Ratio of net income to net assets of leading corporations, 1947 to 1957 1 Oil and gas group excluded beginning with the year 1950. NOTE.-Net income is taken as reported, after depreciation, interest, taxes, and other charges and reserves. but before dividends. Net assets include book value of outstanding preferred and common stock and surplus account at beginning of each year. Source: The First National City Bank of New York. Mr. LOOMIS. I think, Mr. Chairman, that completes my statement. The CHAIRMAN. We are being interrupted again. I guess there is hardly any use to continue. Mr. Williams, may I inquire of you about your statement? How much of a statement do you have? Mr. R. ARTHUR WILLIAMS (chairman, Railway Progress Institute). Sir, I will be very happy to come in tomorrow. The CHAIRMAN. You can be here tomorrow? Mr. WILLIAMS. I can adjust my time to your convenience. The CHAIRMAN. Apparently it is useless to try to continue the hearing this afternoon as long as that situation exists on the floor of the House. In view of that fact, the committee will adjourn until 10 o'clock in the morning. I suppose, since Mr. Williams can be here in the morning, the appropriate thing to do is to proceed with your testimony, Mr. Loomis, until the members have had an opportunity to ask you such questions as they desire. With that understanding, the committee will adjourn. (Whereupon, at 3:40 p. m., the committee adjourned, to reconvene at 10 p. m., Thursday, May 22, 1958.) RAILROAD PROBLEMS THURSDAY, MAY 22, 1958 HOUSE OF REPRESENTATIVES, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. The subcommittee met at 10 a. m., pursuant to recess, in room 1334, House Office Building, Hon. Kenneth A. Roberts presiding. Mr. ROBERTS. The subcommittee will please come to order. Mr. Loomis, I believe you had finished your statement yesterday. STATEMENT OF DANIEL P. LOOMIS, PRESIDENT, ASSOCIATION OF AMERICAN RAILROADS-Resumed Mr. LOOMIS. I might add this, Mr. Chairman: Congressman Younger referred to the hearings before the Committee on Government Operations on the amortization program. I find that on July 11, 1955, Dr. Flemming, who was then Director of the Office of Defense Mobilization, testified as to the freightcar supply. It appears on page 5 that Dr. Flemming testified that he had been advised by Mr. Faricy, who was then president of the Association of American Railroads, that the railroads were placing orders for 44,000 freight cars. Dr. Flemming testified that that would still leave the program about 60,000 cars short, assuming that these 44,000 cars were ordered. Now, to look at what actually happened in the last 6 months of 1955, the railroads actually placed orders for 132,473 cars, so that they exceeded the goal of 104,000 that Dr. Flemming had referred to in his testimony before the Committee on Government Operations. Mr. ROBERTS. I believe in yesterday's Wall Street Journal there were several news articles on the statements by railroads. One referred to Nickel Plate and said carloadings were picking up. It referred to the Southern, that Southern was weathering the recession well, and a statement by the Wabash that business was looking up. Now, what I would like to know is this: Do you consider these statements are representative of all railroads, or are they more or less optimistic comments to stockholders, whereas the railroad situation continues critical? Mr. LOOMIS. Well, I could not say they were typical of the industry. 263 You will recall that I stated yesterday that the carloading last week showed a decline of 26 percent under the corresponding week of 1957. That is the worst week we have had so far. In April, as I put in the record at the time of the hearings on H. R. 11527, the carloadings for April had shown a decline of 21.9, but a week ago the decline was just about 26 percent, a fraction over 26 percent. Mr. ROBERTS. Is it usually true that the spring brings an upturn in the railroad industry as it does in some other industries? Mr. Loomis. There is generally some upswing, particularly with the grain harvest started, and with the movement of ore beginning generally in April or about that time. Traditionally the peak has come in the fall. Of course, the fall of 1957 instead of a peak we had a very sharp dip. But traditionally the peak business has been during the period of about October and November. Mr. ROBERTS. In your opinion, do you think that the chance for the usual spring upturn has pretty well run its course, or what is the situation at the present time? Mr. Loomis. There has not been any appearance of it yet as compared to a year ago. I believe the actual carloadings last week in number were somewhat greater than they were the previous week. But when you compare it with the same week in 1957, you still had a 26-percent decline. Mr. ROBERTS. Is it your opinion that