"Sound & Clear"

First major industry to suffer from the present depression was railroading, which last summer discovered that its operating costs were climbing much faster than its revenues although the latter were well ahead of last year (TIME, Sept. 13). The subsequent decline in other industries brought worse news, for railroad revenue began to fall on most fronts. Car-loadings are now some 20% under last year at the same season. With 28% of U. S. trackage already in the courts, the railroads were quick to clamor for Government help in the form of a general 15% rise in railroad freight rates. For a month railroad men and business leaders have almost unanimously maintained that the alternative to a rate rise is Government operation. Hearings before the Interstate Commerce Commission in Washington by last week had become such a unanimous parade of evidence that almost everyone began to take it for granted that the ICC would certainly grant a substantial part of the rise. Railroad stocks climbed a little from their lows.

As a quasi-judicial body, the ICC is accustomed to ponder its decisions long and earnestly. But established practice before any commission allows a petitioner to request an immediate emergency order after presentation of ample evidence pending a final decision. Last week the railroads resolved to take this step. Through the Association of American Railroads they asked that the ICC provide an emergency rate rise immediately to last until February when final hearings had been scheduled. The reason: many roads could not hold out two months longer.

Meanwhile, Jesse Jones, whose Reconstruction Finance Corp. has made immense railroad loans, had the ear of President Roosevelt. To the White House the President soon afterward called newshawks to unburden himself. First, he said, he had discussed the advisability of the RFC making further small railroad loans. Asked if the Government would do anything else for the lines, he declared that the major responsibility rested on the ICC, that rail-road economics is one of the most serious problems facing the nation, that he did not believe any member of the ICC yet had a good solution for the problem, that he himself had none. Of one thing Franklin Roosevelt was sure, however: the last thing he wanted was Government control of railroads.

To this fair disclaimer, Franklin Roosevelt then added his view of the railroads' two most pressing problems. One is financial. He suggested the case of a road with outstanding bonded indebtedness of $200,000,000 which can earn interest on only $100,000,000. What, asked the President suggestively, would you do? The other problem is competition. He suggested that the nation is gradually coming to believe that parallel trackage must be eliminated in many places. Best solution he could think of for his press conference was consolidation of many lines into single, efficient, noncompeting systems.

Hardly had the press conference broken up and this front-page news been made public when the ICC announced its decision on the petition for an immediate rate rise. The answer, by a 6-to-4 vote, was No. But the commissioners did agree to speed their hearings by three weeks and they voted Yes on the proposed consolidation by which the affluent Chesapeake & Ohio will control the less profitable Erie and Nickel Plate in one unified financial system with some 9,000 miles of track laced across the northeastern States.

Next day gossips in the ICC offices revealed that the commissioners were irked by the President's prodding. Railroad men, despite the immediate adverse decision, were happier than for many a week. Said President John Jeremiah Pelley of the Association of American Railroads: "The President's statement is sound and clear. . . ."

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