double-track road, viz, that its increased business may depend entirely upon the pro vision made at the terminal points to handle the property. I have known the New York Central and Hudson River Railroad to be blocked from New York to Utica, because they could not handle the property at New York. An exclusively freight-road might run a train one way every 15 minutes, provided there were no accidents and the property could be handled quickly at its destination. While upon a single-track, with sidings to hold six trains 30 miles distant, would run 6 trains in 14 hours. Then the 30 miles would run trains the other way for 1 hours, thus reducing the capacity of running one-half, and in case of delay with many trains would create confusion in the running of trains the whole length of the road. Question 39. Is it not true that a very large proportion of the single-track roads engaged in traffic between the East and the West are now carrying a traffic much below their actual capacity? p. m. Answer. I have no doubt that as a whole single-track roads could do twice the business they now do if they were properly managed. The capacity of roads depends very largely upon the management. To give an illustration: In my early railroad management it had been the custom on a local road to bring a train of 30 cars after 6 o'clock After the usual manner of slack management at that time, they would not transfer the loads until next day, and as only one train per day was run on that local road, they would be obliged to have 50 cars, unless they were unloaded in the night. Therefore I adopted the plan of unloading and starting the freight on a midnight train. The cost to transfer would be about $4 extra. The result was the connecting road took the same cars back the next morning, and the freight would be about 200 miles on its way, both roads having gained the use of 25 cars for one day, besides having them in the trains instead of blocking up our side-tracks. It is the active use of the facilities of roads that proves how much can be done. Just now the business here is blocked for want of cars, and yet cars do not make an average of over 60 miles per day, while for three years I made an average of over 100 miles per day, when the same road had less than one-half the motive-power that they now have. This is partly owing to the custom of sending cars to local stations to load and unload, and the unjust practice of using through or line cars locally on their return trip. The abuse in the use of through or line cars must also be corrected. SUPPLEMENTARY STATEMENTS, PRESENTED BY MR. J. D. HAYES, IN REGARD TO A PROPOSED CLEARING-HOUSE SYSTEM. . Mr. Fink's views are in the direct road toward the clearing-house system. I maintain that the competitive business as now conducted by the railroads, with their distinctive, separate offices and army of agents, each bidding against each other for the same business, and in many cases going over thirty to fifty per cent. of distance over the same roads, is wrong in principle, and, if continued, will sap the very foundations of commercial principles and bring the entire railroad system under the control and management of a few men through the process of failure and bankruptcy, instead of a wise system for the benefit of all corporations, under the clearing-house, for the management of all competitive or through inter-State business, under authority of an act of Congress, and subject to a United States commissioner, to see that the clearinghouse system is properly and honestly carried out by the railway officials that compose the clearing-house board, while at the same time it does not interrupt nor interfere in any way with the local business, which will continue under the management of each local corporation. To illustrate the principle, as now carried on, I will give an example: Rent of office in Chicago for Red (or any other) line, say General agent of the line.... Contracting agent. Bill-of-lading clerk. Messenger Claims clerks and operators. Sundries Advertising, &c...... Total for freight....... for one "line" office at one place. $8,000 4,000 2,500 1,800 1,000 1,500 200 2,000 21,000 Blue Line, Red Line, Canada Southern, White, International, and Hoosic Tunnel, all running over the New York Central Road, six offices and six different sets of agents bidding against each other for freight to run a part of the way over New York Central Road, they (New York Central) paying about 40 per cent. of the whole expense, for no other purpose than cutting their own throats on rates, while the same expense under the clearing-house system would do the whole, and include Erie and North Shore, Grand Trunk, Baltimore and Ohio, Pennsylvania Central. When you include traveling agents, solicitors, &c., the total expense of the "clearing-house” plan for agencies alone would be about one-tenth of what it is under the present cut-throat plan. Then take the fair, honest, low rate, and you will have from 30 to 40 per cent. more net money than under the present uncertain and fluctuating system of war to-day with all classes at 20 cents, New York to Chicago, than a patched-up peace, with fair rates restored, with the secret payment of drawbacks to wholesale dealers, which by right should be paid openly, upon the universal principle of recognition of difference between wholesale and retail, the drawback to be graded in proportion to the actual legitimate business of the individual or firm, and not a combination of individuals or firms, such as "protective freight unions," formed for swindling the roads out of payments to the agent, on the one hand, while the "protective freight union" agent is being paid by the "union" to swindle both parties; on the other hand, I say, the net results of the clearing-house system of fair, honest low rates, would be from 30 to 40 per cent. more. Each road would get its own fair, legitimate business, everything else being equal; if not equal, then upon all business that is common to all, upon the uniform basis, let the clearing-house board agree upon the percentage each have done heretofore, and go on upon that basis, allowing the road doing more than its percentage the actual expense of hauling its increased tonnage and pool the surplus earnings upon the same basis of percentage, or equally, so that each would get its fair share of surplus increase. After one year's working of the clearing-house plan each would have settled down into its fair, legitimate proportions, and the business would be about evenly divided in proportion to the needs of the country tributary to each road or system of roads. Then, again, a very great saving of expense in stationery, billing, checking, and auditing-clerks will be saved. For example, now a through bill is made from Chicago to Boston, each of the four companies check up, audit, and rebill local over their roads, in addition to the through way-bill, while my clearing-house system would send each freight-auditor an impression-copy of each way-bill, from which they would charge the clearing-house with its share of earnings. Suppose there were six hundred bills in one week between Chicago and Boston, via Boston and Albany, New York Central, Great Western, and Michigan Central Railroads, total footings being, say, in round numbers, $60,000. One division of that total sum would give each road its share of the earnings, so that when the clearing-house abstract is received by the freight-auditor, showing numbers and totals, say— Chicago to Boston, bills 1 to 400, inclusive.... Total both ways. $40,000 20,000 60,000 Having the same numbers of way-bill and numbers on the abstract-books in each freight-auditor's hands will give the same total amounts between the two places. The percentage of the total is the same, without any regard to the classification or rates, so that The same system may apply to a single way-bill, a week's, month's, or year's business between those points over those roads. And the same system is applied to all roads and all lines over all routes. Each would deal with totals over each route, both in freight and passenger business, the settlement of balances being upon clearing-house certificates from the creditor road to the debtor road, or by draft upon the debtor road from the clearing-house direct upon freight and passenger auditors, and payment to the creditor road by clearing-house check once a month or week. The plan is very simple and complete, and can be worked with success to all parties. Nothing is wanted only that the roads and the public shall fully understand the vast benefits to result to both by its working, while at the same time it will "regulate commerce between the States," and keep the management virtually in the hands of railroad representatives in the clearing-house board, while the board would be under the inspection of a United States commissioner, who should be under the direction of a Government department of commerce. This letter may be somewhat imperfect, as I have replied upon the impulse of the moment, with some interruptions. Yet I think it can be seen that the principle laid down, and which, I claim, is the only true one to solve the entire difficulties that threaten to swallow up the $4,000,000,000 invested in railroads and about $1,000,000,000 of vessel property, if our present system is to be continued, and to rear upon their ruins a monopoly in the hands of a few individuals that will control the value of every man's property and crush out all chances of new enterprises or legislation to control them. BASIS FOR A RAILWAY CLEARING-HOUSE SYSTEM. (a.) The trunk lines, with their immediate connections, to make up a statement, showing the number of passengers carried and money earned by each, to and from competing points, and the number of tons of freight carried under the different classifications, with the amounts earned, say for three years past, the average percentage of the total to form the basis of the percentage for future business. (b.) The entire competing business, both in freight and passengers, to be done by the clearing-house board for the account of all roads that are members of the clearinghouse. (c.) All through tickets and bills of lading to be issued by the clearing-house and all settlements made with the general ticket agents for each road's share of earnings of passenger traffic, and with the freight auditors for freight earnings, each road in interest receiving clearing-house impression-copies of each way-bill or ticket state ment. (d.) The clearing-house to give to each line its share of the business and earnings, according to the agreed average percentage to be done by each; but should there be much deviation from this rule, the lines doing an excess of the business would be allowed a percentage for hauling such increase, the balance to be prorated over all the lines in proportion to the agreed basis of percentage. (e.) Each road to do its own local business, but its competing business to be done through the clearing-house system. (f.) To make