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provision in the RFC loans that on default the Government would take over and operate or sell and dispose of.
The CHAIRMAN. That is just the point I am making, that we loaned money to the railroads and we did not do it even with the remotest intention of ever taking them over and operating them. And this bill does not contemplate the taking over and operation of these market facilities by the Department of Agriculture, except if they default, and then only for such length of time as is necessary to protect the Government's investment.
Mr. SOUBY. You cannot embarrass me by bringing up any of your other laws, I do not believe, including the RFC, the Federal farm loan, or any other enterprise of that sort. I do not like it. I am speaking personally now, as a private citizen. I am opposed to all of that sort of Government injection into private business.
The CHAIRMAN. You say I can not embarrass you. You do not have the idea that I am trying by method to embarrass you, do you?
Mr. Souby. No. Let me tell you about the RFC. I think both the RFC and your farm-loan business is fundamentally different in principle from the thing you are fooling with here. I say personally I do not like either one of them. I thought they were wrong when they were adopted. But if you go back to the origin of the RFC, you remember that it happened in a time of depression, it was not a promotional enterprise, it did not propose to lend one nickel to the building of some new facility or promoting some new facility. It was devised in, I think, probably a mistaken notion that they could stay the depression by bailing out some going concerns that had fallen into financial difficulties as the result of the depression.
The CHAIRMAN. And among those concerns were the railroads of the country.
Mr. Souby. Among them were the railroads and probably it harmed the railroads more than it helped them.
The CHAIRMAN. In other words, you do not like the RFC but the RFC came to your rescue in the days of the depression.
Mr. Souby. That is right. I say personally I thought it was a mistake because I foresaw, I do not claim to have any greater vision into the future than other people, but I foresaw that the minute the Government injected itself in the field of trying to help big business, whether railroad business or banking business or any other kind of business, it was just inevitable politically that it was going to have to help little business and the little fellow and finally come down to where the Government would be lending to everybody or bailing them out.
The CHAIRMAN. Analyze the statement you have just made. You say in effect that you are perfectly willing for the Government to aid big business, but you are so afraid it is going to aid little business that you have some misgiving about perınitting it.
Mr. Souby. You misunderstood me entirely. I said that I felt it was a mistake to start with, whether it was big business or little business.
The CHAIRMAN. Suppose the Federal Government in the days of the depression had not come to the rescue of the railroads, what would have happened to them?
Mr. Souby. Why, most of the railroads that the Government undertook to rescue it did not rescue at all. They went through the wringer. Practically every road, with one or two more recent exceptions that borrowed money from RFC, wound up in receivership or bankruptcy, and it was merely delaying the evil day and added to the complications of the reorganization. You read the history of that and you will find that. In other words, the machinery did not succeed in accomplishing the purpose it was intended to.
The CHAIRMAN. In other words, the railroads were in such foul shape financially that even with the RFC they could not still be saved from liquidation.
Mr. Šouby. That is right.
Mr. Souby. They would have been kept running away. They are kept running after they go into the bankruptcy court.
The CHAIRMAN. But you were running in the red constantly.
Mr. Souby. No. When they get into the red for any definite length of time, they get into bankruptcy. Then they are run under the court's orders, and they never stopped running them.
The CHAIRMAN. You make the statement that you are opposed to the principles back of RFC and you are opposed to lending money from the Federal Government to anybody who is in financial difficulties to finance any sort of an enterprise in which private capital is unwilling to take to finance.
Mr. SOUBY. That is correct, Mr. Chairman. I do not think there is any reason to get angry about it or excited over it; it all comes back to one's notion of the proper function of government, and my notion as to that is one of rather strict limitation. I go back pretty much to the original real Jeffersonian theory of government, that the least of it you have the better off you are.
The CHAIRMAN. It is easy for you to go back to the Jeffersonian idea that you are now advocating when yon are operating profitably, but when your railroads and the people that you are here representing today came up to the Federal Government in the days of the depression, you did not come up complaining about the Jeffersonian democracy was being debauched and prostituted, did you?
