activities of the Corporation should bring it within the area of regulation where the Securities Exchange Act of 1934 is operative (as would be the case, for example, if the Corporation should seek to list its securities on a national securities exchange), the Securities Exchange Act provides machinery for such exemption as may be appropriate in the case of a Government instrumentality. See particularly section 3 (a) (12), 15 U. S. C. section 78c (a) (12). There is no exemption, under either act, for fraudulent market transactions in Government securities. Section 304 (a) (4) of the Trust Indenture Act of 1939, 15 U. S. C. section 77ddd (a) (4), affords an exemption from the requirements of that act. The other statutes administered by the Commission do not appear to be relevant to this discussion.

In conclusion, therefore, we see nothing in H. R. 429 which would create problems from the viewpoint of a Government corporation which are not already dealt with in the Federal securities laws. We have no other comment on other aspects of the bill.

The opportunity afforded us to express our views on this legislation is very much appreciated.

Sincerely yours,

Hon. ROBERT CROSSER,

Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives,

Washington, D. C.

MY DEAR CHAIRMAN CROSSER: Your letter of January 13, 1949, addressed to the Chairman of the Commission, and requesting a report and comments on H. R. 429, introduced by Congressman Jones of Alabama, to increase the capital stock of the Inland Waterways Corporation and to extend the service of such Corporation to the Tennessee and Cumberland Rivers, has been referred to our legislative committee. After careful consideration by that committee, I am authorized to submit the following comments in its behalf:

H. R. 429, would make two amendments to the Indland Waterways Corporation Act, which created the Inland Waterways Corporation and provides for its direction in operating the Federal barge lines on the Mississippi and Warrior Rivers and their tributaries, not including the Ohio River.

Under section 1 of the bill the capital stock of the Corporation would be increased from $15,000,000 to $33,000,000. This increase of $18,000,000 presumably is intended to cover the cost of a complete rehabilitation of the facilities of the Corporation, which, according to a statement of Under Secretary of Commerce Foster before the subcommittee of the House Committee on Appropriations April 17, 1947, would involve the expenditure of approximately $17,000,000 over a period of about 3 years.

Section 2 of the bill would have the effect of permitting operation of the Federal Barge Lines on the Tennessee and Cumberland Rivers and on the Ohio River between its mouth and the confluence of the Cumberland River.

H. R. 429 appears to present a question of congressional policy concerning which it would seem inappropriate for us to offer an opinion. Respectfully submitted.

WALTER M. W. SPLAWN,
Chairman, Legislative Committee.
CHARLES D. MAHAFFIE,
JOHN L. ROGERS.

STATEMENT ON THE PROPOSED LEGISLATION RELATING TO THE FEDERAL BARGE LINES BY LESLIE HILL PRINCE, DIRECTOR, WASHINGTON OFFICE, NEW YORK STATE DEPARTMENT OF COMMERCE

Any group proposing to expand the operation of the Federal Barge Lines by the Inland Waterways Corporation must prove the value to the whole country of this subsidy. For many years these operations have been defended as cheap transportation. In fact, it is very expensive transportation when you include the cost of maintaining the navigability of the Mississippi River and the operation of the tax free Inland Waterways Corporation.

The Federal Barge Lines was a war baby of World War I. At first their operation was justified on the basis that we had the river, we had to keep it clear anyway for private operation, and we had the boats left from the war. So, why not put the boats and the river together for the benefit of primarily agricultural shippers in the Mississippi Valley.

The cost fears of the expenditures of such subsidized shipping have been realized. It is now proposed to expand the operation rather than merely use it to salvage part of the cost of barges originally built for war purposes. Although the cost of operating the Federal Barge Lines is met by the taxpayers of the United States, of whom a substantial percentage live in New York State, their operation is building the port of New Orleans at the expense of the port of New York and the inland ports of Buffalo and Oswego. Paying tax to destroy our own business is not popular in New York State.

The proponents of the present subsidy measure will have to prove to the people of the Northeast that they should be taxed to support unnecessary public service. Has any necessity for subsidized water transportation been shown, or has the case rested on the simple proposition that a shipper benefits when part of his cost of transportation is paid by somebody else? This fact we willingly concede; but we have no desire to be the "somebody else" at the expense of New York State's facilities, supported by New York State taxpayers. Perhaps the people in the Mississippi Valley would be willing to underwrite this operation, in which case, we have no quarrels with how they use their own money. Our quarrel is with those who would tax us to destroy our own business.

