS. That is all; and I wish to say I do not ask
the question in any spirit of antagonism to the Senator’s posi-
tion, but simply because, to use the familiar phrase of my
friend from South Carolina [Mr. Tir~tMan], “I want some
light.”

I am aware of the fact that the Senator is discussing a very
close question of law, one that has given me a great deal of
trouble, and one about which I have had doubts, and ‘I still have
some doubt.

I understood the Senator yesterday in his argument to take
the position that although Congress had created these courts of
inferior jurisdiction it did not have the power to destroy the

6655
87

courts unless at the same time it should substitute in their place
courts possessed of similar jurisdiction. I understood the Sen-
ator to go further and to contend that one of the reasons, if
not the chief reason why this could not be done, was that it
would bring about a stute of chaos and anarchy, and would
be revolution; and that to take away a part of the powers of
these statutory courts would pro tanto accomplish the same pur-
pose, in that it would take away the arm of the courts, and to
that extent would bring about chaos and revolution.

Now, the question I want to ask the Senator is this: If
Congress should pass an act providing that the Interstate Com-
merce Commission might set aside or suspend a rate prescribed
by a railroad after a full hearing, with the opportunity of all
sides to be present with their witnesses and their attorneys,
could not Congress provide that the Interstate Commerce Com-
mission having decided that question after full hearing and
having set aside the rate established by the carrier, no court
shall be permitted to suspend and set aside the rate thus sub-
stituted by the Commission without according to all parties the
same fullness and the same completeness of hearing upon which
the order of the Commission was based?

Is not that practically what is proposed here, and if that is
done ‘will that be a deprivation of any power of the court which
is essential to its jurisdiction, or will it be a mere regulation of
the practice of that court?

Mr. SPOONER. Mr. President, I did state yesterday, and I
reiterate it to-day, that for the Congress to repeal the laws
creating the district and circuit, substituting for them no other
inferior courts, would bring about a condition of anarchy,
not anarchy in the courts, for they would have been de-
stroyed if it could be lawfully done, but anarchy among the
people. It would leave no tribunals in which the guaranties
of the Constitution which secure to every citizen life, liberty,
and property could be tried by due process of law. It would
leave no court in the United States which could try offenders
against the laws of the United States.

Think for a moment of 80,000,000 people living under the Con-
stitution without a Federal court from ocean to ocean. That is
anarchy; that is revolution. No one could challenge that, and
it is because of that inevitable chaos, because of that paralysis
of the Government, because of the withdrawal of the judicial
tribunals without which in some form, Mr. President, the
operations of the Government could not be conducted, that I
feel myself warranted in the absence of any authority to deny
that the Congress, under the Constitution, can obliterate the
judicial system of the United States and substitute nothing in
its place. But let that go. I did not argue——

Mr. SIMMONS. The Senator does not understand me as
disagreeing with him upon that proposition?

Mr. SPOONER. I am glad the Senator agrees with me about
it. I did not, however, argue that depriving the courts of the
United States of the power to grant a preliminary injunction
would bring about anarchy and revolution in the United States.

Mr. SIMMONS. I did not mean to convey the idea that the
Senator intended it would.

Mr. SPOONER. Even pro tanto, to use the language of the
Senator. I am not criticising the Senator.

6655
38

Mr. SIMMONS. I should like to interrupt the Senator fur-
ther, if he will permit me. Perhaps he misunderstood me about
that.

Mr. SPOONER. I understood the Senator perfectly. What I
did say about that was that it would emasculate the chancery
court. That is what I said, and that is what I say to-day. It
would in thousands of cases rob the equity jurisdiction of the
power to afford preventive relief, which is inherent in and es-
sential to the jurisdiction in equity.

If in some way a negotiable note had been secured by fraud
from the Senator from North Carolina upon misrepresentations
which he had good reason to believe were true, involving his
whole fortune, and he discovered suddenly that it was a fraud,
what good would appeal to equity do the Senator if he could
not secure promptly a restraining order to prevent the negotia-
tion of that paper, the passing of it into the hands of a bona fide
purchaser for value without notice? The Senator would be
left to a remedy at law against a scoundrel who perhaps might
be hundreds of miles away, or who might be utterly worthless.
He would be irrevocably remediless without the exercise of this
power, which ought to inhere in equity and in the chancellor to
afford prompt, preventive relief until the case could be heard
and the equities determined.

So it is, as I snid yesterday, in cases of waste. So it is in
cases of threatened trespass, of threatened offenses, even though
they be punishable if perpetrated, affecting a man’s life, his
liberty, his property, if they may not be prevented irrevocable
harm would come to the people.

Now, I do not for one moment discuss with the Senator the
question either as to the power or the desirability in this case of
requiring notice to be given before the issue of a preliminary
injunction suspending the order of the Commission. I think in
this case it must be accompanied by restraining order pend-
ing the hearing of the motion, to make the provision valid if
the court finds it necessary.

Mr. SIMMONS. Mr. President

The VICE-PRESIDENT. Will the Senator from Wisconsin
yield to the Senator from North Carolina?

Mr. SPOONER. If the Senator insists.

Mr. SIMMONS. I was going to ask the Senator if his argu-
ment did not necessarily lead to the conclusion that Congress
could not require the courts to issue notice before the granting
of an injunction?

Mr. SPOONER. Not at all. It was provided in the judiciary
act that no court in the United States should grant an injunc-
tion without reasonable notice. That is a matter for Congress
to determine. That is one thing. But the denial to the court of
equity of power to issue a preliminary injunction upon terms in
proper cases is another thing.

The jurisdiction in equity over the subject-matter existing, the
question whether the case is a proper case for preliminary in-
junction, whether it is a case in which justice and the efficient
exercise of the judicial power in equity requires preliminary
preventive relief, is a judicial, not a legislative, question. It
can not be a political question. The judgment of the legislature
can not be substituted for the judgment of the court upon that
question.

6655

 
39

Mr. TILLMAN. Mr. President

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from South Carolina?

‘4 Mr. SPOONER. Yes; if my friend will not take much of my
ime.

Mr. TILLMAN. I want to ask the Senator if all his argu-
ments, which are perfectly reasonable in the cases he supposes,
do not fall to the ground in this case we are discussing?
For instance, all the remddies by preliminary injunction which
he is pleading for, which I acknowledge, do not apply in the
case of the Interstate Commerce Commission——

Mr. SPOONER. Do they not? ;

Mr. TILLMAN. Which would be a body of high men, se-
lected for their eminent fitness, I hope, for the work, who would
do nothing without the most careful consideration and investi-
gation, and who, having reached a decision that the rate was too
high and declared it to be so, would order a lower and a just
rate to go into effect. Does not the Senator see that his plea for
the inherent power of the court and the right of the judge to
grant protection does not lie in this case?

Mr. SPOONER. Mr. President, I proceed now to another
phase of this subject, which, so far as my view of it goes,
answers the question put to me by the Senator from South
Carolina.

In the view I wish now to present I pass from the judicial
articles of the Constitution, upon which I have been basing
the observations which I have addressed to the Senate, and
assume, for the purposes of the argument, that it may be
lawful to prohibit generally the granting of interlocutory in-
junctions by the circuit courts of the United States, and yet be
absolutely unlawful to prohibit the granting of such injunctions
in cases arising under this bill if enacted into law.

What is the pending bill so far as it affects this question? It
is a bill, among other things, to confer upon a commission the
power, upon complaint and hearing, to overturn as unreason-
able rates fixed by carriers engaged in interstate transportation,
and to substitute for the rate or rates thus overturned rates
fixed by the Commission as reasonable maximum rates.

Mr. President, I am assuming that the Congress has the
power to confer that jurisdiction upon the Commission, making
its rates in all courts and places prima facie reasonable rates.

Note that it is not proposed here by this amendment to
modify the practice as to injunctions or the judicial power of
the courts of equity of the United States in respect of issuing
interlocutory injunctions generally. That is to be left as to all
other cases to existing law and practice.

Now, Mr. President, that brings me to the Senator’s ques-
tion. There are restrictions in the Constitution upon the exer-
cise by Congress in this particular class of cases, I think, upon
the power to restrain courts of equity from issuing interlocutory
injunctions. After the adoption of the Constitution, amend-
ments to it were adopted which restrict in many ways the power
of Congress as it was ccnferred by the Constitution itself.
Among others is the fifth amendment. which is as follows:

No person shall be held to answer for a capital or otherwise infamous
crime unless on a presentment or indictment of a grand jury, except in
eases arising in the land or naval forces or in the militia when in

6655

 
40

actual service in time of war or public danger; nor shall any person be
subject for the same offense to be twice put in jeopardy of life or limb;
nor shall be compelled in any criminal case to be a witness against
himself, nor be deprived of life, liberty, or property without due process
of law; nor shall private property be taken for public use without just
compensation.

Without that amendment, Mr. President, I should doubt if
private property could be taken for public use without just com-
pensation. I do not think it required a constitutional provision
to prevent the Congress from enacting a law taking the prop-
erty of one man and vesting it in another, because that would
be violative of fundamental principles which underlie govern-
ment and which are an essential and vital part of the social
compact as we know it.

In a decision of the Supreme Court long ago, the opinion being
delivered by Mr. Justice Chase, and being one of great learning,
it is declared that, without constitutional restriction, there are
acts so abhorrent to natural equity and to every sane man’s
sense of justice that, although not prohibited by written consti-
tutions, they can not be lawfully done. (See Calder v. Bull., 3
Dallas, 387.)

My friend from Minnesota [Mr. Ciapp] said the other day
in his able speech that he had studied law in my office, which is
true, and I felt like saying then what I say now—that he has
splendidly redeemed in his maturer years the promises of his
youth

Mr. TILLMAN. He looks to be as old as you.

Mr. SPOONER. But he is not. I have been proud of his
eareer at the bar and I have been proud of bis career in the
Senate, and it was a gratification to me that the Senator thus
publicly alluded to our association of many years ago. He
has just called my attention to the fact that in the first case
in which an act of a legislature was set aside it was done upon
the basis that while it violated no provision of a written con-
stitution it was so abhorrent to common decency and equity
that no court could sustain it. There are some things higher
than constitutions. They underlie them, they pervade them,
Mr. President, and run like golden threads through the warp
and woof of the social fabric; and. though unwritten, except in
the consciences of men, they are enforced by public opinion and
enforced by the courts.

Mr. BACON. Mr. President, I suppose. of course, the Senator
means by that when they are not in conflict with a written
constitution ?

Mr. SPOONER. Of course. I said when they are not in a
constitution.

Mr. BACON. When they are not in conflict?

Mr. SPOONER. Certainly.

Mr. President, this is a restriction which can not be ignored:

Nor be deprived of life, liberty or property without due process of
law; nor shall private property be taken for public use without just
compensation.

Mr. President. how does that apply to this case? It is con-
ceded here, I take it, that no rate fixed by a commission to be
charged by an interstate carrier for the service which it is com-
pelled to render through the use of its own property, managed by
its own servants, and at its own risk, can be enforced without a
“day in court” some time and somewhere, upon the question of

6655

 
41

the justness of the compensation. It is conceded here by every-
one that the door of the United States court is open, and can not
be closed against an original bill filed by the carrier to set aside
the rate fixed by such a commission upon the ground that it does
not afford just compensation, that it is confiscatory in its nature,
and therefore is a taking of property in violation of the fifth
amendment. This bill is to regulate the taking of private prop-
erty for a public use.

Mr. TILLMAN. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from South Carolina?

Mr. SPOONER. Certainly.

Mr. TILLMAN. Is not the presumption to the contrary, how-
ever, that this. matter having been determined by a high and
impartial board or commission who have examined into the
facts, and who in their attributes and characteristics are the
equals of the judges—is it not the presumption that that tri-
bunal has given justice and has not deprived anybody of prop-
erty without due compensation? Why not give the man who
is shipping the benefit of the doubt?

Mr. SPOONER. Let me answer the question. I answer it
yes. I stated that. I said that these rates were made prima
facie reasonable. The presumption is that they are reasonable.
The burden is upon the carrier to show that they are not rea-
sonable. If they are reasonable, if they afford just compen-
sation for the property taken, the carrier fails in his lawsuit.
If they are unreasonable, if they are confiscatory—and I use
that word because it is expressive—the carrier must prevail.
It is the theory that these rates are presumptively right; but it
can not, under the Constitution, Mr. President, be made by
Congress the law that they are conclusively right.

Mr. TILLMAN. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from South Carolina?

Mr. SPOONER. I yield.

Mr. TILLMAN. Does not the Senator recognize the justice
of the statement of the writers on this subject that a single
rate, which alone will be in controversy, can not be confiscatory ;
that it would take a schedule of rates which could be demon-
strated as yielding no proper return to make the basis of such
a lawsuit? And that the carrier is allowed to go into court——

Mr. SPOONER. Mr. President

Mr. TILLMAN. Please give me a minute. A carrier is al-
lowed to go into court upon one case or one rate, because the
possibility is that a constitutional right has been taken away
from him by the Commission, and the judge is to be permitted
to issue his order staying the rate and putting the case again
into court, causing delay and all that kind of thing.

Mr. SPOONER. Mr. President, there is no power in the
United States that could take away from the Senator from
South Carolina his property. If the carrier takes a rate to the
court and can not show it to be unlawful, the suit fails, and
that is the end of it. That can only be determined by the court.

Mr. TILLMAN. Why, Mr. President, if I have not $2,000
worth of property involved I can uot even get into this court,
and the Senator knows it.

6655

 
42

Mr, SPOONER. Does the Senator consider that an answer
to what I was about to say? [Laughter.]

Mr. TILLMAN. I do not know what it is an answer to; but
it is a thought that came into my mind on account of what
the Senator did say.

Mr. SPOONER. Mr. President, there is no power under the
Constitution to take private property for public use, save for
just compensation, which is defined to mean “a full and fair
equivalent.”

Mr. ‘TILLMAN rose. .-

Mr. SPOONER. Now, I beg the Senator to permit me to pro-
ceed with my argument.

The VICE-PRESIDENT. The Senator from Wisconsin de-
clines to yield. io

Mr. SPOONER. And, Mr. President, if the compensation is
not just, if it is not determined according to judicial procedure,
the Senator will have his remedy.

It will not be contended, I take it, that the property of the
public carrier is not as completely within the protection of the
fifth amendment to the Constitution as the property of any indi-
vidual. It has been sometimes thought otherwise, but without
any foundation. It does not follow because property is af-
fected with a public use, that it ceases to be private property
entitled to the protection, in its ownership, of the fifth amend-
ment or in proper cases of the fourteenth amendment to the Con-
stitution. The fact that it is charged with a public use, Mr.
President, gives to the public the right to regulate it; it gives
to the public the right to its use without unjust discrimination
for just compensation. It is to secure that right of the public
which is inherent as to property affected with a public use, and
which can not be taken away, that there comes this right in
behalf of the public to regulate the use of such property by its
owner and to prevent extortionate charges or unjust discrimina-
tion in that use; but subject, Mr. President, to the rights which
grow out of the public use with which the property is affected,
it ig private property as much as any property, and entitled
under the Constitution to protection against spoliation as com-
pletely as if it were owned by a citizen.

Not long ago the Supreme Court had oecasion to deal with
that question. I do not know that anyone disputes it. One
often hears it suggested that the property used thus by the
public, created for public use, is public property, and, be-
cause public property, to be absolutely under the domination of
the public. That is not the law. It is public in its use; it is
private in its ownership, and it is entitled to the protection of
the law. I want to read a word from the Supreme Court of the
United States on that subject. (W. U. Tel. Co. v. Pennsylvania
Co., 195 U. 8.)

A railroad’s right of way has, therefore, the substantiality of the
fee—

That is, whether it is acquired by a conveyance in fee or ac-
quired in the exercise of the power of eminent domain—
and it is private property even to the public in all else but an in-
terest and benefit in its uses. It can not be invaded without guilt of
trespass. It can not be appropriated in whole or part except upon the
payment of compensation. In_ other words, it is entitled to the pro-

tection of the Constitution, and in the precise manner in which protec-
tion is given. It can only be taken by the exercise of the powers of

6655
43

eminent domain, and a condition precedent to the exercise of such power
is, we said in Sweet v. Rechel, that the statutes conferring it make pro-
vision for reasonable compensation to the owner of the property taken.

Now, Mr. President, it must not be supposed that, in order to
bring it within the purview of the constitutional amendment,
property must in specie be taken. That is not the law. It was
decided long ago by the Supreme Court in the “ Pumpelly case”
(13 Wall. 166) that, though property be not actually taken for
public use, if the oirner's use of it be destroyed by the Govern-
ment, it is a taking. In that case public improvements sur-
rounded the land with water so as to prevent its being utilized
by the owner, and the Supreme Court held that it was a “ tak-
ing” of the property within the Constitution which could not be
consummated without just compensation.

In Scranton v. Wheeler (179 U. S., 153) the court says:

Undoubtedly compensation must be made or secured to the owner
when that which is done is to be regarded as a taking of private prop-
erty for public use within the meaning of the fifth amendment of the
Constitution; and of course, in its erercise of the power to regulate
commerce, Congress may not override the provision that just compensa-
tion must be made when private property is taken for public use.

* * * * * * *

In Pumpelly v. Green Bay Company (13 Wall., 166, 181) the court
coustrued a provision of the constitution of Wisconsin declaring that
the property of no person shall be taken for public use without just
ou penenien therefor, observing that it was a provision almost iden-
tical in language with the one relating to the same subject in the Fed-
eral Constitution.

* * 7 oe * * * *

Referring to some adjudged cases which went, as the court observed.
beyond ‘sound principle, it was said that “it remains true that where
real estate is actually invaded by superinduced additions of water,
earth, sand, or other material, or by having any artificial structure
placed on it, so as to effectually destroy or impair its usefulness, it is a
taking within the meaning of the Constitution, and that this propo-
sition is not in conflict with the weight of judicial authority in this
country, and certainly not with sound principle.”

How does this differ? Here, Mr. President, the property is
not taken, but what is the same thing within the meaning of the
law, its use is taken. There is little value in such property save
in its use. It is the power to use it for the transportation of
passengers and freight and to charge reasonable compensation
for that use in which its value consists; and that use can not be
taken, Mr. President, under the Constitution of the United
States any more without just compensation than the property
itself can be taken. Is that disputed?

It is said by the Supreme Court of the United States in
Chicago, Milwaukee and St. Paul Railway Company v. Min-
nesota (134 U. S.):

From what has thus been said it is not to be inferred that this power
of limitation or regulation is itself without limit—

Speaking of the regulation of freight rates—

This power to regulate is not a power to destroy, and limitation is
not the equivalent of confiscation. Under pretense of regulating fares
and freights the State can not require a railroad corporation to carry
persons or property without reward; neither can it do that which in
law amounts to a taking of private property for public use without just
compensation or without due process of law.

* * * * * * *

If the company is deprived of the power of charging reasonable rates
for the use of its property, and such deprivation takes place in the ab-
sence of an investigation by judicial machinery, it is deprived of the
lawful use of its property, and thus, in substance and effect, of the
property itself, without due process of law and in violation of the Con-

6655
44

stitution of the United States; and in so far as it is thus deprived,
while other persons are permitted to receive reasonable profits upon
their invested capital, the company is deprived of the equal protection
fy laws. (Chicago, M. & St. P: Ry. Co. v. State of Minn., 134 U. 8.,

Mr. President, subject to the one limitation, that the com-
pensation shall be just, the right to fix rates for the carriage
of persons and property has many times been held to be within
the power of the States. That is the right which, on behalf of
the Government, underlies the proposition to pass this bill. .

But what about the justness of the compensation? Jit is
irrelevant at least to say that this Commission is, or will be,
in point of ability and dignity and all that, the equal of the
justices of the Supreme Court. That is apart from the ques-
tion. It is a matter of principle upon which I am _ speak-
ing. A suit brought to test the question as to whether the
rate is a reasonable rate may be wrongly brought; it may be
determined adversely to the carrier; it may be found that the
rates afford just compensation within the definition of that
expression by the Supreme Court. It may be, however, that
this Commission will not be infallible. It is barely possible
that it will be composed of human beings with all the likelihood
to make mistakes and all the weaknesses of judgment which
inhere in mankind. It may be that the rates which they fix
would be confiscatory rates. Rates fixed by the States under
such legislation have been many times held by the Supreme
Court to be confiscatory rates. That is to be judicially de-
termined, and I am speaking of the right to have it’ so de-
termined one way or the other; and, Mr. President, here
comes in a principle, universal in its application, with certain
exceptions, laid down by the Supreme Court in extracts
which I just read, and nowhere better stated than it is stated
by Judge Cooley in his work on Constitutional Limitations.
He takes what I first read from Chancellor Kent:

The settled and fundamental doctrine is that government has no right
to take private property for public purposes without giving just com-
pensation; and it seems to be necessarily implied that the indemnity
should, in cases which will admit of it, be previously and equitably as-
certained and be ready for reception concurrently in point of time
with the actual exercise of the right of eminent domain.

An exception was made early to that general principle where
towns take private property for highways and where counties
or municipalities take private property for public uses. Upon
this ground the exception was made, and it may be carried be-
yond this, that the taxable property of the town or of the
county or municipality constitutes a fund from which, when as-
certained, the owner can, without doubt, secure his just compen-
sation. So the payment at the time of taking in such cases was
dispensed with.

And while this is not an inflexible rule unless in terms established
by the Constitution, it is so just and reasonable that statutory pro-
visions for taking private property very generally make payment pre-
cede or accompany the oppropriation and by several of the State con-
stitutions this is expressly required. And on general prinelples it is
essential that an adequte fund be provided from which the owner of
the property can certainly obtain compensation; it is not competent
to deprive him of his property and turn him over to an action at law
against a corporation which may or not prove responsible, and to a
judgment of uncertain efficacy. For the consequence would be in

some cases that the party might lose his estate without redress, in
violation of the inflexible maxim upon which the right is based.

6655 :
45

On elementary principles the carrier is entitled to receive
for the service rendered in the use of its property at the time
the service is rendered the “ just compensation” of the fifth
amendment. Carriers can not be required to render the service
upon credit or to deliver before payment property transported.

One could spend hours, Mr. President, reading decisions to
the same purport. How does that apply to this case? In this
way: The carrier in the exercise of a constitutional right files
his bill in a Federal court—for it is a Federal question regard-
less of the matter of diverse citizenship—making the Interstate
Commerce Commission parties defendant, and the original com-
plainant ought probably to be made a party—alleging that the
rate fixed is not ‘just compensation” within the language of
the constitutional amendment, and asking a decree of the court
that the Commission be enjoined from enforcing its order.

Mr. OVERMAN rose.

Mr. SPOONER. Excuse me a moment. I will listen to the
Senator later. I beg the Senator’s pardon; I do not mean to
offend him.

If an adequate fund or other security were provided from
which the carrier could certainly obtain the “ just compensa-
tion” guaranteed by the fifth amendment when the compensa-
tion shall have been judicially ascertained, no such question
would arise, for injunction would have no office to perform, none
would be granted, and such prohibition would be valueless, and
therefore probably innocuous to the bill. No such fund or
security could be afforded except by the Government whose
Commission fixes the compensation for the use of the property
and in whose court the justness of the compensation is being
challenged, and that would be “ impossible” from every stand-
point but that of financial ability.

What happens if without any fund or security, and pending
the ascertainment of the just compensation, the court is pro-
hibited from granting an interlocutory injunction, no matter if
the bill and exhibits demonstrate its justice and necessity? The
complainant carrier will have been compelled to furnish to the
public for months, perhaps, the use of its property for the com-
pensation fixed by the Commission and challenged in court from
the beginning as noncompensatory. If the rate shall be held
by the court in the end to be not ‘“ just compensation,” and
the enforcement of the order be perpetually enjoined as un-
lawful, how stands the carrier? The difference between the
rate fixed by the Commission and “just compensation ’”’ may
amount to many millions. It will have compulsorily rendered
the service by the use of its property for the public without the
“just compensation,” to which the Constitution entitles and of
which no valid law can deprive it. So far as it relates to the dif-
ference between the rates collected and just compensation, it
will have been compelled to furnish the use of its property,
through its own servants and at its own cost and risk upon
credit. Where is its remedy? From “an adequate fund from
which the owner of the property can certainly obtain compensa-
tion,” as in the case of the individual? There is none such.
There is no remedy. Its only recourse would be to bring many
suits as there were separate shippers, for large sums and small
sums, against the solvent and the insolvent, against estates of

6655
46

shippers who meanwhile have died, against parties in different
jurisdictions—perhaps in other countries—certainly in different
sections of our own country, involving a multiplicity of suits be-
yond comprehension very barren of result. It would all come to
this: That private property would have been taken for public use
without just compensation paid in hand and without possibility
of redress, for there would obviously be no redress. Can this
be done under the Constitution? Can Congress provide for the
compulsory taking of this property, and at the same time by law
applicable only to this class of cases prohibit the courts of the
United States having jurisdiction of the subject-matter from
exercising the judicial power to secure the full protection which
the fifth amendment, upon the demand of the States, was adopted
to afford? It would not be a regulation of the jurisdiction, but
a limitation of the judicial power. It would be substituting for
the discretion of the chancellor the judgment of the legislature.
It would be, in effect, nraking the rate fixed by the Commission
conclusive pending final decree.

It will not be contended that Congress may lawfully provide
that the rate shall be conclusive until final decree setting the
order aside, and that the decree shall not relate back to the
filing of the bill. In effect this would accomplish substantially
the same result.

Mr. TILLMAN. Will the Senator allow me?

Mr. SPOONER. No; not now. Excuse me.

The VICE-PRESIDENT. The Senator from Wisconsin de-
clines to yield.

Mr. SPOONER. Will not any Senator say that at least this
is a serious and dangerous question whether that is constitu-
tional or not?

Mr. TILLMAN. The Senator will not let me interrupt him.
I tried to get in.

Mr. SPOONER. The Senator’s observations would not illu-
minate what I have in my mind.

Mr. TILLMAN. But I would illuminate the subject all the
same.

Mr. SPOONER. Oh, I do not mean to be discourteous or to
minimize in the least the Senator’s ability. He knows I do not.
But I wish at this moment not to be interrupted by anyone.

There are in this bill, Mr. President, questions which can not
be eliminated from it. The Supreme Court has left it an open
question whether Congress has the power under the commerce
clause to fix maximum rates or the prices which the carrier
shall charge for interstate transportation. They said so in the
Northern Securities case. Great lawyers differ about the power.
It is not absolutely clear, but I think the power will be sustained.
I know this, Mr. President, that it is time the Supreme Court
passed upon that question, and it can not pass upon it until the
Congress enacts legislation which involves it. Let that go. We
can not eliminate that danger, if it be a danger. It is doubted
by very able lawyers whether if Congress possesses the power
to fix maximum rates, it possesses the power to delegate the
function to the Commission which is provided for by this bill.
That can not be eliminated because of anybody’s doubt. Other-
i that question could not be presented to the Supreme

‘ourt.

But this danger is not necessary. The court may, without
injustice to shipper or carrier, grant in proper cases, as is done

6655
47

in other cases, interlocutory injunctions upon terms. This
course will, as nearly as possible, be just to all interests. The
terms may be either a bond running to the Interstate Commerce
Commission or otherwise, as may be thought wise, and condi-
tioned to repay to shippers, if the order be sustained, the
charges collected pending final decree in excess of those fixed by
the order of the Commission. Or—and much I prefer this—the
excess rates may be required to be paid into court monthly to
abide the result of the litigation, for distribution among those
entitled if the order is sustained. The payment of the excess is,
in my opinion, practicable, and it would have a greater tendency
to prevent litigation except upon good ground for it. I have
thought much of this phase of the subject, but can not now
discuss it. Either plan can be arranged to do approximate
justice both to shippers and carriers without endangering the
validity of any portion of the act.

All these fears about the eternity of such litigation are with-
out foundation. That is largely a matter within the power of
Congress. It largely is due to the Senator from Pennsylvania
(Mr. Knox], while Attorney-General, that measures have been
placed upon the statute books for speeding such causes. These
cases need not go to the court of appeals. They ought not to
go there. They may go directly to the Supreme Court, and all
the legislative power may be exercised, consistent with the va-
lidity of the procedure, to bring about speedy hearings and
determination of the question.

Mr. SIMMONS. . Will the Senator let me ask him a ques-
tion with respect to this bond scheme? What provision would
he make to see to it that the man who actually paid the
freight, and not the man who nominally paid it, got the excess
returned to him?

Mr. SPOONER. I think that is practicable. The Senator
knows what my judgment about that is. It requires special
provision to accomplish that. I think if it provided simply for
the return to the “shipper ”’ of the excess rates, in thousands of
cases the man who really paid the excess would not get it. But
I can not enter upon that at this time.

No man knows any better than I the good faith with which
this proviso is offered. No man appreciates any more than
I do the great ability with which it has been advocated by the
Senator from Texas. I can not agree with him. It is an honest
difference of opinion. It has always been my theory to avoid
dangers in legislation, where it can be done, and I can see no
possible justification for incorporating in the bill unnecessarily
a provision which may afford good ground for the successful
challenge of its validity.

Mr. President, I have finished. The question I have discussed
is, in its relation to this measure and independent of it entirely,
of the gravest possible import. Painfully conscious of the dis-
cursiveness and inadequacy of my presentation of it, I thank the
Senate for the courtesy of its patient attention.

Mr. CLAY. The Senator does not think, if that feature of
the bill was declared unconstitutional, it would affect the re-
mainder of the bill?

Mr. SPOONER. I fear it would affect that part of the bill
which authorizes the Commission to fix rates.

6655

O
REGULATION OF RAILROAD RATES.

“« The right to have equitable controversies dealt with by
equitable methods is as sacred as the vight of trial by jury.”

 

 

 

 

SPEECH

OF

Hon. JOHN C. SPOONER,

OF WISCONSIN,

IN THE

SENATE OF THE UNITED STATES,

THURSDAY AND FRIDAY, APRIL
26 AND 27, 1906.

ube
“ye

WASHINGTON.

1906.
‘6770
SPEECH
HON. JOHN C. SPOONER.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled ‘An act to regulate commerce,” approved Febru-
ary 4, 1887, and all acts amendatory thereof, and to enlarge the powers
of the Interstate Commerce Commission—

Mr. SPOONER said:

Mr. PresIDENT: I am reluctant to ask further attention of
the Senate to the question involved in the proviso to the amend-
ment offered by the distinguished Senator from Texas [Mr.
Baitey] to this bili prohibiting the court in a suit brought
under the provisions of the amendment for a review of the rate
fixed by the Interstate Commerce Commission from granting,
pending the final decree, an interlocutory injunction suspending
the order. The question isa very grave one to my apprehension.
It is my conviction that if the amendment were adopted it
would very seriously imperil the rate-fixing provision of this
bill if enacted into law.

The subject is a great deal broader, however, than in its
application to this measure. It is, to me, the largest question
which has been presented to the Senate, take it all in all, since
I have had the honor to be a member of this body. Its main
support (and no proposition could have better, or abler) has
come from the distinguished Senator from Texas. His argu-
ment, in concentrated form, I find in a few words printed upon
the pamphlet copy of his speech recently delivered:

The power to create and the power to destroy must, in the nature of
things, include the power to limit and control.

Applied to the question I am proposing to discuss, that propo-
sition seems to me not only unsound but dangerous, from the
standpoint of the Constitution, as restricting the exercise, un-
trammeled by legislation, of the judicial power of the Constitu-
tion by the courts of the United States.

The question is a narrow one, although many things have been
discussed, and I am responsible in part for the scope of the de-
bate. It is not whether Congress has the power to destroy the
Federal courts. I deny that, unless others are created at the
same time in which eo instanti is vested some of the judicial
power of the Constitution, but I pass that for the moment.
The question is not whether ‘Congress may confer jurisdiction
of the enumerated cases of the Constitution over Federal courts
or withhold it. I admit that. I do not for a moment question,
nor have I questioned, under the decisions, that Congress may
confer jurisdiction over one of the enumerated controversies or
a igo upon one or all of the Federal courts, and with-

raw i

2 6770
3

The power of Congress to confer and withdraw the jurisdic-
tion is not here, as I understand it, in dispute, but by confound-
ing jurisdiction with judicial power, treating the two words as
representing the same thought and meaning the same thing, this
motto is logical in saying that the power which the Congress has
over the jurisdiction it has also over the exercise of the judicial
power jurisdiction existing; that in a case over which the court
has jurisdiction Congress has authority to limit and control the
judicial power. I do not challenge the accuracy of these words,
for if the power exists at all to limit or control the judicial
power of the court in a case over which it has jurisdiction, the
limit and extent of that control is to be determined by the Con-
gress.

DISTINCTION BETWEEN “ JUDICIAL POWER” AND “ JURISDICTION.”

Now, Mr. President, that leads me to this question: Is there
or is there not a distinction between judicial power and juris-
diction in its relation to this and kindred questions?

The Senator from Texas reprobated a little the tendency of
lawyers to indulge in subtle distinctions. Whenas ablea lawyer
as he is sneers at lawyers for indulging in subtle distinctions, it
must, I think, necessarily arise from a consciousness of necessity
to indulge in some looseness of speech if not in looseness of
thought. Distinctions in the law are multitudinous. Lawyers
have to deal with them. The courts are always dealing with
them. I have not known many which in the last analysis were
not important. I have in my life followed some which seemed to
me too subtle to be sound back to their origin—a laborious
work—to find where first they sprung into existence and were
recognized or asserted by a court; and in almost every case I
have found the origin of these distinctions to be in a finer sense
of justice and their foundation to lie in necessity for ampler
judicial remedies. ‘

The Senator from Texas credited also, asserting, however, that
it is of no value to the patentees, the invention of the distinction
between judicial power and jurisdiction to the distinguished
Senator from Pennsylvania [Mr. Knox] and myself. I would
have to be very, very old to establish any claim to the in-
vention of that distinction. I find it clearly enough marked in
Blackstone, the words “‘ judicial power ” being used in the same
sense that they were used by the framers of the Constitu-
tion, and the word “jurisdiction ” also used in the same sense,
which is familiar to every lawyer, and which originating in
the Constitution so far as this question is concerned is carried
through the decisions. Chief Justice Holt defined judicial power
thus:

Whenever a power is given to examine, hear, and punish it is a
judicial power, and they in whom it is reposed act.as judges.

Mr. President, to me it is written plainly in the Constitution,
and no sophistry can eliminate it or confuse it. Very many of
the men who framed the Constitution were great and learned
lawyers. It has been said of this instrument, and I think it
is true, that tautology is a stranger to it; that almost, if not
every, word in it has its distinct significance, and it has been
said by the courts many times in construing it that every word
must be given significance.

