Proceedings of Committee of General Assembly to examine into the West Point terminal, etc.

PROCEEDINGS OF COMMITTEE
GENERAL ASSEMBLY
Examine into the West Point Terminal, Etc.
PRINTED BY ORDER Of HOUSB.
ATLANTA, GA.-. W. J. C-AMPBBI.L, STATIC PRINTER.
CONSTITUTION JOB OFFICE. 1890.

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PROCEEDINGS OF COMMITTEE
Examine into the West Point Terminal.
Committee met in capital building, Atlanta, Georgia, August 21st, 1889, at 3:30 oclock p. m.
Present: Messrs. Bartlett, chairman; Lyle, Rankin, Glenn, Berner and Lamar.
Gen. E. P. Alexander, called and sworn: J Question. (By the Chairman.) General Alexander, you are 19 the president of the Central Railroad and Banking Company ? JJr Answer. Yes, sir.
Q. How long have you occupied that position ? O A. Since January, 1887, sir a little over two years two and
a half years. o Q. Have you a list of the stockholders of the company ? O A. I have that is, I have a list as made up on the books 5 October, 1888, a year ago. There have been no essential -* changes since that time. On the first of .October we make ^ up the books, which is quite a tedious thing, of those who < hold stock on that date, and those holding stock then can en vote at the election in the succeeding January. Stock - bought after that time will not be allowed to vote. I -* have that list made up for voting purposes. Perhaps, Mr. 2 Chairman, it will save time if I make a little statement upon the 2 subject in opening a way for questions to be asked. Jj Q. You have fl list of the stockholders, you say. What is Z the amount of the capital stock of the company ? u) A, Seven and a half millions of dollars. JE Q. Who is the largest stockholder? ^_ A. It stands in the name of the Central Trust Company, of " New York. O
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Q. How much do they own ? A. Forty thousand shares. Q. Four million dollars ? A. Yes, sir. Q,. That is a majority of the stock ? A. Yes, sir, it is. Q. The Central Trust Company, of New York ? A. Yes, sir. I know, not as an officer of the company, but indirectly, who is the owner of that stock. That stock is deposited as collateral, and the beneficial owner is what is called the Georgia Company. Q. That is a company organized and chartered in North Carolina ? A. Yes, sir. The Georgia Company was organized to hold a majority of the stock in the fell of 1886, when I made the contest with Captain Raoul myself and friends. We bought a krge quantity of the stock before the election, and after the election we continued to buy until we made up forty thousand shares. For the purpose of carrying that stock in bank for a long period of time, we decided to form a company and issue collateral trust bonds on it, which was equivalent to a long loan, for a part of its value. That was the object of the formation of the Georgia
Company. Q. Where was that company chartered ? A. I think at High Point, in North Carolina. Q. When was the charter granted ? A. I can tell approximately, sir. I should say it was about
May, 1887. Q. The 30th of May, 1887? A. I am only guessing at the time. I never noticed particu
larly. Q. That was chartered by the courts of North Carolina, was
it not ? A. Yes, sir, by the courts. There was a good deal ofdiscussion
among the parties owning the stock as to where it should be obtained, and as the laws of North Carolina offered a favorable charter, as I was informed, it was decided to obtain it there for the purpose of carrying that stock.

Q. Do you know in whose name the application was made and signed by?
A. No, sir, I never was familiar with the details of it. Q. Do you know whether or not it was signed by D. Schneck, 8. H. Wiley and Thomas Carr? Do you know those gentlemen? A. I do not know them. Q. You spoke of your associates who were they ? A. It was between twenty and thirty gentlemen in New York and Savannah, and different places, who had supported me in this contest -and bought stock for the purpose of putting me in as President of the Central Railroad and Banking Company. Q. Can you give the names of some of them ? A. Yes, sir, Messrs. Hollins, Rice, Denniston, Lehman, Sulley, the two Messrs. Calhoun John C. and Pat Calhoun and Mr. Kissell. These are the principal names I know. They had friends Mr. Rice had friends whose names I do not know. I know there were about twenty-five stockholders. Q. Mr. John Inman a party ? A. Yes, sir, I think so.
Q. Mr. Hale? A. I do not remember his name. Q. Samuel Thomas? A. I did not know that he was a stockholder. He may have been, but I do not know it. Q. John H. Hall? A. Yes, sir, he was. Q. You said Rice. You meant Brice, didnt you ? A. No, sir, Isaac M. Rice. Q. This was in 1886, you say? A. It was in 1886 that we began buying stock. We finished it in 1887, and formed this company after the election. Q. How much of the stock did you and your associates buy ? A. We had bought about two million eight hundred thousand at the time of the election that is twenty-eight thousand sharet before the election and we bought the balance after the election. Q. You did buy a majority of the stock? A, Not before the election. A majority of the stock would

have been three millions seven hundred thousand, and we only

bought two millions eight hundred thousand. But we had a

great many friends who would vote with us. We voted at the

election about four millions and two or three hundred thousand.

Q. When did you become owners of a majority of the stock ?

A. This Georgia Company became the owners. At the time

we bought this stock there was no Georgia Company. It was

these individual?. They kept on buying the stock until they had

forty thousand shares.

Q. When did that happen these individuals becoming possessed

of a majority of the stock ?

A. Gradually between Jauuary and May, I would say, but I

do not know exactly what time.

Q. As soon as you became possessed of a majority of the stock,

did you then apply for a charter at High Point ?

A. Yes, sir.

Q. When the charter was granted, what became of the stock that you had purchased?

A. Wheu the charter of this Georgia Company was granted,

the Georgia Company bought from all these individuals the stock

that they owned Central Railroad stock. They bought it by

issuing bonds.

Q. What amount of bonds did the Georgia Company issue ?

A. Four millions of bonds and twelve millions of stock, and

for each, say, ten shares of Central Railroad stock, it issued a one

thousand dollar bond and thirty shares of its own stock. That

divided its stock of twelve millions. That makes three shares

for one for the forty thousand.

Q. General, what were some of the powers given to the Geor

gia Company under the charter granted by the North Carolina

courts ?

A. I could not tell you, only it was to buy and own the stocks

and bonds of any of the railroads in the State of North Carolina

or in any of the adjacent States. That is as much as I can tell

you.

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:..

Q. Have you a copy of that charter ?

A. I am not sure that I ever saw a full copy of the charter. I

will look among my papers when I get to Savannah, and if I have one I will send it to you.
Q. What is the connection between the Georgia Company and the West Point Terminal Company ?
A. Last fall I forget the month Q. What is the proper name the Richmond Terminal ? A. Richmond and West Point Terminal Railway and Ware house Company. Q. What is that company ? A. That company is a company that was chartered in the State of Virginia ten years ago, more or less, for the purpose of acquiring railroads and terminal facilities. The only railroad it owns itself is the railroad from Richmond to West Point. Q. What is the length of that railroad ? A. I think fifty or sixty miles fifty miles probably. Then it has the power under its charter to buy and sell the stocks and bonds of all railroads in any part of the United States, and to lease railroads and to build them. It is a company with very broad powers. It was given because the old charter of the Richmond and Danville did not give it power to acquire other connecting railroads. It was considered important to get that power, and it was o.btained by getting these supplementary powers, and the Richmond and Danville bought the stock of the Richmond Ter minal. Q. Do they own it now ? A. I think it has been reversed. I think the Terminal has bought the other. Q. The Terminal owns the stock ? A. Yes, sir, I think the Terminal bought all the stock of the Richmond and Danville. Q. Is the line from here to Charlotte a part of the Richmond and Danville? A. That is leased to the Richmond and Danville. That is a separate corporation, which issues its stocks and bonds, and is leased on a certain fixed rental. Q. About these companies: I asked you the question as to what connection the Richmond and West Point Terminal had with the Georgia Company organized in North Carolina ?

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A. Last fall I do not remember the time the Richmond and West Point Terminal bought the whole twelve millions of stock of the Georgia Company. The Richmond and West Point Terminal, therefore, is the sole stockholder in the Georgia Company.
. Q. Who are the officers of the Georgia Company now ? Do you know ?
A. I think Mr. Hall is president, and I do not know that there are any other officers. Mr. Rowe, I think, is secretary and treasurer. I do not know of any other officers.
Q. They are the same men who were the directors and presi dent of the West Point Terminal ?
A. No, sir; Mr. Hall is not. Mr. Rowe is the secretary and treasurer of the West Point Terminal, I think.
Q. Do you know some of the directors of the Georgia Com pany?
A. Yes, sir, I think Ido. I think that Mr. Swann and Mr. Inman, Mr. Kissell, and Mr. John Calhoun and Mr. Pat. Calhoun. I am not one of them myself, and I am not sure about the whole list.
Q. Where is the office of this company ? A. The office is No. 18 Wall street. Q. Any office in North Carolina? A. About that I cannot tell you. I never was connected with the company, and do not know.
Q. Where is the office of the Richmond and West Point Terminal ?
A. That is in No. 2 Wall street.
Q. Are there any other offices ? A. Not that I know of. Q. This company, known as the Georgia Company, organized at High Point. Do you know -whether or not they owned the rtock of any other company than that of the Georgia Company? A. I am under the impression that this company bought no other stock but the Georgia Central before they themselves were bought by the Richmond and West Point Terminal. Q. Do you know whether or not the Richmond and West

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Point Terminal own any amount of stock in any other railroads in Georgia?
A. I think it owns a majority of a certain class of what is called the first preferred stock of the East Tennessee, Virginia and Georgia. I am not aware that it owns stock in any other railroad in Georgia. It did own, I believe, at one time this is hearsay perhaps some of this road from Athens to Lula, the North eastern but I am under the impression they traded that off.
Q. Now, General, any statement you desire to make you can do so?
A. I only want to add a little in explanation of why we formed this Georgia Company at the time we did. I do not know that the members of the committee are aware that I was president of the Central about five years ago after the death of Mr. Wadley. I succeeded Mr. Wadley, and at the next annual meeting, Captain Raoul, his son-in-law, ran against me, and a day or two before the election he bought ihe proxies of between six and seven thousand shares of stock owned by a lady in New York, which turned the election on me and beat me. Naturally we did not like that. I did not like that very much. But I have been a great believer in the value of the Central Railroad. When I first came to Georgia ten or eleven years ago, the stock of the Central was only worth seventy. Mr. Wadley tried to lease the road for six per cent, to the Nashville, Chattanooga and St. Louis. I gradually got impressed with the belief that the Georgia Central was an exceedingly valuable property, and that its stock ought to be worth a great deal more than anybody ever dreamed, and I told many of my friends in New York about it, and they bought in the stock and took some interest in the management. When Mr. Wadley died and I took charge, the stock was worth about one hundred and eight or one hundred and ten that is, when the contest began. Under Captain Raouls management the stock went down. I am not pretending to blame him for it, but the stock went down to about sixty-five. I and all my friends were watching it, and a great many stock holders were very much dissatisfied, but I believed in the stock as much as ever, and with the assistance of Mr. Calhoun and

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others we got up a party in New York to buy up enough of the stock to change its management. We started to buy it, and immediately the stock went up, and when we bought at the time of the election, the twenty-eight thousand shares averaged us one hundred and eighteen. That is what we paid for it. We were in possession and control then, and I told the gentlemen; who had bought in the property with me, that it would take about five years to bring that property out to what it ought to be steel rails, extensions, improvements and some financial matters and that it would be worth two hundred in five years. I told them also that this was a day of consolidations, and that it was bound to sweep over the whole country, and that the time would come when other corporations would want this property, and that it was a good thing to have and hold, and when we bought it, the only trouble was to hold it. The shares we bought cost us nearly one twenty-five, and all amongst us we did not have five millions to lay out. So we borrowed money in bank. Ordinarily, as you may know, money carried in batik, you may be called on any day for it. We wanted it for a long time, or a part of it. To get it for a long time, the only way to do was to issue bonds, and that was the principal object in forming this Georgia Com pany to issue a bond to nut for a long time, and that would furnish us .ninety-five dollars out of the hundred and twenty-five that we put out. The balance we could lay out of. And that was the first object in forming this company, and we formed it in North Carolina, where we could get a liberal charter, and where we could buy other roads if necessary. If others did not buy u., we thought we might buy some one else. That is the explanation simply of the formation of this company. We went into it intending to hold it for five years and refuse all offers for it for five years until we could get our bonds funded at a low rate of interest aud get the whole road laid in steel and other improvements. We intended to hold it for five years, but last fall the Richmond Terminal also appreciated what we did that consolidations were going on rapidly, and that those who did not get in would be left out; aud I came to the conclusion, after the Richmond and West Point Terminal acquired a large

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interest in the East Tennessee, for the protection of the minority stockholders, whom I represented, as well as for the protection of the majority, and for the interest of the port of Savannah and for the State at large, that we ought to be in that consolida tion. So my friends, Mr. Calhoun and his brother, and others, and myself, came to the conclusion that it would not do to let this consolidation form and leave us out in the cold, and we negotiated with them, and they were willing to pay a price satisfactory to the other stockholders, and they bought it out. So that was the way the Georgia Company was formed at first for the purpose of carrying this stock and holding it together, and when these consolidations started at the north of us, we con sidered it vital to the interests of the road that we should be in, and we concluded to sell out.
Q. You mean to sell out the Georgia Company ? A. Yes, sir. To let the Georgia Company sell itself to the Richmond Terminal, and to have them interested with us. Here la a list of all our stockholders. I brought up two copies, and I will leave them with the board wuh one word of explanation: The most of our stock is listed on the books in Savannah, but we have a New York book, and anybody that lives in N?w York, and desires their dividends paid there can have their stock transferred to the New York book. On the 28th page here it is 43,149 shares on the New York book. These dividends are paid in New York. The Central Trust Company hold forty thousand shares. The balance, three thousand one hundred and forty-nine shares, are held by parties there, or the dividends are collected by parties there. That will show you who the stock holders of the Central road are. It is quite interesting to see how many there are, and how many small holders there are.There are two hundred and seventy-nine owners of one share each. Here is another copy, the same as that, except it has not got the New York list in the book. In this book I have given the addresses as far as we could get them. A great many are paid over the counter, and we do not know their address. So, where there is no address given, it is probable that it is some one in or near Savannah. These two together will put the board in full

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possession of who our stockholders are and the number of shares of each. If the board will permit me to make a few remarks
Q. (By Mr. Glenn) General, is that Richmond and Terminal Company chartered by the Legislature of Virginia?
A. Yes, sir. Q. Do you remember the date ? A. About ten years ago. I remember about when it was formed. If you have a copy of "Poes Manual" you can get it probably. Q. That would be about 79 ? A. Yes, sir, to the best of my recollection. It was not later than that. Besides our stock, we have certificates of indebted ness out, which are contract notes of the Central Railroad, and I brought it also. We do not have a printed list of those, as they do not vote. I have from the books the As, Bs, C^s and Tf, the first four letters. Q. Those are called the debentures? A. Yes, sir. I had those made up. Q. Those are contracts or promissory notes of the Central Railroad? A. Yes, sir. Of those there are four million and six hundred thousand. Q. The difference between those and the stock is practically simply the right to take part in the management of the company ? A. Yee, sir. Q: That is practically the difference ? A. Yee, sir. I will answer one of the questions that the com mittee was appointed to investigate. There is no contract what ever between the Central Company and the West Point Terminal. Officially, we do not even know them. On our books we only know the Central Trust Company. It is our stockholder. In the election in January a proxy from the Central Company is presented to vote. Of course, I know who controls it, but the company, as a company, does not know anything, except that large stockholder, whose stock will undoubtedly carry the elec tion and put in the officers. Q. (By the Chairman). The Central Trust Company holds the stock as a pledge for the loan ?

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A. Yes, sir.
Q. Of course, the Trust Company is an inanimate person. But isnt it true that when that stock is voted it is voted at the pleasure or will of the real owner?
A. Yes, sir. Under the contract by which they hold it, they hold it as a security for these bonds that the Georgia Company put up. The Terminal Company has taken up those bonds, or nearly all of them, and, as I am informed, propose to take them all up and cancel the bonds and wipe out the Georgia Company. The objects for which the Georgia Company was formed now no longer exist. It was formed for the benefit of the small holders and to keep the stock for five years, and to keep Captain Raoul from buying it. We wanted it in a lump, where no one could beg, buy or borrow it and turn our management out. We wanted to fix that management for five years. Now the Termi nal no longer cares for that. She has money interests, and can put it some other way.
Q. You mean since she bought out the Georgia ? A. Yes, sir. The Georgia Company has no necessity for bor rowing. She can do it in other ways. Q. In other words, it is not necessary for the Richmond Termi nal Company, which owns the Georgia Company, to pledge stock for collateral in order to hold it? A. No, sir, it is not necessary. I do not know whether or not it is necessary. At any rate, they can do themselves what the Georgia Company could not do. We individuals in the Georgia. Company would have to get together as individauls and do what it as a stockholder could do. As a corporation, it can afford to wipe out the Georgia Company, and, I am told, propose to do so. The Georgia Company would then disappear and be no longer in existence. Q. Be absorbed by the Richmond Terminal ? A. Yes, sir. Q. In the event the Georgia Company is absorbed by the Richmond Terminal and the Terminal gets control and pays the money that the Central Trust Company loaned upon the pledge of the stock, then the West Point Terminal will own the stock, and it would so appear upon your books?

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Witness: State your question again, please.

Q. You stated just now that the Richmond Terminal were

not required to carry the stock that the Georgia Company was ?

A. Yes, sir.

Q. And that they were making arrangements to relieve them

selves from the debt they owe the Central Trust Company ?

A. Yes, sir; retire those bonds.

Q. The stock was pledged to secure the bonds?

A. Yes, sir.

Q. When the bonds are retired the Central Trust Company

will have no claim upon the stock ?

A. No, sir; turn it over to the other company. I suppose

they will transfer it to themselves.

Q. Whether they transfer or not the Terminal will be the

only party interested in the stock ?

A. Yes, sir. If the coupons on these bonds should not be

paid when they fall due, the holders can go to the Central Trust

Company and say, "Pay my bonds."

Q. (By Mr. Glenn). I will ask you, General, if it is not true

that yourself and a number of others, for reasons known to

yourselves, were inimical-to the policy of Captain Raoul while

he was president of the Central Eailroad, and desired to secure

control of the company ?

A. That is true.

Q. And after securing control and not being or feeling secure,

you desired to form a company for the control of the road ?

A. Yes, sir.

Q. And then you formed this Georgia Company and organ

ized a campaign and elected yourself as president with a board

of directors in line with yourself?

A. Yes, sir.

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Q. And then after that the Richmond Terminal Company

acquired possession of the stock of the Georgia Company ?

A- Yes, sir.

Q. In order to carry on the transaction and get the money

necessary to do this, the Richmond Terminal Company pledged

this stock to the Central Trust Company ?

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A. You are right up to that point. The Georgia Company had already pledged it to the Richmond and West Point Ter minal, and have not yet redeemed it.
Q. They took it subject to the debt put upon it by the Geor gia Company ?
A. Yes, sir. Q. And the legal owner is the Central Trust Company, while the real owner is the Richmond Terminal Company ? A. Yes, sir, the beneficial owner. I will be glad to answer any question the committee may desire to ask. I am so familiar with this thing, and, if I have not already done so, I will be very glad to make it perfectly clear. I am talking only of the legal status of the thing. Q. At the time mentioned, when you went into office as presi dent of the Central Railroad and Banking Company, it had no connection with any other corporation outside of the State? A. No, sir. Q. This Georgia Company had accomplished its purpose at that time? A. When I went in, the Georgia Company had not been born. After I went I wanted to secure myself for five years, and we formed the Georgia Company for that purpose to lock up the stock for that long so that it could not be sold. Q. At the time you went in, the Central Railroad Company controlled the property it had controlled for years ? A. Yes, sir. Q. And had no connection with any other company outside the State of Georgia ? A. Yes, sir, and it is so yet. The Central Railroad has not changed its status. Q. Under this contract with the Richmond Terminal Company the stock is voted by the real owner ? A. Yes, sir. Q. The policy of the company, however, is dictated by the management of the Richmond Terminal Company ? A. I would not put it that way. They can elect a board of directors at the annual meeting. They can elect thirteen direct-

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ore of whom eleven must be citizens of Georgia. They can then elect after that whom they please.
Q. (By the Chairman.) Would they not elect men friendly to their views ? Isnt that likely to be the case ?
A. Yes, sir. They did elect at the last election the same board exactly almost that we had. Here is the board we had last year: E. M. Green, of Savannah; J. J. Wilder, Savannah, was not re-elected. Captain W. W. Gordon was elected in his place.
Q. Was he a director all the time? A. No, sir. He was one of Captain Raouls directors; Captain Garner; E. M. Mills died last year, and Mr. H. M. Comer was elected in his place; Mr. C. W. Woods was not re-elected. They substituted for him Mr. Jacob Kaoul; Messrs. Vetzburg, Calhoun and Inman and these others were re-elected. Mr: Loop was dropped, and in his place is Judge Chisolm, of Savannah. His initials I forget. Q. Is Judge Chisolm not also a director in the West Point Terminal ? A. Yes, sir, and vice-president of Mr. Plants system. Q. How many of those directors are connected with the West Point Terminal ? A. Mr. John C. Calhoun, Mr. Pat. Calhoun and Judge Chisolm three of them. Q. The Messrs. Inman are not connected with it ? A. They live here H. T. and Sam. They live here and and are not connected with it. Q. John H. Inman is not a director ? A. No, sir. Q. What are the names of the two that live here ?
A. Sam and Hugh. Q. They are brothers of John H. ? A. Yes, sir. Q. (By Mr. Glenn.) I wish, General, you would give us the dates of these transactions as well as you can ? I under stand you to aay it was in 1886 that you commenced to mature your plans?

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A. Yes, sir, to organize the campaign. My election against Captain Kaoul took place in May, 1887.
Q. This says on the 30th oi May the application was made for a charter under the laws of the State of North Carolina. That was about the time ?
A. Yee, sir. Q. Now, about the transfer to the Richmond Terminal Com pany ; when was that ? A. That was made, I should say, about the last of October. Q. Now, what was the date of the transaction between the Central Trust Company and the Georgia Company ? A. That was probably done very soon after the organization of that company. Should think about July, 1887. Q. Was this mortgage note given March 1, 1889 ? A. No, sir; that mortgage must have been in 1887. Q. (By Mr. Berner.) When did the Georgia Company transfer its interest to the West Point Terminal? A. In October, 1888. Q. Be*kind enough, please, to tell me who composed the board of directors of the Georgia Company at that time? A. I have given the names of all I remember. The paper you have there is probably the new board that they elected after the company sold to the Terminal. The fellows who sold the leading men were Hollins, Denson, Leahman and Belmont. There are two Leahmans. They negotiated for a long time as to what price they would sell at. Q. (By the Chairman.) When you determined to form this company in North Carolina that is, under the laws of that State why is it the names mentioned were put in as the incorporators ? A. I can only judge of that by what I know of other corpora tions. For instance, I am a stockholder, unfortunately, in two or three mining companies out in New Mexico and Mexico, and one place and another, and they have incorporated themselves over in New Jersey; and to obtain charters there Jerseymen must make the applications, and I think a good many over there live by forming corporations that the laws allow. I suppose it

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was necessary to have three citizens of North Carolina to incor porate it, and probably the company deeded them a small inter est for that purpose, and the outside fellows took the balance of the stock.
Q. Why didnt you get a charter in Georgia ? A. That probably was done in New York. Q. You stated, I believe, that after you had gotten a majority of the stock of the company, you determined to form the Georgia Company in order to carry it ? A. Yes, sir. Q. And that you ascertained that the laws of North Carolina were fovorable to that sort of thing ? A. Yes, sir. Q. Now, why was it, instead of applying to the courts of Georgia, you applied to the courts of North Carolina, when the only powers seemed to be to hold, buy and sell railroad stock ? Did you think there was anything in the laws of Georgia to pre vent the organization of a corporation of like character ? A. As I did not decide the question myself, I can anly guess at their conclusions. I imagine, under the Georgia law, they thought they could not buy that they would be hampered in buying the stocks and bonds of other railroads. Q. This company organized at High Point is not a railroad corporation ? A. It has the power to build, lease, buy and sell railroads. Q. Without any restriction as to completion as to railroads? A. Yes, sir. Q. Now, isnt that the reason, instead of applying for a char ter here, you applied up there that is the restriction in holding and controlling competitive lines in Georgia ? A. I suppose that is the reason of it. Q. You mean, under the laws of North Carolina, you could obtain a charter from the courts permitting you to own and con trol and operate competitive lines? A. That is what I understood that they could get a charter with broad powers. Q. Do I understand you to say that the powers for which

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this corporation was organized at High Point, North Carolina, were for the purpose of owning railroad bonds and stocks?
A. Yes, sir. Q. And was organized for the purpose of making stocks and bonds the basis of credit? A. Yes, sir. Q. And that was done in order that you might not be forced to sell the stock of the Central Railroad and Banking Company for a term of five years? A. Yes, sir. Q. In order that the stock of the company might not be put upon the market by those inimical to your system ? A. Yes, sir. Q. (By Mr. Lamar.) At the time you formed this company, did you have the matter of control of other railroads in your mind? A. Nothing except this: We were looking forward to con solidations. We thought in a little while other people would be bidding for us, and I tried to get the Kansas City road from Birmingham. I went to Boston and advised them to come in and help me buy this stock and consolidate it into one line that it would give them a trunk line from Kanqflj City to New York and I urged them to do it Q. That is the Gould system ? A. No, sir; Mr. Thayer is president of that. I thought those people were great fools not to come in with us. I tried to get them to help us to buy the stock and make a through trunk line. That is what I have been after all the while to put Georgia on a through trunk line from the West to the East. That is the same thing our grandfathers thought of when they started these roads. I wanted to get in a trunk line from the West to the East, and I went to these people and worked with them, and did everything I could to get them to buy us, but could not get them up to it. Q. (By Mr. Glenn). Your idea was, if they could secure the Central, taking into consideration the position it occupies with reference to the matter of supply and demand of the ooun-

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try, they would then have a through line stretching from the West into Georgia and through Georgia and on up the coast line to New York ?
A. Yes, sir. Q. Making this a part of a great connecting system between the East and West? A. Yes, sir; that would make the Central worth two hundred, first putting the road in steel and making other improvements. Q. Now, General, we can readily understand how that will benefit the stockholders of the Central. Now, what about the advantages that would result to the people of Georgia ? A. It seems to me that is one thing that is hard to argue, as it seems so perfectly apparent. Here is the business of the coun try sweeping by the lakes over those long lines of railroad. When one of these lines gets started, it is able to put down heavier rails, better machinery and make faster time. Those fellows up there are going on in that way, and I want to get into that swim. If I can get that business, I will put down heavier rails, more rails, use more supplies for my people; I will have more employees at all the different places. My stockholders will all get more money, and will get rich, and I will put the State of Georgia on the high road of travel between the East and the West. Q. But, General, would not the inevitable drift of that thing be to build up the port of Savannah at the expense of this part of the State and above here ? A. No, sir; it would bring it through the whole State. On the other hand, Mr. Chairman, if we are left out, we are going to be bottled up. Here is an illustration right here. In eighteen hundred and thirty-odd, the first railroad, chartered to be a steam railroad in the United States, was the South Carolina from Charleston to Hamburg. They got locomotives to run on it, and the South Carolina started ahead, and when it was built was the longest railroad in the world. Savannah was not far behind her. She ran a small railroad from there to Macon. When it was finished it was the longest railroad in the world. Look at the history of those roads from that time to this. That South Carolina road stands to-day as it was when it was finished. It

21
has stood still and waited for other people to bring it business. It has not acquired other lines nor has it built branches. The Central road has gone on and acquired territory and consolidated and built up. The South Carolina, on the other hand, as a result of its policy, is going into bankruptcy a second time. The second set of stockholders is being wiped out. We have paid on an average of six per cent, dividends since the road was built in 1840. The South Carolina road would have gone to the bow-wows but for the discovery of fertilizers near Charleston. All of Charlestons trade has gone. I know men, myself, living over here in Ala bama that used to trade in Charleston. A man in Talbotton told me the other day that the people there used to trade in Charleston. Now they do not. Savannahs trade has increased three or four hundred per cent, and this is because the Central Railroad is not waiting for people to bring it business. It came near breaking itself at it sometimes, but we have gotten along and managed to go through all right. The South Carolina road is standing there, and there she stands.
Q. (By the Chairman). These consolidations destroy competi tion, dont they ?
A. The question of consolidation and competition is a very big one. Consolidation to a certain extent does destroy competi tion. But this is the first view I take of it. For the sake of a little bit of competition between us and some of these roads down here, dont bottle us up and keep us out of the big competition outside of the State. The old idea to keep rates down was by competition. Upon the subject of competition in railroads, if you gentlemen desire to read a little upon the subject, I will give you a few books that will show you what has been done in Europe. Competition in railroads is not like competition in other things. In the first place, the first effect of it is to make rebates. They will hunt up the biggest shippers and offer them some kind of secret rebate, and you can pass all the laws against them in the world, and they are very difficult to put a stop to.
Q. Why should it not lead to a general lowering of rates instead of to single individuals?
A. I do not mean by that there are general reductions, but special reductions.

