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Senator MORGAN. Does that traffic arrangement obtain on both sides of the Isthmus?

Mr. DRAKE. Yes, sir. Do you mean the "open door?"

Senator MORGAN. I mean, have you a similar traffic arrangement on the west side- on the Pacific side of the Isthmus?

Mr. DRAKE. Yes, sir; the traffic arrangements are the same on both sides.

Senator MORGAN. With what vessels; the same companies?

Mr. DRAKE. No, sir; they are different companies on each side. The railroad company is in the position of making bipartite arrangements. That is, it arranges with the cocarriers on the Pacific side that it will bring all the freight obtainable, at through rates that are established by agreement and that are thereafter prorated, to the western terminus (I am taking what is called the homeward voyage now), under bills of lading which are issued by the consent of the other two carriers, the Panama Railroad Company and the Atlantic Line, that takes the freight away from the Panama Railroad on the Atlantic side. That cargo is then carried to destination, is delivered by the final carrier, the freight money is collected, and is distributed in account to the participants.

Senator MORGAN. Are there certain ports of delivery on the Pacific and on the Atlantic to which these traffic agreements relate?

Mr. DRAKE. Yes, sir. The home port of each of the lines is of a distinct nationality, except in the case of England. For instance, we have an Italian line, we have an Austrian line, we have a Spanish line, we have a French line, we have three English lines, we have our own line from New York, and two foreign lines from New York to the Isthmus.

Senator MORGAN. But you have not traffic arrangements with all of these lines?

Mr. DRAKE. We have traffic arrangements with all of them, sir. They are arrangements that have been in existence for fifty years in some cases. Those arrangements are similarly made; similar arrangements are made with the carriers on the Pacific side. That is, they bring the freight to us, leaving to us the option to give it to any one of the lines.

Senator MORGAN. Name the carriers on the Pacific side with whom these traffic arrangements are made.

Mr. DRAKE. I should also have named the United Fruit Company from New Orleans. The carriers on the Pacific are the Pacific Mail Steamship Company from the north, the Pacific Steam Navigation Company from the south, and the Chilean Company-the South American Steamship Company, it is called. Its name is the Cia SudAmericana de Vapores; but if you will allow me I will call it the "South American Steamship Company," which is the translation. Senator MORGAN. Yes; please.

Mr. DRAKE. Those are the three companies on the other side. We have expected all along that other companies would be induced to come in, but they have not yet done so.

Referring to my old testimony, Senator, which you perhaps will readily recall, I have stated once before this committee that thus far, although there was an unlimited prospect for business to develop on the Pacific coast, there had not come business enough for more lines than were operating in connection with us. That is evidenced so far

by the fact that we have not been able to induce any other lines to come in. There are two or three lines that are operating independently up and down the coast that sail around to Magellan, that go to Europe via Magellan the Kosmos line, Lambert & Holt, and the Chargeur Reuinis; that is a French line. Those latter lines do not operate in connection with us.

Senator MORGAN. Are the arrangements with each of these lines of ships that you speak of the same in every case?

Mr. DRAKE. În every case; yes, sir.

Senator MORGAN. Now, if you will just describe to the committee what a traffic arrangement is, we will get to the merits of the subject. Mr. DRAKE. There are two phases of a traffic arrangement. may be by hard and fast contract, naming all the parties and their obligations. That was the form that we adopted for a great many years, and that was in operation on both sides, binding all of the parties to do certain things, up to 1893 or thereabouts. In 1893 we canceled all of those arrangements because they were so voluminous that a great many of their conditions were dead letters. They were all canceled, and what are known as working arrangements were established by exchanges of letters stating that existing practices would be continued subject to ninety days' notice of termination by either party.

Senator MORGAN. It is the old traffic arrangement then, in substance? Mr. DRAKE. In substance; yes, sir.

Senator MORGAN. Continued by correspondence?

Mr. DRAKE. Yes, sir.

Senator MORGAN. Until you notify them of its termination.

Mr. DRAKE. And one thing I would like to make plain is that the railroad company is not trammeled now by any agreement which it can not break on ninety days' notice.

Senator MORGAN. Why do you say it is not trammeled?

Mr. DRAKE. I mean it is not hampered. Once before we had a contract that required six months' notice, or a year's notice. We are now on what might be called the customary reasonable-time notice.

Senator MORGAN. You have given up a fixed period for the termination of the arrangements, and you now exercise the right of giving a reasonable notice of termination?

