I. C. C. v. Holding Companies

Railroad officials, lawyers and lobbyists jostled one another unceremoniously last week to crowd into the House Interstate and Foreign Commerce Committee Room for the opening of a great investigation. Subject of the investigation: Railroad holding companies. Prime question: Who owns which railroads?

Last year the Interstate Commerce Commission loudly warned against these holding companies, insisted their undercover activities were already blurring the I. C. C.'s merger map (TIME. Dec. 16). Last week Interstate Commerce Commissioner Joseph Bartlett Eastman appeared as a witness before the House Committee to give specifications for starting the inquiry. His general complaint was that the I. C. C. could handle railroads but that it lacked any legal authority to deal with their financial alter egos which acquire rail stocks, scramble them together in defiance of the I. C. C. and, for all practical purposes, produce consolidations which the I C. C. has prohibited. The Commission, he said, is thus rapidly losing control over consolidations. He asked for legislation to break up the present practice.

Pennroad and Allegheny. Commissioner Eastman's major specifications dealt with two famed holding companies--Pennroad, controlled by directors of the Pennsylvania R. R.--and Allegheny Corp. controlled by Oris Paxton and Mantis James Van Sweringen. He cited the fact that Pennroad was buying heavily into Boston & Maine and New York, New Haven & Hartford. He warned that if Pennsylvania enters the New England territory, it will be absolutely contrary to the I. C. C.'s merger plan. Likewise Pennroad is buying into Atlantic Coast Line, Southern, and already controls 15% of Seaboard Air Line. It has gobbled up Detroit, Toledo & Ironton which the I. C. C. assigned to Baltimore & Ohio.

Allegheny Corp., according to Mr. Eastman, beside controlling the Van Sweringen roads forbidden to merge by the I. C. C.. now owns 20% of Kansas City Southern, is buying into Sante Fe and Great Northern. It controls Missouri Pacific which the I. C. C. never intended to go into such a vast East-West lineup.

Couzens Bill. Largely because of the activities of these holding companies in mixing up mergers, Michigan's Senator James Couzens, Chairman of the Senate Interstate Commerce Committee, introduced a Bill to withdraw from the I. C. C. its power to approve rail mergers. Effect of this bill would be to "freeze" the railroad map as it is until such time as holding companies can be brought under Federal control. Should roads attempt to merge without authority, under the Couzens Bill the U. S. could enjoin them. The ban on consolidations would be lifted if and when "adequate legislation properly designed to protect and promote the public interest" is enacted.

Loree Rejection. The Interstate Commerce Commission last week received from its assistant finance director who had examined the matter, a recommendation to reject the plan of Leonor Fresnel Loree, bushy-bearded Delaware & Hudson R. R. president, to build a 344-mile line across Pennsylvania as the main link in a new New York-Chicago Trunk Line. Reason: public convenience did not necessitate the construction cost of $200,000,000; no new traffic would be created.

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