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Q. Why does that follow from competition ? In the struggle for business they make these rebates ?
A. Yes, sir; they will go to the big shipper and make special arrangements with him.
Q. That is injurious because it gives an undue advantage to the big shipper over the smaller one ?
A. Yes, sir. Q. You spoke of combination: what effect would a combina tion have upon those roads going in the same direction compet ing for the same traffic which are not in the combination or in the arrangement? Will it have the same effect it has had upon the South Carolina road because she has not gotten in the com bination ? A. Yes, sir, and ultimately result in bankruptcy. Q. Then the condition of the South Carolina road has been brought about mainly because she has not been able to get into one of these combinations? A. I think so. I think that has had a good deal to do with it; that is one of the elements, certainly. Q. 80 that is an injury resulting from the want of consolida tion? A. It is a great injury to the fellow that stays out. I was going to say that my first scheme was to get the Kansas City people to unite with us, and that would have made a trunk line from there to New York. In the meantime, the Richmond and Danville and the East Tennessee got together and formed a consolidation. Then I got very uneasy for the Central when I saw that consolidation being made. I was representing all these people whose names are there, some living in this State and some in other States people who have emigrated, and some heirs of former stockholders, and they were in the minority. Q. While that is true that they are in the minority there is one block of four millions of stock owned by the Richmond Terminal? A. Yes, sir, and there is three and a half owned by eleven hundred and ninety stockholders. In addition to that, there are five millions of bonds, which are scattered all about. We have

23
no record of them, as they are paid to bearer. Besides that, they have a half interest in the lease of the Georgia Railroad.
Q. I will ask you now if the Central Railroad owns a joint interest with the Louisville in the lease of the Georgia road ?
A. That lease was made to William M. Wadley a joint half interest to the Central and the Louisville and Nashville roads.
Q. The Central, with the Louisville and Nashville, now own the lease of the Georgia Railroad ?
A. Yes, sir. Q. For how long? A. For one hundred years that is, from the beginning of the lease. Now, you see, I represented stockholders like you see on that list there more women than men. Q. You say you were confronted with the problem of the consolidation of the East Tennessee and the Richmond and Danville? A. Yes, sir; that is true. It is a long story, and I want to simmer it all down at once. I wanted to be in that procession, for the benefit of my stockholders, the port of Savannah and the State of Georgia, and I believe it benefits and does not injure any interest in the State of Georgia, and it seems to me that every one will be benefited by it. As to the advantages of con solidation, they seem to be too plain to consider. Under one of these long systems a man could check his baggage from a point in the East or West to Cornelia, or any other little place on its line. Q. General, suppose you give us the two situations right there and what you resolved to do? A. Here (exhibiting paper) I have drawn a little diagram by which I can show the advantages to be gained by being in the combination I have mentioned. The combination of the roads here would leave the Central blocked at Birmingham, and I thought it far better for us to be in this combination. All I want is a fair showing to let me come in and work from the terminal lines. I do not ask them to give up any business to me. In sending freight by water it goes cheaper. When we

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divide money between the railroads, on through freight, we di vide it pro rata, but when we divide with steamboat lines, we only give them one mile for three. To illustrate: Say it is seven hundred and fifty miles from Savannah to New York by steam er ; the steamship line is pro rated at the rate of two hundred and fifty miles. To Norfolk it is put in at one hundred and sixty. A short haul cannot be as much, of course, as a long one, with the expense of terminals. So considering Savannah as two hundred and fifty miles from New York, my freight rate distance from Kansas City is very little longer than the shortest of the trunk lines, and for the great bulk of this territory I am practically a short line.
Q. You say the water haul, being cheaper, why is it, if you are a short line and practically the cheaper line, unless you are into this combination, you cannot get freight?
A. Though the short line, I cannot afford to work against these people up here and cut rates. They will also cut rates down with me.
Q. In other words, unless you are in the combination, you cannot afford to haul at the same price they do ?
A. I will show you Q. One moment first: Come back to the question of combina tions lessening competition, or stands in the way of competition ? A. I do not see the point. My being in this combination would open other lines to me. Q. Why? A. Because they would be willing to pro rate. Some road beyond there, for instance, if I am in this combination, will bring it to Birmingham and give it to me, and they would not give it to me if I was not in it. Q. Why? A. They would want the long haul, and in the other case they would take it to Norfolk. In one case they would have a long haul, and in the other a short haul. Q. How does it pay them any more if it goes that way ? A. Because if I am in the combination the whole freight from there to New York goes in the combination. If they take

25
it to Norfolk one hundred and sixty miles of the freight goes to another fellow.
Q. You mean to get the same men who are interested in the other line to have an interest in your line ?
A. Yes, sir. Q. If you are in the combination they will give you the haul ing? A. Yes, sir; they will open their lines for me to work from. Q. You would not get the hauling simply by competing for it and by being the cheaper route ? A. No, sir; they would not pro rate. They would refuse to exchange business with me, and would turn- their business the other way. If we are in the same boat and working together they will give me a fair showing. I would be the favored con nection with the Missouri Pacific, because my hauling distance being shorter it would be given to me. Q. Your line being a short line, pays them more than if they haul it over a longer line ? A. Yes, sir. I wanted the door open so that the freight might go where it wants to. I would get, not all of it, but all I could do. I do .not expect to monopolize the earth. Q. When that state of facts exists it is to the interest of each other to get all the freight from each others line they can ? A. Yes, sir; we work together harmoniously. Here is some thing showing the distance by the East Tennessee to be nine hundred and eighty-one miles, while by the Central it is only five hundred and thirty-two. Q. You mean the distance measured by the freight rating? A. Yes, sir. Take cotton shipped here from Atlanta. If my road takes it I collect it all the way to New York, and if they take it the man at Norfolk gets it, and they have a haul of three hundred miles further and earn their money. So I can afford to go into the consolidation, and I secure myself from being squeezed into the condition of the South Carolina road. Q. Now, General, take a shipper here in Atlanta: What ad vantage is it to him to send his freight over your road ? A. I do not think it makes a bit of difference to the shipper.

26
The rates are the same and always have been. They always have been both in times of competition and in times of pooL Before it was illegal, there used to be some rebates given, and if I should stand off and let some other fellow carry it at a lower rate I could get nothing.
Q. You have to agree upon the lowest rates? A. Yes, sir. As I was saying, my road would get nothing. You are obliged to meet the rates of the other fellow. As to whether the rates are extravagant or not, there is a tribunal to settle that. Q. Even if you are not in this combination, could you not afford, estimating the actual work done, having a cheaper line, to carry freight cheaper than the East Tennessee and make a reasonable return for the labor? A. I suppose, being the shorter line, possibly it could, but what it costs to carry freight involves an estimate of its costs, and that is running on a very big subject. I will take the lib erty of sending to the members of this committee a little pam phlet on that subject. What it costs to carry freight is as im possible as to estimate what it costs a lawyer to give an opinion. If there was a commission appointed to regulate the charges you could not estimate what it costs. As a lawyer, in estimating the cost of an opinion, you would have to take into considera tion your life, your early education, your experience, your libra ry, and what it costs you to give an opinion is something you cannot make an estimate of. Q. (By Mr. Berner.) Isnt the cost of water transportation the standard by which steam transportation is fixed ? A. No, sir; I think the cost of water transportation is reg ulated by what they can get. Q. As between the water and steam transportation, isnt the standard the water, and by which the charges by steam are fixed? A. Yes, sir; water is the cheaper of the two. Q. Isnt that the conclusion that the inter-State commission reached that water transportation would control it? A. Yes, sir.

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Q. And die water transportation regulates it all ? A. Tea, air; I have frequently had a reduction of canal rates to change the rates down here. Q. (By Mr. Glenn.) Isnt it true in pro rating, the long line accepts the rate of the short line ? Isnt that the basis ? A. It is in the passenger business. In frieghts in order to get a fellow to work well, we pro rate by actual distance. A road will take a short line pro rate sometimes. I do not carry these things in my head enough, but that is what I understand from our traffic manager in his quarrels with other lines up here. Take this for instance (referring to map): There is the Richmond and Danville. Imagine a thousand dollars worth of freight from K.nanR City to New York. That shows how it will be divided. If by the Richmond and Danville it would get six hundred and nineteen, and the steamship would get ninety-three dollars. If it came by our line, having a shorter pro rate, the Missouri Pacific would get three hundred and twenty-two to our one hundred and sixty-eight. The Missouri Pacific would get that much more. Now, if the Missouri Pacific demands its short line pro rate they lose money by it; then the Richmond and Danville had far better let me take it, for they would get the whole of it, rather than get ninety three dollars of it when it gets to West Point. So I wanted to get into this procession. Q. What would be the effect if the Richmond Terminal, owned the steamship line from Norfolk to New York ? A. Then they would get the same money, but there would be this loss. They would have the hauling of it that many more miles by rail equivalent to seventeen hundred and thirty-one miles against fifteen hundred and four. There is no more net money to them. There are fewer engineers and conductors to pay, and they can afford to work in competition with the lakes and upper routes. Q. If it pays the Missouri Pacific better and they get more money by sending by your line, what is it that keeps them from giving it to your line even if you are not in the procession, as you call it?

28
A. Three hundred and five miles of railroad between Birming ham and Kansas City that belongs to the Richmond and Dan ville.
Q. And the Richmond and Danville prevents you from get ting that business ?
A. They keep me from going to Kansas City. Q. Can they discriminate by not allowing your ears to go over there ? A. I think they could. When the Missouri Pacific brings it down to this point here, they want their money. The custom is for this agent here to pay that road its money when it crosses the river. When it is transferred to my line I would have to pay the freight to that point. Now he could refuse to pay the back charges if he chose. He could put as many obstacles as he might want to in the way, and I think it much better to have him with me than against me. Q. If that is true, how is it that it is not true that the Rich mond Terminal controlling these roads, as it does, destroys com petition? A. It does destroy competition to a certain extent that is, it might destroy competition to a certain extent. Here in At lanta, for instance, and in two or three other places, they might stop competing for business, but if they did nobody would know it. The rates would be the same, and a few leas drummers on the street would be the amount of it. The rates are necessarily fixed by rate committees that meet and adjust these things. Q. (By Mr. Lamar.) What is the difference between the rates of freight now between here and New York and what it was in 1886 when you formed this Georgia Company say in 1887 when you were elected ? A. I am not positive that I have that information. I know what they are now that is, I know first-class is one dollar and fourteen cents. It is my impression that it was about a dollar and a quarter, but I cannot be positive as to that. Q. Can you say whether it is greater or less ? A. It is certainly not greater.

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Q. The transfer took place in October, 1888? A. Yes, sir. Q. Has there been any change in the freight rates since that time?
A. No, sir. The rate was changed from one dollar and a quarter, I think it was, to one dollar and fourteen cents when the inter-State commerce law went into effect. This change has not had anything more in the world to do with rates than a change of the moon. In 1885 our local rates to several points, Macon, Forsyth, and others,, were changed by being reduced, upon the idea that they were discriminating.
Q. What I want to get at is, what has been the change since October, 1888?
A. I think I can say quite positively that there has been no change whatever in the Centrals freight or passenger rates. Practically the making of rates has passed out of the hands of the railroads. We accept what is made for us. The commis sion of Georgia has reduced our local rates on cotton and lum ber and other products, and I have nothing more to do with that than you. Sometimes I can reduce them to a rate lower than that allowed by the commission, which I sometimes do where there are special reasons for it. The rates outside the State are fixed down here by the Southern Railroad and Steam ship Association, which is simply a committee for the adjust ment of rates. That committee was not made, but it grew. It is the result of twenty years of fighting in all sorts of compe tition, and they have come down and been adjusted into groups. From New York to Atlanta is one dollar and fourteen cents; to Chattanooga, one fourteen; Birmingham, one fourteen.
Q. What is it to Augusta from New York ? A. I forget. Macon is one dollar and nine cents, and I do not think it is as high as Macon. Atlanta is one dollar and fourteen cents, but I forget what Augusta is. Q. About the Southern Railway and Steamship Association: that is an association of roads controlled by the Richmond Ter minal?
A. These roads are in it, but there are others. The Western

30
and Atlantic is in it; the Cincinnati Southern and the Louis ville and Nashville were in it; the Clyde steamers are in it, and the steamers from Norfolk are in it.
Q. The question I asked you was whether or not the South ern Railway and Steamship Association does not consist mainly of the roads controlled by the West Point Terminal ?
A. The roads controlled by the West Point Terminal are in it, and then I imagine there are five or six others.
Q. The Cincinnati Southern in it? A. It was, but it and the Louisville and Nashville drew out. Q. (By Mr. Glean.) Isnt this true about these associations: that the railroads recognize the fact that they can make nothing by warring with each other, and they have these associations to make rates wherever there is competition between them ? Isnt that the reason for such a thing and the thing itself? A. You are correct in everything but one. This association does make the rates, but no rate can be made that is not unanimous. Q. Has each railroad a veto power ? A. Yes, sir, every one. If it is not unanimous, then they refer it to what they call the rate committee of the traffic men. Q. That is practically consolidation? A. No, sir; it is only practically co-operation. We want uniformity. If everybody works on his own hook there will always be irregularities. If they cannot agree, then it is referred to an executive committee, composed of the principal officers of the roads, and if they cannot agree upon it, then it is referred to arbitrators. The final result is an arbitration by three disinterested men. One is General John Screven, of Savannah. I forget the names of the others. Q. (By Mr. Berner.) General, I was not in here when you started with your testimony, and I desire to get your version of the formation of this Georgia Company. When did you start your campaign for the presidency of the Central ? A. In 1886. Q. Who made the campaign with you ? A. Mr. Pat. Calhoun was the leading man in it, and they had

31
a little sort of syndicate, as they call it, in New York at the time Hollins, Wise, laaac L>. Wise, Leahman, Belmont, Sulley, and some others whose names I now forget.
Q. When was the Georgia Company formed ? A. In May, I think, of 1887, after the election. Q. Who were the real petitioners for the charter for this Georgia Company? A. With that I had nothing to do. Q. Hie petition was made by Scneck, Wiley and one other, I believe? A. I suppose they are from North Carolina, Q. Who were the real applicants for the charter for this Georgia Company ? A. About twenty men. Q. Were they the men that made the campaign with you ? A. Yes, sir. Q. The petitioners here were simply figure-heads in order that they might come up to the North Carolina laws? A. I imagine so. Q. Your purpose in organizing the Georgia Company was to procure a company upon which to make the fight ? A. It was to hold the fort after we had made the fight. Q. Your reason for going up into North Carolina was to avoid the Georgia laws? A. It was to give us powers that the Georgia laws did not give us. Q. What powers were those ? A. The powers to buy and hold railroads and stocks and bonds in North Carolina and in all the adjoining States without restriction. Q. You procured powers in North Carolina which the Consti tution of this State prohibited ? A. Yes, air. Q. Who owned the stock of the West Point Terminal in 1886 ? Who were the stockholders ? A. I could not tell you. Q. Who owned it in 1887 ?

32
A. I could not tell you. I only know incidentally. I have never been present at a meeting ofthe board. You can ascer tain by getting a copy of "Foes Manual."
Q. Who were the directors of the West Point Terminal at the time the Georgia stock went into their hands ?
A. That I cannot answer except from hearsay. Q. Were your friends directors of that ? A. No, sir yes, two of them were John C. Calhoun and John H. Inman. Mr. Inman was president of it. Q. President of the West Point Terminal ? A. Yes, sir, in October, 1888. Q. Were not John C. Calhoun and John H. Inman active parties in your campaign and in making the purchase of this stock by the West Point Terminal ? A. None of the Inmans had anything to do with my cam paign at that time. At that time one of the Messrs. Inman was on Captain Raouls board, and they were rather against us. Q. Were those two men not your active friends, and were they not interested in the Central Railroad and the West Point Terminal and the Georgia Company ? A. Yes, sir. Q. And the West Point Terminal bought the stock of the Georgia Company to carry out the original plan you had in view? A. You are putting in a little more. Q. Be kind enough to state how far they were interested and how far the purchase by the West Point Terminal was con trolled by an inclination to carry out the plan you had ? A. Those two were only two of probably a dozen or fifteen that had to act on it. The whole board of the Terminal acted on it. Q. At the time the West Point Terminal purchased the Georgia Company stock, how many interested friends did you have on that board ? Did your friends control the board ? A. No, sir; I am not sure that I had any interested friend there except Mr. John C. Calhoun. Q. What was the motive of the West Point Terminals pur chase of the Georgia Company stock?

33
A. They thought it was a verygood purchase and would be worth a good deal, of money to them that the stock would finally be worth more than they paid for it, and there were form ations of other consolidations going on that would injure them largely, and they preferred to have us with them than on the outside.
Q. Those who made the campaign and obtained control of the Central constituted the body of the Georgia Company?
A. Yes, sir. Q. And the Georgia Company sold their stock to the West Point Terminal ? A. Yes, sir. Q. Was there any agreement or understanding at the time it was sold? A. No, sir, nothing in the world, except that it was to be paid for at so much. Q. How much were they to be paid for it? A. Thirty-five dollars a share, I think, for their stock. Q. You mean that much profit ? A. No, sir, thirty-five dollars a share. The stock was twelve millions of dollars one hundred thousand shares of the Geor gia Company stock. Q. And the control of the Central Railroad went with that ? A. Yes, sir, that controlled the Central Railroad. Q. Have you ever read that ? (Presenting an undescribed paper.) Is that the. contract between the Georgia Company and the New York Trust Company? A. I cannot tell you. This is a copy of the mortgage on which some bonds were issued. This is what they call their con solidated mortgage. I suppose this is correct. This is the "Financial Chronicle," and I suppose it is correct. Q. (By Mr. Glenn.) Didnt you say a while ago there was no contract with the Central ? A. I did. That is not a contract. That is a mortgage. Q. (By Mr. Berner.) The Georgia Company had forty thousand shares of the stock of the Central Railroad ? A. Yea, sir.

34
Q. And the Georgia Company sold to the West Point Ter minal at thirty-five dollars a share ?
A. Yes, sir. Q. And with that went the control of the forty thousand shares ? A. Yes, sir. Q. And that forty thousand shares controlled the Central ! A. Yes, sir. Q. Now, I want to know among whom are the present board of directors of the West Point Terminal ? A. I cannot telJ you. I will send you a copy of "Poes Manual" that gives it a year ago. Q. Who were the members of the board at the time the West Point Terminal purchased the forty thousand shares? Will you be able to give us that at the next meeting? A. Yes, sir. I would like to leave with the committee cer tain things. We were speaking about the way these consolida tions were being formed, and I brought with me two or three reports to show the kind of system being formed these days. The Gould system, that is one I wanted to connect with at Kansas City. All these colored lines on this map belong to that system. Q. Has that system any tendency towards absorption ? A. I should say it has. Q. (By the Chairman.) Have any of those people an interest in the West Point Terminal ? A. I think Mr.. George Gould has. Here is a map of the Missouri Pacific that we connect with. You can see from this the extent ofthe lines being formed. I want to read you about six lines, giving an account of the system that exists in England. (Reading): "The number of persons employed by the company is sixty thousand; in locomotive department, sixteen thousand; miles operated, two thousand five hundred; stations, eight hun dred. Last month, with a mileage of 4,750,000, they had with the passenger trains only one hot crank pin, and with the goods trains two such failures, and they only had one failure of a con necting rod for both goods and passenger trains. During the

35
year, beyond the ordinary services, 41,314 special passenger trains; 47,238 special goods trains; 78,285 special cattle and mineral trains; total, 166,832 trains." That simply illustrates the benefits to come from these consolidations cheaper and better and safer service. If our little railroads stand still they will be left out in the cold aud bottled up.
Q. Are not all- the railroads in England operated by only three combinations?
A. My impression is there are more than three. Q. Isnt this the difference between railroads in this country and those in England: Here we have State lines, but in England, being all under one government, they can be controlled wherever they run? A. They are controlled, I think, by a commission something like ours. I brought up some copies of a book on railway mat ters by Prof. Adway, of Princeton College, and I will leave them with you. You will find in it a great deal of data. (At five oclock the committee adjourned to meet to-morrow at 3 oclock p. m., when it is again adjourned until Tuesday, September 3rd, at three oclock p. m.)

36
Committee met at 8 oclock, September 3rd, 1889, with fol lowing members present: Messrs. Bartlett, Chairman; Lyle, Rankin, Glenn, Lawson and Lanmr.
The Chairman: Before we proceed further with General A lexanders testimony, perhaps it would be best to ascertain Jrom Mr. Calhoun whether or not he can accommodate us with the papers he was requested to produce.
Patrick Calhoun called. Q. (By the Chairman.) Have you those papers, Mr. Cal houn? A. I think I have all the papers that were in New York, Some of the papers are in Georgia, I think. I went oil lu New York immediately after the last meeting, and I have all that were in New York, I think, that you desire. Q. The charter of what is known as the Georgia Company? A. I have it here. Q. Mortgage executed by the Georgia Company to the Cen tral Trust Company, of New York? A. Yes, sir. Q. Copy of mortgages from the Georgia or Terminal Com pany to the Central Trust Company, and contracts of lease of the East Tennessee, Virginia and Georgia Railroad Company by the Richmond and Danville or the West Point Terminal or other company? A. I have the consolidated first collateral mortgage of the Terminal Company, and another one dated in 1887. It is that one I gathered that you wanted. I do not know how I got the idea that it is the one you referred to the lease of the East Tennessee, Virginia and Georgia Railroad by the Richmond and Danville. It is proper to note that the lease is not in force. It is now a subject matter of litigation enjoined in East Tennea-

37
see and all the control that has passed to the Richmond and Danville under that lease was done away with last fall.
Q. Contract of lease of the Georgia Kailroad by W. M. Wadley and transfer by him to the Central and Louisville and Nashville Railroads?
A. No, sir; that is in Georgia, and I have not got that, Q. Any contract touching the forty thousand shares between the men who made the campaign for the presidency of the Cen tral Railroad in 1886? A. Yes, sir, I have that here. Q. Any contract between the Savannah, Florida and Gulf and the Central touching transportation? A. I havent that. Q. Copy of the contract by which the Central controls the Atlanta and West Point Railroad? A. There is no contract. To state that as we go along my object is to give you full information as I understand it there is no contract whatever between the Central and the Atlanta and West Point. The Georgia owns a certain amount of the stock, a part of which or all of which, as I understand, was acquired by the Georgia Railroad many years ago, some of it in the construction of the Atlanta and West Point road. Then the Central owns some of the stock, and there is no other con tract that I know of between those companies except the gen eral contract that is published in the Railroad Commissioners reporta between all these companies and the Southern Railway andSteamship Association. Q. Any agreement or contract between the Central Railroad and the Georgia Railroad touching transportation? A. Nothing except this contract no contract unless you refer to the contract between all these railroads in the Southern Railway and Steamship Association. Q. Any agreement between the Central Railroad and the East Tennessee, Virginia and Georgia Railroad, or the Central and Richmond and Danville, touching the question of freights? A. No, sir, with the same modification as to all of them. Q. Any agreement or contract between the West Point Ter-

38
mural system or Central system and the Gould system touching freight?
A. None. Q. Any papers showing nites or tariffof both roads before the consolidation, State and inter-State? A. I am having a tabulated statement of those made out. To give a statement of all the rates would make a very large book. It is changed from year to year, and it is difficult, therefore, to get up a tabulated statement of all the rates, because they cover a multitude of points everywhere. I will endeavor to give you any specific information that you may desire. It is difficult because those matters are always changing. Since the last meeting of this committee there had bsen an announcement of n reduction of seven per cent, on all enst-bound goods. Q. Any copy of any contract between the Georgia Company and the West Point Terminal as to the sale and purchase of the Georgia Company stock by the West Point Terminal? A. Yes, sir, I have that. Accurately speaking, of course there is none between the Georgia Company and the Terminal, but I have one between the Georgia Company stockholders and the Terminal. Q. Copy of the contract under which the Central controls or owns the Port Royal and Western North Carolina? A. That is the Port Royal and Western Carolina. As I un derstand it there is no such contract. Q. Agreement between the Port Royal and Western Carolina 11 nd the Richmond and Danville? A. None that I kno\v of. Q. Copy of contract by which the Richmond and Danville cantrols the Georgia Pacific? A. I luive a copy of the lent*. Q. The contract by {which the Central Railroad Company controls the road from Columbus to Birmingham? A. There is no contract. There is simply a consolidation of a number of smaller branches. I will state, Mr. Chairman, in explanation that I was under the impression that as a copy was isent. to me one was also sent to General Alexander, who would

39
get up the Georgia papers, and I wired him in reference to it, and he replied that no copy was sent to him, and, therefore, I did not get the papers, except those I could reach in New York.
E. P. Alexander, re-called. Q. (By Mr. Lamar.) General, as I understand it, you say the purchase of this stock by which a majority of the stock of the Central Railroad was controlled by a set of individual?, and finally by the Georgia Company, was completed about, the spring of 1886? A. No, sir, it was started in the summer of 1886, aud at the time of the election in January, 1887, the gentleman with whom I was associated owned I forget exactly the antount, but my recollection is it was about twenty-seven thousand shares and after the election, when wa had gotten control, we then acquired other stock, making up the forty thousand shares. The forty thousand shares was completed in the spring of 1887. Q. That forty thousand share* was subsequently sold to the Terminal ? A. First, for the object of holding it, it was >ld to the Geor gia Company, and the Georgia Company in fact still owns it, but these gentlemen who bought the stock took in payment stock iu the Georgia Company. So that left the Georgia Com pany a stockholder in the Central. Those gentlemen who were associated together became the stockholders of the Georgia Com pany. Now, that remained the status from the organization of the Georgia Company until last October, or about that time I am not positive as to dates when these gentlemen sold their stock in the Georgia Company to the Richmond and West Point Terminal. So the result of the whole transaction, as it stands to-day, is the Richmond Terminal is a stockholder in the Georgia Company owns practically all the stock in the Geor gia Company. The Georgia Company owns these forty thou sand shares of Central Railroad stock, or owns a beneficial inter est in it, having pledged it to secure certain bonds, and it stands in the name of the Central Trust Company, of Xcw York, as. trustee for the bondholders.

40
Q. The West Point Terminal Company is also the owner of a controlling interest in the Richmond and Danville system?
A. I believe it is. Q. Was it the owner of that controlling interest in 1887 when it became the practical owners of the Georgia Company? Witness: In 1888, you mean? Mr. Lamar: Yes, in 1888. Witness: Yes, I think so. Q. Now, at our last meeting we wanted to know what WOK the effect of that upon rates. What has been the effect upon rates iu the State of Georgia since that consolidation? A. That consolidation has had no more effect upon rates than the occultatton of Jupiter by the moon that is going on now. The rates have been fixed for years by the Southern Railway and Steamship Association. The force that goveruH them i the competition of the markets. Since I was here last very suddenly Rites have been reduced, as Mr. Calhoun stated, quite a per cent. The cause of it was a reduction made first by the Richmond and Danville. I did not know of it until it took place. And I am told it was caused by a reduction of rates between Baltimore and Norfolk. It was* found the combina tion of locals cut through rates, so the latter were reduced. This illustrates how reductions arc transmitted all over the country. I have brought with me the rates now in force that is, the rates that were in force the first of August. This pam phlet or these two pamphlets give you an idea. This one is called, "How to Ship." It is the issue of the Richmond and Danville lines. This one we call "The Best Way to Ship." It. is issued by our lines. You will soe what a mass of figures it is and how large a book. Here are the rates from New York and Phillodelphia to all local stations on the Port Royal and West ern Carolina road. There are all the rates to all stations on the Georgia road, fifty-two of them. Here are all the rates to all the local points in the South, and over here is a classification. There are many little changes that occurred since this edition was issued, but this is now being revised, and it will take some little time to get it out and put in these last reductions. These

41
are the rates that existed in August by our lines. Here is the Richmond and Danville book, something smaller, but covering the territory from Virginia to Texas. Here are the Missis sippi points, and here to Jacksonville, Florida, and points all over the South. Here are the rate tables. Those are from the east. In addition to that, circulars like this come out pretty constantly. Here are the lines that compose the South ern Railway and Steamship Association, about twenty lines. Those compose that association. Here are the names of the lines with representatives on the rate committee, who get together and adjust and announce the rates. Here are the cotton rates, put in effect August 12th. That is circular number one, issued under the requirements of the inter-State commerce commission, printed so as to be posted for the public. Here is circular number two that gives the rates on freight from Anniston, Atlanta, Columbus, Macon, Rome, Daltou, to points in Arkansas and Louisiana. Those are the general rates used by all roads. The committee can see what a mass of it there is. There are some two hundred points in Arkansas and Louisiana, and those are the rates on all classes shipped to or from these places. That took effect August 20th. Circular number three is rates from Columbus, Macon, Atlanta, Anniston, Rome and Dalton, to points in Texas and Louisiana. There are some several hundred points on the different lines, and the rates from all these points to all those. The rates to and from many of these points are identical, and they are placed together in groups. As I said, this is fixed by the competition of markets. Here la circular number four on cotton factory products, and takes effect September 10th. So, when the committee asks about rates, it is a very big question to answer, as there is so muchgiven.
Q. I only wanted to ask one or two questions in reference to rates. Take the question of cotton. What is cotton from here to New York?
A. Cotton from Atlanta to New York is sixty-four centa^ fifty-nine cents to Baltimore, sixty-five cents to Providence and Boston, and forty-six cents to Mobile.
Q- What was it in October, 1888?

