I have asked the privilege of addressing you in order to report to you
that on the twenty-eighth of December last, during the recess of the
Congress, acting through the Secretary of War and under the authority
conferred upon me by the Act of Congress approved August 29, 1916, I
took possession and assumed control of the railway lines of the country
and the systems of water transportation under their control. This step
seemed to be imperatively necessary in the interest of the public
welfare, in the presence of the great tasks of war with which we are now
dealing. As our own experience develops difficulties and makes it clear
what they are, I have deemed it my duty to remove those difficulties
wherever I have the legal power to do so. To assume control of the vast
railway systems of the country is, I realize, a very great
responsibility, but to fail to do so in the existing circumstances would
have been a much greater. I assumed the less responsibility rather than
the weightier.
I am sure that I am speaking the mind of all thoughtful Americans when I
say that it is our duty as the representatives of the nation to do
everything that it is necessary to do to secure the complete
mobilization of the whole resources of America by as rapid and effective
means as can be found. Transportation supplies all the arteries of,
mobilization. Unless it be under a single and unified direction, the
whole process of the nation's action is embarrassed.
It was in the true spirit of America, and it was right, that we should
first try to effect the necessary unification under the voluntary action
of those who were in charge of the great railway properties; and we did
try it. The directors of the railways responded to the need promptly and
generously. The group of railway executives who were charged with the
task of actual cooerdination and general direction performed their
difficult duties with patriotic zeal and marked ability, as was to have
been expected, and did, I believe, everything that it was possible for
them to do in the circumstances. If I have taken the task out of their
hands, it has not been because of any dereliction or failure on their
part but only because there were some things which the Government can do
and private management cannot. We shall continue to value most highly
the advice and assistance of these gentlemen and I am sure we shall not
find them withholding it.
It had become unmistakably plain that only under government
administration can the entire equipment of the several systems of
transportation be fully and unreservedly thrown into a common service
without injurious discrimination against particular properties. Only
under government administration can an absolutely unrestricted and
unembarrassed common use be made of all tracks, terminals, terminal
facilities and equipment of every kind. Only under that authority can
new terminals be constructed and developed without regard to the
requirements or limitations of particular roads. But under government
administration all these things will be possible,--not instantly, but as
fast as practical difficulties, which cannot be merely conjured away,
give way before the new management.
The common administration will be carried out with as little disturbance
of the present operating organizations and personnel of the railways as
possible. Nothing will be altered or disturbed which it is not necessary
to disturb. We are serving the public interest and safeguarding the
public safety, but we are also regardful of the interest of those by
whom these great properties are owned and glad to avail ourselves of the
experience and trained ability of those who have been managing them. It
is necessary that the transportation of troops and of war materials, of
food and of fuel, and of everything that is necessary for the full
mobilization of the energies and resources of the country, should be
first considered, but it is clearly in the public interest also that the
ordinary activities and the normal industrial and commercial life of the
country should be interfered with and dislocated as little as possible,
and the public may rest assured that the interest and convenience of the
private shipper will be as carefully served and safeguarded as it is
possible to serve and safeguard it in the present extraordinary
circumstances.
While the present authority of the Executive suffices for all purposes
of administration, and while of course all private interests must for
the present give way to the public necessity, it is, I am sure you will
agree with me, right and necessary that the owners and creditors of the
railways, the holders of their stocks and bonds, should receive from the
Government an unqualified guarantee that their properties will be
maintained throughout the period of federal control in as good repair
and as complete equipment as at present, and that the several roads will
receive under federal management such compensation as is equitable and
just alike to their owners and to the general public. I would suggest
the average net railway operating income of the three years ending June
30, 1917. I earnestly recommend that these guarantees be given by
appropriate legislation, and given as promptly as circumstances permit.
I need not point out the essential justice of such guarantees and their
great influence and significance as elements in the present financial
and industrial situation of the country. Indeed, one of the strong
arguments for assuming control of the railroads at this time is the
financial argument. It is necessary that the values of railway
securities should be justly and fairly protected and that the large
financial operations every year necessary in connection with the
maintenance, operation and development of the roads should, during the
period of the war, be wisely related to the financial operations of the
Government. Our first duty is, of course, to conserve the common
interest and the common safety and to make certain that nothing stands
in the way of the successful prosecution of the great war for liberty
and justice, but it is also an obligation of public conscience and of
public honor that the private interests we disturb should be kept safe
from unjust injury, and it is of the utmost consequence to the
Government itself that all great financial operations should be
stabilized and cooerdinated with the financial operations of the
Government. No borrowing should run athwart the borrowings of the
federal treasury, and no fundamental industrial values should anywhere
be unnecessarily impaired. In the hands of many thousands of small
investors in the country, as well as in national banks, in insurance
companies, in savings banks, in trust companies, in financial agencies
of every kind, railway securities, the sum total of which runs up to
some ten or eleven thousand millions, constitute a vital part of the
structure of credit, and the unquestioned solidity of that structure
must be maintained.
The Secretary of War and I easily agreed that, in view of the many
complex interests which must be safeguarded and harmonized, as well as
because of his exceptional experience and ability in this new field of
governmental action, the Honorable William G. McAdoo was the right man
to assume direct administrative control of this new executive task. At
our request, he consented to assume the authority and duties of
organizer and Director General of the new Railway Administration. He has
assumed those duties and his work is in active progress.
It is probably too much to expect that even under the unified railway
administration which will now be possible sufficient economies can be
effected in the operation of the railways to make it possible to add to
their equipment and extend their operative facilities as much as the
present extraordinary demands upon their use will render desirable
without resorting to the national treasury for the funds. If it is not
possible, it will, of course, be necessary to resort to the Congress for
grants of money for that purpose. The Secretary of the Treasury will
advise with your committees with regard to this very practical aspect of
the matter. For the present, I suggest only the guarantees I have
indicated and such appropriations as are necessary at the outset of this
task. I take the liberty of expressing the hope that the Congress may
grant these promptly and ungrudgingly. We are dealing with great matters
and will, I am sure, deal with them greatly.