Mr. President, the judicial power of the United States is an
indivisible thing. ‘ Jurisdiction” may be distributed, and has

6770

—_
4

been and may be changed and redistributed. There are four-
teen sorts of jurisdiction. One finds them all in Bouvier. I
have found but one meaning substantially imputed to the words
“ judicial power.’’ The States possessed all the judicial power,
and by the Constitution they surrendered to the United States
that which is set forth in that instrument. The Constitution
says (Art. III):

Section 1. The judicial power of the United States shall be vested
in one Supreme Court, and in such inferior courts as the Congress may
from time to time ordain and establish, * * *

Then, section 2 provides:

Src. 2. The judicial power shall extend to all cases, in law and
equity, arising under this Constitution, the laws of the United States,
and treaties made, or which shall be made, under their authority; to
all cases affecting ambassadors, other public ministers, and consuls; to
all cases of admiralty and maritime jurisdiction; to controversies to
which the United States shall be a party; to controversies between
two or more States; between a State and citizens of another State;
between citizens of different States; between citizens of the same State
claiming lands under grants of different States, and between a State, or
the citizens thereof, and foreign states, citizens, or subjects.

In all cases affecting ambassadors, other public ministers, and consuls,
and those in which a State shall be a party, the Supreme Court shall
have original jurisdiction. In all the other cases before mentioned, the
Supreme Court shall have appellate jurisdiction, both as to law and
fact, with such exceptions, and under such regulations as the Congress
shall make.

Did the framers of the Constitution use the two words in the
same sense? Did they not, Mr. President, use the words
“ original jurisdiction ” in the sense with which lawyers are so
familiar? What does it mean? It means that a suit “may be
begun ” in that court. The judicial power extends to such suit
when brought within this original jurisdiction of the Supreme
Court:

In all the other cases before mentioned the Supreme Court shall have
appellate jurisdiction only.

Does that mean appellate “judicial power?” It means what
it says, Mr. President—appellate jurisdiction. What is this?
Manifestly the right to exercise the judicial power on appeal.

« It is the essential criterion of appellate jurisdiction that it revises
and corrects the proceedings in a cause already instituted and does not
create that cause. (Marbury v. Madison.)

It seems perfectly obvious that the framers of the Constitution
did not use the two words “judicial power” and the word
“ jurisdiction ” as synonymous.

What is the distinction? The Senator from Texas seems to
think—although I observe he qualifies the statement and limits
it to its applicability to this question—that the words “ judicial
power” and the word “ jurisdiction” mean and were intended
to mean precisely the same thing. Do they? All through the
books one finds the words in the opinions somewhat loosely used.
Now and then we find “distribution of judicial power,” but
in the great mass of opinions, Mr. President, the distribution
of judicial power comes through the distribution of the subjects
of jurisdiction. Given jurisdiction in an inferior court over the
cases enumerated in the Constitution, or part of them, the judi-
cial power lodges in that court, I think, without any words
conferring it in the act of Congress. The Constitution says the
“judicial power shall extend to all cases in law and equity aris-
ing,” ete. The Senator from Texas and I do not differ as to the

6770
5

definition of the words “ judicial power.” I adopted the defini-
tion given by Mr. Justice Miller, and the Senator is content with
that.

It is the power of a court to decide and pronounce a judgment and
carry it into effect between persons and parties who bring a case before
it for decision. :

That is not the right to hear a case at all; that is not the
right to exercise the judicial power in any given case. That, to
my view, is jurisdiction. But the judicial power to be exercised
in the case over which the court has jurisdiction is the power
to hear and determine and carry into effect the determination.
Of course, parties are essential to a case.

Mr. President, Chief Justice Marshall, in the Canter case (1
Pet., 511), dealt with this question somewhat. He kept, as I
read it, the distinction between judicial power and jurisdiction
always in mind.

The Constitution and laws of the United States give jurisdiction to
the district courts over all cases in admiralty; but jurisdiction over
the case does not constitute the case itself. We are therefore to in-
quire whether cases in admiralty and cases arising under the laws and
Constitution of the United States are identical.

If we have recourse to that pure fountain from which all the juris-
diction of the Federal courts is derived we find language employed
which can not be well misunderstood.

And that jurisdiction can not be diminished by Congress, nor
can it be enlarged by Congress. It is written in the Constitution
which limits the judicial power of the United States, and as it
is written so it must remain, Mr. President, until by an amend-
ment of the Constitution it is enlarged or contracted.

The Constitution declares that ‘the judicial power shall extend to
all cases in law and equity arising under this Constitution, the laws of
the United States, and treaties made or which shall be made under their
authority,” etc.

* * * * * * *

The Constitution certainly contemplates these as three distinct
classes of cases, and if they are distinct, the grant of jurisdiction
over one of them does not confer jurisdiction over either of the other
two. The discrimination made between them in the Constitution is, we
think, conclusive against their identity.

* *

* * * * *

It has been contended that by the Constitution the judicial power of
the United States extends to all cases of admiralty and maritime juris-
diction, and that the whole of this judicial power must be vested “in
one Supreme Court, and in such inferior courts as Congress shall from
time to time ordain and establish.’ Hence it has been argued that Con-
gress can not vest admiralty jurisdiction in courts created by the Ter-
ritorial legislature. : ?

We have only to pursue this subject one step further to perceive that
this provision of the Constitution does not apply to it. The next sen-
tence declares that ‘‘ the judges, both of the Supreme and inferior courts,
shall hold their office during good behavior.’’ The judges of the supe-
rior courts of Florida hold their offices for four years. These courts,
then, are not constitutional courts, in which the judicial power con-
ferred by the Constitution on the General Government can be de-
posited. They are incapable of receiving it.

Even if they are given jurisdiction over the same cases, power
to exercise the same functions, they are not vested—and I pre-
sume that will not be contested—with the judicial power of the
Constitution, and they are incapable of receiving it.

They are legislative courts, created in virtue of the general right of
sovereignty which exists in the Government, or in virtue of that clause
which enables Congress to make all needful rules and regulations re-
specting the territory belonging to the United States.

The jurisdiction with which they are invested is not a part of that
judiciat power which is defined in the third article of the Constitution,

6770
6

but is conferred by Congress in execution of those general powers which
that body possesses over the Territories of the United States. (The
American and Insurance Companies v. 356 Bales of Cotton, 1 Pet., 510.)

It has seemed to me that the Senator from Texas treats the
inferior courts of the United States as statutory courts purely
in the same sense, so far as unlimited control of Congress over
them is concerned, as the Territorial courts in Florida referred
to by Chief Justice Marshall.

Take the case, Mr. President—and I will only consume a mo-
ment on these cases—of Cohens v. Virginia (6 Wheaton, 262).
This was a great opinion, perhaps in some respects an “ essay,”
but one of the monuments—so regarded by the profession, and I
think by the people—of the learning of Chief Justice Marshall.
The first point in that case upon which this great opinion was
delivered was the point of jurisdiction, it being insisted, based
on the fact that a State was the defendant, and the contention
that no writ of error lay from the Supreme Court to a State
court, that the court could not entertain the case, Chief Jus-
tice Marshall says:

The first question to be considered is whether the jurisdiction of
this court is excluded by the character of the parties, one of them
being a State and the other a citizen of that State.

The second section of the third article of the Constitution defines
the extent of the judicial power of the United States. Jurisdiction 1s
given to the courts of the Union in two classes of cases. In the first
their jurisdiction depends on the character of the cause, whoever may
be the parties. This class comprehends all cases in law and equity
arising under this Constitution, the laws of the United States, and
treaties made, or which shall be made, under their-authority. This
clause extends the jurisdiction of the court—

Did not the Chief Justice appreciate the difference in mean-
ing between the word “ jurisdiction” and the words ‘ judicial
power?” Was it absent from his mind, Mr. President? Not
in this case or.any other which I now remember—

This clause extends the jurisdiction of the court to all cases de-
scribed, without making in its terms any exception whatever and with-
out any regard to the condition of the party. If there be any exception,
it is to be implied against the express words of the article.

In the second class the jurisdiction depends entirely on the character
of the parties. In this are comprehended “controversies between two
or more States, between a State and citizens of another State,” and
““between a State and foreign states, citizens, or subjects.” If these be
the parties, it is entirely unimportant what may be the subject of the
controversy. Be it what it may, these parties have a constitutional
right to come into the courts of the Union.

If these parties designated in the Constitution have a consti-
tutional right to come into the courts of the Union, then there is
surely a correlative constitutional duty in Congress to provide
courts of the Union.

The jurisdiction of the court, then, being extended by the letter of
the Constitution to all cases arising under it or under the laws of the
United States, it follows that those who would withdraw any case of
this description from that jurisdiction must sustain the exemption
they claim on the spirit and true meaning of the Constitution, which
spirit and true meaning must be so apparent, as to overrule the words
which its framers have employed.

I will not take the time, Mr. President, to read further, but
ask permission of the Senate to incorporate some extracts
in my remarks. ;

The VICE-PRESIDENT. Without objection, permission will
be granted.

Mr. SPOONER. I have here the case of Osborne et al. v.
The Bank of the United States (9 Wheat., 819), which is a very

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7

interesting case, in which Chief Justice Marshall deals com-
pletely with this question.

The appellants contest the jurisdiction of the court on two grounds:
First. That the act of Congress has not given it
Second. That, under the Constitution, Congress can not give it.

He proceeds with an argument, which I need not stop to
read:

_ If we examine the Constitution of the United States we find that
its framers HEpE this great political principle in view. The second
article vests the whole executive power in the President; and the
third article declared: “The judicial power shall extend to all cases
in law and equity arising under the Constitution, the laws of the
United States, and treaties made or which shall be made under their
authority.”

This clause enables the judicial department to receive jurisdiction
to the full extent of the Constitution, laws, and treaties of the United
States when any question respecting them shall assume such a form
that the judicial power is capable of acting on it. That power is
capable of acting only when the subject is submitted to it by a party
who asserts his rights in the form prescribed by law.

It then becomes a case, and the Constitution declares that the ju-
dicial power shall extend to all cases arising under the Constitution,
laws, and treaties of the United States, etc.

* * * * x = *

The Constitution establishes the Supreme Court and defines its juris-
diction. It enumerates cases in which its jurisdiction is original and
exclusive; and then defines that which is appellate, but does not in-
sinuate that in any such case the power can not be exercised in its
original form by courts of original jurisdiction. It is not insinuated
that the judicial power, in cases depending on the character of the
cause, can not be exercised in the first instance in the courts of the
Union, but must be exercised in the tribunals of the State.

All through the opinion runs the plainly recognized distinc-
tion between judicial power and jurisdiction, Mr. President.
Mr. Justice Curtis, one of the ablest lawyers who ever adorned
the American bar or ever sat upon the bench of the Supreme
Cowrt of the United States, deals with this subject, and there is
no confusion of ideas in his text upon it. In his lectures he
says:

“The judicial power of the United States shall be vested in one
Supreme Court and in such inferior courts as the Congress may from
time to time ordain and establish.”

You will perceive that the Constitution establishes ‘‘one Supreme
Court,” but leaves it for Congress to ordain and establish, from
time to time, such inferior courts as it may think proper. ;

In this connection, before I come to the article which distributes
the jurisdiction among the courts, it is necessary to read the second
section of the third article, which determines to what subjects the
judicial power of the United States shall extend.

* + * * * * *

Now, turning back to the second section of the third article of the
Constitution, allow me to read: ‘The judicial power shall extend to
all cases in law and equity.’’ In the first place, what is meant hy
“‘eases?” That. you will find, was discussed, and there is an opinion
of Chief Justice Marshall thereon, in Osborn v. The Bank of the
United States, 9 Wheaton, 738. The conclusion to which the court
came, and substantially the definition which was there given, is that
a “case,” within the meaning of the Constitution, is a subject on
which the judicial power is capable of acting, and which has been sub
mitted to it by a party in the forms required by law.

The latter gives the jurisdiction.

I find in an old report an opinion which was delivered by
the supreme court of Pennsylvania in the case of Silver v. The
County of Schuylkill, in 1859, by Chief Justice Lowrie. (32
Pa. State Reports, 356.) It was a very able bench, and there
was no dissent from the opinion. Judge Strong, afterwards

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8

an associate justice or tae Supreme Court of the United States,
of great distinction, sat on that bench at that time.

_ Those who raise a question of jurisdiction as the ground of objec-
tion to the judgment of a court ought to notice a confusion of ideas in
as use of the word “ jurisdiction” and to draw the proper distinc-
ions.

Jurisdiction is often confounded with judicial power, or its equiva-
lent, judicial competence; yet there is a clear distinction between the
terms. The judicial power of a court extends to all those classes of
eases which that court may hear and determine. The jurisdiction of
a court is confined to cases actually brought before it, and admits of
various degrees, for jurisdiction of a case, as a cause in court, vests
the court with authority to call in the parties and to bring it to a hear-
ing in some form so as to determine the cause in court, though the de-
termination of the case itself may be beyond its competence. The
jurisdiction by which a case may be determined is measured by the
judicial power of the court and not by the form in which the case is
brought before it. This is a question of regularity of practice and
not of power, competence, or authority.

It is not questioned that the common pleas has judicial competence
to hear and determine cases of taxation. And when a case of that
kind is instituted in court by appeal the court obtains jurisdiction to
hear and determine it. This, therefore, is a case within the competence
of the court and a cause within its jurisdiction, and the court was
pound to determine it.

* * * * * * *

It is argued that the whole proceeding was beyond the jurisdiction
of the court, for the reason that the commissioners had no authority
to increase the valuation, and therefore it was void and furnished no
basis for a valid appeal. We need not say whether this reason is
well founded or not, for it does not support the conclusion—the want
of jurisdiction of the court. It is the cause in court that is in ques-
tion. The subject-matter of it was within the judicial power of. the
court, and it was instituted in court by appeal, and thus the jurisdic-
tion attached.

The italics are in the opinion.

Mr. Justice Johnson, Mr. President, in 1808, had occasion to
deal somewhat with this subject. It was in a time of em-
bargo, and, sitting at the circuit, he granted a mandamus®@to
compel the collector of the port of Charleston, 8. C., to issue
clearance papers to the master of the Resource. Mr. Rodney,
then Attorney-General, wrote a letter to the President of the
United States, criticising the opinion and contending that the
circuit court had no power to issue the writ of mandamus in that
case. The letter, so far as it is here, is a very interesting one.
That letter was published, which made it a public criticism
emanating from the executive department of the decision of the
judge in the discharge of his duty. Mr. Justice Johnson took
the bench to deliver himself of some observations on the letter,
in which he said:

In pursuing my remarks on the Attorney-General’s letter, I feel an
embarrassment resulting from what I hope he will excuse me for de-
nominating a WANT OF PRECISION OF LANGUAGE. JURISDICTION IN A
CASE IS ONE THING; THE MODE OF RBXERCISING THAT JURISDICTION IS
QUITD ANOTHER.

If a court possessed the learning and infallibility of the
angels, if every step in the cause were sound and the decision
what it ought to be, without jurisdiction the judgment would
be a nullity. Why? Because without jurisdiction the court
had no right to try the case at all; no right to exercise over it
the judicial power, the power to hear and determine and carry
into effect its judgment or decree.

Mr. Justice Johnson continues:

The jurisdiction of the court, as is properly observed by the Attor-
ney-General, must depend upon the Constitution and laws of the United

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9

Bates. te mieeta lt all pretensions ie aay other origin of our juris-
3 ecially the unpopular grounds of prerogati
the King’s Bench. OP = ¥ ee SMeaeneree oe
That judicial power, which the Constitution vests in the United
States and the United States in its courts, is all that its courts
exercise. In the Constitution it is laid down that ‘the judicial power
of the Unitedy States ” shall extend to all cases in law or equity arising
under this Constitution, etc. :
THE TERM “JUDICIAL POWER” CONVEYS THE IDEA BOTH OF EXERCIS-
ING THE FACULTY OF JUDGING AND APPLYING PHYSICAL FORCE TO GIVH
EFFECT TO A DECISION.

And I maintain, Mr. President, and I think shortly I will be
able to establish, that the power to carry a decree or judgment
into effect is a part of the judicial power without which it would
not be the judicial power of the Constitution at all.

The term power could with no propriety be applied, nor could the
judiciary be denominated a department of government—

Italicized—

without the means of enforcing its decrees. In a country where laws
govern, courts of justice necessarily are the medium of action and
reaction between the government and the governed. ‘The basis of indi-
vidual security and the bond of union between the ruler and the citizen
Iust ever be found in the judiciary sufficiently independent to disre-
gard the will of power— <

He exhibited the spirit of the real judge—

and sufficiently energetic to secure to the citizen the full enjoyment of
his rights. To establish such a one was evidently the object of the
Constitution. But to what purpose establish a judiciary with powcr
to take cognizance of certain questions of right, but not power to afford
such redress as the case evidently requires.

Suppose Congress had vested in the circuit court a certain jurisdic-
tion, without prescribing by what forms that jurisdiction should be
exercised, would it not follow that the court must itself adopt a mode
of proceeding adapted to the exigency of each case? Jt must do 80 or
refuse to act.

He then calls attention to the fact that Congress had acted, and
proceeds to construe the act of Congress. In view of Congres-
sional action providing necessary judicial machinery for the in-
ferior courts, the question what the courts might have done
without it is an abstraction, although Mr. Justice Johnson
clearly sustains the concession of the Senator from Texas, that
without legislation there exists inherent power to issue execu-
tion, and punish for contempt. It will be remembered that in
the case of Florida v. Georgia (17 How., 478), the court said:

But the Constitution prescribes no particular mode of proceeding, nor
ig there any act of Congress upon the subject. And at a very early
‘period of the Government a doubt arose whether the court could exer-
cise its original jurisdiction without a previous act of Congress regu-
lating the process and mode of proceeding. But the court, upon much
consideration, held, that although Congress had undoubtedly the right
to prescribe the process and mode of proceeding in such cases, as fully as
in any other court, yet the omission to legislate on the subject could not
deprive the court of the jurisdiction conferred; that it was a duty im-
posed upon the court, and in the absence of any legislation by Congress

the court itself was authorized to prescribe its mode and form of pro-
ceeding, so a8 to accomplish the ends for which the jurisdiction was

iven. See
er ibené was no difficulty in exercising this power where individuals
were parties ; for the established forms and usages in courts of common
law and equity would naturally be adopted. But these precedents
could not govern a case where a sovereign State was a party defendant.
Mr. BAILEY. If it will not interrupt the Senator
Mr. SPOONER. It will interrupt me, but not disagreeably.
Mr. BAILEY. The episode to which the Senator from Wis-
consin alludes was a very interesting one at the time, and still
remains so; but we have a recent episode more interesting than

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10

that one, because in that case it was the Attorney-General who
criticised the judge, while in this recent case the criticism comes
from the President himself. I would ask the Senator from Wis-
consin if Judge Humphrey has resumed the bench to respond to
the criticism of his judgment? ‘

Mr. SPOONER. Does the Senator from Texas pretend to
have jurisdiction to | me that question and require me to
answer it?

Mr. BAILEY. No; I have judicial power to do it. [Laugh-
ter.]

Mr. SPOONER. I think the Senator’s distinction as to judi-
cial power in this instance is better than mine.

Mr. President, I am perfectly willing to say that I stand with
all my heart and soul as an American citizen and as an Ameri-
ean Senator for the distinction which the Constitution makes
between the three independent, equal, and coordinate branches
of the Government; and I look upon it as fundamental that
neither shall invade in any way the functions of the other;
and it will be a sorry day for this country if the time ever
comes when the courts of the United States shall be terrorized
by either the Congress or an Executive. The place to correct
the errors of inferior courts, if any be committed, is in the great
tribunal created by the Constitution for that purpose. But
that is apart from what I wish to say.

Was Mr. Justice Johnson wrong in his definition of judicial
power? This, tomy mind, is the heart of the controversy. Juris-
diction is the right to sit in the case at all. Judicial power
involves, as he says, the exercise of the faculty of judging.
The one Congress can regulate. Can Congress limit or control
the other? Given, Mr. President, the inferior court of the
United States, clothed with jurisdiction over a class of con-
troversies, having jurisdiction over a case included in that
class of controversies, is it within the power of Congress con-
stitutionally to control the power to hear, determine, and carry
into effect its judgment or decree? Is there any part of it to be
controlled? It is not susceptible of being sliced like a water-
melon and the pieces tossed here and there. It is an entirety—
the power to hear; the power to determine, to decide, which
involves the exercise of the mental faculties and the application
of all the knowledge of law possessed by the judge, aided by the
argument of the lawyers. Nothing can be stricken out of the
judicial power leaving anything remaining. Neither, Mr. Presi-
dent, can the power to execute its judgment or decree be elimi-
nated any more than ‘“ the faculty of judging” the two elements
enter into it, and the only judgment the court exercises on the
question of jurisdiction is decision as to whether it possesses it
or not.

Take the appellate jurisdiction of the Supreme Court of the
United States. It can be regulated by Congress. That court
exercises such appellate jurisdiction as Congress declares it
may. The McArdle case, to which the Senator from Texas re-
ferred the other day, illustrates the distinction between judicial
power and jurisdiction. From the standpoint of to-day the
action of Congress then is deeply to be deplored. I do not like—
probably I was content with it then—legislative interference
with cases pending in the courts anywhere. But in the McArdle
ease the right of appeal was given in habeas corpus. The case

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11

was taken to the Supreme Court of the United States. It was
argued on eithér side by a great lawyer, Senator Carpenter, of
Wisconsin, and Judge Sharkey, of Mississippi, both by nature
and study fit to grace any judicial position. And the point of
jurisdiction was made and argued and the court decided—the
merits of the case? No. Only the question whether it had a
right to consider at all the merits of the appeal; whether it had
jurisdiction or not; and it decided that it had jurisdiction.
Thereupon the Congress passed an act taking away the appellate
jurisdiction of the Supreme Court in that case, practically. The
court dismissed the appeal for want of jurisdiction. It had lost
jurisdiction over that case. Had it lost any of its judicial power
of the Constitution? That was not conferred by Congress, nor
can it be taken away by Congress. It remained, as to such a
case, dormant until jurisdiction was restored. ,

The Supreme Court in cases on appeal looks into the record at
the outset to see whether jurisdiction in the inferior court is
affirmatively shown. If it be not so shown the court, of its own
motion, dismisses the appeal, for in that event it has no right to
consider the appeal at all, being without jurisdiction; but it
thereby loses none of the judicial power vested in it by the
Constitution. A State court has jurisdiction of a cause where
the parties are citizens of different States. A petition is
filed under the removal act to transfer it to a circuit court
of the United States. The filing of the petition, with the
apropriate bond, ousts the jurisdiction of the State court. It
had judicial power and jurisdiction before the removal. It lost
the latter by the removal. It lost none of its judicial power.
Congress can not deprive a State court of any of its judicial
power. It is only a question of jurisdiction.

Mr. President, in the Sewing Machine case (18 Wall., 577), to
which the Senator from Texas referred, we find as clear an
exposition of the distinction between judicial power and juris-
diction as one need want. Proceedings under the removal acts
illustrate the distinction. The court says:

The circuit courts do not derive their judicial power immediately
from the Constitution, as appears with sufficient explicitness from the
Constitution itself, as the first section of the third article provides that
“the judicial power of the United States shall be vested in one Supreme
Court, and in such inferior courts as the Congress may from time to
time ordain and establish.’”’ Consequently the jurisdiction of the circuit
court in every case must depend upon some act of Congress, as it is
clear that Congress, inasmuch as it possesses the power to ordain and
establish all courts inferior to the Supreme Court, may also define their
jurisdiction. fe

It should have said “‘ must also define their jurisdiction,” for
it is conceded that if jurisdiction is not found in the act, the
court has no right to exercise judicial power over that contro-
versy or case.

Courts created by statute can have no jurisdiction in controversies
between party and party but such as the statute confers. Congress, it
may be conceded, may confer such jurisdiction upon the circuit courts
as it may see fit, within the scope of the judicial power of the Constitu-
tion, not vested in the Supreme Court.

Why use the two words if there be no distinction between
them?

But as such tribunals are neither created by the Constitution nor ia
their jurisdiction defined by that instrument, it follows that inasmuch

as they are created by an act of Congress it is necessary, in every at-
tempt to define their power, to look to that source as the means of ac.

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12

complishing that end. Federal judicial power, beyond all doubt, has its
origin in the Constitution, but the organization of the system and the
distribution of the subjects of jurisdiction— 5

That comes along down. Here and there are looseness and
confusion about it, but not often—
among such inferior courts as Congress may from time to time ordain
and establish within the scope of the judicial power, always have been,
and of me must be, the work of the Congress. (Case of the Sewing
Machine Companies, 18 Wall., p. 577.)

In the case of Sheldon v. Sill, which the Senator from Texas
cited in his first speech, the distinction is clearly recognized.
Mr. Justice Grier, delivering the opinion of the court, said:

It must be admitted that if the Constitution had ordained and es-
tablished the inferior courts and distributed to them their respective
powers—

There the. word “ powers” is used instead of “ jurisdiction,”
as generally used—
they could not_be restricted or divested by Congress. But as it has
made no such distribution, one of two consequences must result, either
that each inferior court created by Congress must exercise all the ju-
dicial powers not given to the Supreme Court, or that Congress, having
the power to establish the courts, must define their respective jurisdic-
tions. The first of these inferences has never been asserted, and could
not be defended with any show of reason, and if not, the latter would
seem to follow as a necessary consequence, And it would seem to fol-
low also that, having a right to prescribe, Congress may withhold
from any court of its creation jurisdiction of any of the enumerated
controversies.

That can not be disputed.

Courts created by statute can have no jurisdiction but such as the
statute confers. No one of them can assert a just claim to jurisdiction
exclusively conferred on another, or withheld from all.

In Rhode Island v. Massachusetts, 12 Peters, 652, where the
question of jurisdiction was raised in the Supreme Court, the
court defined it a little differently :

However late this objection has been made or may be made in any
cause in an inferior or eo pen ate court of the United States, it must
be considered and decided before any court can move one further step
in the cause, any movement is necessarily the exercise of jurisdiction.

They must first determine their right to try the case at all,
first determine whether the parties are before the court at all,
or whether the court has jurisdiction over the subject-matter
at all, and if either is wanting the court has no power to move
a step.

Here is the definition the Senator read:

Jurisdiction is the power to hear and determine the subject-matter
in controversy between parties to a suit—

The “parties to the suit” give jurisdiction in respect of par-
ties, the court having jurisdiction over the subject-matter. Now,
this follows—
to adjudicate or exercise any judicial power over them; the question
is, whether, on the case before the court, their action is judicial or
extrajudicial, with or without the authority of law, to render a judg-
ment or decree upon the rights of the litigant parties.

If the law confers the power to render a judgment or decree, then
the court has jurisdicticn; what shall be adjudged or decreed between
the parties, and with which is the right of the case, is judicial action,
by hearing and determining it.

Is there no distinction, Mr. President, between the right to
hear and determine and the judicial power of determining?
The one Congress may regulate. The other is sacred, in my

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18

judgment, under the Constitution, from the touch of Congress,
and if it be held otherwise, there being no limit to the inter-
ference, the power being conceded, the courts—intended by the
Constitution to be independent, to pass upon the constitu-
tionality of acts of Congress—will have ceased to be inde-
pendent. They will be solely dependent, not only for jurisdic-
tion, but for power of judgment, upon Congress. And then
there would have come about, to all intents and purposes, one
situation of evil which our forefathers fled from, and that was
the blending of judicial and legislative functions. If they
brought one lesson here from over the sea it was that first the
judges should not be dependent upon the will of an Executive
or a Congress for their tenure of office, and, second, that the
whole judicial power of the United States should be vested by
the Constitution in the courts and none of it in Congress or in
legislatures.

The court continues:

Before we can proceed in this cause we must, therefore, inquire
whether we CAN hear and determine the matters in controversy between
the parties, who are two States of this Union, sovereign within their
respective boundaries, save that portion of power which they have
granted to the Federal Government, and foreign to each other for all
but Federal purposes. * * *

I will not read the remainder.

It was necessarily left—

The court says—

to the legislative power to organize the Supreme Court, to define its
powers consistently with the Constitution as to its original jurisdiction,
and to distribute the residue of the judicial power—

Which I claim can only be done through distributing the
subjects of jurisdiction—

between this and the inferior courts which it was bound to ordain and
establish.

Mr. Justice Story, delivering the opinion of the court in
Ex parte Watkins says:

But the jurisdiction of the court can never depend upon its decision
upon the merits of the case brought before it, but upon its right to
hear and decide it at all. (7 Pet., 571.)

I take some definitions of jurisdiction from Words and
Phrases Judicially Defined, which I think are accurate. It
gives many which I think are inaccurate. I indicate the sepa-
rate extracts by letters.

(a)

JURISDICTION.—Subject-matter in controversy: Jurisdiction is the
power to hear and determine the subject-matter in controversy between
parties to a suit, or to adjudicate or exercise ANY judicial power over
them, (Citing Ritter v. Kunkel, 39 N. J. Law, 259, with other cases.)

(b)

“ Jurisdiction” is defined to be “ the right to adjudicate concerning
the subject-matter in a given case.” ‘There must be, therefore, a sub-
ject-matter presented which is within a jurisdiction. That subject
must be so presented in the case before the court as to justify action
thereon. (Citing Dodd v. Una, 5 Atl., 155, and other cases.)

(¢)

As authority to declare the law: “ Jurisdiction” in courts is the
power and authority to declare the law. The very word, in its origin,
imports as much. It is derived from “juris” and ‘ dico’’—‘I speak
by the law.’’ And that sentence ought to be inscribed in living light
on every tribunal of criminal power. It is the right of administering
justice through the laws, by the means which the law has provided for
that purpose. (Citing Johnson v, Hunter, 40 F. E., 448, and other
cases. )

6770

a
14

Bouvier’s Law Dictionary, which the. Senator highly and
justly commended, defines jurisdiction as follows:

“ Jurisdiction ” is the right of a judge to pronounce a sentence of the
law in a case or issue before him, acquired through due process of law.
(Citing Chicago Title and Trust Co. v. Brown, 183 IIL, 42.)

In other words, the right to exercise the judicial power in a
given case.

Jurisdiction does not depend upon the correctnes of the decision
made. (Citing People v. Talmadge, 194, Ill., 67, and other cases.)

No court ever loses jurisdiction for errors of law in rendering
its judgment or decree or which occur pending the proceeding,
within certain limits, immaterial here.

Continuing from “Words and Phrases: ”

(d)

The mere grounds upon which the determination is reached may or
may not be correct in themselves. These may be supported by evidence
inadmissible when tested by the rules governing the introduction of
evidence. ‘The reasons given for the conclusion arrived at may or may
not be such as address themselves to the judgment of others, but
erroneous rules entertained, or incorrect reasons assigned, or evidence
erroneously admitted in deciding the controversy do not make a case of
want of jurisdiction. (Citing Central Pacific Co. v. Board of Equall-
zation, 43 Cal., 365.) bs

e

If the petitioner states such a case in his petition that on demurrer
the court would render judgment in his favor, it is an undoubted case
of jurisdiction. The court would be then bound to hear and determine,
and its judgment, however erroneous, would bind parties and privies,
and would be conclusive of the right established, and could be im-
peached only in an appellate tribunal. (Citing Goodman v. Winter, 64
Ala., 410.) 4s

Jurisdiction does not relate to the rights of the parties as between
each other, but to the power of the court. The question of its exer-
cise is an abstract inquiry, not involving the existence of an equity to
be enforced, nor the right of the plaintiff to avail himself of it if it
evists. It precedes these questions, and a decision upholding the juris-
diction of the court is entirely consistent with a denial of any equity
either in plaintiff or in anyone else. The case we are considering illus-
trates the distinction I am endeavoring to point out as well as any
supposed case would. It presents these questions: Have the plaintiffs
shown a right to the relief which they seek? And has the court
authority to determine whether or not they have shown such a right?
A wrohg determination of the question first stated is error, but can be
reexamined only on appeal. The other question is the question of
jurisdiction. (Citing People v. Sturtevant, 9 N. Y., 263.)

(g)

It is not the particular decision given which makes up jurisdiction,
but it is the authority to decide the question at all. Otherwise the
distinction between the erroneous exercise of jurisdiction on the one
hand, and the total want of it on the other, must be obliterated. (Cit-
ing Chase v. Christianson, 41 Cal., 253.) The distinction is between
a lack of power or want of jurisdiction in the court and a wrongful or
defective execution of the power. In the first instance, all acts of the
court not having jurisdiction or power are void, in the latter only
voidable. (Citing Paine’s Lessee v. Mooreland, 15 Ohio, 435.)

(h)

Jurisdiction of a court is the power to hear and determine the par-
ticular case involved. If this power to hear and determine the particu-
lar case does not exist, then, to confer actual jurisdiction of the par-
ticular case or subject-matter thereof, the judicial power of the court
must be invoked or brought into action by such measures and in such
manner as is required by the local law of the tribunal. When this is
done, it is then coram judice. (Citing Basset Min. Co. v. Schoolfield,
10 Colo., 46.) ;

i)

It is not enough that the court should have jurisdiction of the sub-
ject-matter. It must have jurisdiction of, or power to try, the indi-
vidual cause. (Citing Yates v. Lansing (N. Y.) 9 Johns., 395.)

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15

(f)
By “jurisdiction,” as applied to judicial proceedings, is meant the
right to act. (Citing Bumstead v. Read, 31 Barb., 661.)

(k)
Jurisdiction means the power to act judicially; to determine any

question presented in a controversy between parties. Citing King v.
Poole, 36 Barb., 244.) Z ® : e e
(ly

Jurisdiction means legal power to make a judicial decision. (Citing
Browning v. Wheeler, 24 Wend., 258.)
It is said in re Sawyer (124 U. S., 220):

As this court has often said, “ Where a court has jurisdiction, it has
a right to decide every question which occurs in the cause; and whether
its decisions be correct or otherwise, its judgment, until reversed, is
regarded as binding in every other court. But if it act without au-
thority, its judgments and orders are regarded as nullities. They are
not voidable, but simply void.” (Elliott v. Peirsol, 26 U. S., 1 Pet.,
328, 340, and other cases.) .

It is axiomatic that jurisdiction over the subject-matter must
be vested in a judicial tribunal by the law of the land, or it
does not possess it. Consent of parties can not confer it, al-
though such consent gives jurisdiction over themselves. And
the court, having jurisdiction over the subject-matter and over
the parties, may exercise the judicial power in the case and
bind the parties to it by its judgment or decree.

But, Mr. President, I will not spend more time on the ques-
tion whether there is a distinction between “ judicial power ”
and “jurisdiction.” With due deference to those who differ
from me, I think the distinction is an obvious one. I do not
see the force of the qualification made by the Senator from
Texas, that while there is in some aspects such a distinction,
there is none applicable to the question here involved. If it is
not important in the matter which we are here discussing, it is
impossible to imagine a controversy in which it would be of the
slightest significance. I read again Mr. Justice Miller’s defini-
tion of judicial power:

It is the power of a court to decide and pronounce judgment and

earry it into effect between persons and parties who bring a case
before it. ‘

‘““JUDICIAL POWER” INVOLVES POWER TO CARRY INTO EFFECT JUDG-
MENTS AND DECREES,

Now, Mr. President, a part of that definition of judicial power
is the power to carry its judgments into effect, the power
in an action at law to issue execution, the power upon a decree
in equity to utilize the usual equitable processes and orders
tor carrying into effect the decree. Whether upon the crea-
tion of inferior courts they would have possessed, in the ab-
sence of legislation, the power to issue executions and other
processes is immaterial for my purposes. I am willing to con-
cede for the purposes of the argument that they would not. If
the Congress had failed, therefore, to provide process and
judicial machinery to enable the courts to effectually exer-
cise the judicial power, it might be said that it had failed to
organize the courts of the United States, and that they would
remain without power to enforce their judgments until Con-
gress supplied the necessary machinery, or they would have
been without the judicial power of the Constitution under the
agreed definition. I am not called upon to dispute that at all.
The Congress did early, after creating the inferior courts, pass
process acts conferring upon the courts the right ‘‘ to issue writs

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16

of sciere facias, habeas corpus, and all other writs not specially
provided by statute, which may be necessary for the exercise
of their respective jurisdictions and agreeable to the principles
and usages of law.”