42
A. My recollection is rates are all exactly the same last year as this, except that they are two cents less this year to two points; Baltimore is one, but I am not sure as to the other. I have not last years tariff to compare. Cotton from Atlanta to New York was seventy-five cents about three years ago. I happen to have that one figure here. It is now sixty-four cents.
Q. You say that cotton from here to New York is eleven cents less than three years ago ?
A. Yes, sir, less than three years ago. Q. Do you count in that the seven per cent, reduction made last week ? A. That reduction was not on cotton, but only on eastern goods from New York to this point that is, all this territory down here. Q. Now, I hapj>en to be a little interested in Augusta. What bas been the change of rates from Atlanta to Augusta since the Georgia Railroad was leased to the Central road, and the Central was combined with the Richmond Terminal ? A. There has been a general reduction, but I cannot tell you how much. All these rates have been going down steadily for some years. There has not been a single advance. All the changes have been to lower rates for a number of }-eare. I cannot give you off-hand the figures, but I can procure the information. Q. Now, between New York and Augusta, we have the Richmond and Danville and the South Carolina to Charleston, and then by steamship line. Now, what has been the change of rates between Augusta and New York since the combination ? Has it had any effect? A. I think there has been no change in the last year until this change took place the other day. I think the rates have been the same since last October. Q. If the rates remain the same, what is the advantage of this consolidation ? What is the purpose of it ? A. The purpose of the consolidation I am anxious to have it understood is to prevent the Central system, the system I represent, and the interest of whose minority stockholders I have to look after, being left without any western connections, so we

4,J
can cope with other HDCS. I am at a loss for a simile small enough to express the influence this so-called consolidation exerts upon local rates All our rates here in the State are fixed by Mr. Campbell Wallace, and all inter-State rates arc fixed by the inter-State commission.
Q. That commission does not fix rates, does it? A. Yes. I have brought here and I want to leave with the committee their last ruling concerning onr rates. About two years ago that ommission came down here and had a meeting and questioned all of us as to the way our rates were fixed. At that time the rates, competitive rates, were made to junction points only by the roads nearly all over the United States, except in the north, where nearly every station was a competitive point. Our rates were made, giving Atlanta, Macon and all junction points low rates, and then the intermediate stations took higher rates. Ho the rate from Marietta to New York would be the rate from hero to New York, plus the local fixed by the AVestern und Atlantic from here to Marietta. Chattanooga was the same as Atlanta The rates from Chattanooga and Atlanta were both one dollar and fourteen cents. As I said, the rate to ^larietta would be the rate to Atlanta with the local added. That made the rate from New York to Marietta higher, through Atlanta, than the rate from New York to Chattanooga through Atlanta. That, was a higher rate for a shorter distance, which was a violation of the inter-State commerce law. This committee came here and examined into these things, and made a ruling that the discrepan cies in our rates were too great, and we turned in and made some cd actions Then lost December the committee, without any comlaint upon the part of any shipper, called up all the roads in this territory the Louisville and Nashville, the Chesapeake and Ohio, the Atlantic Coast Line, the Richmond and Danville, and all of us. They had a meeting in Washington, and made us produce our rates, and they went over them and reviewed them. I will leave with the committee a report of the opinion of the commission upon each road. They took up each road and discussed its difficulties and the situation, and then gave a ruling upon the subject. What they say about our road is very short: -The

44
Central Railroad comprises several important lines" it describes what they are, and says, " It does not publish, with the precision required by law, inter-State tariffs for traffic on its own lines between Alabama and Georgia points." They say the law requires us to publish, for instance, the rates between Forsyth, Georgia, and Goodwater, Alabama. We had never published those things because there is no business between these local stations, but they now require us to publish them. (Witness reads several extracts from said report.)
Q. Take Chattanooga. That is a point outside of the State, and you have competition between Chattanooga and Atlanta. What has been the effect on rates between Chattanooga and Atlanta since this combination ?
A. I ara not posted in those rates, but, on general principles, I do not imagine there lias been any change whatever.
Q. Is not the East Tennessee, Virginia and Georgia a competitor of the Western and Atlantic?
A. That does not effect the rates between Chattanooga and Atlanta. The competition of markets and rates to more distant points control it, and they would probably remain unchanged if there were but one road or three.
Q. What was it before the East Tenneseee road got into the hands of the combination ?
A. I have no information as to the local rates between here and Chattanooga.
Q.. Take the rates between here and Savannah? A. I do not think there has been any change at all. Q. Since the combination? A. I do not know of any change. I do not know as to. that business from Chattanooga business originating at Chattanooga and going to the coast. Q. When freight from the west gets to Chattanooga, it could come over the East Tennessee, Virginia and Georgia, the Western and Atlantic or the Chattanooga, Borne and Columbus. What were the rates befovc, and what hsvvo they been since the combination? A. I cannot tell you what they are, but I am prepared to state

45
that if there has been any change the combination has not had any more to do with it than you or I have.
Q. What are the facts? Are they higher or lower? A. I do not know. Any special rate that you will ask me about I will get the information to-morrow, but I do not think I will find it in the papers I have here. These rates are from the east pretty much, and I do not carry rates in my head. Q. Can you furnish us with the difference in the freight on corn and meat from Cincinnati and Chicago and from St. Louis before and after this combination and before and after the East Tennessee went into the control of the Richmond and Danville? A. Yes, I can furnish that later. Q. As a general idea, can you tell us what that result has been? A. I do not see how that con have been affected by it, but I can find out all about it and be prepared to tell you to-morrow. Q. Say from points out there in the west for the south? Witness: To Augusta and the coast? Mr. Lamar: Yes, sir, and to southeast Georgia. General Alexander: I will tell you how they are always governed: The rates to the coast are always governed by the rates from Chicago to New York and Baltimore. A great part that feeds the coast comes in by steamers from Baltimore and New York. There is practically a water line from Chicago to Charleston and Savannah by lake and canal to New York, and thence by steamer to Charleston and Savannah. The steamers bound south have practically but little cargo. Our steamers go heavily loaded north, but come nearly empty south, and will take freight for the south at almost any rate. Sometimes it is only five cents a hundred. That practically makes Baltimore and Savannah nearer to Chicago than Atlanta and Augusta are. That is the short route by cost of transportation. Q. Is the Western and Atlantic Railroad now in the Southern Steamship and Bailway Association? A. Yes. Q. Is the East Tennessee, Virginia and Georgia? A. Yes.

46
Q. Doea that association fix lhi> ratet for both of those c,ompanies?
A. Yes. Q. Then, us I understand it, there i# no competition between the Western and Atlantic and the Eiut Tennes.ee, Virginia and Georgia? A. Although they fix the rates, there is a certain amount of competition. \Ve are all in competition to a certain extent, but it is all the competition of markets We are all trying to make a market for all of our different producte. To illustrate, take the factories of Augusta: They make a lot of goods they want to sell out west in competitiou with the factories of Connecticut and Massachusetts. We fix the rates to meet the rates that prevail over the trunk lines to western points. It is not a competition between the Kasl Tennessee and Richmond and Danville and the Georgia Central. It is the compe tition of the market our factories against the other fellow that is producing the factory goods at the north. We fight for our lines. A striking illustration of that thing ia found perhaps in Nashville. Nashville for seven or eight years baa had no line except the Jxmisville and Nashville. It con trols every line going iato Nashville; yet, every merchant in this country will tell you that Nashville has had more advan tages and been more favored in rates that is what its compet itors think than any point south of the Ohio river. It is because the Louisville and Nashville fight for it. That is what makes -Nashville the market it is and puts it in competition with Kansas City and Cincinnati and other places, and never allows its rates to be raised to hurt its business. Q. They have the benefit of water rates, havent they? A. While there is a river there I do not think it has done any business in a good many years. The possibility of it may have an influence, but I do not think it is the controlling factor at all. It is simply protected by the road which serves it, as each of us try to work for the territory we serve and give it a chance to get in its business wherever it can, as is perfectly natural.

47
Q. I understand you to say the Central Railroad has nothing to do with this this purchase of the stock by certain indi viduals?
A. Yes. Really, when the thing started, to the manage ment of the Central Railroad at that time Captain Raoul and his friends it was a death-blow. They kicked and fought all they knew how. But my friends and myself thought they did not appreciate the property they were running. The stock was down to seventy, and we turned in and bought it.
Q. What benefit has it been to the stockholders, the individ ual stockholders, to form this combination ?
A. The benefit has been this: The Central Railroad has got now on its list of stockholders a strong and rich corporation that can do it good in many ways. For one way, it caught money for it. As an illustration: When we turned out Captain Raoul he was just making arrangements to build the Birming ham extension. With a good deal of difficulty and much trouble, he had managed to borrow one million and eight hun dred thousand dollars at about six per cent. We borrowed, by the influence of these gentlemen who were associated with us, five million dollars at about five per cent. There was nearly one per cent, interest per annum saved to our stockholders nearly fifty thousand a year a benefit to our minority stockholders as well as majority. I have the active friendship of these peo ple. They have a good deal of money in our road and cannot get it back without giving dividends to the minority stockholders as well as to themselves. I did the best thing possible for the minority stockholders. I represent now nearly twenty miBiona of dollars in stocks and bonds owned in the State of Georgia, and owned, too, very largely by widows, minors, trust estates and societies. Men put their money in business, but estates and women in stocks usually. Whether what has been done is right or wrong the company is not responsible. The old man agement kicked against it and fought it all they knew how. My Mends and I brought it about by open purchases in the market. We ought to get strong people with us, just as if you were starting a cotton factory and you could get Mr. Vander-

48
bilt to take stock in it, or you were building a hotel and could get Mr. Flagler to take stock, you would think you were doing a good thing. That is what we need more than anybody could suspect who will not come over our lines and see-our necessities. I have spent that five millions of dollars which I got about two years ago. A part of it was to pay for the North Carolina roads which had been built before, a part for the road down to Birmingham and the one to Americus, a part was for the building of steamers, and now I want from five to ten millions more. I want steel rails, more locomotives and cars and termi nal facilities. To illustrate how we need such facilities, I have brought along a letter that came to me a day or so ago from the New York Timber Company, which reads: "We have received your request about our staves on your dock, and we have ordered our truckman to immediately remove them, and we have notified our correspondents not to ship any more freight by your line." Those staves we ordered moved had been lying on the dock for over a month, and I had to have them moved. By the influence of these gentlemen on the Terminal Board, I have succeeded in renting additional dock room in New York already. They turned out a Scotch line. By their influence I had them turned out and got the half of another dock that joins me. By their influence I have got money to buy terminal facilities over in Hoboken, for which I paid four hundred and fifty thousand dollars. That is a great benefit to the minority stockholders. Being rich and strong these men can help us in many ways. I can give you already many illustrations. In the future I will have still more. These people control connections beyond us, and will keep me from being shut out and from being practically bottled up. They are far more important to us than we are to them. I have never conceived of having a bet ter piece of luck than to get them to come in and buy our stock. I urged the parties owning the Georgia Company stock to sell it to the Terminal, for if we were left out of the consolidation, Central stock would not be worth as much. It is now one hun dred and eighteen, and when we took hold of it three yean ago it was down to seventy. There is a difference of thirty-eight

49
points on three and a half millions ot stock, a difference of over a million and a quarter in the market value of the minor, ity stock since we have had friends in New York. Our Geor gia Company friends were good as far as they went, but they were not as important to us as the Richmond Terminal people.
Q. Now, General, what would be the effect of having this combination broken up? Suppose the combination or consoli dation was no longer allowed to exist?
A. Then the effect would be that these roads the Richmond and Danville and the East Tenneaaee would go into other com binations outside of this State. They would probably combine with the Norfolk and Western, a road with which many efforts have already been made to combine. They would go into other combinations and leave us by ourselves. The effect upon the value of our stock, I believe, would be a very heavy depreciation. Our future prospects would not be near so hopeful.
Q. What would be the effect upon the State and the people who ship over the road and travel over it?
. A. It would leave our road a little bit of a road, and isolated instead of being a part of a big system. It would leave us off the highway from the east to the west, and would make it by the Georgia Pacific and the Richmond and Danville, and it would leave everything on our line out in the cold.
Q. What effect would it have upon the people? A. Only this: You would have an old fashioned-serviee. Q. In what respect? A. I could not provide terminal facilities, and I would not rum a* many steamers a week or as many trains a day, and I would not be able to keep up with the advances going on in railroad service and equipment for increase of safety, speed and comfort, and it would be an inefficient service as compared with an efficient service. I could not build branch roads to serve adjacent territory. It would be a road breaking down instead of a road that was being improved and built up. These combinations are being formed elsewhere. We did not start this thing. It started north of us. Commodore Vanderbilt started it with the New York and Hudson River, and Mr. Scott with his Pennsvlvania

50
lines. It has now become a case of what Mr. Darwin calls the survival of the fittest; unless we come in and adapt ourselves to the environment, we cannot survive the new conditions. It is the history, not only of this country, but of the world, that large corporations can work cheaper than small ones, especially among railroads. They can live on lower rates, and they can render a far better service. I happened to see to-day, in looking over one of these papers, that the New York Central line is content with a profit of about thirty-two cents a mile on each train it runs. Going over that road you will see them sometimes with two or three engines pulling twenty passenger cars, and the average net earnings is thirty-two cents a mile for each train. A big thing can live on a small profit.
Q. You claim there has been no change in rates since you entered this combination?
A. This combination only took place last October. I do not remember as to those rates from Chattanooga down here. I am not posted as to that.
Q. Now, dpes the combination enable you to get any higher rates than you would without the combination?
A. No, sir, it does not, because they are regulated by this competition of markets. If I charged higher rates, for instance, on factory goods to western points, our factories here could not sell to the west. If I charge high rates on anything produced in this territory, the business of producing it goes down. I am obliged to adjust my rates by going into the swim and taking the rates prevailing over the whole country.
Q. You have reduced rates seven per cent, in (he hut ten days?
A. Yes. Q. Could you not increase rates as well? A. Of course; I could print rates and go out and demand them, but business would leave me so that I never would do it. I could go and cut my throat, but I do not propose to do it. Q. Why would you lose business between here and New York if you control all the roads between here and New York? A. Atlanta would lose her business. Chattanooga would sell

51

to points that Atlanta now sells to. Augusta would sell to points

that Atlanta now sells to, and so would other cities. This

adjustment of rates was not made arbitrarily; it grew. The

competition ofcommerce has brought it about. We have Atlanta,

Birmingham and other points at one fourteen, Macou at one six.

Those were the rates until the other day. That grouping has

been found necessary to adjust commercial rivalries; otherwise,

our territory would lose business. If we were all agreed to raise

rates to Atlanta, and if the inter-State commerce commission let

us do it if they did not stop us which they would our

territory would lose its trade, and we are as anxious to build up

the territory as anybody in it is to build it up.

Q. Take a place on the line of the Georgia Railroad between

here and Augusta, could you not change the rates between here

and a point like that?

A. That is entirely under thecontrol of the Georgia commission,

and they have made

Q. I mean between Madison, say, and New York !

A. The rates between Madison and New York are a part of

the rates that the inter-State commerce commission controls. It

used to be that we could take the rates from New York to

Augusta and add the local rate to Madison, but the commission

has made us bring those local rates very nearly in line. But

suppose we could suppose there was no inter-State commerce

commission, and we would arbitrarily say that we would raise

Madison, then Madison would lose her business, and it would go

to Athens on one side and Macon on the other.

Q. Say you hauled all the freight to both points?

A. It would not make any difference to me if I hauled all the

freights to both points, but I do not haul all the freights to both

points. Now, I see your point. It is of course possible to

imagine a combination so extensive that rates to some interior

points might be advanced and maintained, provided there were no

commission* to restrain or regulate, bnt such a course would react

upon the business of that territory and would be bad railroad

policy. .... .._..

...

Q. Take the comparison between Brunswick and Savannah

52
before the combination and since. Has this combination had any effect upon the business of those two towns?
A. No, sir; the rates are exactly the same and have been the same for a number of years. Here are the rates on cotton: Brunswick is forty-three cents; Savannah, Port Royal and Wilmingtou are the same.
Q. I understand you to say that the Central Railroad itself had no hand in making this combination. But was it not the purpose of the persons that did buy the stock to lessen compe tition and to increase rate??
A. No. The purpose that they had in buying the stock was to make money. They were individuals and proposed to make money.
Q. Isnt that the way they proposed to make money? A. No; those who knew anything at all about railroad rates knew that they could not raise them. It is the competition in the markets, the State and the. inter-State commerce commis sion? and the rates by water lines that would prevent it. Rates are practically not in our power, and they are moreover under the supervision of the commissions, as you know. I have here a paper that I was asked for and promised to produce at the last meeting of the committee. Mr. Calhoun did not have a copy of this, I see. That is the original agreement by which the stock was bought before the election an agreement between Alfred Sully, H. B. Hollins & Co., Dennistou, Ijehman Bros, and Isaac L. Rice for self and two or three others. Those are the only parties by whom it is signed. It reads: "We agree to pur chase the number of shares set opposite our names and place the shares in trust for the period of one year." Q. Those, with yourself and the Messrs. Calhotm, are the ones that procured the Georgia Company charter, or who had it procured? A. Ye,, those with the ones who came in after we raised the amount to four millions. Upon the subject of that Georgia Company charter, I remembered, after the committee meeting the other day, on going back to Savannah and finding some papers in my desk that recalled the fact, that their first plan

53
was to take a charter in the State of Georgia, which was controlled by Mr. Calhoun, called the "Georgia Investment and Banking Company." That charter was submitted to counsel, and they reported that there might be some question about it as to the legality of the charter. While the report upon the legality of die charter was not absolute, I thought it satisfactory, yet the counsel in New York thought the report condemned the charter. Then they started to get a charter in South Carolina, and they found that their taxes would be very high, and then it was they obtained it in North Carolina. They talked of Connecticut, too, but that was the way they got to North Carolina event ually.
Q. (By the Chairman.) Did I understand you, General, the other evening, to say that the Richmond Terminal controlled this four million dollars worth of stock?
A. I expect you did, because it does control the whole stock of the Georgia Company.
Q. Do you remember the contract between the Georgia (!oiupany aud the Richmond Terminal that the Richmond Ter minal shall have the right to direct how the four million dollars worth of shares shall be cast in the election of directors?
A. I think it likely. Q. The Richmond Terminal, in the election of direction* of the Central Railroad, cau direct how that four million* of stock shall be coat? A. Yes, sir. By the way, here is the ticket that was voted at the last meeting. The vote shows the fact that the minority stockholders approve my action, for they gav<- me the largest vote ever cast when there was no contest fifty-eight thousand one hundred and sixty shares cast unanimously for the ticket, with the exception of one share cast for Captain Kaoul in place of one of the directors one single share. Q. The Richmond Terminal, as I understand you, control the controlling interest in the Richmond and Danville, or control all of it, dont they? A. Yes. Q. And the Virginia Midland?

54
A. Yes; it controls fifty-seven millions of stocks and bonds of different roads.
Q. Can you give us the names of those roads? A. I imagine it controls more or less all these roads, but the control may only be partial. I will read the titles of the roads here ID which they seem to own stock. The Virginia Midland, Western Carolina, Northeastern of Georgia, Knoxville and Augusta, Blue Ridge, Richmond and Mecklenburg, Washing ton and Ohio Western, Georgia Pacific, Asheville and Spartanburg, Oxford and Henderson, Statesville and Western. All those are bonds. Then they own stock in the East Tennessee, Virginia and Georgia, Western North Carolina, Columbia and Greenville, Blue Ridge and Atlantic, Virginia Midland, Char lotte, Columbia and Augusta, Northeastern of Georgia, Asheville and Spartanburg, Knoxville and Augusta, Danville and Boxville, Richmond and Danville, Georgia Pacific, Oxford and Hender son, Richmond and Mecklenburg, Statesville and Western, Georgia Company, Richmond and Danville Extension Company, American Construction Company, Greenville Construction Com pany, and then other stocks not given. Q. I wanted to know the railroads. How many miles of railroads do they control? A. I give you this from "Poors Manual," including the Central, six thousand eight hundred and sixty-nine miles of rail lines, and then the water lines, the Baltimore and Chesapeake and German and the Ocean Steamship Company. That is about five hundred miles. The Ocean Steamship Company, three hundred miles. That is an arbitrary mileage that I put on it for the purpose of valuing transportation. The most of these are small roads, and the Richmond and Danville, I sup pose, represents them all in this Southern Steamship and Rail way Association. Q. What did you mean by saying that the Central Railroad Company did not have anything to do with the purchase of the shares for the Richmond and Danville or the Richmond and West Point Terminal Company getting control of the stock ? A. I mean that the Central Railroad and Banking Company

55
has nothing to do with any purchase or sale of its shares. Tom may sell his stock to Dick, and he to Harry. The company cannot control it. It does not act in the matter.
Q. What do you understand by the Central Railroad Company when you speak of their acting?
A. I understaad it to be a corporation that was chartered about the year 1833 under that name, and will survive after we are gone.
Q. It can only act through its president and directors? A. Yes, sir, that is true. Q. But the president and directors, or a majority of the directors and the president, are interested in both the Georgia Company and the West Point Terminal Company? A. Here is a list of the directors. I am at the head. I have no interest in any of these corporations except the Central Rail road and Banking Company. Q. You have no interest in the Georgia Company? A. None now. I sold it out. I had a certain number of shares. Q. That you sold to the Richmond and West Point Terminal Company? A. Yes. Q. With the understanding at the time that the Richmond and West Point Terminal should direct how those four million shares should be voted? A. Yes. Q. About the directors: What did you start to say? A. Messrs. Comer, Baoul and Gordon: I do not think they have any interest whatever, direct or indirect, in any railroad except the Central. Mr. Chisolm: I do not know about him. I think likely he has. He is a director in the Richmond and West Point. Mr. Garnett, and Mr. Vetsburg, and Mr. Phinizy, they, I am quite sure, have no interest in any of them. The two Messrs. Calhoun and the two Messrs. Inman, 3. H. and H. T., I imagine that they may have. In fact, the two Messrs. Calhoun are directors, and the Messrs. Inman are brothers of John H. Inman.

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Q. General, what was the object in selling out to the Terminal Company?
A. My object was, in the first place, the price they offered, which was a satisfactory one. In the next place, if we did not sell to them this road would have been left out of the combina tions that were being formed, to the great injury of the stock that I held and all that the minoiity stockholders held as well. I have always felt that while I have brought a good deal of money to Georgia to the stockholders of the roads I represented in this State, that I never did anything which was of as much benefit to the stockholders as I did in promoting the purchase of this stock by the Terminal Company. I have no apologies to make for it. Railroading is the only thing I profess to know anything about, and, if I know anything about it, I saved Central stockholders from a very critical situation.
Q. Now, you say it enabled you to borrow money ? A. Sir? Q. Were you not enabled to borrow money by placing bond* on the Central Railroad? A. Yes. Q. Could you not do it with this company? A. No, not without their help and support. Q. Would not a mortgage on the Central Railroad float on the market? A. A sale of bonds depends largely upon the friends you have to bring them out. Captain Raoul had been negotiating for sometime for money. He had built the roads in South Carolina on the Centrals credit by borrowing money in bank, and on the first day of January, 1887, when I took charge, he had a debt in bank of about fourteen hundred thousand dollars. His contractors were at work on the extension of the Columbus and Western to Birmingham. He contracted to have that done, and he was borrowing money frori day to day, month to month in bank, and he had gotten up a bond to sell, a six per cent., first mortgage bond and a six per cent, second mortgage bond, and he was negotiating a sale of them with a firm in Baltimore, Wilson, Colston & Co., and with William B. Johnson, of Macon, who

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has since died. The whole amount was only about eighteen hundred thousand and the rate was six per cent., and they sold for about an average of one hundred and one. As soon as I got this combination, we issued a five per cent, bond
Q. How was that bond secured? A. That bond that he was going to sell was to be a mortgage bond-on the Columbus and Western, guaranteed by the Central. Q, How about the bonds yon issued? A. I issued a bond that you will find described in my annual report, which was secured by the stock of the Ocean Steamship Company and stock in the Western Railway of Alabama and the Montgomery and Western and the Eufanla and Stockton. We call it a collateraltrust bond. AH this stock that is mentioned here was put out in a trust company, just as yon pledge stock as collateral in bank. Q. As I understand you, the Central Railroad Company pledged the stock? You do not mean the stock of the stock holders? A. No. The Central Railroad owns the stock of the Ocean Steamship Company, and that we put in the hands of the Central Trust. Company. Then we put other stocks in the same way. Q. Stock owned by the (.Central Railroad ? A. Yes, sir. We pledged that for this five millions of bonds. Now, to speak as a financier, F do not think that a collateral trust bond is a favorite security. Mortgage bonds are secured by property, and a collateral trust bond is secured by property put up. Steamship stock also is considered less favorably than railroad stock, because it is subject to the waves and the waters. So that was not a very strong bond within itself. The bond wa given strengfh by the fact that it was the Central Railroads. On that we sold a five per cent, bond at ninety-seven and a half, which was by far the best price the Central road ever got for a bond, and the largest sale except one. It sold a seven per cent, bond once at eighty. So this last sale was the best financiering ever done for the Central Railroad. Q. What other bonds did you issue?

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A. That is all the Central Railroad ever issued until within the last few months. The Savannah and Western is a consolida tion with the Columbus and Western and a number of small lines. It issued a bond covering its line at eighteen thousand a mile. The Central sold those bonds with its endorsement upon them.
Q. General, can you give us an idea what the contract is with the Savannah, Florida and Western touching transportation?
A. I wish I had a map here. That is a contract between the Savannah, Florida and Western, the Charleston and Savannah, the Ocean Steamship Company of Savannah, and the Brunswick road, by which all of these corporations agree first, each to make the others its preferred connections for any business it can give to the others. Second, each agrees not to build any road into the other roads territory. Third, not to give any aid or comfort to anybody else attempting to do the same thing, with the exception that the Savannah, Florida and Wet-tern road shall be allowed to carry out aud help the Alabama Midland, which is being built from Baiubridge to Montgomery. Fourth, for through business we make each other preferred connections, and for competitive business we agree to work, if possible, harmoniously, and if our agents cannot agree we will arbitrate any differences that may arise. I will send you a copy of the contract, but those are the essential points of it. I would like to say, if you will allow me, and make you understand the contract better, that the object of going into it was to secure business for our steamship lines. The Savannah, Florida and Western couid haul their freight to Charleston and send it by some one elses line from there, because their line goes to Charleston. I have always con sidered that a delicate point, and wished to serve them so that they would give us their business at Savannah instead of taking it to Charleston, and also that they should favor our Savannah steamship lines a? against the all-rail lines in carrying the oranges and other Florida products out. You see the large business I had to protect. On their side they have a very strong com petitor all through Florida the Florida Railway sind Navigation Company and they were anxious to have our business given to
,

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them in preference to the other line. So we made a contract that wherever we joined each would make the other its preferred connection when it could. Wherever business comes routed by a certain line, it has to go that way, but when left with us to direct, we give to them and they give to us.
Q. When was that contract made ? A. That contract was made, I believe, about last December. I believe it was only completed and signed then. It was started two years ago. We began to negotiate and had a little protocol two years ago, but it was never actually put in shape until about last December. Q. That was after th<* purchase by the West Point Terminal of the Georgia Company stock? A. Yes. Q. Now, have you a Central Railroad contract with the Georgia Railroad in reference to freight, or anything of that sort? A. No, none at all. Q. You do, however, in connection with the Louisville and Nashville, control the Georgia Railroad? A. Yes. Q. What interest has the Central Railroad in that? A.- One-half interest in the lease. Q. Does the Central, by that means or by any other means, have an interest in the West Point Railroad? A. The way the Georgia Railroad is operated is this: The Central Railroad appoints three directors, and the Louisville and Nashville appoints three, for the Georgia Railroad. Then those directors elect a president and they run the Georgia Railroad. Now, that board of directors can vote the stock, which the Georgia road controls. Q. The Georgia Railroad owns stock in the West Point road, does it not? A. Yes, a large amount of the stock. Q. Is it a majority? A. Np, but it is a large amount. Q. The Central also owns stock in it?

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A. Yes, and the Central, takeii together with the Georgia road, make a majority.
Q. A majority of the Atlanta and West Point stock? A. Yes.
Q. Ho both the Central and the Georgia together own a majority of the \Vest Point Railroad ?
A. Yes, the Georgia road owns thirty-nix per cent, of it, and the Central own* enough to make a majority. I left at the laet meeting of the committee a copy of our report for 1888, which explains all these things more fully.
Q. Did you leave that list of the New York stockholder!)? A. Yes; I left two copies. I left it here on the table. This report of 1887 has a statement of our control of other roads more fully than the one of 1888 has. Q. General, the Western and Atlantic Railroad, of course, is not a part of the system you are in; but does the Central Railroad pro rate with the Western and Atlantic Railroad in freights? A. Yes, we also have a contract with the Western and Atlantic something like the .contract with the Savannah, Florida and Western. It was made seven or eight years ago, I believe, by which we make it our preferred connection here in Atlanta, and they make us their preferred connection. If they bring anything here for Macon, they give us the preference instead of the East Tennessee, unless it is consigned by the East Tennessee, and if we bring anything here for Chattanooga, unless consigned by the East Tennessee, we give it to the Western and Atlantic. Q. That contract wan made seven or eight years ago? A. Yes.
Q. If that contract if at an end when this lease expires, the tendency would be to give it to the East Tennessee if the East Tennessee is a part of your system ?
A. Yes, I suppose it would. Q. Your interest would be to give it to the East Tennessee? A. There would be a good many factors that come in to decision of that question. One would be what they wonld do about it. They have as much or probably more to give us than

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we have to give them. The volume >f traffic south-bound is a good deal larger than the other way. I expect, even after the present lease expires, and if it should be released to a foreigner, and no one here had an interest in it, I could not afford, I imagine, to cut oft from them. I think I would be bound, and it would be to my interest to give them aid, because they could give me back so much more.
Q. If both the East Tennessee and Western and Atlantic Railroads were operated by the same company or owned by the same parties, it would make no difference then to whom or to which one you gave it ?
A. No, I do not see what difference it would make. Q. Then there would be no competition between the two tor your business? A. No, sir, unles< that Marietta and North Georgia should run in here. Q. (By Mr. Lawsou.) If your combination should lease the Western and Atlantic road, what effect would that have on competition between Chattanooga and Atlanta and between Atlanta and western points? A. I do not think it would have one particle of effect, because competition ie governed by other things that I have explained before. Q. What effect does that competition have ou building new roads? Suppose it was desired to build a new road through Middle Georgia and on to Savannah from here, do you think one would put money into ati enterprise of that sort, hedged in as it is by your combination ? A. I could only say about that, :is to what people would do it is hard to say. I think it is very possible that some people who look at it . Q. Would your combination be an obstacle in the way or not? A. In one sense it might be, and in another it might be an inducement to try to sell out to us. Q. If it was a bonafide enterprise, you think your combination would be an obstacle in their way? A. I think it would.

