The course of events after 1906, so far as acquiescence in the law was concerned, was precisely like that of twenty years earlier. For some time the railroads seemed submissive,—in almost a chastened mood. The Commission also exercised its new powers rather timidly. Up to July 1, 1908, only a single appeal to the Federal courts had been taken by the carriers against orders of the Commission. A sudden change of front supervened at this time. During the second half of that year, sixteen suits to set aside orders of the Commission were filed. Nine more were entered in the following year, and thirteen during 1910; with the result that the dockets were greatly congested with proceedings of this sort. No less than thirty-six were before the circuit courts, when in 1910 they were all transferred to the newly constituted Commerce Court, soon to be described. This accumulation of unfinished business, with the consequent delay in settlement of important transportation disputes, contributed greatly to the movement in Congress in favor of further amendment of the law.

There were several reasons for this sudden shift of attitude toward the law in 1908 on the part of the carriers. The political atmosphere had suddenly cleared so far as popular hostility to railroads was concerned. A change of administration had ensued, with a marked preponderance of professional legal talent in the Cabinet. And several important decisions of the Supreme Court, once threatening, had now been rendered in favor of the carriers. Among these may be mentioned the first interpretation of the "commodity clause,"—on the one hand upholding the constitutionality of the law, and on the other, pointing the broad and easy way to its evasion; the Harriman decision, protecting witnesses from disclosure of details as to their personal participation in the finances of companies under their control; and the exculpation of the Standard Oil Company by the aid of eminent counsel and the technicalities of the law, with escape from the extreme penalties of the statutes for rebating and personal favoritism. Things seemed indeed to be going at last the railroads' way.

The brightening financial outlook also gave better heart to the carriers. The panic of 1907, with its forced postponement of ambitiously constructive plans, seemed to have passed. The revival of these projects might be hampered by a further extension of government regulation and publicity. Railroad labor, moreover, was becoming restive. Demands for increased wages were imminent; and the carriers evidently proposed to shift the incidence of these wage increases, if granted, upon the public by means of an advance of rates. Such increases were bound to be disputed. It was deemed important to test the law at every point. This need was the more imperative as the Commission itself was bound to pass upon several questions of fundamental importance, such as the adjustment of transcontinental freight schedules and others soon to be described.

A presidential campaign took place in 1908. Both political parties committed themselves in their platforms to still further amendment of the Interstate Commerce Law. The Republican party, however, modestly confined its recommendations to authorization of traffic agreements and the regulation of stock and bond issues by railroads for the prevention of over-capitalization. The Democrats offered a much broader program providing for real amplification of the power of the Commission over rates. President Taft,—well in advance of his party, controlled as it was by the so-called "regulars,"—offered soon after election a more definite policy. Its main feature was the establishment of a Court of Commerce to which all judicial review of orders of the Commission should be submitted, in lieu of revision by the regularly constituted Federal judiciary. He evidently proposed to seriously amend the law; but, beyond the foregoing proposition, most of the other details of his plan seemed to be either half-way measures or else ill-designed to meet the real difficulties of the case. Thus the proposal to give power over mere rules and regulations in advance of their taking effect, without at the same time conferring a like power to pass upon the reasonableness of rates themselves, seemed to miss the main point. The same criticism was applicable to the plan of conferring authority to postpone the taking effect of a new classification until it had been approved by the Commission. Other excellent details were such as conferred authority to compel through routes and to forbid stockholding by one road in other competing lines, set forth in speeches in the fall of 1909.

