"(e) If the issue is of shares of stock, the number thereof, the face or par value thereof, if any, specifying whether common or preferred, and the number and kinds of then outstanding shares previously issued.

"Second. The preferences or privileges granted to the holders of any such securities; the dates of maturity, rates of interest, or fixed dividend, whether cumulative or not, and any conversion rights granted to the holders thereof, and the price, if any, at which any such securities may be retired or redeemed.

"Third. The purposes to which the proceeds of the issue are to be devoted, in such detail as the commission may require.

"Fourth. In case of proposed assumption of any obligation or liability in respect of the securities of any other person, natural or artificial, like showing shall be made as to the financial condition of said other person, as also of the objects sought and benefits to be realized by the carrier from such assumption, to be accompanied by copies of any agreements or contracts therefor.

"Every application for authority, as also every certificate of notification hereinafter provided for, shall be made out under oath, signed, and filed on behalf of the carrier by its president, a vice president, auditor, comptroller, or other executive officer having knowledge of the matters therein set forth and duly designated for that purpose by the carrier.

"Whenever any securities set forth and described in any application for authority or certificate of notification as pledged or held as a free asset in the treasury of the carrier shall, subsequent to the filing of such application or certificate, be sold, pledged, repledged, or otherwise disposed of by the carrier, such carrier shall, within ten days after such sale, pledge, repledge, or other disposition, file a certificate of notification to that effect, setting forth therein all such facts as are required by subdivision (c) of the foregoing first paragraph, or as may be required by the commission. "Upon application to the commission for approval of proposed issues of securities the commission shall cause notice to be given to the railroad commission or public service or utilities commission, or other appropriate authority, of each State in which the applicant carrier operates. The railroad commission, public service or utilities commission, or other appropriate State authority thus notified shall have the right to present before the commission such representations as they may deem just and proper for preserving and conserving the right and interests of their people and the States, respectively, as involved in such proceeding. The commission may hold hearings, if it sees fit, to enable it to determine its decision upon the application for authority. "Nothing herein shall be construed to imply any guaranty or obligation as to such issues on the part of the United States.

"The foregoing provisions of this section 20a shall not apply to notes to be issued by any said carrier maturing not more than two years after the date thereof and aggregating not more than five per centum at any time of the securities of said carrier then outstanding. Within ten days after the date of such notes the carrier issuing the same shall file with the commission a certificate of notification, in such form as may from time to time be determined and prescribed by the commission, setting forth as nearly as may be the same matters as those required in respect of applications for authority to issue other securities.

"The commission shall require periodical or special reports from all carriers hereafter issuing any securities, including such notes, which shall show, in such detail as the commission may require, the disposition made of said securities and the application of the proceeds thereof.

"All issues of securities contrary to the provisions of this section may be enjoined by any court of competent jurisdiction at the suit of the United States, the Interstate Commerce Commission, or of any director, officer, or stockholder of the carrier proposing to make the issue; and any director, officer, attorney, or agent of such corporation who assents to, or concurs in, any issue of securities forbidden by this section 20a shall upon conviction be punished by a fine of not less than $1,000 nor more than $10,000, or by imprisonment for not less than one year nor more than three years, or by both such fine and imprisonment, in the discretion of the court.

"From and after the passage hereof it shall be unlawful for any officer or director of any operating carrier to receive for his own benefit, directly or indirectly, any money or thing of value, in respect of the negotiation, hypothecation, or sale of any securities issued or to be issued by said carrier, or to share in any of the proceeds thereof, or to participate in the declaring or paying of any dividends of an operating carrier from any funds properly included in capital account, or otherwise than from the revenues of said carrier. Any violation of these provisions shall be a misdemeanor, and on conviction in any United States court having jurisdiction shall be punished by a fine not less than $1,000 nor more than $10,000, or imprisonment for a term not less than one year nor more than three years, or by both such fine and imprisonment, in the discretion of the court."

Much has been said in recent years about the proposition of securities of railway corporations. Much has been printed, much has been said in Congress and out of Congress upon this question, and it has reached the stage when national parties have placed provisions in their platforms on this question.

The Committee on Interstate and Foreign Commerce considered it of enough importance to report the bill H. R. 563. We had before that committee many distinguished witnesses, men of broad experience in affairs of this kind-the attorneys of railway corporations and the members of the Interstate Commerce Commission, and men of that character and that type.