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t. And for that reason would it not be an injury to the country ?
A. No, sir, I do not think it would. Q. Dont you think the building of railroads is an advantage to 11 country ? A. Up to a certain extent it is. I think it would be an injury to the State of Georgia to have a cotton factory every ten miles over the country, for the business would be overdone. I think it is a set-back to any community to have a business overdone. Q. What business? A. Any business, Cotton factories, cotton seed oil mills, or any business in the world that is overdone I think is a set-back to a country. Q. Would it ho possible that it would be a set-back to country to have a competition in railroads ? A. That is a big question to discuss, but I think the people who havestudied it have come to the conclusion the best writers on the subject, aud men who are not railroad men that it is one of the worst things or as bad a thing as can happen to -a country overdoing transportation before there is a necessity for it. The panic of 73 was caused by that. Over-building brings about panics and financial distress, and over-competition brings rebates and fluctuations of rates. If you care to study that subject I will be glad to give you access to writers who are not railroad men and who have studied from the experience of other countries as well as our own. Q, You understand me to speak in reference to the people who own no interest in railroads? A. Yes. Q. In behalf of those people, dont you think it would be a good thing to have more than one railroad from every town ? A. No. They would not have a good railroad or one safe to ride over, and one that could give them transportation to distant points. They would have nothing but the old-fashioned trans portation that is left behind now by the world. The cheapest service and the best service that you can find in the world is a service where that does not take place a service where the

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benefit of railroad transportation is not largely ahead of the wants of the country. For instance, take this road recently built from here to Fort Valley. There has been at least half a million of dollars I believe over a million of dollars has been spent on that road, and has practically been sunk. The lambs here in Atlanta followed some fellows who were in the habit of making big money, and the lambs put their money in, and if they ever get it out it will be a long ways from now.
Q. If it had a road to connect with it east and west and willing to help them, would it not be an advantage ?
A. I think not. The roads already built in Georgia have a traffic far less than in other sections. Our section is now better supplied with roads than any in the United States that is, there are more in proportion to the business offering. The earnings of our roads are less per mile in the southern group than any in the United States, and there are fewer people to the mile of road than in any other section of the United States. Here are statistics of the dividends paid by all the railroads of the United States classified into groups: The New England group pay an average of four and a half per cent, dividends; the Central group, two and ninety-one one-hundredths; the South Atlantic group, twothirds of one per cent, and the Gulfand Mississippi, three-fourths of one percent.
Q. (By the Chairman.) This contract with the Savannah, Florida and Western: Why was it necessary to stipulate that you would not assist in building any railroads in that territory ?
A. Just as a natural protection of our own business. I did not want them to help anybody build in my territory, and they did not want me to help anybody in theirs.
Q. Why? A. They did not have as much business as they wanted a matters already stood. Q. (By Mr. Lawson.) You avd if this combination was dissolved it would hurt your system ? A. Yes. Q. How could that be unless you diminished the production at one end or the consumption at the other? The combination does not increase or diminish the production or consumption ?

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A. My combination enables me to reach out and participate in business I have never participated in. It allows me to take shoes from Boston to supply Kansas City, and to bring back from Kansas City canned beef, cheese and things of that sort to New York. That is how the combination puts me on the highway between Kansas City and New York. It enables me to reach out further and get more. I am losing territory here. Half a dozen lines have been built in the last few years that are taking business away from us the Covington and Maeon, the Atlanta a lid Florida there are a half dozen of them, and my local territory is being cut off all the while and I am reaching out to make up for it.
Q. (By Mr. Rankin.) Something ha? been said about compe tition: How many competing points are in Georgia?
A. I do wish I had a map here, for it is so much easier to show that. The principle competing points in Georgia are Augusta, Athens, Gainesville, Atlanta, Macon, Dalton and Home. I think that is about all.
Q. Now, about what percentage of the tonnage shipped over the roads in Georgia go to intermediate points where there is no competition?
A. I could not pretend to answer that. Q. Would it not be :i great deal more than to >ni]>etitive points ? A. Yes, a great deal more. I think more goes to the inter mediate points on the whole than to the competing points, and a great deal that goes to competing points first is only on its way to the smaller points afterward. Q. If lines are operating in competition, and they haul from one competing point to another at a loss, dont they play for a profit at the intermediate points and charge the maximum rates allowed ? A shipper in Chattanooga wants to ship to Atlanta those lines competing will haul at the minimum rate ? A. Yes. Q.. And which ever one gets it, if he happens to haul at a loss, or does not get a profit, doesnt he play for a profit on the inter mediate points?

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A. You might imagine there would be a tendency to this, but as a fact they cannot do it, because the rates arc fixed by the inter-State commerce commission.
Q. That is true, but if one competing line hauls between com peting points without a profit, wont they go to the maximum allowed by the commission for the intermediate points?
A. Yes. Q. Consequently, competition does not benefit the majority f A. No that is, it does not directly reach the majority ? Q. There are about seventy-five thousand pharos of slock in the Central Railroad ? A. Yes. Q. In 1886 and 1887 you and your friends bought about forty thousand shares? A. Yes. Q. And those parties sold that stock to the Georgia Company? A. Yes. Q. And the Georgia Company sold to the Richmond Terminal? A. No; the Georgia Company never sold anything, and the Georgia Company to-day owns this same stock and dors not own any stock but this stock. But these individuals who owned the Georgia stock sold it to the Richmond Terminal, every one of them sold the whole thing in one lump. Q. (By the Chairman.) Didnt the individi:::!.s who owned the stock constitute the company ? What other property did the company hare after that ? A. The action of individual stockholders does not.constitute the action of the company. That is an entirely now idea to me. The individuals are not the company. The company is a creation of the lew and can only act by its officers. Q. But without the individual there eau be no company. A. That is true, but, for all that, the corporation is some thing that gets life from the State, can sue and be sued, stud exercises powers and franchises which no individual could. Q. Then you mean to say by that the Georgia Company took no action by the board of directors? A. None whatever.

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Q. After the stockholders got through disposing of their prop erty, there was nothing left in the Georgia Company to oper ate Oil?
A. That Georgia Company owns that stock to-day. The only thing is that the stock oftlte Georgia Company is now owned by the Richmond Terminal.
Q. They became stockholders? A. Yes". Q. And they own the Georgia Company? A. They own the Georgia Company stock. Q. And the Richmond Terminal and the Georgia Company are merged one into the other? A. No, they are not merged. Q. That is the effect of it if not in name? A. You can state that for yourself. Q. I want to know if it is not a fact? A. All I can say is, they own the entire stock, and they can put in a board of directors to suit themselves. Q. Docs the Georgia Company do any business now at all? A. No, and never has done any. Yes, it does this: it receives its dividends and pays the interest on its bonds. Q. Has it a president and board of directors? A. Yes, a president and directors and treasurer, and it draws its dividends and pays its coupons. -Q. And it has an office? A. Yes. < Whereat? A. Eighteen Wall street. Q. The office is at the same place as the West Point Ter minal? A. I think the West Point Terminal Companys office is num ber two Wall street, and this is number eighteen Wall street. Q. Are the directors of the West Point Terminal the same as those of the Georgia Company? A. Not all. Q. A number of them are? A. A number of them are. Q. (By Mr. I^amar.) General, what would be the effect on

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rates of the Louisville and Nashville leasing the Western and Atlantic Railroad?
A. I do not think the effect on rates is going to be different, either with the Louisville and Nashville, Cincinnati Southern or the Central, or any independent party becoming the lessee, The rates are not made by HS, but are made by the swim, or by the environment as a whole. Whoever leases it will be forced to accept whatever he can get.
Q. What t\vould be the effect of the East Tennessee leasing the Western and Atlantic?
A. I do not think it will make any difference. An Indian might come here and lease it and circumstances beyond his con trol will fix his rates for him.
Q. I am not talking about an Indian, f am asking you as an expert in rate-making?
A. I do not think it will make the difference ot one cent as to who leases it. These rates will be made by the rate com mittee and these commissions and the competition of markets.
Q. (By the Chairman.) It would make no difference on through freight from New York, Chicago and other large places?
A. The State road cannot control these rates. They result from rates by other lines even as far off as the lakes and Canadian lines.
Q. Doesnt it tend to reduce rates from Chicago to New York because there are competing lines?
A. Yes, I suppose so. Q. Why would it not have the same effect between Chatta nooga and Atlanta if there were competing lines? A. Because there are other influences which overwhelm the little competition possible between Atlanta and Chattanooga. These rates are governed largely by those rates up there. They all re-act on each other, and the competition of markets makes them re-act, and that, I think, swallows up the little local com petition possible. Between Chicago and New York, I think competition of roads may make a little difference, because the rate between these cities is what you may call the basing rate in this country everything fluctuates with that rate. If that rate

G8
goes down our rates to Kansas City eventually fall. That is what I call the basing rate in the country.
Q. Isnt it a fact that before the East Tennessee Railroad was built, or soon after it was built from Atlanta to Macon, there was a reduction in .freights between Macon and Atlanta?
A. I do not knrjw; I was not connected with the road then. Q. (By Mr. Lamar.) In reference to that basis line, the com petition betweeu the New York Central, the Lake Shore and th* Baltimore and Ohio systems: Havent they got the same rates nine months in the year? A. They have an association like we have, and they get together and make the rates. Q. I s.iw s:>m3tini3 ago an announcement of a cut rate? A. Yes. Q. They did fall out? A. Yes. Q. And finally agreed on some one rate? A. Yes. Q. And they did have the same rate? A. Not the same, all of them. They allow a system of differ ential rates to permit round about lines to come in and get a share of business. They allow that. I struck on a case the other day. The rate from Boston to Kansas City was a dollar and twenty-seven cents by the all-rail lines due west; it was one dollar and twenty-two cents by the lines that started directly east from New York, and then up in Vermont and thence in a rouud about way by the lakes. That Hue, although a great deal longer, was allowed what they call a differential rate, given to enable them to participate in this business. Their rates are generally the same, except the difference given to these weak and round about lines that cannot secure much business. Q. (By the Chairman.) General, when the East Tennessee was completed to Macon, the passenger rate was three dollars and fifteen cents from Atlanta to Macon. The East Tennessee charged two seventy, and the Ccniral put il down to that? A. Yes. Q. Why di 1 the Central do that? A. The East Tennessee charged three cents a mile. Its line

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was shorter and they each charged the same rate per mile. Now, the Central would have lost business if it had not met that rate.
Q. You made that rate in order to compete with the East Tennessee?
A. Yes. Q. You lessened the rate in order to compete for the bus iness? A- We made the rate to compete with the other line. Q. (By Mr. Lamar.) When both come to the bottom rate, wherein does the competition consist then? A. It does not continue then. Q. The road that has the shortest line has the advantage? You have to compete in facilities then? A. Yes. Q. Compete for the most rapid route and the best facilities? A. Yes. Q. Is that true in reference to freights? A. Yes. We all work the same rates. Take Florida to New York. We work the same rates, but we are competing to get there first. I am running a freight train to Atlanta from Savannah in about the same time that a passenger ran about four years ago. I am competing with these fellows as hard as I ever did in my life, for I am trying to make the best showing for the Central, and they are trying to make the best showing for the Richmond and Danville. The competition has not been affected by that sale. That has not had anything more to do with it than the rising of the moon. Q. (By the Chairman.) If you are all working for the money in it, and it all goes to the same party, what difference does it make? A. It does not go altogether to the same party. I have minority stockholders. If it did go to the same parties, I think that the Central Railroad would get a larger share of the
Q. You do not understand me. If the revenuesofthe railroad goto the same parties, or the roads are owned by the same parties,

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what inducement is there to have any competition, either in rates of passengers or freight, or competition in facilities?
A. In a case of that kind, where there is but one man or one corporation, I suppose one corporation would not compete with itself.
Q. (By Mr. Lamar.) What \vas the difference of the local rates on the Central and the East Tennessee at the tune of this cut in passenger travel? Did you make a reduction for inter mediate points?
A. I think we charged three cents a mile until we got up to ninety-three miles. The other line is twelve miles shorter than we are.
Q. People who lived within ninety-three miles of Atlanta did not get any advantage from that at all.
A. No, only the last twelve miles got it. Q. People in Macon got the advantage? A. Yes. I was asked as to some of the directors of some of these companies, and I have brought "PoorsManual" that will give all that information. The committee adjourns until to-morrow, September 4th, 1889, at 8 oclock p. m.

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The committee met at 8 oclock p. m., September -1th. 1880, with the following members present: Messrs. Bartlett. Chairman; Lyle, Rankin, Berner, Glenn. Lawsnn and Lamar.
E. P. Alexander, re-called. Q. (By Mr. Berner.) I see in this testimony that Mr. Lamar asked you in reference to rates to Augusta and to the southwest, and you promised to have thetn on hand to-day. Have you got them, General ? A. Yes. Q. (By the Chairman.) Dili you procure tin* other con tracts? A. I telegraphed to Savannah for them, and they are to be sent to-night and we will have them to-morrow. Q. This mortgage of the Central Trust Company by the Richmond Terminal: That mortgage,! understand you to say, is here? *A. Yes. Explain to the committee this clause in reference to thttwo million four hundred and fifty th >usand dollars to re tire three million and five hundred thousand dollars of Cen tral Railroad stock. What Is the meaning of that? A. As I understand that mortgage I have no official connection with it, but simply what I happen t> know of the general design it is intended to merge in a single bond all of the different obligations that the Terminal Company has on the market. You will find them detailed in " PoorV Manual." I wont go into them more fully than that unless I am asked, but the general design was that the Terminal should have but two kinds of securities a stock and a con solidated bond. It now has a common stock and a pre ferred stock and collateral trust bunds, and perhaps someother obligations. This was a general or blanket mortgage, intended to take in everything else, and was also intended to take in all the stocks that this company has not yet ac-

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quired but may desire to acquire, or the owners of which might desir.t to nut them in, and they made the mortgage large enough to let them come in. If in the future the com pany should desire to do so, and the holders of the Central Railroad stock should desire to surrender their stock, it will enable the Terminal to oflFer in exchange for each share of Central stock seventy dollars of bonds in addition to such other amounts of the Terminal stock as would induce stock holders to make the exchange, and those bonds are provided for that purpose.
Q. That is, the minority stock ? A. Yen. Q. And those two million four hundred and fifty ihougund dollars worth >f bonds are issued for what purpose ? A. They sire provided for. Q. They are provided for the purpose of the purchase, if it can be done, the stock of the minority stockholders? A. Yes; by the Richmond Terminal. Q. That would make it about seventy cents? A. If you will read iht.t (indicating papers) through you will see that you have only caught on to a part of it. Mr. Glenn: Not as a part of the proceedings, but for my own information, I would like to knowif that mortgage provides that it is a security for this two million and four hundred thousand that you speak of? The Chairman: Yes. Mr. Glenn : That was made for the purpose of buying up this stuck in the hands of the minority so as to have the mortgaged stuck oi the Central Railroad into one set of hands? The Chairman : That was the question 1 asked. Q. Witness: You will see from this they could issue from these bonds seventy dollars of bonds lor each share of Central stock, provided the Ientr.il stock at that time was worth one hundred and twenty dollars a share in the New York market. If at the time they offered this seventy dol lars Central Railroad stock was, say, par in the New York market, then they could only get fifty dollars of these

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bonds. In other words, they left- a margin or a difference of fifty dollars that would have to be paid in cash.
Q (By the Chairman). In other words, the purpose and meaning of that word * retire " in connection with these bonds is those bonds were intended to be used for the pur pose of retiring the stock? Was it the purpose that the Trust Company should use the bonds for the purpose of purchasing the three million and five hundred thousand dollars worth of stock of the minority stockholders by pay ing for the stock by bonds to be rated at seventy dollars in case the stock at the time was worth one dollar and twenty oents? Do I state that correctly?
A. Yes. Q. If it is worth less, the stock is to be bought and paid for in proportion? A. Yes, with possibly this exception: The Tntst Com pany would not make this offer of exchange. It is only the Terminal who could make the Offer to the stockholders. Q. The Trust Company obligates itself to carry out the directions of the Terminal Company? A. It obligates itself to hold those two million of bonds, except when the Central stock is offered by the Terminal Company in its place. Q.. (By Mr. Lamar). What does the minority stockholder get? Witness: The present value of the stock is one seven teen. Q. Suppose it was worth one twenty, and that is carried out, what would the minority stockholder get? A. He would get the market price, or whatever he would choose to ask whatever he can get for it. Q. (By Mr. Glenn). Mr. Lamar means if this contract was carried out? A. Just the same way. Q. If the contract was carried out, the whole thing was carried out, and everything of that sort, and the minority stockholders were willing to go into it, what would they be

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getting? Suppose this whole contemplated idea is carried out, what, in fact, would Ihey received?
A. They would receive in cash the price at which they would agree to sell. The only way in the world that this plan could be earned out would be to buy the stock from you or anybody else who might own it. Take, for instance? J. H. Millichamp, who I see here is a stockho der owns some stock. Nobody in the world can get his stock without paying him in cash a price satisfactory to him. Does that answer your question?
Q. Our understanding was, if this arrangement was car ried out, if the Central stock was worth one dollar and twenty cents, the stock of the minority was to be bought in at a basis of seventy to one twenty?
A. It would be paid for in cash by the Terminal Company, and the stockholder would not know, except by money, nor would he care, what bonds the Terminal Company ex changed the stock for. He is paid in cash.
Q. How much is he paid? A. The market price say one hundred and eighteen, or one hundred and twenty, or whatever it is. Now, then, the Terminal Company, in carrying this out, pays the stock holder one eighteen or one twenty, whatever it is, in cash. So they take that Central share to the Central Trust .Com pany and say, " Here is a share in the Central Railroad; put it in trust," and he turns it over to him to hold forever in trust. The Trust Company then gives him seventy dollars of these bonds. Then it rests with the Terminal Company to sell those bonds to whoever they can at whatever price they can. Q If a man is giving one dollar and eighteen cents for stock and putting it into another consolidation at seventy cents, how is he benefited by that arrangement ? Mr. Lamar: He does not put it in, as I understand it. Let me see if I understand it: The Terminal Company buys it from the stockholder at one dollar and eighteen cents for cash? A. Yes.

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Q. And the stockholder has nothing more to do with it?

A. No.

.

-

Q. And the Terminal Company then carries it to the Cen

tral Trust Company and gets seventy dollars on it?

A. Yes, and it is out fifty dollars.

Q. (By the Chairman.) What is there that would author

ize them to make that deduction in it?

A. The necessity of making the reduction of issuing

bonds to a less amount than cost of the stock is to make the

bonds sell. The security for these bonds that they want to

Bell will be inquired into by the banks in New York, and

everybody that buys them. They will say, u What is the

security for these bonds? Is .it a mortgage?" The reply

will be, "No, it is a collateral trust bond." "How much is.

the stock put in at?" " It is put in at seventy." . Then he

says, " That is a pretty good bond." If it was put at one

hundred and twenty, then the bonds would not be so well

secured, and then they could not hope to sell, them at the

price they expect to get for them; but if they only issue

seventy dollars of bonds on a share of stock worth 120, the

bond is a pretty good loan.

Q. The Richmond Terminal does not part with its stock

when it turns it over to the Trust Company? Suppose the

bonds are paid, who will the stock belong to?

A. It would come back to them. It is held in trust. As

long as the stock staid in the Trust Company, the Trust

Company would come up every year and get its dividends

on the stock, and they would have that dividend to pay the

interest on the bonds.

Q. (By Mr. Glenn.) The man that carries the stock to the

Central Trust Company, and is paid seventy cents for stock

that he gave one hundred and eighteen for, isnt his control

of that stock forever gone, and hasnt the title passed out

of him? What becomes of the original stock?

A. If I follow you correctly, the man who sold the stock

is paid in nothing but cash, mind you. Now, lets follow

the stock: The new owner of the stock is the Richmond

Terminal. Now, what are they going to do with it? They

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have gone and borrowed from bank perhaps one hundred and eighteen dollars and paid for it. Now, they owe the bank one hundred and eighteen or one hundn-d and twenty dollars, as the case may be. Then they take this stock to the Central Trust Company and say, "Give me new bonds that you are now authorized to issue," and they get seventy dollars worth of bonds, and the Terminal takes those bonds and goes into the market and sells them for whatever they will bring say at par and then it pays seventy dollars of the one hundred and twenty that it had borrowed in bank, and the other fifty dollars it has to shinny around and get the best it can. The bondholder does pot care how it raises that fifty dollars. That whole stock ia pledged and held by the Trust Company to protect the bond.
Q. (By the Chairman.) Isnt the deficiency made up by the fact that a large amount of bonds are issued on the stock twelve millions, I think you said?
A. On the three and a half millions we issued Mr. Calhoun: As I drafted this financial plan, Mr. Chairman, if you will permit me at this time I will explain it fully in all its bearings. I think I might save time to the committee is the reason I suggest it. Members of the Committee: We think that would be sat isfactory.
The Chairman: Go on, then, Mr. Calhoun. Patrick Calhoun, called and sworn. Witness: Shall I proceed to explain this whole financial plan?
The Chairman: Yes, sir. particularly the point under in vestigation.
Witness: The scope of this mortgage was this: The Ter minal Company had in its treasury a large amount of stocks and bonds.. It had made a mortgage for eight or nine millions and five hundred thousand do lars originally, bearing six per cent, interest. It had been paid down at the time this consolidated mortgage was drawn to five mil lions and a half. A mnjority of the Richmond and Dan ville stock was pledged to secure five millions of the first

77
preferred stock of the Terminal Company. In addition to the stocks and bonds pledged to secure the six per cent, mortgage and the Terminal preferred st <ck. it had a large amount of unincumbered stock, which it had secured partly for cash and partly in exchange for its >wn stock. That was the financial condition of the company at the time it bought the Georgia Company stock. It became necessary, our credit being pretty seriously attacked in Tennessee and Vir ginia, to formulate a plan that would float the company and meet its liabilities. My idea, when the Terminal Company bought the Georgia Company stock, was to pay for it in the Terminal common stock, and not to issue any bonds uy-on it at all. So serious were the attacks upon the Terminal Company, however, that its stock depreciated in value, and it was found necessary to find some means to pay the debt incurred in purchasing the Georgia Company stock. In that condition of the company, I set to work to draft a plan that would take up its outstanding obligations and fund them all in a single bond, and be flexible enough to enable us to carry out our idea and protect all the stock in our system, our object being to arrange it so that no minority holder could feel that he had any complaint to make, but pay him the full market price for his stock. It was diffi cult, necessarily, to financier a plan of that sort, for we could not undertake to pay the full value of the stock in bonds. The Terminal Company stood towards the public merely as a borrower of money on this stock it already had and on the stocks it proposed to acquire. It set aside, therefore, a sufficient number of bonds out of this mortgage to meet its outstanding sixes. It set aside four millions to retire its preferred stock, our object being to retire it so that the stock of the Richmond and Danville would pass under this new bond, and thereby strengthen its commercial value. We then provided five millions to sell to pay off the floating indebtedness that we were incurred for the Georgia Company stock. Then we reserved a certain amount to buy in tho minority of the Richmond and Danville, which amounted to 7,390 shares. We reserved 7,390 bond?, and undertook

78.
to pay the difference between the par and the market value of the stock in cash or in our other securities. To illus trate how it works: When we bought up all the Richmond and Danville, except one or two hundred shares, and paid $235 per share, we had to make up the difference of the other hundred and thirty-five in c-ish and in our securities. We paid for that stock partly in cash, partly in bonds and partly in the increase of our own common stock. Then we reserve.1 two million and four huivlrjdand fifty thousand
Q. You say by increase of your stock? A. Yes, sir, of our Terminal stock. Q. You issued additional stoc*? A. We bought Danville at two hundred and thirty-five dollars per share, and WP paid for that. Q, 1 want to know what represented these additional shares? the same money that was in there before? A. No, sir; the difference between the amount of the bonds at one hundred and the one hundred and thirty-five. The Central stock was soil ing at about one hundred and eighteen or twenty. I calculated that it woulrl cost us something near one forty to buy it in. Now, when we come to financier that and buy that Central stock in, we calculated (his way: We can only {jot seventy dollars in bonds, and 1he market price is already one twenty a share, and there was a margin of fifty dollars. We have to pay for that in cash to the minority stockholders. Now. why did we make money by this plan? was asked a moment ago. Assuming that the Central Railroad pays an eight per cent, dividend, and that each share was bonded at seventy dollars at five per per cent. That is a fixed charge on that share of three dollars and a half. Now, we have got, in net, coming to the Terminal Company, four dollars and fifty cents. That we calculate, in the markets of New York will make the stock worth at least seventy-five cents on the dollar. So that without hurting the minority stockholder and giving him his full market value by our being able to obtain money at a lower rate and placing a bond at seventy do.lars on each share of stock, we get an income over

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margin of four dollars and a half. By a mere matter of. financiering, we have converted a share of stock worth or.e hundred and eighteen or twenty in Georgia into something worth at least one hundred and fifty in New York. Now, that is the whole of the financial plan. We then reserved, sis I remember, one million seven hundred and sixty thousand of these bonds to retire the 42,210 shares of tho East Tennessee preferred stock that is still outstanding. 1 speak of it in round figures. They are practically, in round figures, accurate. That stock is selling at seventy dollars a share, and paying five per cent, dividends. We expected it to pay it. It has been paying four and a fraction. We reserved forty dollars a share for that stock. You see that we are buying a stock at seventy-odd dollars, partly with a bond at forty and pailly with cash, on our stock or other securities. We get three dollars as a dividend on what cost us thirty dollars. It is ten per cent, on our money, or on a five per cent, for money, it makes our investment worth sixty dollars, and just doubles the value in this financial transaction. It simply means nothing in the world except our being able to borrow money cheap and to make that difference in the margins. Every time, therefore, a share of Central stock paying an eight per cent, dividend, or a share of East Tennessee first pre ferred stock paying five per cent., passes under this mort gage, the mortgage becomes that much stronger.
Q. (By Mr. Lamar). After this stock was transferred to the Central Trust Company, the Terminal Company drew all the dividends, notwithstanding it was pledged to secure this mortgage?
A. I think the exact method was the dividend was paid to the Trust Company, and they appropriated a sufficient amount to pay the interest, and the balance was turned over to the Terminal.
Q. That is simply a collateral? A. I think the legal title passed to the Trust Company with an equity of redemption in us. Q. (By Mr. Berner.) Explain how you make anything

80
put of the Central stock. Please go through that process again. You say a share realizes an eight per cent, div idend?
A. Yes, sir, taking that as a basis. Q. And you realize the three dollars and a half? A. Yes, fir, and that leaves four and a half on what cost us fifty. If the minority Central stock cost us one twenty and we get seventy dollars in bonds back, we are out fifty dollars, on which fifty dollars we are receiving four dollars and a half dividends. That is at the rate of nine per cent. We think that that practically doubles in the markets the value of the fifty dollars we paid for it. Q. Under this arrangement who pays those bonds? A. The Terminal Company. Q. How? A. Out of its earnings. Of course, it has an income from all its securities. Q. You deposit one share and upon that is issued seventy dolhirs worth of bonds? That seventy dollars is retained by the Central Trust Company? A. That seventy dollars is held by the Terminal Company to reimburse itself. Of course, we are speakiog of it now as at one hundred and twent} not as a fixed price, but a fluctuating price. They may be worth one hundred and forty. The bonds cut a very- small -figure in it. It is merely the way after it is purchased of financiering to pay them up. Q. (By the Chairman.) If it is one hundred and twenty, and you pay seventy for it, if it goes up to one hundred and forty, you pay more for it? A. Yes, sir. Mr. Alexander: The amount of bonds provided to be issued on three and a half million Central stock is only $2,-J50,000. No matter what the stock cost in cash, the Trust Company will issue no more bonds on it. Q. (By Mr. Berner.) I want to know how you propose to pay that seventy dollars of bonds? How long do they run? A. My impression is that it is a fifty-year bond. There

81
was a good deal of discussion about the length of time before the sinking fund began. My recollection is that the sinking fund begins at the end of eight years, and then we pay a sinking fund during the life of the bond. Let us assume that we had bought the whole thirty-five thousand shares. If you will calculate the interest on that, you will find that we receive a dividend annually of two hundred and eighty thousand dollars, and we pay out five per cent, on two million four hundred and fifty thousand. After the elapse of eight years we take a certain part of that in come and set it aside as a sinking fund. Now, we pay our bonds just exactly like any other company or any other individual pays his debts out of our assets.
Q. How was the five millions to be disposed of? A. To be sold. Q. What disposition was to be made of that? A. For the purchase of the Georgia Company stock, and there may have been other floating debts. Q. What was the amount of the Georgia Companys stock? A. Twelve millions. Q. What did it own? A. Forty thousand shares of the Georgia Central stock and about five hundred thousand dollars in cash. Q. This five millions was to go to pay for that forty thousand shares? A. That was to pay the individuals that held the Georgia Company stock not the whole of it, but a portion of it. The Georgia Company stock was one hundred and twenty thousand. Q. It only owned forty thousand shares? A. Yes, sir. Q. That constituted the assets of the Georgia Company? A. Yes, sir, with the five hundred thousand dollars. Q. And that was to pay them for those shares and that
amount of cash? A. It was not to pay them for the forty thousand shares

82
nor the five hundred thousand dollars at all. This Georgia Company was a nonenity in the trade between the Termi nal Company and the individuals who held the Georgia Company stock. The Georgia Company cut no figure in it whatever; no more than if you bought a share of Atlanta National Bank stock to-morrow would the bank cut a fig ure in your purchase.
Q. What I want to get at is the truth of where this five millions went to. I understand that went to pay off th& twelve millions of the Georgia Company stock?
A. Yes. Q. And the value of that twelve millions of stock de pended upon its assets? A. Yes. Q. And its assets were forty thousand shares of Central Railroad stock and half a million in cash? A. Yes. Q. And those five millions went to pay that amount of assets? A. No. Let me explain that financial operation to you so that you will clearly understand it. We held forty thousand shares of Central stock Q. Be kind enough to tell me what that forty thousand shares cost the Georgia Company? A. It cost the Georgia Company four millions of collat eral trust bonds and twelve millions of common stock, les an assessment of four hundred thousand dollars in cash, which was paid into the treasury of the Georgia Company. Q. What were the trust bonds worth? A. Ninety-five, with accrued interest. Q. What was the accrued interest? A. The amount due at the time of the sale of the bonds. Q. What did the forty thousand shares cost the Georgia Company? A. It cost the parties who bought it originally on an average of one hundred and seventeen and a fraction for the first twenty-seven thousand shares and a little higher for the remainder. I should think one hundred and twenty

83
a share would be a fair average, costing us in round figures five millions of dollars. We desired to make the most money we could out of that stock. Now, we financiered that in this way: We placed on that stock that we consid ered a valuable bond at par. We then sold that bond
Q. Stop right there. How happened it when you come to borrow with this stock you placed that at par, and issued bonds at par, and when you come to deal with the minority s.ockholders you valued that at seventy?
A. The real reason why that is done is not the valuation placed upon the property. The real reason was that the credit of the Terminal Company had been seriously im paired by the attacks made upon it, and the result was it was not in a position to borrow the same amount of money on stock that the Georgia Company was when it was first organized. Then this Georgia Company bond was brought out by the Belmonts and Rothchilds, and they were interested in the Georgia Campany, and they under took to place a bond on that stock at par. The real fact about that was we sold a good many of them some of them had to be taken by the insiders. We concluded it was a mistake to use so heavy a bond on the stock as col lateral. I would say there, as I said about the stock of the Terminal Company, I advocated the issuance of no bond at all, for I doubted the wise financiering of issuing a bond upon stock, but to pay for the Central stock in the stock of the Georgia Company.
Q. You thought it was dangerous to issue a bond at par and you reduced it down to seventy?
A. Yes, sir. Q. Were the valuations not made at the same time? A. No, sir; the Georgia Company was formed a long time before the sale of the Terminal. After the Terminal Com pany purchased it, as a means of financiering its own pur chase, it formulated this new financial scheme. Q. When did you issue the bonds at a hundred dollars a share on that forty thousand shares?

