"Critical"

Official spokesman for U. S. railroads is President John Jeremiah Pelley of the Association of American Railroads. Last week, in common with many another railroad bigwig, J. J. Pelley was irked beyond measure. It was not merely that U. S. railroads face their greatest crisis. It was not merely that the Interstate Commerce Commission last fortnight gave the roads a 5.3% freight rate rise instead of the 15% the A.A.R. had requested (TIME, March 21). The cinder that really got in Mr. Pelley's eye was the fact that when President Roosevelt finally held his long-promised railroad conference last week he pointedly neglected to invite J. J. Pelley or any other working railroad man to attend. Puffing in their wrath like Hudson engines on a 2% grade, the A.A.R. directors retired to Chicago to match Franklin Roosevelt's conference with one of their own.

Fourteen. Nearest approach to an A.A.R. representative at Franklin Roosevelt's conference was white-thatched Carl Raymond Gray, who at 70 retired last year from the presidency of the Union Pacific and is famed for his modernization of that big line, his benevolent relations with employes. The others who attended were ICC Commissioners Walter M. W. Splawn, Joseph Bartlett Eastman and Charles Delahunt Mahaffie, Senators Burton Kendall Wheeler and Harry S. Truman of the Senate Interstate Commerce Committee. Chairman Clarence Frederick Lea of the House Interstate & Foreign Commerce Committee. President George Harrison of the Railway Labor Executives Association, President Henry Bruere of Manhattan's Bowery Savings Bank, Secretary of Treasury Henry Morgenthau Jr., Assistant Secretary of Commerce Ernest Draper, RFC Chairman Jesse Jones, SEC Chairman William 0. Douglas and Farm Security Administrator Will W. Alexander. After these 14 worthies had put their heads together with President Roosevelt, he informed a press conference that the group would meet again in a few days, that the major topic had been the old, old one of railroad consolidation. Other topics: elimination of railroad holding companies, Governmental renting of the lines until they had been modernized and integrated, development of a special court to speed railroad reorganizations.

Two days later Franklin Roosevelt's railroad conference met again. This time major topics were: 1) creation of a new agency probably within the ICC to have complete jurisdiction over railroad reorganizations and to cut down the stupendous railroad bonded indebtedness; 2) amendment of the Bankruptcy Act to prevent minority groups of security holders from sidetracking railroad reorganizations as they do now with such effectiveness that no road has come through reorganization in five years; 3) establishment of a Federal authority to compel consolidation.

This is a notable reversal of the Government's position. The roads have been effectively prevented from consolidation of services by the Emergency Act of 1933 and subsequent Railroad-Labor agreements which froze railroad employment at the 1933 level. As everybody who knows anything about the railroads is well aware, the economy in avoiding service duplications would come chiefly in abolishing duplicate jobs. Carl Gray was reported to have explained to the assembled bankers and politicians that 70-c- of every dollar saved in railroad consolidations would come from savings on wages and that therefore the Government would have a huge responsibility on its hands to compensate the displaced employes. That did not sound so good to most of those present because to a public officeholder the fear of death is little more terrible than the fear of losing a constituent his job, and right now the Administration will be hard put to find money to lay off several hundred thousand railroaders, probably for life. Nevertheless, Franklin Roosevelt appointed a committee of Messrs. Splawn, Eastman and Mahaffie to report in a week on recommendations "for immediate action by Congress in regard to the whole railroad situation, which is critical."

A.A.R, in Chicago. Day after President Roosevelt held his second conference, J. J. Pelley & friends held their second one, ended up by resolving that since the ICC had not given them the extra revenues they had requested to meet increased costs, the only thing left to do was to cut down costs. Easiest way to do that is to cut railroad wages, which rose $140,000,000 in 1937, and the A.A.R. therefore appointed a committee to discuss the matter with the 21 railroad brotherhoods and other labor organizations. Well knowing that Labor will fight to the last ditch against wage slashes, the A.A.R. labeled the projected parley as a discussion on "the whole situation in the railroad industry to see if we can get together on remedies to meet the problem created by the disappointing decision in the rate case."

Snapped George Harrison when informed of the A.A.R. plans: "There is no justification for wage cuts . . . since the ICC granted increases in freight rates for the specific purpose of avoiding such a reduction."

Snapped J. J. Pelley when informed that Franklin Roosevelt's group was chiefly occupied with thoughts of consolidation: "We did not even discuss consolidation here today. It is too far in the future. This talk about consolidation isn't worth a damn until careful studies have been made!"

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