Mr. DRAKE. Yes, sir.

Senator KITTREDGE. I notice here, in the minutes of date January 9, 1902, a statement to the effect that "The treasurer's statement of this date was presented, showing $444,855.51 cash assets on hand." Mr. DRAKE. Yes, sir.

Senator KITTREDGE. What were the items going to make up that total amount?

Mr. DRAKE. I had very little information before I came here as to what would be required on the financial point, and I have brought what I thought might be required. This is such a statement as would be presented at that time [exhibiting statement to committee]. It is the statement of date of April 23. It shows the cash assets of the company as follows: Cash at banks, $25,185; cash with the Mercantile Trust Company at interest, $280,000; cash with the Mercantile Trust Company at interest, $20,000. (That $20,000 is money that has been set aside to redeem bonds that have been called, but until the bonds are presented we put it in a separate account to draw interest

so as to make an earning.) Deposits with Credit Lyonnaise, in London-all of the connecting carriers remit to our London bankers in sterling, and we draw bills of exchange against their remittances, and they advise us from time to time of how much money they have in hand there as per letters of advice to April 14, £2,812 11d., $18,638.42. Liquid cash to-day (that is, yesterday), $338,823.46.

In addition, there are held in the treasury 100 Panama 6 per cent subsidy bonds and 628 of the Panama 4 per cent bonds. There is due to the Isthmian Canal Commission for cash loaned to the Commission for account of new equipment and construction, March 8, $160,000; March 20, $190,000; total, $350,000. That I am prepared to explain when I am asked to do it-I mean, why there is an indebtedness on the part of the Commission. The cash assets to-day are $338,000, liquid cash to be drawn against. That statement means that at that time, in addition to the free bonds in the treasury, there was that amount of cash in bank.

Senator MORGAN. How much cash was there in bank yesterday? Mr. DRAKE. Yesterday? $338,000, sir.

Senator MORGAN. Why is it necessary to keep that large amount on hand?

Mr. DRAKE. It has always been the policy. One of the things I omitted to say, perhaps, is that the Panama Railroad Company has always heretofore been more ready in paying its bills than it is able to be now. On the 10th we pay one class of bills and on the 20th another. Before I came away last night I signed checks for $65,000 for current bills that will be drawn against there, the vouchers having been approved and audited, that will be drawn from this fund.

In addition I have bills for $120,000 for supplies for the steamers and for Isthmus commissaries that will have to be paid to-morrow. Somebody else will have to sign them in my absence. Mr. Shonts will probably do so; but I would like to say here, Senator, if I may be allowed, that it has been the policy of the railroad ever since I have been connected with it to maintain large cash reserves, and I think there has not been a time-there is certainly not a time that I recall; I could easily prepare a list to show it-when the balances have not been in the neighborhood of five or six hundred thousand dollars always employed at interest, and we have run as high as a million dollars in bank of cash assets.

The CHAIRMAN. That money that is at interest is all subject to check, is it not?

Mr. DRAKE. Entirely, sir; subject to two signatures.

The CHAIRMAN. It is subject to check on demand?

Mr. DRAKE. Yes, sir.

Senator MORGAN. Now, Mr. Drake, you said you would give us a description of what the traffic arrangements were--what they amounted to, what they mean.

Mr. DRAKH. Yes, sir. The purpose of the arrangement and the effect of the arrangement is this: The Panama Railroad Company wants all the business that it can get. It needs it in order to earn money enough to pay its operating expenses and its fixed charges. We seek to have as many lines as possible connect with us, in order to provide for the Pacific coast traffic. The Isthmus of Panama has been, up to now, the only means of transcontinental traffic to those ports-in fact, they depend upon it-except the route around the

Horn. In order to secure that business we accept any regularly established line that advertises scheduled sailings to and from our ports, our terminals on either ocean.

Our understanding with those lines is that they are to make rates for all classes of goods, down to certain minima that are established. The minimum is very much lower than it has ever been necessary to go. That is in order that what are called initial carriers may have full authority to make competitive rates to secure business. As a matter of fact, the steamship lines maintain classifications of freight and grade their rates accordingly, making such rates as are necessary to secure the business. Our interests are left to that extent in their hands. All reports of business are made directly to our New York office. All accounts are checked there.

If we notice a falling off in the tonnage or a change in the rates that would be prohibitive or restrictive in any way, we immediately protest that their arrangement with us is to get the business, and if we find that we are losing any particular class of tonnage we insist on their making rates that will recover it or will secure it.