Under what power was this legislation enacted? Not under
the power to constitute tribunals inferior to the Supreme Court.
Not under, as an implication, the power in the judicial article
to “ordain and establish” inferior courts. Not as involved in
the power to create and destroy. Not at all. But, Mr. Presi-
dent, under this clause of the Constitution, subdivision 18
of section 8, Article I:

To make all laws which shall be necessary and proper for carrying
into execution the foregoing powers, and all other aay vested by
this Constitution in the Government of the United States, or in any
department or officer thereof.

Chief Justice Marshall in Wayman v. Southard et al. (10
Wheat., 1), delivering the opinion of the court, says (the ques-
tion being involved) :

The Constitution concludes its enumeration of granted powers with
a clause authorizing Congress to make all laws which shall be neces-
sary and proper for carrying into execution the foregoing powers and
all other powers vested by this Constitution in the Government of the
United States or in any Department or officer thereof. The judicial
department is invested with jurisdiction in certain specified cases, in
all which it has power to render judgment.

That a power to make laws for carryiny inte execution all the judg-
ments which the judicial departmeit has power to pronounce, is ex-
pressly conferred by this clause, seems to be one of those plain proposi-
tions which reasoning can not render plainer. The terms of the clause
neither require nor admit of elucidation. The court, therefore, will
only say that no doubt whatever is entertained on the power of Con-
gress over the subject. The only inquiry is, How far has this power
been exercised ?

The thirteenth section of the judiciary act of 1789, chapter 20, de-
scribes the jurisdiction of the Supreme Court and grants the power to
issue writs of prohibition and mandamus in ceftain specified cases. The
fourteenth section enacts “that all the before-mentioned courts of the
United States shall have power to issue writs of scire facias, habeas
corpus, and all other writs not specially provided by statute which may
be necessary for the exercise of their respective jurisdictions and agree-
able to the principles and usages of law.’ The seventeenth section au-
thorizes the courts ‘“‘to make all necessary rules for the orderly con-
ducting of business in the said courts,” and the eighteenth empowers a
courts to suspend execution in order to give time for granting a new

rial.

These sections have been relied on by the counsel for the plaintiffs.

The words of the fourteenth are understood by the court to compre-
hend executions. An execution is a writ, which is certainly ‘‘ agreeable
to the principles and usages of law.” s

There is no reason for supposing that the general term “ writs”
is restrained by the words ‘“‘ which may be necessary for the exercise
of their respective jurisdictions’’ to original process, or to process
anterior to judgments. The jurisdiction of a court is not exhausted
by the rendition of its judgment, but continues until that judgment
shall be satisfied. Many questions arise on the process subsequent
to the judgment in which jurisdiction is to be exercised. It is, there-
fore, no unreasonable extension of the words of the act to suppose an
execution necessary for the exercise of jurisdiction. Were it even
true that jurisdiction could technically be said to terminate with the
judgment, an execution would be a writ necessary for the perfection of
that which was previously done, and would, consequently, be necessary
to the beneficial exercise of jurisdiction. If md doubt could exist on
this subject the eighteenth section, whith treats of the authority of
the court over its executions as actually existing, certainly implies
that the power to issue them had been granted in the fourteenth sec-
tion. The same implication is afforded by the twenty-fourth and twen-
ty-fifth sections, both of which proceed on the idea that the power to
issue writs of execution was in possession of the courts. So, too, the
process act, which was depending at the same time with the judi-
ciary act, prescribes the forms of execution, but does not give a power
to issue them.

6770
17

On the clearest principles of just construction, then, the fourteenth
section of the judiciary act must be understood as giving to the courts
ota the Eee; respectively, a power to issue executions on their

judgments,

Mr. Justice Iredell in his dissenting opinion in the case of
Chisholm v. Georgia (2 Dallas, 432) traced the power to pass
the process acts to the same source, and declared it to be the
constitutional duty of Congress to enact such laws, and inti-
mated a restriction upon their power. He says:

I conceive that all the courts of the United States must receive, not
merely their organization as to the number of judges of which they are
to consist, but all their authority, as to the manner of their proceed-
ing from the legislature only. This appears to me to be one of those
eases, with many others, in which an article of the Constitution can
not be effectuated without the intervention of the legislative authority.
There being many such, at the end of the special enumeration of the
powers of Congress in the Constitution is this general one: ‘‘ To make
all laws which shall be necessary and proper for carrying into execution
the foregoing powers, and all other powers vested by this Constitution
in the Government of the United States, or in ao department or officer
thereof.’”? None will deny that an act of legislation is necessary to
say at least of what number the judges are to consist; the President,
with the consent of the Senate, could not nominate a number at their
discretion. The Constitution intended this article so far at least to be
the subject of a legislative act. Having a right thus to establish the
court, and it being capable of being established in no other manner, I
conceive it necessarily follows that they are also to direct the manner
of its proceedings. Upon this authority there is, that I know, but one
limit; that is, “that they shall not exceed their authority.” If they
do, I have no hesitation to say that any act to that effect would be
utterly void, because it would be inconsistent with the Constitution,
which is a fundamental law paramount to all others, which we are not
only bound to consult, but sworn to observe, and therefore where there
is an interference, being superior in obligation to the other, we must
unquestionably obey that in preference. ubject to this restriction, the
whole business of organizing the courts and directing the methods of
their proceeding where necessary, I conceive to be in the discretion of
Congress. If it shall be found on this occasion, or on any other, that
the remedies now in being are defective, for any purpose it is their
duty to provide for, they no doubt will provide others. It is their
duty to legislate, so far as is necessary, to carry the Constitution into
effect. It is ours only to judge. We have no reason, nor any more
right to distrust their doing their duty, than they have to distrust that
we all do ours. ‘There is no part of the Constitution that I know of.
that authorizes this court to take up any business where they left it,
and in order that the powers given in the Constitution may be in full
activity, supply their omission by making new laws for new cases, or,
which I take to be the same thing, applying old principles to new cases
materially different from those to which they were applied before.

Now, Mr. President, the power conferred by section 18 is not
an unlimited power. The Senator from Texas seemed to think
that after Congress had created inferior courts, clothing them
with jurisdiction, Congress could prevent their issuing execu-
tion and carrying into effect their decrees and judgments. I
dissent from that proposition. Could Congress prohibit by a
valid act the circuit and district courts of Pennsylvania from
issuing any executions or other process to carry into effect their
judgments or decrees? I do not doubt that it could not. 2

This eighteenth subdivision from which Congress obtained
power to pass the process acts, as I said, does not confer an un-
limited power. It was the provision to enable the Congress “to
make all laws which shall be necessary and proper for carrying
into execution the foregoing powers and all other poivers vested
by this Constitution in the Government of the United States, or
in any department or officer thereof,” which includes, of course,
the judicial department. That clause of the Constitution has
been under review by the Supreme Court of the United States

6770-——2
18

more than once. First, it arose in the case of McCulloch v.
Maryland (4 Wheat., 316), and. of it Chief Justice Marshall
said:

Let the end be legitimate, let it be within the scope of the Consti-
tution, and all means which are appropriate, which are plainly adapted
to that end, which are not prohibited, but consist with the letter and
spirit of the Constitution, are constitutional.

That was adopted by the court in the Legal Tender cases:
(110 U. S., 421). They say in addition:

But, admitting it to be true, what does it prove?

That is, whether the power which Congress had exercised
was necessary or appropriate.

Nothing more than that Congress had the choice of means for a
legitimate end, each appropriate and adapted to that end, though, per-
haps, in different degrees. What then? Can this court say that it
ought to have adopted one rather than the other? Is it our province
to decide that the means selected were beyond the constitutional power
of Congress because we may think that other means to the same ends.
would have been more appropriate and equally efficient?

The question is for the court to decide whether Congress has
in a given case exceeded its power under section 18.

When the law is not prohibited, and is really calculated to effect any
of the objects intrusted to the Government, to undertake here to in-
quire into the degree of its necessity would be to pass the line which
circumscribes the judicial department and to tread on legislative
ground.

* * * * * *

*

It may be conceded that Congress is not authorized to enact laws in.
furtherance even of a legitimate end merely because they are useful
or because they make the Government stronger. There must be some
relation between the means and the end; some adaptedness or appro-
priateness of the laws to carry into execution the powers created by
the Constitution.

If the Congress should prohibit existing courts from issuing
executions or other process to carry into effect their judg-
ments, it would not be in harmony with the letter or spirit of the
Constitution, and the Supreme Court would, in my judgment, be
.compelled to say “the Congress has continued the existence of
these judicial tribunals, has thereby testified that there is con-
tinuing public necessity for the exercise of the judicial power
of such courts; that the attempt to emasculate them is indirect;
that the end is not legitimate; that the purpose is ulterior;
that the act is not to carry into execution any powers conferred
by the Constitution on the judicial department of the Govern-
ment, but is obstructive and therefore unconstitutional.”

The language of Chief Justice Marshall in Wayman v. South-
ard, just quoted upon this subject, does not stand alone in the
decisions of that court. The accuracy of Justice Miller’s defini-
tion of judicial power, which treats as a part of it the power
to carry into effect its judgments and decrees, is well main-
tained in the decisions of the court. Congress may take away
the jurisdiction, but where the jurisdiction exists it can not
emasculate the judicial power by rendering it impossible for it
to enforce its judgments and decrees.

EXECUTIONS, 2

The express determination of this court is that the jurisdiction of
a court is not exhausted by the rendition of a judgment, but continues
until that judgment shall be satisfied; consequently a writ of error
will lie when the party is aggrieved in the foundation, proceedings, judg-
ment, or execution of a suit in a court of record. (Wayman v. South-
ard, 10 Wheat., 93; Suydam v. Williamson, 20 How., 487; 2 Tidd’s
Pr., 1134; Co. Litt., 288b.)

6770
19

Process subsequent to judgment is as essential to jurisdiction as
Sa ala as to judgment, else the judicial power would be in-

“The judicial power would be incomplete ”—

and entirely inadequate to the purposes for which it was conferred by
the Constitution. Congress, it is conceded, possesses the uncontrolled
power to legislate in respect both to the form and effect of executions
and other processes to be issued in the Federal courts. United States
v. Johnson County; United States v. Henry County, 73 U. &., 166.)

In Central National Bank v. Stevens (169 U. S., 464, 465),
the court say:

_ But it has been frequently determined by this court that the jurisdic-
tion of a court is not exhausted by the rendition of the judgment, but
continues until the judgment shall be satisfied.

* * * * * * *
An execution is the end of the law. It gives the successful party

the fruits of his judgment. (United States v. Nourse, 9 Pet., 828.)

But it is scarcely necessary to quote authorities to show that to
deprive a court of the power to execute its decrees is to essentially
me eo) jurisdiction. Juris effectus in executione consistjt. (Co.

itt., i

An interesting case upon this subject, for another reason than
the merits of the opinion, is that of Gordon v. The United States
(117 U. S., Appendix, p. 697). The opinion was the last judicial
utterance of Chief Justice Taney, against whom I was in his
prime prejudiced, but of whom I long ago grew to think that he
was a very great lawyer and jurist. Without going into a state-
ment of the case, it is sufficient to say that the court held that it
would not take cognizance of appeal from a court which could
not issue execution or other process to carry into effect its
judgment, and to which the Supreme Court could not issue a
mandate which it could carry into effect; that—

Congress can not authorize or require this court to express an
opinion on a case where its judicial power could not be exercised and
where its judgment would not be final and conclusive upon the rights
of the parties and process of execution awarded to carry it into effect.

It is added, and this is the point to support which I cite the
case:

The award of execution is a part, and an essential pare of every
judgment passed by a court exercising judicial power. It is no judg-
ment, in the legal sense of the term, without it. \itnout suc. «4
award the judgment would be inoperative and nugatory, leaving the
aggrieved party without a remedy. Jt would be merely an opinion,
which would remain a dead letter, and without any operation upon the
rights of the parties, unless Congress should at some future time sv*c-
tion it and pass a law authorizing the court to carry its opinion into
effect. Such is not the judicial power confided to this court in the ex-
ercise of its appellate judisdiction; yet it is the whole power that the
court is allowed to exercise under this act of Congress. ge

It is true the act speaks of the judgment or decree of this court.
But all that the court is authorized to do is to certify its opinion to the
Secretary of the Treasury, and if he inserts it in his estimates, and
Congress sanctions it by an appropriation, it is then to be paid, but not
otherwise. And when the Secretary asks for this appropriation, the
ropriety of the estimate for this claim, like all other estimates of the
Eecretary, will be opened to debate, and whether the appropriation will
be made or not will depend upon the majority of each House. The real
and ultimate judicial power will, therefore, be exercised by the legisla-
tive department, and not by that department to which the Constitution
has confided it.

Referring to the decision in Hunt v. Pallas (4 How., 589) in
which a motion was made for writ of error to be directed to
the judges of the State court, which motion was overruled, the

court is quoted as saying:
It would be useless and vain for this court to issue a writ of error
and bring up the record and proceed to judgment upon it when, as the

6770

|
20

law now stands, no means of process is authorized by which our judg-
ment could be executed.
He also adds:

The court has uniformly refused to take jurisdiction when there was
not a court of the United States in existence in possession of the orlg-
inal record to which we were authorized by law to send a mandate to
earry into effect the judgment of this court.

After going into the theory of the Constitution as to our
judicial system and the line of demarcation between the coor-
dinate branches of the Government, he says:

The Constitution of the United States delegates no judicial power
to Congress. Its powers are confined to legislative duties and restricted
within certain prescribed limits.

In In re Sanborn, petition for writ of mandamus (148 U. S.,
220), to command the allowance of an appeal by John B. San-
born from certain findings of fact and conclusions of law of
the Court of Claims, the decision in the case of Gordon v. The
United States was approved by the court as follows:

This subject came, for the first time, before this court in the case
of Gordon v. United States (69 U. S., 2 Wall., 561, 17:921), wherein
it was held that as the law then stood no appeal would lie from the
Court of Claims to this court. The reasons for this conclusion are
stated in the opinion of Chief Justice Taney, reported in the Appendix
to 117 United States, 697, and interesting as his last judicial utter-
ance. Briefly stated, the court held that as the so-called judgments
of the Court of Claims were not obligatory upon Congress or upon the
executive department of the Government, but were merely opinions
which might be acted upon or disregarded by Congress or the De-
ee and which this court had no power to compel the court

elow to execute, such judgments could not be deemed an. exercise of
judicial power, and could not, therefore, be revised by this court.

What is true of executions to carry into effect judgments at
law is true as to the necessary process for carrying into effect
decrees in equity. (Root v. Woolworth, 150 U. S., 400.)

It is my belief that if this amendment were adopted and be-
came a part of the law, dealing with this class of cases, the
court would be obliged to hold it to be unconstitutional; and
I very much fear that if it were incorporated in a provision for
judicial review the court would decline to take that emasculated
jurisdiction at all, which would leave the act without provision
for judicial review, and therefore void so far as the rate-fixing
section is concerned, as being without due process, as in the
cease of C., M. & St. P. v. Minnesota, 184 U. S. But I will briefly
advert to this later.

‘Ido not care to‘spend more than a moment on the case of Fink
v. O’Neil, which in the Senator’s first speech he elaborated, and
also*in his second, except to say that there was not involved in
that case at all the power of Congress to prohibit an existing in-
ferior court from issuing execution. The court said that there
was no inherent right to issue execution; that the inferior
courts of the United States had no prescriptive power in that
regard, but the sole question there was not whether the exe-
eution might issue or not, for it had issued, and a bill was filed to
prevent any further proceeding under the levy upon the ground
that the property seized was exempt under the constitution and
laws of the State of Wisconsin from seizure and sale under any
execution or other process from the State courts. The Supreme
Court held that Congress kad conformed the practice as to exe-
cutions to the laws of the State and had provided that execu-
tions from the Federal court should only be leviable as execu-

6770
21

tions from the State courts where leviable, and that the ez-
emption laws of Wisconsin had since: the enactment of that
statute been the Federal law in Wisconsin upon that subject.

So it was not a question whether Congress could prohibit the
issue of execution or whether that court lawfully issued execu-
tion, but wlether execution could be levied upon property which
was exempt under the constitution of the State.

Mr. President, I come now to another proposition. The Con-
stitution contains words which, if the Senator from Texas is
right, in my judgment involve an assertion by him practically
of Congressional power to amend it.

“Law,” “EQUITY,” AND “ ADMIRALTY” IN THE CONSTITUTION.
_. The judicial power shall ertend to all cases in LAw and EQUITY aris-
ing under this Constitution and * * * to all cases of ADMIRALTY
and MARITIME JURISDICTION.

Have those words any permanent significance? They were
incorporated in the Constitution with intelligent purpose. They
were put there, Mr. President, by men who understood them,
and they were put there to remain until eliminated in the man-
ner provided by the Constitution for amending that instrument.
“Law,” “ Equiry,” “ ADMIRALTY AND MARITIME JURISDICTION.”
They were not defined, but they are there. What do they mean?
It was not intended that Congress should define them, and
Congress has never attempted to define them. “Law” was a
word of well-understood signification at that day, as it is to-day.
It referred to the enforcement in the courts of common law of
rights through the intervention of a common-law jury.
“Equity ” was well understood. “Admiralty” and “ maritime
juridiction ” were perhaps not so definitely understood, but they
mean something. What they mean is for the courts, not the
Congress, to say. The Supreme Court has had occasion more
than once to pass upon the meaning of the phrase “ admiralty
and maritime jurisdiction,’ and they took occasion to consider
not only what it means in the Constitution, but what power Con-
gress las over it.

In the Belfast v. Boon (74 U. S., 624), the court says:

Difficulties attend every attempt to define the exaot limits of ad-
miralty jurisdiction, but it can not be made to depend upon the power
of Congress to regulate commerce as conferred in the Constitution.
They are entirely distinct things, having no necessary connection with
one another, and are conferred in the Constitution by separate and dis-
tinct grants. (The Genesee Chief, 12 How., 452.)

Congress may regulate commerce with foreign nations and among the
several States, but the judicial power, which, among other things, ew-
tends to all cases of admiralty and maritime jurisdiction, was conferred
upon the Federal Government by the Constitution, and Congress can
not enlarge it, not even to suit the wants of commerce nor for the more
con®enient execution of its commercial regulations. (The St. Lawrence,
1 Black, 526; 66 U. S., XVII, 182.) sets

Remarks, it is conceded, are found in the opinion of the court in the
case of Allen v. Newberry (21 How., 245; 62 U. S., XVI., 111) incon-
sistent with these views, but they were not necessary to that decision,
as the contract in that case was for the transportation of goods on one
of the western Lakes, where the jurisdiction in admiralty is restricted
by an act of Congvess to steamboats and other vessels employed in the
business of commerce and navigation between ports and_places in
different States and Territories. (The Hine v. Trevor, 4 Wall., 555;
71 U.S. XVIII, 451.)

That was under the extended jurisdiction which the court
adopted ultimately, because the jurisdiction of England was too
narrow, being confined to the ebb and flow of the tides.

6770
22

In the Lottawanna (21 Wall., 558-609) Mr. Justice Bradley,
speaking for the court, said:

The principal question pireenied by the appeal, therefore, is whether
the furnishing to a vessel on her credit at her home port needful re-
pairs and supplies creates a maritime lien.»

2 * * * * * eo. *

That we have a maritime law of our own, operative throughout the
United States, can not be doubted. The general system of maritime
law which was familiar to the lawyers and statesmen of the country
when the Constitution was adopted was most. certainly intended and
referred to when it was declared in that instrument that the judicial
power of the United States shall extend “ to all cases of admiralty and
maritime jurisdiction.’ But by what criterion are we to ascertain the
aaa limits of the law thus adopted? The Constitution does not

efine it. It does not declare whether it was intended to embrace the
entire maritime law as expounded in the treaties, or only the limited
and restricted system which was received in England, or lastly, such
modification of both of these as was accepted and retognized as law in
this country. Nor does the Constitution attempt to draw the boundary
line between maritime law and local law, nor does it lay down any
criterion for ascertaining that boundary. It assumes that the meaning
of the phrase ‘admiralty and maritime jurisdiction” is well under-
stood. It treats this matter as it does the cognate ones of common law
and equity, when it speaks of “cases in law and equity,” or of “ suits
at common law,’ without defining those terms, assuming them to be
known and understood.

* * * * * * *

The question is discussed with great felicity and quca ment by Chief
Justice Taney, delivering the opinion of the court in the case of the
St. Lawrence, 1 Black, 526, 527 (66 U. S., XVII, 183), where he
says: ‘Judicial power, in all cases of admiralty and maritime juris-
diction, is delegated by the Constitution to the Federal Government in
general terms, and courts of this character had then been established
im all commercial and maritime nations, differing, however, materially
in different countries in the powers and duties confided to them, the
extent of. the jurisdiction conferred depending very much upon the
character of the government in which they were created; and this cir-
cumstance, with the general terms of the grant, rendered it difficult to
define the exact limits of its power in the United States. This diffi-
culty was increased by the complex character of our Government, where
separate and distinct specified powers of sovereignty are eXercised by
the United States and a State independently of each other within the
same territorial limits. And the reports of the decisions of the court
will show that the subject has often been before it, and carefully con-
sidered, without being able to fix with precision its definite boundaries ;
but certainly no State law can enlarge it, nor can an act of Congress
or rule of court make it broader than the judicial power may deter-
mine to be its true limits. And this boundary is to be ascertained by
a reasonable and just construction of the words used in the Constitu-
tion, taken in connection with the whole instrument, and the purposes
for which admiralty and maritime jurisdiction was granted to the Fed-
eral Government.” -

* * * * * * *

The question as to the true limits of maritime law and admiralty
jurisdiction is, undoubtedly, as Chief Justice Taney intimates, ew-
clusively a judicial question, and no State law or act of Congress can
make it broader, or, it may be added, narrower than the judgial
power may determine those limits to be. But what the law is within
those limits, assuming the general maritime law to be the basis of
the system, depends on what has been received as law in the mari-
time usages of this country and on such legislation as may have been
competent to affect it. ‘

To ascertain, therefore, what the maritime law of this country is,
it is not enough to read the French, German, Italian, and other for-
eign works on thé subject, or the codes which they have framed, but
we must have regard to our own legal history, Constitution, legisla-
tion, usages, and adjudications as well. The decisions of this court
illustrative of these sources, and giving construction to the laws and
Constitution, are especially to be considered; and when these fail us,
we must resort to the principles by which they have been governed.

It never was intended by the framers of the Constitution, in
the judicial clause of that instrument, Mr. President, to leave
6770
23

the courts of the United States to be shorn, directly or indi-
rectly, of the judicial power conferred by the Constitution. It
never was intended by the framers of that instrument that the
judicial power of the Government should ever be subject to
‘Congress save as to the distribution of subjects of jurisdiction :

Congress undoubtedly has authority under the commercial power,
if no other, to introduce such changes as are likely to be needed. The
-scope of the maritime law, and that of commercial regulation are not
coterminous, it is true, but the latter embraces much the largest por-
tion of ground covered by the former. Under it Congress has regulated
the registry, enrollment, license, and nationality of ships and vessels;
the method of recording bills of sale and mortgages thereon; the rights
and duties of seamen; the limitations of the responsibility of ship--
owners for the negligence and misconduct of their captains and crews,
and many other things of a character truly:maritime. And with
regard to the question now under consideration, namely, the rights of
material men in reference to supplies and repairs furnished to a vessel
in her home port, there does not seem to be any great reason to doubt
that Congress might adopt a uniform rule for the whole country,
though, of course, this will be a matter for consideration should the
question ever be directly presented for adjudication.

= x * * * * *

Be this however as it may, and whether the power of Congress is
or is not sufficient to amend the law on this subject—if amendment
is desirable—this court is bound to declare the law as it now stands.
And according to the maritime law, as accepted and received in this
country, we feel bound to declare that no such lien exists as is claimed
‘by thé appellees in this case. The adjudications of this court, before
referred to, which it is unnecessary to review, are conclusive on the
subject ; and we see no sufficient ground for disturbing them.

In the St. Lawrence Meyer v. Tupper, 1 Black, 522, the court
say, through Mr. Chief Justice Taney:

Yet Congress may undoubtedly prescribe the forms and mode of pro-
ceeding in the judicial tribunals it establishes to carry this power into
execution; and may authorize the court to proceed by an attachment
against the property or by the arrest of the person, as the legislature
‘shall deem most expedient to promote the purposes of justice.

In Butler v. Steamship Company (180 U.S., 527), through Mr.
Justice Blatchford, the court says:

These quotations are believed to express the general, if not unani-
mous, views of the members of this court for nearly twenty years past;
and they leave us in no doubt that, whilst the general maritime law,
with slight modifications, is accepted as law in this country, it is sub-
ject to such amendments as Congress may see fit to adopt. One of the
“modifications of the maritime law, as received here, was a rejection of
the law of limited liability. We have rectified that. Congress has
restored that article to our maritime code. We can not doubt its
power to do this. As the Constitution extends the judicial power of
the United States to “all cases of admiralty and maritime jurisdiction,”
and as this jurisdiction is held to be exclusive, the power of legislation
on the same subject must necessarily be in the national legislature, and
not in the State legislature. Jt is true we have held that the bounda-
ries and limits of the admiralty and maritime jurisdiction are matters
of judicial cognizance, and can not be affected or controlled by legisia-
tion, whether State or national. (Chief Justice Taney, in the St.
Lawrence, 66 U. S.; 1 Black, 522, 526, 527; 17: 180, 182, 183; the
Lottawanna, 88 U. 8.; 21 Wall., 558, 575, 576; 22: 654, 662.) But
within these boundaries and limits the law itself is that which has
-always been received as maritime law in this country, with such amend-
ments and modifications as Congress may from time to time have
-adopted.

Mr. President, what power over admiralty and maritime juris-
diction, recognized and established by the Constitution, does the
Congress possess? Certainly not the power of life and death.
The Supreme Court has held the words in the Constitution, that
‘the judicial power shall extend to all cases of admiralty and
maritime jurisdiction,” is a constitutional recognition of a sys-

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24

tem of jurisprudence already existing, understood and estab-
lished as a part of the judicial power and jurisdiction of the
courts of the Union, and that the scope of the jurisdiction is be-
yond the power of Congress to either enlarge or contract or con-
trol, that being solely a judicial question. Midway the limits
fixed by the court the Congress may, as indicated in the opinions,
legislate, but that it can essentially impair or destroy the ad-
miralty and maritime jurisdiction, to which the Constitution
says the judicial power shall extend, seems settled in the nega-
tive. ;
“ CASES IN LAW AND EQUITY.”

The Constitution says that the judicial power shall extend to
all cases in law and cquity. What about them? Has the Con-
gress more power to limit and control the jurisprudence at law or
in equity than it has in cases of ‘admiralty and maritime juris-
diction?” Is there any ground for the contention that the latter
is imported into the Constitution and established as a permanent
system of jurisprudence and the former are not? The phrase
“admiralty and maritime jurisdiction”? was, as the court has
said, difficult of definition. Not so much so the word “law; ”
not at all so the word “ equity.”

Neither of the three was made more permanent by the Con-
stitution than the other two, and all three are established by it,
to be eliminated from it only by amendment to the instrument
itself. Each represents an entirely different and separate juris-
prudence, well established and understood and administered in
this country before the Constitution was adopted.

What does the word “law ” represent in the second section of
Article III? In Fenn v. Holme (62 U. 8.,,481) the court say:

In the act of Congress “to establish the judicial courts of the
United States” this distribution of law and equity powers is fre-
quently referred to, and by the sixteenth section of that act, as if to

lace the distinction between those powers beyond misapprehension,
it is provided ‘‘that suits in equity shall not be maintained in either
of the courts of the United States in any case where plain, adequate,
and complete remedy may be had at law,” at the same time affirming
and separating the two classes or sources of judicial authority. In
every instance in which this court has expounded the phrases, proceed-
ings at the common law and proceedings in equity, with reference to
the exercise of the judicial powers of the courts of the United States,
they will be found to have interpreted the former as signifying the
application of the definitions and principles and rules of the common
law to rights and obligations essentially legal, and the latter, as mean-
ing the administration with reference to equitable as contradistin-
guished from legal rights, of the equity law as defined and enforced by
the court of chancery in England.”

In Parsons v. Bedford et al. (8 Pet., 446, 447) the Supreme
Court, speaking of the word “law” in the Constitution, and the
light thrown on it by the seventh amendment, say:

The Constitution had declared, in the third article, that the judicial
power should extend to all cases in law and equity arising under this
Constitution, the laws of the United States, and treaties made, or which
shall be made under their authority, ete. It is well known that in
civil suits, in courts of equity and admiralty, juries do not intervene,
and that courts of equity use the trial by jury only in extraordinary
cases. When, therefore, we find that the amendment requires that the
right of trial by jury shall be preserved in suits at common law, the
natural conclusion is, that the distinction was present in the minds of
the framers of the amendment. By common law they meant what the
Constitution denominated in the third article—Law—not merely suits
which the common law recognized among its old and settled proceed-
ings, but suits in which legal rights were to be ascertained and deter-
mined, in contradistinction to those where equitable rights alone were
recognized and equitable remedies administered.

6770
25

The same doctrine {s recognized in the case of Strother v. Lucas, in
6 Pet., pages 768, 769 of the volume, and in the case of Parish v. Ellis,
16 Pet., pages 453, 454.

Is it more difficult to define “law” and “admiralty” and
“maritime jurisdiction ” than it is to define the word “ equity?”
It would seem under the decisions that the test as to whether
a suit is to be on the law or equity side of the court depends
upon the question whether, the amount being sufficient, the
parties are entitled to a determination of the facts by a com-
mon-law jwry. It has been repeatedly decided that the word
“equity ” in the Constitution referred to the system of equita-
ble jurisprudence as administered by the high court of chan-
cery of England at the time the Constitution was adopted. Cer-
tainly the Constitution treated it as a separate system of juris-
prudence, not requiring definition, but established and well
understood. The word of necessity means something in the
Constitution. It is permanent in that instrument, unless taken
therefrom by the States by amendment, and for over a hundred
years the courts sitting in equity have administered that juris-
prudence as established and understood at the time of the
adoption of the Constitution. It is unnecessary to cite author-
ities to support this proposition.

Of course, where States have given larger equitable remedies,
the courts of the United States sitting in equity in cases of
diverse citizenship will effectuate such remedies, if they be in
harmony with the established principles of equity jurisprudence.
(Gormley v. Clark, 134 U. S8., 338.)

So, many acts of Congress have given rise to controversies
which the courts have held were cognizable in equity within
the meaning of that word in the Constitution as they have con-
strued it, but in the last analysis the system of equity juris-
prudence, as recognized and established as a part of American
jurisprudence by the Constitution, has been administered and
must continue to be administered until the Constitution is
changed.

In Wright v. Ellison (68 U. S., 16) Mr. Justice Swayne. for
the court, says that—

This is a suit in equity. The rules of equity are as fixed as those

_ of law, and this court can no more depart from the former than the
latter. Unless the complainant has shown a right to relief in equity,
however clear his rights at law, he can have no redress in this pro-
ceeding. In such cases the adverse party has a constitutional right to
trial by jury. The objection is one which, though not raised by the
eee en suggested by counsel, this court is bound to recognize

In Van Norden v. Morton (99 U. S., 378) the court say:

We think the rule is settled in this court that whenever a new right
is granted by statute, or a new remedy for violation of an old right,
or whenever such rights and remedies are dependent on State statutes
or acts of Congress, the jurisdiction of 3uch cases as between the law
side and the equity side of the Federal courts must be determined by
the essential character of the case, and unless it comes within some of
the recognized heads of equitable jurisdiction it must be held to belong
to the other.

e * * * * * *

The case of Thompson v. Railroad Company (6 Wall., 134) had been
removed from the State courts into the circuit court of the United
States. In the latter a bill in chancery was filed and a decree ren-
dered in favor of the complainant. On appeal this court held that the
case had no feature of equitable cognizance, and it was ordered to be
dismissed without prejudice. It was conceded that if the case had
remained in the State court the plaintiff could have recovered. The

4770
26

court said: “The remedies in the courts of the United States are at
common law or in equity, not according to the practice of the State
courts, but according to the principles of common law and equity, as
distinguished and defined in that country from which we derive our
knowledge of these principles. And although the forms of proceed-
ing and practice in the State courts shall have been adopted in the cir-
cuit courts of the United States, yet the adoption of the State practice
must not be understood as confounding the principles of law and
equity nor as authorizing legal and equitable claims to be hlended
together in one suit. (Citing Robinson v. Campbell, 3 Wheat., 212,
and Bennett v. Butterworth, 11 How., 669, to which we beg leave to
of Sener v. McMasters, 20 How., 8, and Basey v. Gallagher, 20 Wall.,

In Fontain v. Ravenel (58 U. S., 369), Mr. Justice McLean,
speaking for the court, says: a

The courts of the United States can not exercise any equity powers,
except those conferred by acts of Congress and those judicial: powers
which the high court of chancery in England, acting under its judi-
‘cial capacity as a court of equity, possessed and exercised at the time
of the formation of the Constitution of the United States. Powers
not judicial, exercised by the chancellor merely as the representative
of the sovereign, and by virtue of the King’s prerogative as parens
patriae are not possessed by the circuit courts.

The seventh amendment threw a bright light upon the word
“law” as it is used in the Constitution, and drew clearly the
distinction between law and equity, but the equity jurispru-
dence represented by the word “equity” in the Constitution
referred to a system of jurisprudence very definitely settled,
as administered by the high court of chancery in England,
and by courts of chancery in the States at the time the Con-
stitution was adopted.

It has been settled that the scope of the admiralty and mari-
time jurisdiction recognized by the Constitution is a judicial,
not a legislative question. Is the scope of the judicial power
of the Constitution in equity to be defined or controlled by
Congress? Obviously not. Its scope is a judicial question.
How far may the Congress, if at all, limit or control its scope?
Can Congress lawfully enact a law forbidding the circuit courts
of the United States to entertain an original bill for injunction?
That was from the beginning a part of the jurisdiction in equity,
as I understand it. That is preventive relief, and without it
there could be none. It goes back to the interdict, Mr. Presi-
dent, of the Roman law, and from its adoption down through
the history of English jurisprudence it was a jurisdiction to
afford preventive relief, where the common law courts could
only afford redress for past wrongs.

Can Congress pass a. valid act prohibiting the circuit courts
of the United States having jurisdiction in equity, from takirg
cognizance of an original bill to compel the performance of a
contract, or forbidding the court in such case to restrain by
appropriate order or writ the party defendant from conveying
the property to a bona fide purchaser or otherwise pending the
final decree?