Nor do we quarrel with those who feel that maintaining a navigable waterway adjoining several States is a legitimate Federal expenditure. New York State continues to support her barge canal, successor of the old Erie Canal of a century ago, but our canal system is navigated by privately owned companies operating barges and motorships between the Great Lakes ports and the ports of Albany and New York. Continued subsistence of the Federal Barge Lines has already resulted in the diversion of a substantial volume of this private enterprise to the Mississippi Valley. For instance, no sulfur was carried over the New York State Barge Canal during 1948 due to the low freight rate established by the Federal Barge Lines. Formerly, as much as 300,000 tons per year moved through the New York State Canal system. So, not only the New York State taxpayers but also private water transportation companies are injured by this Government competition with private enterprise.

We would be derelict in our duty to the taxpayers of the State of New York, and to the industry and commerce of our State if we did not oppose H. R. 328, H. R. 429, and S. 211.

STATEMENT OF HON. F. EDWARD HÉBERT, MEMBER, HOUSE OF REPRESENTATIVES, FIRST LOUISIANA DISTRICT

Mr. Chairman, and members of the Committee of the House on Interstate and Foreign Commerce:

The civic and trade interests of New Orleans, hundreds of whom are small shippers, and who are connected with domestic and world trade, have made their views known to me.

They favor continuation of the Federal Barge Lines (Inland Waterways Corporation) under public ownership until such time as private capital will find it advantageous and feasible to buy and operate it, and provided that when this takes place, the private owner will continue to handle traffic under rates applying for carloads, less-carload and less-than-barge loads, to the same extent as is generally existent over these lines at this time; further, that the private owner will be required to continue, as a minimum, substantailly the present differential rate coverage, both as to territory and commodities; and that such private owner will be required to furnish the same service as was normally furnished by these lines before World War II, a service curtailed today because of worn-out equipment, shortage of barges, and lack of sufficient modern towboats. Today the private barge operator does not serve the carload and less-carload shipper. Having examined the provisions of H. R. 328, and mindful of the position which the civic and trade groups took toward the continuation of regular common carrier barge service, as stated hereinbefore, they wish to record before this committee their support for this legislation, feeling that this is to the best interests of the people of the Mississippi Valley and to the commerce of the city of New Orleans and all of its related interests.

It is their and my belief that, with the passage of this legislation, the Federal Barge Lines will be rehabilitated, its equipment will be modernized, its services will be improved, and the shippers of the midcontinent area will receive the service to which they are entitled under the organic law creating the Inland Waterways Corporation.

We further feel that when these things have been done, the Federal Barge Lines, as a going concern, can be sold to private owners who will then have no hesitancy to purchase and give assurance of continuation of common-carrier service on the Mississippi River and its tributaries.

The Federal Barge Lines have served the midcontinent and New Orleans areas since 1918 and have a rightful place in their economic set-ups.

The Government has invested millions of dollars in the improvement of rivers and canals. The continuation, therefore, of the Federal Barge Lines until such time as private capital can take over, warrants the granting of the appropriation now requested to insure uninterrupted transportation on these rivers and canals and to justify the moneys spent upon their betterment.

Mr. BECKWORTH. We shall be glad to hear Mr. Willis at this time. Mr. WILLIS. My name is Edwin E. Willis, representative from the Third District of Louisiana.

I appear here to testify in favor of the legislation under consideration having to do with the Inland Waterways Corporation.

The continuation of the Federal Barge Lines is absolutely necessary if the small shippers and merchants in the Mississippi Valley are to obtain the benefits of water transportation. The independent barge lines operating on the inland waterways are gradually going out of the less-than-bargeload business. From a cold business standpoint, the independent barge lines are disposed to pick the cream of the traffic; they cater to bargeload business, but are indifferent to the less profitable less-than-bargeload traffic. In consequence, the Federal Barge Line is the one medium which the small-business men can look to for movement of their produce on the Mississippi River and its tributaries.

Among other commodities, the maintenance of the operations of the Federal Barge Lines plays an important part in connection with the rates on sugar and rice, of which great quantities are produced in the Third District of Louisiana, which I represent.

The philosophy of Congressman Boggs' bill is that there is room in our economy for both independent barge operators and the Federal Barge Lines. It contemplates that Federal should not unduly encroach upon the bargeload traffic developed by independents, and by the same token that these private operators should cooperate with Federal in connection with the handling of less-than-bargeload business.

I accordingly urge a favorable report on this bill.

Mr. BECKWORTH. The next witness is Representative Hale Boggs, New Orleans, La. He is the author of two of the bills which are before the committee, H. R. 328 and H. R. 4978. We shall now hear Representative Boggs.

STATEMENT OF HON. HALE BOGGS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA

Mr. BOGGS. Mr. Chairman and member of the committee: First, I should like to express my appreciation to the chairman and members of the committee for arranging this hearing as quickly as it has been arranged and for giving the interests involved here as much time as you have set aside.

We consider this legislation vitally important to the entire Mississippi Valley or midcontinent area section of the United States of America.

As the chairman has pointed out, I first introduced H. R. 328 which was a companion bill to a bill which I introduced last year and which had been sponsored jointly by the late Senator Overton and myself.