84
A. In the summer of 87. The mortgage is here, and I think it bears date of July 1st of that year.
Q. When did you conclude to issue at seventy dollars a share on the minority stockholders?
A. In 1889. Q. Will you please tell me how you agreed that the valu ation of this stock should be one huudrcd and eighty dol lars a share? How did you come to put it at that price ? A. We did not do it. Q. That is arbitrary?
A. No. If that is the statement it is a mistake in the bond.
Q. (Reading.) "On the written request of the Terminal Company to gain possession of the forty thousand shares of the Central Railroad and Banking Company of stock which shall be sold, the stock being taken and held by the trustees subject to this deed of trust, and it is agreed that the value, for the purpose of this stock, shall be one hundred and eighty dollars per share." Explain how that is?
A. There is evidently a misapprehension upon the part of the man that wrote that.
Q. Where is the original mortgage? Is this it? A. No. (Reads paper.) Q,. Be kind enough to explain that, please? A. That means this: In tieing up these securities for fifty years, it is customary in all these collateral trust bonds to put a valuation for the purposes of agreement under which they can be withdrawn. If you did not have that you would find your securities permanently locked up, and nobody knows what fifty years would bring forth. It might be the policy of the Terminal Company next year to sell this Central stock. Now, if it was withdrawn from behind these bonds, the Terminal Company must pay one hundred and eighty dollars per share into the Trust Company. That, under the terms of this agreement, would go towards paying off the bonded indebtedness. Q. That is a method or measure of liquidation, and not a measure of value, then?

85
A. Yes, sir. I do not like that word " liquidation." Q. (By the Chairman.) What was the purpose, after you had acquired control of the Central Railroad, in making a plan for the purchase of the three million five hundred thousand shares of the minority stock? A. We made that provision not only for the Central, but for each of these three roads. The reason we did it was we did not want the minority interest outstanding. We pre ferred to pay them a fair market value for their securities. We had an idea by this combination that we would be able to greatly enhance the value of all the properties, for we thought we saw our way of getting a great deal of additional business for the properties in this system. We therefore preferred not to leave minority stock outstanding. An ad ditional reason was that it is a very hard thing to convince a minority man that he is always fairly treated, and we have known in our own experiences of instances where minority stock had been bought up purely for the purpose of sorving ulterior interests than those of the corporation, and that pro vision is for the purpose of retiring the minority stock, or making provisions to do so if they prefer to do so. Q. You mean by retire to become the owners of it your self? A. Probably, Mr. Chairman, I can explain the use of that word retire " a little better, but to do that I will have to give you a statement of the Terminals finances. Under our whole system, it takes in seventy-five hundred miles, including steamship lines. The capitalization is about seventeen thousand three hundred dollars a mile in bonds, and eighteen thousand dollars per mile in stock, making, I think, the lowest capitalization of any great system on the American continent. Now, a great many of these stocks are very low priced. For instance, the East Tennessee common stock is only selling at ten dollars a share. The full finan cial scheme I have formulated for this company will enable it, in my judgment, to reduce its capitalization to the round figure of eighteen thousand dollars per mile in bonds and not exceeding fifteen thousand dollars a mile in stock.

86
When we say " retiring " we speak of putting these stocks in our own treasury and getting out our own stock.
Q. If the stock on the market for any cause should be enhanced or should be depressed, the object was to purchase the stock at whatever the market price was?
A. Undoubtedly. Q. Not to pay a fixed price, but the market price? A. The market price. Q. Whether the market price was one twenty or fifty? A. Yes. sir; but we are prepared to say this: That none of the methods that we have contemplated have we ex pected a reduction of the price on any of our stock, but in every one of the calculations that have been made we have calculated on an enhanced value of every share of the stock in our system. Q. (By Mr. Lamar). To give this stock of the Terminal Company in value, so far as you base it upon ownership of this Central stock, it is necessary for the Central Railroad to make a seven per cent, dividend, or a dividend? A. Yes. Q. And also the balance of the railroads? A. Yes.
Q. Suppose you do not make a dividend? A. Then we would be bankrupted. We must make divi dends upon the properties we have purchased or we would lose money.
Q. You must make enough to cover the bonds received and the bonds upon which that is based?
A. The whole scheme of the Terminal Coinpanj is this : That these properties we control can be bought at a price, and some of them have been bought at a price less than their cost. We have about forty-four millions of common stock and about five millions of preferred. We own fifty-odd millions of stocks and bonds. In other words, while there has been an increase of Terminal stock, there has been a decrease of the outstanding capital of our system. Now, our theory was that we believed in the development of this Southern country; that if we could get these securities into

87
our treasury, and go on and help to develop this country and increase the business of our properties, and at the same time reduce the amount of capitalization outstanding per mile, we would naturally make a great deal of mouey, and there would be a large enhancement in the value of Terminal common stock. In other words, if we could get all of this stock into the Terminal Company, then there would be nothing outstanding except the Terminal stock. Everything that was made in the system would go into this one treasury, and it would go out as dividends to the stockholders. Now, the Terminal Company must help to build up these different properties, or its whole life and its whole scheme is a complete failure. It becomes bank rupted unless the properties in which it is a stockholder in creases in value.
Q. (By Mr. Berner.) You paid out for these forty thou sand shares from a dollar and seventeen cents to one dol lar and twenty-seven?
A. Yes. Q. They issued you a bond at par on that?
A. Yes. Q. That was a hundred dollars? A. Yes. Q. So there was from seventeen to twenty-seven on which .you paid five dollars? A. Ten. Q. Ten percent.? A. Ten per cent. Q. Ten per cent, on that bond? A. Oh, no, five per cent, on the bond assessmeat of ten per cent. Q. That was five dollars, was it not? A. Yes. Q. That took five dollars of the eight dollars realized as A dividend, so that you got three dollars for the seventeen dollars extra, or the twenty-seven dollars extra that you paid for those shares? A. Yes.

88
Q. Now, you come to the minority stockholder and issuehim a seventy dollar bond?
A. We do not issue him anything. Q. A bond is issued for seventy dollars on the minority stock, and that leaves fifty dollars? A. Yes. Q. Isnt there forty thousand shares upon which a hun dred dollar bond was issued, and isnt that man in better shape than the seventy dollar stockholder? Havent you the advantage by twenty-seven dollars? A. No. The difference is this: When we started to buy this stock the market price of the Central stock was less than seventy per share. We went into the market and bid it up until it cost us an average of one twenty. We paid, therefore, more for our forty thousand shares than the entire capital stock of the company was selling at in round figures, about the same amount that the entire capi tal stock was selling at when we began. We then left out standing three million five hundred thousand, which at tained a market value of one hundred and eighteen or twenty. Aa soon as this combination was made that stock rose on the market to one hundred and twenty-eight or one hundred and thirty. When the attacks were made on the Terminal Company, that stock receded back to one hundred and eighteen. Now, we are treating our minority stock holders with the greatest possible fairness, for this reason: They have one of two privileges. They see very clearly we must pay eight per cent, on our own capitalization to make anything. They get the same dividends that we get on our stock. We have this advantage, and this only: In the money markets of the country, by being in this com bination, we are able to borrow money on our securities cheaper than a man in Georgia is able to borrow the money on his securities, and we make the difference in the value of that stock in a market where money is worth seven and eight per cent. That is all the advantage we have. Q. (By Mr. Glenn.) These minority stockholders get

89
nothing but the natural returns in their stock, and you gentlemen get that and this additional advantage?
A. Yes. Q. They get all they are entitled to under the stock? A. Yes. Q. You get that, and by the means you have stated get this additional advantage? A. That is all. Q. And that accrues to you in the manipulation of the stock? A. Yes. Q. What I mean is this: They fare, so far as their rela tion of stockholder is concerned, the same as these other gentlemen do? A. Yes. Q. All you get does not arise from your relations with the company, but in the manipulation of this stock? A. That is all. I think I can make myself very clear in this way. if you will permit me: Suppose I was a very rich man myself, and had capital enough to own all this business, and borrow money from the North at five per cent. Now, suppose the stock cost me one hundred and twenty dollars a share, and I owned it all and held it all in that way. On my investment of a hundred and twenty thousand dollars at eight per cent, on the par value of the stock, I would get an interest on my money of less than seven per cent. Suppose I went to New York and borrowed, par, at five per cent, on that stock, which would leave me a margin outstanding of twenty dollars per share. Now, on that twenty I would get three dollars interest, which would be fifteen per cent. I would have converted then by a mere manner of financiering an investment that paid me less than seven per cent, into an investment that paid me fifteen. Q. (By Mr. Lamar.) If the Central Railroad stock is the basis of the value of that bond at seventy dollnrs, and the stock which you say at four and a half would be worth seventy-five dollars, that makes one hundred and fifty dollars?

90
A. Yes, sir.
Q. For which you gave one hundred and twenty? A. Yes.
Q. If the Central Railroad is the support of that one hundred and fifty dollars value, why isnt the Central stock worth that much in New York?
A. The real reason of that is that somebody else would have to go through the very process that we have gone through and float our bonds.
Q. As I understand it, the Central Railroad stock is the only value of this?
A. It is the Central plus all the other securities. Q. Suppose the whole scheme was bused simply on Central Railroad *tock, why would not the Central Railroad stock itself be worth as much as the two subsequent values? A. Intrinsically, if the stock and bonds were held by the same parties, it would be worth identically the same. But suppose bonds bearing five per cent, passes off into the hands of one class of investors, then they would get a first lien on that stock at par, and I would take the risk of the depreciation of the property down to par, and hence I would get a higher interest on my money to pay for the increased risk that I take. You will see very clearly that if you own both the bond and the stock you would simply get the same rate of interest on your investment, however much you cut it up, but if you return a part of that money to your pocket and keep your margin, then you are making a very decided difference in the value of what you retain. Again, great speculative public will not put money as readily in stock that costs them one hundred and fifty dollars as they will in stock that costs them a less price, for if anything should happen the chances of depreciation are so great. So you will find this invariably the case: for instance, if you have four shares of stock on the financial markets of the world that pays you two per cent, those four shares would sell higher than a single share, paying eight per cent. Q. They become more shaky as they pass above par?

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A. Not necessarily. It -is the chance of depreciation, with the chance of additional rise being so much less.
Q. (By Mr. Berner.) About your eight percent, dividends: If the Central Railroad does not thrive you are bank rupted?
A. If all our property does not thrive. I want to be understood. I say our properties.
Q. Now, in order to make your scheme a success, what dividends will you be obliged to realize from your Central stock ?
A. Eight per cent. To make it a big success we ought to get eight per cent.
Q. Tell me what you consider a big success? A. I would consider it a pretty good success if I got stock at one twenty and floated a bond on it at par, and made my stock three shares for one or any other pay me at the rate of sixty dollars on a five per cent, basis for what I had bought. Q. Please state that over again? A. I would consider this a success: Take this Georgia Company. I consider it a success, and a very considerable success. Now, we floated a bond Q. What I want to get at is this: What profit would you consider a big success a remuneration for .your invest ment ? What per cent.? A. I would feel if we had permanently eight per cent, on the Central Railroad property that we had all the success that we would legitimately care for. We have based our calculations on earning over eight per cent, on the stock. Q. If you earned eight per cent, on the stock, what profit would it be upon the forty thousand, deducting the expenses of interest on the bonds? A. One hundred and twenty thousand dollars a year. Q. On four millions ? A. Yes, sir. Q. That is about three per cent. ? A. That is just three per cent. Q. Suppose it was to come down to six per cent. ?

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A. We would only earn forty thousand.
Q. Say it come down to five per cent.?
A. We would just skim through by earning the interest on the oonds.
Q. Suppose it come below that? A. We would have to borrow more money, or go into the hands of a receiver. Q. If that is true, isnt it to your interest that there should be no other roads in Georgia to take the freight away? A. It would not be to our interest to do it. Q. Isnt it your safety? Doesnt it depend on your divi dends? You say if it goes below five per cent, you would go into the hands of a receiver. Does not the success of your whole scheme depend upon you getting all the ton nage and keeping all competitors out of the field? A. Not at all, and I will say frankly that I never have conceived for one moment during the whole proce-s of the formation of this combination that we would be able to con trol the entire transportation of this country. There are just two ways by which I expect to make money out of this Terminal Company. The first has been by acquiring con trol of the three great properties that I regard much more supplemental than competitive. I have studied pretty thoroughly the railroad system of this country, and I know of none of any importance in this country or in Europe that are so supplemental and so little competitive as the three properties amalgamated or brought into line. Q. What do you mean by that so little competitive as between themselves? A. So little competitive as between themselves and so sup plemental the one to the other. Q. That is the Richmond and Danville, the Central and the East Tennessee ? A. Yes, sir. Q. Will you be kind enough to explain and make out these lines to me? (Indicating map.)

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A. Certainly. I will say, however, that I did not expect to go into that, as the General desires to get off.
The Chairman: As General Alexander wishes to leave to-morrow or next day, it is suggested we conclude his ex amination.
E. P. Alexander, re-called. Q. (By Mr. Bcrner.) General, you will remember that the other night I asked you if there was not some under standing when the Georgia Company sold to the West Point Terminal as to the control of these Central Railroad shares. I believe you answered there was none ? A. The absolute possession of the shares was turned over to them, but their control is limited to the election of a board of directors at the annual elections. Q. You answered me that when the Georgia Company sold to the West Point Terminal there was no understanding or agreement. That is the way it is written down. A. No more than the selling of the stock carries. Q. Was there no understanding as to the control of the shares for election purposes between the Georgia Company and the West Point Terminal ? If you made a mistake in answering, I know it is unintentional, and I desire that you will correct it. A. I do not understand the point, sir. Q. When the Georgia Company owned the forty thousand shares, it sold to them the West Point Terminal ? A. No, sir; the Georgia Company still owns them. Q. When the Georgia Company by a sale of itself Witness: It never sold itself. A lot of individuals who owned the stock sold their stock to the Terminal Company. Q. When the forty thousand shares by whatsoever means went into the possession of the West Point Terminal let it go there however it will was there any understanding as to how those shares should be voted ? A. No. Q. There was none? A. No. There is no uuderstanding by whom they should be voted, but they were to be voted by the owners.

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Q. I want to know when the Central Railroad stock went into the possession of the West Point Terminal if there was any understanding or agreement at that time about the voting or controlling of those shares for election pur* poses?
A. I can only answer your question intelligently by making a statement over again that I think possibly I have made almost in the same words before: When the West Point Terminal bought the stock of the Georgia Com pany they bought it without any reservation or obligation or anything whatever. It was their stock to do whatever they pleased with.
Q. Now, when the West Point Terminal mortgaged or pledged these shares to the Central Trust Company, was there any reservation or any agreement or understanding as to how these forty thousand shares should be voted in the elections of the Central Railroad and Banking Company?
A. I cannot answer that. The Terminal never pledged them. They were pledged by the Georgia Company a year before Terminal bought Georgia Company stock.
Q. When these individuals sold their stock out the West Point Terminal became the owner of the Georgia Company stock?
A. Yes. Q. (By Mr. Glenn.) They were still to be controlled by the Terminal, although held by the Central Trust Company for these advances? A. The Terminal owned the beneficial interest" in it. Q. And have a right to vote that stock ? A. I suppose so, but I do not know. I do not recollect the conditions of the deed of trust. Q. (By the Chairman.) I understood you the other night to say, General, that the Central Trust Company, which was the nominal owner, and the only person whom you knew as a stockholder on your books, had a right to vote that stock? A. Yes. Q. But that, as a matter of course, when they cast the

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vote for the directors or to carry out the policy of the com pany, they would be governed by the views or wishes of the West Point Terminal, which was the owner of the stock ?
A. Yes; that, I think, is absolutely correct, except that possibly the West Point Terminal must go to the Trust Company through the Georgia Company. That is, the Trust Company only knows the Georgia Company from which it received the stock in trust.
Q. I hold in my hand what is called an agreement, to which your name is signed by Inman, Swann & Co., and by Messrs. Hollins & Co. and it is called an agreement be tween certain stockholders of the Georgia Company with a company acting for the Richmond and West Point Ter minal and Warehouse Company, and I find in this agree ment : "The parties of the first part further agree that the Georgia Company will not require or accept the proxy of the Central Trust Company to vote the said forty thousand shares of stock of said Central Railroad and Banking Com pany unless the parties of the second part shall have made default in this agreement." In other words, so long as the Richmond Terminal carry out their part of the agreement then the Georgia Company will not accept the proxy of the Central Trust Company. "So that, if this agreement shall be complete with respect to the purchase of said cer tificates of stock, the Terminal Company shall through its board of directors have the power to designate to whom said proxy shall be given in the election of directors at the annual meetings." That is the agreement or understand ing you had reference to ?
A. Yes, sir. Q. So long as the Richmond Terminal carry out their agreement? A. Yes, which was to pay for the stock. Q. They have done that? A. Yes. Q. After they did that they had a right to direct for whom these four millions of shares should be voted? A. Ye.

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Q. (By Mr. Berner.) General, I see in your testimony of the other night the following: " The Georgia Company had forty thousand shares of the Central Railroad stock? ^and you answer, Yes. And the Georgia Company sold to the Terminal? Yes. And with that went the control of the forty thousand shares? Yes. And with that went the control of the Central? Yes. And the Georgia Company sold their stock to the Terminal? Yes. Was there any agreement or understanding at the time it was sold? Nothing in the world, except it was to be paid for at so much." Is that right?
A. I said the Georgia Company sold to the Terminal. I used a short expre.-sion, meaning that the stockholders sold their stock. As I have several times explained, the Georgia Company could not itself sell its stock, for it was the individual property of the stockholders. And the stock holders who sold had no interest in making any agreement further than having their money paid them for their stock.
Q. I want to ask you about the Richmond and Danville freights? I see in a portion of your testimony that has been transcribed you say that the inter-State commerce commission controls through freights?
A. Yes. Q. Do they fix the rates ? A. In one sense they do, and in one sense, no. Q. Now, I will be glad if you will explain that ? A. The Georgia commission publishes figures at so much. The inter-State commerce commission Q. You mean at not more than so much ? A. Yes, but sometimes I believe they fix the figures, and they have to be asked permission to charge any less. Now, the inter-State commerce commission call on us. and have called on us twice, and have given notice that we would be called on again to bring our tariffs up to be examined, and they make us come up individually and submit to questions upon them, and they invite the people whom we serve, our patrons, to make any suggestions they have to make, and then they deliver a ruling on the subject.
.

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Q. (By Mr. Glenn.) Under the last section of the act. have they not shown some disposition to regulate rates?
A. They have in some cases said that
Q. Havent they bordered on regulating rates in some recent oases?
A. Yes. I think there are some Oregon wheat rates, two or three, in which they have prescribed actual figures.
Q. Just like our commission?
A. Yes.
Q. (By Mr. Berner.) Does the inter-State commerce com mission regulate rates by fixing a maximum or a minimum?
A. Sometimes they do. Q. The only cases of that *ort are those you have men tioned ? Is not this the method: They call on you for youv rates, and unless there is something unjust in them they leave them ? They leave it to the railroads to fix their rates themselves, i,nd unless there is something unjust about the rates there is no quarrel about them is that correct? A. I think that is a pretty fair statement of it. Q. 1 will ask you this question: Can you give me an idea of what is the tonnage on through freights on your system in Georgia the through freights that come east and west and stop in Georgia? A. No. Q. Can you approximate it, General? Witness: You mean foreign goods that are consumed in Georgia ? Q. How many millions ot tonnage does your system do in Georgia? A. I could not give an approximation. We have an an nual statement made up. but I cannot pretend to remember the figures.
Q. Let us take for granted, say there is ten millions of tonnage or five millions of tonnage?
A. I doubt whether the through freights would go into the millions at all.

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Q. The State road did.a tonnage last year of nine hun dred thousand. I mean going and coming both.
Witness: There is a book there that gives us some fig ures.
Mr. Berner: Suppose we say five millions of tonnage of freights.
Mr. Alexander: Well, sir, I will call it anything I mean for illustration.
Q. Suppose your system does a tonnage of five millions in the State, and suppose you were to put half a cent a hundred on that. That would be a dollar a ton ?
A. That is arithmetic. Q. You would gather then ten cents a ton. You could then levy by this imposition of half of one cent on the hun dred, live hundred thousand? A. Yes. sir, if we had sufficient tonnage. Q. 1 Jo you know of any rule of the Inter-State Commerce Commission by which it lays its hands on an imposition of that kind ? A. Yes.
Q. Will you tell me what the rule is ? A. It is the general rule that says rates are to be uniformly adjusted, and without discrimination and without extor tion. As the sum total of all our earnings, freight, passen ger, mail and express for the past year was only about $5,110,000, there must be some enormous exaggeration in your figures. Q. I do not care for the figures. What I want to get at is, do you know of any occasion where the commission have ever laid their hands upon an imposition so small as half a cent per hundred ? A. I know where they have fixed rates. The only rates that I happen to remember was the wheat rates out in Oregon, where they made a change, and perhaps one or two other small things. If you mean that a small rise of that kind might be made without their interfering with it, I can only say that 1 do not know.

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(J. That is what I want to get at your judgment as to whether or not they would take hold of an imposition like that?
A. If anything was done that produced inequality of rates, if anybody would make complaint, they would make A correction of it.
(f. Is there any difference, Oeneral. between through eastern rates on the Richmond and Danville now. and what it was before the combination ?
A. Yes; some difference. I spoke of it last night. Rates can be changed in three ways: First. By an actual change in the figures. Second. They can be changed by a change of classification. For instance, when anyth : ng is in the first class, it can be changed to second. Third. They can be changed by increasing the car-load quantity. Changes in figures are not made very often, because it requires so much printing to correct them. Changes in classification are con tinually going on, and I have here all the changes that have taken place in classification since this consolidation. I will say, roughly, there are some one hundreri and fifty of them, and I think that one or two, possibly, ave increases, and all the rest are diminutions.
Q. I understand that. I want to ask you particularly in reference to the Richmond and Danville. \Ve will take Hall county, for instance. Is it not true that before the consolidation goods could be ship|>ed from New York to Hall county at six cents a hundred less than they can be .<hip|ied now since the consolidation? Is that true?
A. I doubt it exceedingly. (J. Have you any facts that warrant you in saying that is not true? A. Yes: I have here all the changes that have taken place from the year 1870 the leading changes down to 1889, of the different classes. In 1870the first-class was one ninetyeight. <i. Where was that to? A. From New York, Philadelphia and Boston to Atlanta.

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Q. Take Gwinnett county. Is it not true that before the combination freights could be shipped from the east to Gwinnett county cheaper by about six cents a hundred than they can be shipped under the consolidation ?
A. I can only say that I do not believe it. Q. What I want to get at are the facts. Have you the facts before you sufficient to warrant you in saying it is not true? A. I give these facts: That the rates to Atlanta are re duced, and have not been raised, and the rates to all these places are based on Atlanta rates. Q. Your answer that you do not believe it is true is based upon general information ? A. It is based upon the rates to Atlanta. Q. Isnt it true that your syndicate owns I call it a syn dicate tell me the difference between a monopoly, trust and a pool. What is a pool, General ? A. I think on that I would have to refer you to the dic tionary. Q. What is the meaning of the word pool in railroad par lance ? A. That depends generally on the connection in which it is used. What we called a pool in 73 and 74 was an agree ment among all the roads serving this part of the country practically pooling their competitive business. Q. What is pooling as to the distribution of the profits ? A. Each road took an agreed percentage of the profits. Q. Now, I understand in a pooling arrangement between these roads competition exists as lively as if no pool existed. Does pooling destroy competition, or does competition existunder pooling, or can it exist? A. It can exist, hut it is not so extreme. It is more regulated. Q. There is a difference in the pooling of half a dozen roads and the ownership of all those roads under one head? A. Oh, yes.

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Q. Do you know how many shares of the Richmond and Datville is owned by the Terminal Company ?
A. No, but the Terminal Company owns a great majority of it-
Mr. Calhoun: Practically all of it. Q. You practically own all of it? Isnt it true that there is practically a competition between the Richmond and Danville and the Central systems with the Centrals water way? A. We compete for Atlanta business yes. Q. In competing for Atlanta business, that constitutes a large part of the whole State, for it would stop at Atlanta and then be distributed from here ? A. A great deal of it. Q. You own both lines, and you own four thousand shares, a majority, of the Central stock ? A. Yes. Q. Isnt it true, with competing lines, a natural compe tition exists between the Richmond and Danville and the Central, but if one company owns them both, just like you all own them, and it wanted to get possession of the thirtyfive thousand minority shares, would it not be very easy for them to force all of the traffic over the Richmond and Danville, thereby decreasing the dividends of the Central, and then scoop the thirty-five thousand shares in ? A. I do not think it would be possible. Q. You say possible. Do you mean possible or probable ? A. I hardly think it would be possible. Q. Tell me why it could not be done ? A. Because the rates would have to be the same by all lines, and different people will favor different lines, and the amount that the management would be able to control would not amount to enough to make a great deal of difference. Q. Now, that is in general terms. You say they own practically all the Richmond and Danville stock ? A. Yes.

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Q. And they own forty thousand shares and do not own thirty-five thousand shares of the Central stock ?
A. Yes. Q, Say they want to get control of the thirty-five thousand shares at as .small a [trice sis they can. \ow, what is there to prevent the majority management from issuing orders that all the freight going westward shall go over the Rich mond and Danville if they control both roads? A. Because the shippers can ship by whatever route they choose. Q. That is true; hut suppose the management says, " We will shi[. cheaper over the Richmond and Danville than we will over the Central." They get it all, dont they ? The same management reaps the income from all the shippers? A. Yes. Q. Now. if the shipper says. " 1 want to ship by sea instead of by land," suppose the management says to him, " If you will go over the Richmond and Danville we will cut it down to such a rate, and it is to your interest to do so," would not the law of self-interest control shippers to send it over the Richmond and Danville? A. Yes, if it was to their interest. Q. Then the management would control all the traffic over the Richmond and Danville, and the Central would lose so much of it. and thus decrease its earnings? A. Yes. Q. Now, isnt it natural that upon a decrease of dividends the stock falls? A. Yes. Q. Could they not force the stock down in that way and then buy it up at reduced figures ? A. I think I see practical difficulties in the way that would prevent any serious accomplishment of that purpose any practical accomplishment of that purpose. Q. Is that your answer? A. Yes, sir. Q. Tell me some of the practical difficulties in the way,

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admitting that the same management controlled both of them, and they set out to decrease the value of the thirtyfive thousand shares with an avowed purpose of purchasing them at reduced figures, and they could lower the rates on the Richmond and Danville so as to force the traffic north ward and southward over that line?
A. I think one practical difficulty in the way would be that the minority stockholder could interfere by a receiver, that it would be such au open, patent and outrageous attempt that it could not be covered up in such a way that it would not be so glaring that any court would not interfere for the stockholder.
Q. (By the Chairman.) Appoint a receiver for what? A. A receiver for the property. Q. What property? A. The Central Railroad. Another thing is, that the amount of competitive business is, after all. comparatively small, and even if it loses that, it would not be injured much, but would still, with any decent management, be able to live and keep in pretty good shape. Two years ago, as an illustration, eighty-seveli i>er cent, of all our business began or ended at points on our own line. The other busi ness was only about twelve j>er cent, on the hundred. We have so much local that a thing like that would fail of its purpose. Q. (By Mr. Burner.) It was for that reason 1 asked you a moment ago to give some idea of what the tonnage was over the road. That is the answer you make those are the practical difficulties that you think are in the way? A. Yes, sir. those arc some of them. Allow me, in that connection, to make one or two statements of fact, as the line of your inquiry has been as to the possible robbing of the Central road by the Terminal. Mr. Berner: I did not use the word robbing" at all. Witness: I do not mean it in an offensive sense. It was on the idea that the Terminal would favor itself at the ex pense of our line. Instead of that, by the assistance the

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Terminal has given us, we have gotten money to buy termi nal facilities in New York, and have been able to rent termi nals that we could not have gotten without their help; and their leading men have already urged and approved of enormous expenditures in Savannah, with a view of increas ing our facilities. The proof of the pudding being in the eating, as far as the pudding has been eaten the assistance they have rendered has been valuable; and promises to be greater. There is one feature that gives us the advantage : Take a bale of cotton from here to New York. Tf they let the Central take it to New York, every cent of the freight remains in the family; but if by Norfolk, other corpora tions participate in it.
Q. I asked Mr. Calhoun in reference to it, and the result of the inquiry was, that if the Central road earned less than a five per cent, dividend, the scheme stood on a shaky basis. What is the lowest per cent, the Central ever paid?
A. Zero.
Q. It has been often under rive per cent., hasnt it? A. Yes.
Q. It has not been under five since you have had control of it?
A. No.
Q. (By the Chairman.) Five per cent, annually? A. Yes. Q. (By Mr. Berner.) It has not been five per rent, in four or five years ? A. In 1<S86, in the semi-annual dividend, they tirst de clared two and a half, and then they declared four when* the election was near. Q. I asked Mr. Calhoun the question if it would not be to his interest if the Central Railroad could do all the business in the State. You know the reply he made. Then I asked him why it would not be to the interest of the Cen tral Railroad, in view of the fact that it had to earn five per cent, to pay this interest, that there should be no com peting lines. Will you be kind enough to explain it?

