Mr. DREIER. That is correct, sir; and it is our further contention that this railroad, the Central Railroad of New Jersey, came into the area many, many years ago primarily to serve the area and that the municipalities that are thriving there now are the result of the railroad coming in and inducing the growth of the municipalities. We contend that the municipalities are entitled to have the railroad remain to serve their growth.

One of the municipal mayors is here and will go into more detail with regard to the results to the municipalities if the plan were adopted with article 3 therein.

The Interstate Commerce Commission has submitted to your committee, through its legislative committee, a report on this bill, raising two objections. One of their objections is with reference to the right of the Interstate Commerce Commission to order a merger of railroads in a certain manner, as set forth in that report. The Interstate Commerce Commission, or their subcommittee, contends that their authority might be affected by this proposed legislation. We definitely state it was never the intention of the proponents of this bill nor is it our belief that the bill written will affect the rights of the Interstate Commerce Commission in that type of action over which they have control; that is, merger of certain railroads.

However, so that there will be no question about it and to fully and adequately satisfy the Interstate Commerce Commission on that score, we have suggested amendments to the two sections being amended by the bill itself. Insofar as the first section is concerned, this amendment provides that there be the addition, after the amendment as now written, of the following:

This proviso shall not be construed as restricting any of the powers of the Interstate Commerce Commission under the Interstate Commerce Act.

That amends section 1 by eliminating the quotation mark at the end thereof and adding the above.

We are also offering a suggested amendment, if the committee deems it advisable, to that portion of the bill dealing with section 77 (f). The previous amendment had reference to section 77 (b). We would amend section 77 (f) by adding at the end of the second sentence thereof, instead of the wording used, the following:

Provided, however, That such plan of reorganization shall not affect the existing authority of any State or State regulatory agency relating to service, operations, or rates. This proviso shall not be construed as restricting any of the powers of the Interstate Commerce Commission under the Interstate Commerce Act.

Mr. REED. You propose that amendment in place of the one that is now section 2 of the bill?

Mr. DREIER. The second one which I have read would take the place in toto of section 2. The first one would be an additional sentence.

Mr. REED. To section 1?

Mr. DREIER. To section 1; yes, sir. And I would like to offer that amendment.

Mr. REED. It may be placed in the record.

(Amendments referred to are as follows:)

PROPOSED AMENDMENTS TO H. R. 6012

Amend section 1 by eliminating the quotation mark at the end thereof and adding the following: "This proviso shall not be construed as restricting any of

the powers of the Interstate Commerce Commission under the Interstate Commerce Act."

Amend section 2 to read as follows:

"SEC. 2. That section 77 (f) of said Act is hereby amended by adding at the end of the second sentence thereof the following: 'Provided however, That such plan of reorganization shall not affect the existing authority of any State or State regulatory agency relating to service, operations, or rates. This proviso shall not be construed as restricting any of the powers of the Interstate Commerce Commission under the Interstate Commerce Act.'"

Mr. DREIER. With reference to the other objection raised by the Interstate Commerce Commission's committee, we feel that it is true that they are directly attacking in that part of their objection what we are trying to have rectified by this legislation. The Interstate Commerce Commission subcommittee says-and I am not going into detail because it is before you that the power should lie with the Interstate Commerce Commission to recommend to the Federal court for its approval for the benefit of the reorganization of a railroad the right to permit such railroad, for all time in the future, to discontinue or curtail passenger services if the loss once reaches that critical figure of $1,000,000 in two consecutive years.

They are by this action asking that they be permitted to divest themselves of all control of the railroad for all time in the future regardless of what the future circumstances may be and to divest the utility commission in the particular State-whether it be New Jersey, as in this instance, or your own State the next time to divest those commissions of all power for all time in the future over the railroad.

Now, we say that should not be done. It never was the intention, in our opinion, of the Congress when it enacted this legislation that that power be given the railroad.

The Commission's report shows that this right was grasped by the Commission from an opinion-not the main portion of an opinion but the dicta of an opinion-in another case. The Commission says in their report to you that it is very necessary to have the power to approve a section such as article 3, and they give you examples of its need. They say they are going to cite to you two examples. They cite the New York, New Haven & Hartford Railroad case generally referred to as the Old Colony case, where this power was actually applied and has been approved and is now in force. They cite the Central Railroad as another example. Those are the two examples which they give.