A special presidential message of January 7, 1910, contained the specific program recommended for legislation to Congress. It consisted merely of a tentative bill, which was introduced in both houses and properly referred.[688] By this time the influence of the Interstate Commerce Commission in strengthening the proposals was apparent. More positive provisions were added, such as the right to suspend rate increases pending determination of their reasonableness. Serious consideration was given this bill in appropriate committees both of the House and Senate. It was, in fact, with the consent of the Attorney-General, amended out of all semblance to its original form. The most serious changes were made in the Committee on Interstate Commerce of the House of Representatives. The coalition of Democrats and "insurgent" or "progressive" Republicans, succeeded in striking out the authorization of traffic agreements, as well as a proposition permitting a railroad owning a majority of stock in other non-competing lines to purchase the balance of their shares. Several radical amendments of the Commerce Court plan were likewise effected, especially those giving the power of appointment to the Chief Justice instead of the President. The hands of the "progressives" in all this work were considerably strengthened, without doubt, by the course of events during the spring months of 1910, especially the impending general increase of freight rates all over the country.

The strength of political sentiment in favor of the measure appears in the fact that the radical House bill was passed unanimously; while the Senate bill was adopted by a solid Republican vote with the aid of six Democrats,—the total vote being fifty to eleven. Reference to a conference committee, which considered it for ten days, still further modified the original plan. Pooling was dropped entirely; stock-watering and details of inter-corporate finance between non-competing lines were also thrown but as favoring the carriers unduly. Physical valuation, as provided in the House bill, was considerably restricted. Prompt approval of the conference bill followed in both houses. And the signature of the President was added on June 18. Thus did the Mann-Elkins "Amendments" become law.

The three most important features of the Mann-Elkins Act[689] were: the grant of power to suspend changes in rates for examination as to their reasonableness; resuscitation of the long and short haul clause; and the creation of the Commerce Court for review of the Commission's orders. Of these, the first two represent substantial extension of the regulative power of the government; the third being a mere modification of procedure on appeal.

The proposition to so amend Section 15[690] of the Act of 1887 as to confer power upon the Commission to suspend proposed changes in rates, seems to have been a feature added at the behest of the insurgent-Democratic coalition in Congress. It was neither in the President's first unofficial program nor in the formal bill drawn up by the Attorney-General. The intolerable obstructions in the way of prompt determination of transportation disputes incident to the practical working of the law, even since 1906, had created a renewed demand for relief. Great force was added to this demand among shippers by the rate advances which had been occurring all along the line for two years; and particularly by the rumors of a general rate advance by the western and trunk line roads during the progress of the debate upon the bill. The President, to be sure, blocked this advance by means of a clever legal and political move. On May 31 an injunction was issued against twenty-four carriers, temporarily restraining them from putting into effect higher tariffs, as they had planned on June 1. This action was taken upon the allegation that the simultaneous action of all these roads in so doing constituted a violation of the Anti-Trust Law. The injunction, which as a weapon had been turned mainly by the carriers against enforcement of the orders of the Commission, was now invoked against the railroads. Regardless as to whether a bona fide prosecution was contemplated, the effect of these equity proceedings was to secure postponement of the advance in rates; and, of course, at the same time forcibly to attract the attention of Congress to the necessity of control. The carriers withdrew their tariffs in some discomfiture; the injunctions were dissolved; and all proceedings were stopped.

It is unnecessary, perhaps, to repeat the demonstration that a loss by shippers once incurred through payment of an unreasonable rate, is irretrievable. The manner in which transportation costs enter into the profitableness of contracts by the shipper for future delivery is well known.[691] Any change of rates during a period for which shippers have contracted to deliver at fixed prices, must seriously affect the chances of profit. It was recognized as essential, therefore, that adequate protection for the shipper could be given only through suspension of any change in rates until the reasonableness of that change had been determined.