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A. I do not say it would not be to the interest of the Central Railroad to have no competing lines. I think it would be to the interest of the Central road if it was the only road in the State, but there are many things to our interest that we never expect to happen, and things that can never possibly happen. I have never, and I do not think Mr. Calhoun has, dreamed of the possibility of own ing all the roads in the State, or having a monopoly of the business of the State.
Q. What is it you do not own? A. To begin at the north, there is the Chattanooga. Home and Columbus, the State road, Marietta and North Georgia, Atlanta and Florida, Augusta, Gibson and Sandersville, Georgia Midland, Georgia Southern and Florida, Macon and Covington, Brunswick and Western, Savannah. Americus and Montgomery, and the whole of the Plant system, and a lot of smaller roads. Q. You own over half the roads in Georgia? A. Xo; we were looking ti;-day, incidentally, and figuring, and roughly, the whole Terminal system in Georgia is probably two thousand miles, and there are probably some forty-seven or forty-eight hundred. Some have built since. There are now probably five thousand. Q. Explain why it would not be to the interest of the Terminal system to have no competition in Georgia? A. I do not say that. It would )>e to their interest if there was no other road in Georgia, or South Carolina, or North Carolina, or probably in the world. Q. Would you not be better off if you had no competition? Would you not earn more? A. Doubtless we would earn a great deal more. Q. If you would earn more without competition, would it not be to your interest to prevent competition? Witness: I do not catch the point. Q. You admit that if you had no competition you would doubtless earn more? A. Yes.

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Q. If that is true, is it not to the interest of the system to prevent competition?
A. It is to our interest to have as little competition as possible; and it would he equally to the interest of any lawyer, or doctor, if every other lawyer and doctor in his county should die, or l>e dynamited ; but I dont think that proves anything.
IJ. (By Mr. Laniar.) Just one word in conclusion: You said you could furnish as with the rates on bacon, corn and Wheat from Chicago, before and since the combination, to points in Southwest (Jeorgia?
A. Yes. I took the rates from Louisville, because it is on the Ohio river, and is the basing point. Here are the rates: January, 1SS7, the rates on hog product were seventy-seven cents a hundred; January, 187$. 48 cents a hundred. There it remained until 1880, when it was 43 cents a hundred. In March, 1884, it fell to 36 cents, and it is 8(> cents yet. That was on h )g products. Grain, Jan uary. 1SK7, was5o cents; January, 78, it was 44 cents; Sep tember, "SO,:-{ cents; January. S3, :-52 cents; March, 84, 27 cents.
Q. What is it now? A. It is still that 27 cents. The first class rates from New York to this point was $1.!)8 in 1870; in 80, $1.25; in 85, $1.14; August 26th, 1889, it fell to $1.08. In addition to those changes in rates there have been a great many changes, and by far the greater changes in the classifica tions. For instance, on boots and shoes and drugs from \cw York here, in 1875, they were first class, and were 11.70 per hundred; now, by change in classification and rates, car load lots are 90 cents, and less than car load lots are
$1.14 per hundred; iron articles, in 75, fourth class, 90 cents, are now special and 29 cents per hundred; agricul tural implements, in 75, second class, $1.40, now sixth class and 49 cents per hundred; furniture, in 75, first class, $1.70 per hundred, is now second class and 98 cents per hundred in small lots, and in car lots 86 cents; farm wagons, in 75,

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$1.10 per hundred, now, in small quantities. 73 cents per hundred, and in car loads 60 cents; carriages and buggies, in 75, $3.40 per hundred, now $1.14 in small quantities, and in car load lots 73 cents; dry goods that in 85 were $1.14 per hundred are now, by reduction of classification, 49 cents l>er hundred.
Q. (By Mr. Itankin). Xow, General, under the o]M?ration of the inter-State commerce commission, is it possible for the roads, if they consolidate, to get back to these high prices?
A. No; even if they would consent we could not do it ourselves, as I endeavored to show last night, o-.i account of the comietition elsewhere through the country. As an illustration, a case came up today in the office as to cotton rates from Galveston to Boston. ()ur rates to interior New England mills are affected by them. \Ve are obliged to put our factors in the New England market or they cannot sell. If we did not, all our people that raise cotton or manufac ture anything would be left out. They could not do any business, and would dry up, unless we put them in the market with all comj>etitors. So when cotton goes down from Galvestou to Boston, we have to fall with them, so that our people can sell in those markets. Everything like that in the whole country re-acts all around, and that is the way these things go on all the while. Here are several circulars, issued since the 5th of last September, giving the changes in classifications, every one of which is a reduction of rates. We have to put our people in the markets every where to get their business, and we put them in by reducing rates classifications.
Q. That is made by the commission ? A. No, that is made by our railroad association. All this in inter-State commerce. The association issues these circulars. Opening one at random, here is first a reduction on glycerine, glue, and things like that. The next one is on beets, cabbages, plows, grindstones, marble, granite, onions, seed potatoes, and so forth. While the rates have

108
been going down, the classifications have also been going down, and these are the only changes that have been made since this consolidation.
Q. (By the Chairman.) You do not mean to say that consolidation is the cause of that?
A. No, sir, I do not say that. I say consolidation does not prevent it does not have any more to do with it than the rising of the moon.
Q. One more question : Take a road that is not in your system for ir.stance, take the Chattanooga, Rome and Carrollton road freights going over that road, going east, and delivered to you comes from Chattanooga, and you carry it to Augusta, for instance, and they are delivered to you at Carrollton do you pro rate with them, or do you charge them local rates?
A. No; we pro rate with them everywhere, just like we do with the Western and Atlantic.
Q. You do not charge them local rates on freight shipped from the west to Augusta? You do not charge them local rates from Carrollton to Augusta?
A. Xo. The freight to Augusta would be the same by all lines.
Q. Do you pro rate? A. Yes, if anything comes. We take everything that comes. The committee adjourns until to-morrow, September 5th, 1889, at 8 oclock p. m.

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Committee met September 5th, 1889, at 3 oclock p. m., with following members present: Messrs. Bartlett, Chair man ; Rankin, Wooten, Berner and Lamar.
E. P. Alexander, recalled. Q. (By Mr. Berner.) Last night, General, I was asking you about the Richmond and Danville cutting rates on the Central. Hasnt that been a cut rate in the last ten days? A. There has been a general reduction of rates. Q. What brought that about? A. I have not seen any of these people to know posi tively, but I am informed that the rates were reduced be tween Baltimore and Norfolk, and a new rate went into effect there by the steamship line, which, added to the local from there here, made a through rate less than the through rate was before. You cannot maintain the rate where the through rate is more than sum of locals. This change came about on account of this reduction. Q. What connection has Mr. Sol. Haas with the com pany? A. He is Traffic Manager of the Richmond and Danville. Q. Didnt he bring about this reduction? A. It was first brought about by that system. He was Traffic Manager of that road. Q. Is the control of the rates in him? A. Yes, largely. But I suppose, as in all corporations, the President is at the head, and can control everything; but Mr. Haas has charge of this sub-division. Q. I will ask you, General, what effect the insurance of goods had upon the cutting of that rate? A. I do not think the insurance had anything to do with the cutting of the rate. I can explain what that insurance is, if you care to know. Q. I will be glad if you will. A. When goods are shipped by a railroad line, the rail-
L

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roud is responsible for them, and shippers generally do not

insure. That is, if a man in New York is going to ship

goods down here all rail, as the railroad company would be

responsible, he would not insure; bvit if he ships by steamer,

the steamer is not responsible, and all prudent men insure

when they ship by steamer. The result is, the insurance of

freight by steamer is sometimes assumed by the steamer.

For instance, if you ship by our line, we will insure for

you and pay the insurance -out of our rate. The all-rail

lines sometimes agree to put their rates a little higher

three cents for u low class and five or six cents for a higher

class because of the advantage the shippers have by such

lines.

Q. That was the connection the insurance had with this

cutting?

A. I do not think the insurance had anything to do with it.

Q. Were the rates not reduced to Atlanta?

A. The rates were reduced to Atlanta.

Q. And that forced you down?

A. Yes.

.

Q. Then it is possible for the Richmond and Danville to

cut its rates down and force the Central down, isnt it?

A. Yes.

Q. (By the (.luiinojm.) The reduction on those rates, I

believe you said, was seven per cent.?

A. Eight on first class; less on the others.

Q. Does the insurance still go on as it did before?

A. Xo. At the same time this reduction was made in rates,

it was also announced that they would give through bills in

competition with the all-rail line around by Cincinnati, so

that we are now issuing insured bills.

Q. My question was, whether or not you still issue insur

ance bills since the reduction?

A. Yes.

Q. So that you insure just the same now, with the reduc

tion of seven per cent., as before the reduction?

A. Yes. But to Atlanta we did not insure before. We

Ill
were insuring to the western points where we were in more direct competition with the all-rail lines.
Q. Isnt it a fact, if yon know, that this insurance with the Ocean Steamship Company upon goods shipped hy it gives it a considerable advantage over the all-rail linos?
A. Xo; it only puts it on an equality. That made it exactly the same, because a man did not. have to insure by the all-rail lines, and we simply gave him same exemption at same rate one-fourteen. for instance.
Q. You do the same service now as before, and tret no more for it?
A. We get less, because we pay insurance-. Q. Therefore, the dividends, on account of that, would he materially reduced? A. Yes. A few years ago there was none <>f that insur ance, but gradually we found it necessary to put it into effect where we reached out far Memphis, Kansas Iity and western points and I suppose it will soon have to become a general thing. Of course, we are at some disadvantage against the all-rail lines. There were several questions asked me as a railroad man by Mr. Berner last night that I am so familiar with, and they seem to me so simple, that it is as hard for me to explain, perhaps, to a i>erson not familiar with them at first glance as to explain how I throw a brick, or anything of that sort. There were one or two questions asked last night that I would like to make fuller reply to. One was the question whether or not. under this joint ownership, it would be possible to prevent the Rich mond and Danville from taking business away from the Central. I call it, for short, "robbing the Cen ral" con centrating it on that line and in that way Q. Would not wrecking be a better word? A. Perhaps it would. I answered that there were two reasons why it could not be done. One was that the courts of the State would protect the minority stockholders: sec ondly, that there was comparatively little business that could be taken from the Central in that wav: that the Inisi-

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ness possible to be diverted was not very great. To give you as an illustration, our freight business to Atlanta from New York is only two per cent, of our total. The whole business we do from New York to Atanta is only about two per cent, of our entire revenue. There are still other reasons, or points to same purpose. One is, that in doing this they would be hurting themselves more than any one else. It they reduce the revenue of the Central Railroad, they, having more of the railroad stock than anybody else, would themselves suffer most. They would lose the divi dends ot forty thousand shares, where the minority stock holders, all together, would lose on only thirty-five thousand. Nothing like that could be kept a secret, and any such policy would become apparent to every one, and the minority stockholders of the Central would hold on to their stock all the harder the great majority of them doubtless would. There are many stockholders who have held their stock from ten to forty years. It is a permanent investment with a great many of them. All the floating stock pretty much was bought up by the Terminal by our party in obtaining these forty thousand shares, and what is left it would be exceedingly difficult to move. Then there is still another thing. After all, the danger of any man agement wrecking the proj>erty is no greater than the dan ger of any other management wrecking any other property in the State of Georgia or elsewhere. The president and directors of any corporation often have the entire power and ability to squeeze the stockholders. Any bank can suppress divi.lends and let its stock go down, while the real value would be going up. The owners of any go d or silver mine would have the same opportunities, or far greater, for a railroads business is more open to ob servation than that of any other corporation. The man agers of a cotton factory could do so, and the stockholders would only have the same protection that the stockholders of any other corporction. In other words, the same objec tion could be urged more strongly as to other corporations

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than as to the Central. It would be supposable for a dis honorable management to cut the dividends of any corpor ation down and buy up the stock for three or four years, and then afterwards raise the stock. There is a theoretical possibility of that in every case.
Q. It has been done, hasnt it? A. It has been done in many corporations; but to do that in this case the Terminal Company would have to find eleven men in Georgia to do the work for them. By the charter of the Central, eleven of its directors must be citi zens of Georgia, and by the necessities of the case they must be reputable men. Such a thing has never been done in Georgia, to my knowledge. And this suggests an im portant scholium to this discussion, which is that the more prominent a corporation becomes, the greater it is exposed to public view and more amenable it is 1o public opinion. There was a second point on which Mr. Berner questioned me last night, on which I thought I had no figures at the time; but the figures. I find, are in our annual report. Q. (By Mr. Calhoun.) I will ask you, veneral, if the president of the road would not lose his place if he ceased to be a resident of Georgia. A. Yes, sir; that is my recollection of the charter. There was another point on which Mr. Berne r questioned me, and asked some questions on an idea entirely new to me.- I did not follow him in his figures, and had only a vague idea of what they were, and my replies, I presume, might lead him astray. That was his question as to what was to prevent the management of the Central from raising the rates one-half cent, a ton rates within the State. These rates could not be raised even half a cent, a ton. because the figures themselves are announced and fixed by the com mission of the State. Q. You mean the maximum rates? A. Yes, sir. Therefore it would be impossible for us to raise on local even half a cent, a ton on anything at all, because they are fixed figures. The way he figured it out, our profit,

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it would make something like five hundred thousand dol lars. I myself did not figure it out; but our report gives our total tonnage of last year as 1,215,000 tons, and a half cent, a ton on that entire business will amount to exactly $6,075.
Q. Over the whole line? A. Yes. sir, the Central Railroad all the lines of the Central Railroad. Q. General, do you mean to.is or pounds? A. That is tons. That includes lumber, turpentine, rosin, fertilizers, cotton, ties, general merchandise everything that we haul. Now, the heaviest of those articles, fertilizers, lumber, naval stores, stone, brick and a greater part of that is only local, and is und*jr tlie control of the State com mission. Inter-State business, I should not suppose, would amount to more than forty per cent, of it at the outside. That controlled by the inter-State commerce law is a much lighter class of {roods than those I have mentioned, lumber, turpentine, fertilizer and so fort!). S.>, if you will look at it a little, an advance like that, on tho freight to Atlanta, raising it a half cent a ton, the whole business from the east to Atlanta at half a cent, would give us fifty-five dollars. In quoting rates, where we now quote sixty-four cents, it would have to be 64^0 cents. We have never come down to quoting fractions yet, and it would be just as impossible to sneak on a littlo bit to these prices as it would be for a farmer, or a doctor, or a lawyer, or a merchant to sneak on a little to his prices, because whatever it is it is just exactly that much to the other man also; and to put it up eve i that much the same, result would follow as any other rise in our rates. The underlying idea, however, that suggested itself io you is one which has an important application in this connection. It is a fact that has been prominent in my mind in carrying through this consolidation as far as in my power th ;t small profits on a big business amount to a great deal in the end; and, as a scholium to that fact, a big business can be sustained on a smaller profit than a

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small one, and be more prosperous; the cheaper the service the bigger the business, and back again, the bigger the busi ness the cheaper the service, and so the two things help each other on. That is the line of railroad development of the day. The whole development of railroad systems and the purposes for which they are combined is to form corporations that can afford to work for small profits, and in that way make cheaper rates. That is the reason I want to get our lines consolidated so as to form one continuous line out to the west, and be able to compete with other lines in the east that are working at such low rates. As I mentioned the other night, the profits of the New York Central are only thirty-two cents a mile on a whole train. They are able to live on a profit of that kind because they have such a number of trains. If J can got Georgia on a trunk line between Kansas City and New York, and have as many trains as that company coming through Georgia, I can afford to work at as low a rate. That is all I have to say on those points. I have brought, Mr. Chairman, some papers which I" promised to have here with me. There is the Georgia Railroad lease. I will give you that, and only ask that you will be kind enough to return it to me when the committee rs through with it, as the copies are very scarce. Here is the assignment of the lease to William M. Wadley, and here is the contract between the Ocean Steamship Com pany and the Central Railroad and the Savannah, Florida and Western.
Q. (By Mr. Calhouu.) General, on this question of rates: What are the basis factors in waking railroad rates in this country?
A. Two elements control in that the rates by water lines which practically make an island of us. The water starts from Chicago and comes to New York by lake and canal, and then it comes around here, and then it goes ar jund by Florida and strikes the Mississippi river; thence up the Mississippi river, until it i- nearly back to Chicago. That is almost "all the way around, and a person would

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hardly think a water line could compete from New York to Memphis as against our line; but a large proportion of Memphis business is done and its rates controlled by the water lines from New York to New Orleans, and boated up the rivor. The railroads will meet those rates and gradually get more and more of the business. That is the most influ ential factor in the making of rates.
Q. Might it not be said that that is the basis for making rates in that territory?
A. That, I should say, was the foundation of all rates in the United States the water rates.
Q. So much so, General, that is it not true that grain from Chicago and the west goes to New York or Baltimore or Philadelphia and thcnco by water to Savannah, so that the railroads are forced to give lower rates from the west to the sea const than to the interior points, in order to meet the competition of that water line?
A. Yes; we have with a good deal of trouble gotten the steamship lines to consent to work only seven cents lower than we do to these points say from Chicago to Charles ton they only work seven cents a hundred lower than we do from the west. The Baltimore and Ohio road brings freight to Baltimore and it charges say twenty-five cents a hundred for bringing that freight to Baltimore, and for the Balti more and Ohio to come down here, it being an outside bus iness to them, they will take eighteen cents on it. The steamers coming south are always comparatively lightly loaded, though going north we carry as heavy cargoes as the depth of the water in the river will permit. If we light ly load the propeller wheel is not submerged, losing power to the ship, and making it not so safe. We can therefore afford to haul freight even for the loading and discharging, rather than go empty. Sometimes we get our own steel rails and haul them backwards and forwards two or three times just as the ballast when business is light. So you will see that to bring grain south by water we can work at exceedingly low rates. So that I might say, the controlling factor is the rates from Baltimore to Chicago.

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Q. Now, General, if we owned all the systems in this sec tion of the country, and we were to attempt to enhance our rates to interior points, isnt it true that that freight would come by the trunk lines and thence by sea to Savannah, and thence by other lines to the interior points, and would it not be impossible, if we controlled every road south of the Ohio river, to advance our rates?
A. Yes; because it would go to Savannah, Charleston and Brunswick by water, and thence by rail come up here at rates of Georgia State commission. The competition of the markets controls the rates to the sea coast.
Q. I will come to that directly. Now, as an illustration of this freight coming around by steamship, and thence by rail, I want to ask you if it is not true that with any con tinuous line of road of importance that you are familiar with there is a certrin amount of competition, even outside of combination? To illustrate: take the Central road run ning from Savannah to Macon. It was consolidated with the Macon and Western from Macon to Atlanta. Now, is it not a fact that prior to that consolidation there was a certain amount of competition at Macon between those two continuous lines of road on western products?
A. Yes sir. a very strong competition. Q. Isnt it true if we take the Seaboard and Roanoke sys tem and the Georgia, Carolinas and Northern when built into Atlanta that there would be a certain amount of com petition destroyed between the western business that would come this way via Atlanta and the busines that would come around i>y sea and back thit way via Norfolk? A. Yes. Q. Do you know of any continuous through lines of any importance that if consolidated would not to some ex tent destroy the competition between the business of two companies? A. I could hardly conceive of such a case. Take any two road-; on this map, which are now continuous and con nected, running, 8ay, east and west, but are two independent

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roads. Consolidate them and you do destroy competition at the point of junction, because there are so many roads in the country that to reach points north and south of the junction point there are always different routes around by the east and by the west. For instance, there is a route to the oast and here is a route to the west. Consolidate those two and competition to this point either north is dimin ished. I do not know that anything can make it plainer than this the two lines from Savannah to Macon und Macon to Atlanta, when they were consolidated there was some competition destroyed competition at Macon on freights from Chicago to Macon via Atlanta and Chatta nooga and freights from Chicago to Macon via Norfolk and Savannah.
Q. General, is it not true that immediately following that consolidation there was a reduction of rates?
A. I do not know. That consolidation took place in 1872, and I am not familiar with the rates at that time. While 1 know there has been general reductions since, I cannot assign the dates particularly as to when they took place.
Q. Is it not, General, a fact, from your knowledge as a railroad expert, that all consolidations have a tendency to a reduction of rates?
A. Yes; for the reasons 1 have given. They enable us to do a cheaper business. A general reduction takes place all over the country.
Q. Which is largely due itself to those consolidations? A. Yes; because those consolidations enable the lines to work so much cheaper, and the result is felt. Q. General, what is the second factor in making rates? A. The second is competition of markets. If we attempted to put up the rates on cotton from Atlanta to New England mills, for instance, that shipped from Memphis to Galveston could reach the spinners at lower rates. Here is an illustration of how this thing is going on all the while: On the first of July, we reduced the classification of agricul-

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tural implements in car lots from 6th class to 5th class, which makes quite a reduction. That reduction was made to allow our implement factories to compete with those of the north and west. Here is a list of perhaps a hundred reductions of classification that have taken place within the last six months. Besides these, are the reductions by in creasing carload quantities. These reductions all are caused by competition of markets, and all these changes are reductions.
Q. That competition of markets shows itself in two ways: first, by direct competition between the different markets on goods meeting in a common or neutral market, but hasnt it another, that of enabling any railroad in any given section of the country to get the products on its line into market at a price that they will sell?
A. Yes. Q. To illustrate : Our watermelon crop comes on at a time when there are no other melons in the market, and there is no competition therefore on them? A. None at all. Q. Therefore we have practically a monopoly, have we not, on that particular article? A. Yes; practically, a large portion of it. Q. Now, to enable the watermelon grower to get his melons into northern markets at a price at which a con sumer will take them, are we not compelled to lower our rates? A. Yes, and not only to lower our rates, but to give the most expensive character or service in cars and in time. Q. The direct reason of that is thai unless the melon growers could make a profit, and unless the melon was put into the market at a price that would induce consumption, the business to the railroads would fall off? A. Yes. Q. What rate per mile do we charge on that line of traffic? A. We are doing that at eight-tenths of a cent per ton per mile.

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Q. Less than you could get a boy to take a single melon across the room for?
A. Yes. Q. Take the question of pig iron. I have seen it recently stated that the south is producing more pig iron to-day than the entire world produced in 1800, and produces more pig iron to-day than the whole of the Union produced twenty-nine years ago. I will ask you if it is not true that the railroad interests of the south have greatly fostered and promoted the industry? A. Yes; Mr. Hewett, the large iron manufacturer in the north, stated when he made a trip through this country last winter that the rate given pig iron men here was lower than that given to the Pennsylvania men. The Pennsylvania road was forced, by the complaints of iron men and the competition of our lines, to make a reduction to enable them to meet the competition that we gave them on pig iron from Birmingham and through Savannah and over the Norfolk and Western and other lines. Q. Do you remember the rate on pig iron Birmingham to New York ? A. It is about four-tenths or five-tenths of a cent per ton a mile. I remember the division our steamships got, $1.38. We load it from the cars and into the steamers and carry it to New York, unload it and put it on the docks there. That costs us about fifty cents, and the net we get is about eighty or ninety cents a ton. Q. That rate is made by the common consent of all the roads, isnt it ? A. Yes. Q. Is that rate made because of the competition between the roads for that iron or to enable the southern iron maker to get his iron into the market? A. Entirely to let him get his iron into the market. Q. Now, I will ask you if this plan we have in the Ter minal Company contributes to our capacity to help those manufacturers?

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A. Yes; very largely. Q. Would it, in your opinion as a railroad expert, affect in one iota the raising of rates on our southern pig iron? A. Not in the slightest. Q. In your opinion, would it not contribute to decrease it? A. Very decidedly. Q. The same thing is true in moving our southern manu factured cotton products to the west, isnt it. A. Yes. Q. Isnt it true, General, that it has been the policy of our southern railroads to develop in every way in their power the manufacturing interests in this section of the country by enabling our manufacturers to get into these western markets and compete with the manufacturers of other sections? A. I think every railroad management in the south has appreciated the importance of it, and certainly the Central Railroad has been and is now doing everything it can to advance the interests of all the industries on its line. The way to make rates is to find out what rates are necessary to get them into the market and to give them if they will pay for car grease. Q. Suppose you give us, General, some figures in refer ence to factory products? A. Factory products have been largely reduced in classi fication. On factory products we reduced in classification in 1887, October 1st, from first class to sixth class, to aid our southern factories in meeting the competition out west; and I think it was our doing it first that forced the trunk line in New York afterwards to make considerable reduc tions to their factories to meet the competition of southern factories that were forced upon them in the northern coun-
*ry.
Q. (By Mr. Rankin.) What has been the change in the transportation of cotton from the south to the east?
A. I have all the cotton rates for some years back. Q. Give it prior and subsequent to the consolidation?

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Witness: Taking Atlanta? Mr. Rankin: Yes. A. Here is a group Athens, Rome, Dalton, Chattanooga, Atlanta and Cedartown. They are in a group together and have the same rate. September, 1886, to Brunswick, Savannah, Port Royal, Charleston and Wilmington the rates are forty-five cents; to New York was seventy-five,, and to Boston and New England points eighty-five. Q. Those were the rates in 1886? .A. In 1886. In 1887, September. Atlanta was forty-five. I believe that is the same. New York seventy. It was before seventy-five; and Boston seventy-five as against eighty-five in 1876. There is a reduction there. That was 1887. Now this is 1888: Atlanta, forty-three; New York,, sixty-five; Providence and Boston, seenty-one. This is 1889: Atlanta, forty-three; New York, sixty-five, and Provi dence, sixty-nine. Then within the last year, however, on cotton an >ther reduction has come in. We have it com pressed at Macon. We have for several years been having it compressed at Savannah, but now we compress it at Macon, iSufaulu and Columbus, with compresses that we own ourselves, and there are other compresses. On all our local cotton, for instance, between here and Micon, we began to compress it in Macon without any charge, which prac tically makes it worth sixty-five cents a bale more for the cotton, the usual charge for compressing at the port. There is a gain of sixty-five cents to the seller. He gives us the cotton; we compress it and take it to Savannah and turn it over to the ship, and it is worth sixty-five cents per bale more to him than the year before when we did not compress it in Macon. Q, (By Mr. Berner.) What is the difference between At lanta to New York and Forsyth to New York ? A. I think from Forsyth to New York and from Atlanta to New York is just the same. I know that from New York to Forsyth aud from New York to Atlanta is the same. I have not those figures and T could not state it ab-

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eolutely, but generally all our rates are the same both ways. The through rate from New York to Forsyth is one four teen on first-chiss goods, the same as Atlanta.
Q. (By the Chairman.) You mean by that that the rate from here to New York by Savannah over your steamship line is the same as from Forsyth to New York?
A. Yes. Q. Although there ip a difference of nearly a hundred miles? A. Yes. Q. (By Mr. Rankin,) That is a privilege, I believe, that is allowed by the inter-State commerce commission; you can charge as much fora short haul? A. We can charge as much, but no more. Q. (By Mr. Berner.) When you make those groups, do you group them in a circle? A. Yes, approximately, and where commercial circum stances are about the same. Q. (By the Chairman.) Do you know what the difference is in cotton from Americus or Fort Valley to Savannah? A. I have not the rates from the local points, and I can not answer. Mr. Rankin: Here is a question I wish to ask Witness: Allow me to answer this first, please: All these rates to Savannah from points within the S ate are fixed by the State commission, and they were all reduced very much last year, and these practically control the rates to New York. When the rate to Savannah is made by the State commission, that fixes the rate to New York, because you have simply to take the regular steamship from there to New York. The Chairman: Year before last the rate from Americus to Macon on cotton was very near as much as the rate from Macon to Savannah ? Witness: I do not remember, but both were fixed by the State commission, and have been ever since the commission has been in existence.

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Q. (By Mr. Berner.) General Alexander, will you please tell me what fixes the rate from Atlanta to New York by your line what fixes it at one dollar and fourteen?
A. That is just where it has arrived after all the changes that have happened hefore, and the competition of various lines in different directions.
Q. If it has been reduced lately, it has been reduced on account of the cut made by Mr. Haas?
A. Let me say that the original cut that was made was not made by Mr. Haas. The cut that made it, I under stand, wns made by the line from Baltimore to Norfolk.
Q. (By the Chairman.) That was brought about, I be lieve yon said, by this matter of insurance?
A. No, sir; I said that the insurance had nothing to do with that whatever.
Q. (By Mr. Berner.) You say you charge one-fourth from New York to Forsyth and one fourteen from New York to Atlanta; you say you are permitted to do that by the interState commerce commission?
A. Yes. Q. The} fix no rates to Atlanta? That is fixed by com petition? A. Yes; by the competition of markets. Q. And because it is a terminal point? A. Not so much on account of that, but on account of its geographical situation and other things. Q. Suppose its geographical situation was left as God made it, would it not stand in the same position that For syth does; and suppose there is a competing line above Atlanta, would it be the same to Atlanta? A. I cannot answer hypothetical questions. Q. It is now one fourteen to Atlanta from New York and that, you say, is fixed by competition. Now you say it is on account of itn geographical situation and competition. Suppose there was no competing line to Atlanta, and sup pose the competing lines met at a point one hundred miles above Atlanta, and theie competition fixed it at one twenty-

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five, would not the rate from New York to Atlanta by your line be one twenty-five? Would it be the same as to the competing point one hundred miles above here?
A. Those questions are, as to probabilities, like if I had a brother would he like cheese.
Q. Take Forsyth: One hundred miles above there is a competing line. Under the inter-State commerce laws you can charge the same to Fors}-th as to Atlanta, upon the proposition that you cannot charge any more for a short haul than for a long haul. Atlanta, therefore, gets the advantage of sevent3r-seven miles?
A. Yes; it depends on how you look at it. You might say, on the other hand, that Forsyth gets the advantage by the law giving it the benefit of competition.
Q. Yes, gets the ultimate benefit of competition, but isnt it a fact Atlanta has the advantage of Forsyth by seventyseven miles by distance, and yet the freight being the same?
A. Yes. Q. Now, isnt that owing to the fact that there is compe tition at Atlanta? A. Yes. Q. (By Mr. Lamar.) What is the rate from Forsyth to New York by the Richmond and Danville road ? A. I do not know that any rate has ever been made over that line to Forsyth. I do not know that they quote any rate. Q. Would it be the Atlanta rate plus seventy-seven miles
of local? A. I should think if the Richmond and Danville wanted
to work down there we would charge them local; we would not pro rate with them.
Q. What would be the price to New York from Forsyth? A. You could not get anything to go to Forsyth for more than one fourteen. If they took the Forsyth business they would charge one fourteen; but out of that one fourteen they would give us our local. We would not pro rate with them, because we have another line.

