Chapter 8
The public interest must be first served, and in addition the financial interests of the Government and the financial interests of the railways must be brought under a common direction. The financial operations of the railways need not then interfere with the borrowings of the Government, and they themselves can be conducted at a great advantage.
INVESTORS TO BE PROTECTED
Investors in railway securities may rest assured that their rights and interests will be as scrupulously looked after by the Government as they could be by the directors of the several railway systems. Immediately upon the reassembling of Congress I shall recommend that these definite guarantees be given:
First, of course, that the railway properties will be maintained during the period of Federal control in as good repair and as complete equipment as when taken over by the Government, and, second, that the roads shall receive a net operating income equal in each case to the average net income of the three years preceding June 30, 1917; and I am entirely confident that the Congress will be disposed in this case, as in others, to see that justice is done and full security assured to the owners and creditors of the great systems which the Government must now use under its own direction or else suffer serious embarrassment.
The Secretary of War and I are agreed that, all the circumstances being taken into consideration, the best results can be obtained under the immediate executive direction of the Hon. William G. McAdoo, whose practical experience peculiarly fits him for the service, and whose authority as Secretary of the Treasury will enable him to co-ordinate, as no other man could, the many financial interests which will be involved and which might, unless systematically directed, suffer very embarrassing entanglements.
A RECOGNITION OF FACTS
The Government of the United States is the only great Government now engaged in the war which has not already assumed control of this sort. It was thought to be in the spirit of American institutions to attempt to do everything that was necessary through private management, and if zeal and ability and patriotic motive could have accomplished the necessary unification of administration, it would certainly have been accomplished; but no zeal or ability could overcome insuperable obstacles and I have deemed it my duty to recognize that fact in all candor, now that it is demonstrated, and to use without reserve the great authority reposed in me.
A great national necessity dictated the action, and I was therefore not at liberty to abstain from it.
WOODROW WILSON.
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The text of the proclamation follows:
Whereas, the Congress of the United States, in the exercise of the constitutional authority vested in them, by joint resolution of the Senate and House of Representatives, bearing date April 6, 1917, resolved:
"That the state of war between the United States and the Imperial German Government which has thus been thrust upon the United States is hereby formally declared, and that the President be, and he is hereby, authorized and directed to employ the entire naval and military forces of the United States and the resources of the Government to carry on war against the Imperial German Government, and to bring the conflict to a successful termination, all of the resources of the country are hereby pledged by the Congress of the United States."
And by joint resolution bearing date of December 7, 1917, resolved:
"That a state of war is hereby declared to exist between the United States of America and the Imperial and Royal Austro-Hungarian Government, and that the President be, and he is hereby, authorized and directed to employ the entire naval and military forces of the United States and the resources of the Government to carry on war against the Imperial and Royal Austro-Hungarian Government, and to bring the conflict to a successful termination, all the resources of the country are hereby pledged by the Congress of the United States."
And whereas, it is provided by Section 1 of the act approved August 29, 1916, entitled "An act making appropriations for the support of the army for the fiscal year ending June 30, 1917, and for other purposes," as follows:
"The President, in time of war, is empowered, through the Secretary of War, to take possession and assume control of any system or systems of transportation, or any part thereof, and to utilize the same, to the exclusion as far as may be necessary of all other traffic thereon, for the transfer or transportation of troops, war material and equipment, or for such other purposes connected with the emergency as may be needful or desirable."
And whereas, it has now become necessary in the national defense to take possession and assume control of certain systems of transportation and to utilize the same, to the exclusion as far as may be necessary of other than war traffic thereon for the transportation of troops, war material and equipment therefor, and for other needful and desirable purposes connected with the prosecution of the war.
