THE RAILROAD PROBLEM
While the boards and commissions appointed by Administrator Dru were
working out new tax, tariff and revenue laws, establishing the judiciary
and legal machinery on a new basis and revising the general law, it was
necessary that the financial system of the country also should be
reformed. Dru and his advisers saw the difficulties of attacking this
most intricate question, but with the advice and assistance of a
commission appointed for that purpose, they began the formulation of a
new banking law, affording a flexible currency, bottomed largely upon
commercial assets, the real wealth of the nation, instead of upon debt,
as formerly.
This measure was based upon the English, French and German plans, its
authors taking the best from each and making the whole conform to
American needs and conditions. Dru regarded this as one of his most
pressing reforms, for he hoped that it would not only prevent panics, as
formerly, but that its final construction would completely destroy the
credit trust, the greatest, the most far reaching and, under evil
direction, the most pernicious trust of all.
While in this connection, as well as all others, he was insistent that
business should be honestly conducted, yet it was his purpose to throw
all possible safeguards around it. In the past it had been not only
harassed by a monetary system that was a mere patchwork affair and
entirely inadequate to the needs of the times, but it had been
constantly threatened by tariff, railroad and other legislation
calculated to cause continued disturbance. The ever-present demagogue
had added to the confusion, and, altogether, legitimate business had
suffered more during the long season of unrest than had the law-defying
monopolies.
Dru wanted to see the nation prosper, as he knew it could never have
done under the old order, where the few reaped a disproportionate reward
and to this end he spared no pains in perfecting the new financial
system. In the past the railroads and a few industrial monopolies had
come in for the greatest amount of abuse and prejudice. This feeling
while largely just, in his opinion, had done much harm. The railroads
were the offenders in the first instance, he knew, and then the people
retaliated, and in the end both the capitalists who actually furnished
the money to build the roads and the people suffered.
"In the first place," said Administrator Dru to his counsel during the
discussion of the new financial system, "the roads were built
dishonestly. Money was made out of their construction by the promoters
in the most open and shameless way, and afterwards bonds and stocks were
issued far in excess of the fraudulent so-called cost. Nor did the
iniquity end there. Enterprises were started, some of a public nature
such as grain elevators and cotton compresses, in which the officials of
the railroads were financially interested. These favored concerns
received rebates and better shipping facilities than their competitors
and competition was stifled.
"Iron mines and mills, lumber mills and yards, coal mines and yards,
etc., etc., went into their rapacious maw, and the managers considered
the railroads a private snap and 'the public be damned.'
"These things," continued Dru, "did not constitute their sole offense,
for, as you all know, they lobbied through legislatures the most
unconscionable bills, giving them land, money and rights to further
exploit the public.
"But the thing that, perhaps, aroused resentment most was their failure
to pay just claims. The idea in the old days, as you remember, was to
pay nothing, and make it so expensive to litigate that one would prefer
to suffer an injustice rather than go to court. From this policy was
born the claim lawyer, who financed and fought through the courts
personal injury claims, until it finally came to pass that in loss or
damage suits the average jury would decide against the railroad on
general principles. In such cases the litigant generally got all he
claimed and the railroad was mulcted. There is no estimating how much
this unfortunate policy cost the railroads of America up to the time of
the Revolution. The trouble was that the ultimate loss fell, not on
those who inaugurated it but upon the innocent stock and bondholder of
the roads.
"While the problem is complicated," he continued, "its solution lies in
the new financial system, together with the new system of control of
public utilities."
To this end, Dru laid down his plans by which public service
corporations should be honestly, openly and efficiently run, so that the
people should have good service at a minimum cost.
Primarily the general Government, the state or the city, as the case
might be, were to have representation on the directorate, as previously
indicated. They were to have full access to the books, and semi-annually
each corporation was to be compelled to make public a full and a clear
report, giving the receipts and expenditures, including salaries paid to
high officials. These corporations were also to be under the control of
national and state commissions.
While the Nation and State were to share in the earnings, Dru demanded
that the investor in such corporate securities should have reasonable
profits, and the fullest protection, in the event states or
municipalities attempted to deal unfairly with them, as had heretofore
been the case in many instances.
The Administrator insisted upon the prohibition of franchise to "holding
companies" of whatsoever character. In the past, he declared, they had
been prolific trust breeders, and those existing at that time, he
asserted, should be dissolved.
Under the new law, as Dru outlined it, one company might control
another, but it would have to be with the consent of both the state and
federal officials having jurisdiction in the premises, and it would have
to be clear that the public would be benefited thereby. There was to be
in the future no hiding under cover, for everything was to be done in
the open, and in a way entirely understandable to the ordinary layman.
Certain of the public service corporations, Dru insisted, should be
taken over bodily by the National Government and accordingly the
Postmaster General was instructed to negotiate with the telegraph and
telephone companies for their properties at a fair valuation. They were
to be under the absolute control of the Postoffice Department, and the
people were to have the transmission of all messages at cost, just as
they had their written ones. A parcel post was also inaugurated, so that
as much as twelve pounds could be sent at cost.