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contact with the money market, too-the Wall street exchange?-A. I will agree with you; but in the coffee business-that is the natural way to bring it in here. Why should coffee, for instance, come from Rio Janeiro to Baltimore and come into Chicago and then drift down into the Mississippi Valley? Why should it not come to New Orleans? Why should it not come from La Guayra and Mexico?

Q. While the barge system was in existence on the Mississippi River what effect did it have on the rates?-A. It is still in existence; but it is not the factor it was. They used to take a great deal of grain and heavy freights, but our rates have got so low that, including the two elements of marine insurance and our better delivery at the point of destination, being able to switch all around towns, our rates are as low as theirs for practical purposes. The barge line has not been the factor it used to be in our business. I can give you a very good illustration of that in regard to another business-cotton. It used to be carried from Memphis to New Orleans in steamboats in large quantities-upward of a hundred thousand bales a year. I watched for 3 years the shipments from Memphis by boat to New Orleans, and they did not carry 1 bale in 3 successive years. The railroad rates had got so low, including marine insurance and the delivery, that we could take cotton from Memphis and contract to put it alongside a ship on a day certain, whereas a steamboat could not.

Q. What is the relative difference between the rates from Kansas City to Galveston and from Cairo to New Orleans?-A. I am sorry to state that I can not tell you; I do not follow the rates. I have very little to do with that business. I know there is that competition every day in the year. We are interested in the Kansas City situation in another way. The Memphis, Kansas City and Birmingham road brings us considerable freight at Memphis.

A question by Professor Johnson led up to a matter on which I wrote something. It was on that question of capitalization, and the thought came to me after I had prepared the paper already read to you. The facts are interesting, I think. (Reading.) "As to capitalization: The statement that the railways of the United States are overcapitalized has been so often reiterated as to be quite generally believed.

"While I know not only that there is no water in the securities of the Illinois Central Railroad Company, but that their sum total does not represent by millions of dollars the cash actually spent on the property, permit me to call your attention to the following statements, taken, with respect to the railroads of the United States, from the statistical reports of the Interstate Commerce Commission, and with respect to those of the United Kingdom of Great Britain and Ireland, from the returns of the British board of trade.

"The statements contrast the situation in 1890-the first year for which the Interstate Commerce Commission published statistical reports-with the year 1898.

"It will be seen therefrom that, while the number of miles of railroad in the United States has increased 18.06 per cent, their capitalization, including both bonds and stock, has increased only 14.64 per cent; and that the increase in the capitalization per mile of railroad is $3, a sum too small to be expressed in percentages, less than one-half of one-hundredth of 1 per cent.

"Also that the gross receipts of the railroads in the United States have increased in almost exactly the same ratio as the miles operated, viz, 18.58 per cent, while their gross receipts per mile have increasd $30, or less than one-half (%) of 1 per cent. This in a country which has developed enormously in the meanwhile, and whose population is estimated by the Interstate Commerce Commission to be increasing at the rate of 1,250,000 per annum.

"On the other hand, in the same time in the United Kingdom the number of miles operated increased 7.9 per cent, the capital increased 26.41 per cent, the capital per mile operated increased 17.15 per cent, gross receipts increased in amount 20.39 per cent, and per mile operated, 11.57 per cent.

While it is true that, as a whole, the English railways are better built than ours, there are many points in which ours excel them, and there are also thousands of miles of railroad in the United States which are well and permanently constructed. "The capitalization, including bonds and stocks, of the railroads in the United States, is $60,343 per mile; that of the railways in Great Britain, £52,379 per mile, which, at $5 to the pound, equals $261,895.

"The increase in the capitalization of the railroads of the United States per mile in 9 years has been, as above stated, $3.

"The increase in the capitalization of the British railways per mile during the same 9 years has been £7,669, or, at $5 to the pound, $38,345.

"The figures are given as reported, without accepting responsibility for their

accuracy.

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I think there are some inaccuracies in the Interstate Commerce Commission's figures, and I have had a good deal of correspondence with them about that. I have been very much impressed with that difference within the last 10 years. What may have happened 40 or 50 years ago I do not know, but in the last 10 years the railroads of the United States have gone through a process of undercapitalization, not only as to the amount, but as to the rate of interest. In all the recent reorganizations the 7 per cent bonds which the bondholder had a right to exact under his contract have been put in at 34 and at 4 or 3, or whatever the rate may be. There has been a tremendous undercapitalization in the last 10 years out of that. I can point out 6 miles of the Illinois Central Railroad on which we have spent $6,000,000 in the last 10 years and not $1 of capital has been issued for it. We may have borrowed a few dollars of money, but I mean no stock has been issued for it; and that is going on all over the country.