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Q. Then that makes.Forsyth a competing point? A. Yes, just as much as any other. Q. (By Mr. Rankin.) If there is no competition at these other points, Atlanta, Macon, Rome and Dalton, would there not be a great inducement-to haul for these intermediate points and give them a fair showing? A. Yes. Q. And would there not be a greater advantage resulting to these local stations by a consolidation of the roads?
A. I think so. Q. Under one management, could they not haul as cheap for a local point as for a competitive point ? A. Yes. That in one thing never spoken of before. We are talking of the purchase of Georgia Company stock by the Terminal ns a consolidation. It is not a consolidation yet; neither did the (Jeorgia Company itself "sell out," though we have spoken of it so for short. If it even were an actual consolidation, it seems to me many benefits would result to these intermediate points. One illustration, for instanw, occurs to me where a gentleman, who has relatives at Clarkcsville, mentioned to me the other day that it was such a convenience that lie could get his baggage cheeked and buy bis tickets .from Lulu to a little way station way up hero near Alexandria, Va. Consolidate these roads, and doubtless you will find them working more freely with each other everywhere 1 ere (indicating.) If a gentleman in For syth prefers to have anything come to him by w::y of the Richmond and Danville he can get it, but they do not seek that business. We had rather have the long haul. Of course, we arc obliged to takes it, and cannot refuse it when offered, but we have the right to ask our local out of that rate. We would not have to pro rate with them while we have a long haul. It docs not matter to the man in For syth which way it goes. They do not seek that sort of business, and we do not seek business on each others line. Let us once be consolidated, baggage can be checked and tickets bought from and to any local station. At once it

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will be a matter of indifference; now it is not a matter of indifference.
Q. You then charge according to the distance you had it to carry?
A. The rates would still be fixed as before by the compe tition of markets, and each road would be indifferent as to which route it took.
Q. You say those freights are controlled by competition of markets. Take the pig iron industry, and suppose your road runs into the pig iron region of Alabama, and suppose there is a line in the northern portion of the United Stales that also runs into a pig iron section of the country. Now, New York is the objective point?
A. That is one of them. Q. The pig iron region he.rc and the one up there are two competitive points? A. Yes. Q. Now, do yon call it competition of markets when you say it reduces rates, because it is to the interest of that railroad up there to put its rates so that pig iron can be shipped on its line to New York? A. Yes. Q. It is to your interest to get it down, and the object of both is to secure the largest amounts of shipments? A. Yes. Q. Isnt that an endeavor on the ]>avt vf lth voada to secure the largest amount of business instead of being a competition of markets? Isnt it a fact that it is just sim ply a competition between the two roads? A. I have no objection to that view being taken of it. Q. {By the Chairman.) How can there be competition of roads when they do not touch the same country? A. This is what I mean. The Pennsylvania road wants to take all that iron from Pittsburg to New York. I would like to take all that from Birmingham to New York. Now, I call that a competition of markets, or rather I might, say a competition as between the two producing centers, Bir-

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mingham competing in New York with Pittsburg. I call that, for short, competition of markets.
Q. You mean by that, in order to give the markets in the different sections competing for the same business, equal facilities?
A. Yes. Q. And you make your freight rates so .-is to compete with the rates of freight given to other markets competing with it? A. Yes. There are many iron-producing points. There is the Scotch pig iron. I am competing against that, besides the competition with Pittsburg iron. Q. (By Mr. Calhoun.) General, let me ask you this ques tion : Suppose every road in this country carried its freight without one dollar of cost suppose every line of these roads were owned by the government, and they carried freight without cost would not th.it competition between the markets still exist? A. Of course; the Pittsburg fellow would try to undersell the Birmingham fellow, and both of them would be trying to undersell the Scotch pig iron man. Q. (By Air. Lamar.) General, the other day we made an effort to find what competition was between railr.iads. It seems to be an easy matter, but when we come to put it down on paper we cannot do it so easily. Is there any definition? A. The word can hardly be strictly defined, and I have often thought it is a misfortune that a word so indefinite in its meaning should be loosely used in an important consti tutional provison. Strictly interpreted it would absolutely prohibit the consolidation of any two roads in Georgia. You might discover a new country and build a road in it a hundred miles long from the center east, then build another the same length from the center west, and unite the two and you destroy a certsiin amount of competition. Q. Has there ever been any attempt at defining it? A. I do not know of any.

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Q. (By Mr. Calhoun.) Is not the best definition of rail road competition "discrimination?"
A. I would not call that a definition of competition. That is rather the result of it. There is a legitimate or re stricted competition and there is unrestricted competition. The .inter-State commerce commission and this in Georgia and all the hostile legislation against railroads and all mis understandings that exist between the roads and the people are all the result of unrestricted competition competition not limited by law, because it results in discrimination. I have been in it seventeen years and know what it is. The first result is the giving rebates or secret inducements to large shippers. One road can go to a big shipper and make an arrangement with him that gives him the advan tage over his competitors in return for his business, and if there is any way to stop that we will be glad to see it. We tried pooling with the greatest reluctance, because we found nothing else would answer, but we found that to be an imper fect remedy. It is tried now by inter-State commerce law to make it a high penal oflense. We aie all honestly trying to carry that out, and we are willing, if we can catch any one at it, to send him to jail for it; but it is a difficult thing to stop. As an illustration of the devices that are used, one man in Birmingham told me he had an arrangement with a competing line that they would call him their agent and that they would pay his monthly telegraphic bills for all his business telegrams. They took his word for the amount, I suppose, as they had no check upon the amount. That is practically giving a rebate. If I want to make an arrangement with you to give you something for your bus iness and not to be caught at it, it is not a difficult thing to do. That seems to me to be the worst kind of discrimina tion. Therefore that kind of unchecked competition results in rebates and in fluctuations which are the worst things for the country. Ask one of your merchants or business men, "Do you care what rates are?" and they will tell you, "No, not what rates are positively; I only care to know what

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they are comparatively, compared with rates to other places. I want my city to be on an equality with other cities^ and I want to sit at my desk and know that the other fel low across the street is not getting better rates than I do. I do not want to have to go shopping for rates like my wife does for her bonnets."
Q. On this question of competition of markets: Let us assume, as I said a moment ago, that all the roads in this country were run by the government free of cost to the shipper; can you conceive of anything that would so pro mote competition between all parts of this country and at every point? If they were all absolutely free, would not this rate competition in the markets continue?
A. Of course it would. Q. Then, instead of destroying competition over the coun try, would not such a thing tend to promote competition? A. Yes.
Q. Then that would be because everybody got the same thing and there was perfect uniformity?
A. Yes.
Q. Then there is no other way that would so subserve individual competition in the country as perfect uniformity of rates? Is that true?
A. Yes. Q. Then the most important factor in the promotion of individual competition and the competition in the markets is the uniformity of rates? A. Yes; because that puts the small man on the same footing as the big man. The big fellow has no advantage over the little fellow when the rates are perfectly uniform to everybody. Q. And the result of that would be to put the local sta tions on the same basis as competitive points? A. Yes.
Q. There is a general fallacy in the country that the re sult of that would be to the injury of competitive points. Looking at this thing in its final analysis, would not the

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result be to build up these common centres tbat were nat urally the distributing centres of the different sections of country that the people could reach so easily for the pur pose of conducting their trade ?
A. I should think so. Q. (By Mr. Berner.) Mr. Calhoun asked you this ques tion : " If all the roads were owned in this country by the government, whether this competition of markets, as you call it, would not lessen the rates?" Now, I want to ask you this question: Take pig iron, for instance, which is one of our commodities. The world competes for that? A. Yes. Q. And New York, being an objective point, it would be to your interest to get as much business as you can? A. Yes. Q. Is the like true of cotton? A. Yes. Q. What lines compete with you on cotton ? A. All Texas and all Arkansas and Louisiana and Missis sippi all the other cotton-producing sections. Q. Then there is never a competition of markets on any article except the most important that the manufacturing world desires? A. Oh, yes, sir; there is hardly a thing that you can men tion everything that is produced at two places. Q. This competition of markets on pig iron now exists between your road and say that road up there (indicating on map)? A. Yes. Q. Now. admitting the same as true of the other roads, New York is your competitive point, and you have a rate to New York and that company has a rate to New York? A. Yes. Q. Now, General, suppose, leaving out those common commodities, cotton and pig iron, what about there being a competition as to smaller things coming from Alabama into Georgia, what roads make competition for those things thai

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do not go to New York? Let me ask you this: Suppose you owned all the roads that run from Alabama into Geor gia, and suppose an article was shipped from there to here and you get all the tonnage, now how does what you call competition of markets affeet rates between such points when you own all the roads and get all the tonnage? Could such a thing exist?
A. If a thing is produced in one State and the same thing is produced in the other State, then there is a competi tion between those two centers of production.
Q. Say Georgia wants to get Alabama products. I can see very well how this pig iron competition will rise, but suppose Georgia wants Alabamas products, the only road over which she can get them are your roads?
A. Yes. Q. Now, how could there ever arise such a thing as com petition of markets and a reduction of rates as a conse quence? A. When we can get hold of a special instance we can un derstand each other better. We will take, for instance, stoves. Alabama is producing stoves; there are large stove works there. Also, there are big stove works at Troy, New York, and there is a competition at once between those points. As to that coming from Alabama, we would give them good rates to enable them to compete with the stoves that come from Troy. Q. Now, give me the rate from Troy, New York, to At lanta on stoves, and the rate from Alabama to Atlanta on stoves? A. I have not the figures at hand. Q. (By Mr. Rankin.) Suppose you did not own these roads, would not Montgomery and Mobile and Atlanta be competitive points, and the competing Hues would have to haul cheaper to those pDints? A. Yes; otherwise they would not get the business. Q. And would there not be a .greater good resulting to these intermediate points ?

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A. I think so.
Q. (By the Chairman.) The question is asked as to pig iron. Suppose you take other goods, for instance. Take Cincinnati and Baltimore and New York. I want to find out whether or not it is confined to those special recognized commodities. Take Cincinnati: that is a great dry goods market for Macon, Atlanta and other places, New York and Cincinnati. They compete with each for the trade on. your road?
A. Yes.
Q. Now, when you come to consider rates you make the rates so as to give these markets advantages or equal advan- tages with each other; is that it?
A. Yes.
Q. Then is it or not a fact that it is immaterial what the product is? The material point is that the markets that are sought to be used are endeavoring to sell their articles or their products at a cheaper price ?
A. Yea.
Q. In other words, it does not matter what the goods are, whether pig iron or dry goods or other trade. It is simply the competition between the markets in a great measure that affects the rates?
A. Yes. Q. (By Mr. Lawson.) About rates made so as to foster industries: Could not that as well be done by agreement of the lines? A. Probably not quite so well. When you come to an actual consolidation, then one man can agree with himself better than two fellows, no matter how harmonious they may be that is, if I catch your idea. There must be some sort of association and we must meet and agree on some thing. When you want to quote a rate (for instance, to Riley, Texas), you have to have the co-operation of a good many people between here and there, and they can only be got together by an association of some kind. Q. But if you could make the agreement it would be as effective as a combination, would it not?

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A. Yes, perhaps, while it lasted, but it might not be so permanent.
Q. (By Mr. Calhoun.) If there existed the unlimited power of making whatever traffic agreement that would be desired between all these corporations, then there would never be any use of any other method of consolidation ?
A. Of course that would accomplish it, if we could open all our roads to-morrow and enter into contract over all the lines that the rates would be adjusted in accordance with those conditions.
Q. (By Mr. Berner.) Now, General, suppose on account of this competition of markets you reduced the freight rates on pig iron from Birmingham, Alabama, up to New York, does that reduce the rates on every other class of goods?
A. No. Q. Then the competition of markets only reduces the rates on that particular industry that you are striving to get into the markets of the world? A. Yes. Q. (By Mr. Calhoun.) Now, General, isnt that question, with your reply, misleading? Isnt it a fact that in regard to every manufactured product of this country, unless they are very small articles, isnt there a very steady competition going on in all parts of the country? A. Yes, for everything which is produced at more than one point or which is in competition with any similar ar ticle of commerce. Q. Isnt it a fact that only a few years ago we got all our wagons from the east? A. Yes. Q. Isnt it a fact all that class of manufactured articles are constantly and steadily moving westward? A. Yes. Q. Now, would it not be misleading to assume that be cause there was a competition in the markets between Pittsburg and Birmingham on a single commodity it does not exist on all commodities?

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A. What I mean to say is, the competition of each one only affects itself that because I may reduce the rate on pig iron to meet Pittsburg I do not on that account reduce agricul tural implements. You will find on examination that there is scarcely a single article of commerce which is not the object of competition. Take, for instance, cabbages, plows or cow peas; there is competition among them just as there is in pig iron. Quinine, or articles like that, only manufac tured in one place, may be exceptions. You might consider, for instance, the articles sold in notion stores as excep tions, because sold by the notion store almost as much a commodity as pig iron, because they are not commodities, but yet the notion dealer in Cincinnati competes with the notion dealer in New York. A hundred things on this list here have been changed in classification during the last six months, but each one stands by itself each on its own foundation.
Q. Isnt it true that the main elements that have entered into this reduction of freights that have been going on in this country from the development of railroads are the in crease.) productions and the increased competition of com mercial centers?
A. Yes. Q. In other tvords, when you find a country, like that be tween New York and Chicago, teeming with industries, those roads getting a va-t amount of tonnage, whether they control the traffic of the whole country or not, would nat urally reduce their rates; isnt that true? A. Yes. Q. Now, coming back to this illustration in regard to Forsyth: the tendency of consolidation or the alliance be tween these two roads is to put the local stations upon the same standing with competitive points ? A. Yes. Q, Isnt it a fact that the result of that is to put money directly into the pockets of the agricultural classes ? A. Certainly. It reduces the rates to the local points.

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Q. And isnt it a fact that the effect of the alliances of these consolidations is to enable the cotton-producer prac tically to sell his cotton at the gin-house by shipping it from the local stations to the markets of the world ?
A. Yes. Q. Isnt it true the rate to New York, New England and Liverpool is materially affected by the water rate on the ocean ? A. Oh, yes. Q. Isnt it so much so that in arranging the rates on the great irunk lines of the wi-st on wheat that it was found absolutely necessary to take in all rates on water between the great ports of the north and the ports of Europe ? A. Yes. Q. When you come to consider the question of rates of railroad transportation, isnt it a fact that it has grown so great that you are compelled to consider the commerce of the continent rather than the commerce of a local station? A. Yes. Q. Take this illustration of Mr. Berners railroad one hundred miles north where there was competition. Let us take Atlanta and Chattanooga as an illustration. Suppose our system of roads own every line of road entering into the city of Atlanta, and suppose another company owns one-half of the roada that went out of Chattanooga or onehalf the roads of Birmingham, we have got a haul on every article of freight that comes to Atlanta, and every article of freight that went from there, and they got a haul at Chat tanooga on only one-half of the business that went to it and one-half that came away. Would it not be directly to the interest of the road centering at Atlanta to foster the interests of Atlanta and not those of Chattanooga? A. Yes; I can show you an illustration of that in the city of Nashville. Compare Nashville now with Nashville nine years ago. The Louisville and Nashville own, and has for the last nine years, every road entering Nashville. Nash ville has been the envy and complaint of Chattanooga,

Memphis and Atlanta, all brought about by the way the Louisville and Nashville has stood up to it and the advant ages it has given it, and the way it has protected it, and the growth of Nashville in the last nine years I do not think is exceeded or equaled by any commercial town in the south.
Q. Take Atlanta and Birmingham as two centers. Sup pose one produces one class and the other another class of products; would it not be to the interests of railroad managements to give to each of those towns the amplest facilities of trading with each other?
A. Certainly it would. Q. Suppose they not only produced articles of commerce needed in Birmingham and Atlanta, and suppose this is what we call a neutral market, would it not be to the interest of any intelligent railroad management not only to try to induce the manufacture of sufficient products to supply those two points, but enough to take out of this territory into the neutral markets? A. Of course that would be only common sense. Q. Isnt it a fact that every railroad system, whether small or large, tries its best to discriminate in favor of the territory immediately on its line? A. That is a fact. Q. And that lies at the basis absolutely of what is called discrimination? A, Yes. Q. Now, General, would it not be to the interest of this allied system of roads to discriminate in favor of every pro duct along its line in its endeavor to get those products into the markets of the country? A. Certainly it would. Q. In your opinion, is there anything to-day that could be adopted by men of intelligence, who really had a desire to serve southern interests, to promote its prosperity, to encourage its manufactured products and to reach out and compete with the markets of the trans-Mississippi country,

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is there any plan that you are familiar with, or of which you have ever thought, that would tend to promote that as the alliance we have been attempting to build up?
A. No. sir, and I have honestly and conscientiously believed I was serving not only the clients I directly repre sented (the stockholders of the Central), but the prosperity of the whole State as well, in promoting as far as I could this bringing about of joint interests of central and termi nal lines.
Q. Assuming that whole territory west of the Mississippi river, south of Missouri, which is nearest to our manufac turing portion of this country than any other, assuming that it would be advantageous to carry our products there, would the Central Railroad system be able to do that successfully without this alliance?
A. No. Q. Isnt it a fact that the Central Railroad system is shut off at Selma, Alabama, at Birmingham and at Atlanta? A. Yes. Q. That at Selma it meets the East Tennessee, Virginia and Georgia, stretching out to Meridian and down to Mobile, coming in there and forming a barrier between the Centrals going out into that portion or section of the country? A. Yes. Q. Now, isnt it to the direct interest of the East Tennes see, Virginia and Georgia Railroad to take every part of the production that it can get west of Meridian or any portion of that country, and take all away from this section of Georgia and carry it to the northeast? A. Yes. Q. Now, General, I would like lor you to define the word barrier there. You spoke of the East Tennessee being a barrier to our system. Why is it a barrier to the Central Railroad? A. Because they have their agents along their line and they will not turn their freight over to me for eastern points unless it is absolutely consigned. They might even refuse

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to give it to me then. They may refuse to advance the charges on it things of that kind. Take the road from Marion Junction to Akron, for instance (indicating on map). They have virtually cut off that road from us. The result is that while we are perfectly friendly and get along harmoniously, they take the most of that business over that line and I get comparatively little from that territory.
Q. Isnt it to the interest of the East Tennessee road at that point really to discriminate against you?
A. Yes; in every way possible. Q. And instead of saying they competed with you or the Central system, you would say their interest was to dis criminate against you ? A. Yes. Q. (By the Chairman.) Then, in order to prevent that discrimination, if you were to reduce your rates, or could do it legitimately, the Central being the shorter and cheaper by reason of your water connection, would that not teifd to force the business over your line? A. I would have to work at the same rate, because we cannot work different rates. Were I to reduce, they would at once follow. Q. (By Mr. Calhoun.) Take the business of Meridiaa by the East Tennessee, from New York to Meridian, we will say, for round figures, it is a dollar, though I have no idea what it is. If the East Tennessee brings that freight from New York it would get it and pro rate with all the roads north of it in proportion to its mileage?
A. Yes. Q. If you brought it from the north you would have to bring it here and then pay the local rate bej-ond Selrna? A. Yes; they probably would not be willing to pro rate. They would charge me the local rate. Q. But the moment those two Hues were brought to gether the business that came to this country would not have to pay the through rate to Selma, plus the local, but would go at one through rate, and these people here would be put on a level with those there (indicating on map)?

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A. Yes. The Chairman : The result of that combination, then, in stead of lessening competition, enhances competition? Mr. Calhoun: In one sense it does, and I hope to demon strate that fact; that the amount of small competition we destroy is much more than made up by the great advance ment of competition in the commerce of this continent. The Chairman: Then you have this condition of things where one system of road is competing with itself? Mr. Calhoun : Not at all. Q. (By Mr. Rankin to Mr. Alexander.) Without this consolidation or alliance of the roads of the East Tennessee and Central, could they not cut off the manufacturing inter ests of Georgia from the western market? A. Yes, sir; they could cripple it. They could throw obstacles in our way and refuse to pro rate with us here. One of the points I tried to nv.tke the first night I was here was, that whenever we got into this consolidation, cotton from this section, instead of going by Norfolk, would come to me. Say the rate is a dollar. If I take it to New York I get the whole dollar, because I take it all the way to New York. When I get into this procession all the cotton from this territory out here, Memphis and that section, I bring on down here to Savannah and thence take it to New York and get the entire rate, making more money for the consoli dation than if it should go the other way. So I want to put our road into that procession, and I do not want it to form all around me and leave me out. Q. What I mean is this: Take the manufacturing inter ests of Georgia; we want to ship to the western markets and your line gives out at Set ma, your terminal point. The East Tennessee then takes it and they could charge you locals on that out west?
A. Yes. Q. But if they brought it the other way they would have the long haul? A. Yes.

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Q. (By Mr. Calhoun.) At that point. General, the East Tennessee is essential, supplemental and essential, and not competitive?
A. Yes. Q. In my argument last fall I stated that instead of stopping competition I hoped to see a system with one foot in New Orleans and one in Shreveport. Now, let us assume for the moment that that combination could be made, as an illustration; would we not get into that market on better terms than we could hope to get in there without it? A. Yes. Q- Is it not to the interests of the Cincinnati Southern now, reaching as it docs out here and taking all the busi ness from that common point, to carry its freight on that way (indicating on map)? A. Yes. Q. And from there to New York ? A. Yes. Q. The east being the natural direction of all the products of this country ? A. Yes j that is true. Let me say here, just in this con nection, this one thing: This thing of railroad consolida tion ia going on. We did not start it, nor did it start in this State. Conditions of progress and commerce have forced it. The East Tennessee now stops there (indicating on map), but I would not be surprised to see the system extended away out here into Texas. We are now cut off here. I want to be in the procession as far as it is formed; I want to he in it all the way through. Q. From New York it is about six hundred and twentyfive miles north going by the Ohio river, and about eight hundred and sixty-five miles to Savannah, which, added to our two hundred and fifty miles of water prorating dis tance, would make it about a thousand as against theirs? A. Yes. Q. If that line could be brought across this country,

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would we not have a decided advantage in handling that business more cheaply ?
A. Yes. Q. And perhaps more cheaply than any other line on the American continent? A. I think we can more cheaply to ourselves. Q. (By the Chairman.) If that is the cheaper line, why would not the husiness of that country come in naturally without being forced over it? . A. Simply because every fellow is working and fighting for it. No matter how cheaply I can carry it, the other line will work the same rate, and, being the initial road, can secure the better part of the business. Q. You mean those engaged in carrying it ? A. Yes. Business does not always take its natural flow. Take the Cincinnati Southern at this point: Instead of letting business take its natural flow by the nearest route east, they are bringing most of it way around by Cincin nati. Q. (By Mr. Calhoun.) All this business out here that now goes by rail until a few years ago went by the Ohio river? A. Yes. We handled a little cotton from Shreveport to New York about a year ago, but we did not get it by this line, but by New Orleans and the Louisville and Nashville to Montgomery. When this line gets hold of it they prefer to send it by Cincinnati. Q. (By the Chairman.) If this line here undertakes to haul it for the same price in order to defeat you, being so much the longer line of the two, dont they lose money ? Can they afford to haul it? A. They do not make as much out of it, of course, as I would, but still they make money out of it or they would not keep it. Q. Then how does it affect the shipper? A. It does not affect the shipper. Q. Why?

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A. What the railroad makes out of it does not affect the shipper.
Q. The railroad freights are the same whether long or short?
A. Bear in mind, Mr. Chairman, the rates of freight are bound to be practically the same, or nobody will patronize the road asking the higher rates. When you have two things of equal size or value to sell, there is no use to ask a higher price for the one than the other. The buyer will always take the cheaper. Rates must be the same unless there is some difference like insurance against one of the lines.
Q. The freight rate is the same, no matter what the differ ence may be in the expense of hauling?
A. Yes, the same. Q. (By Mr. Calhoun.) Is that always true? A. Practically always. Here, for instance, is what I mean : The rates on cotton from Atlanta to all the Atlantic sea ports south of Hatteras are the same and by all lines, where several lines reach the same port. There are, maybe, twenty different lines concerned in it. The rates are the same also by every line to each northern point, though some lines much longer than others. Q. (By the Chairman.) They are the same for what reason? A. Because everybody wants some of the business, and no line would get any which demanded a higher rate than the others. Q. Is that not competition ? A. Yes; you a ay call it that. Another illustration of it is cotton going last year from Athens to Charleston via this line, from Lula to Atlanta, Macon, Jesup, Savannah and Yemassee. Q. They are the same over both the long line and the short line, although the distance is greater and the expense of moving greater by the long line? A. Yes; the short line makes the rate and the long line takes it or accepts it.

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.

Q. There is no competition in rates?

A. No.

*

Q. But the long line then does not make as much money

as the short line?

A. No; here is the rate: Forty-five cents from Athens to

Charleston. It can go there by the long line as well as by

the shortest route. Here is another one: Athens by the

Port Royal and the Atlanta and Charlotte; and here is still

another one, around by Columbia, S. C.

Q. They take the most of it that way (indicating)?

A. I rather think they take the most of it.

Q. If the rates fixed are reasonable and fair that is, a

fair return for the work done then the long line does it

at an expense or a loss ?

A. No, not at an expense or loss, but at a less profit, be

cause it costs them more to do it.

Q. Suppose the line is twice or three times as long, and

the rate fixed by the short line is a fair and reasonable

amount for the short line, and the long line, being three

times as long, hauls it for the same price, are they not apt

to lose money by it ?

A. That is a subject that is hard to speak on briefly. It

is something we talked of once before. You must consider

this fact: To do a little extra business does not cost as

much as the average of their entire business. The cost of

hauling extra business does not include the rotting of the

cross-ties, trestles and bridges, depots, platforms, etc., nor

do the salaries of the officials and employees enter into it.

All these expenses are the same, whether they take the

cotton from Athens or not. The company has a railroad,

and has invested its money in it, but not as much business

as it can do. To estimate whether it makes any profit out

of that business or not, you can estimate what they would

save if they refuse it. Probably they would not save a-

dollar. They might save the wear to the car, but that gen-

erally occurs anyhow when being returned empty. They

perhaps pay their engineers and train crew a little more

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and burn a little more coal, but the extra costs would be so trifling that they can afford to haul it at a very small figure. What does it cost for a doctor to go and prescribe for a case of chills? He has to charge his regular patient on an average what will allow him to live. But suppose a traveler at a hotel sends for the doctor and says, "Doctor, I cannot pay you two dollars, but if you will prescribe for me for half or one-fourth price, I can pay you, and will employ you. Now, considering the doctor as a money making machine, would it not be throwing away money for him to refuse to pre scribe? It does not cost the doctor any more to prescribe for one more patient. For similar reasons a railroad can afford to do extra business at a cheaper price.
Q. (By Mr. Lamar.) But must there not be a limit to that?
A. There is a limit. I have figured for instance to see what I could afford to haul coal from Birmingham to Savannah at in competition with the schooners bringing it from the north, and it comes down pretty low four-tenths of one cent a ton a mile. That does not pay for my crossties, because they rot out anyhow, and it does not pay the salaries of the officers. That only pays the engineer and fireman, and the grease and coal consumed in hauling it.
Q. (By Mr. Calhoun.) Would not an illustration of that be this: If we were able to bring down grain from Kansas City to Savannah, rather than let the cars go back empty, could we not send back manufactured products?
A. Yes, anything. For instance, take cotton seed meal. When we go into that country we have empty cars going back and we can put our products out there at almost any price.
Q. (By Mr. Lamar.) It would not cost you any more? A. Very little a little coal is about all. Q. (By Mr. Calhoun.) Now, General, we had just reached the Georgia Pacific. That is built across there now? (Indi cating on map.) A. Yes.
10

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Q. Where we meet Mr. Goulds system? A. Yes. Q. Now, the interest of the Richmond and Danville, if it was out of this Central system, would undoubtedly be to discriminate against the Central road in going into that market? A. Yes. Q. And if you take that product there they would charge you on through business the local from that point to that? (Indicating.) A. Yes. The Chairman: Would not the inter-State commerce law interfere to prevent the charging of locals? Mr. Calhoun: I think not at all. They would compel us to exchange freight, but they could not compel us to pro rate on a competing line. I cannot answer that with abso lute certainty, but that is my impression. Q. (By the Chairman to Mr. Alexander.) You consider that an injustice to your road? A. No; "I do not consider it any injustice. It is only natural. They are not going to make me a present of any business they can do themselves over roads built with their money. Q. It is not an injustice to you when things are shipped to you and they do not turn them over to you? A. Perhaps if it were consigned by my line. Q. It is not an injustice to refuse to pro late the freight for the whole distance? A. Not if they have a line of their own. They have prac tically a line to New York. Q. Suppose freight was shipped from this point here on the river, would it not be just for them to pro rate for that distance? A. It would be liberal, but I do not think there would be any reason why they should do it. Certainly not where they have a line of their own. Q. One moment. Does not the inter-State commerce law have a clause preventing discriminations?

