TWENTY-FIRST ANNUAL YEAR BOOK— PART VII 599 



not the situation. It has never been the situation up to tlie present time. 

 During 1907-08 there was another depression. During 1914 there was 

 another depression. And in 1914 we took the position, if you will re- 

 member, that the railroads must accept the ebb and flow of commercial 

 conditions; they could not expect to go thru periods of depression earn- 

 ing profits when everybody else was failing to earn profits. We said we 

 vvould like to have a government guarantee at that time; we said we 

 would like to have congress pass a law insuring that our eggs were fer- 

 tile and that our hens would hatch the eggs, and that we would have fair 

 v/eather and bumper crops, etc. 



The Interstate Commerce Commission, in the spring of 1914, in spite 

 of the period of depression, denied the advance on over 80 per cent of 

 the traffic, and in the winter of 1914 they granted it on 90 per cent of 

 the traffic. Within three months thereafter tl>e western advance rate 

 case came up, and it was denied. That was in the east in 1913-14. The 

 only point I am making is this, that as long as the railroads remain in 

 private operation and in private hands, we must expect, and we must 

 have them anticipate, periods of prosperity and depression. During 

 periods of prosperity they can lay up funds to tide them over a period 

 of depression without guaranteeing fixed return. 



We have introduced an exhibit showing that their surplus as evi- 

 denced by moneys on hand, deposits in banks, the ownership of market- 

 able securities, was over $800,000,000. It showed a bookkeeping surplus 

 of over $1,000,000,000. And the Interstate Commerce Commission has 

 specifically declared that to be one of the purposes. 



We have heard a great deal about surplus, and in that connection 

 last spring we went to congress and urged upon the senate committee 

 an increase in the loans to railroads, if necessary, to buy additional 

 equipment and engines. We thought it was better for the railroads to 

 buy them with their own capital than for rates to be pushed higher so 

 that we built cars and engines out of the rates we pay, and then we have 

 to pay a return to them for what we built for them. The senate com- 

 niittee found they were not justified in granting additional loans. They 

 based their conclusion upon such testimony as the following: 



President Rea said that considering the $500,000,000 already author- 

 ized, plus what the larger roads could finance, it would exhaust the ca- 

 pacity of the mills and factories of this nation to build more cars and 

 engines. 



So what was the object of lending them more money? 



With regard to service, some time we are going to be misled, and we 

 should watch carefully our sources of information on facts. I have a 

 statement here, a photograph of an exhibit Mr. Julius Kruitschnitt, of 

 the Southern Pacific, who chanced to be on the stand one day toward 

 the close of the case, and during the cross examination he referred to 

 some sheets in his portfolio that looked sort of interesting from a dis- 

 tance, and we asked him if he would lend them to us a moment, which 

 he finally did, and then we had them photographed. At the time Mr. 

 Kruitschnitt was testifying that they were not going to be able even to 

 pay their interest on their debt — that the great Southern Pacific was 

 actually threatened with possible receivership. That identical word or 