Can the Congress pass a valid law lawfully prohibiting the
Federal courts of the United States, sitting in equity, from en-
tertaining or from taking cognizance of an original bill to pre-
serve a trust estate, or for an accounting, or to enjoin the trustee
or guardian who has fallen into evil ways from despoiling and
wasting the trust estate?

If Congress has the power to obliterate one of the original
heads of equity jurisdiction, as they existed when the Con-
stitution was adopted, it has the power to strike them all down,

6770 ,
27

because if the power be once admitted, Mr. President, the
boundary at which the power of Congress shaJl cease is to be
determined by the Congress, not by the courts.

And so we would have the Congress amending the Constitu-
tion by striking the word “ equity ” therefrom, which is an im-
possibility. The Constitution says (it can not be repeated too
often) ‘the judicial power shall extend to all cases in law and
equity arising,” ete.

In Noonan v. Braley (67 U. S., 497) the court say:

The equity jurisdiction of the courts of the United States is derived
from the Constitution and laws of the United States. Their powers
and rules of decision are the same in all the States. Their practice
is regulated by themselves and by rules established by the Supreme
Court. This court is invested by law with the power to make such
rules. In all these respects they are unaffected by State legislation.

Congress may change the practice and procedure, but can
they deprive the court, having jurisdiction in equity, of any
power essential to the beneficial exercise of that jurisdiction?

Do Senators think that Congress has the constitutional power
to provide that the facts in chancery cases shall be found by a
common-law jury instead of by the chancellor, as has always
been the rule? The Supreme Court of the United States
long ago held that the seventh amendment did not apply to
equity. (Shields v. Thomas, 18 How., 253.) The testimony
is differently taken in courts of suits in equity than in
courts of law. Sometimes a feigned issue was sent out of
equity to be tried by a common-law jury, but it has always
been the law, Mr. President, that the chancellor treated the
findings of the jury as advisory only and not binding on
his conscience. There have been attempts in the States to
require the determination by a jury of the facts in equity
cases, but the courts each time—and they were very able
courts—have held such laws to be unconstitutional.

Let me call attention to what Mr. Justice Miller says in his
work on the Constitution as to whether Congress may disturb,
contract, or enlarge the equity jurisdiction—and when I say
“jurisdiction” I refer to “jurisdiction in equity.’ He says
(p. 488) :

Not only did the framers of the new Constitution follow as well as
they might the general polity of the English system, but they evinced
an ardent desire to preserve the principles which had been accepted
as part of the general administration of the law among our ancestors.
This is shown in many of the provisions of the Constitution. Among
others the article concerning the judicial powers of the new Govern-
ment establishes its jurisdiction as extending to all cases in admiralty
and in law and in equity, thus recognizing the English separation of
these three classes of legal controversies as being governed by a sep-
arate jurisdiction. At least such has been the construction placed upon
that instrument by the courts of the country without much question.
It has been repeatedly decided that the jurisdiction in equity, which
was a very peculiar one under the English system of legal administra-
tion, remains in the courts of the United States as it was at the time
they separated from that country, and that one of the distinctive
features of the difference between law and equity, namely, that at
law there is a right to a trial by jury and in equity there is none, has
continued to the present day. And it is a very grave question, one
which has never been brought to the attention of the courts, because
‘Congress has never attempted to exercise any such authority, whether
the Congress of the United States can make any change in the cquita-
‘ble jurisdiction of the courts of the United States; and if so, to what
eotent it can be done.

In this connection I quote from a Wisconsin case (Callahan v.
Judd et al., 23 Wis., 343). In that State there was a class of
mortgages called “farm mortgages.” A great fraud had been

6770
28

perpetrated upon a large number of farmers in Wisconsin. In
order to promote the construction of a railroad through their
farms or in close proximity to them, they had been induced to
give their negotiable notes, secured by mortgage upon their
farms, in payment for stock of the railway company. I believe
there was a little agreement attached or pinned to the notes in
some way, providing that they should not be negotiated until the
stock paid dividends, or something like that. That is my recol-
lection. Of course the notes were put at once into the hands of
bona fide holders—nonresidents, many of them—and suits were
brought to foreclose the mortgages. The railroad company did
not ever pay any dividends; but a great many farmers lost their
farms, and there was great excitement in the State. The courts,
of course enforcing the law, rendered decrees of foreclosure.
The legislature passed an act prohibiting the courts from trying
any action to foreclose a mortgage in which there were ques-
tions or issues of fact, without the intervention of a jury,
except upon the written stipulation of the parties and giving to
a verdict of the jury the same force and effect as in actions at
common law.

The court held the law to be invalid; and I read a brief ex
tract from the opinion. It was a very strong court. Mr. Justice
Payne, who wrote the opinion, has been dead many years. He
was a man whose intellectual force and knowledge of the law
would have made him a conspicuous member of the bench of the
Supreme Court of the United States. He says:

I think the act invalid, and my reasons are briefly as follows: The
power to decide questions of fact in equity cases belonged to the chan-
cellor just as much as the power to decide questions of law—

Just as the power to decide whether in equity cases justice
demands that the status quo shall be maintained until final
judgment belongs to the chancellor, and always did belong to the
chancellor—

It was an inherent part and one of the constituent elements of
equitable jurisdiction. If, therefore, it shall appear that, by the Con-
stitution, the equitable jurisdiction existing in this State is vested in
the courts, I think it will necessarily follow that it would not be com-
po for the legislature to divest them of any part of it and confer
t upon juries. If they can do so as to a part, I do not see why they
may not as to the whole. f

Who can see? If the legislative judgment can be lawfully
substituted for the judgment of the chancellor with knowledge
of the facts as to what remedial justice is demanded in a partic-
ular cause over which the court has jurisdiction in equity,
where is the limit?

If they can say that in an equity case no court shall render any
judgment except upon the verdict of a jury on questions of fact, I can
see no reason why they may not say that the jury shall also be allowed
to decide questions of law.

But the constitution, in section 2, article 7, provides that “the
judicial power of this State, both as to matters of law and equity, shall
be vested in a supreme court, circuit courts, courts of probate, and
justices of the peace. The legislature may also vest such jurisdiction
as shall be deemed necessary in municipal courts.” * * *

In order to determine the meaning of the phrase “ judicial power as
to matters of law and equity,” it is only necessary to recur to the
system of jurisprudence established in this country and derived from
England, in which the courts had certain well-defined powers in those
two classes of actions. In actions at law they had the power of deter-
mining questions of law, and were required to submit questions of fact
to a jury. When the Constitution, therefore, vested in certain courts
judicial power in matters at law, this would be construed as vesting

6770
29

such power as the courts, under the English and American system of
jurisprudence, had always exercised in that class of actions. It would
not import that they were to decide questions of fact, because such was
not the judicial power in such actions. And the constitution does not
attempt to define judicial power in these matters, but speaks of it as
a thing existing and understood— ‘

Just as the Constitution of the United States speaks of it—

But to remove all doubts, in actions at law the right of a trial by
jury is expressly preserved by another provision—

As it is by the Constitution of the United States—

But, as already stated, the power of a court of chancery to deter-
mine questions of fact, as well as of law, was equally well established
and wnderstood. And when the constitution vested in certain courts
judicial power as to matters in equity, it clothed them with this
power, as one of the established elements of judicial power in equity,
so that the legislature can not withdraw it and confer it upon juries.

* * * * * x *

The plain object of this provision was to enable the legislature to
distribute the jurisdiction in both matters at law and in equity as
between the circuit courts and the other courts in the State, giving
to the circuit courts such original jurisdiction and such appellate
jurisdiction as it might see fit. But the jurisdiction there intended
was jurisdiction of the suit.

It may well be that the legislature may deprive the circuit courts
of original jurisdiction in actions for the foreclosure of mortgages.
It is unnecessary to determine whether it could or not. But it is
quite certain that this clause contains no authority for it, while leav-
ing those courts jurisdiction of this class of actions, to attempt to
withdraw from them an acknowledged part of the judicial power and
vest it in the jury. (See Freeman v. McCollum, 20 Wis., 360.)

I turn also, for I think there is great wisdom in it——

Mr. BAILEY. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Texas?

Mr. SPOONER. Certainly. °

Mr. BAILEY. Does the Senator from Wisconsin insist that
in the absence of a constitutional amendment providing for
trial by jury Congress would have no right or power to abolish
the trial by jury?

Mr. SPOONER. There was much fear about it. There
was grave dispute about it. It was argued by many, as I recol-
lect, that the word ‘‘ law” was to be construed so as to import
a common-law jury. But te make that absolutely certain—the
States demanded that the seventh amendment

Mr. BAILEY. The Senator has well said that every word and
phrase in the Constitution means something, and that would mean
absolutely nothing if in the absence of it Congress would be as
powerless as it is when it is written in the Constitution.

Mr. KNOX. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Pennsylvania?

Mr. SPOONER. Certainly.

Mr. KNOX. I desire to call the attention of the Senator
from Texas to the fact that there is a case—I can not recall
the name of it now, but I have come across it within the last
few weeks—holding- that the right of trial by jury is sacred
and would exist independent of the provision contained in the
Constitution.

Mr. SPOONER. The seventh amendment?

Mr. KNOX. Yes, sir. :

Mr. BAILEY. So there is a case holding the law of a State
void even before the State had a written constitutiom—the

6770

 
30

celebrated Rhode Island case. But nobody believes that that
isolated case is the law, and neither can those of us who be-
lieve that every sentence of the Constitution means something
and was written in there for a purpose believe that without
this amendment Congress would still be powerless to abolish
the right of trial by jury, and that it was not written into
the Constitution so as to disable Congress from abolishing the
right of trial by jury.

Mr. SPOONER. I think the Senator
Mr. BAILEY. Will the Senator permit me?
Mr. SPOONER. Certainly.
. Mr. BAILEY. I want to add a word. I do believe there
is this limitation upon the power of Congress in respect to
equity courts. I do not believe that with this amendment guar-
anteeing the right of trial by jury in actions at common law
Congress could confer upon courts of equity jurisdiction which
would defeat the constitutional guaranty of right of trial by
jury. My opinion is that the only limitation upon the power
of Congress in that respect——

Mr. SPOONER. Does the Senator think that Congress can
pass a valid act for a common-law jury in equity cases, giving
the same effect to the verdict of the jury as is given under the
seventh amendment to the Constitution?

Mr. BAILEY. My own opinion is that Congress could abolish
all courts of equity if it chose, just as many of the States have
abolished them.

Mr. SPOONER. In the States which abolished the distinc-
tion I think they adopted constitutional amendments or else
they were authorized by the constitution to do it by legislative
act. I do not think Congress can take away from the chan-
cellor the power which he has always exercised—one of the pe-
culiarities of the chancery system—and transfer the decision of
questions of fact to a jury making the verdict more than
advisory.

Mr. BAILEY. If it will not interrupt the Senator——

Mr. SPOONER. No.

“ Mr. BAILEY. When the people who adopted the Constitution
were so far dissatisfied with its guaranties as to insist upon an
amendment that secured the right of trial by jury, it seems to
me that undoubtedly they recognized the right of Congress to
abolish the right of trial by jury in the absence of that limita-
tion, and if Congress could abolish the right of trial by jury, as
immemorial and as sacred as that right is, it scems to me it
could surely extend it to a case in equity, although I am aware
that there are two or three State decisions to the contrary.

Mr. SPOONER. Will tlhe Senator tell me what limit he
thinks there is to the power of Congress over the equity juris-
prudence or jurisdiction recognized by the Constitution, as con-
strued by the Supreme Court?

Mr. BAILEY. My own opinion is that Congress could abolish
it; that Congress could forbid every court in the United States
from exercising it. The Senator, I am aware, has just de-
manded to know, with a good deal of vehemence, if Congress
could deny courts of equity the right to entertain certain ac-
tions—an action for accounting, an action to preserve a trust.
I only remind the Senator that a little earlier in his speech he
said that Congress could either grant or withhold jurisdiction

6770

 
31

over these cases; and if Congress can merely, by withholding
jurisdiction, disable the courts of the United States from enter-
taining a bill for an accounting surely by express enactment it
could do it. It needs no express enactment in a case like that,
because if a suitor comes to the court with his bill for an ac-
counting and the party on the other side says the court is with-
out jurisdiction, the court itself must look to the statute book
and find some statute which authorizes it to entertain that bill
of accounting. °

Mr. SPOONER. I have never contended that Congress might
not withdraw from the circuit courts the equity jurisdiction
and confer it upon existing courts or might not vest equity and
law jurisdiction and the admiralty jurisdiction in one court.
I have denied—and if I am vehement it is more my misfortune
than my fault—and I do deny, the power of Congress to oblit-
erate the inferior courts of the United States, and it is my belief
that any act of Congress which abrogated the district and cir-
cuit courts of the United States without substituting for them
courts to exercise some of the jurisdiction of the Constitution
would be held by the Supreme Court to be void.

I am not ready to believe that we are in England, living under
a parliament. I am not ready to believe that the Senator from
Texas does not exalt, beyond justification in law, the power of
Congress over the courts. Does the Senator agree with me that
the Congress could not pass a valid act prohibiting the circuit
and district courts of Pennsylvania from issuing process to
carry into effect their judgments or decrees?

Mr. BAILEY. Does the Senator wish me to answer now?

Mr. SPOONER. Not unless the Senator chooses to. I have
no right to interrogate him. I beg pardon.

Whether a case is a case in equity or not depends upon
whether it falls within one of the heads of the ancient equity
jurisdiction which was imported into the Constitution. It does
not depend upon a legislative characterization of it. When the
Constitution says that the judicial power of the United States
SHALL extend to all cases in LAW and gEquity in the enu-
merated classes, does it mean something or nothing? The
courts have said repeatedly that whether a case is a case at
law or a case in equity is to be determined by the essential
features of the case itself.

And, Mr. President, nothing is gained in the way of argument,
it seems to me, by assuming impossibilities. I assume in all I
say that the time will never come, as it never has come, when
there will be found a Congress sitting under this Dome oblivious
to the duties imposed by the Constitution. The Senator said
the other day that Congress could repeal all laws+on the
statute books relating to crime. What of it? That is a
mere abstraction. They would have to reckon with the people.
Congress could starve the executive department. It would not
need to pass any law to do it. All that would be needed would
be omission to act. Congress could shut up the courts by starv-
ing all the couvt officials and neglecting to appropriate money to
pay the judges. Congress could omit to appropriate money to
pay the Cabinet, to pay the President, to pay the Army, to keep
up the administrative department. What of it? Does that
argue anything concerning the matter now before the Senate?

6770
.
32

As Mr. Justice Iredell said, it is our duty to assume that the
constitutional function of the Congress will be performed—as
we know it always will be—and the question is not whether the
Congress could do this or could do that; the question is
whether in a suit in equity, pending in one of the courts of the
United States having jurisdiction of the subject-matter and
the parties, Congress can pass a valid law taking from the
chancellor the inherent function of a chancellor to find the
facts, and require him to delegate that power or itself confer
that power upon a@ common-law jury of twelve and make
that jury’s verdict have the effect of a common-law verdict.
I think it couid not be done. I think the Senator can not
maintain the proposition, and I believe on reflection he will not
assert it—that Congress has power to do away with the whole
equity jurisprudence recognized and established by the Consti-
tution. Of course it is an impossibility.

Suppose Congress should pass an act requiring in a class of
eases the chancellor to grant a preliminary injunction; would
that be a valid enactment? It is*for the chancellor, under the
system, to determine upon investigation, having the facts be-
fore him, whether the law or the rules of equity require that a
preliminary injunction should be granted, or should be de-
nied. Where does Congress get the power, invading the judicial
domain in equity, to substitute its judgment for the judgment of
the chancellor or to interfere with any step which shall be taken
in an equity suit?

Mr. BAILEY. Will the Senator from Wisconsin permit me?

Mr. SPOONER. Certainly.

Mr. BAILEY. The Senator from Wisconsin, I believe,
agrees with me that the inferior courts of the United States
can entertain jurisdiction of no cause except Congress has by
law authorized them to do so. I believe the Senator assents
to that proposition. =

Mr. SPOONER. Admit it.

Mr. BAILEY. Then, of course, it follows naturaJly that if
Congress confers upon the inferior courts of the United States
jurisdiction only in certain. cases it withholds or, if you choose
to use the other word, it withdraws jurisdiction in all other
eases. Let us apply the rule. Suppose Congress authorizes the
courts of the United States to entertain jurisdiction in no mat-
ter of equity. The Senator from Wisconsin agrees that the
chancellor is without any jurisdiction, and that effect is simply
accomplished, not by affirmatively denying him the right, but by
failing affirmatively to give him the right. Therefore it does
seem to me a strange course of reasoning which asserts that
Congress can deny jurisdiction, and yet in another breath ad-
mits that the jurisdiction does not exist except upon the affirma-
tive action of Congress.

Mr. SPOONER. Mr. President

Mr. BAILEY. If the Senator will permit me, I say that if
Congress may withhold from the jurisdiction of inferior courts
all or any part of those cases enumerated in the Constitution,
then it is utterly impossible to maintain that a given law
which denies them jurisdiction is unconstitutional. If the law
affirmatively denying them is unconstitutional, then surely any
provision in the law that provides for the exercise of any part of
the jurisdiction would be void unless it provided for the exer-
cise of every part of the jurisdiction. e

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33

Mr. SPOONER. The Senator falls back each time upon the
power of life and death. He falls back for a basis of conten-
tion upon an impossible assumption. I am not discussing that
question. It is not involved here in any way. His amendment
provides, of which this proviso is a part, for the filing of an
original bill in the circuit court for an injunction to restrain
putting into force a rate fixed by the Interstate Commerce Com-
mission; and on the assumption that the court is clothed with
the judicial power to hear and determine that case and to render
its decree and carry it into effect I am discussing this ques-
tion—not upon what would be done or could be done if there
were no such courts.

Mr. President, is it contended that the Congress can lawfully
enact, as a part of the Senator’s amendment, a provision re-
quiring a trial by jury and a verdict upon the facts in the case
which by his amendment he authorizes to be brought? That is
the precise question I am now discussing. Is it contended that
in this case, which the Senator is providing for bringing, this
suit in equity, Congress can exercise any function which from
time immemorial has devolvel upon the chancellor? It has al-
ways been the function of the chancellor to determine whether
in a suit brought for a permanent injunction a preliminary
order was required to prevent the doing of the wrong complained
of until a hearing upon the testimony and the determination
of the merits. That is not a decision of the cause, as the Sena-
tor seemed to think the other day. That rests in the sound ‘dis-
cretion of the chancellor, and always has so rested. The power
should be exercised with caution. It does not involve a de-
cision upon the merits. (High on Injunctions, 4th ed., secs. 1-6,
pp. 2-10.)

Now, for Congress in such a case to “ decide” by act in ad-
vance that if a motion is made for a preliminary injunction to
maintain the status quo, no matter what the showing may be,
the chancellor shall deny it, while he may be convinced it should
be granted, is a legislative usurpation of a judicial function;
and if it may be done in such a case, tell me, some one, where
the power ceases? Can Congress lawfully pass an act that here-
after in all cases in equity where the court is of the opinion that
justice requires a preliminary injunction, the maintenance of the
status quo, upon that being made to appear, the suit shall be
dismissed? Why not? In thousands of cases if the wrong
were not prevented in limine a permanent injunction would be
as idle as the wind that blows. It would be a solemn farce.
It would bring the court of equity into contempt.

Suppose the trustee of an estate is about to-morrow, if not
prevented, to take all that is left of the assets and embark it
in a gamble, leaving penniless those for whom the decedent
toiled and wrought all his life. It is the function of equity to
protect that trust estate. Of what avail would equity be if
in the beginning the wrong could not be prevented? Equity
takes cognizance of bills to prevent, in violation of confidence,
the publication of trade secrets. Of what avail would that be
without the power of the chancellor, which has always been
exercised, to grant in a proper case preliminary preventive
process? Equity will take cognizance of a case, the citizen-
ship being diverse, to prohibit a lawyer from violating the
confidence of a client. Of what avail would it be if equity
may not at once prevent that violation of confidence?

6770—_3
34

Take the case I put when I last addressed the Senate on this
subject, where, hy fraud, negotiable paper has been obtained
from some man and he is in time, by his bill in equity, if the
preventive writ is granted, to save himself from financial de-
struction by preventing the negotiation of that paper. Of what
avail would the permanent injunction be if the chancellor could
not prevent in limine the wrong which the suit’was brought
permanently to prevent? If Congress, in a suit pending in
equity, in an existing Federal court, may say to the chancellor
by law, ‘No matter what the case may be, no matter what
showing is made, if any motion is made for a preliminary writ,
you shall deny it,’ why may not the Congress in another case
say, ‘‘“No matter what showing may be made, no matter how
convinced the chancellor is that the writ ought not in justice to
issue, it shall be granted?” Where is the limit? 7

Once admit the power—not the power to destroy the courts;
I am assuming their existence, as the Serfator’s amendment
does—once admit the power of Congress to say what steps
shall be taken in the progress of a lawsuit and what decisions
shall be made on motions and petitions, what is left of the
judiciary? Anything? And applied to cases arising under
this bill—for I have been speaking on general principles—
but applied to cases arising under this bill, the proposition is
one which is fatal, I think, to the bill. The men who are
seeking to perfect this bill, who are anxious, as I am, that it
shall contain no unconstitutional provision, are not to be
classed as enemies of the bill. Iam working here under my oath
to do what I think is my duty. I believe this is an unconstitu-
tional provision. I believe you can not, under the fifth amend-
ment, take private property for public use and deprive the
owner of any remedy essential to his protection,

The Congress, the Supreme Court has held, can not pass a
lawful act taking private property for public use unless it con-
tains an appropriation. Suppose it did and this power over
the courts is unlimited, and it takes the property, and its offi-
cers are in possession of it, with no provision for payment; can
the Congress pass a valid law under which the party is denied
relief in equity? Can it pass a valid law that its agents in pos-
session shall not be subject to any possessory action at law?
That would not be “ due process.”

Going back, it was attempted in Michigan by an act to take
the power to find the facts from the chancellor and vest it in
a common-law jury. The question came up in the case of Brown
v. Buck (75 Mich., 274). It is not obiter; it is a part of the
ratio decidendi. The question was whether that was a valid
enactment, and the supreme court of Michigan say:

This leads to the inquiry whether it is competent for legislation to
bring about any such radical change as is here attempted. We think
it is not. The decisions of the United States Supreme Court before
referred to do not bind State practice, but they nevertheless to some
extent indicate the real difficulty. That tribunal did not decide that
under the United States Constitution there could be no change in
equitable procedure—

No one claims that—
because the whole body of chancery practice bas been repeatedly
amended and simplified by that court.

It has all been done under the power delegated to the court.

_ Their rulings mean neither more nor less than that there are various
kinds of interests and controversies which can not be left without

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35

equitable disposal. without either destroying them or el a) their
value. It is within the power of a legislature to change the formal-
ities of legal procedure.

Formalities, Mr. President; formalities of legal procedure.
Yes. These may be changed. The body of jurisprudence and
the things which inhere in it and are essential to its beneficial
exercise are not mere matters of practice or formal procedure.

But it is not competent to make such changes as to impair the
enforcement of rights. In rude times, when there is no business and
no variety of property rights, very simple remedies are sufficient. But
where the ordinary remedies have become inadequate to deal with
more extended or peculiar interests, such as multiply in all civil-
ized countries, different methods and different tribunals become neces-
sary. The universally recognized basis of equitable jurisprudence,
found in statutes and constitutions as well as in the reports and text
writers, is the inadequacy of the common law to deal with these sub-
jects. A principal basis of that inadequacy was the nature of the
tribunal passing on the facts.

In common-law igsues fact and law can be readily separated; but
in the great majority of equity proceedings it is impossible to make
any such separation. The functions of judges in eguity cases in deal-
ing with them is as well settled a part of the judicial power and as
necessary to its administration as the functions of juries in common-
law cases. Our constitutions are framed to protect all rights. When
they vest judicial power they do so in accordance with all of its essen-
tials—

Barring the formal procedure, all of its essentials—
and when they vest it in any court they vest it as efficient for the protec-
tion of rights, and not subject to be distorted or made inadequate.
is as sacred as the right of trial by jury.

I assert, Mr. President, that this is a sound and golden sen-
tence which is the law in the last analysis:

The right to have equity controversies dealt with by equitable meth-
ods is as sacred as the right ot trial by jury.

Let me read it again:

THE RIGHT TO HAVE EQUITY CONTROVERSIES DEALT WITH BY EQUITABLE
METHODS IS AS SACRED AS THE RIGHT OF TRIAL BY JURY.

If it be not so, Mr. President, there is nothing in equity juris-
prudence.

Whatever may be the machinery for gathering testimony or enforc-
ing decrees, the facts and the law must be decided together, and when
a chancellor decides to have the aid of a jury to find out how facts
appear to such unprofessional men it can only be done by submitting
single issues of pure fact, and they can not foreclose him in his con-
clusions unless they convince his judgment.

It is said that there is no inherent power in equity under our
Federal system. There are many inherent powers in equity.
In the case of Vidal v. The Executors of Girard, Vidal being a
relative, suit was brought in the circuit court of the United
States of Pennsylvania to interfere with the bequest for educa-
tion made by Stephen Girard, which the court held to be a
charity within the doctrine of equity. (Vidal et al. v. Girard’s
Yxecutors, 2 How., 194.) It was claimed by very eminent law-
yers that there was no jurisdiction in equity; I do not mean
over the case, but in equity; in other words, that it was not a
ease where, upon theeprinciples of equity, the court could grant
relief. It was argued with supreme ability and surpassing
learning, and the court inter alia say:

Sir John Leach, in the case of a charitable use before the statute of
Elizabeth (Attorney-General v, The Master of Brentwood School, 1
Mylne & Keen, 376), said: “Although at his time no legal devise could

be made to a corporation for a charitable use, yet lands so devised were
in equity bound by a trust for the charity, which a court of equity

6770
36

would then execute."’ In point of fact, the charity was so decreed in
that very case, in the twelfth year of Elizabeth. But what is still more
important is the declaration of Lord Redesdale, a great judge in equity.
in The Attorney-General +. The Mayor of Dublin (1 Bligh. R., 312, 347,
1827), where he says: ‘‘ We are referred to the statute of Elizabeth
with respect to charitable uses as creating a new law upon the subject
of charitable uses. That statute only created a new jurisdiction; it
created no new law. It created a new and ancillary jurisdiction, a
jurisdiction created by commission, etc.; but the proceedings of that
commission were subject to appeal to the lord chancellor, and he
might reverse or affirm what they had done or make such order as he
might think fit for reserving the controlling jurisdiction of the court
of chancery as it existed before the passing of that statute, and there
can be no doubt that by information by the Attorney-General the same
thing might be done.”

He then adds: “The right which the ‘Attorney-General has to
file an information is a right of prerogative. The King, as parens
patrie, has a right, by his proper officer, to call upon the several
courts of justice, according to the nature of their several jurisdic-
tions, to see that right is done to his subjects who are incompetent
to act for themselves, as in the case of charities and other cases.”
So that Lord Redesdale maintains the jurisdicti®n in the broadest
terms, as founded in the inherent jurisdiction of chancery independently
of the statute of 43 Elizabeth. In addition to these dicta and doc-
trines, there is the very recent case of The Incorporated Society v.
Richards (1 Drury & Warren R., 258), where Lord Chancellor Sugden,
in a very masterly judgment, upon a full survey of all the authorities,
and where the point was directly before him, held the same doctrine as
Lord Redesdale, and expressly decided that there is an inherent juris-
diction in equity in cases of charity, and that charity is one of those
objects for which a court of equity has at all times interfered to make
good that which at law was an illegal or informal gift: and that cases
of charity in courts of equity in England were valid independently of
and previous to the statute of Elizabeth.

They found abundant authority for the proposition that inde-
pendent of that statute, as an inherent element of equity juris-
diction, the courts of chancery in England had administered
such trusts. So, rejecting the prerogative element of jurisdic-
tion, the court upon the principle that the jurisdiction inhered
in equity granted the relief sought.

It was held the same way in Fontain v. Ravenel, an interest-
ing case which I will not take the time to read, although later I
want to refer to it for another purpose. There the court held
that prerogative suits in equity on the relation of the attorney-
general, representing the King as parens patriw, were no part
of the equity system of the United States; but they sustained
as inhering in equity jurisprudence on general principles the
power to grant the relief sought in the bill.

Right here, if the Senator from Texas will do me the honor
to give me his attention, he will find the principle which applies
to mandamus aud to habeas corpus. They were each high pre-
rogative writs across the sea, and as it has been decided, as it
was here in equity, there is distinction between the inherent
jurisdiction in equity and the prerogative jurisdiction.

So our courts very properly have drawn the distinction as to
the common-law writs prerogative, and they have held that the
sovereign possesses them, and the sovereign in this country is
represented not by the courts, but by the Congress, and that
therefore when the prerogative jurisdicti@n shall be conferred
upon the courts it is for the Congress to decide.

I want to read a little of what Chief Justice Taney says in
the case of Fontain v. Ravenel (17 How., 369), in a concurring
separate opinion. I read it because it is a succinct and fine
statement:

It remains to inquire whether the Constitution has conferred this
prerogative power on the courts of equity of the United States.

6770
387

The second section of the article of the Constitution declares that
the judicial power of the United States shall extend to all cases in
law and equity specified in the section, These words obviously confer
judicial power and nothing more, and can not, upon any fair _con-
struction, be held to embrace the prerogative powers which the King,
as parens patric, in England, exercised through the courts. And the
chancery jurisdiction of the courts of the United States as granted by
the Constitution extends only to cases over which the courts of chan-
cery had jurisdiction in its judicial character as a court of equity.
The wide discretionary power which the chancellor of England exercises
over infants or idiots or charities has not been conferred.

These prerogative powers which belong to the sovereign as parens
patrie remain with the States. (Fontain v. Ravenel, 58 U.§., p. 80.)

If I may be pardoned one moment, I should like to refer to
another case, for it is an interesting one. This was a case
in which a bill was filed to declare and enforce a resulting trust.
The Territory of Minnesota, under the authority of Congress,
had passed an act in relation to resulting trusts. I will say
that in the act of Congress it was provided that the laws
passed by the Territorial legislature should remain in force
until disapproved by the Congress, which had not been done. An
agent receiving money from his principal for the entering of
land at the land office took the title in his own name and re-
fused to convey. Suit was brought to declare the trust and en-
force it. This point was made in the case:

With regard to the fourth objection, of a want of jurisdiction in the
courts of the United States, in the absence of express statutory provi-
sions, to recognize and enforce a resulting trust like that presented by
the present case, it is a sufficient response to say that the jurisdiction of
the courts of the United States is properly commensurate with every
right and duty created, declared, or necessarily implied, by and under
the Constitution and laws of the United States. Those courts are
created courts of common law and equity, and under whichsoever of
these classes of jurisprudence such rights or duties may fall, or be ap-
propriately ranged, they are to be taken cognizance of and adjudicated
according to the settled and known principles of that division to which
they belong. :

By the language of the Constitution it is expressly declared Art.
III, sec. 2, clause 1) that the judicial power of the United States shall
extend to all cases in law and equity arising under the Constitution,
the laws of the United States, and treaties made under their authority.
By the statute which organized the judiciary of the United States, it is
provided that the circuit courts shall have jurisdiction of suits of a
civil nature ‘at common law or in equity.” (Vide 1 Stat. L., p. 78,
sec. 11.) In the interpretation of these clauses of the Constitution
and the statutes, this court has repeatedly ruled that by cases at
common law are to be understood suits in which legal rights are to be
ascertained and determined, in contradistinction to those where equita-
ble rights alone are recognized and equitable remedies are administered.
(Vide Parsons v. Bedford, 3 Pet., 447, and Robinson v. Campbell, 3
Wheat., 212.) That by cases in equity are to be understood suits in
which relief is sought according to the principles and practice of equity
jurisdiction, as established in English jurisprudence. (Vide the case
of Robinson v. Campbell, just cited, and the United States v. Howland,
4 Wheat., 108.)

Relief is sought according to the established principle of
equity and the practice of equity jurisdiction as established in
English jurisprudence.

Here, then, is an exposition, both of the Constitution and laws of
the United States, with reference both to the jurisdiction and powers
of their courts and to the instances in which it is their duty to_ex-
ercise those powers; and the inquiry forces itself upon us, Who shall
or can hare the authority to deprive them of those powers and that
jurisdiction? Or can those courts, consistently with their duty, refuse
to exert those powers and that jurisdiction for the protection of rights
arising under the Constitution and laws, in the acceptation in which
both have been interpreted and sanctioned? (Irvine v. Marshall, 61
U. S., p. 994.)

677)
38

Friday, April 27, 1906.

Mr. SPOONER. Mr. President, I thank the Senate for its
indulgence, and I will take as little time to-day as will suffice to
present a part only of what might properly be presented on this
subject.

The Senator from Texas [Mr. Bartey] seemed to think that
the Senator from Pennsylvania [Mr. Knox] and myself were
contending because of the distinction which we draw between
judicial power and jurisdiction for some proposition which in-
volved that the lesser shall be /arger than the greater. I do not
state his precise language. That suggestion, too, I think comes
from a confusion of the distinction between judicial power and
jurisdiction. Jurisdiction, as far as it refers to inferior courts
of the United States, is a matter of legislation. The exercise of
the judicial power where jurisdiction exists is judicial. The
powers are utterly different; and therefore it can not be said
that one is less or greater than the other.

Whether a case is made out before a court or judge which,
according to the rules and established principles of equity entitle
the litigant to a certain remedy, can not be a legislative
question. That is essentially judicial. Will it be contended
that the Congress can constitutionally enact a law prohibit-
ing a party to a suit from applying to the court for a remedy,
interlocutory, if you please, to which he conceives and which
he is advised he is entitled? It would be practically a denial
to the suitor if the Congress can control the exercise of ju-
dicial power, of the constitutional right of submitting to the
chancellor on full hearing the question whether he is or is not
entitled to the interlocutory remedy which he seeks.

Suppose this proviso were recast and prohibited a party com-
plainant in a bill filed under the provisions of the Senator’s
amendment, if it were adopted, to apply to the court for an
order maintaining the status quo, even though he made it
plain to the court that otherwise irremedial loss would ensue,
would that be legislation? ‘Would it especially be legislation
constitutionally enacted under the fifth amendment?

I have a right—every man has a right who is a party to a
litigation—to make such application or motion to the court as
he may be advised is within established usage in equity or at
law, and whether the petition should be granted or denied,
whether the remedy should be afforded or withheld, it does not
seem to me can be made a legislative question.

The Senator from Texas seemed in his speech to have a corn-
sciousness that his proviso might be going too far, and his in-
stinct for the law is excelled by that of no man whom I know.
I do not mean by that that his legal knowledge is not abundant.
He said:

I am willing to leave with the court the right to say how it shall
decide these cases—

From my standpoint that is not an option to be exercised by
the Congress—
and I only ask Congress to say when it shall decide them. I do not
say—and it would be a nullity if Congress were to so say in any
statute—that the courts shall decide these cases for the Commission
or for the railroads.