Q. Do the Interstate Commerce Commission or do you railway men ever take into account the amount of local stock and of common stock that by reorganization is entirely wiped out and does not appear on a single figure to-day? For instance, township stock, county, State, or city stock and private individual stock, taken up in these reorganizations, has been entirely wiped out of existence and never shows in any figures whatever on the record. Are there not millions involved in that way that never show up?-A. I had a personal experience on that line. In 1877 I came back into the Illinois Central service. I had been out for a while, and then came back, as secretary of a reorganization committee for the New Orleans, Jackson and Great Northern and the Mississippi Central Railroad, leading from Cairo to New Orleans, 567 miles. Those 2 concerns had a capitalization, as shown by their reports, of about $50,000,000. They were bankrupt; they were physical wrecks; and we went to work and in 5 years thoroughly rebuilt them. We relaid every bar of iron with new steel rails; we rebuilt all their engines and all their cars and added to them, and at the end of the time we turned them over with a capitalization of $28,000,000, and it went on the books of the Illinois Central at that figure, having in the meanwhile spent the earnings of 5 years, and that was all the money we could scrape together. The difference between the $50,000,000 and $28,000,000 was not what I spoke about earlier as being at least $20,000,000 in the Illinois Central property which is not shown by capitalization there. I mean real property-real money applied to the purposes of the corporation. I should say there must be something like $20,000,000 of it. I would not like to swear to the figures, but it is many millions-I would certainly swear to that.

Q. (By Mr. KENNEDY.) Have you fixed any limit to your capitalization?-A. No; there is no limit; that is to say, it is authorized from time to time to be issued by our

board of directors.

Q. (By Mr. C. J. HARRIS.) Have you been able to pay dividends in these depressing years?-A. Yes; we have always paid dividends. The Illinois Central Railroad has always paid a 6-monthly, semiannual dividend. We have paid in recent years at the rate of 5 per cent.

Q. (By Mr. CLARKE.) Was any of this shrinkage to which you referred traceable to the increased value in money?—A. No; the loss in those Southern railroads was due to two facts-the war and the reconstruction period. During the war the railroads were destroyed. I had in my possession-I suppose I have still-2 receipts given, 1 by a Federal officer and 1 by a Confederate officer, for the destruction of a bridge across Yalabusha River, near Grenada, Miss. It was in Forrest's country, where General Forrest was cavorting around there back of Memphis in north Mississippi. I merely mention that as showing what went on. Bridges were destroyed over and over again during the war. And then came the period of national political reconstruction and the period also of the reconstruction of these railroads; and there were carpetbaggers in both; there was rascality in the railroads.

Q. I suppose some of the earlier capitalizations of your various roads were on the greenback basis, and when we got to the gold standard of course there was a shrinkage?-A. Well, of course, there was a shrinkage; and as a result of that panic of 1873 the Illinois Central, which had been paying 8 to 10 per cent, had shrunk; they got down in 1877 to paying 4 per cent. But I do not know that there was any shrinkage in the capitalization; it was in the earning power.

Q. More millions of stock on a greenback basis would have to be issued than on the gold basis, of course, at a gold premium?-A. Some of our stock was issued during the war.

Q. I would like to inquire if there has been a large natural increase in the value of your locations, especially in cities?-A. I think there has been in Chicago, very large; and elsewhere, but chiefly in Chicago.

Q. Is that fully covered by your present capitalization?-A. No; our land in Chicago, as far as capitalized at all, stands on our books at just what it cost 40 or 50 years ago. That has never been marked up. Those things have stood.

Q. Your position, then, and your opportunity to do business, the value of which is constantly increasing, would bear in your judgment a much larger capital than is shown in the amount issued?-A. The mayor of the city of Chicago had an estimate made by experts within 2 or 3 years-I think it was Mr. Mayor Swift, the predecessor of the present mayor-of the value of the property of the Illinois Central Railroad on our first mile, and he brought in figures of about $34,500,000. I should say that that property probably stands on the company's books at $200,000. I do not know the figures. Now, that is the same unearned increment that any other owner of real property would have had if he bought it. When this company was organized with $17,000,000 of paid-in capital, the directors themselves paid in $2.50 per share, and made themselves personally liable for $97.50, and they were the first men in New York at that time. They were men like William H. Aspinwall and Jonathan Sturges, George Griswold and Ludlow-I can give you the names of all of them-merchants in good standing. They believed that the sale of the land would build the railroad, and therefore were willing to make themselves personally liable. Then came the panic of 1857 and these gentlemen, after indorsing the company's paper very largely, had great trouble to pull through, and they assessed themselves on that stock first $20 and then $10 more and then $10 more until every last dollar was paid in on that $17,000,000 of stock. Now, suppose those gentlemen, intelligent men, men of affairs, had gone into the city of Chicago and taken their $17,000,000 and bought corner lots and let somebody else build this fool railroad. It nearly broke them; it did break some of them. They had the money to do it, and they had the credit, and they could get money just as well for Chicago real estate as they could for the railroad. Q. (By Professor JOHNSON.) There is a question connected with taxation on which I think I would like to hear from you. The Illinois Central pays to the State of Illinois a tax upon its receipts?-A. Yes.