the present lump in the automobile industry, which also, of course, has had its effect in the steel capacity, has something to do with this present situation? Mr. Loomis. I think so. Almost everything has something to do with the present situation—automobiles, steel, all sorts of manufac ture. Mr. ROBERTS. The slower starts in the building construction industry as compared to last year has had something to do with it? Mr. LOOMIS. Yes, and ore has started out very slowly so far this year. Mr. ROBERTS. Mr. Loomis, you and the other witnesses speaking for the TAA, have proposed certain language changes to section 13 of the Interstate Commerce Act relating to the ICC procedures regarding the intrastate rates and regarding the abandonment of passenger train service and facilities. As you are, of course, aware, your proposals are at variance with those by Dr. Baker, speaking for TAA. Dr. Baker indicated that the proposals had gone before the TAA panels. Do I understand that while you advocate your own language, you would favor the TAA language as a substitute? Mr. LOOMIS. No; I think the explanation for that is that, since the TAA acted, the situation has changed. On the opening day of the hearings on the Senate side, which was January 13, I, myself, testified somewhat along the lines of the proposal of Dr. Baker. However, that afternoon the decision of the United States Supreme Court in the Milwaukee case was handed down and it changed the whole complex, so that it forced us into a revision of our thinking and resulted in a change in the proposal that took considerable study of the effects of the Milwaukee case, and the TAA has never had an oppor tunity, as such, to consider the effects of the Milwaukee case, and particularly the effects of the Utah case, just decided, on this case, a decision handed down by the Supreme Court on Monday, I believe, which Mr. Kaier testified about yesterday. Mr. ROBERTS. Speaking for the Chair, I believe I am fairly familiar with the decision in the Milwaukee case. Will you comment on the Utah case? Mr. LOOMIS. I will, to the best of my ability, but it has to be general, because I have not studied it. Mr. HALE. I think all the committee would like to know just what the facts of that case were and what the Court decided. Mr. LOOMIS. As I understand it, Mr. Congressman, and as I said, I will have to explain it in a general way, because I have not had an opportunity to study it in a detailed way. The railroads had before the Interstate Commerce Commission a general-revenue case, Ex parte 175, in which they were asking for a general increase in all rates. The Commission granted a specific increase in the freight rates, but when it came to the intrastate rates in Utah, the Utah commission did not grant an increase in intrastate rates corresponding to the increase that the Interstate Commerce Commission had ordered in interstate rates. The railroads then took the case to the Interstate Commerce Commission under the provision of section 13. The Commission found that the failure of the Utah commission to grant an increase similar to that granted by the Interstate Commerce Commission on interstate rates resulted in undue discrimination and an undue burden on interstate commerce. The Supreme Court, however, set aside the Commission's order because it had not made a finding with respect to intrastate operations within the State of Utah on the basis of whether there was a gain or loss to the railroads from the operations in the State of Utah. That would take a cost study that is impossible to make, because you cannot separate your crew cost, your freight-car cost, your track cost, your traffic cost, as between the intrastate business that a railroad handles and the interstate business, except on an arbitrary level. The Interstate Commerce Commission had found a general need on the part of railroads for revenue, but the Utah Commission did not go along with that finding, and because the Interstate Commerce Commission had not made a specific finding with respect to operations within the State of Utah alone, the court set aside the ICC order. That is the first time, I think, in over 60 years, that any such principle as that had been enunciated. We thought the law had been settled by the Shreveport case. Mr. HALE. You consider that the Utah case completely overrules the Milwaukee case? Mr. LOOMIS. No; it is in line with the Milwaukee case, but it goes even further. In the Milwaukee case, the Court said, in looking at whether or not a commutation rate is reasonable, you must look at the result of all operations within the State of Illinois. The Milwaukee case was solely on the question of the commutation rates from Chicago to the suburban area. The Court set aside the order on that case, which found that the commutation rate was unreasonably low and undue burden on the |