Is that the ultima thule? Is that the limit of Congressional
power? May the legislature go that far and no farther, or go

6770
39

‘up to that line and be free to limit, hamper, and control the
judicial power in all the territory this side of the final decree?
It seems to me that proposition refutes itself.

I ask Congress to exercise no power like that, because I know that
to be a judicial power.

What is the “ power” to be exercised, when the Senator from
Texas, on a bill filed for foreclosure, asks for the appointment of
a receiver by the chancellor on the presentation of facts which
under established usage authorizes such an order? Is not that
a judicial power? The power to preserve the property pending
the litigation has been inherent in the chancellor from time
immemorial.

I only ask Congress to say that the court shall not decide these
cases at all until it is ready to decide them right, and, according to the
Senator from Pennsylvania, that is a legislative power.

I think that must be an error.

I am willing to write it in the law that Congress disclaims the power
to say how the court shall decide any case, provided that it also be
written that the court shall not decide a case under this law at all
until it is ready to decide it right.

A great many questions arise, matters of right as well as
matters resting in the sound discretion of the court, pending
the proceeding and before the court is ready to decide it “ right ”
or ‘“ wrong,” and many of those preliminary motions and appli-
eations and the power to grant them have been part of the
equitable administration and jurisdiction for over two hundred
years. The decision of any one of them involves absolutely the
exercise of judicial power. Is not the “ faculty of judgment”
in passing upon all applications and motions of necessity as
completely exempt from legislative control and dictation as the
final decision upon the merits? How would it do to write this
disclaimer at the end of the Senator’s proviso?

Provided, however, That no rate or charge, regulation or practice
prescribed by the Commission shall be set aside or suspended by any
preliminary or interlocutory decree or order of the court: Provided
further, That Congress disclaims any power to dictate to the court
what decision it shall make upon any motion or application in accord-
ance with the established principles and procedure in equity properly
brought before it in the progress of any such suit in equity.

The first proviso is the Senator’s. The second my proposed
one to test the soundness of his position.

Obviously the Senator’s proviso and mine would eat each
other up; and yet, Mr. President, under the Senator’s proviso,
if the carrier should satisfy the court that the rate fixed by the
Commission is absolutely confiscatory, the court would be de-
prived of the faculty of judgment upon the subject and de-
nied the power to exercise the function which, I say, inheres in
the judicial power of a court. Congress, without any knowl-
edge, would be in the attitude of saying by legislative enact-
ment—as unyielding and arbitrary as anything that could be
imagined—that, no matter what should be made to appear to
the court in such a case, it should not have the power to sus-
pend the order upon any terms, not even if every dollar received
by the carrier was paid into the registry of the court to abide
the result of the litigation, and notwithstanding the fact that
it was perfectly apparent to the court that the loss to the party
complainant would be otherwise irremediable.

Is it possible that Congress can substitute its judgment in such
a proceeding for the judgment of the court? This is not a mere

6770
40

rule of practice, Mr. President. Practice and procedure do not
generally reach the heart of jurisprudence; and if, under the
guise of regulating practice and procedure, the essential and
vital jurisdiction in equity is impinged, the court would hold
that beyond the power, I think, of the legislature.

RIGHT ARM OF EQUITY.

Equity, it was said one day here, acts in rem. The maxim
which comes down to us is, “ Equity acts in personam, not in
rem.” The judgment at common law is satisfied out of the
property of the defeated litigant, but, save in few cases, the
chancellor enforces his orders and decrees against the person.
He constrains the conscience by orders and writs, and punish-
ment for disobedience.

“Mr. President, injunction is called, and has been called for over
two hundred and fifty years, I think, the “ right arm of equity.”
Without it how could the fundamental power in equity to
afford preventive relief be accorded?

Injunction, temporary or permanent, is not a mere instru-
mentality. Disobedience of it is punished as contempt, which
is inherent at the common law; and our Supreme Court has
held it is inherent in all courts. (In re Debs, 158 U. S., 564.)
Equity is full of instrumentalities. Some of them, Mr. Presi-
dent, are almost vital to the exercise of the jurisdiction in
equity ; but the injunction is the “ right arm of equity.” It is not
a mere instrumentality. It is a part of the body of equity juris-
prudence. This glass in my hand is an instrumentality. The
arm is a part of my body; and if it lies within the power of
Congress to cut off the right arm of the body of equity juris-
prudence, it rests in the power of Congress to cut off the left,
and if it may cut off both arms, it may cut off the head and
leave nothing of the equity jurisprudence recognized and estab-
lished by the Constitution but an armless and headless trunk.

If the Senator is right, if Congress may exercise the power
for which he contends, then Congress may say to a chancellor,
“You shall not, whatever case may be presented to you aris-
ing.under this law—not under another, but under this law—
even though essential justice demands it, suspend an order
and maintain the existing status upon terms which you think
to be just or upon terms which may be prescribed by the
statute.” I do not believe, on the strength of the authorities
which I partly read yesterday, that it is in the power of Con-
gress to take away from the inferior courts of the United States
by valid enactment any process necessary to the exercise of its
jurisdiction. Admit that the jurisdiction might be withdrawn,
but with the jurisdiction existing under an act of Congress, I
believe it to be incompetent for Congress to emasculate the ju-
dicial power by depriving the court of the power to carry out
its judgments and decrees.

Congress tried that experiment, Mr. President, in the Klein
case (13 Wall., 128). I referred to it on a former occasion. The
Congress has apparently as unlimited power, under the Constitu-
tion, over the appellate jurisdiction of the Supreme Court as it
has over any other subject. The Congress has the power to
make such exceptions under the Constitution as it may see fit
and to regulate the appellate jurisdiction of the Supreme Court;
but the Congress can not give it jurisdiction and yet withhold it.

6770
41

It can not give jurisdiction and dictate at the same time how the
court shall exercise the judicial power. That was attempted by
Congress. By act of Congress the Supreme Court was ordered
on appeal, when certain facts appeared to the court, to dismiss
the appeal. The court said about it—and I will not take time
to restate the case; it is familiar here, for I read it here on
another occasion—

It is evident from this statement that the denial of jurisdiction to
this court, as well as to the Court of Claims, is founded solely on the
application of a rule of decision, in causes pending, prescribed by Con-
gress.

The court has jurisdiction of the cause to a given point; but when it
ascertains that a certain state of things exists, its jurisdiction is to
cease, and it is required to dismiss the cause for want of jurisdiction.

* * * * * * *

The court is required to ascertain the existence of certain facts and
thereupon to declare that its jurisdiction on appeal has ceased by
dismissing the bill. What is this but to prescribe a rule for the decision
of a cause in a particular way?

And the Supreme Court held the proviso invalid.

In the case before us the Court of Claims has rendered judgment for
the claimant and an appeal has been taken to this court. We are di-
rected to dismiss the appeal, if we find that the judgment must be af.
‘firmed, because of a pardon granted to the interstate of the claimants,
Can we do so without allowing one party to the controversy to decide
it in its own favor? Can we do so without allowing that the legisla-
ture may prescribe rules of decision to the judicial department of the
Government in cases pending before it?

What does the proviso to the amendment of the Senator from
Texas do but prescribe the rule of decision to the court of equity
on application made in accordance with established equitable
principles for an order maintaining the status quo? It is simply
a legislative mandate that every such application as that shall
be decided, regardless of the facts, for the Government. I
can not believe that that is within the constitutional capacity of
the Congress. The Senator from Texas believes otherwise.
That is a difference of opinion.

Mr. BAILEY rose.

Mr. SPOONER. I did not mean to say——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Texas?

Mr. SPOONER. Certainly.

Mr. BAILEY. Of course, I do not believe that Congress could
command the court to decide a question in favor of the Govern-
ment. If the Senator from Wisconsin

Mr. SPOONER. I say “in effect; ” I did not say that the——

Mr. BAILEY. The words “ in effect” escaped me.

Mr. SPOONER. I did not say “in effect.” There is no Sen-
ator who heard me who did not understand what I meant.

Mr. BAILEY. Well, I heard the Senator, and I did not under-
stand that he meant that, or I should not have interrupted him.

Mr. SPOONER. I say that would be the effect of this proviso ;
but the Senator does not think so.

Mr. BAILEY. Ah! If the Senator from Wisconsin will per-
mit me——

Mr. SPOONER. Certainly. ;

Mr. BAILEY. My contention is that the courts shall have no
jurisdiction over that, just as if I should say the courts shall
have no jurisdiction over a case involving less than $2,000. To
say that the court shall not decide that question at all, because

6770

 
42

of a lack of jurisdiction to decide, is one thing; to say that the
court may have jurisdiction to decide it and shall decide it in
favor of either the plaintiff or the defendant is, to my mind,
quite a different thing.

Mr. SPOONER. Oh, Mr. President, that is a new distinction ;
that is a theory of which I have not heretofore been advised.
I have supposed that a court, in order to exercise the judicial
power of the Constitution, must have jurisdiction—first, juris-
diction over the subject-matter; second, jurisdiction over the
parties. I have never been taught that a court could have juris-
diction over the subject-matter and jurisdiction over the parties,
and yet be prohibited from doing, in the exercise of judicial
power in that case, what justice demands and what is in
accordance with the established usages of the jurisprudence
being administered. Test ‘that. If the Congress may clip off
a part of the jurisdiction which the court has in the case so as
to prevent the court from hearing and deciding a preliminary
motion, where must the Congress stop? Congress has a right,
then, to cut off enough of the jurisdiction, or, in better words,
judicial power—for everything the court does, Mr. President,
where it has jurisdiction of the parties and the subject-matter,
is the exercise of judicial power, and involves the faculty of
judgment to leave a third or half of a case. On the Senator’s
theory it is competent for Congress to provide, splitting up the
jurisdiction, that in a class of causes the court shall make no
decision upon any question or proposition arising in the progress
of the suit except the final decree.

Mr. BAILEY. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Texas?

Mr. SPOONER. Certainly; always.

Mr. BAILEY. Mr. President, probably I can make the issue
between the Senator and myself even more definite than he has
made it up to this point. I not only affirm that Congress can,
to borrow his expression, clip off a part of a jurisdiction here
and there, but I affirm that Congress ean completely deny all
jurisdiction.

Mr. SPOONER. Oh, yes.

Mr. BAILEY. Not only can it take a part and another part
and another part, as the Senator expresses it, but the Congress
is entirely competent to declare that no circuit court of the
United States shall have jurisdiction to entertain any particu-
lar kind of suit that the wisdom of Congress may choose to
exclude, and if it can exclude all jurisdiction I think there is
no difficulty in concluding that it may exclude partial juris-
diction.

THE REAL QUESTION.

Mr. SPOONER. Mr. President, I am not called upon to deny
the broad statement which the Senator makes that the Congress
can withdraw all jurisdiction from the circuit courts of the
United States. I am not called upon, either, to deny that the
Congress can withdraw part of the jurisdiction from the cir-
cuit courts of the United States and the district courts of the
United States over a class or classes of cases enumerated in the
Constitution. I am not called upon to deny that the Congress
may withhold, or, if having conferred, it may withdraw, jurisdic-
tion over habeas corpus as a prerogative writ as contradistin-

6770
43

guished from the ancillary writ or writs essential to the exer-
cise of the jurisdiction. I am not called upon to deny that the
Congress may withdraw jurisdiction from the courts over man-
damus upon the same basis. I am not claiming, Mr. President,
nor need I, that the Congress, having conferred jurisdiction
upon the circuit courts of the United States over almost all of
the enumerated cases in the Constitution, can not withdraw one
jurisdiction and another and another and another. But that is
not the question. The question is whether Congress, having
conferred jurisdiction upon an inferior court over a class of
eases, and not withdrawing that jurisdiction over that class of
cases, can, where a case falling within the class is before the
court, subdivide that jurisdiction over the one case. I deny it.
Congress can confer jurisdiction, over a case or it can refuse to
confer it, but, Mr. President, when Congress does confer it, the
judicial power of the Constitution goes with it as to that partic-
ular case, and Congress can not take away, in my judgment.
from the court in that case or in cases of that class, the power
to hear motions or applications and to decide them as the court
thinks fit, subject to correction by the circuit court of appeals or
the Supreme Court of the United States.

If Congress may not only clip off the judicial power, but may
give the court jurisdiction of a case and take away part of the
jurisdiction over that case, what is left? The result of that
would simply be this, I think, and that I believe is what this
amendment would accomplish: I believe the court would say
that it is such an attempted impairment of the jurisdiction that
it could not assume it or exercise judicial power under it. I do
not believe a court of the United States, sanctioned by the Su-
preme Court, would deem it possible to take half of the juris-
diction of the Constitution over a particular lawsuit. I think
it must be withheld over the particular case or given to the
constitutional extent.

There is where the Senator and I run against each other
again. We agree up to a certain point. We agree as to the
power of the Congress to confer so much of the constitutional
jurisdiction over the enumerated cases of the Constitution as
it may deem wise. We admit that it may be withdrawn, but if
the Senator contends that the jurisdiction over the enumerated
cases may be given to the court, and the judicial power as to a
case within the class can be split in two, I can not see any earthly
foundation upon which to support that contention.

Mr. CARTER. Mr. President

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Montana?

Mr. SPOONER. Yes.

Mr. CARTER. The construction of the word “ jurisdiction ”
and the term “ judicial power ” constitutes a point at issue, as I
understand, between the Senator from Texas and the Senator
from Wisconsin. The Senator from Texas contends that “ juris-
diction ” and “ judicial power” are interchangeable terms, prac-
tically synonymous terms.

Mr. BAILEY. Will:the Senator from Montana allow me to
interrupt him there?

The VICE-PRESIDENT. Does the Senator from Montana
yield to the Senator from Texas?

Mr. CARTER. I do.

6770

 
44

Mr. BAILEY. I would not want to be put in the position of
Saying that there is no distinction between them at any time or
under any circumstances. My statement was that they are the
same when applied to a question like that under consideration.

Mr. SPOONER. I conceded that the Senator had made that
qualification.

Mr. BAILEY. Yes.

Mr. CARTER. I understand that to be a fact, and will be
glad to follow so as to confine the Senator’s express understand-
ing to the particular matter under consideration.

As I understand the issue at this moment being considered,
the Senator from Wisconsin falls into what I deem the error of
the Senator from Texas, to wit, disregarding the plain dis-
tinction between ‘ jurisdiction.” and “judicial power.” The
persons and the subject-matter being within the jurisdiction of
the court by proper legal authority, it is proposed by this
amendment, not to limit the jurisdiction, but to enter the
court room, where the jurisdiction over persons and subject-
matter is complete, and there prescribe what the court shall
or shall not do with reference to an ancient and well-established
course of proceeding in equity.

Therefore I submit to the Senator from Wisconsin that this
is an invasion of the judicial power, and has nothing whatever
to do with the jurisdiction, which presumably is complete.

Mr. SPOONER. If I did not draw that distinction I thank
the Senator for his suggestion. I thought I had that distinc-
tion pretty thoroughly embodied by this time in my mind, and
that either from intellectual firmness or intellectual stubborn-
ness nobody could eliminate it from my constitution. But if in
the haste of debate I did not recognize it the Senator is right,
and I thank him.

Mr. CARTER. I understand the Senator to say that the Sep-
ator from Texas proposed to divide and subdivide jurisdiction.
The Senator from Texas concedes that the jurisdiction of the
court over the subject-matter and the parties would be com-
plete.

‘Mr. SPOONER. Yes; by his amendment. In the heat of
debate I very likely used ‘“ jurisdiction’ where I should have
used ‘judicial power.” It must be very apparent from the
argument I have made here that I should have used the term
“judicial power.”

Mr. CARTER. I understood that.

Mr. SPOONER. Because Congress can not give jurisdiction
and yet not give it, and where Congress does give jurisdiction
Congress can not emasculate the judicial power, or deprive the
court of the right to exercise the whole of the judicial power in
a given case. The Constitution says: ‘ The judicial power shall
extend to all cases,” ete. It means the whole of auy case over
which it is given jurisdiction, not part of the case.

Now, Mr. President, neither the Senator from Texas nor I
ean find any decision of the Supreme Court upon this question.
I should not say, perhaps, that he can not, but I know of none. It
has never been presented to the Supreme Court, as I understand
it. We can only reason upon general principles and analogies.
That it is impossible for Congress to give jurisdiction to a court
over a class of cases and yet withhold the full judicial power

6770
45

over cases within that class of cases, or over a single case falling
within the class of cases, I think is too plain for debate.

It is a matter of congratulation that in the history of this
country, during the last fifty years at least, and perhaps more,
there have been rare instances, even in the States, of attempts
by the legislature to interfere with the exercise of judicial
poiwer as contradistinguished from jurisdiction. Now and then
such things have happened. It happened once in California as
to tide lands, lands which lay between high and low tide.

On the 18th day of May, 1853, the legislature of California passed
an act entitled “An act to provide for the sale of the interest of the
State of California in the property within the water-line front of the
city of San Francisco.” The defendants, in pursuance with the terms
of the act, were duly appointed commissioners to examine into and
make sale of such interest,¢and, as such, advertised the property of
the plaintiff for sale, in order to satisfy whatever interest the State
of California might have therein.

The case was submitted to a referee to report upon the facts, who
found that at one time the land in dispute was for the most part below
high-water mark, but before the State of California was admitted into
the Union the same had been wholly reclaimed and was covered with

buildings and a part used as public highways. That the title of the
plaintiffs was derived from grants—

Which I need not read.

Upon this state of facts the court granted a perpetual injunction, as
aforesaid.

The act prescribed that no injunction should be issued against
the commissioners appointed for the sale of the State interest
within the water line, and the court said, dealing with this
point:

The legislature can not exercise judicial functions, and therefore
can not except one case, or one party, from the operation of a general
rule of law, either as to right or remedy. ‘That portion, therefore, of
the act of May, 1853, entitled “‘An act to provide for the sale of the
interest of the State of California in the property within the water
line,” etc., which prescribes that no injunction shall be issued against
the commissioners is invalid. (Guy et al. v. Hermance et al., 5 Cal.
(Morris).)

They treated it as a legislative interference with judicial

ower,

Mr. RAYNER. ‘That was a case of final injunction.

Mr. SPOONER. Yes; final injunction. Why may not the
legislature, or Congress deal with final injunction as well as
with preliminary injunction where it is absolutely necessary
to justice, and where the right to grant it in proper case is
inherent in the court. Why may not Congress in this case,
if it may provide that no injunction shall issue pending final
decree, provide that no injunction shall issue pending a final
determination by the Supreme Court of the United States of the
constitutionality of the rate?

Congress has control over supersedeas. Why may it not go
that far if it may begin? It is only attempted here to confer
through delegation the power of Congress upon this Comunis-
sion. Suppose Congress should pass an act prohibiting the
carriage of freight from San Francisco to New York at a higher
rate than one-quarter of what is now charged and providing that
no injunction shall be granted to suspend operations under that
law until the Supreme Court of the United States shall have
passed upon its constitutionality; would that be valid? It
would not be applicable only to one case. It would be applicable

6770
46

to a class of cases. In other words, Mr. President, if Congress
in any case may constitutionally supplant the judgment of the
court by the mandate of legislation, it is for Congress to draw
the line where it will stop.

It was tried in Wisconsin some years ago. I can not take the
time to read the case. It applied to the driving of piles in
Rock River, Wisconsin. It was enacted that—

It shall be unlawful and presumptively injurious to persons and prop
erty to drive piles, build piers, cribs, or other structures * * * in
Rock River within the limits of the county of Rock, and the doing of
any such act shall be enjoined at the suit. of any resident taxpayer
without proof that any injury or danger has been or will be caused

by reason of such act.
* * * * * * *

The doing of any such act shall also bé enjoined at the suit of any
owner or lessee of the right to use water of said river to operate any
mill or factory within said county, without proof of any further fact
than that such act will cause the water of said river to rise or set
pack, to some extent, at the place where the water used to operate
such mill or factory is discharged into said river.

Why not? That would only be a rule of evidence, would it
not? Or would it be more than that? The moment one leaves
the beaten track, the moment one forgets that the Constitution
created the judiciary a coordinate, equal, and independent
branch of this Government, we get into the fog and we get into
danger. It might be a rule of decision.

The Senator from Texas [Mr. BarLey] seemed to think I
would exalt the judiciary over the legislative department. I
would not. Although the judiciary is to decide upon its juris-
diction, and if it decides wrong in the court of last resort there
is above that no court for the correction of the error, I would
keep the Congress within the limitations of the Constitution. I
would as zealously protect the power and the sovereignty of the
States against Congressional invasion as I would protect the
power and jurisdiction of Congress against invasion by any
other body. I would not consent to assign to the judiciary any
other position relatively to the other departments of the Govern-
ment than that assigned to it by the Constitution, but I do in-
sist'that that assigned to it by the Constitution neither nor both
of the other branches of the Government can take away from it.

When Congress enacts that in a certain class of cases like
the cases covered by the Senator’s amendment no injunction
shall be granted pending final decree, Congress, to all intents and
purposes, decides that justice will not and can not demand,
pending final decree, the granting of an injunction. The con-
clusive legislative presumption is against it. So it does not
much differ in effect from this case, from which I will briefly
read. I hope some Senator will point out the distinction
between the power of Congress to say that an injunction shall
not be granted by the court and to say that an injunction in
cases which Congress designates shall be granted by the courts
in classes of cases. The court said:

The legislature usurped the judicial power of the courts by the enact-
ment of this statute. It adjudicates an act unlawful and presump-
tively injurious and dangerous, which is not and can not be made to
be so without a violation of the constitutional rights of the defendant,
and imperatively commands the court to enjoin it without proof that
any injury or danger has been or will be caused by it.

It reverses very many decisions of this court on the very questions

invelved in it, and which have the effect of a judicial determination of
the defendant’s rights of property.

6770
47

It takes away the jurisdiction of the courts to inquire into the facts
and determine the necessity and propriety of granting or refusing an
injunction in such a case, according to the established rules of a court
of equity.

Let me read that again. It should say the “ power ”—

It takes away the jurisdiction of the courts to inquire into the facts

. and determine the necessity and propriety of granting or refusing an
injunction in such a case, according to the established rules of a court
of equity. (City of Janesville v. Carpenter, 77 Wis., 288.)

Just as this proviso, if enacted into law, would require the
court to deny preliminary injunction, no matter if the duty to
issue it, from a judicial standpoint, is as plain as Holy Writ.

I will say to the Senator from Texas—I spoke to him about
it once—that there is a case in California (I do not remember
the report; I looked at it once hurriedly ; it seemed so involved
with the code and the constitution of California that I did not
get back to it) which seemed to me might sustain his proposi-
tion. It is Spreckels v. The Hawaiian Commercial Company.
He can look it up, or I will look it up.

Mr. BAILEY. Mr. President.

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Texas?

Mr. SPOONER. Certainly.

Mr. BAILEY. I could have found a number of State cases,
but the Senator from Wisconsin knows as well as I do that
there is scarcely a controverted question in this country which
has not been decided both ways by the various State courts,
and I did not think it worth the while, I did not think it would
enlighten the Senate, to produce here the conflicting decisions
of State courts on the same question. Even questions that ap-
pear plain to us sometimes aS many as thirty supreme courts
have decided one way and eight or twelve have decided the
other. ”

Mr. SPOONER. I do not think there has ever been very
much difference of opinion between State courts on a question
like this.

Mr. BAILEY. Because this particular question has not often
been presented. But the Senator will agree with my general
statement, that there is scarcely a question presented for judi-
cial determination in the States that different courts have not
decided opposite ways.

Mr. SPOONER. I do not know about that. I think I can re-
member a great many matters upon which there has been almost
universal concurrence among the courts of the States. Many
of the courts of the States have been illustrious, and there have
been on the supreme bench and on the circuit bench in the
States a great number of judges whose opinions upon questions
of law I would value as highly as any opinion ever delivered in
this country. And so, on a general principle like this, where
there is no decision of the Supreme Court upon it, and where
one must be guided by analogy, I think the Senator and I are at
liberty to avail ourselves of the opinions of the State courts.

Mr. BAILEY. I do not want to be put in the attitude of
underestimating the State courts, and I think it is no reflection
on them that they see the same question in different lights. I
only need to remind the Senator from Wisconsin that the Su-
preme Court of the United States within the last four years

6770

 

 
48

has decided almost every important question before it by a vote
of 5 to 4. It is no impeachment of their ability or integrity
that that is true. Neither do I intend it as any reflection upon
the State courts when I say that they have decided the same
question opposite ways.

Mr. SPOONER. I did not intend to imply that the Senator
disparaged in any way the judiciary of the States, of course.

Now, Mr. President, I have said all I care to say upon the
general proposition. While I can not speak e# cathedra, nor
can any Senator do so, I have an abiding conviction that on
general principles this proviso can not constitutionally be en-
acted.

ARGUMENT AGAINST MY CONTENTION.

I come now to the argument of the Senator from Texas,
and, first and briefly, I wish to notice some strictures which that
Senator thought proper to pass upon the fairness of a portion
of the speech I delivered on a former day. I have seen it stated
in newspapers that issued about the time of the Senator’s speech
that a portion of my speech contained misquotations from deci-
sicns. I heard no such imputation from the Senator. Such a
statement could not be maintained for a moment by a cur-
sory reading even of the speech. The Senator from Texas, while
criticising a portion of my speech delivered on the first day as
misleading, acquitted me of any conscious purpose to mislead
the Senate.

It is now thirty-eight years since I began the practice of
my profession, which with zeal I pursued during those years
except while I have been a member of the Senate. I was
taught the law, Mr. President, by a great lawyer, a modest man,
of sensitive honor, long since dead, who taught me as the first
lesson which a lawyer should learn and never forget, that
he is an officer of the court, bound to be frank and fair al-
ways with the court, and, subject to that, the advocate of the
interest of the client. Never in my life have I forgotten it. The
two Senators from Minnesota knew him and both loved him and
revered him. I never have failed to bring to the attention of
the court an adverse decision when I found it, nor have I ever
nor could I ever omit to read from an opinion what seemed ad-
verse to the proposition for which I was contending. My pur-
pose is simply to show——

Mr. BAILEY. Will the Senator from Wisconsin permit me?

Mr. SPOONER. Certainly.

Mr. BAILEY. The Senator from Wisconsin says that I ac-
quitted him from any design to mislead the Senate. I did that,
as I recall now, in two different places. I want to say, in
justice to him, that I believe him incapable of attempting to
deceive either the courts, as he says now, or the Senate, as I
say for him. I believe him incapable of attempting to deceive
anybody by garbling or misquoting the authorities.

I wish to say, inasmuch as the Senator has referred to it in
the open Senate, what I have said to my friends in private
conversation, and that is, that so far as any criticism was jus-
tified—and I think it was justified against the Senator from
Wisconsin—it was due to the fact that he had not examined
those cases for himself, but that, under the great pressure upon
us all here, he had relied upon somebody else to examine them

6770
49

for him, and that they had not been examined with that care
which the Senator from Wisconsin would have employed if he
had examined them for himself.

In view of all that has been said in the public prints and
in view of what the Senator says, I think that statement ought
to be made before the subject passes from us.

Mr. SPOONER. Mr. President, I desire to say to the Senate
very briefly that in my opinion neither, if consciously or un-
consciously uttered, could anything I said mislead the Senate.

Mr. BAILEY. If I am mistaken in thinking the Senator from
Wisconsin had those cases examined by some one for him, I
desire to withdraw the explanation I made.

Mr. SPOONER. What did the Senator say?

Mr. BAILEY. I said, if I am mistaken——

Mr. SPOONER. I want to show that a fair construction of
my speech will show that what I said constituted no predi-
eate for the charge that the extracts were misleading. That is
a matter of opinion.

Mr. BAILEY. Yes; and of course I am perfectly willing to
meet that, if it is to become a subject of discussion. But I do
not want to make a statement as to the course pursued by a
brother Senator if I am mistaken about it; and if the Senator
examined those authorities for himself, waiving the question
whether the extracts were misleading or not, I want to with-
draw the explanation which I have made to my friends in
private conversation and the explanation which I have offered
now.

Mr. SPOONER. Mr. President, I never asked any man’s
silence about me, nor shall I. I propose to maintain, if I can,
and I would leave that to a jury composed entirely of manly
enemies—I would leave it to the Senator from Texas, who is
not my enemy, although he drew inferences which he thought
were justified from what he found in my speech, that the matters
to which he called attention are not justly subject to such criti-
cism.

First, the Senator criticised as misleading what I read from
Julian v. Central National Bank (169 U. S., 482) in connection
with my observations upon the power of courts, notwithstanding
section 720, Revised Statutes, to issue injunctions restraining
proceedings in State courts.

The cases cited in the extract which I read are in the opinion
of the Supreme Court sustaining the proposition announced.
I did not examine the cases cited in the opinion. I assumed
that the Supreme Court could be relied upon to cite cases which
support the doctrine which the court announces. I read first a
statement of the case from the syllabus, and then I read con-
nectedly the statement of the court as to the power of Federal
courts to issue injunctions enjoining proceedings in State courts.
I also stated that the rule always has been that where the Fed-
eral courts first acquired jurisdiction it issued such injunctions
as were necessary to protect the jurisdiction first acquired and
so it has been.

It never occurred to me that anyone could draw from my
remarks or the language I quoted from the court an inference
that it involved the proposition that section 720 is unconstitu-
tional. I had admitted the binding force of the section in an-
other part of the speech and had justified it, claiming that it

6770——_4
50

was not at all antagonistic to my contention, for reasons which
I do not take time to repeat. I coved not for a moment imagine
that anyone could fancy even that I cited the Julian case as an
authority for the contention that section 720, prohibiting Fed-
eral courts from enjoining proceedings in State courts, is
unconstitutional, because I knew that for one hundred and
thirteen years that statute has been in existence and obeyed,
and ‘that it was sustained thirteen or fourteen years after its
enactment by the Supreme Court of the United States. For
the life of me I can not see, on reviewing that part of my
speech, where anything can be found in it justifying the sug-
gestion that it was misleading, and I pass that.

The Senator then commented on Mr. Justice Story’s “ essay,”
as he termed it, in Martin v. Hunter’s Lessees, I Wheat., 304.
It is only fair for me to say that I did not make that extract.
I asked a lawyer friend of mine, as I was not able to use my
eyes at night, to run down some authorities for me, and that
was sent to me, typewritten and italicized, as was the extract
from He parte Crane.

The elaborate quotation from Mr. Justice Story’s opinion, al-
though interesting, is quite irrelevant, and, moreover, empha-
sizes his opinion that Congress was bound to confer all of the
judicial power upon the inferior courts, when I had conceded
early in my speech that that is not the law. I had said, on
page 4, if the Senator has it before him:

I concede, under the decisions, of course, that the circuit and district
courts of the United States are statutory courts; that they do not
derive their jurisdiction immediately from the Constitution. They are
created by Congress. Their jurisdiction is to be found in the legisla-
tion of Congress. For many years Congress withheld from their juris-
diction a large number of cases or controversies enumerated in the
Constitution. That Congress could lawfully do this I do not question.

A part of Mr. Justice Story’s opinion quoted asserts the con-
trary doctrine. So a part of the extract from Ex parte Crane
asserts a contrary doctrine, the italics in neither case being
mine.

But, Mr. President, that certainly could mislead no one who
reads the speech with any care or who reads it without un-
friendliness, as I know the Senator read it.

There is one part in Mr. Justice Story’s opinion upon which
I relied, and one only. The extract led up to it, and inserting
stars, not to make it too long, and to call attention to the fact
that something was omitted, I quoted the language, putting it
in small caps to emphasize it in the strongest possible way as
the language to which I particularly desired to call attention:

But EVEN ADMITTING THAT THE LANGUAGHD OF THE CONSTITUTION Is
NOt’ MANDATORY, AND THAT CONGRESS MAY CONSTITUTIONALLY OMIT TO
VEST THE JUDICIAL POWER IN COURTS OF THE UNITED STaTEs, IT CAN
NOT BE DENIED THAT WHEN IT IS VESTED IT MAY BE EXERCISED TO THE
UTMOST CONSTITUTIONAL EXTENT.

The statement in my speech on the first day that “it was
dissented from only by one justice, and not by any as to the
portion of it which declares specifically the law to be as I am
contending for it” was too broad, which is apt to occur to one
who frames his sentences as he utters them, as I do. I referred
to Mr. Justice Johnson, whose opinion was a concurring not a
dissenting opinion, as having criticised some of the reasoning
of Mr. Justice Story. The point which I had in my mind, as

6770
51

emphasized above, he did not criticise. On the next day I
quoted again that clause of the opinion, and it only, thus:

Mr. President, I put against all comers on this question the statement
of Mr. Justice Story in the case to which I called attention yesterday—
Martin v. Hunter, reported in 1 Wheaton—at the end of an elaborate
STS UME on the construction of the judicial clauses of the Constitu-

10D :

“ BUT EVEN ADMITTING THAT THE LANGUAGE OF THE CONSTITUTION IS
NOT MANDATORY AND THAT CONGRESS MAY CONSTITUTIONALLY OMIT TO
VEST THE JUDICIAL POWER IN. COURTS OF THE UNITED STATS, IT CAN
NOT BE DENIED THAT WHEN IT IS VESTED IT MAY BE EXERCISED TO THE
UTMOST CONSTITUTIONAL EXTENT.”

That was one of the first opinions of the Supreme Court on the con-
struction of the judicial clauses of the Constitution. It found its way
in extenso into Judge Story’s Commentaries upon the Constitution.
No one of the great judges who sat with him on that bench, save Mr.
Justice Johnson, criticised anything in that opinion. It is not to be
supposed that Chief Justice Marshall was not familiar with it; that
Mr. Justice Washington was not familiar with it; that Mr. Justice
Livingston was not familiar with it; and had it not met their concur-
rence it is sure, from the practice of the judges of that day, that the
dissent from its argument, even if its conclusions were approved, would
have found its way into the reports. Mr. Justice Johnson criticised
a portion of the opinion, ALTHOUGH NOT THAT PORTION OF IT.

My statement the second day, that “Mr. Justice Johnson
criticised a portion of the opinion, although not that portion of it,”
could only be construed, I think, as referring to the five lines from
Mr. Justice Story’s opinion, which I had just quoted for the
second time. It was that quotation to which I referred when I
said that Mr. Justice Johnson criticised a portion of the opinion,
although not that portion of it. In fact, Mr. Justice Johnson
did not criticise that portion of it, and in his opinion in
the case of the Resource he announced the same doctrine, and
that is the doctrine for which I have been contending to-day,
and it is a statement the accuracy of which I have never seen
or heard anywhere impeached before that when Congress does
vest the judicial power in courts of the United States, “it can
not be denied that it may be exercised to the utmost constitu-
tional extent.”

The Senator says I did not state the point of the decision.
That is true. I would have assumed that to lawyers it was not
necessary to state the point of the decision in Martin v. Hun-
ter’s lessee. The Senator has used many extracts from cases
without stating the point of the decision. I hunted up the cases
to which he referred in his first speech to determine how far the
language which he quoted was obiter and how far it was a part
of the ratio decidendi.