That shows that they have a free hand to make rates to get the business. Then, thereafter, the rates are divided on agreed percentages. The railroad company received 25 per cent of any through rate made. Forty per cent goes to the Atlantic carrier, and the balance, 65, or 35, or 38 per cent, to the Pacific carriers.

Senator MORGAN. What inducements do you offer to these various lines that have these traffic arrangements with the railroad company to unite in your scheme?

Mr. DRAKE. It is a common interest, Senator. Most of the lines are subsidized. They run to contiguous ports, and our port is a port of call to that extent. The rates are remunerative. They come with various quantities of freight to be transported over the railroad. To that extent it is an increment to them. That is their inducement. We furnish them, on the other hand, with freight to take to their home ports. That is the business that I referred to as the circulatory business that is constantly maintained by those lines. They start from their home ports and stop at various ports on the way, leaving and taking cargo. They come to our port and do the same thing, and start on their way home, doing the same thing; so that when they leave their home ports they are loaded, and presumably when they reach them they are loaded. Now, we are not interested except in our proportion or share of that business; on that business that they bring to us we get our earning.

Senator MORGAN. You say you supply them with freights to their home ports?

Mr. DRAKE. For the reverse journey; yes, sir.

Senator MORGAN. In what way do you supply them?

Mr. DRAKE. It is collected by carriers on the Pacific side, destined to their home ports. All of the steamship lines have agents on the coast canvassing for business; all of the different nationalities have agents, and that business is destined perhaps to Havre, to London, to Southampton, to Genoa, to Barcelona. According to its destination, it is carried by the line of that nationality, and the line to which it is delivered accounts to us for our proportion of the freight.

Senator MORGAN. All of these different steamship lines which you have arrangements with do not touch at New York?

Mr. DRAKE. None of them do, except the two that have recently established branches.

Senator MORGAN. Then they supply themselves, do they not, with this freight that goes to the home ports?

Mr. DRAKE. They start out from New York with whatever freight they have been able to secure for the ports they stop at on the way to Colon; they deliver whatever freight they have for Colon, take whatever freight we have for them there, and go on to their home ports. That service is different. The other lines run between the home ports and Colon.

Senator MORGAN. Are there any differences in the rates of freight across the Isthmus in respect of any of these vessels? Mr. DRAKE. No, sir.

Senator MORGAN. They all have the same flat rate?

Mr. DRAKE. They have the same authority-we have not a flat rate across the Isthmus, sir. They have the same rates; they are allowed to make the same rates. Sometimes it is necessary for one carrier to make a little lower rate on a certain class of goods from one port than from another; but he has the authority to do that.

Senator MORGAN. To make his own rates?

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Mr. DRAKE. To make his own rates; yes, sir.

Senator SIMMONS. Senator Morgan, may I ask the witness one question?

Senator MORGAN. Certainly.

Senator SIMMONS. I wanted to inquire, Mr. Drake, at what ports these steamers sailing from New York to Colon stop on their way going and coming.

Mr. DRAKE. The Royal Mail stops at Kingston; it sails to Jamaica, principally, and Barbados, I believe, and from there on to Port Limon, to Colon, and then home. The Atlas Line steamers go to Kingston; they stop sometimes at Fortune Island on the way to Kingston (that is on this side of Cuba); then to Kingston; then to Cartagena in Colombia, and to Colon, Port Limon, Veracruz, and home.

Senator SIMMONS. They stop at those places both going and coming? Mr. DRAKE. No; not both going and coming.

Senator SIMMONS. Going from New York and returning to New York?

Mr. DRAKE. Their ships are run interchangeably. They meet at different ports and may dispatch a ship that will come from Europe to New York; but lately they have changed their ships frequently. The Royal Mail has gotten down now to the Tagus, the Trent, and the Atrata; the Hamburg-American has the Siberia and the Princess something; I do not know the exact name, sir.

Senator MORGAN. You say, Mr. Drake, that the rates charged to all of these different lines crossing the Isthmus in either direction are the same?

Mr. DRAKE. Yes, sir.

Senator MORGAN. Without discrimination?

Mr. DRAKE. Yes, sir.

Senator TALIAFERRO. And what did you say the railroad's proportion was?

Mr. DRAKE. Twenty-five per cent of any rate made.

Senator TALIAFERRO. The Secretary of War stated it at 45 per cent.

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