Q. And the amount is fixed by the State constitution, I believe?-A. Yes; it is fixed in the charter, and then the constitution provides that it shall not be altered.

Q. Will you please give us your views on the question of taxation, as to the best system, and as to the working of the various systems?-A. It seems to me that a tax on gross receipts, if properly regulated as to per cent, would be the fairest tax. Seven per cent is undoubtedly excessive.

Q. That is, on gross receipts in the State of Illinois? A. Yes; we pay 7 per cent, and that is undoubtedly excessive. It is very much more than other railroads pay, and it is more than the business will bear. That was accepted by my predecessors, and I do not complain. We have made our bargain with the State of Illinois and we have lived up to it and we shall; but that was predicated on the railroads in the New

England States showing, in the years previous to 1850, that they could be operated for less than 50 per cent of their gross receipts, payment of taxes and everything else. Our people thought, and it is in writing that they said so, that the railroads in Illinois, on those flat prairies, with coal abundant under the soil, could be operated for less. Now, if we got 55 per cent of our gross receipts, after paying operating expenses, you know, if we had that left, we could afford to pay the State 7 per cent; but as a matter of fact, we have only less than 30; our operating expenses run up to about 70 per cent. Last year, including taxes, it came to 69.580 per cent-operating expenses, very nearly 70 per cent, leaving 30.420 per cent as net. Now I have deducted there all taxes, taking the whole railroad as a system. To take from a business which it costs 62 per cent to operate 7 per cent out of the 37 left is too large a proportion for a tax. We should get to some figures such as they have up in Wisconsin, 24 to 4, varying with the different classes of railroads. My reason for believing that a tax on gross receipts is a fair thing is that it is a tax on the money which the railroads take from the people for transportation in a quasi public service. Now, it is not unfair to the railroads, it seems to me, that they should be taxed in proportion as they take, just as I might be taxed on my income. There is nothing unfair in that. Nobody pretended that there was anything unfair in an income tax properly adjusted. Q. (By Senator MALLORY.) How many employees have you in connection with your system?-A. The 2 railroads, the Illinois Central and the Yazoo and Mississippi Valley, have 28,750.

Q. Has your system any objection to employing men who belong to labor organizations? A. No; we employ them regardless of what they do in that respect.

Q. Have you any arrangement with the men providing for them in case of sickness or injury? A. We have on one division; on the Louisville division. We have a hospital fund there. There is a small contribution by the men from their wages and the company contributes a house and the land. The details of that I am not very conversant with-whether we make a monthly addition to it or not.

Q. The money for running it comes out of the earnings of the men?-A. A part of it does, I know. The company furnishes them with a very nice house and a piece of land and all the transportation for the hospital, etc., of course; but whether we make a payment of money I do not know.

Q. Is it compulsory on the men to subscribe to it?-A. No.

Q. Or is it just a matter of their own?—A. They all do it, though. They see the advantage of that. It is in a country where hospitals are not as close together as they would be here-western Kentucky and along the Ohio River.

Q. What are your hours of labor for train hands-men who are connected with the running of trains? Do most locomotive engineers and train hands work by the mile? A. Yes; and we watch those men very carefully. The master mechanic watches that; looks his men over to see that a man can not go out unless he has had his sleep, and all that sort of thing.

Q. Have you any rule regarding intoxication of employees?-A. Yes; especially the men on the trains.

Q. I assume that that is rigidly enforced?-A. Yes; that is enforced.

Q. To what extent has the Illinois Central complied with the law requiring automatic couplers and air brakes to be put upon freight cars?-A. I can give you that information down to the 30th of June. It is in Mr. Harahan's report. On the 30th of June we had 95.39 per cent of our freight equipment equipped with automatic couplers and we had 38.83 per cent of our freight equipment equipped with air brakes. Of course all the passenger equipment is equipped with both. We will conform with the law at the end of the year.

Q. Have you any complaint to make about the system of ticket brokerage as it is practiced in this country to-day?-A. I did not come here to make any complaint, if you ask me the question.