As to the extract from Ex parte Crane. The Senator said it
was so phrased at the outset, thus: “It is said by Mr. Justice
Baldwin in Ex parte Crane” (5 Peters, 190-192), as to lead any
lawyer to suppose it was the opinion of the court. Possibly that
is so. I should not so regard it. That was part of the ex-
tract sent to me. It has been my habit to say “the court
says,” or “Mr. Justice—speaking for the court—says.” Other
lawyers may do differently, and it may be that the Senator is
right; but while the extract is utterly irrelevant to any con-
tention in my speech, while it asserts his opinion to be in
accord with that of Mr. Justice Story, which I had conceded
not to be the law, the extract carries on its face indubitable
evidence, so that it could not mislead anybody, that he regarded
his opinion as against the uniform decisions of the Supreme

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Court of the United States upon the subject. Let me read it.
It is brief:

Though the courts of the United States are capable of exercising the
whole judicial power as conferred by the Constitution, and though
Congress are bound to provide by law for its exercise in all cases to
which that judicial power cxtends—

Those were not my italics—

YET IT HAS NOT BEEN DONE, AND MUCH OF IT REMAINS DORMANT FOR
THE WANT OF LEGISLATION TO ENABLE THE COURTS TO EXERCISE IT, IT
HAVING BEEN REPEATEDLY AND UNIFORMLY DECIDED BY THIS COURT THAT
LEGISLATIVE PROVISIONS ARE INDISPENSABLE TO GIVE EFFNCT TO A POWER
TO BRING INTO ACTION THD CONSTITUTIONAL JURISDICTION OF THE
SUPREME AND INFERIOR COURTS.

I think the Senator will on reflection not feel justified in say-
ing what he says in one part of his speech as to this extract.

The Senator quotes this, which he thought ought to have been
added. I submit to him that it adds nothing to the evidence
afforded by the extract in my speech that the decisions of the
Supreme Court had been uniformly against the proposition that
all the judicial power must be vested in inferior courts of the
United States.

These principles remain unquestioned. ‘They have long been settled,
as the judicial exposition of the Constitution, on solemn argument and
the gravest consideration; and they are binding on all courts and
judges. I shall ever be found among the last to oppose my opinion in
opposition to the results of the deliberate judgment of the highest tri-

pase when thus formed. (Ex parte Crane, 5 Peters, 30 U. S. Reports,

And there was much more in the same line of thought which
the Senator could have added, but if the Senator will place that
alongside the extract found in my speech I know he will say
that it adds nothing to the extract except the declaration of the
justice’s devotion to duty and his obligation, although differing
from the court on that subject, to stand by the decisions of the
court. The Senator said:

The Senator from Wisconsin gave the Senate the benefit of Judge
Baldwin’s opinion upon the political duty of Congress to invest the
court with the whole judicial power of the Government, but he neg-
lected to give the Senate the benefit of Judge Baldwin’s admission that

the-court had not taken the same view of the question which he ex-
pressed.

Is that so?

I do not intend in saying this to insinuate that the Senator from
Wisconsin designed to mislead the Senate.

Of course the Senator would not insinuate that, but on the
merits of the matter is it so that the extract which I read did not
inform anyone that the uniform decisions of the Supreme Court
of the United States had been just as he states in different lan-
guage in what the Senator added? I regret that it is there,
Mr. President, not because it is misleading, but because it is ir-
relevant and a blemish in the speech.

The Senator also criticised me with reference to the extract
from the Wheeling Bridge case. (18 How., 518.) I do not think
the criticism a just one, although I know perfectly well that
the Senator would consciously do me no injustice. I quoted the
following:

In exercising this jurisdiction the courts of the Union are not lim-
ited by the chancery system adopted in any State, and they exercise
their functions in a State where no court of chancery has been estab-
lished. The usages of the high court of chancery in England, wherever
the jurisdiction is exercised, govern the proceedings. This may be said

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53

to be the common law of chancery, and since the organization of the
Government it has been observed.
* * * * * * *
_ Under this system, where relief can be given by the English chancery
similar relief may be given by the courts of the United States,
The Senator complains that I omitted the following:

In Robinson’ v. Campbell (3 Wheat., 222) it is said: “The court
therefore think that, to effectuate the purposes of the legislature, the
remedies in the courts of the United States are to be at common law or
in equity, not according to the practice of State courts, but according
to the principles of common law and equity, as distinguished and de-
fined in that country from which we derive our knowledge of those
principles.”

And also contends that there should have been inserted before
the sentence quoted, after the stars, the words:

By the act of Congress of 1828, proceedings at law, in the courts of
the United States, are required to conform to the modes of proceeding
in the State courts; but there is no such provision in regard to courts
of chancery.

The extract from the Robinson case might well have been in-
serted; it is a stronger exposition of the preposition I was mak-
ing, which was siinply to put before the Senate the relation of
the equity jurisprudence of this country to the system admin-
istered in England when the Constitution was adopted than was
the extract which I quoted.

The reference to the act of Congress of 1828 would seem to be
of no relevancy whatever. Out of abundance of caution, as I
always do, I inserted stars, to advise anyone who might read it
that there was an omission. Could either omission mislead any-
one? It did not and does not occur to me so.

I think every lawyer knows that over a hundred years ago
Congress conformed the proceedings at law in the Federal courts
to the proceedings at law in the States, and that it has
never made any such provision as to equity for one good
reason that in some of the States they had abolished the
Gistinction between law and equity, and in one State, I think,
the State of Louisiana, they never had any such distinction.
Nor could any inference be drawn from it at all upon the ques-
tions which we are contesting, for I never have contended for a
moment that Congress might not change the practice and modes
of procedure in equity not affecting the essential principles and
remedies of the system.

I believe that is the end of the criticisms made by the Senator.
I refer to them because there went out the imputation that
there was concealment and unfairness in it, a thing of which I
hold myself incapable.

Mr. BAILEY. Mr. President——

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Texas?

Mr. SPOONER. Certainly.

Mr. BAILEY. I wish to incorporate into the Senator’s speech
in this connection my language, to show just how careful I was
against making a direct criticism against him in reference to
section 720. I want to call his attention to the fact that I said:

To say that, “ notwithstanding this plain prohibition ne

And I put that in quotation marks to indicate that it was
taken from the Senator’s speech—

the courts had granted the injunction, might mean that the Supreme
Court had held that injunctions could ‘be granted contrary to the pro-

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54

visions of that law, and this would seem to imply a doubt as to the
constitutional power of Congress over the subject. .

So the Senate will see that I was very careful indeed.

Mr. SPOONER. The Senator does not claim that the quota-
tion from the opinion of the court was not accurate.

Mr. BAILEY. Oh, no.

Mr. SPOONER. Nor does he contend that there was any-
thing in the decision pertinent to the subject which was not
‘given.

Mr. BAILEY. I do not.

Mr. SPOONER. But the Senator finds it in one of the cases
cited in the opinion, as I understand it——

Mr. BAILEY. Upon which that was based.

Mr. SPOONER. I did not look at that. I assumed that the
Supreme Court would refer to no decisions which did not sustain
their proposition. Moreover, it never entered by mind that
anybody could infer from anything I had said that there is
any doubt whatever about the constitutionality of section 720.

Mr. BAILEY. I read the Senator’s speech while I was re-
turning to Washington on the train, and when I read that part
of it it created upon my mind the very impression that is
created here, that it might mislead those who were not familiar
with the cases upon which it was based.

Mr. SPOONER. I take it that that would be the fault of the
Supreme Court, not mine.

Mr. BAILEY. I am not willing to accept that; but at any
rate, remembering the very ground upon which the first decision
was based, and the others following it, I thought it proper to
put it in. I am doing this now for a double reason, first, as a
matter of justice to myself to show that I do not recklessly
accuse Senators of intending to mislead, and, next, to show
in the Senator’s own speech that I made no such charge against
him in that respect.

Mr. SPOONER. The Senator, I said, acquitted me of that.

Mr. BAILEY. I did expressly, and I used the words, if the
Senator will refer to the speech, that will be calculated to mis-
lead those who are not familiar with the case.

Mr. SPOONER. Mr. President, I think a layman who read
it would not draw that inference from it, and I am quite certain
lawyers would not. At any rate, the proposition in my speech
rests entirely upon the language of the Supreme Court of the
United States which cited these decisions. The Senator as a
lawyer knows that for one hundred and thirteen years section
720 has been in operation, many, many times dealt with, and
never challenged as to its constitutionality. I think if the Sen-
ator had been discussing that question, which is purely a legal
question, it would not have entered into his mind that a law-
yer—a layman seldom reads decisions~could infer from any-
thing said by the court that it intended to challenge the consti-
tutionality of section 720.

That is all. I apologize for having said a personal word. I
have wished to correct the impression which went out to some
newspapers upon the subject. Now, Mr. President, I have done
with it.

ANTI-INJUNCTION BILLS.

What does the Senator from-Texas in his remarkable speech—

remarkable in many ways—urge by way of precedent or author-
6770 :
55

ity against my contention? First, he cites the anti-injunction
bills in Congress. I have been here for sixteen years, and I do
not stop to spend any time upon the legislative history of the
anti-injunction bills, which in a time of public excitement and
passion and political disquiet have gone through one House or
the other. Whatever as authority they are worth, my opponents
upon this question are entitled to.
HABEAS CORPUS,

I come to the writ of habeas corpus. The Senator seems
very largely to rely upon the fact that Congress has asserted its
power to abridge the right of the courts to issue even “ the great
writ of liberty.” Has the Congress ever abridged the power of
the courts to issue the great writ of liberty? The Senator is
usually extremely accurate. The Senator was not accurate, I
think, in using the word “ abridge.” He would be if the courts
possessed an inherent power to issue writs of habeas corpus;
but they do not. That is a common-law writ. These are not
common-law courts. I read what Chief Justice Marshall said
in the Swartwout case (4 Cranch, 75); the Senator cited it
and I will read but a word from it:

Courts which originate in the common law possess a jurisdiction
which must be regulated by the common law, until some statute shall
change their established principles; but courts which are created by
written law, and whose jurisdiction is defined by written law, can not
transcend that jurisdiction.

And he holds:

The reasoning from the bar, in relation to it, may be answered by
the single observation, that for the meaning of the term habeas corpus,
resort may unquestionably be had to the common law; but the
power to award the writ by any of the courts of the United States
must be given by written law.

I agree to that. So the failure of Congress to confer upon
the courts jurisdiction over suits of habeas corpus, for it has
been held to be a suit within the judicial power of the United
States, does not abridge any power or right of the courts. It
was a high prerogative writ. It simply withholds jurisdiction
from the courts in one of the cases in which under the Constitu-
tion it might be conferred by the Congress. No prerogative writ,
Mr. President, was brought across the seas by our forefathers
to be inherited by the courts of the United States. That has
been repeatedly established. Judge Betts, of New York, in an
able opinion denying the writ in 1844 held, first, that a circuit
court of the United States could not exercise the common-law:
functions of parens patrie and had no common-law jurisdic-
tion over the matter; second, that the court had not judicial
cognizance of the matter by virtue of any statute of the United
States. This was sound. The courts do not- represent any
sovereign in this country, Mr. President.

Mr. Justice Wilson, in Chisholm v. Georgia (2 Dall, 457),
says:

To the Constitution of the United States the word “sovereign” is
totally unknown. There is but one place where it could have been used
with propriety. But even in that place it would not perhaps have
comported with the delicacy of those who ordained and established
that Constitution. They might have announced themselves ‘‘ sovereign ”
people of the United States. But serenely conscious of the fact, they
prolded the ostentatious declaration.

The inferior courts of the United States have no power to
exercise jurisdiction in habeas corpus unless that power is con-

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ferred by law. Congress répresents the only sovereign—the peo-
ple. The power to issue prerogative writs in most of the States
depends upon the acts of the legislature. The power to issue pre-
rogative writs by the inferior courts depends upon the act of the
Congress. But, Mr. President, the Congress of the United
States was under constitutional duty to confer jurisdiction
upon some court or courts of the United States to issue “ the
great writ of liberty.” Whether Congress would do it or not
was not a question between the courts and the Congress. Their
failure to do it would not weaken at all the exercise of exist-
ing jurisdiction in the courts. It would not degrade in the
slightest the courts any more than withholding jurisdiction in
other matters in which it might be conferred affected the power
of the court. Whether Congress should confer that power
on the court is a question between the Congress and the people.

Chief Justice Marshall says they gave early, over a hundred
years ago, to the court the right to issue the writ and all writs
necessary to the exercise of their jurisdiction and in accordance
with law. They gave within fair limits for the time, Mr. Presi-
dent, the right to issue the prerogative writ to inquire as to the
validity of .a commitment. They did not make it general. So
far as they gave it, it could be exercised, and so far as they
did not give it, it could not be exercised. Chief Justice Marshall
SAySs ?

It may be worthy of remark that this act was passed by the First
Congress of the United States, sitting under a Constitution which
had declared ‘that the privilege of the writ of habeas corpus should
not be suspended, unless when, in cases of rebellion or invasion, the
public safety might require it.”

Acting under the immediate influence of this injunction, they must
have felt, with peculiar force, the obligation of providing efficient
means by which this great constitutional privilege should receive life
and activity; for if the means be not in ewistence, the privilege itself
would be lost, although no law for its suspension should be enacted.
Under the impression of this obligation they give to all the courts
the power of awarding writs of habeas corpus. Ix parte Bollman and
Swartwout, 4 Cranch, 95.)

Habeas corpus is the privilege of the citizen, not a right of
the courts. ;

* F MANDAMUS,

I need not repeat it, but all I have said as to habeas corpus
is applicable also to the writ of mandamus. So far as it
is a merely ‘“ judicial writ,” essential to the exercise of juris-
diction, thé power to issue it was conferred upon the courts of
the United States by the judiciary act of 1789. It is a common-
law writ, and essentially a high prerogative writ, called “one
of the flowers of the King’s bench,” and issued alone out of
the court of King’s bench. If the right to issue the writ in any
form could be said to inhere in any court of this country, it
would certainly be in the common-law courts of general juris-
diction, existing in a State in which the common law had been
adopted. Certainly the power to issue the writ would not exist
in the courts of the United States unless conferred upon them
by law.

It is said in Kendall v. United States (12 Pet., 619) by Mr.
Justice Thompson, speaking for the court:

The theory of the British Government, and of the common law, is
that the writ of mandamus is a prerogative writ, and is sometimes

called one of the flowers of the Crown, and is therefore confided only to
the King’s bench, where the King, at one period of the judicial history

6770
57

of that country, is said to have sat in person, and is presumed still to
sit. And the power to issue this writ is given to the King’s bench
only, as having the general supervising power over all inferior juris-
dictions and officers, and is coextensive with judicial sovereignty. And
the same theory prevails in our State governments, where the common
law is adopted, and governs in the administration of justice; and the
power of issuing this writ is generally confided to the highest court of
original jurisdiction. But it can not be denied but this common-law
principle may be modified by the legislature in any manner that may
be deemed proper and expedient. No doubt the British Parliament
might authorize the court of common pleas to issue this writ, or that
the legislature of the States where this doctrine prevails might give
the power to issue the writ to any judicial tribunal in the State, ac-
cording to its pleasure; and in some of the States this power is vested
in other judicial tribunals than the highest court of original juris-
diction.

It is not, of course, to be doubted that legislation is necessary
to confer jurisdiction upon the courts of the United States over
mandamus as a case. Absence of such legislation does not
abridge the right of the court in any way, for without the
legislation it possesses no right to issue the writ at all.

How the distinguished Senator from Texas finds in the fact
that the inferior courts can not exercise jurisdiction over the
writs of habeas corpus and mandamus without legislative au-
thority support for the proposition contained in this proviso to
his amendment for the life of me I can not see. Reduced to a
syllogism, it resolves itself into this:

Congress may confer jurisdiction upon the inferior courts of
the United States over suits of mandamus and habeas corpus.

Congress may withhold from the courts of the United States
jurisdiction over mandamus and habeas corpus.

Therefore Congress may in a case over which it has conferred
jurisdiction upon an inferior court of the United States control
and direct the steps which shall be taken therein pending the
final determination thereof.

It seems, Mr. President, a perfect non sequitur.

PROHIBITION OF SUITS RESTRAINING THE ASSESSMENT AND COLLECTION
OF TAXES.

The Senator also referred to section 3224, Revised Statutes,
which is:

No suit for the purpose of restraining the assessment or collection
of any tax shall be maintained in any court.

I am surprised again that the Senator from Texas should
find here any support by way of precedent for his contention.
The power to lay taxes, Mr. President, is a sovereign power.

Mr. BAILEY. Mr. President : :

The VICE-PRESIDENT. Does the Senator from Wisconsin
yield to the Senator from Texas?

Mr. SPOONER. Certainly. ;

Mr. BAILEY. That power is granted in precisely the same
part of the Constitution as is the power to regulate commerce.

Mr. SPOONER. Certainly. :

Mr. BAILEY. Which is the power we are proposing to excr-
cise in this bill. :

Mr. SPOONER. Yes; but, Mr. President, the power proposed
to be exercised by Congress in this bill must be exercised sub-
ject to the Constitution. The Senator thinks one way as to
whether this would be exercising it under the Constitution, and
I think another; so that it is rather petitio principii to make
that suggestion.

6770

 
58

But what I was: saying is that the power to tax is a sov-
ereign power, and no one knows better than the Senator
that whether the Government will allow itself to be sued
in any case is for the Government to say. It may be unjust;
it may, from the standpoint of fair play, be mean; but in the
last ahalysis, Mr. President, Congress may provide that in no
case shall the Government of the United States be liable to
suit. There is nothing better settled than that.

The Congress permitting the Government to be sued may, of
course, prescribe the precise conditions upon which the suit may
be brought. It may dictate the form of the suit and may desig-
nate the court in which it may be maintained. The rule has
often been recognized that public policy will not permit—and it
would seem to be manifest—judicial intervention in respect of
the assessment and collection of governmental revenue. Sec-
tion 8226 provides that:

No suit shall be maintained in any court for the recovery of any
internal tax alleged to have been erroneously or illegally assessed or
collected, etc., until appeal shall have been duly made to the Commis-
sioner of Internal Revenue, and a decision of the Commissioner has
been had therein: Provided, That if such decision is delayed more than
six months from the date of such appeal, then the said suit may be
brought,. without first having a decision of the Commissioner, at any
time within the period limited in the next section—

Which is two years.

It is said in Nicholl v. United States (7 Wall., 122):

The immunity of the United States from suit is one of the main ele-
ments to be considered in determining the merits of this controversy.
Every government has an inherent right to protect itself against suits,
and if, in the liberality of legislation, they are permitted, it is only on
such terms and conditions as are prescribed by statute. The principle
is fundamental, applies to every sovereign power, and but for the pro-
tection which it affords the government would be unable to perform
the various duties for which it was created. It would be impossible for
it to collect revenue for its support, without infinite embarrassments
and delays, if it was subject to civil processes the same as a private
person.

UNITED STATES VY. UNION PACIFIC RAILROAD COMPANY.

The Senator from Texas also cited the case of the United
States v. Union Pacific Railroad Company (98 U. S., 569), prop-
erly characterizing it as based upon an extraordinary statute,
which was sustained by the court. I find nothing either in the
statute or in the decision upon it which sustains the proviso of
the Senator from Texas.

The act of Congress before the court will be found in the
Seventeenth Statutes at Large, 508. Briefly stated, it directed
the Attorney-General to bring a suit in equity in some cir-
cuit court of the United States against the Union Pacific Rail-
road Company, and a great many people living in different
parts of the United States, upon various causes of action, au-
thorized subpoenas to be served wherever those persons lived,
and made such service as effective for the purposes of jurisdic-
tion over the parties in the case as if they had been served
in the district in which they severally resided, and authorized
all the causes of action to be combined in one suit, although it is
admitted—and I admit it—that without the act of Congress the
bill would have been demurrable for being multifarious. The
right of Congress to provide by special act for the issue of
process running throughout the United States and bringing
parties into a lawsuit pending in a district in‘ which they did

6770 d
59

not reside, in exception to the general rule, was attacked in the
Supreme Court. The court sustained the act.

Mr. President, it is perfectly within the power of Congress to
make the subpcenas of the courts of the United States run
throughout the jurisdiction of the United States, if Congress
sees fit to do it. This was the first case I remember, but not the
last, in which that was done. The Sherman antitrust law con-
tains a provision of that kind. I offered the amendment to it,
when I was first a member of the Senate, under which a subpeena
could be served effectively in a suit under the Sherman antitrust
law on anyone within the jurisdiction of the United States to
bring the party into court, and it was adopted.

Mr. Justice Miller, delivering tbe opinion, says:

Whether parties to a suit shall be compelled to answer in any court
of the United States wherever they may be served with process, or
shall only be bound to appear when found within the district where
the suit is brought, is mere matter of legislative discretion, a discre-
tion which ought to be governed by considerations of convenience, ex-
panee etc., but which, when exercised by Congress, is controlling in the
courts.

The Senator, I think, did not read the whole opinion, be-
cause it is perfectly clear from the opinion that this decision
is not in support of his contention for this reason: The court
held that, without the act of Congress, if cases involving ‘the
matters complained of had been separately brought in the
same court had been pending, all being of equitable cognizance,
they could have been consolidated under existing rules into one
suit, and the court said, so far as this is concerned, speaking of
the rule in regard to multifariousness :

The rule itself, however, is a: very accommodating one, and by no
means inflexible. Such as it is, however, it is under the control of the
legislative will, and may be modified, limited, and controlled by the same
power which creates the court and confers its jurisdiction. It is simply
a matter of practice.

The italicized words are not found in the official report, but
are in the opinion certified in the’ Lawyers’ Cooperative Edition
by the clerk of the Supreme Court. I sent and had it compared
with the original opinion, and it is in the original opinion.

It is simply a matter of practice. The Constitution imposes no
restraint in this respect upon the legislative power of Congress. Sec-
tion 921 of the Revised Statutes, which has been the law for fifty
years, declares that when causes of like nature or relating to the same
question are pending the court may consolidate them or make such
other orders as are necessary to avoid costs and delay. It is everyday
practice, under this rule, to do what the statute authorizes to be done
in the case before us.

But it is argued that the statute is special, confers a special juris-
diction to try a single case, and is intended to confer new and substan-
tial rights on the complainant at the expense and by a corresponding
invasion of the rights of the defendants.

It does not create a new or special tribunal to try the case. All the
circuit courts of the United States were, by the act, invested with the
jurisdiction whenever called into action by filing the bill. Nor was
any new power conferred on these courts beyond those which we have
considered as affecting the mode of procedure.

STEPHENS V. CHEROKEE NATION.

Mr. President, the distinguished Senator from Texas stated
what seemed to be—and I thought it had considerable instant
effect—a Congressional precedent, which he insisted sustained,
so far as Congressional precedent can sustain it, his proviso.
It is found in an act of Congress considered by the Supreme
Court in the case of Stephens v. Cherokee Nation (174 U. S.,

6770
60

445). The statement of facts is complicated, and it is not neces-
sary to go into the subject at any length. There were 162
cases taken by appeal to the Supreme Court of the United States
in citizenship and allotment cases which arose under the admin-
istration of the Dawes Commission. Appeals were allowed by
Congress from the United States courts in the Indian Territory
direct to the Supreme Court in all citizenship cases and in all
cases between either of the Five Civilized Tribes and the United
States involving the constitutionality or validity of any legisla-
tion affecting citizenship or the allotment of lands in the Indian
Territory, under the rules and regulations governing appeals to
said court in other cases, with a proviso that—

Appeals in cases decided prior to this act must be perfected in one
hundred and twenty days from its passage; and in cases decided sub-
sequent thereto, within sixty days from final judgment; but in no such
case shall the work of the Commission to the Five Civilized Tribes be
enjoined or suspended by any proceeding in, or order of, any court, or
of any judge, until after final judgment in the Supreme Court of the
United States.

The proviso was claimed to be retrospective as to a large class
of the appeals, and therefore void. The court held that the ap-
peal granted “was intended to extend only to the constitu-
tionality or validity of the legislation affecting citizenship or
the allotment of lands in the Indian Territory,” both as applied
to citizenship cases and to cases between either of the Five
Civilized Tribes and the United States. No question was made
as to the provision about injunction, because it was not involved.
The court say:

The contention is that the act of July 1, 1898, in extending the
remedy by appeal to this court was invalid because retrospective, an
invasion of the judicial domain, and destructive of vested rights. By
its terms the act was to operate retrospectively, and as to that it may
be observed that while the general rule is that statutes should be so
construed as to give them only prospective operation, yet where the
language employed expresses a contrary intention in unequivocal terms,
the mere fact that the legislation is retroactive does not necessarily
render it void.

And while it is undoubtedly true that legislatures can not set aside
the judgments of courts, compel them to grant new trials, order the
discharge of offenders, or DIRECT WHAT STEPS SHALL BP TAKEN IN THE
PROGRESS OF A JUDICIAL INQUIRY, the grant of a new remedy by way of
review has been often sustained under particular circumstances. (Cald-
er v. Bull, 3 Dall., 386; Sampeyreac v. United States, 7 Pet., 222; Free-
born v. Smith, 2 Wall., 160; Garrison v. New_York, 21 Wall., 196;
Freeland v. Williams, 131 U. 8., 405; Essex Public Road Board v.
Skinkle, 140 U. S., 334.)

The United States court in the Indian Territory is a legislative
court and was authorized to exercise jurisdiction in these citizenship
cases as a part of the machinery devised by Congress in the discharge
of its duties in respect of these Indian tribes, and assuming that Con-
gress possesses plenary power of legislation in regard to them, subject
only to the Constitution of the United States, it follows that the
validity of remedial legislation of this sort can not be questioned unless
in violation of some prohibition of that instrument.

In its enactment Congress has not attempted to interfere in any way
with the judicial department of the Government, nor can the act be
properly regarded as destroying any vested right, since the right as-
serted to be vested is only the exemption of these judgments from re-
view, and the mere expectation of a share in the public lands and
moneys of these tribes, if hereafter distributed, if the applicants are
admitted to citizenship, can not be held to amount to such an absolute
right of property that the original cause of action, which is citizenship
or not, is placed by the judgment of a lower court beyond the power of
reexamination by a higher court, though subsequently authorized by
general law to exercise jurisdiction.

I do not find anything in the case which supports the Sena-
tor’s proposition. On the contrary, there is pertinent language
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61

in the opinion adverse to it. The only court which was clothed
with jurisdiction of the matters involved was the United States
district court (misnamed the supreme court, say, so far as the
word “district” is concerned) of the Indian Territory. The
Dawes Commission was an administrative body, vested with
quasi judicial functions, administering on behalf of the Govern-
ment and under authority of Congress trusts which the Govern-
ment had assumed in its relations to the Indians. I do not know
the occasion for the prohibition of injunction until the cases
should be decided by the Supreme Court, but I do not think the
Commission could have been sued at all without the consent of
Congress, nor do I doubt the power of Congress to say that in
a suit against the Government, which a suit against the Com-
mission practically would be, they should not be sued, or injunc-
tion issued to stop their administrative duties anywhere, until
ae aL of the law had been decided by the Supreme
ourt.

The power of Congress over the Indians was plenary; the
power of Congress over the Dawes Commission was plenary ;
the power of Congress over the purely legislative court in
which the jurisdiction was vested was plenary, with the single
limitation that in disposing of a case pending before it it would
not be subject to legislative dictation. The power of Congress
over the Territory was plenary.

Mr. President, a few words and I have done with this sub-
ject. It is my conviction that on the general principle the
incorporation of the amendment prohibiting the court from
suspending the rate in a suit brought to prevent its enforcement
pending a final decree is not constitutional. If I am wrong on
the general principle upon which I have been discussing this
matter, and my conviction is that I am right, I am not able to
entertain any doubt whatever that in a suit brought by a carrier
to restrain the enforcement of a rate fixed by the Interstate
Commerce Commission under the operation of this bill an at-
tempt to prevent the court from suspending the rate pending
final decree can not be upheld.

This bill is an exercise by Congress of the constitutional
power to regulate commerce among the several States. That
power, it has been often held, is not without limitation. It is
said in Monongahela Navigation Co. v. United States (148
U. S., 384):

But like the other powers granted to Congress by the Constitution,
the power to regulate commerce is subject to all the limitations im-
posed by such instrument, and among them is that of the fifth amend-
ment we have heretofore quoted. Congress bas supreme control over
the regulation of commerce, but if, in exercising that supreme control, it
deems it necessary to take private property, then it must proceed sub-
ject to the limitations imposed by this fifth amendment, cnd can take
only on payment of just compensation.

It is conceded, for it has been too often determined to be
susceptible of doubt, that the fixing of rates either by the States
or by the United States, directly by law or by an administrative
board through a power delegated by the legislature, can not
constitutionally be made conclusive. The court said in Chi-
eago, Milwaukee and St. Paul Railway v. Tompkins (176 U. §.,
172):

When we recall that, as estimated, over ten thousand millions of

-dollars are invested in railroad property, the proposition that such a
vast amount of property is beyond the protecting clauses of the Con-

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62

stitution, that the owners may be deprived of it by the arbitrary enact-
ment of any legislature, State or national, without any right of appeal
to the courts, is one which can not for a moment be tolerated.

It was said in Chicago, Milwaukee and St. Paul Rwy. Co. v.
Minnesota (134 U. S., 458):

The question of the reasonableness of a rate of charge for transporta-
tion by a railroad company, involving as it does the element of reason-
ableness, both ag regards the company and as regards the public, is
eminently a question’for judicial investigation, requiring due process of
law for its determination.

It is settled that the property of a railway company is private
property, like unto other private property, save that it is af-
fected with a public use, giving the public the right to regulate
its use to prevent extortion and unjust discrimination. Subject
to this limitation it can not be taken for public use without just
compensation, and it is essential to valid legislation that when
the just compensation shall have been judicially ascertained the
owner of the property shall be able to obtain it. The compul-
sory use of such property is a “ taking ” within the Constitution,
for its main value is in its use, and the right of the owner
to receive just compensation for its use.

Mr. President, this proviso, or any having the same effect, if
incorporated in the law would in effect make the rate conclu-
sive until final decree. The “taking” is a continuous one.
Every freight contract is a new taking, and if the rate fixed
by the Commission, and to restrain the operation of which the
suit is brought, is enforced upon the carrier until final hearing,
and the decision of the court is against its validity, it inevitably
oceurs that during the pendency of the suit the use of the
property of the carrier, through its own servants and at its
own risk will have béen taken under the law at a rate which
the court will have held is not just compensation.

Can Congress do that thing constitutionally? If Congress can
do that, why may it not provide that the order fixing the rate
shall not be suspended until the Supreme Court shall have
passed upon it? I can not believe that Congress can provide
for the taking, through its own Commission, with a judicial re-
viéw which is necessary to the validity of the act, and at the
same time prohibit the court from exercising the inherent and
long-established remedy in equity of suspending the order pend-
ing the suit, if it be made to appear that otherwise justice will
not be done, but irremediable loss will ensue. Such a remedy
seems to me to be a part of the constitutional guaranty.

On reflection, I think in such case the carrier would have no
cause of action against shippers for the excess between the rate
paid and the just compensation when ascertained. Under the
operation of such a proviso the order would be in effect and the
penalties of the law would apply, but the railway carrier could,
I think, only receive and carry freight according to its published
tariff, and if it attempted to do otherwise it could be enjoined
or compelled by mandamus to observe it.

It is not a question, as the Senator seems to think it is, as to
whether the people shall lose this money or the carrier shall lose
it. We are not confronting that alternative, because it is in the
power of the court and in the power of the Congress to prescribe
the terms upon which such relief shall be afforded. The carrier
may be required to pay into court every penny of the money col-
lected above the rate fixed by the Commission or to give a bond,

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63

approved by the court, to pay it if in the end the determination
a the court is adverse to him. The Supreme Court will know
that.

There is no necessity, Mr. President, for any such provision

“in order to protect the people. There is necessity, in my opinion,
in order to protect this bill, if it become a law, that no such
provision shall be incorporated in it. If private property can
be taken without just compensation for three months, it can be
taken for three years. It can not be lawfully taken from an
individual, and it can not be lawfully taken from a carrier.
But what would be the result of the adoption of such a proviso?
I fear, as I said before, that the court would decline to take
jurisdiction at all. I think the court would be inclined to say
that it is an impaired judicial power, which they could not exer-
cise. In that event, Mr. President, what would become of the
rate-fixing clause of this bill? It would be left without provi-
sion for judicial review, as the question could not be raised in
the mandamus proceeding by the terms of the measure. It
would be the Minnesota Milk case over again, of want of due
process. (134 U. S.)

Mr. President, begging pardon for the time I have taken, I
ask the Senate if it be not true that there is trouble enough in
this subject that can not be eliminated from it? There are
questions enough of the gravest possible import under the Con-
stitution which are inseparable from it, and which can only be
determined by the court when this bill becomes a law and the
questions are presented. Is it wise, Mr. President, to inject
into this measure one more challenge of its validity, especially
when, with perfect justice, that may be omitted?

Mr. President, I am not an opponent of this measure. I want
to see it speedily passed, as perfect as it may be, and with every
constitutional danger avoided, so far as it can be done. I re-
gard this as a loyal support of the measure and a real con-
servation of the public interest.

6770

O
Railread Rate Regulation.

 

SPEECII

°

i
HON. WM. J. STONE,
OF MISSOURI,
IN THE SENATE OF THE UNITED STATES,
Thursday, April 5, 1906.

The Senate having under consideration the bill (H. R. 12987) to
amend an act entitled ‘‘An act to regulate commerce,” ete., and to en-
large the powers of the Interstate Commerce Commission.

Mr. STONE said:

Mr. PRESIDENT: Much time has been expended and learning
exploited in discussing the Federal judiciary. In some respects
this discussion has been more academie than practical, although
interesting and instructive. It is remarkable that in this day
and generation, after more than a century and a quarter of
national life, there should be such a disputation in the Senate
of the United States as that we have been listening to at inter-
vals during the last three weeks. I had not supposed the Fed-
eral judiciary could have been made the subject of such con-
troversies as have engaged the attention of the Senate. While
my principal purpose in arising, Mr. President, is to submit
some observations on one or two of the more practical features
of the proposed legislation, since it seems to be the fashion, I
will, with the indulgence of the Senate, first pay my respects to
the courts also.

DUTY TO ORGANIZH COURTS.

