To assume infallibility or even great accuracy in sketching a regional railroad plan for the United States would be of course ridiculous. We have just had the mere suggestion of twenty-five or twenty-six railroads, some of them non-competitive monopolies and others quite completely competitive, in form at least, which is about all that our so-called competitive railroads are to-day. Still the great transport god of our transport world apparently must continue to be appeased. Form seems to please him. We shall grant him that. But in a national transportation plan which begins to assume any real form of high organization we shall not permit the component parts of it to indulge in internecine struggle. It is too expensive business.
So probably we shall begin the operation of our regional plan, which you already have seen outlined geographically, by first taking our thousand or more separate railroads—nearly 265,000 miles of line—and thrusting them together into a great single organization. This we might easily call the United States Railroad, even though it is to be in one sense not a railroad, from an operating point of view at any rate. For once we have centralized our great rail transport plant, we shall at once begin to decentralize it. We shall make many railroads of it. We shall follow in the main the scheme used by those vastly successful private organizations, Standard Oil and the Bell Telephone, and the equally successful government institution, the Federal Reserve Bank, and set up regional and highly autonomous separate organizations. I began my planning of the regional railroad for this country with the number of separate units fixed at about the same as of these three organisms that I have just mentioned—approximately an even dozen. Gradually I found, however, that in as intricate or as extensive a business as railroading in the United States twelve or fourteen or even sixteen regional companies would not be enough. Perhaps twenty-six is not even enough. After all, that is but a detail. What we really are seeking now is the proper method of organization.
Our regional railroads, recentralized and each provided with a president and other directing and operating officers extremely local and sensitive to the territory which they would serve, would have left something behind them in the central organization which was created primarily for the business of rearrangement. For having transacted that immediate business the United States Railroad still would continue to exist as a permanent body, with its headquarters either in New York or in Washington. Its modus operandi would be the virtually continuous sessions of vice-presidents designated from its constituent railroads—one vice-president for each road, especially chosen for this purpose—together with the occasional meetings of the presidents and other executive officers. These men would form a congress whose powers along almost all phases of our national railroad would be virtually supreme.
Its greatest power—its greatest responsibility, if you please—would be the proper financing of our railroad structure. That problem is far too big to-day to be handled locally, even in the locality which we know as Wall Street, New York. And Wall Street has shown itself capable of taking care of some pretty large financing problems. Before we are done with our railroad financing, it may be necessary for no less a hand than Uncle Sam’s to take hold of it, either by assuming the bonded indebtedness of the roads and against this issuing his own bonds at a slightly higher rate of interest, or else by direct and complete ownership of the carriers.
I am not going into this vexing and highly controversial phase of the railroad question in America further than to say that I do not feel that this country is ready yet to accept government ownership and operation—particularly the latter. Please note that I have differentiated between these two. It is not often done. And yet in that very shading of difference may yet rest the solution of our entire railroad problem. At the conclusion of this book I shall refer to this again.
According to a man who has made a critical inspection of the outstanding securities of our American railroads and of whose ability and impartiality there can be no doubt whatsoever, these are represented chiefly in about ten billion dollars’ worth of perfectly good bonds and about five billion dollars’ worth of good stock, at least normally returning dividends. About $100,000,000 might be written off in poor bonds, that either are fraudulent or else never should have been issued, while there are four or five billion dollars par value of stock certificates which to-day may be regarded as fairly hopeless. Out of all these securities three quarters would assay, which after all does not compare so badly with the estimate of value of from $18,000,000,000 to $20,000,000,000 which the railroads themselves place upon their properties.
These “good securities” in normal time average a return of from $750,000,000 to $800,000,000 each twelvemonth. Suppose that our Uncle Samuel, heeding what seems to be a rather certain voice of his people at this time to avoid both government ownership and government operation, should arrange that the “good” stock of the present railroads be turned in for that of the United States Railroad, which might either keep the stock issue in its own name or else at the proper moment divide it pro rata between its constituent regional roads? This certainly would not be either government ownership or government operation.
Upon the stock portion of this trade our good Uncle Samuel would arrange to guarantee a 4 per cent. dividend annually (possibly 4½ per cent.) and try to standardize and pay a 6 per cent. one. That sounds a little different from the Transportation Act, does it not? As a matter of fact, it is hardly conceivable that even a 4½ per cent. guarantee would ever become a serious drain upon the United States Treasury, while the fact that the stock end of the capitalization of this railroad which is not a railroad would never be permitted to exceed more than 35 or 40 per cent. of the whole would be a real help in the situation.
If the roads that belonged to the United States Railroad found themselves earning more than 6 per cent. upon the entire property a tripartite even division could be arranged of the excess between their stockholders, their employees, and the Government. It is hardly conceivable, however, that such a condition would long continue without a demand arising for a downward revision of the rates. It is a question that would settle itself rather automatically most of the time.