There was not a man who appeared before the committee who did not recommend in some way that Congress take some steps for the control and the regulation of the issue of stocks and bonds by railway corporations. It is true that some went much further than others. Some believed that publicity alone, carried through the proper channels by the Interstate Commerce Commission, would be all that was needed to cure these evils. Others as distinguished and as well known in the country believed that we should not only enact further and greater publicity provisions into law, but that the Congress should go far enough to lodge in somebody-and, of course, it was the general consensus of opinion that it should be lodged in the Interstate Commerce Commission-the power of veto over issues of securities. In other words, that we may have the right to say whether or not under a given state of facts the railroad corporation should have the right to issue stocks and bonds. Along this line we have worked in this bill, both along the publicity line and along the line of giving the Interstate Commerce Commission the veto power over the application for the issue of stocks and bonds by railroads engaged in interstate commerce.

This bill contains two provisions which we deem necessary at this time for the protection of the public in the proposition of railway regulation:

First. Greater publicity in financial transactions of railway corpo

rations.

Second. Making it unlawful for railway corporations to issue stocks and bonds or other evidence of indebtedness except for certain specified purposes, and that they shall not be issued for those specified' purposes until previous approval by the Interstate Commerce Commission shall have been had.

Some people are going to criticize the form and not the substance of this bill, while others are going to criticize the substance and not the form. Some will say that it is not proper legislation to incorporate in section 20 of the act to regulate commerce. Section 20 of the act to regulate commerce deals almost wholly with the subject of publicity of the actions of common carriers with respect to their dealing with the public. The Hadley commission, appointed under act of Congress (1910) and composed of a body of men of high character and established reputation along this line, went into an investigation of railroad securities with the purpose of recommending to Congress some legislation along this line. The report of the Hadley commission deals wholly with the subject of publicity of securities of common carriers. This, we believe, brings it absolutely as a proper amendment to section 20 of the act to regulate commerce.

Section 20 of the act to regulate commerce provides that railroad corporations shall make annual reports and such special reports as the Interstate Commerce Commission may direct, and says that the commission shall have at all times access to all accounts, records, and memoranda kept by such carrier, is reenacted. In fact, the whole of section 20 as it now stands is reenacted with the additions in this bill. But this bill goes further and uses the following language, following up that just quoted: "Correspondence and other documents, papers and indexes thereto, regardless of the dates thereof." In the past much has been covered up in the correspondence and papers of the carriers which could not be made accessible under the old law. Believing that this was a defect, and a vital one, we have added that as part of the existing law. You will also note that the bill provides that this correspondence and these documents and papers shall be accessible to the commission, regardless of the dates. thereof. The reason of this language may be made clear by quoting from the statement of Commissioner Clark before the Committee on Interstate and Foreign Commerce, as follows:

A situation has grown up since our annual report was submitted to Congress and under which the railroads take the position that the provisions of section 20 have no application to any books, records, memoranda, etc., which are older than the effective date of the so-called Hepburn Act. In other words, that under section 20 we can go back through all of these records-except that they have challenged our right to go into correspondence--to August 28, 1910, but beyond that is a sealed book. If this was so, if the law is permanently so considered, it means that a great deal of the vitality shall have been sapped.

This was the celebrated Louisville & Nashville case, in which the Interstate Commerce Commission was acting in response to a resolution of the Senate. Since Commissioner Clark made this statement, the Supreme Court has decided that the words "records, documents, accounts, and memoranda" are not broad enough to cover correspondence, etc.

From this statement from a member of the Interstate Commerce Commission you can readily see the absolute necessity for the bill's provision making these papers, documents, correspondence available regardless of their date. In our determination to get full information in regard to the business transactions of the carriers we did not stop with this, but go much further, as will be seen from the following language used in connection with the power of the commission to employ special agents or examiners who shall have authority, under orders of the commission, to inspect and examine into all such records, documents, accounts, and memoranda, and then we add, "and also books, papers, correspondence, and indexes thereto, of carriers, construction or other companies, or of firms or individuals, with which a carrier shall have had financial transactions."

We believe this is a proper authority to give the commission, and further believe that it is absolutely a necessary power to give it in order that it may surround itself with all of the facts regarding financial transactions of these railroads, in order that they may be able at all times from this great fund of information at hand to deal with all applications of railroads in the matter of rates and regulation other

wise.