Some new and interesting questions have been raised, or,
rather, some old and interesting questions have been revived.
It has been said that the Congress was not obliged to establish
inferior courts. Mr. President, I believe it was the imperative
constitutional duty of the Congress to create the Supreme Court
and to establish inferior courts. It was as much the duty of
the Congress to establish inferior courts as it was to create the
Supreme Court. The Constitution did not create the Supreme
Court nor any other tribunal. It simply declared that “the
judicial power of the United States shall be vested in one Su-
preme Court, and in such inferior courts as the Congress may
from time to time ordain and establish.” Upon that short and
simple declaration the Federal courts are founded. The judi-
cial power was vested, but no court, not even the Supreme Court,
was created. The Constitution did provide that there should be
a Supreme Court, but it did not provide for the number or quali-
fications of the judges who were to constitute the court nor
make any provision for its organization. That was left to the
Congress, just as the establishing of inferior courts was left to
the Congress. It has been said that the duty of Congress to

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2

ereate and organize the Supreme Court was mandatory, but not
so as to the inferior courts. As to those courts it has been said
that it was left to the discretion of Congress to establish them or
not. To that view J can not give my assent. The Congressional
duty was as imperative in the one case as in the other. The
inferior courts are as essential to an adequate judicial system,
such as the Constitution contemplated, as the Supreme Court.
The judicial department was established by the Constitution as
a coordinate and independent department, and its functions
were as well defined as those of any other department. It is as
necessary to the orderly conduct of publie affairs and as neces-
sary to national life under our governmental system as either
the legislative or executive departments. Without a Federal ju-
diciary there would be no courts in which controversies to which
the United States was a party, or in cases arising under the ad-
miralty and maritime jurisdiction of the United States, and
other causes, could be heard and determined. Without a Fed-
eral judiciary there would be no courts in which numerous
crimes against the United States, committed both on land and
sea, could be punished. The Congress might enact laws and
the Executive might stand ready to execute them, but without
courts the law would be a dead letter and the executive arm
would be powerless. The Supreme Court alone would not suffice,
for the Constitution expressly lipits its original jurisdiction to
two classes of cases—those against ambassadors, other public
ministers, and consuls, and those in which a State is a party.
In all other cases the Constitution declares that the Supreme
Court shall have appellate jurisdiction only. Except as to the
two classes of cases specified, all controversies which are be-
yond the reach of the State judiciary would be without a forum
for their settlement if there were no inferior courts of the
United States. Even if the Congress could clothe the courts of
the States with the judicial power devolved by the Constitution
upon Federal courts, which Judge Story denies, it would mani-
festly and inevitably lead to conflict and confusion. The Goy-
ernihent could not be successfully maintained and administered
on the plan laid down by the Constitution without the inferior
courts. They are just as necessary to the public safety, to the
protection of private rights, and to orderly government as the
Supreme Court itself. It does not seem to me that this can be
intelligently controverted. The eighth section of Article I of the
Constitution conferred upon Congress power “ to constitute tri-
bunals inferior to the Supreme Court.” Did not the bestowal
of the power to do this necessarily carry with it an obligation
to do it? The same section of the same article conferred upon
Congress the power— :

To lay and collect taxes, duties, imposts, and excises, to pay the
debts and provide for the common defense and general welfare of the
United States.
eine, _feaulate commerce with foreign nations and among the several

To establish a uniform rule of naturalization.

To coin money, regulate the value thereof, and of foreign coin, and
fix the standard of weights and measures.

To provide for the punishment of counterfeiting the securities and
current coin of the United States.

To establish post-offices and post-roads.

To define and punish Dinars and felonies committed on the high
seas and offenses against the law of nations,

To raise and support armies,

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8

And to enact other laws for purposes specifically enumer-
ated and necessary to the orderly administration of the Govern-
ment. The language of the Constitution is: ‘“ The Congress shall
have power” to enact laws for all such purposes. The Consti-
tution did not say that the Congress shall enact such laws,
but shall have the power to do so. Could the Congress have
refused to exercise that power? I think not. When the power
was conferred, by necessary implication the duty to exercise it
attached. The grant was equivalent to a mandate. Neces-
sarily, discretion was given to Congress to adopt such forms of
legislation and to establish such agencies as they might deem
essential to accomplish the purposes contemplated by the Con-
stitution, but they could not refuse to act at all. If the Congress
had refused to do the ‘things they were given power to do,
among others to establish such courts as were necessary to
the proper administration of the law, they would have been
recreant to duty and to their oaths.

But it is said that the Congress could not have been compelled
to establish inferior courts. If by that it is meant that there
was no official power which could have exercised that compul-
sion, the statement of course is correct. The Constitution and
public opinion are the only things that can compel Congress
to perform any duty. Beyond these there was no power to
compel Congress to create the Supreme Court. Therefore it
may be said that Congress could have obliterated the whole
judiciary by refusing, in the beginning, to provide for any
tribunals, high or low, supreme or subordinate, which could
exercise the judicial powers written into the Constitution; or, in
other words, that the Congress could in that way have wiped cut
that much of the Constitution. Mr. President, it requires some
patience to seriously consider a suggestion of that kind. The
faintest intimation that it was ever possible for Congress not
to provide, and fully provide, for a complete Federal judicial
establishment is too puerile for consideration even as a test of
the legislative power. Such an intimation belongs to the dis-
tempered domain of dreams and hallucinations. It presupposes
that Senators and Representatives in Congress would ignore
their oaths and deride the Constitution, and it presupposes that
the men who made the Constitution were bent on destroying,
in the yery hour of its birth, the governmental fabric they had
created. Further still, it presupposes that the men of the
Revolution, the people themselves, whom the Congress repre-
sented and to whom they were amenable, also desired to im-
molate the fruits of their victory on the altar of chaos. Mr.
President, that is to suppose a situation that is not supposable.
The Congress were compelled to provide for the organization
of the Supreme Court and to establish such inferior courts as
the Constitution contemplated, or be guilty of moral and legal
treason,

CAN NOT DESTROY.

Mr. President, those who hold that the power imposed upon
the Congress to establish inferior courts was merely permissive,
or in other words, those who contend that Congress was not
bound by the mandate of the Constitution to establish them,
also contend that since they have been established Congress may
now destroy them. It is said that since Congress created them
Congress may abolish them; that what the Congress has estab-

6670 :
4

lished it may disestablish; that what it has done it may undo.
I deny that also. Cengress can not constitutionally do any
such thing, and therefore can not do it at all. These courts
were established as a public necessity and in pursuance of a
public policy outlined in the Constitution. Their existence is
essential to national vitality, and they exist in obedience to a
constitutional direction. The Congress had power to create, but
has no power to destroy. Congress can not destroy the judiciary
any more than the judiciary can destroy Congress. Of course,
if the people themselves want to destroy the Federal judiciary it
can be done. It might be done by a constitutional amendment,
and even without that, if the people wanted it done, Congress
might, in the execution of a revolutionary propaganda, devise
expedients for wiping out the courts, from the supreme tribunal
down. But in the same way Congress could destroy any other
political division of the Government. If Congress should refuse
from year to year to provide for the support of the executive
department; if it should refuse to provide for the support of
the Army and Navy; if it should refuse to make provision for
the public debt—in other words, if the Congress should refuse,
with popular approval, to perform its functions, of course the
Republic could not survive. But none of these things could be
done except with the approval and by the direction of the
American people. Mr. President, all talk of that kind is idle,
fantastic, chimerical, impossible. The people could destroy the
judiciary, but it is not within the power of Congress alone to
do it. If to-day the Congress should pass an act abolishing all
the circuit and district courts of the United States without sub-
stituting other tribunals in their stead, can there be any doubt
that the Supreme Court would declare the act to be unconstitu-
tional and void? If it did not, it would be unworthy to occupy
the high place it holds in the respect of the American people.
I do not mean to say that Congress can make no change in the
Federal judiciary. I do not mean to say that Congress might
not recrganize the judiciary and abolish, if you will, the circuit
and district courts as they now exist, provided that other courts,
no matter by what names designated, with substantially similar
jurisdiction, should be establisheé to take their place. I think
that would be within the province of Congress, but that is a
yery different thing from the wiping out of the judiciary alto-
gether. An act absolutely destroying the inferior courts of the
United States would be unconstitutional, in my opinion, and if so,
Congress, of course, would have no right to pass it.
MAY DEFINE JURISDICTION.

But, Mr. President, while it was the constitutional duty of the
Congress to ordain and establish courts, and while the Con-
egress has no constitutional power to destroy them, it does not
follow that they can not, within the limits of the Constitution,
enlarge or restrict their jurisdiction and regulate their practice.
That is something the Congress may do. ‘The Supreme Court bas
decided that the judicial power of the United States, although
it has its origin in the Constitution, is, except in enumerated
instances, applicable exclusively to the Supreme Court, depend-
ent for its distribution and organization and for the modes of
its exercise upon the action of Congress, and has decided that
Cengress may invest the courts it creates with jurisdiction
either limited, concurrent, or exclusive, or withhold jurisdiction
from them to whatever extent Congress may deem proper for

6670
5

the public good; and the Constitution expressly provides that
the Congress may regulate appeals to the Supreme Court. That
Congress is clothed with power, except in a few specified in-
stances, to define the jurisdiction of the Federal Courts has been
so often decided that it may be considered as settled law. And
this is as it should be.

Mr. President, I have a profound reverence for the opinion of
Thomas Jefferson. He was sometimes suspicious of the courts.
Once he even went so far as to say:

The judiciary of the United States is the subtle corps of sappers and
miners constantly working underground to undermine the foundations
of our confederated fabric. They are construing our Constitution from
a coordination of a general and special government to a general and
supreme one alone. * * * Having found from experience that im-
peachment is an impracticable thing, a mere scarecrow, they consider
themselves secure for life. They skulk from responsibility to public
opinion, the only remaining hold on them, under a practice first intro-
duced into England by Lord Mansfield. An opinion is huddled up in
conclave, perhaps by a majority of one, delivered as if unanimous, and
with the silent acquiescence of lazy or timid associates, by a crafty
chief judge, who sophisticates the law to his mind by the turn of his
own reasoning. * * * A judiciary independent of a king or execu-
tive alone is a good thing, but independence of the will of the nation is
a solecism, at least in a republican government.

With all due respect for this greatest of American statesmen,
I fear that this utterance was prompted more by his antagonism
to the great Chief Justice of that day than by his deliberate
judgment. Moreover, while I believe it to be true that the sov-
ereigu rights of the States and the people have been often en-
croached upon by judicial interpretation, still, taken as a whole,
the record of the judiciary is a proud one, and the courts have
frequently stood as the solitary and impregnable refuge of the
Constitution.

Mr. Jefferson spoke with greater dignity and sagacity and
more like the statesman he was when he said:

The dignity and stability of government in all its branches, the
morals of the people, and every blessing of society depend so much upon
an upright and skillful administration of justice that the judicial power
ought to be distinct from both the legislative and executive, and inde-
pendent of both, so that it may be a check upon both, as both should
be a check upon that.

In each instance Mr. Jefferson was addressing himself to the
Federal judiciary. Although, as I have said, he spoke net with-
out prejudice and resentment in the first quotation I have read,
there was, nevertheless, enough of truth in his malediction to
sbow that the founders were wise in delegating to the legis-
lative department the power of defining the jurisdiction of the
courts.

It has been asked, ‘ What is meant when it is said that Con-
gress may define the jurisdiction of the courts?” The question
can be answered only in general terms, and that is suflicient.
It is enough to say, in general terms, that the Congress may de-
termine the forum in which controversies may be judicially
heard; that they may put limitations upon the jurisdiction of
those forums whenever and wherever jurisdiction is conferred
by them; and they may prescribe the mode of procedure to be
observed from the initiation of an action to its close. But,
while this is primarily true, it is not within its limitations.
While it is true that Congress is clothed with power to define
the jurisdiction and regulate the practice of the courts, they can
not constitutionally so restrict that jurisdiction as to paralyze
their arms and wake them utterly incapable of affording relief.

6670
6

That can not be done, for the effect of that-would be to destroy
the courts. If it was the constitutional duty of Congress to estab-
lish courts, then equally was it their duty to invest them with
every adequate power necessary to the proper and effective exer-
eise of their functions. It was as much their imperative duty
to do the one as the other. The two things are inseparable and
of equal importance. The legislative duty is the same in both.
And in neither case is it a purely optional duty, or a mere mat-
ter of legislative discretion, but in both it is a high, commanding
constitutional duty. The last clause of the eighth section of
Article I of the Constitution provides that Congress shall have
power—

To make all laws which shall be necessary and proper for carrying
into execution * * ™* all powers vested by this Constitution in the
Government of the United States, or any department or officer thereof.

The Supreme Court and the inferior courts established by
Congress constitute the judicial department. The Constitution
declared that there should be one Supreme Court, and left it to
the Congress to provide for its organization. The Constitution
did not establish the inferior courts, but they are founded in it.
They were not created by the Constitution, but created by Con-
gress in obedience to the constitutional mandate. The judicial
power of the United States was vested in these courts; and the
Congress was given power to enact all laws necessary to enable
the courts to exercise their legitimate functions. When this
power was granted to Congress the duty of utilizing it was im-
posed. A constitutional obligation, express or implied, can not
be ignored without offense to the fundamental law. No, Mr.
President, the power that Congress may exercise over the courts
is not absolute, plenary, unbridled. The Constitution by neces-
sary intendment and implication has put limitations upon that
power.. Congress may say what courts shall have jurisdiction of
criminal causes, but it can not deny jurisdiction to all courts to
punish crime. That would leave the Government and the peo-
ple at the mercy of the lawless. Congress may determine what
courts shall Lave jurisdiction of civil causes, but they can not
absolutely deny to all courts the power to hear and determine
controversies which may arise within the judicial jurisdiction pre-
scribed by the Constitution. That would be to deny justice alto-
gether; to deny a remedy for all wrongs, public or private; and
it would lead inevitably to universal chaos. The Congress may
regulate the practice of the courts, but they can not deny to the
courts the right to issue any process whatever, and thereby ren-
der nugatory the powers with which they are invested. The
Congress may regulate the forms and the manner of executing
all processes, but they can not deny them altogether. They
may put limitations upon the issue and service of process, but
not to the extent of denying process altogether, nor of so cir-
cumscribing it as to make the judicial power a sham and a
farce. The legislative power may change the formalities of
judicial procedure, but not so as to make the enforcement of
rights impossible. It was well said by the supreme court of
Michigan, in the case quoted by the junior Senator from Penn-
sylvania (75 Mich., 283), that—

When they [the legislature] vest judicial power they do so in ac-
cordance with all of its essentials, and when they vest it in any court

they vest it as efficient for the protection of rights, and not subject
to be distorted or made inadequate.

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7

My learned and eloquent friend the Senater from Texas [Mr.
Baitey] has called our attention to the case of Fink v. O'Neil
(106 U. S.). The justice who delivered the opinion in that case
did say that the Federal courts had no authority to render
judgments or to issue executions or other process, except when
authority to do so had been conferred by the legislative depart-
ment. He did say that those courts have no inherent authority
of that kind. But, Myr. President, that statement was unnec-
essary and inapplicable to the case before the court. It was
obiter dictum. The point at issue in that case concerned the
sale of a homestead, which, under the laws of Wisconsin, was
exempt from seizure and sale under execution. Under the laws
of Congress the I’ederal courts are required to conform their
practice to the laws of the States, respectively, in which they
are held in so far, at least, as these laws are applicable. It was
contended that the exemption law could not be plead against the
sovereign—that is, the Government—as it might have been
plead against a private suitor. The point at issue concerned
not the power of issuing an execution, but the power of enforc-
ing it. The power to issue the execution unquestionably ex-
isted, and the execution had, in fact, been issued and placed in
the hands of the marshal. The question was whether a cer-
tain property, exempt from execution under the laws of the
State, was subject to sale at the suit of the Government as a
sovereign. The same question would have arisen even if it had
been admitted that the courts had inherent powers, for still the
protection of the exemption laws, enacted to promote a wise
public policy, might have been invoked. ‘The justice who made
the declaration referred to went beyond the record, and there-
fore what he said in that behalf is not entitled to the weight of
a judicial deliverance.

POWER OF SELF-PROTECTION.

Mr. President, I do not contend that the Iederal courts are
invested with all the inherent powers that appertain to courts
existing at common Jaw and by proscription. Such a contention
is unnecessary, and I would not sanction it if it were made. At
the same time, I am unwilling to admit that the courts are so
utterly dependent, so devoid of power—inherent power, if you
pleass—as to be incapable of moving a hand to protect them-
Seives against annibilation.

Mr. BAILEY. Mir. President

The PRESIDING OFFICER (Mr. Burtwxetey in the chair).
Does the Senator from Missouri yield to the Senator from
Texas?

Mr. STONE. Certainly.

Mr. BAILEY. I wish to hear the Senator from Missouri ex-
press himself directly on the question as to whether Congress
has even the power to prevent an inferior court from issuing a
preliminary injunction to suspend the rate established by this
railroad commission.

Mr. STONE. If the Senator will pardon me at present, I
will treat very fully upon that in a few moments, but I would
rather not just at this time. :

It is to be presumed, must be presumed, that the courts will
themselves obey the Constitution and keep within its limita-
tions. It must be presumed that the courts, as well as the Con-
gress, will respect and obey the Constitution. It must be pre-

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8

sumed that the courts will uphold the laws of Congress unless
they clearly contravene the fundamental law. They have often
declared it to be their duty to sustain legislative enactments
and to reconcile them to the Constitution whenever it can be
done. That is the uniform judicial policy of all American
courts, both State and Federal. It is curious to note that those
who fear the power of the courts and live in dread apprehen-
sion of judicial usurpation are constantly quoting the Supreme
Court itself to prove that the judiciary is dependent upon the
legislative pleasure. No, Mr. President, I believe the highest
public good requires that the courts should be left undisturbed
in the possession of all their constitutional powers. I think
these powers are ample for self-protection. Congress could not
destroy the courts if they would, and sbould not if they could.
The Constitution embodies the wisest thought of the wonderful
pen who made the Republic. It is the most perfect work of its
kind ever devised by the wit of man. It is inconceivable that
a great department, like the judicial department, should have
been established and then made wholly subservient to the legis-
lative will and helpless in its presence. The three great de-
partments established by the Constitution are coordinate and
coequal. Neither towers above the other—supreme, absolute,
imperial—but the same Constitution is cver them all. Within
their respective spheres each is supreme. But above all is the
power of the people. The harmony and syminetry of this su-
perbd creation should not be marred. It should be left as the
fathers made it.
COURT REVIEW. Py

Mr. President, I come now to consider briefly and to express
my view upon the particular question which has given rise to
all this discussion about the courts. The question is, Shall
jurisdiction be expressly conferred upon the circuit courts to
review tbe orders which may be made by the Interstate Com-
merce Comimission prescribing rates to be charged and regula-
tions, to be observed by railroads as common carriers? And if
so, then with what limitations, if any, shall that jurisdiction
be hedged about? The bill provides that, after certain findings
and formalities, the Commission shall have power to prescrive
what shall be a just and reasonable and fairly remunerative
rate to be thereafter charged as the maximum rate, and to pre-
scribe what regulation or practice in respect to a given trans-
portation is just, fair, and reasonable to be thereafter followed.
There is no express provision in the bill authorizing a judicial
review of orders that might be predicated upon these provisions.
The question is, Shall an express provision of that import be in-
serted in the bill? That appears to be the question; but, Mr.
President, it seems to me that to consider this question in that
form is to proceed in the inverse order and upon a false premise.
It is to proceed on the assumption that the bill as it stands in
some way denies the right of judicial review. But that is not
true. The bill as it passed the House, and as it stands to-day,
does not deny the right of judicial review, nor even attempt to
limit it. On the contrary, sections 15 and 16 of the bill, as
reported, expressly recognize that right. Those sections pro-
vide that the orders of the Commission shall take effect at the
end of thirty days after notice, unless such orders shall have
been suspended or modified by the Commission itself, “ or set

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9

a by the order or decree of a court of competent jurisdie-
ion.”

If the bill should be enacted in its present form, and the Com-
mission should prescribe a rate which was confiscatory or non-
compensatory, could there be any doubt that the carricr affected
would have the right, under existing law, to apply to a cireuit
court for relief, or that the court would have power to grant
whatever relief the nature of the case might warrant? If the
bill should pass in its present form, could there be any doubt
that the same jurisdiction would attach if a rate established
should not be fairly remunerative? Under the powers now
possessed and exercised by the circuit courts can there be any
doubt that they would take jurisdiction of any cause, involving
a sufficient sum, which concerned a rate alleged to be contisea-
tory or noncompensatory? If that be true, then the: power of
judicial review exists already, and there is nothing in this bill
which seeks or pretends to divest the courts of that power or
to limit them in its exercise. There is, therefore, no need of a
special provision to confer a jurisdictional right of review. The
real question is not whether this power of review shall be con-
ferred upon the courts, but whether it shall be enlarged upon
the one hand, or withdrawn or limited upon the other. This
bill proposes to enlarge it. It proposes to authorize tue courts
to deterinine not only whether a rate is confiscatory, but whether
it is fairly remunerative. Whether this jurisdiction sheuld be
enlarged is a question of such doubtful wisdom that I hesitate
to approve it. I doubt whether the jurisdiction now exercised
by the courts can be wholly withdrawn, and I am confident it
ought not to be. Railroads are sometimes guilty of flagrant
abuses, but for that reason, no matter how outrageous their
offending, they should not be shut cut of the courts and put.
wholly at the mercy of an administrative board. Because they
offend, because they do wrong to others, is no reason why the
Congress should deny them access to the courts of justice. That
they should be curbed, restrained, regulated, is manifest and
imperative; but that they should be outlawed is absurd. When
their rights are in jeopardy they are entitled to a hearing. Un-
doubtedly, in my opinion, the Commission shoull be given
authority to prescribe rates to be charged and regulations to be
observed by the carriers; but the rates and regulations suould
at least be just and reasonable—actually so. If any rate so
prescribed should be unjust, or should not be compensatory, it
should not stand; and if any regulation prescribed should be
unjust or unreasonable, it should be set aside. I do not think
any fair-minded man in or out of Congress will controvert that.
It follows, then, that if the Commission should adhere to an
order which a carrier might deem to be unjust and unreasonable,
the controversy must be settled in the courts. It must be set-
tied in the courts because there could be no other forum for
settling it. I can hardly believe that any Senatcr would deny
jurisdiction to the courts to hear and deterniine controversies of
that character, even though he believed that Congress had power
to deny it. If that be true, Mr. President, as I aim sure it is,
then it is useless to discuss the question as to whether Congress
could, by affirmative enactment, place the orders of the Com-
mission above and beyond the reach of the courts. ‘here is
no use talking about something nobody wants to do, and which

6670 ‘
10

many think-can not be done. We had better discuss things
which some of us, at least, think ought to be done, and some
of us think we have power to do.

Mr. President, this whole subject is narrowed to two proposi-
tions: The first involves an enlargement of the judicial power,
and the other a limitation upon its exercise. Paradoxically, the
two things are not necessarily in conflict. Both may be done
without inconsistency. Under the law as it is to-day, the courts
have jurisdiction to hear and determine whether a prescribed
rate is so high as to be extortionate, or so low as to be confisca-
tory. Between these two extremes it seems to be conceded in
the arguments I have heard the courts can not go. It is said
that if a rate is not so high as to be extortionate, nor so low as
to be confiscatory, the courts can not interfere. They can not
intervene, so it is said, between the two extremes to say whether
a rate fixed by the Commission is fairly remunerative. The
courts have said that if a rate is not compensatory it is confisca-
tory. A line has been drawn here between what is justly com-
pensatory and what is fairly remunerative. But the line is a
narrow one—so narrow as to be scarcely distinguishable. The
line between ‘“ compensatory,” simply, and “ fairly remunera-
tive” is more distinct; but the line between “ justly compensa-
tory” and “fairly remunerative” is difficult of discernment.
It is a little hard for me to differentiate between the two; and it
is a little hard for me to understand why a court has power to
determine whether a rate is justly compensatory, or even com-
pensatory, and yet is without power to determine whether a rate
is fairly remunerative. On the otber hand, it is evident that be-
tween the extremes of extortion and confiscation, as those terms
are understcod, the Commission should have some discretionary
power in establishing rates. What latitude should be given to
that discretion is problematical. But, Mr. President, as the
courts now have power to intervene to set aside a rate which is
extortionate or confiscatory—that is, a rate which oppresses the
shipper or which does not bring a fair return to the carrier upon
the capital invested and labor expended—I am inclined to think
it would be wiser, at least in the experimental stage of this new
administrative authority, not to invest the courts with any
powers not already possessed. If the courts have not the power
already to determine whether a rate made by the Commission is
fairly remunerative, I doubt if it should be conferred upon them.
For the present, at least, we had better leave that question
where it is. But to do that the bill should be amended. As it
now stands it seems to me that that power would be, by the
very terms of the bill, conferred upon the courts. If the bill
should be amended so as to authorize the Commission to pre-
scribe just and reasonable rates—using those words, “ just and
reasonable ’—and by striking out the clauses which provide that
the orders of the Commission shall stand unless set aside by a
court of competent jurisdiction, that would leave the matter, so
far as the jurisdiction of the courts is concerned, where it is
already. Moreover, it seems to me that the power to fix just
and reasonable rates would answer all the purposes of this leg-
islation. Under that phraseology it would be the duty of the
Commission to establish rates that were “fairly remunerative,”
and something should be conceded to the administrative integ-
rity of the Commission,

6670
ll

But, secondly, Mr. President, even if the jurisdiction of the
courts should be affirmatively extended so as to authorize them
to determine whether a given rate was fairly remuneratiye, the
courts might still be limited in the method of granting relief.
That they should be limited in this behalf, particularly with
respect to injunctive relief, I am certain. The reasons for this
are founded in a sound public policy, and they are of the high-
est importance. If the railroads could take up every order
made by the Commission for a judicial review, and on an ex
parte and prima facie showing obtain a temporary injunction
suspending the operation of the order during the interval of
litigation, often greatly prolonged, the efficacy of the law would
be greatly impaired, if, indeed, its effectiveness would not be
practically destroyed. At all events, if that should be permitted
it would render the administration of the law difficult, tedious,
exasperating, and expensive. A law of this kind to be effective,
and orders of this kind by a commission of this kind to be of
value, must be promptly enforced. The courts should be open
to every suitor, but the privilege of resorting to them should
not be turned into an abuse. While guarding the right of every-
one to seek a judicial remedy for private wrong, the exercise
of the right should be so regulated as to prevent it eventuating
in a public wrong.

Mr. President, I would not deny the substantial right of in-
junctive relief to the carrier. Some able lawyers have said
that that can not be done, and it may be that they are right.
But I would provide in this bill that injunctions suspending
or setting aside the orders of the Commission should be applied
for only upon notice and granted only after a hearing. I be-
lieve the Supreme Court would uphold a provision of that nature
as being within the purview of the legislative power. The Con-
gress has power to regulate the practice of the courts and to
place such limitations upon the employment of their processes
as may be, in their judgment, necessary to the public good,
provided, as I have said, the limitation does not go so far as to
vitiate judicial administration. The fact that such a restriction
would apply to all railroad corporations as a class, and the fact
that railroads are quasi-public highways, and that railroad
corporations are quasi-public bodies, clothed with extraordinary
powers and privileges, would answer the objection that such
a restriction was vicious because it was special. If such a
restrictive provision should be inserted, and if all cases involv-
ing a review of the Commission’s orders should be given a
preference on the dockets of all the courts, the controversies
would be speedily determined and the possible damage would
not be great. If it be said that the damage, whatever the
amount, suffered by the carrier under that practice would be
irreparable, it might be answered that the damage to the public
under a contrary rule would be even greater and more irrepara-
ble; and I assume that the courts, while regardful of private
rights, would not be oblivious to the public interests.

Besides, Mr. President, it should not be forgotten that a pro-
ceeding against the Commission to prevent a damage resulting
from their orders would not stand upon the same ground as a
proceeding to prevent waste or other injury by a private person,
The Commission are a public body, charged with the perform-
ance of public duties, and under obligation to deal impartially

6670
12

with all interests, and their orders are made under the obligation
of an oath and by direct authority of the law. They should not
be put upon.a level with the trespasser, nor shouJd their orders
be treated as if made in a spirit of wrongdoing, hostility, or
unfairness, or with any intention to oppress. ‘Their orders are
entitled to that consideration which should always be accorded
to the deliberate action of every official body. If they act
within the limits of their authority, it should be presumed that
they have acted properly, and their orders should not be sus-
pended upon the mere ipse dixit of an individual complainant.
They should not be set aside, even provisionally, without a
hearing. The public interest and public policy alike forbid it.

Mr. President, my conclusion is that if some such provisions
as those I have indicated should be inserted in the bill they
would solve the problem. So far as limiting the jurisdiction of
the courts is concerned, the amendment proposed by the Senator
from Texas [Mr. Battery] embodies substantially what I have
in mind, and while not committing myself to the exact phrase-
ology of his amendment, I am in harmony with what he seeks
to accomplish.

THD PRESIDENT’S AMENDMENT.

Mr. President, on Monday the Senator from Kansas [Mr.
Lone] offered an amendment. This is understood to be an
amendment proposed through the Senator from Kansas by the
President of the United States. The confession made here
last Tuesday in the open Senate by the Senator from Kansas
confirms that understanding. On Sunday morning last the
papers contained an account of a meeting at the White House
of several Republican Senators of the select Presidential set for
consultation with the President and the Attorney-General. It
is reported that for some hours they sat in solemn conclave on
the rate bill, and in due course the amendment proposed by the
Senator from Kansas was hatched. By this amendment it is
proposed to strike out the clauses now in the bill which provide
that the orders of the Commission shall take effect after thirty
days, unless they shall be suspended or modified by the Com-
mission itself, or be suspended or set aside by the order or decree
of a court of competent jurisdiction, and in lieu thereof to pro-
vide that the orders of the Commission shall take effect within
such reasonable time as the Commission shall prescribe, and
remain in force not exceeding two years—
unless suspended or set aside in a suit brought against the Commission
in the circuit court of the United States, sitting as a court of equity, for
the district wherein any carrier plaintiff in said suit has its principal
operating oflice, and jurisdiction is hereby conferred on the circuit
courts of the United States to hear and determine any such suit whether
the order complained of was beyond the authority of the Commission
or in violation of the rights of the carrier secured by the Constitution.

Mr. President, that ought to be satisfactory to the railroads.
There is no need for making any additions to it. There may be,
and in a sense there is, a technical distinction between rights
specifically secured by the Constitution and rights that are
founded purely in statutory provisions or in the general princi-
ples of the common law. But as applied to cases ordinarily
arising out of the orders of the Interstate Commerce Commis-
sion a distinction of that kind would be a distinction without a
practical difference; and if this amendment should be adopted
there would be no occasion to apply it. Under this bill the only

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18

action a carrier would ordinarily institute against the Com-
mission would be to have the court determine whether a rate
prescribed by that body was a just, reasonable, and fairly re-
munerative rate, or whether a regulation prescribed was a just,
fair, and reasonable regulation. This amendment provides that
the court may determine ‘“ whether the order complained of was
beyond the authority of the Commission or in violation of the
rights secured by the Constitution.”

No express prohibition is put upon the jurisdiction of the
court against extending its inquiry to any limit. If the amend-
ment is to be considered as intended to restrict the jurisdiction
of the court, it can have that effect only by inference, on the
theory that if a particular jurisdiction be expressly conferred
by statute, the statute shall be so construed as to exclude any
further or additional jurisdiction. But, Myr. President, so far
as this amendment is concerned there is no need of wrestling
with refinements of that character. It is broad enough to meet
every requirement of the railroads. If a carrier complainant
can show to the court that a rate prescribed by the Commission
was confiscatory er not even compensatory ; if it could show that
the returns under the rate prescribed did not afford a fairly
remunerative return for the capital invested and for the time
and labor expended, would it not be depriving the carrier of its
property, under the pretense of public authority, “ without due
process of law” or “just compensation?” The forms of law
can not be used to wantonly destroy the property of citizens or
the fruits of their labor. If the Constitution is not competent
to protect the citizen against a wrong so monstrous, it should
be amended without delay.

But aside from the Constitution, how would the statute op-
erate if this bill, with the amendment proposed by the Senator
from Kansas, should be enacted? It would provide that the
Commission should bave authority, after certain preliminary
findings, to prescribe what would “in its judgment be the just
and reasonable and fairly remunerative rate” to be charged,
and to prescribe what should be a “just, fair, and reasonable eg
regulation to be followed. If the Commission should prescribe
a rate which was confiscatory or noncompensatory or not fairly
remunerative, or prescribe a practice which was unjust, unfair,
and unreasonable, would they not exceed the authority con-
ferred upon them? ‘True, the bill says they may prescribe a
rate which “in their judgment” is just, reasonable, etc. and
from this it may be argued that the law would vest a discre-
tion in the board which the courts could not disturb, no matter
how unwisely that discretion might be exercised. But I do
not believe that a mere executive discretion could be so exer-
cised as to defeat not only the manifest spirit of the law, but
its very letter. The Congress themselves could not directly
establish a confiscatory rate, and if the Congress could not
themselves directly destroy the property of a carrier, they can
not do so indirectly by investing an administrative body with
a discretionary power to do it.

Justice Miller once said, in one of his great opinions, that the
forms of law could not be used to rob the citizen under the pre-
tense of levying taxes; neither can they be used to rob him un
der any pretense. And so I repeat that the amendment of the
Senator from Kansas does not restrict the jurisdiction of the

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14

courts to a degree that should make it obnoxious to the rail-
roads,

Mr. President, if this were not a matter of serious import,
this performance would be diverting. If this amendment is to
be adopted and incorporated in the bill, what is all this bulla-
baloo which has vexed us so long about? While the bill was
still pending before the Interstate Commerce Committee, the
papers contained daily accounts of the bold and implacable op-
position the junior Senators from Iowa and Minnesota were
making to the insertion of any provision whatever for a judi-
cial review of the orders of the Commission. And the papers
told us, also, of the pathetic, albeit defiant, dispatches sent by
the revered and venerable Senator from Illinois [Mr. CuLtom]
from a health resort down somewhere among the magnolias
and orange blossoms of the far Southland to the Senators from
Iowa and Minnesota to stand pat for the bill as it came
from the House. The papers told us, also, of a stirring scene
which occurred in the committee when the Senator from Iowa
bearded the committee in its den and moved to report the House
bill to the Senate without amendment. It is a pity that that
scene can not be reproduced on canvas. It was historical and
inspiring, or might have been. I doubt if it can be made so
now. After eyents bave robbed it of its glamour.

The motion of the Senator from Iowa was adopted by the
committee by the votes of all the Democrats and the three Re-
publicans I have named. Thereupon, according to newspaper
accounts, the accuracy of which no one has disputed, the Sen-
ator from Rhode Island [Mr. AupricH] said that as this was
a Democratic measure, not a Republican measure, and as it had
been carried through the committee by Democratic votes, he
would move that it be reported to the Senate by the senior
Democratic member of the committee [Mr. TILLMAN], and that
motion prevailed. Then a war cry, not quite so resonant as of
old, but still defiant, issued from the White House. The Presi-
deut, as he is accustomed to do on great occasions, forthwith
summoned the newspaper correspondents to his august presence,
and through them informed the country that he would stand
resolutely and unshaken for the House bill and against any
amendment authorizing a court review of the orders of the
Commission; and this he would do though the heavens fell. As
the press pictured him he stood before the country as grim and
immovable as old Horatius at the bridge. Since then, how-
ever, whisperings have come of caucuses, concessions, and com-
promises. Those of little faith teok on a prophetic aspect and
smiled, while those of great faith still avowed their confidence
in the unyielding firmness of the iron man at the White House.
But those of little faith were the wiser. The President’s abject
surrender has justified their prophecies. If this amendment
proposed by the President, through the Senator from Kansas,
contains anything the railroads do not want, it will require the
superfine acumen of a lawyer as versatile and obliging as the
present Attorney-General, who has O. K.’ed the amendment,
to point it out. Although not quite all they want, the very pro-
posal of that amendment was a triumph for the senior Sen-
ators from Rhode Island and Ohio [Mr. Atpricu and Mr. For-
AKER] aud their party coadjutors. But it affords a sad and
sorrowful example of a Presidential fiasco. However, it is only

6670
15

another instance of our mighty man of destiny and duty back-

ing away ufter one of his spectacular grand-stand performances.