The extent to which the aid of the courts had been invoked by the carriers to set aside orders of the Commission has already been described. Proceedings on the equity side in the courts had also, although in a most unsatisfactory manner, been undertaken to restrain advances in rates. But in all cases the exercise of this power had been bitterly contested, and proved at best to be so cumbersome as to be almost futile. The utmost confusion resulted in some cases. For example, in 1908 the carriers filed notice of an advance in rates on boots and shoes from New England to the South. An injunction was obtained prohibiting such advance, on condition that application be immediately made to the Commission for a ruling upon the reasonableness of the proposed change. This would have left the carriers without choice except to collect one rate while continuing to publish another. They therefore withdrew their schedules, leaving the old rates in effect. As a result no complaint could be filed with the Commission, the new rate not having come into operation. To meet this situation, the court then so modified its injunction that carriers might publish the advanced schedule, but were restrained from collecting it. This was manifestly an absurd situation. Moreover, supposing that the Commission could immediately take up the question, no order could become effective until after thirty days. In the meantime, the whole matter must remain in suspense. Considering that 15,000 tariffs advancing rates in trunk line territory alone, were filed in July, 1910, the necessary delay incident to such roundabout procedure would render it intolerable. Other complications might be mentioned, such as the localization of injunctions within the territorial jurisdiction of the enjoining court; legal technicalities touching the filing of bonds; and the status of non-petitioning shippers. Speedy relief must be had: that was clear beyond question.

Aside from the practical unworkableness of the injunction process as a protection against unreasonable rate advances, reform might well be demanded on grounds of fairness. No reduction of rates ought to be compelled without opportunity for protest by the carrier. Contrariwise, no new burden should be laid upon the shipper without a hearing. The burden of proof against disturbance of a long-standing adjustment ought properly to rest upon the party responsible for the change. Such delay as was requisite for determination of the reasonableness of the change could not constitute a serious burden; and even if it did, it was but just under the attendant circumstances.

The new law yielded to these arguments by a radical extension of the authority of the Commission. It was authorized to suspend the taking effect of any new rate or regulation for not more than one hundred and twenty days, to afford opportunity for hearing and decision as to its reasonableness. If necessary, a further period of six months' suspension might be had. Moreover, the burden of proof that the change was just and reasonable was laid upon the carrier. Beyond the ten months' period thus allowed, postponement might not extend. Thereafter the rates became effective automatically. This control fell short of the demand of the "insurgents" that downright approval of the Commission for all changes should be required; but it was, nevertheless, a substantial increase of power. It remains to be seen what the practical result of this great extension of government control may be. It was predicted that its greatest benefit would come from those suspensions of rate advances which ultimately brought about their withdrawal.[692] This prophecy was fulfilled, as will be seen in the next chapter, in the first great test to which the law was put, almost immediately after its passage.

Resuscitation of the long and short haul clause of the Act of 1887 was the second important feature of the new legislation. The long and tedious process of judicial interpretation, by means of which this section of the statute was nullified for so many years, has already been set forth.[693] Dissatisfaction with the local discrimination prevalent throughout the southern states and in the Rocky mountain region had been steadily increasing for a long time. Public opinion in these districts urgently demanded the relief which the original law sought to afford. Chairman Knapp fairly described the situation in 1905 before the Elkins Committee as follows:[694]—"No one, I think, can read the Fourth section ... and be in doubt that Congress intended to provide some actual and potential restraint upon that particular form of discrimination. And, I may say, it remains today much as it was then, not the greatest evil, but the most irritating and obnoxious form of discrimination that has been encountered." No distributing business could hope to become established in the West or South without vitalizing this section of the law. The larger cities, and particularly the manufacturing districts in the East, on the other hand, viewed with alarm any encroachment upon the far distant markets which they were able to hold by reason of peculiarly low rates. The railroads' coÖperation with eastern representatives in Congress had successfully prevented any change in 1906. But four years later it became apparent early in the debates that something would have to be done for the relief of the West and South.