At the beginning of this session I reintroduced H. R. 328, the same bill having been introduced in the Senate this year by quite a bipartisan group.

To show that bipartisan interest in this legislation I should like to read for the benefit of the committee and the record the names of the Senators who sponsor this legislation:

Senator Wherry, Senator Gurney, Senator Butler, Senator Kefauver, Senator Long, Senator Humphrey, Senator Ellender, Senator Sparkman, Senator Fulbright, Senator Hill, and Senator Hickenlooper.

Some time after the introduction of H. R. 328 and the Senate bill, an effort was made-and I am very happy to say a successful effort, generally speaking-to work out some of the difficulties which had cropped up between the Inland Waterways Corporation, or Federal, and some of the private and independent operators.

H. R. 4978 and the companion bill in the Senate upon which hearings have been commenced, is the combined effort of those of us who are interested in preserving private enterprise and of giving the private barge line operators every conceivable break they should be entitled to under our American system of doing business, at the same time preserving and maintaining the very vital and important services which have been provided in the Mississippi Valley and the tributaries of the Mississippi River for about 30 years.

I do not believe it is necessary for me to go into any great detail with the members of this committee on the fundamental issue involved here. The House Committee on Interstate and Foreign Commerce has had before it over a period of several years now the question of the Federal Barge Lines. As a matter of fact, it has always been rather ironical to me that Mr. Henry Wallace was the first man in recent years who wanted to dispose of the Federal Barge Lines to private interests-a bit inconsistent with his present philosophy, to say the least.

In any event, when Mr. Wallace was Secretary of Commerce, it was seriously proposed that the Federal Barge Line interests or the interests of the Inland Waterways Corporation, be disposed of to private operators. Working on that basic premise, innumerable hearings were held all over the Mississippi Valley. As a matter of fact, one of the sponsors of this legislation in the Senate, Senator Kefauver, sat on the Small Business Committee in the House of Representatives which at that time conducted those hearings. I believe no more conscientious effort was ever made by a committee of Congress to reach a solution to a problem than was made by the Small Business Committee. I think that a review of that testimony will show one principal theme running throughout, and that is, that the services performed by the Federal must be maintained, if we are to continue our system of inland waterway transportation. I believe that this conclusion can be fairly drawn from the results of those

hearings and from the failure of private enterprise to come in and acquire the barge lines.

The Congress now, in my judgment, has only one course of action that it can consistently and conscientiously follow. Under the legislation which came out of the hearing, the idea was that the Federal Barge Line would be disposed of as a unit to private enterprise, with the assurance that the essential services rendered by the line would be maintained. Despite all those hearings, and despite the wide publicity given thereto, there was never a firm offer made to the Government for the acquisition of those properties. So it seems to me to be a fair conclusion to reach that if the Government believes, or if the Congress believes, that all of the millions of dollars which we have spent for the development of the inland waterways of the United States of America has been a sound investment-and we really believe that then the only alternative that we have at this time is the adoption of H. R. 4978 or similar legislation, because, in my humble opinion, it has been shown beyond a shadow of a doubt that at this time private enterprise is either not able, or not willing, or not ready to come in and acquire these properties, operate them, and provide the services which have been provided in the past. Therefore, it seems to me, that having exhausted the other proposition over a period of years, that we are now up against determining the basic policy of whether or not we are going to continue these operations on a sound financial basis, or whether we are simply going to permit them to be liquidated in a piecemeal fashion at a great loss to the Government and at a tremendous and incalculable sacrifice to the great many shippers located all over the Mississippi Valley and the midcontinent area of the United States.

Now, Mr. Chairman and members of the committee, to show you just how serious that situation is, last year when the Congress failed to pass this legislation and failed to determine upon any policy, during the summer months the barge line found itself in such a precarious financial position that it was forced to place an embargo on a great many points up and down the Mississippi River. And in all that time, the shippers who had taken this service for granted over a period of time, over a period of many years, and who really had no idea of the precarious position in which the lines found themselves, suddenly woke up and found they were about to lose one of the most valuable transportation systems in the United States.

I can tell you as one of the people who has the privilege of representing a small segment of that great section of our country, that the protest was vigorous and decisive and long and loud and it came from all over the valley.

Fortunately, because of a large movement of certain commodities which brought in additional revenues to the lines, that embargo was lifted.

I might mention in passing that at a time that the embargo came about, unfortunately the private interests were not able to come in and take up the slack, so for all practical purposes the shippers in that area were deprived of this service.

Now, I, of course, could talk about this at great length. Fundamentally this bill seeks to do just two things: Number 1, to provide sufficient funds to modernize and rehabilitate the equipment, the floating equipment of the lines and secondly, to acquire new equipment where it is needed.