We may all be sorry, but we have no reason to be surprised.
DEMOCRATIC POSITION,

In saying this T may be accused cf injecting partisanship into
this discussion, thereby disturbing that sweet spirit of har-
mony which has been so often invoked during the course of
this debate. The Senate has been repeatedly warned that this
is a purely economic and not a party measure, and that all
party considerations should be eschewed. Mr. President, despite
this warning I feel obliged to say that this measure has party
aspects as well as economic aspects which can not be ignored.
The tariff question, the money question, and other questions of
like import are as much economic questions as the one before
the Senate; nevertheless these questions have not only divided
parties, but they have given rise to some of the most terrific
political combats in our history. The Democratic party in
national conyention twice declared specifically in favor of Con-
gress enacting legislation for the regulation of railroad trans-
portation, but never has the Republican party spoken on the
subject. During the last two or three great party struggles
for national supremacy the candidates of the Democratic party,
giving voice to their party platforms, spoke in favor of this
character of legislation; but the Republican candidates, al-
though voluble upon other subjects, were silent as to this.
The senior Senator from Rhode Island, who is in the foremost
rank of Republican leaders, denounced this measure before the
Interstate Commerce Commission as a Democratic measure, and
because it was so considered by a majority of the Republican
members of that committee, its management on the floor of the
Senate was committed to a Democratic Senator; and that
there might be no mistake about it, it was committed to the
capable hands of that soft-spoken and gentle-tempered Senator
from South Carolina [Mr. TirpMAN], who is everywhere known
as the especial béte noire of the President. [Laughter.] The
President took up this Democratic measure in the belief that
he could carry it through, and thus add to his prestige and
popularity ; but the pressure upon him has been greater than
his power of resistance, and so his commendable attempt to
appropriate a Democratic policy has proved abortive. Into
the ear of the trusting people he breathed the promise of re-
lief, but he has broken it to their hope. Everyone now knows,
what many knew at the inception of this crusade, that if ef-
fective legislation of this character is really desired the Re-
publican party can not be depended upon to enact it.

PENALTIES.

Mr. President, one other thing, and I am done. Prior to the
act of February 19, 1903, known as the “ Elkins Act,” punish-
ment for the violation of the interstate-commerce law Was pro-
yided not only for railroad corporations themselves, but the law
also provided for the punishment, by both fine and imprison-
ment, of the officers and agents of such corporations who showld
knowingly and willingly do or cause to be done, or suffer or
permit to be done, any act or thing prohibited by the law. The
Jelkins Act repealed so much of the penal clauses of the exist-
ing law as authorized imprisonment as a punishment.

6670
16

Mr. President, until those clauses are restored, and the
danger of a prison cell is set before the eyes of offending officers,
I doubt if many of the great corporations will be much alarmed
by the remaining penalties. If the fine for a vivlation of the
law is less than the profit realized out of the criminal transac-
tion, it stands to reason that risks will be taken. But the
gloom, the odor, and the shame of a prison is a more scrious
thing, and there can be no doubt as to its deterrent cifect. A
corporation can act only through its officers and agents. The
insensate, incorporeal thing called a “corporation” is itself in-
eapable of criminality. ‘The real criminal is the man who acts
for it and violates the law. A fine imposed on him, we may
be sure, is in some way, directly or indirectly, ultimately paid
out of the corporation treasury. Such a punishment, therefore,
has in it nothing of terror and litile of restraint. But fear of
the jailer appalls the criminal and tempers his courage with dis-
cretion. The battle the beef-trust magnates fought at Chicago
the other day was not to save their corporations from a fine,
but their persons from a cell. When they succeeded in unload-
ing their personal delinquencies on their corporation treasuries
they congratulated themselves and each other on their victory.
I know it has been said that the imprisonment clauses of the
penal sections of the law are difficult of enforcement. That
may be true, but they are not incapable of enforcement unless
the courts are either impotent or too complaisant.

Mr. President, if the majority here desire to enact an effective
rate regulation law, the penal clauses of the old law as they
existed prior to the passage of the Elkins Act should be re-
stored. Every honest, conscientious railroad official who wants
to obey the law would approve that action. Only those who
would treat the law and public authority with contempt would
protest.

Finally, Mr. President, I desire to say that the pending meas-
ure is essentially a business measure, with far-reaching effects
on the commercial interests of the country. It should be dis-
posed of with great deliberation and without passion or preju-
dice. The rights and interests of all concerned should be
guarded with equal care. But if we pass any Dill at all—and
undoubtedly one should be passed—it should be sufficiently com-
prehensive, and at the same time sufficiently restrictive and
drastic, to accomplish the purposes intended. Unless we suc-
ceed in accomplishing what we attempt, we had better not have
made the attempt at all.

6670

O
RAILROAD RATE BILL.

 

New conditions require new laws. The conditions of to-day
demand an effective governmental control of all railway rates,

 

SPEHCH

OF

HON. OSCAR W. UNDERWOOD,

“OF ALABAMA,

IN TOE

TIOUSE OF REPRESENTATIVES,

MONDAY, FEBRUARY 5, 1906.

WASHINGTON.

1906.
6596
SPEECI

HON. OSCAR W. UNDERWOOD.

The House being in the Committee of the Whole House on the state
of the Union and having under consideration the bill (H. R. 12987)
to amend an act entitled ‘An act to regulate commerce,” approved
February 4, 1887, and all acts amendatory thereof, and to enlarge the
powers of the Interstate Commerce Commission—

Mr. UNDERWOOD said:

Mr. CHairMAN: New conditions require new laws. The con-
ditions of to-day demand an effective governmental control of
all railway rates.

There was a time in the history of the commerce of this
country when the competition of railway companies contending
for the transportation of freight and passengers regulated the
rates and charges of the contending companies, but that day has
passed, the ownership of transportation lines is now concen-
trated in the hands of a few men, and the rate is charged that
the traffic will bear.

The competition of markets continues as long as competitive
markets are served by competing carriers, but competition as a
regulator of railway rates and as a protector against unrea-
sonable and unjust rates has proven a failure in every country
in which railway systems have been developed.

All of the great nations of the earth save two (France and
the United States) have adopted some governmental system
for the control of railway rates. In the United States the Con-
gress passed a law in 1887 that was intended to give the power
to the Interstate Commerce Commission to control rates, and it
was so exercised by the Commission for eleven years, when the
Supreme Court of the United States, in 1898, declared that the
powers granted by Congress were only advisory.

In Great Britain the board of trade has control or regulates
within certain limits the railroad rates. In Ross’s British Rail-
ways: Their Organization and Management (London, 1904),
this statement is made:

Section 31 of the railway and canal traffic act (1888) provides that
if a man thinks a railway is charging him at an unfair or unreason-
able rate for the goods he sends by it, or is in any way treating him
in an unfair or unreasonable manner, he may complain to the board of
trade, and that department, if the complaint seems reasonable, will
call upon the railway for an explanation of its action. Further, the
railway and canal commissioners, by section 10 of the same act, are
empowered to hear and determine any dispute as to the legality of any
toll, rate, or charge for merchandise traffic, and to enforce payment of
so much as they decide to be legal.

In France the railroads are operated by private companies,
which have concessions from the State. The proposition of
Government ownership in France has been much debated, but

6596 3

 
4

has not resulted in any change of the system. A brief state-
ment of the financial relations between the State and the rail-
ways is given in the British Diplomatic and Consular Reports,
annual series, No. 3172, pages 16 to 22.

In Germany the principal railroads are owned and operated
by the State. There are some private lines, but they are under
Government control,

In Switzerland the railroads have just been taken over hy the
State in accordance with the law of 1897, which took effect in
1903.

In Italy the railroads have just come under Government owner-
ship and control.

In Austria-Hungary the Government owns and operates most
of the railroads. A general survey of the railroad system of
Austria-Hungary, with statistical tables showing the operations
for a series of years, is given in Diplomatic and Consular Re-
ports of Great Britain, annual series, No. 3348.

In Belgium most of the railroads are owned and operated by
the Government. A few lines are owned by private interest, but
are under governmental control.

The argument has been advanced’ by those who are opposed to
this legislation, both in the Congress and outside of it, that gov-
ernmental control of railroad rates by the German Government
has paralyzed the railroads and that the railroads have paralyzed
the industry of the country; that to get away from the railroad
monopoly they had created they were compelled to develop
their river and canal system, creating a new monopoly to over-
throw the old one. I do not confess this argument, I do not
admit that industry is languishing in the German Empire; but
I do concede that when they adopted a system of freight rates
without limitation as to time or provision for changes to meet
changing conditions they made a serious mistake, with the re-
sult that the shippers of the country who had been benefited
by these rates claim they have made future contracts based on
the existing rates, and thereby preventing changes to meet the
growing demands of new markets. But this objection can not
possibly apply to the terms of the present bill, for it provides
that when a rate is fixed by the Commission it shall only last
for three years and may be sooner changed by the Commission.

With all the abuse we bear heaped on the German system of
fixing railroad rates, I bave failed to hear anyone inveigh
against the English metheds of governmental control, which
are very similar to those proposed in the bill now before the
House for the control of rate tariffs in this country. In fact,
the great railroad systems of Great Britain have been con-
ducted under a system of governmental control of freight and
passenger rates for a number of years without harm to either
the railroads or the great business and industrial interests of
the country. The English railroads have made more money
for their stockholders than the American railroads, and yet the
complaint is not made that they are run in the interests of
monopoly, and the public are guaranteed fair and just freight
rates by the Government.

It is beyond dispute by anyone that the railroads in this
eountry are public highways. The history of the organization
of railroad companies demonstrates this and the unbroken line
of court decisions sustains it. It is true they might have been
organized as private corporations, but they were not. There

6596
5

is not a railroad company in the United States that has not
accepted its charter on the basis that it intended to build and
operate a public highway just in the same way that the old
macadamized turnpike was built and operated as a public high-
way; and as a public highway the owners of railway securities
can not deny the proposition that the people through their leg-
lative bodies have a right to control and fix the tolls on these
great public highways so long as the rate is not confiscatory.

Let me read to you what the Supreme Court of the United
States has decided in the case of Smyth v. Ames (169 U. S.
Reports, p. 467) :

A railroad is a public highway, and none the less so because con-
structed and maintained through the agency of a corporation deriv-
ing its existence and powers from the State. Such a corporation was
created for public purposes. It performs a function of the State. Its
authority to exercise the right of eminent domain and to charge tolls
was given primarily for the benefit of the public. It is, therefore,
under governmental control, subject, of course, to the constitutional
guaranties for the protection of its property. It may not fix its rates
with a view solely to its own interests and ignore the rights of the
public; but the rights of the public would be ignored if rates for the
transportation of persons or property on a railroad were exacted with-
out reference to the fair value of the property used for the public or
of the services rendered, and in order simply that the corporation may
meet operating expenses, pay the interest on its obligations, and de-
clare a dividend to stockholders.

* * * * * * *

jn ane of the adjudications these principles must be regarded as
settled :

1. A railroad corporation is a person within the meaning of the
fourteenth amendment, declaring that no State shall deprive any per-
son of property without due process of law nor deny to any person
within its jurisdiction the equal protection of the laws. .

2. A State enactment, or regulations made under the authority of a
State enactment, establishing rates for the transportation of persons or
property by railroad that will not admit of the carrier earning such
compensation as, under all the circumstances, is just to it and to the pub-
lic would deprive such carrier of its property without due process of law
and deny to it the equal protection of the laws, and_ would therefore be
repugnant to the fourteenth amendment of the Constitution of the
United States. .

3. While rates for the transportation of persons and property within
the limits of a State are primarily for its determination, the question
whether they are so unreasonably low as to deprive the carrier of its
property without such compensation as the Constitution secures, and
therefore without due process of law, can not be so conclusively deter-
mined by the legislature of the State, or by regulations adopted under
{ts authority, that the matter may not become the subject of judicial
inquiry.

This decision, one of many holding the same principles
to be true, not only decides that a railroad is a public high-
way and subject to governmental control, but it also very
clearly states the extent to which that control can effect the
earning capacity of the property, and very clearly holds that
railroads must be allowed to charge such rates for the trans-
portation of persons and property as will enable them to meet
all operating expenses, pay the interest on their obligations,
and declare a dividend to their stockholders. What more can
a fair and reasonable man ask? No law can be passed that can
take away this right, as it is guaranteed by the Constitution.
Then how can the wages of employees be affected by rates
fixed by a railroad commission when the courts require that
those rates must be sufficient to meet operating expenses? How
can the owner or stockholder complain when the courts guar-
antee a dividend to the stockholder? No honest man who
wants a fair and just rate for all shippers can be hurt and the
dishonest man should be.

6596
6

Let us, then, consider the question as to how we ean best
regulate these public highways, doing justice to the owners and
for the good of the people. There are three ways in which it
ean be done. The Government can purchase all the railway
systems in the United States and as the owner and operator fix
absolutely the rates to be charged. That is one way. Another
plan is for the Congress, either itself or by a commission ap-
pointed under the authority of its legislation, as an initial
proposition to ‘prescribe and define the rates or tolls to be
charged for transportation of persons and property over these
great railway highways. (In passing let me say in the begin-
ning of railroad building in England the charters of all the orig-
inal railway companies prescribed the maximum rates that
could be charged.) The third system is to allow the railroad
companies to fix their own rates and charges in the heginning
and then provide a commission that shall have the power and
authority to hear all complaints made by the public and deter-
mine what is a just and fair rate and then put it in operation
and enforce it. That is what the bill now under consideration
does—it only interferes in case of a contested rate. Mr. Chair-
man, as some of the gentlemen who have spoken seem to ques-
tion this position, let me read from the bill itself:

That the Commission is authorized and empowered, and it shall be
its duty, whenever, after full hearing upon a complaint made as pro-
vided in section 13 of this act, or upon complaint of any common car-
rier, it shall be of the opinion that any of the rates or charges whatso-
ever, demanded, charged, or collected by any common carrier or carriers,
subject to the provisions of this act, for the transportation of persons
or property as defined in the first section of this act, or that any regu-
lations or practices whatsoever of such carrier or carriers affecting
such rates, are unjust or unreasonable, or unjustly discriminatory, or
unduly preferential or prejudicial, or otherwise in violation of any of -
the provisions of this act, to determine and prescribe what will, in its
judgment, be the just and reasonable and fajrly remunerative rate or
rates, charge or charges, to be thereafter observed in such case as the
maximum to be charged.

That being the language of the bill, how can any gentleman
charge that Congress by this legislation proposes to initiate rate
making? The words used are very clear and are not subject
to misconstruction. When the railroads prescribe just, reason-
able, and fairly remunerative rates in the beginning no one will
interfere, and it is only when they do not do so that the Commis-
sion will interfere and see that no injustice is done. How can
any fair-minded man complain? Is it not fair and right to have
a disinterested tribunal, such as the Interstate Commerce Com-
mission, given the power to determine in contested cases what is
just between railroad and shipper, what is right between man
and man, as the courts of the land have done for centuries
past?

The very foundation stones of all civilized governments are
the courts; life, property, and human liberty are dependent on
them for preservation and protection. The Interstate Commerce
Commission is merely a great court, vested with the power to see
that the railroad highways of the country are kept open to all
citizens alike on just and equal terms; that monopolistic greed
shall not possess them as an instrument to oppress the poor, and
that honest industry may freely use them to develop the great
resources of our country.

This legislation does not attempt to make railroad rates, but
it says to every citizen of the United States if you complain that

6596
7

the rates given you by the railroads for the transportation of
your goods, wares, and merchandise are such as to drive you
out of the markets you are entitled to reach on equal terms with
your competitors, if you are not permitted to build up your busi-
ness and develop your industry, then it says we have appointed a
tribunal before whom you can take your case and justice will be
done.

A railroad company is not given the right to make all the
money it can as an ordinary private corporation has the right
to do. If I am in the shoe business, I have a right to make all
the profit I fairly and honestly can. That is not the case with a
railroad company. Is there any man on the floor of the House,
whether he is in favor of this proposition or against it, who will
contend that: the owner of an old-time turnpike who has the
right to charge toll to each wagon that passes on the road would
have the right to make the farmers bringing their produce to
town pay exorbitant tolls? Not one. Is there a man here who
will deny that the rates charged for driving along the turnpike
should be only reasonable and just, and that the owner of the
turnpike should have only a fair and reasonable return on his
investment? Not one. The railroads stand exactly in that
attitude toward the public. They are entitled to a fair and
reasonable return on the capital invested. They are entitled
to keep up the betterments of the road; they are entitled to pay
running expenses, and there is no legislation Congress can pass
that can take that right away from them, but they are not en-
titled to take more.

There is another phase of this question that I wish to call
to the attention of the House before I conclude.

Last fall a number of gentlemen claiming to represent the
railroad men of America called on the President of the United
States and protested against the enactment of the legislation
we now have under consideration, claiming that it would have
a tendency to reduce the wages of railroad employees in this
country. Since that time I have received a number of petitions
from railroad employees in my district requesting me to vote
against the bill on the ground that it would reduce their wages.
These petitions are all in the same language, have the appear-
ance of being all manufactured by the same hand and to come
from a source other than that of the employees themselves.
Let me read to you a part of one of these petitions:

Whereas of the total number of employees mentioned above, 56,041
were locomotive firemen, whose share of the wages paid amounted to
$37,484,283; and .

Whereas in this country, where the rate-making power is in the
hands of the railroads, the average daily wage paid firemen in 1903
was $2.28, while in Belgium, with state railroads, it was but 72 cents,
and in Great Britain, with government control of rates, only 91 cents,
although our freight rates are the lowest in the world: Therefore, be it

Resolved, That we, the ‘Tombigbee Lodge, No. 426, Brotherhood of
Locomotive Firemen, consisting of 170 members, are opposed to_the
enactment of any legislation which will give to the Interstate Com-
merce Commission, or to any other body, the power to make the rates
for the railroads of this country, thereby controlling their employees,
and consequently their ability to pay fair wages to their employees.

Now, Mr. Chairman, the report of the Interstate Commerce
Commission for the year 1904 shows that there are 1,312,537
railroad employees in this country, whose annual wages amount
to the sum of $775,321,415. We can not pass the petition of
this great number of American citizens by without giving ther

6596
8

a most careful consideration. T have studied the question from
their standpoint as thoroughly as I cculd, and have come to the
ecnclusion that railroad rate legislation will not affect them in
any way. In the first place, as I have shown by the Supreme
Court decision that I have already read, that any railroad rate
made by a railroad commission that did not provide sufficient
revenue to take care of the operating expenses of the railread
would be confiscatory and enjoined by the courts. No one will
believe that a commission acting in the interest of the American
people will attempt to reduce the present wage scale of Ameri-
can workmen. #

I do not deny that the railway wages of employees in Euro-
pean countries are less than they are in this country, but I do
deny that the Government ownership or contrel in any material
way accounts for the low wages in England, Belgium, and other
eontinental countries. I contend that railroad wages are low
in Hurope because all wages are low in every branch of indus-
try, and that railroad wages in America are high because the
American standard of work and wages is high throughout and
because the American railroad employees have the strongest
and best labor organization in the world. It is organization
that has kept up wages in this country.

In bulletin No. '20 of the Department of Labor, on page 8, in
discussing the question of wages of European railway em-
ployees, the Department says:

The length of the working day and the general conditions of railway
employment are also disadvantageously affected by the comparative
weakness of railway labor organizations. In several countries, such as
Prussia or Belgium, it is not permitted to railway employees to partici-
pate in any labor union; in other countries, like Austria, the unions
are small, unimportant, and too intimately associated with political
parties to have much influence, while even in France the railway labor
unions have but little real power. In England, the home of trade
unionism, the difficulties in the way of labor organizations among rail-
way men have until recently placed a bar in the way of the attainment
of the wishes of the men. The wide dispersion of the men, the special
character of much of their work, the great degree of differentiation
among the employees, and the innumerable differences in rank render
it dificult to establish a general, strong, and permanent ‘organization.
It is*usually found that the higher classes of employees desire to hold
themselves aloof from those less favored, this being especially the case
with the locomotive staff. In England and in France these better paid
employees usually remain outside of the regular union when they do
not actually form another and an antagonistic organization.

The weakness of the continental railroad organizations is
shown in this statement.

Let me here call your attention to another pertinent fact why
our railroad men receive higher wages than are paid abroad. It
is because they do more work and render a greater service
than does the foreigner. In the United States in the year
1896 there were employed on an average 454 men for each bun-
dred miles of railroad, or 443 men per mile. In England in
1895, 465,112 men were employed on 21,174 miles of railroad,
or 22 men per mile. In France in 1896, 251,971 persons were
employed on 22,895 miles of road, or 11 men per mile. In
Belgium in 1896, on the state railroads, 48,415 persons were
employed on 5,359 miles of read, or 9 men per mile. In other
words, the American railroad man, on an average, does twice
as much effective work for his employer as does the employee
in Belgium, two and a half times as much as in France, and

6596
9

nearly five times as much as in England. Is he not entitled
to the higher wage scale? He earns it.

Now, let me show you that it is not only the railroad wages
that are lower in Europe than America, but that all wages are
much lower; that the wage scale is low on account of the gen-
eral condition of the country and not because the railroads
are owned or controlled by the government.

The petition that I read a few moments ago stated that in
1903 the wages of a fireman was $2.28 in the United States,
91 cents in Great Britain, and 72 cents in Belgium for each
work day. Taking the American wage of $2.28 a day as 100,
the daily wage in Great Britain would be 40 per cent, or
four-tenths of the American wage, and in Belgium it would be
31 per cent, or less than a third of our wage in this country.

Now, let us compare the fireman’s wage. The same com-
parison can be shown as to the engineer, conductor, and other
employees with the general wage scale of Europe. I have
compiled a table of the wages of thirteen different trades from
the data given in Bulletin No. 54, pages 1023 to 1086, of Bureau
of Labor, giving the wages per hour and the hours of work in
1903, which I will now read.

Comparison of American and European wages and hours of labor, 1903.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Compositors --... 4467) -1795] 11411) 11308! | 0955] 49/81) 50:00] 51.08] 60:00] 54.00
Hod carriers --.-- . 2863) . 1250} .0849| . 0965) ..-_.- 47, 98) 59.50) 63.91}...
Iron molders. -..- 8036) .1774)__-.-- -1810} . 0692] 56. 80) 53, 67!____.- 60.00) 60.00
Laborers,general| .1675| .1019} .0797) .0965) .0549) 56.39} 52.50) 56.36} 60.00) 63.00
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House painters...) .8450) .1774) .1194) .1255) .0667] 48. 89} 51.00) 56. 25} 60.00) 66.00
Plumbers -..-..--. 4429] . 2027) .1148) 1501) .0784| 48.91) 49.17) 56. 68} 54.00) 60.00
Stone cutters ....} .4225| .1994] .1177) .1448, .0685] 48.67) 50.17) 54.00) 60.00) 65.00
Stone masons -...| .4579| .2078] . 1828) 8) 0845) 49.54) 50,17] 56.50) 66.00] 62.60

 

From this table you see that a carpenter receives nearly
86 cents per hour in America, only 20 cents in Great Britain,
and 7 cents in Belgium, whereas the American carpenter works
only forty-nine and one half hours a week, the Hnglishman fifty,
and the Belgian nearly sixty-five. This great difference is
clearly not due to railroad control but to general conditions and
labor organizations. Through the whole list of skilled me-
chanics the same comparison runs in varying degrees.

But let me call your attention to another table comparing
the same wages and hours of labor on the per cent basis, tak-
ing the American wage at 100 as the standard. I read from
Bulletin No. 54 of Bureau of Labor, page 1125;

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_raking, for example, the occupation of carpenters it is seen that
with the average hourly wages for the United States in 1903 repre-
sented as 100, the average hourly wages for Great Britain were but
56.4 per cent of that figure, or a little more than half the average
wages paid in the United States; the wages for Germany were but 36.2
per cent, or a little more than one-third of those paid in the United
States; the wages for France were but 43 per cent, or considerably
less than one-half those paid in the United States; and the wages for
Belgium were but 19.8 per cent, or less than one-fifth those paid in the
United States.

Let us state the case clearly. The English fireman received,
in 1903, 40 per cent of the American scale, and the Belgian 31
per cent; the English carpenter 56 per cent, the Belgian 19 per
cent; the English compositor 40 per cent, the Belgian 21 per
cent; the English plumber 45 per cent, the Belgian 17 per cent;
the English stone mason 45 per cent, the Belgian 18 per cent, and
so on through the entire wage scale. Does it not demonstrate
beyond a doubt that the low rate of wages paid railroad men on
the Continent is due entirely to the general conditions of the
labor market there and is not due at all to government control
of railroads?

France is the one great European nation that has no form of
governmental control of its railroad system, and yet I find from
the statistics contained in Bulletin No. 20, of the Department of
Labor, that the great bulk of French railroad wages are under
5.26 francs, or $1.015, per day, 80.54 per cent of the employees
receiving less than that sum, while nearly four-fifths of Ameri-
can railroad wages are from $1 to $2 per day. In fact, the
American railroad wage is about double the French railroad
wage. There are nearly three times as many men employed
on the French roads; there is no governmental control, and yet
the difference in the wage scale.

Mr. Chairman, it seems to me the only question left in doubt
about the matter is whether the persons who prepared the peti-
tion I have referred to did so to mislead the railroad employees
themselves or to fool the Members of Congress. F

Now, Mr. Chairman, let me make a brief review as to present
labor conditions of railroad men as compared to railroad con-
ditions.

Let me read you a table showing the daily wages of railroad
employees in 1895 and in 1904, showing the percentage of in-
crease :

Statement relating to average daily compensation of railway employees
for the years ending June 30, 1904 and 1895.

 

 

 

   
 
 
 
  
 
 
 
 

 

 

 

 

 

Increase, 1904 over
Class. 1904. 1895. e
er

Amount. Gant:
General officersis.....--2-22s-202-200+5- $11.61 $9.01 $2. 60. 28.88
Other officers. -__--- | OF 5.85 «22 3.76
General office clerks - 2.22 2.19 03 1.387
Station agents---.-.- 1.93 174 a 19 10. 92
Other station men 2 1,69 1.62 07 4.32
Enginemen --.---- 4.10 3. 65 45 12. 33
Firemen -- 2.35 2.05 30 14.63
Conductors -... 3.50 3. 04 46 15.13
Other trainmen - 2.27 1,90 37 19. £4
Machinists- ---. 2.61 2.22 39 17.57
Carpenters. - 2.26 2.03 23 11.33
Other SHOPMC irene ccd wane ncemamaare 1.91 1.70 21 12.35

6596
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Statement relating to arcrage daily compensation of railway employees
for the years ending June 30, 1904 and 1895—Continued.

 

 

 

Increase, 1904 over
1895.
Class. 1904. 1895. =
er
Amount.) cont.
Section foremen..-..-_-....-------------- $1.78 $1.70 $0.08 4.71
Other trackmen.....--.....------------- 1.33 1.17 16 18. 67
Switch tenders, crossing tenders, and
WatChMen ccc ceccsccuseescetceeee seen 1.77 1.75 02 1.14
Telegraph operators and dispatchers. . 2.15 1,98 1T 8.59
Employees, account floating equip-
MONG reesscsees cece taseesmecussmezee es 2.17 1.91 26 13,61
All other employees and laborers ~-..... 1.82 1.65 elf 10. 30

 

 

 

 

 

You will observe that within the time named the salaries of
the general officers have increased 28.86 per cent, while that of
engineers 12.33 per cent, firemen 14.63 per cent, conductors 15.13
per cent, section foremen 4.71 per cent, and switch tenders,
watchmen, etc., only 1.14 per cent.

I find that the gross earnings of the railroads of the United
States from operation in 1895 were $1,075,371,662; in 1904,
$1,975,174,091, a net increase of $899,802,629, or an increase in
nine years of 83.68 per cent; that within that time the oper-
ating expenses increased from $725,720,415 in 1895 to $1,388,-
896,253 in 1904, an increase of $613,175,838, or 84.49 per cent;
that the net earnings in 1895 were $349,651,047 and in 1904
were $636,277,838, an increase of $286,626,791, or 81.98 per cent;
that the number of miles of road operated on June 30, 1895, was
177,746 miles, and in 1904 was 212,248 miles, an increase of
34,496 miles, or an’increase of mileage of 19.41 per cent, which
demonstrates that the increased receipts are due to increased
business on the old roads mostly, and not to any great extent
to increased mileage.

I also find that the number of cars in freight service in 1893
was 1,013,307, in 1904 was 1,692,194, an increase of 678,887, or
67 per cent; that the number of locomotives in freight service in
1893 was 18,599, and in 1904 was 27,029, an increase of 8,430, or
45.32 per cent; that the number of tons of freight carried in
1893 was 745,119,482 tons, and in 1904 was 1,309,890,165 tons,
an increase of 564,779,683 tons, or 75.80 per cent; that the num-
ber of tons carried for each trainman employed in 1893 was
5,083 tons, in 1904 was 6,800 tons, an increase of 1,715 tons, or
83.73 per cent; that the average number of tons in a train in
1893 was 184 tons, in 1904 was 308, an increase of 124 tons, or
67.39 per cent. All of which clearly demonstrates that the
earning capacity of the railroads does not regulate the wages of
the employees, for in the last ten years the railroad earnings
have increased about 82 per cent, the cost of handling freight
has decreased, for the average train now carries 67 per cent
more in a load than it did ten years ago, the work of the train-
men has increased, for the number of tons carried to each
trainman employed has increased 33 per cent since 1893, and
the average increase of wages to trainmen during this period
of unexampled prosperity has been less than 15 per cent, not
enough to cover the increased cost of living during that period.

6596
13

I will now read from bulletin No. 59 of the Bureau of Labor,
on page 18, a table showing the increase in the retail prices of
food from 1890 to 1904 as compared with the general increase in
the wage scale in the United States in the same period.

Relative employces, hours per weck, wagcs per hour, weekly earnings
per employee and of all employees, retail priccs of food, and purchas-
ing power of hourly wages and of weekly earnings per einployee,
measured by retail prices of food, 1890 to 1904.

[Relative numbers computed on basis of average for 1890-1899—=100.0.]

 

 

 

Retail Purchasing
prices of Power, measured
food, iy ftond: oe
‘ 7 Weekly | Weekly | weight- | 0! food, of—
oar ce es bh earnings/earnings| ed ac-
"ees week. | hour, | Per em- of all em-| cordin Weekl
. . * | ployee. | ployees. |to family Hourly earnings
earn: wages.} per em-
tion, ployee.
1890 ...| 94.8] 100.7] 100.3 101.0 O57 102.4] 97.9 98.6
1891...) 97.3] 100.5] 100.3 100. 8 98.1 103.8 96.6 97.1
1892_...| 99.2] 100.5] 100.8 101.3 100.5 101.9 98.9 99.4
1893 ....} 99.4] 100.3] 100.9 101.2 100.6 104.4 96.6 96.9
1894 -.. 04.1] 99.8 97.9 97.7 91.9 99.7 98. 2 98.0
1895 ....| 96.4} 100.1 98.3 98.4 94.9 97.8 | 100.5 100.6
1896 ....] 98.6 99.8 99.7 99.5 98.1 95.5 | 104.4 104.2
1897 ....| 100.9 99.6 99.6 99.2 100.1 96.3 | 103.4 103.0
1898 -_..} 106.4 99.7} 100.2 99.9 106.3 98.7 | 101.5 101.2
1899 _...] 112.1 99.2] 102.0 101.2 113.4 99.5 | 102.5 101.7
1900 ----} 115.6 98.7 | 105.5 104.1 120.3 101.1} 104.4 103.0
1901 --..} 119.1 98.1 | 108.0 105.9 126.1 105.2 | 102.7 100.
1902 ....} 123.6 97.3 | 112.2 109.2 135.0 110.9 | 101.2 98.5
1908 ....| 126.5 96.6 | 116.3 12.3 [ . 142.1 110.3 | 105.4 101.8
1904 ....} 125.7 95.9 | 117.0 112.2 141.0 111.7 | 104.7 100, 4

 

 

 

 

 

 

 

 

 

This table shows that in 1904, as compared with the average for the
ten years from 1890 to 1899, 25.7 per cent more persons were em-
ployed; hours of labor per week had been reduced 4.1 per cent; wages
per hour had increased 17 per cent; weekly earnings per employee had
increased 12.2 per cent; weekly earnings of all persons employed had
increased 41 per cent; retail prices of food had increased 11.7 per
cent; the wages of one hour would purchase 4.7 per cent more food,
and the earnings of a week would purchase 0.4 per cent more food.

The wages per hour of the average workman in the United
States since 1805 has increased about 19 per cent. The average
of the increase in wages paid trainmen in that period has been
Jess than 15 per cent. In 1895 the purchasing power in the
retail price of food of the weekly wages of employees: was
100.6 and in 1904 was 100.4, a decrease of 0.2 per cent; and as
railroad wages have not increased in that period as much as
general wages, it is demonstrated beyond cavil that railroad
employees are not receiving as great a wage, measured in the
purchasing power of their money to buy food, as they did ten
years ago, and yet within that time the railroads have expe-
rienced an era of prosperity never before known in the world.

Now, what I contend is this—that the railroad employees, so
far as their wages are concerned, will not be affected in any
way by this legislation; that the wages of railroad employees
in this country are maintained solely by their safe and conserva-
tive labor organizations; that the only real interest that rail-
voad men have in the pending legislation is that of the general
public in its opposition to present conditions, which allow the

6596
14

great monopolistic corporations of this country special privi-
leges in the way of rebates, private car rental, switch-track pool-
ing, and other devices, through which they receive the benefit
ot discriminating freights, whereby they are enabled to drive
their competitors from the country’s markets and absolutely con-
trol the prices the public must pay for many of the necessities
of life.

Mr. Chairman, I am not in favor of the Government interfer-
ing with the business of the country. I believe every man
should be allowed freedom to work out his own destiny, but I
do believe that the railroad highways of the country are as nec-
essary to the life of commerce as the air we breathe is to the
life of the human body. I believe the air should be free to all,
and I believe the opportunities of commerce should be free to
all. This can be only when every man has equal rights and
equal opportunity to seek his markets along the public high-
ways with every other man. That is riot the case to-day. This
bill seeks to abolish discrimination and injustice. It provides a
fair tribunal to see that all men are given an equal chance, that
enly just and fair rates are charged. The bill is not all I
want, but it goes in the right direction and I support it for that
reason. It stands for fair play, it stands against monopoly, it
stands for the right against the wrong, it stands for the people
against the trusts. It means the dawning of a new day in our
commercial prosperity, when industry and thrift may march un-
shackled to the marts of trade, [Applause.]

6595

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