the system effective, a national clearing-house law should be passed by Congress to regulate commerce between the States and to relieve the through business from very annoying local State laws, which affect inter-State traffic; such law to provide for returns by all railroad companies to the States in regard to their local traffic and to the clearing-house board in regard to their through or competing traffic. (g.) The General Government to appoint special railway commissioners, charged with the duty of attending to the administration of the clearing-house laws. Such a system would enable the roads to carry on their competing business through a legalized system managed by themselves as members of the clearing-house, and at the same time it would enable the Government to obtain information in regard to the inter-State commerce of the country, now practically ignored. Thus, Congress would obtain the knowledge necessary in any attempt to regulate commerce among the States. It is also assumed that the clearing-house would become a part of the much needed department of commerce. APPENDIX No. 3. ANSWERS TO INQUIRIES IN RELATION TO THE COMMERCE OF NEW YORK CITY AND THE COMMERCIAL MOVEMENTS TO AND FROM THAT CITY ON RAIL AND WATER LINES, BY MR. THEODORE F. LEES, GENERAL AGENT OF THE NEW YORK CHEAP TRANSPORTATION ASSOCIATION. 1876. Question 1. Please to describe the contest which has been carried on several years between the Boston and Albany Railroad and New York Central Railroad on one side and the Grand Trunk and Central Vermont on the other as to west-bound freights from Boston and other points in the New England States to the West, the nature and extent of the discriminations thus induced, and the circumstances attending the recent settlement of the dispute and the condition of such settlement so far as made public. With reference to discriminations as to the transportation, of what classes of goods have New York merchants made complaints? Answer. The Grand Trunk and Vermont Central Roads form a through trunk line from the seaboard to the State of Michigan, but the geographical position of the line tends largely to restrict its traffic to carrying between New England and the Northwest. The route lying so far to the north is without any important connections until it reaches the State of Michigan, where, by means of the Michigan Central Railroad, Chicago becomes its radiating-point. Under these circumstances it cannot compete with the other trunk lines for business between New England and the Southern States, and all business south of a certain point in the West must be taken at a disadvantage as compared with the facilities of the Boston and Albany and New York Central routes. The Grand Trunk is, from its position, precluded from competing for west-bound business out of New York, except in a very limited degree to certain favorable western points, and even then under a disadvantage that must be apparent. Its comparatively small local traffic furnishes another reason for the tenacity with which it clings to such through business as it can take advantageously. Such considerations naturally deter the managers of the Grand Trunk Company from entering into a combination with the other trunk lines on equal terms. They insist upon an allowance of about 10 per cent., (the privilege of carrying at rates that much under combination rates,) and it is generally believed, and I bave never known it to be controverted, that such a concession has been made to them whenever they have been parties to a combination. Directly, the Boston and Albany and New York Central managers find it necessary to secretly make a corresponding concession to their patrons shipping to points available to the Grand Trunk Road, and the latter is led to overstep the terms of the combination. A sharp contest for the New England business follows, while the combination holds, out of New York. As a result the discrimination against New York increases from 10 per cent., at times, to 100 per cent. The discrimination seems to vary in degree only. The continuance of a wide discrimination for any length of time is quite certain to rupture the whole combination and bring about what is termed "demoralization in rates." There have been times when the Grand Trunk has not been a party to combinations entered into by the other trunk lines. In such instances Boston has not been included, for the reason that the New York Central could not include it without surrendering a large portion of its business to the Grand Trunk. As a result we would at such times not only witness an active competition between the two roads named for Boston and other New England business, but the Erie and Pennsylvania companies would receive at Boston, transport to this city by water, and to western points over their roads at less rates than they would transport from this city to the same western points. The "settlement" of the dispute referred to in the inquiry was based upon a concession of, say, 10 per cent., but the arrangement or settlement was of short duration. At this date the relations of the eastern combined roads is anything but harmonious, while the "pooled" western connections have openly declared war with one another. Highly creditable authority informs me that a certain trunk line out of New York has just come into possession of a correct memorandum of three hundred contracts made by the New York Central out of Boston to the West since the last "settlement," at rates below the rates agreed upon and lower