Well, as a matter of fact, they are the only examples that could have been cited, although the Central plan, not having been consummated, is not a proper example. The Old Colony, I will concede, is an example. Whether it was a good thing is a very dubious question, but it is an example. We are very fortunate in having a representative from the attorney general's department of the State of Massachusetts, who is going to testify before you, and he can talk much more intelligently on that point.

However, I do know that the newspapers, within the last 2 months, have carried a statement by the president of the New York, New Haven & Hartford Railroad that as of October 1, 1948, the passenger service on that line would be abandoned completely. As the papers state, the abandonment affects some 750,000 persons and 75 communities. In our opinion, chaos will result to those communities and to those persons as a consequence, since the Old Colony line is the only

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means of rail transportation. It would certainly result in chaos to our area, where there is only the Central Railroad providing rail transportation, if that service were taken away.

Now, that has happened in Massachusetts; and because it has happened there, we know definitely that it can happen in our area. We do not want it to happen in our State, no more than anyone else wants it to happen in their State. We think it is a bad precedent, and we think the law should be amended.

It is interesting to note that in arriving at the tremendous loss which will be the basis for the enactment of article 3 of the plan, the Central Railroad of New Jersey, I believe in October 1946-—I am not sure, perhaps August 1946, sometime around there divided itself into two railroads, with a parent corporation, the Central of New Jersey. It was divided into the Jersey Central and the Pennsylvania Central. They divided all their assets; all their physical property in Pennsylvania went to the Pennsylvania company, and all the New Jersey property went to the New Jersey company. I may be wrong on certain of the items; but, generally speaking, I believe I am giving you an accurate portrayal of what happened. The rolling stock was apportioned between the two companies, and with the coal mines and most of the freight in Pennsylvania, that company is making tremendous profits. However, the poor New Jersey company, which carries the passenger service and which has the Jersey City Terminal— now, my recollection of the testimony in this case may be incorrect, and I stand to be corrected if I am wrong, but my recollection is that there are 6 miles of the water front in Jersey City as part of the New Jersey company's terminal and that it is one of the biggest terminals in the East and carried by this little line in New Jersey. That is one of the reasons why they are taking such heavy losses.

Over this line runs the Reading Railroad and the Baltimore & Ohio Railroad. Whether they bear their share of cost to cover their participation of the facilities of the Jersey Central and whether they are paying their share to reduce the loss, we do not know, because we do not know the interworkings of the railroads. We do know that the Reading Railroad Co. owns about 57 percent of the stock of the Central and the Baltimore & Ohio Railroad Co. owns the controlling interest-not the majority but the biggest single interest, of the Reading Co. I cite that to show the overlapping of the companies.

Last week I read in the newspapers, and I copied, the financial statement or report for the month of March 1948 for the New Jersey company. Ithad a net deficit for the 1 month of sixty-three-thousandodd dollars, on a gross income of roughly some $3,800,000.

On the other hand, the Pennsylvania company had a net incomeprofit of $488,000, on a gross income of about $1,800,000. That profit came from a gross of less than one-half of the gross of the New Jersey company. The Pennsylvania company made almost half a million dollars, while the New Jersey company lost $63,000.

Now, the point, gentlemen, is this: If the railroad had not apportioned its property into two companies, it would still be all in one company, and we would not be confronted with this terrific loss that is the basis for the plan to take away the passenger service from these various municipalities.

It is our contention that the Public Utility Commission of the State of New Jersey and the Interstate Commerce Commission are fair and

honest, and they are so we hope and so we believe-intelligent bodies. I do not think the Interstate Commerce Commission is acting intelligently in wanting to reject this piece of legislation. When I say they are intelligent, I am talking generally. I think they want to do a fair job, and so I do not think that they should, of their own volition, or through any interpretation of the law or statute, be able to divest themselves or the States affected of all control over a railroad in the future. We do not know what the circumstances are going to be next year or what they will be 10 years from now.

If there is any need for discontinuance of trains, for increasing the rates, or need for any relief, and if the relief sought is legitimate and proper, the public utility commission or ICC is there to see that aid is given the railroad. That is why the public utility commissions were created. That is why the Interstate Commerce Commission was created.

They came into existence for specific performance, and they should not be deprived of their supervision of railroads, merely because it might benefit some bondholders to the detriment of the general public.