Q. Have you any criticism to make?-A. Yes; the thing is wrong, because the companies are not free merchants. They can not sell above their advertised rates, and under those circumstances it seems to me that we ought to be protected against such sale by others below our rates. While I know that other railroad men will not agree with me--I do not suppose anybody will agree with me--I have always thought that that thing could be cured by a very simple statute, which would require every ticket to be stamped with the price at which it is sold and to be redeemable by the company issuing it within 30 days, if presented, in proportion to the part used on any coupon; not on any piece of a ticket or on a piece of a coupon. A piece of a ticket would be cutting it up a little too small. But if there is a ticket sold from Boston by the Boston and Albany Railroad to Albany, by the New York Central Railroad and over the New York Central Railroad to Buffalo, and over the Lake Shore Railroad to Chicago, and so on across the continent, and a man does not use one of

those coupons, I think he is entitled to have his money back; and if the price of the whole ticket is stamped on there, printed on there in plain figures, there will be no quarrel as to what the proportion is, and there will be no reason for the life of the ticket broker except forgery. He would be out of any honest business that he has. I admit that they have some honest business; but there would be no reason for their existence except some of the things that they are accused of doing-altering the dates and places. But I do not believe the other railroad mer. would agree with me in that. I proposed it years ago. I think that such legislation would kill the ticket broker so that you would never hear of him again.

Q. (By Mr. KENNEDY.) Is not the proportion of business which the ticket broker does on unused portions of tickets very small in comparison to the business that is turned over to him by the railroads themselves?-A. I do not know about that, frankly. I imagine that there are some of the weak roads that do that business. Í know that it is in evidence in the Interstate Commerce Commission, reported in their first big investigation in Chicago 8 or 10 years ago, that they found the tickets of every railroad except the Illinois Central in the scalpers' offices. I have had no dealings with them, and I do not think our people have. I think you are right about that-that there is some of that business going on at times. I doubt whether there is just at this moment.

Q. The statement you just made in regard to the finding of the Interstate Commerce Commission would seem to bear that out.-A. This is 10 years ago-1888, I think it was one of their first investigations.

Q. Can not the railroads correct this evil themselves without going to Congress for it? A. I do not see how we can prevent any other railroad company which has a line to points which we reach selling that ticket at any price they please through a broker as long as a broker exists.

Q. Then part of your object in going to Congress will be to control the action of those other railroads as much as that of these scalpers?-A. Undoubtedly.

Q. (By Senator MALLORY.) There is a feature of discrimination in the practical working of the ticket brokerage business, is there not, as where a man gets a ticket to travel over a certain distance at a less rate than the advertised rate which the public is generally called on to pay?-A. You mean that the railroad company sells a ticket to the broker and pays him a commission for the sale out of which he scalps the rate?

Q. I do not care to go into any details of that kind. What I meant to say was this: The principle on which this business is done is such that a man who buys a ticket from a ticket broker gets a ticket, say, from here to New York, at a less rate than he will be able to get a ticket from the railroad company; he pays less for it, less than the published rates, and it is therefore an infringement of the law, a violation of the law, very plain and flagrant.-A. You and I are not prohibited from selling tickets at any price, as I understand it, under the statute nor from buying. The law does not prohibit me from buying a ticket for $20 and turning around and selling it to you for $15. It does as a railroad officer, but not as an individual.

Q. As an officer of the company, yes.-A. Undoubtedly; it would be a violation of the statute.

Q. What have you to say about the giving of passes by railroads to individuals, discriminating against other individuals?-A. I think the evil in that is largely due to the twenty-second section of the act to regulate commerce. After carefully drafting a bill prohibiting discrimination they provide in this way (reading):

"SEC. 22. That nothing in this act shall prevent the carriage, storage, or handling of property free or at reduced rates for the United States, or municipal governments, or for charitable purposes, or to or from fairs and expositions for exhibition thereat, or the free carriage of destitute and homeless persons transported by charitable societies, and the necessary agents employed in such transportation, or the issuance of mileage, excursion, or commutation passenger tickets; nothing in this act shall be construed to prohibit any common carrier from giving reduced rates to ministers of religion, or to municipal governments for the transportation of indigent persons, or to inmates of the (2) National Homes or State Homes for disabled volunteer soldiers and of soldiers' and sailors' orphan homes, including those about to enter and those returning home after discharge, under arrangements with the boards of managers of said Homes. Nothing in this act shall be construed to prevent railroads from giving free carriage to their own officers and employees, or to prevent the principal officers of any railroad company or companies from exchanging passes or tickets with other railroad companies for their officers and employees."

Now, there are 20 lines, half a page, of exceptions, and the law has so expressed them that you can not see the limits of the exceptions. There should be a provision there for commutation tickets and mileage tickets, and then strike out all exceptions

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