Now, therefore, I, Woodrow Wilson, President of the United States, under and by virtue of the powers vested in me by the foregoing resolutions and statute, and by virtue of all other powers thereto me enabling, do hereby, through Newton D. Baker, Secretary of War, take possession and assume control at 12 o'clock noon on the twenty-eighth day of December, 1917, of each and every system of transportation and the appurtenances thereof located wholly or in part within the boundaries of the continental United States and consisting of railroads, and owned or controlled systems of coastwise and inland transportation, engaged in general transportation, whether operated by steam or by electric power, including also terminals, terminal companies and terminal associations, sleeping and parlor cars, private cars and private car lines, elevators, warehouses, telegraph and telephone lines and all other equipment and appurtenances commonly used upon or operated as a part of such rail or combined rail and water systems of transportation, to the end that such systems of transportation be utilized for the transfer and transportation of troops, war material and equipment to the exclusion so far as may be necessary of all other traffic thereon, and that so far as such exclusive use be not necessary or desirable, such systems of transportation be operated and utilized in the performance of such other services as the national interest may require and of the usual and ordinary business and duties of common carriers.
It is hereby directed that the possession, control, operation and utilization of such transportation systems hereby by me undertaken shall be exercised by and through William G. McAdoo, who is hereby appointed and designated Director-General of Railroads.
Said director may perform the duties imposed upon him, so long and to such extent as he shall determine, through the boards of directors, receivers, officers and employees of said systems of transportation. Until and except so far as said director shall from time to time by general or special orders otherwise provide, the boards of directors, receivers, officers and employees of the various transportation systems shall continue the operation thereof in the usual and ordinary course of the business of common carriers, in the names of their respective companies.
Until and except so far as said director shall from time to time otherwise by general or special orders determine, such systems of transportation shall remain subject to all existing statutes and orders of the Interstate Commerce Commission, and to all statutes and orders of regulating commissions of the various States in which said systems or any part thereof may be situated. But any orders, general or special, hereafter made by said director shall have paramount authority and be obeyed as such.
Nothing herein shall be construed as now affecting the possession, operation and control of street electric passenger railways, including railways commonly called interurban, whether such railways be or be not owned or controlled by such railroad companies or systems. By subsequent order and proclamation, if and when it shall be found necessary or desirable, possession, control or operation may be taken of all or any part of such street railway systems, including subways and tunnels, and by subsequent order and proclamation possession, control and operation in whole or in part may also be relinquished to the owners thereof of any part of the railroad systems or rail and water systems, possession and control of which are hereby assumed.
The director shall as soon as may be after having assumed such possession and control enter upon negotiations with the several companies looking to agreements for just and reasonable compensation for the possession, use and control of the respective properties on the basis of an annual guaranteed compensation, above accruing depreciation and the maintenance of their properties, equivalent, as nearly as may be, to the average of the net operating income thereof for the three year period ending June 30, 1917--the results of such negotiations to be reported to me for such action as may be appropriate and lawful.
But nothing herein contained, expressed or implied, or hereafter done or suffered hereunder, shall be deemed in any way to impair the rights of the stockholders, bondholders, creditors and other persons having interests in said systems of transportation or in the profits thereof, to receive just and adequate compensation for the use and control and operation of their property hereby assumed.
Regular dividends hitherto declared, and maturing interest upon bonds, debentures and other obligations, may be paid in due course, and such regular dividends and interest may continue to be paid until and unless the said director shall from time to time otherwise by general or special orders determine, and, subject to the approval of the director, the various carriers may agree upon and arrange for the renewal and extension of maturing obligations.
Except with the prior written assent of said director, no attachment by mesne process or on execution shall be levied on or against any of the property used by any of said transportation systems, in the conduct of their business as common carriers; but suits may be brought by and against said carriers and judgments rendered as hitherto until and except so far as said director may, by general or special orders, otherwise determine.
From and after 12 o'clock on said twenty-eighth day of December, 1917, all transportation systems included in this order and proclamation shall conclusively be deemed within the possession and control of said director without further act or notice, but for the purpose of accounting said possession and control shall date from 12 o'clock midnight on December 31, 1917.