We go further than these provisions just suggested and we say that the Interstate Commerce Commission may in its discretion call upon the railroad companies to make public to their shareholders

such information as the commission desires and in such form as the commission may direct. A great wrong has been practiced along this line by those higher up in authority in these carrier corporations by keeping the men who hold the shares of stock, and who are vitally interested in the business of the companies, absolutely in the dark as to the financial transactions in which they have an interest. It is believed that when that part of this bill becomes a law that it will be a great boon to the small investor in railways in this country. We believe that it takes this, added to the other provisions requiring publicity in this bill, to round it out and make it what it should be along the lines of publicity. And to further justify the position that we have taken upon this publicity proposition in this bill, we quote from section 6 of the recommendation of the Hadley commission as follows:

Upon the whole, your commission believes the accurate knowledge of the facts concerning the issues of securities and the expenditures of their proceeds is a matter of utmost importance. It is the one thing on which the Federal Government can effectively insist to-day; it is the fundamental thing which must serve as a basis for whatever additional regulation may be desirable in the future.

We believe that when we have built up this great line of publicity as suggested in this bill, it would be a great boon to the country, and its beneficent results would be felt throughout the country, especially among the people who are dealing with the railroads and who are engaged or in any way connected with the securities of railroad corporations.

APPROVAL BEFORE ISSUE.

We now come to the second part of the amendment to section 20, that of the control of the issues of stocks and bonds and other securities of railroads and the approval of the Interstate Commerce Commission before any issues of stocks and bonds or other evidences of indebtedness may be made. Much has been said of late years concerning and much proper criticism has come from the public in regard to the overissue of stocks and bonds and overcapitalization of railroads, and many abuses along this line have brought us to believe that legislation along this line is absolutely necessary at this time. Commissioner Clements in his testimony before the Committee on Interstate and Foreign Commerce substantially says:

I have believed for a good many years that there ought to be some regulation, at least to the extent of restricting and limiting the power of corporations engaged in interstate commerce to issue stocks and bonds. This condition has been a matter of growth in my own mind and judgment. I have always been rather inclined to the general theory of as little regulation as was necessary as being better than to have any that is superfluous. But experience and observation have convinced me that there should be some regulation at the base as well as at the top of this matter of common-carrier organization and operation.

You will see from this statement-and it is concurred in by a majority of the Interstate Commerce Commission-that they believe some steps along the line of Federal control of the issues of securities engaged in interstate commerce is absolutely necessary and imperative, and, being in harmony with this law, your committee has added section 20A, which says that it shall be unlawful for any common carrier subject to the act to regulate commerce to issue any capital stock or certificate of stock, any bond or other evidence of indebtedness, or assume any other obligation or become the lessor of any

other railroad, or the guarantor or surety for the securities of any other person, natural or artificial, even though permitted by the authority creating the carrier corporation, except for some purpose necessary to the proper performance of its service for the public and not tending to impair the financial ability of the carrier to discharge its duty to the public, and goes on to say that extensions and improvements of its railroads and terminals in connection therewith. increasing and improving the equipment, refunding and retiring existing bonds, and similar and kindred purposes shall be held to be necessary purposes in the meaning of this law.

By the unbridled and unregulated system in the past of the railroads of the country loading themselves down with unnecessary and inappropriate issues of stocks and bonds, we believe that the railroad companies have placed themselves in a position where they have not been able to perform their duties to the public. We do not say that capitalization is the all-controlling factor in the making of rates, but we do say that it is one of the great determining factors in making and promulgating railroad tariffs. When a railroad company is allowed to unnecessarily load itself down with spurious securities of one kind and another, every thoughtful man will agree that the ability of the carrier to perform its functions is impaired. The present deplorable conditions of the railroads of this country are but an echo of bad management upon the part of the railway officials.

This bill was passed by the House in the Sixty-third Congress with only 12 dissenting votes. It would in all probability have passed the Senate but for conditions arising out of the European war. With this great indorsement of the last House, we believe it should again pass, and this time be passed by the Senate and become law. It is our firm belief that when the provisions of this bill are law it will put a stop to the railroad wreckers in this country and will redound to the good of all, the honest railroad management as well as the shipping and investing public. We are of the opinion, after much study of the subject, that all railroads of the country that are not badly located would at this time, and during the period of depression that has to some extent ended, be making a fair return on an honest capitalization. This bill simply provides for honest capitalization and honest management; we therefore confidently believe that the Congress will eagerly concur in its provisions.