The long and short haul clause was amended by the influence of the Progressive Republicans in the House.[695] Four changes were made. The first was the total elimination of the clause "under substantially similar circumstances and conditions," which had been responsible for almost all of the trouble in the courts. This change made it necessary in all cases in future for permission to be secured in advance from the Commission for any lesser charge for a long haul than for a shorter one, no matter what the local circumstances might be. Secondly, the prohibition was specifically made to cover "routes" as well as "lines." Although the Osborne case[696] had already virtually made it clear that the clause applied to a series of connecting railways as well as to a single company, this addition placed the matter beyond dispute. The third change, practically legalizing a standing rule of the Commission for many years, prohibited a higher through rate than the sum of the local charges over the same line.[697] An addition covering an entirely new point constituted the fourth modification of the section. It is suggestive as an indication of the determined spirit which animated Congress. This last detail was borrowed from the then recently submitted report of the National Waterways Commission, which in turn had borrowed it from the state constitution of California. It was intended to meet the tactics so often adopted by land carriers in competition with water lines, of drastically reducing rates until the competition by water had been killed, after which the losses were recouped by even higher tariffs than before.[698] Under the new law, no railroad, having once reduced its rates in competition with a water route, was permitted to increase those charges until the Interstate Commerce Commission should have found that such proposed increase rested upon changed conditions other than the elimination of water competition.

Improvement of the procedure on appeal, by the establishment of the Commerce Court, was the third important feature of the new law. It was not only the delay of which complaint was made, but the illogical process of review as well. For this permitted the orders of a technically expert commission of seven men to be set aside by the order of a single judge who, in fact, relied upon subordinates for an examination of the evidence as to economic fact. This may be illustrated by two recent cases. In 1907 the transcontinental railroads substantially increased their rates on lumber. The Commission held that this advance was unreasonable; but permitted one half of it to take place. The carriers appealed to the Federal Circuit Court. All the evidence, involving great money and commercial considerations, was taken for the court by a master. Upon the findings of this single individual, without opportunity for the court to critically examine the evidence, the deliberate judgment of the Interstate Commerce Commission was set aside. The same thing happened in the Texas Cattle Raisers' case in 1910, involving rates on live stock from the southwest to northern ranges. In this instance, to be sure, the Circuit Court declined to enjoin the Commission. That did not, however, alter the fact that the decision was based upon hearings by a master, extending over sixty-three days and rolling up a voluminous record which the court did not have time even to peruse cursorily. To standardize procedure, as well as to eliminate delay, was the purpose of the President in the plan for the Commerce Court.

Many objections were advanced in the course of debate in Congress against the creation of a special tribunal. It was urged that such a court with limited jurisdiction would be open to political influence, as well as exposed to the danger of narrowness. It was said to be foreign to our judicial organization, which heretofore had known only courts of general jurisdiction. It was stated that no necessity for a commerce court existed, so small would be the number of cases which might be brought before it. Objection was also raised to it on the ground of expense. The problem of court review was, of course, complicated rather than made more simple by the Hepburn Act of 1906. Prior to that time no administrative orders took effect other than through enforcement by the courts. But this law provided that rates and regulations of the Commission should take effect proprio vigore within thirty days. The contest over broad v. narrow court review has already been described, with the outcome at the time regarded as a victory for broad review. The situation was entirely changed, however, by the Illinois Central decision in 1910,[699] which appeared to put a restraint upon judicial review, except when the order of the Commission was either beyond its legal powers or else unconstitutional. This decision did not, as might have been expected, put an end to the plan for a new transportation court; but it did bring about a specific restriction of the powers of this tribunal to those possessed by the regular circuit courts.

The Commerce Court, as finally constituted in 1910, was composed of five judges, each to serve for five years, designated and assigned thereto by the Chief Justice of the Supreme Court from among the circuit judges of the United States. No member might serve continuously for more than one term, but might be reappointed after an interval of one year. The court was to sit at Washington, and was to be always open for the transaction of business. From it, direct appeal to the Supreme Court might be taken, with as simple a mode of procedure as possible to eliminate delay. The original record, for example, was to be transmitted; and agents of every carrier must be designated at Washington upon whom process might at any time be served. Whatever may be said of other details of this judicial experiment, it certainly sought in good faith to promote promptness in procedure.

The jurisdiction of this Commerce Court was expressly conferred over four kinds of cases:[700]

First, those for enforcement of any order of the Interstate Commerce Commission, other than the payment of money.

Second, cases brought to enjoin, set aside, annul or suspend, in whole or in part, any order of the Commission.