In witness whereof, I have hereunto set my hand and caused the seal of the United States to be affixed.
Done by the President, through Newton D. Baker, Secretary of War, in the District of Columbia, this twenty-sixth day of December, in the year of our Lord one thousand nine hundred and seventeen, and of Independence of the United States the one hundred and forty-second.
WOODROW WILSON.
NEWTON D. BAKER, Secretary of War.
By the President:
ROBERT LANSING, Secretary of State.
XX
GOVERNMENT OPERATION OF RAILROADS
(_Address to the Congress, January 4, 1918_)
Gentlemen of the Congress,--I have asked the privilege of addressing you in order to report that on the 28th of December last, during the recess of 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 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 much greater. I assumed the less responsibility rather than the weightier.
NEED OF UNITED DIRECTION
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 a 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 co-ordination 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 absolutely unrestricted and unembarrassed common use be made of all tracks, 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.
AS LITTLE DISTURBANCE AS POSSIBLE
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 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 carefully served and safeguarded as it is possible to serve and safeguard it in the present extraordinary circumstances.
COMPENSATION SHOULD BE GUARANTEED
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 largest 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 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 co-ordinated 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.
SELECTION OF MCADOO AS DIRECTOR
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 Hon. 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.
XXI
THE TERMS OF PEACE
(_January 8, 1918_)
In an address to both Houses of Congress, assembled in joint session, President Wilson enunciated the war and peace program of the United States in fourteen definite proposals. The President spoke as follows:
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Gentlemen of the Congress,--Once more, as repeatedly before, the spokesmen of the Central Empires have indicated their desires to discuss the objects of the war and the possible basis of a general peace. Parleys have been in progress at Brest-Litovsk between Russian representatives and representatives of the Central Powers to which the attention of all the belligerents has been invited for the purpose of ascertaining whether it may be possible to extend these parleys into a general conference with regard to terms of peace and settlement.
The Russian representatives presented not only a perfectly definite statement of the principles upon which they would be willing to conclude peace, but also an equally definite program of the concrete application of those principles. The representatives of the Central Powers, on their part, presented an outline of settlement which, if much less definite, seemed susceptible of liberal interpretation until their specific program of practical terms was added. That program proposed no concessions at all, either to the sovereignty of Russia or to the preferences of the population with whose fortunes it dealt, but meant, in a word, that the Central Empires were to keep every foot of territory their armed forces had occupied--every province, every city, every point of vantage--as a permanent addition to their territories and their power. It is a reasonable conjecture that the general principles of settlement which they at first suggested originated with the more liberal statesmen of Germany and Austria, the men who have begun to feel the force of their own people's thought and purpose, while the concrete terms of actual settlement came from the military leaders who have no thought but to keep what they have got. The negotiations have been broken off. The Russian representatives were sincere and in earnest. They cannot entertain such proposals of conquest and domination.
SIGNIFICANCE IN PARLEYS
The whole incident is full of significance. It is also full of perplexity. With whom are the Russian representatives dealing? For whom are the representatives of the Central Empires speaking? Are they speaking for the majorities of their respective parliaments, or for the minority parties--that military and imperialistic minority which has so far dominated their whole policy and controlled the affairs of Turkey and the Balkan states, which have felt obliged to become their associates in this war? The Russian representatives have insisted, very justly, very wisely, and in the true spirit of modern democracy, that the conferences they have been holding with the Teutonic and Turkish statesmen should be held within open, not closed, doors, and all the world has been audience, as was desired.
To whom have we been listening, then? To those who speak the spirit and intention of the resolution of the German Reichstag of the 9th of July last, the spirit and intention of the Liberal leaders and parties of Germany, or to those who resist and defy that spirit and intention and insist upon conquest and subjugation? Or are we listening, in fact, to both, unreconciled and in open and hopeless contradiction? These are very serious and pregnant questions. Upon the answer to them depends the peace of the world.