than can be had out of New York. (I may be able to furnish an appendix to this.) The discrimination has extended to all classes of goods, and complaints have been made in reference to all classes from first class to special, although it cannot be questioned that the diversion has been far more apparent in the lower class; that is, fourth and special classes, embracing heavy commodities of small value, and on which the margin of profit is small to the merchant, and on which the cost of transportation is a more important consideration than the time. When the railroads combine without including the Grand Trunk Road, (which has been done formerly,) the combination covers New York, Philadelphia, and Baltimore only. The Erie, Pennsylvania, and Baltimore and Ohio would readily include Boston; but the New York Central cannot consistently do so independent of the Grand Trunk. As a result, while rates are nominally firm out of New York, all the roads are striving for Boston business. The New York Central, the Pennsylvania, the Erie, and the Baltimore and Ohio will, under these circumstances, give through bills of lading from Boston to western points at less rates than rule from New York to the same points, although the three latter incur an arbitrary charge for transportation by water from Boston to their eastern termini. It is safe to say that during the period from January 1, 1875, to March 1, 1876, the New York rates were from 10 to 100 per cent. higher than the Boston rates. (See schedule of rates accompanying resolutions, &c., adopted at the merchants' meeting, December 8, 1875.) In the establishment of the tariff from the West to the different seaboard cities, Chicago is made the indexical point, and the custom until recently has been to fix the rate to Philadelphia five cents per hundred pounds more than to Baltimore; to New York, five cents more than to Philadelphia; and Boston, five cents more than to New York. This plan, even when maintained to all points, operated against the interests of New York and in favor of Philadelphia and Baltimore. But there has invariably been difficulty in maintaining the tariff. There seems to be no doubt that Boston shippers very generally received a drawback equal to the difference of five cents against them in the tariff as compared to New York. The competition between the Grand Trunk and the New York Central roads to that point, which has proved to be inevitable, notwithstanding combinations, has perhaps been a prominent cause of overcoming any nominal difference in favor of New York, while the excess of five and ten cents of the New York tariff over the tariffs to Philadelphia and Baltimore, respectively, has until recently been pretty steadily maintained. I might add that the merchants of New York believe that the comparatively easy grades of the railroads terminating here and the greater magnitude of west-bound business are considerations that fully offset the shorter mileage of the Philadelphia and Baltimore lines. The interest of the New York Central Road in New England business induces a policy which heretofore has operated against the commercial interests of New York. About 70 per cent. of that road's east-bound freight goes into New England, and the contest with the Grand Trunk for that business has sometimes been carried at New York's cost. Question 2. To what extent do such discriminating rates apply to goods manufactured or produced in New England, and to what extent to goods the growth or manufacture of foreign countries? Answer. Such discriminating rates apply to both the products of New England and the products of foreign countries, but I know of no rule or data from which to estimate a probable proportion between the domestic and foreign products to which the discriminations apply. Investigation might show, as conversations I have had with prominent New England merchants indicate, that such commodities as boots and shoes, prints, cottons, woolens, &c., that rate as first-class, and great varieties of hardware, tools, &c., that rate as second-class, make up the greater part of New England products shipped to the West. In that event my opinion would be that the diversion arising from such discrimination would be most apparent in foreign products that rate in the lower classes, such as tin plates, fence-wire, soda-ash, &c. The diversion of this class of imports has been keenly felt by New York merchants. Question 3. What class or classes of goods intended for consumption in the Western States now supplied by New York would have been deflected from New York to Boston by the continuance of discriminating freight-rates, such as those referred to? Answer. All classes of goods supplied by New York to the Western States are more or less liable to deflection to Boston, excepting certain special articles peculiar to the New York market. For instance, certain varieties of soft hats manufactured in the vicinity of New York can only be obtained of the manufacturers or contractors here. But with few exceptions the entire list of articles upon the classification schedules (a copy of which will accompany this report) are subject to deflection, the degree of deflection being, as before intimated, proportioned somewhat to value, weight, &c. Dealers in dry goods and other light commodities do not apparently interest themselves so much in the question of discrimination in rates as the dealers in the heavier classes of goods. These points all considered uniformly indicate to my mind that a continuance of a |