Third, all proceedings on appeal under the Elkins amendments of 1903 with reference to rebates or departure from the published tariffs.

Fourth, all proceedings concerning the enforcement of the law in respect of publicity of accounts, the furnishing of facilities, or compulsion in the movement of traffic.

Proceedings in the first class above mentioned, for enforcement of orders of the Commission, remained practically unchanged in form, except that they were to be prosecuted in the Commerce Court instead of in the ordinary circuit courts. Cases of the second sort, wherein the carrier sought to enjoin or set aside orders of the Commission, were somewhat modified in procedure. The Administration bill provided that the Commerce Court should not issue injunctions, except in cases where irreparable damage would follow. In this regard, the Senate succeeded in somewhat amplifying judicial control. Five days' preliminary notice to the Commission, secured in 1906 after a bitter contest, was now cut down to three days; and the full court might extend the temporary stay of sixty days granted by a single judge, over the entire period necessary for final decision by the Supreme Court. With this exception, the new law held all the ground gained by the Hepburn Act as judicially interpreted in the Illinois Central case.

The principal criticism which may be directed against the Commerce Court, as thus organized, is that, instead of being an unchanging body of judges, becoming expert in the details of transportation by long experience, its membership must change year by year. Fortunately, at the outset the court was favored by the appointment, as presiding justice, of the Chairman of the Interstate Commerce Commission; but it seems likely that the lack of experience and technical knowledge in this ever-changing body may render it an obstruction rather than an assistance in fixing the responsibility for the settlement of these important cases. Specialization ought to be as beneficial here as in all other departments of government. It is a pity that the original plan of a permanent court should finally have been changed, through the insistence of the carriers' representatives, to a tribunal, each of whose members no sooner becomes proficient in the details of his work than he is marked for transfer to other fields of activity.

Next to the creation of the Commerce Court, the most important change in procedure introduced in 1910 was the transfer of the task of prosecuting suits on appeal cases from the Interstate Commerce Commission to the Federal Department of Justice. The confusion of governmental powers in the past, through permitting the Commission to prosecute cases in the Federal courts in which it already had an interest, has already been described. It was obviously illogical that a body having once rendered an opinion should then appear in court in defence of its own order. The jealousy of the Department of Justice in this regard was probably responsible also for the change effected in the law. The amendment of 1910 provides that hereafter all cases and proceedings, either in the Commerce Court or the Supreme Court, shall be brought in the name of the United States under the charge and control of the Attorney-General. It was provided also that the Commission or "any party or parties in interest" might appear of their own motion and as of right, and might be represented by counsel. Communities, associations, or individuals interested in the controversy were authorized to intervene, and the Attorney-General was forbidden to discontinue any proceedings over the objection of such parties in interest.[701] This apparently reasonable procedure was authorized after vehement protest of shippers against the original administration program. The Senate objected to it on the ground that it "would introduce intolerable confusion in legal proceedings and subordinate the general interests of all the people to the selfish concerns of one or more parties." And the Commission insisted throughout that it must participate in such suits, else no competent parties would be at hand to guide the prosecution in complicated proceedings.

Several provisions in the law were aimed at specific abuses which had been revealed in the course of prosecutions under the criminal provisions of the Act. The original law provided for the posting of tariffs in public places, in order that shippers might inform themselves as to the scheduled rates. But the possibilities of concealment of special favors, as well as the mere mechanical difficulty of ascertaining the facts in so complicated a maze of descriptions and rules with all sorts of exceptions, made it necessary that the shipper should rely upon information obtained from the agent. Nor could the shipper recover for losses incurred through misquotation of the rate by this agent inasmuch as the carriers must collect according to the tariff, under severe penalties for departure therefrom. Even a mistake by the agent in quoting the wrong rate did not permit of recovery. The new law met this contingency by the requirement that the railroad should quote the rate upon written request; and should be liable to a penalty of $250 for mis-statement from which loss to the shipper should result. The requirement that both the request and the reply as to rates should be written, it was hoped, would facilitate detection of rebating in the future. Another clause added a penalty of $1000 and made it a misdemeanor for any carrier or its agent to disclose information concerning either the route or destination of any shipment, when such information might be used to the injury of a competing shipper. Solicitation of such information was also penalized. The abuse against which this provision of law was directed is well illustrated in the prosecution of the so-called Powder Trust in 1911. It appeared in one instance that a freight agent had been paid from $15 to $18 a month for furnishing weekly statements of the shipments, with addresses of consignees, made by a competing concern in Chattanooga.[702] Such outrageous espionage, long practised by the Standard Oil Company, it is to be hoped will be eliminated in future by this provision of law.