Mr. Souby. I did not have an opportunity myself. These views I am expressing to you here now in answer to your question, I am expressing my personal convictions, I am not purporting to speak for the railroads as a group, other than I presented here in opposition to this bill. But I actually had no opportunity to express myself on the RFC business, and I do not know
The CHAIRMAN. Why?
Mr. Souby. I do not know that it was the result of any effort by the railroads to get it. I think it was much broader than that.
The CHAIRMAN. It was such a national catastrophe that the National Government had to take charge of the situation, did it not?
Mr. Souby. They thought so.
The CHAIRMAN. "You certainly would have been accorded a forum in which you could have opposed the granting of the RFC power.
Mr. Souby. I do not personally participate in any legislative matters.
The CHAIRMAN. In connection with what you have just said about who you are representing
Mr. SOUBY. Pardon?
The CHAIRMAN. I want to know are you representing Mr. Souby or representing the railroads that you started out to represent?
Mr. Souby. I am representing the members of the Association of American Railroads.
The CHAIRMAN. When you come here to make the categorical attack upon all of the lending agencies of the Federal Government, are you speaking as an individual or as a representative of the railroads?
Mr. Souby. I told you in my direct presentation I was speaking for the railroads. In answer to some of your personal questions I added some of my own personal views.
The Chairman. My questions have all been related to your opening statement.
Mr. Souby. I was trying the best I could to state the position of the railroads generally on this proposed legislation.
The CHAIRMAN. Well, then, would the railroads be opposed to what the Government has done with regard to the REA?
Mr. SOUBY. What kind of program?
The CHAIRMAN. Your clients, the railroads, are they opposed to the program known as the rural electrification program, which has brought light and power to the rural sections of the country?
Mr. Souby. I do not know what their position is on that.
The CHAIRMAN. That agency makes loans which no private industry has heretofore made.
Mr. Souby. I know that the group I represent have taken no position on those bills at the times they were here.
The CHAIRMAN. Because they were not in the light and power business, but you are engaged in the railroad business, and in providing terminal markets in some of the large areas.
Mr. Souby. That is right.
The CHAIRMAN. What is there in this bill that leads you to believe that any Federal agency authorized by this act to make loans would go into any city in which any of your clients are now operating and build a duplicating facility which would put your facility out of business, if your facility is providing adequate service now? Certainly it is not the purpose of this committee, and it is not the intention of this bill.
Mr. SOUBY. It is not so much what is in the bill itself, other than holding out of the offer to lend money or to guarantee loans on facilities of this sort. I am talking about what I think would be the effect of it, Mr. Chairman, and I think we have a good illustration here in the case of some of the people who have appeared here in favor of the bill from the Philadelphia area, for instance. That is a good illustration. It would not require any action by the municipality of Philadelphia or the State of Pennsylvania to enable Mr. Custiss' group here to set up a plan and create this corporation that he told you about to set up one of these facilities. They could qualify specifically within your statute.
The CHAIRMAN. All right. Do you think that the Federal Government would make or approve or insure a loan to build a market in an area that is now being adequately served ?
Mr. SOUBY. Well, I am sure it would make a loan on a project that had the approval of the Secretary of Agriculture and these proposals that I understand, for instance, in Philadelphia already have the
approval of the Secretary of Agriculture. They would make a loan on that.
The CHAIRMAN. Who told you they had the approval of the Secretary of Agriculture?
Mr. Souby. Pardon me?
The CHAIRMAN. Where did you get the information that the plans that you referred to had the approval ?
Mr. Souby. It was my understanding, I may be wrong, that there has been a report by Mr. Crow's organization.
The CHAIRMAN. That is right.
Mr. Souby. On Philadelphia, and there have been on some of the other places.
The CHAIRMAN. Thirty-odd cities. That does not mean that Secretary Brannan has ever seen those programs at all.
Mr. Souby. It looks to me as logical that if the Secretary of Agriculture under this section 6 of your bill, or under the Agricultural Marketing Act, independent of your bill, has made a survey and has devised a plan and a recommendation of a project, then if a group of citizens of any description organize the necessary corporation to carry out that proposal, if and when the plan reached the Secretary, he would not be apt to reject it as improper, having proposed and recommended it himself. That is wbat I am going on.