I say that if H. R. 6012 is not enacted, and if the present reorganization is permitted to go into effect, with article 3 in the plan giving the Central Railroad the right to curtail or abandon its passenger service, as was done on the Old Colony line, then the die will be set for others to follow. It is conceded that passenger service of all railroads is not the profitable service. The freight service is the profitable one. It is going to be the lucrative thing for the railroads in the United States to say, "We are going into bankruptcy and in our reorganization under section 77 of the Bankruptcy Act we will submit a plan similar to the one used in the Old Colony or New Jersey Central cases. It was done twice and there is no reason why it should not be done with us. After our reorganization we will not have to bother with any passenger serv-, ice. We will only keep the plum, the freight business."

That is what is going to happen, in my opinion, Mr. Chairman and gentlemen of the committee.

The State of New Jersey through the senate and the house of assembly have passed a senate joint resolution which on May 7 was signed by the Governor and which therefore becomes a part of our laws for the year 1948. The resolution is very brief, and I would like to read it. It is:

Whereas the Central Railroad Co. of New Jersey is in bankruptcy and whereas certain bondholder groups of said railroad have filed a plan of reorganization, included in which is article II which provides that the charter of the New Jersey company shall be amended or deemed to be amended and its franchises and statutory obligations shall be amended or superseded so that under certain conditions the said railroad would be under no obligation to operate suburban passenger service; and

Whereas the curtailment or discontinuance of suburban passenger service on said railroad would work a severe handicap upon the municiaplities thereby affected and such curtailment or discontinuance would be adverse to the public interest and would further be a breach of the intended obligations of said railroad when it received its charter from the State of New Jersey: Therefore be it Resolved by the Senate and General Assembly of the State of New Jersey:

1. The Congress of the United States is urged to adopt legislation amending the Bankruptcy Act to the extent that upon the approval of a plan of reorganization of any railroad under said Bankruptcy Act, such approval shall not affect the existing authority of any State or State regulatory agency relating to service, operations, or rates.

2. The secretary of state is directed to transmit, immediately following the passage of this resolution, a copy thereof properly authenticated to the Secretary

of the Senate of the United States, the Clerk of the House of Representatives, and to each Member of the Senate and House of Representatives from the State of New Jersey.

3. This joint resolution shall take effect immediately.

Mr. Chairman, I have a copy here of that resolution, certified as being a true copy by the secretary of state of the State of New Jersey, and I would like to offer the resolution.

Mr. REED. That will be admitted.

(Resolution referred to will be found in the committee files.)

Mr. DREIER. In addition to that resolution, I have 10 certified copies of resolutions adopted by various municipalities in the area, asking your favorable action with reference to this bill. I do not intend to take your time by reading these resolutions, but I do want to offer them for your record at this time.

Mr. REED. They will be admitted.

(Resolutions referred to will be found in the committee files.)

Mr. DREIER. I might also say that copies of the proposed amendments and of the joint resolution of the State of New Jersey and of the individual resolutions by the municipalities, that copies of all those documents have been annexed to the statement which I have filed with you gentlemen.

In closing, I say that this is a very, very worthy piece of legislation. We sincerely believe in it. We also believe that while it presently affects the State of New Jersey, there is no way of telling how soon a reorganization of a railroad in bankruptcy will take place in Florida, or in the State of Washington or California or any other State in the Union.

It can happen. It will happen if the precedent is set. We feel this bill is in the best public interest-not of vested interests, not of any particular group, but of the public generally. We certainly urge you gentlemen to act favorably upon the bill. Thank you very much.

Mr. REED. Are there any questions from members of the committee?

(No response.)

Mr. REED. There are no questions. That is all, then, Mr. Dreier. We wish to thank you very much for your testimony.

(Material submitted by Mr. Dreier is as follows:)

STATEMENT OF AUGUSTUS S. DREIER, ATTORNEY FOR THE INTER-MUNICIPAL GROUP FOR BETTER RAIL SERVICE

My name is Augustus S. Dreier and my office is located at 203 Park Avenue, Plainfield, N. J. I am the attorney for the Inter-Municipal Group for Better Rail Service.

The Inter-Municipal Group for Better Rail Service is an association of municipalities served by the Central Railroad of New Jersey. The purpose of the organization is the planning of joint action in the solution of the rail service problems for the area. The municipalities forming the association are Somerville, Bound Brook, Dunellen, Green Brook Township, Watchung, North Plainfield, Plainfield, Scotch Plains, Fanwood, Westfield, Cranford, Garwood, Roselle Park, Roselle, and Elizabeth. Based on the 1940 census, the combined population of these 15 communities was 247,085. The present estimated combined population is 283,255. Each municipality is represented in the association by members appointed by the local governing body and consisting of the mayor, one councilman, the corporation counsel, and one lay member, usually a commuter selected from the public.