Certain details of the act may be dismissed with mere mention. The scope of regulation was extended to include telegraph, telephone, and cable companies. The Commission was specifically authorized to establish and enforce reasonable classification of freight. Such authority, to be sure, had been continuously exercised for years; but this clause put it beyond dispute. A leaf was taken from the experience before the Supreme Court in interpretation of the authority over through routes and joint rates in the "Portland Gateway" case, described in the preceding chapter. Other "reasonable or satisfactory routes" were more specifically defined; although the complicated phraseology adopted was of doubtful value. It may well be that the clause, under judicial interpretation, limited rather than amplified the Commission's power as compared with the law of 1906. But the added requirement that every carrier must provide reasonable facilities for the operation of through routes, proper rules for the interchange of cars, etc., was bound to promote the efficiency of through business. The experience in the "Orange Routing" cases, also, brought about a clear affirmation in the new statute of the right of a shipper to designate the route which he preferred for shipment over connecting lines. The shipper might also demand a bill of lading conformable to his instructions. Whether this freedom of choice to the shipper, with the incidental assumption of responsibility for all consequences, regardless of strikes, blockades, or acts of God, will work to his advantage in the long run remains to be seen. He may probably rely upon strict enforcement of the so-called Carmack amendment of 1906, which makes the initial carrier liable for damage, even if it occurs off its own line. And, finally, among the minor changes in 1910 was the authorization of the Commission to institute inquiries upon its own initiative. Such power had frequently been exercised; but in the enactment of the Hepburn Act four years before, certain verbal inconsistencies were introduced into Section 15. It was deemed best to remedy this error by complete authorization to undertake investigations either with or without complaint.[703]

In place of regulation of the issues of stocks and bonds by Federal authority, as pledged in the political platforms, the almost unanimous opposition in the Senate to such a plan, brought about the substitution of a Railroad Securities Commission to investigate the subject. This, after all, was probably wise; inasmuch as many details as to conflicting state and Federal powers in such matters, were yet to be determined judicially. Moreover, the plans proposed, as it appeared, were so complicated that their adoption might result in the validation of all capitalization then outstanding without reference to its real value. The question certainly merited further investigation at the hands of experts.

Under the authority above mentioned, the President appointed an able although distinctly conservative commission, headed by President Hadley of Yale University. This body rendered its report in November, 1911.[704] The document was concise, cogent in reasoning (with the exceptions noted below), wise in its general conclusions and eminently conciliatory in spirit. It was obviously intended to promote good relations between the government and the carriers. The dominant note was complete publicity as a corrective for all financial abuses of the time. The adequacy of this remedy was probably exaggerated. The wise accounting provisions of the Acts of 1906-1910[705] were certainly already far-reaching in effect. The Securities Commission proposed, however, that they be elaborated to cover fully all phases both of promotion and of subsequent finance.

Not less important and wise than the insistence upon financial publicity, was the recommendation that, until the Supreme Court had clearly defined the relations between Federal and state authority, the Federal government should refrain from attempting to regulate the issue of securities. Too many difficult legal complications remained to be cleared up.