The CHAIRMAN. He might on final action disapprove the plans. He might find it is not necessary to build the facility and he might disapprove the loan.
Mr. Souby. That is conceivable. It is not probable.
The CHAIRMAN. Let us come down to the actual situations. I agree with you that the railroads have built markets throughout the country but they were not actuated by the great altruistic motive.
Mr. Souby. Far from it. That is exactly the point I am trying to make. They were actuated by highly competitive reasons.
The CHAIRMAN. And for business reasons.
Mr. Souby. They were acting in what they thought was their own best interest, and that is what actuates everybody in industry.
The CHAIRMAN. All right. Wherefore the railroads are providing adequate facilities, certainly this committee does not want to duplicate those facilities. If that is the situation in Denver, Colo., where two railroad companies have gone out there and built markets and Denver is adequately served, then Denver will not get any of this money. They do not get any aid because they will not need any aid. I am not in a position to say, to pick out any city and say that this city shall have this facility, but I do know that our distribution system can be improved.
Mr. Souby. There is no question about it.
Mr. Souby. I merely am differing with you as to your method. I think you are taking an unwise method to try to do it.
The CHAIRMAN. All right. I can visualize a situation where one of your railroads has built a market and by improving that market, you can make it efficient, you can make it easily accessible to trucks, but why whould we sit by and see a railroad company build a market and prohibit trucks from coming in and unloading and loading in using those facilities, and when we know that a large part of the produce is now moved by trucks. I do not see the possibility that anybody would be so short-sighted as to build a facility which was going to automatically make an existing facility useless.
Mr. Souby. I have a pretty good basis for that. I read to you a description of the B. & 0. terminal facility at Baltimore.
It was a favorable description, and not a word of condemnation or criticism of it, but what is the upshot of this entire volume? In spite of the fact that the railroad terminal, as they say, is modern and adequate and has all of the necessary equipment and facilities for proper handling of the produce, they recommend that there should be substituted for that terminal, and also one of the Pennsylvania Railroad terminals which is just as good, and for this so-called Camden Market and Marsh Market there in Baltimore, a unified single facility. Now, wait a minute, if you will permit me to go ahead a little bit.
Now, one of the main reasons for their recommendation was the congestion incident to the present situation, not in the railroad terminals, but in this Camden and Marsh Street market. They are right together there. To cure that congestion which appears in two of the markets, they are proposing to throw them all together, the two railroad terminals and the two nonrailroad terminals, to relieve congestion. They immediately recognize the apparent silliness of that, so what is their answer? They say, "Well, you have got to build one in an entirely new location, away out either on the west side or the east side of town where you have got plenty of room, so you can have all of the trucks and railroads you please in there without congestion.' But what is the upshot of it? Their proposal, as I say, at most could not possibly save any handling charges on more than a small part of the total of the produce that is now consumed in Baltimore. But when you put it out all to one side of the city, you increase the hauling from the produce market into the town, instead of handling part of it, as now, halfway across town, you handle the bulk of it all the way across town.
You say you cannot anticipate that they would approve a plan that would result in destroying the usefulness of these railroad investments, but there is one of your plans that recommends that, where they praise the railroad facilities, but yet say because of inadequacy in somebody else's facilities, you have got to abandon the railroad ones along with the others.
The CHAIRMAN. You are emphasizing the point that the railroad facilities in that particular city are adequate.
Mr. SOUBY. That is right.
The CHAIRMAN. But the report also emphasizes and points out the fact that truck facilities and other facilities there are inadequate, and there is a suggestion that they be brought together.
Mr. Souby. That is right.
The CHAIRMAN. But if it is not feasible and financially sound to bring those terminals together in Baltimore, I certainly would not stand in any fear of anybody in Baltimore or in Washington approving the program if it will wreck and make useless the warehouses that are now adequately serving the railroad terminals.
Mr. SOUBY. I would certainly hope so, but I fear not, because I say I have got some concrete illustrations of what is proposed.
The CHAIRMAN. I would like to ask one further question. When it