There certainly should have been a more enthusiastic commendation of the efforts of states like Massachusetts, Wisconsin, Texas and New York to cope with their local problems of financial control.[706] The apparent absence of a due appreciation of the importance of the work of the various public service commissions all over the country may perhaps be accounted for on the ground that it lay outside the scope of the work of a purely Federal commission. Yet a word of encouragement to these state administrations would have done something to offset the rather negative character of its conclusions. Someone must exercise financial control. If inadvisable for the Federal government to undertake it at this time, as might well be, then it was important to emphasize the fact that the states must do it as best they could. On the other hand, the recommendations concerning physical valuation as an element in rate regulation were sufficiently progressive to impart an aspect of judicial balance and general fairness to the report as a whole.

Two specific conclusions of the securities commission, however, were surely open to debate. One was the contention that little relation obtains between capitalization and rates. The statement is, of course, largely true; but like most generalizations of the sort fails to state the whole truth. It is probably absolutely true as to particular rates. No one would claim for a moment that the heavily capitalized Wabash, operating in trunk line territory alongside the Pennsylvania system, could charge any higher rates because of its financial disabilities.

Rather the reverse. But while true of particular rates, capitalization does exert an indirect but nevertheless a very appreciable influence upon the general level of rates. For this point I have argued elsewhere at some length.[707] Was it surprising that the pressure for advanced rates in 1910-1911 in trunk line territory should come from the heavily capitalized New York Central, with substantial aid and comfort from the Erie? Was it a mere coincidence that the Lackawanna road, with its stock quoted above $500, was a less prominent factor in the agitation than some of its neighbors? True enough, no direct relation between rates and capitalization exists; but that a positive incentive to higher charges in general may be found in the need of supporting a large capitalization seems reasonably clear in the light of experience. This point was certainly neglected or glossed over in the report.

A most debatable and, as I hold it, dangerous proposition in this report was the proposed abolition of the "dollar mark" upon capital stock. However desirable it might be for mining companies and the lesser industrials, as in Germany, to do away with any stated par value for share capital in order to disabuse the public mind of its purely artificial character, the proposition is quite different when applied to an industry like a railroad. There is all the difference in fact between purely private and competitive conditions of a more or less speculative character, and those under which monopoly privileges are conferred by gift of the public. Space does not permit a criticism of this proposition in detail. I have elsewhere discussed it more at length.[708] Many objections occur at once, none of them mentioned in this report which, almost jauntily, as it seems, proposed to revolutionize all of our customary habits of financial thought. Among these objections there is the fact that abolition of par value removes the restraint upon the promoter or management, for liability to creditors in case of part-paid shares. The experience of the Asphalt Company of America is illuminating in this regard. May we trust mere publicity to provide corresponding safeguards for honest promotion with this liability removed? Then again, how about the issue of stock in exchange for property acquired, as had frequently occurred in the course of railway consolidation? Was it immaterial whether the absorbing company put out 500,000 "participating shares," with a market value of $100 each, or twice that number of "certificates of participation" commanding half that figure per unit in exchange for the property acquired? And still further, there is the inevitable effect upon speculation. One of the primary needs of the time was to effect a separation of our common carriers from Wall Street influence. Did it make no difference whether the Southern Railway "participating shares" were traded in around $25; or those of the Louisville & Nashville commanded a price of $150? Low quotations always offer a great stimulus to speculative manipulation—as any student of Rock Island affairs must concede. To do away with par, which means permission to emit, without reproach, at any figure "below par"—how hard it is, indeed, to get rid of that conception of some standard of normality—could not but exert a malign influence. And then, finally, over and above all other considerations there was the need of some general standard of comparison for all sorts of purposes—some base from which to judge of normality. The proposal to wipe out all such standards, with the mere warning to public and investors alike to beware, seemed like a step backward.

This brings us to the insistence of the commission upon the need of the railroads for more capital for development; and the difficulty of financing new enterprises under regulative provisions of law, such as the prohibition of the issue of shares at a discount. Massachusetts had recently passed through an experience of probably excessive regulation. But simple modifications of its anti-stock-watering laws seemed to have solved the difficulty. Of course the developmental problems of the West and South are quite different from those of New England. Yet there was the experience of Texas to fall back upon. Complaint had been made, of course, especially by the Gould roads, of the insufficiency of capital for new work. But the growth of mileage seemed, nevertheless, to compare not unfavorably with progress in other states. Were the Gould roads, for example, any better off in other states where greater liberality of laws prevails? The fact was that much new construction and improvement remained to be done all over the country, as this report duly emphasized; but much of it would probably have to be done by companies already in the field. Not many new steam railroad companies are now needed even in the West. It must be confessed that the recently authorized extension of the Grand Trunk Railway into the heart of New England shows how persistent is the demand for new roads even in the East. But whoever may build, let them learn the lesson, so often forgotten, that honest management and conservative financing, to the end that solid credit be first established, has far more to do with facilitating development than non-interference by law. This was probably a time when encouragement to the railroads in a period of stress should properly be given. But let it not be forgotten that good faith to the public and to stockholders, together with prudent financing, must be the primary source of credit.

Many admirable features of this report deserve mention, did space permit. The clear exposition of the distinction between stocks and bonds, and especially the discussion of inter-corporate financing, occupied a prominent place. The document promised to play a large part in the determination of governmental policy in future. It well merited the most careful perusal by legislators, financiers and economists. In the nature of things so conservative a document could never hope for a popular reception. But many of its financial platitudes were probably in need of reiteration for the good, both of the carriers and the public.

The Hepburn Act of 1906, despite the agitation over its enactment in Congress, "came in like a lion and went out like a lamb," imitating thereby the month of March in which its crucial changes were effected. In the end it proved to be a much less drastic measure than the railroads feared. This Mann-Elkins law, four years later, on the other hand, introduced by the presidential bill as a merely supplementary piece of legislation,[709] "rounding out the Roosevelt policies," emerged from Congress really radical in character. Every change made was "progressive"; and yet there was little public interest manifested on either side. No publicity campaign was carried on by the carriers. No extended discussion took place in the press. There were several reasons for this contrast. It is partly true, as one writer has suggested, that "the marrow had already been extracted from railroad regulation as a political issue; and that it had become merely a bone of contention in a factional strife." Moreover, the fundamental principle of effective governmental regulation had been indisputably affirmed in 1906. The Act of 1910 had for its purpose a firmer intrenchment of the position already occupied. Debate centred largely upon uninteresting technical questions. The broader issues were relegated to second place. Even the carriers on their part were extremely reserved in stating their position. It was conceded on all sides that the less public opinion in general was aroused, the lighter would be the sentence passed upon the prisoners at bar. It is difficult to determine in how far the marked advance made in this statute was due to contemporary happenings, like the general advances of freight rates, the Illinois Central scandals and the like; or to a deep-seated conviction on the part of the progressive element in Congress. But that the law, as a whole, was a surprise in the end even to its proponents is beyond doubt.

A word may be added concerning the omissions in the Mann-Elkins law. The most important was the elimination of the administration plan for authorizing agreements between carriers as to rates, subject to supervision by the Commission. The Republican platform had definitely promised relief of this sort to the railroads. The Democratic party had somewhat equivocally promised an amendment of the law prohibiting pooling "to make it unlawful, unless approved by the Commission." The plan, however, met with persistent opposition on all sides, largely on the ground that it conflicted with the Sherman Anti-Trust law. Other details which fell by the way concerned proposals to extend jurisdiction over water carriers on inland waterways.[710] Whether the Commission might exercise any control over those which formed parties to a through line still remained an open question.[711] And then at the last there was the omission of Congress to deal with the question of fixing minimum rates or differentials between rates. This was responsible, as will shortly appear, for much of the difficulty encountered in the application of the long and short haul clause to the transcontinental rate problem.

[688] Characterized somewhat heatedly by Senator La Follette in his Autobiography (American Magazine, 1912, p. 189), as "in all the history of railroad legislation, the rankest, boldest betrayal of public interest ever proposed in any legislative body."