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A. Yes, but I am not suggesting any discriminations. Q. Isnt it a discrimination against you if they endeavor to divert the freight that ought to go over your road. A You are assuming that it ought to go over our road. There is no obligation in such matters. If they have built a road they ought to be allowed to support and use it. Q. If your road is shorter than theirs would not that be the legitimate channel over which it ought to go? A. It might seem a strange proposition to say no, but dis tance makes comparatively little difference. Look how the New York Central runs to get to Chicago. It runs north two hundred miles before it starts west at all. Q. They only discriminate against you in favor of their own line? A. Yes. Q. Does the commission allow an unjust discrimination ? A. No; but I do not think that is an unjust discrimina tion to permit a road to protect its own business. That road has made a big investment, and will of course benefit its own line in preference to others. Q. (By Mr. Calhoun.) Suppose no roads were built to that point, and the Richmond and Danville took the risk of building out there, and the Central sits down and says, " I will stand off and wont build a foot out there." Is it nat ural that they would let this road into that territory? A. Of course not. Nor would it be fair and just. That is what I said. Who takes the risk should be allowed to reap the benefit. Q. They would be compelled to have their local agents at all these stations ? A. Yes. Q. You would not have u right to put agents at those depots? A. No: certainly not. Q. And those agents would be working for this line in stead of yours ? A. Of course.

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Q. And when a combination is brought about, you make that agent the common agent of both lines?
A. Yes. Q. And you make it thoroughly immaterial whether the freight goes that way or this way? A. That is true. Q. You have stated that the basing factor in making rates are the lakes, the Mississippi river, the Gulf and the At lantic? A. Yes. Q. When these two lines meet at the Mississippi river they have the opportunity there of gathering up the busi ness of the Mississippi valley? A. Yes; everything. Q. And they have the opportunity there of making com binations with all the lines of road west of the Mississippi river? A. Yes. Q. Or to divert that traffic that has never come in this direction before; havent they? A. Yes. Q. This combination, by virtue of the large mass of business it controls, is in a position to make combinations with those roads west of the Mississippi river for a return of that traffic? A. Yes; far better than I could, even if I did reach the Mississippi myself. Q. If any one line reached the Mississippi river the volume of freight that it could give to any other line west of thfc Mississippi would be very much less than that coming this way; wouldnt it? A. Of course. Q. It would not have anything like the same facility as the other in making combinations? A. No. Q. Your system would be shut out of that market entirely unless you sent soliciting agents, and go to that extra ex pense for the purpose of diverting the freight?

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A. That is true. Q. I will ask you if in the past there has not always been a theory among southern railroad men to reach out and get a portion of that trans-Atlantic business? A. Yes. Charleston spent millions of dollars trying to get through the Blue Ridge, and the same idea prevailed when the State of Georgia built its line, the State Road, through to Chattanooga. Charleston also spent some money on the Memphis and Charleston road, but it never did them much good, as other roads cut them off from it. That has been the idea ever since railroads were invented that is, seeking the west. The west is going further west. Kansas City is the center now of the grain and meat pro duct, where Cincinnati used to be. Q. Now, isnt it a fact that the New York Central, the Pennsylvania and other railroads have been able to reach Chicago, St. Louis, Indianapolis, and all the cities of the northwest, and obtain there the best terminal facilities, and forming a consolidated system of roads for the purpose of bringing that business east? A. Yes. Q. Has that tended to reduce those freights to the east or not? A. Yes; and not only on the through freight but on all the local points between. Q. The inevitable result of reducing the through rates to the east is to reduce all the intermediate locals; isnt it? A. Yes. Q. Is there any practical plan that can be devised for the south by which she can reach out and get a voice in the control of the markets of the trans-Mississippi country without a combination with our road? A. It is not possible. The railroad service of small sys tems is as utterly helpless in competition as anything can be. Q. (By Mr. Lamar.) Tell us the result of that on these independent roads in Georgia in reference to that busi-

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ness take the Macon and Florida road, the Georgia Southern road does it get any of that western business?
A. Yes; that road is doing some Americus business. The East Tennessee gives it business for all of its local points. I do not suppose the East Tennessee gives it any Florida business.
Q. Does it get any through business? A. It is not a through line anywhere. Q. Is it between Macon and Savannah in a round about way? A. By the way it is. It brought some fertilizers up to Macon that way; no great amount, though. Q. (By Mr. Calhoun.) General, would it not be ridiculous for that road to put a soliciting agent in Kansas City for that business ? A. Of course. It is not reaching any distributing point. Q. Its exchange of business would be so small that it would be unable to make any satisfactory arrangement with western roads ? A. I should think so. They might have a local traveling agent to go about and work up some. Q. (By the Chairman.) The Georgia, Southern and Flor ida goes from Macon to Valdosta? A. Yes. Q. Now, under your arrangement with the Savannah Florida and Western Railroad the business that came down unless it was consigned to the Georgia, Southern and Flor ida, you would take down and turn over to the Savannah, Florida and Western ? A. We would take the longest haul on it we could. We would bring it to Albany and give it up there. Q. Would not the fact that the other road is shorter make the rate cheaper? A. No; the rates are always the same. Q. (By Mr. Lamar.J Is that always the case? A. Perhaps not exactly always. There is sometimes what we call a differential in favor of those roads going around,

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as we might say, Robin Hoods barn. The funny thing about them is, the road with the longest and most expen sive and inferior route is the one allowed the lowest rates.
Q. (By the Chairman.) Freight going by Atlanta from the west by the new road to Valdosta, a shorter line, would it not be going by Robin Hoods barn to take it all the way around by Albany ?
A. Yes; but if the business is consigned to come that way I get it,
Q. And you do not pro rate with them? A. In a case like that I do not think w pro rate with them. Q. (By Mr. Calhoun.) Now, that being an independent road and this being our sj-stem of roads coming down here, and we having a long haul on western business, our interest would be not to give them that business? A, Yes. Q. But if you bring that road into the combination it would be to our interest to give them that business? A. Yes. Q. (By the Chairman.) Then your interest and the one you would follow would be to prevent any business going over there if you could get it over yours? A. It might be to my interest, so-called, but I do not say that I would follow it. A great many things might be to my interest or make money for me that I do not do. Other considerations would come in more powerful than ones
interest. Q. Would not the fact that the other road is shorter make
the rates cheaper? A. No; the rates are always the same. Q. You do not follow the example that you put in the
road out in Mississippi if you happen to be in this combi
nation ? A. I said that out there it would be so largely to the
interest of this combination to give the Central line all the business it could do that naturally they would do it, or, at least, allow me a fair show, which is all I ask for.

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Q. It does not come by your line because you are not in the combination?
A. That is true. Q. Would you not for the same reason not give it to that road? A. For the same reason that I am looking out for my in terests. Q. Would you not for the same reason decline to give it to the Georgia, Southern and Florida ? A. I would prefer to have it come by here (indicating). Q. They refuse to pro rate and charge you the local rates? A. Yes. Q. Dont you for the same reason refuse to pro rate with them and charge them local rates from Atlanta to Macon ? A. In this particular case, no. We have worked with this road, and we let it temporarily come over our tracks that is, for a consideration. Q. (By Mr. Calhoun.) The Central Railroad is going to follow its interests ? A. Of course. Q. (By the Chairman.) You spoke about getting as much haul as you can. If the rate is the same what do you make by giving it the long haul in preference to the short one? A. Suppose I am cut off there. I have a line now from Columbus to Americus. The rate is fifteen cents. I could haul it all the way around here just for the fun of hauling it, but I would not do that but take the shortest line. Q. (By Mr. Berner.) Suppose another man owned the elbow there from Columbus to Americus, and you owned the long line, the short line would fix the rates? A. Yes. Q . And you would haul it around if there were two com peting lines ? A. Yes, sir; and I would go around drumming, and would undertake to get it there as quick as possible. Q. General, where do you connect out here with Gould ?

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A. The Gould system strikes this line here at Arkansas City.
Q. What is the rate per hundred from Arkansas City over your line to New York ?
A. I do not think we publish that. Q. What is the rate over your line from Montgomery to *New York? A. I think that is one fourteen. Anniston, Atlanta, Athens, Birmingham, Cedartown, Chattanooga, Columbus, Dalton, Elberton, Eufaula, Montgomery, Selma and Wash ington all take the same rate one fourten. Macon takes one hundred and nine. Q. Why is it one dollar and nine to Macon ? A. I cannot tell. Q. Isnt there a competing line there? A. Yes, at Macon. Q. Isnt that the secret of it? A. There are competing lines at all these places, theo retically. Q. (By Mr. Calhoun.) How much is it to Augusta? A. Ninety-six. Q. How much at Macon? A. $1.09. Q. (By Mr. Berner.) Which is the furthest from New York: Washington, Ga., or Macon, Ga.? A. Macon, Ga., I reckon. Q. Wherever there is a difference in that group in there, there is a competing line? A. Yes. Q. There are competing lines at nearly every one of these points at all of them? A. Augusta, Macon, Atlanta, Gainesville, Athens, Cedartown, Rome, Birmingham, Anniston, Montgomery, Selma, Columbus, Eufaula, Dalton and Opelika all that territory is grouped. Q. They are at different distances, and there is more profit in serving some of them than in serving others ?

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A. There has been a jealousy among the merchants and the different roads that serve them, and after many jears of fighting they gradually got on the same basis, and it is possible that that grouping will extend to other places.
Q. (By Mr. Calhoun.) The object of that grouping is not the competition between the roads as much as a desire on the part of the roads to put those places approximately on the same basis ?
A. Yes. Q. To enable the merchants of those places to compete with the merchants of other places? A. Yes. Q. (By Mr. Berner.) How is it that Montgomery is* one dollar and fourteen cents, being the furtherest point ? Is that the determining point? A. Selma is, I reckon. Q. What determined that? A. That was probably determined by the steamers run ning to Mobile and thence up the river the steamer run ning from New York to Mobile, thence up the river to Selma. Q. That steamship line competing with the railroad? A. Yes. Q. That water transportation then fixes the limit? A. Yes. Q. Under the inter-state commerce law you could not charge any more for hauling from New York to interme diate points? You sweep the whole business inside the one dollar and fourteen cents ? A. Yes. That is not as high as competition will allow us to put it. Q. (By the Chairman.) You have to do that because you want to meet the rates fixed by the water competition ? A. Yes; and that is one dollar and fourteen cents. It even fixes the rates to interior points. This same steamer fixed the rate at Mobile and Selma. Montgomery must be able to sell against Selma, and then comes the competition

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between the markets, and it just swept this whole territory. The competition of markets carried the water competition .all through that territory.
Q. (By Mr. Berner.) What section of the inter-state commerce act that allows you to charge one dollar and a half to Atlanta on account of that?
A. It is the celebrated long and short haul section. I forget its number.
Q. Is there anything in that that gives you that right when you come in contact with water route competition ?
A. Yes; that it shall not be legal to charge less for a long haul "under similar circumstances and conditions."
Q. Has the inter-state commerce commission ever made a ruling upon that?
A. Yes, in the case of the Louisville and Xashville one of their very first rulings. Their interpretation of that part of the law wns expected with a great .leal of interest all over the United States their interpretation of similar circum stances and conditions." They said where water competi tion comes in the circumstances and conditions are not similar.
Q. (Bv Mr. Lamar.) Isnt that true in Augusta? A. Yes. Q. We have a little tug boat that runs up and down the river there? A. Yes, sir, and therefore I can charge more from New York to Waynesboro than to Augusta, because at Augusta I meet dissimilar circumstances and conditions. They say that it not only prevails on the waters edge, but also works back into the country. Q. (By the Chairman.) Take Macon and Atlanta, or any two points to which there are two railroads running between ; for what purpose could it serve the combination to have both roads own both roads running between those two points? A. No purpose. That is an accident. That there are two lines in there is an unfortunate accident so far as the com bination is concerned.

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Q. Why? A. Because they have two roads to maintain for a busi ness that one could do. Q. Why should they want them, then. A. I just say there are two roads to maintain. They do not want the additional road; it just comes in. When you consolidate roads you have to take them as they are. Q. Take the East Tennessee, Virginia and Georgia and the Central Railroad: If they were out of the combina tion, would they not be competing for business between here and Macon? A. Yes. Q. Then what effect would the combination have on them as to competition? It is immaterial as to which line it was sent? A. Yes. Q. (By Mr. Calhoun.) That would be true if there was absolute consolidation ? A. Yes. Q. General, isnt there the same competition existing be tween Macon and Atlanta that there was before this al liance? A. That is what I say; each is still trying to get the mostbusiness it can. Q. We would regard that as another unfortunate acci dent, for this reason: If that line was away from there, there would be no other place in the State of Georgia where there would be any competition at all? They would be purely supplemental if it was not for that? A. Yes. Q. If competition was destroyed at all, it would be merely a local competition between those two points? A. Yes. Q. Now, standing at Atlanta and looking west, is there any competition between those two systems of roads (indicating on map) for the same business ? A. No.

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Q. From that point looking to the west, and for all the competition we can get in the west, these roads are supple mental ?
A. Yes. There is some competition down there at Bir mingham. This line is what you might call the road frontier.
Q. The fact is, General, this consolidation trom the east to the west, from Selma to the west, and from Birmingham to the west, no more destroys competition than the con solidation of any other continuous lines of road ?
A. No. Q. Can you tell me the amount of tonnage of eastern freight coming from New York to Atlanta? A. Yes. Q. Isnt it thirty-one thousand tons ? A. Yes, sir; that is about it. Q. All the east bound freight that comes from New York to Atlanta over all these systems is thirty-one thousand of tons. Looking to the west then we are connected and sup plemental, and looking to the east, so far as Atlanta is con cerned, if competition is destroyed at all, is on the basis of thirty-one thousand tons? A. Yes, sir; I can give it to you from every point. Q. Are you familiar with any system on the American continent, consolidated system, where there are as few com petitive points as this Terminal line in Georgia? A. I do not think there is any large system with so few. The New York Central controls three or four competing lines. Q. (By Mr. Lawson.) Referring to your examination of two nights ago, I think you omitted that this alliance or combination would likely hinder the building of new roads in the State. I wish to ask if you can sum up in a few words what benefit the combination is to the people of Georgia as the compensation for the obstructing of the building of new lines? An inefficient service is better than none at all 1 We had rather have a poor railroad than none at all.

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A. I see you misunderstood my answer, or at least what I intended. As I understood it, you asked if a man wanted to build a road from Atlanta to Augusta
Q. To Savannah through Middle Georgia to Savannah, I said ?
A. I thought yon said Atlanta to Augusta. But I do not know that I would change the answer. You asked if there would not be "less" inducement for him to build because there would be two possible connections one possible con nection there and one here which wi>uld favor him and promise to give him so much business. That is all right sa far as it goes. I was only answering that particular question about that particular case. There would indeed be /m" inducement to build this particular road, for there is no need for it. But there would be more inducement to build any roads really needed and more ability, too, to build them, of which there are many examples in the rail roads we have fostered. I believe this consolidation we are making has had the effect of building one large road. I do not mean to say that it is going to build a road in every county, but certainly it would prompt a great deal of build ing. Consolidation moved Mr. John Robinson with his Sea board and Roanoke. When he saw the Terminal going west ward, he began to build, too. He has already built as far as Chester, just on account of this consolidation, on his way to reach this territory here.
Q. (By the Chairman.) If he gets to Atlanta, with the exception of the Western and Atlantic Railroad, wouldnt he still meet this consolidation ?
Q. And meeting the same difficulties in Atlanta that you meet with out west induced you to make the consolidation?
A. Yes, and I expect him to come on. When he gets to Atlanta he will want to come on to Birmingham.
Q. You mean by that in order to overcome the obstac es that exist by reason of the consolidation he will be com pelled to come on.
A. Ye?.
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Q. Or lose business? A. Yes, and fail to get some very good business in front of him; and when he gets there he will probably build fur ther out and connect with some others. Q. Your illustration then would rather induce the belief that consolidation would compel the building of new roads rather than prevent it?
A. That is one of the questions that you cannot answer certainly, but the tendency is certainly apparent.
Q. It would either help the building of new roads or bank rupt those that were built?
A. It might stop some and help others. Q. Those that were not able to build on would perish? A. You must judge for yourself about each particular case. I will only say it will have a different effect on almost every scheme in the country. Q. (By Mr. Calhoun.) \Tow, isnt it a fact, to start with, that on this line of road this consolidation has had a ten dency to cause the building of this road (indicating) into Georgia? A. Yes. Q. Take this Macon and Covington, from Macon to Ath ens : Now, suppose these other systems of roads had been separate; wouldnt it have had a natural tendency to cause those gentlemen to build that road and endeavor to make a road to the Richmond and Danville to induce the Rich mond and Danville to come in there? A. Yes. Q. Do you know whether or not it is a factthat in the early inception of our enterprise that was talked about? A.. I was approached by parties several times who said, If you want that road, now is the time to get it." Q. (By the Chairman.) Right there I would like to ask when this combination was formed?
A. It was practically formed, to all intents and purposes, in February, 1887, but it was not actually consummated by the actual purchase of this stock until November, 1888.

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Owing to a great many things that arose backwards and forwards, it was not done until that period of time, al though the same directors were practically in control of the three properties.
Q. (By Mr. Calhoun to Mr. Alexander.) Now, General, this Georgia Midland was built from Columbus across to McDonough? Do you know whether or not, in its early history, that it was contemplated to get the East Tennessee to go into Columbus?
A. They took the East Tennessee people down there to get them to do it.
Q. This Rome and Carrollton road, from Chattanooga to Columbus the earlier inception of that or one of the earlier inceptions of that, was the sale to the Georgia Central?
A. Yes. Q. Was not the direct effect of this combination to ren der those local roads unnecessary to the combination? Hasnt that been the effect of it? A. Yes. Q. We have declined to buy it ? A. Yes. Q. Now the result of that has been to force these roads into combinations among themselves. A. Yes. Q. If we had purchased the Chattanooga. Rome and Co lumbus, or if the deal had been made between the East Tennessee, Virginia & Georgia and the Georgia Midland, those two roads would not have been built to-day to con nect with each other ? A. No. Q. Then the inevitable result of it being this: To con solidate the different local lines of road into one, two or three, as the case may be ? A. Yes. Q. Isnt that the direct tendency? A. That is the direct tendency. Mr. Lawson Why is that the tendency -just a struggle for existence ?

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Mr. Calhoun Certainly. It is a struggle for existence to extend their roads instead of selling them out or making combination. These local roads are compelled to build to each other. Tbey will not be satisfied merely with their local condition, and the inevitable result is they have to make consolidations to meet ours, and extend them to meet the volume of business. The same thing that governs us on a larger schedule governs them on a smaller.
Q. (By the Chairman to Mr. Alexander.) General Alexander, before you got into this consolidation, why didnt they force you to build a road to get rid of these ob stacles in your way out west.
A. We did build as far as we were able to do. Q. Would not these new roads contemplated in vjeorgia build as far as the} are able ? A. That is what I say. Q. When they build as far as they are able to build and do not get connected with you or in your consolidation, what will be the result ? A. I expect they will fall into the hands of the John Robinson system. Here is a road that connects with us here, and that comes in with the Americus & Montgomery, and a very little building will connect it at that point. That will give it a system through Georgia and into North Carolina. Q. They will have to be built in order to compete with you? A. They will have to be built in order to tie themselves together. Q. In order to successfully compete with you at points you go to? A. Many of them do not compete with us. Q. Some of the points they will go to in order to com pete with you ? A. I do not see why it is a competition particularly. A great many points they reach we do not reach at all.
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ATLANTA, GA., September 10th, 1889. The committee was called to order by the chairman, Mr. Bartlett. A quorum failing to be present, upon motion of Mr. Berner the committee adjourned till 8 oclock Wednes day evening.
WEDNESDAY EVENING, September llth, 1889. Committee called to order by the chairman. Upon motion it was resolved hereafter, for the purpose of taking testimony and reporting the same, that four members of the committee should constitute a quorum. By the Chairman: Do you desire to examine Mr. Calhoun to-night? A member: I presume that is proper. Pat Calhoun examined: By the Chairman: You have heard Mr. Alexanders testimony in reference to the formation of the syndicate for the purpose of purchasing the stock of the Central Rail road and Banking Company by certain parties, havent you? A. Yes, sir. Q. You are familiar with that plan, are you ? A. Yes, sir. Q. Mr. Calhoun, at that time what connection did you and the gentlemen who formed the plan have with the Richmond Terminal system ? A. None at all, sir. Q. At what time did you or the gentlemen who formed this plan become associated or connected with the Rich mond Terminal Company? A. Some of the gentlemen became holders of the stock of the Terminal Company in the fall of 1886. Q. When was this plan formed for the purpose of pur chasing the stock of the Central Railroad and Banking Company ?

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A. Contract was signed November 12, 1886. The plan for the purchase of the Central was formed early in the summer of 1886; not perfected, but started.
Q. Is that the agreement you have reference to, Mr. Calhoun ? I do not think it is (exhibiting paper to witness)?
A. No, sir; this agreement was made later. The agree ment I refer to is dated November 12, possibly November 15,1886.
Q. Did you furnish us with that? A. Yes, sir; Gen. Alexander handed it to you ? Q. It is a paper like this is on ? A. Yes, sir. Q. Is that the paper ? (Exhibiting another paper to wit ness.) A. Yes; this is it. By the Chairman: The paper referred to is dated Novem ber 12. 1886, signed by Alfred Sully, H. B. Hollins & Co., Lehman Bros., Isaac L. Rice for various other parties. Q. I dont see that Gen. Alexander or yourself, or Mr. John C. Calhoun, are parties to this contract ? A. No, sir; we were not, except in reserving the right to bring in a certain amount of Central stock. We did not sign it. Q. At that time what connection did Alfred Sully have with the Richmond Terminal Company, do you know? A. My recollection is that he wam President of the Rich mond Terminal Company. Q. What connection did H. B. Hollins <fe Co. have with it? A. None. Q. What connection did Emanuel Lehman have with it? A. He was a director. Q. What connection did Isaac L. Rice have with it ? A. He Was a director. Q. Messrs. Scholley Bros., what connection did they have with it? A. None. They were, however, followers of Mr. Rice. Q. I understand you to say that Mr. Rice was a director? A. Yes, sir.

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Q. What was P. J. Goodhart & Co.? Either of those have any connection with the Richmond Terminal Company at that time?
A. None. They were prominent brokers on Broad street in New York, and Mr. Goodhart was closely connected with Mr. Rice. He is a son-in-law of one of the members of the firm of Lehman Bros.
Q. This paper is dated November 12th, 1886. When was the election of the directors to take place?
A. The following January. Q. And the purchase of shares which resulted in the elec tion of General Alexander and the directors in January, 1887, was made under this agreement? A. Yes, sir, partially p\irchased after that agreement. A portion of the stock had been bought prior to that time, but when the syndicate was formed it was brought in under the S3*ndicate agreement. Q. Now, under this agreement how many shares were pur chased, do you remember, some 24,000? A. No, sir; my recollection is that there was first 25,000 purchased, and then we thought it was advisable to buy a few hundred shares more, and we bought under that agree ment about 27,500 shares, allotting to each party his pro portion of the excess. My recollection is that that agree ment called for only 25,000 shares. The agreement, how ever, speaks for itself. I cannot state the exact details of it. Q. This agreement, November 12th, 1886, was carried out, was it? A. Yes, sir. Q. The terms of it was carried out ? A. Yes, sir. Mr. Chairman, I would make this sugges tion : I would be very glad to give you a full history, as I know it, of how this system has grown up and the steps which have led to its growth; and in that way you might get a better basis for the questions that you desire specifi. cally to ask. Q. Well, sir, you can pursue any method you see proper.

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A. I dont wish to consume one moments more time than this committee desires. It is quite immaterial to me.
Q. The course I wish to pursue myself is simply to folI6w the line of the resolution for us to inquire into the lease. As you are much more familiar with it than I am. or any member of the committee, I wish you would give us a history of it.
A. My desire is to lay before you any fact that is within my knowledge. About ten years ago the Richmond and West Point Terminal Company was chartered by the State of Virginia. Its promoters at that time were the owners or controllers of the Richmond and Danville Railroad Company. Their object was to secure the control of the stocks of certain subordinate railroads in the south that they desired to attach to the Richmond and Danville sys tem as feeders. I have understood that it was formed to aid the Richmond and Danville in building up its system, and that it was patterned after the Pennsylvania Company.
Q. Committeeman Lamar: That is what is known as the Pennsylvania Road ?
A. No, sir; a company owned by the Pennsylvania Road. Now, about the same time that charter was granted by the Virginia Legislature, a similar charter, I have been in formed, was given to the Norfolk and Western. Acting under that charter, the Richmond and Danville Rail road built up its system. It leased directly the roads in North Carolina running from Danville to Char lotte, and the Charlotte and Air-Jane Railroad from Charlotte to Atlanta, giving the Richmond and Danville proper about seven hundred and odd miles. The Terminal Company, a majority of whose stock the Richmond >fc Dan ville owned, purchased a majority of the stock of the Vir ginia Midland, a majority of the stock of the Charlotte, Columbia and Augusta Road, a majority of the stock of the Western North Carolina, a majority of the stock of the Greenville and Columbia and of the Northeastern of Georgia, and became a subscriber to the majority of

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the stock of the Richmond and Danville Extension Com pany that undertook the contract of building the Georgia Pacific Railroad. Now, to see exactly what that meant: The Richmond and Danville and its controllers formed the Richmond Terminal Company. The Danville took a ma jority of the stock and invited the public to take the other part. The Terminal .vouired control of the majority of the stock of the subon.-nate properties just named and a majority of the Extension Company stock, the individuals taking the remainder, and this Extension Company took the contract for building the Georgia Pacific, the central idea of the whole plan being to build up the Richmond and Danville system. The Danville stock rose to a very high value in the market. But in the building of the Georgia Pa cific Railroad it undertook a burden that was very heavy. In the financial stress about 1880 they found it was impos sible to float the bonds which they had undertaken to float at $20,000 on the Georgia Pacific, and they were com pelled to cut the first mortgage down to $10,000 a mile. The result was that their backbone was broken, and their secur ities greatly depreciated. The Danville had in its treasury the majority of the stock of the Terminal Company, and the latter company the stocks and bonds of the subordinate properties I named just now. They had contracted consid erable indebtedness in the purchase of these stocks and bonds, and the obligations of the Terminal Company began to press upon it in the full of 1885. Then the Richmond and Danville undertook to lease many of these subordinate properties; in fact, I believe nearly all of them, except the Georgia Pacific, and made a contract with the Richmond Terminal by which the Danville got a good many of the assets in the treasury of the Terminal Company, and gave the Terminal Company 25,000 shares, I believe, in the Ter minals own stock. The Danville then sold the Terminal stock on the market. My brother and his friends who had faith in the system became very large purchasers of it. A conflict grew up between some of the Terminal

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Company stockholders and the Danville party, and there was a committee formed in New York to represent the in terests of the Terminal Company on the ground that the contract between it and the Danville was not entirely equitable. The controllers of the Danville property in sisted that the contracts that they had made were the very best thing for the Terminal Company; that in view of its financial condition, with large indebtedness and no assets except some bonds and low-priced stocks on some of its southern properties, valuable merely for the control, it was necessary for the Danville to pursue the course it had. My brother was a very large purchasesr of the Terminal stock at that time, and in the early part of May, 1886, the Ter minal stock had depreciated very largely on his hands, and litigation was about to ensue. He telegraphed me to come to New York to assist him about that time. Before I left Georgia the citizens of this city called a meeting at the Chamber of Commerce with a view of seeing if ihvy couldnt build a railroad from here to Charleston, or from here to Savannah. Their main idea was to get to Charleston. Before attending that meeting, I telegraphed a large number of prominent citizen in Charleston to see if they would give assistance in building that road. I got no encouragement. At that meeting it was suggested that it was probable that the East Tennessee, Virginia and Georgia Railroad would part with their line from Atlanta to Brunswick. My recollection is that a com mittee was appointed for that purpose. For my own use I had been studying the southern railroad situation, and had made up my mind that the systems, as then being per fected, tended to discriminate against the State. I had discussed the situation with some of my friends. I was strongly impressed with the early railroad history of this country, and I believed the truth of the statement made by my grand-father in 1845 in regard to the roads running to Atlanta. The statement that all of the roads then pro jected and they form now some of the leading lines of our

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system would meet at a point in DeKalb county not far from the village of Decatur, where each, although looking only to its isolated interests, would contribute to the pros perity of the whole, forming one system of roads. Not only from that, but from some considerable study that I had given to the early development of railroads ia this country, I became perfectly satisfied that that was true to a very great measure. I had waited for two or three years to see an opportunity to acquire control of the Georgia Central. So much was this true that I urged upon my brother two or three years earlier, who was then living in Arkansas, to give up his business in Arkansas and move to New York. Incidentally, during the campaign of Gen. Gordon, and be fore I received the letters from my brother, I went to Savannah, and there picked up a newspaper and saw a lit tle squib in it that insiders stated that a recent movement in the Central stock had been made by a man in Augusta, whose desire was to unload it. That led me to believe that any movement then made to purchase the stock of the Cen tral would be decried as mere speculation. On my return to Atlanta I went almost immediately to Oconee county, and, returning home by way of Athens, I met Gen. Alex ander on the train. I told him I had some railroad plans that I wanted to lay before him, and asked him to call at my office the next day. He called, but said he didnt have time then to talk the matter over. By agreement we met about ten days later in New York. The plan that I started out with was to bring these three properties together, im pressed with the fact that one would contribute to the pros perity of the other.
Conmiitleeman Bcrner: What three properties were they? A. The Central, the East Tennessee, Virginia and Geor gia and the Richmond and Danville. Now, to return to the Terminal Company: After examination, upon my arrival in New York, I thought, and so gave my opinion, that the contract between the Terminal Company and the Richmond and Danville, which then existed, could not be

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upheld, and we had an excellent opportunity to acquire control of the Terminal stock at a very low figure. General Logan was in New York also conducting a campaign try ing to acquire control of the Richmond and Danville, and we combined our forces. His idea was to acquire control of the Danville; mine was wider, with a view of not only acquiring control of the Danville, but the other properties also. Early in the summer of 1886 I called on Mr. Isaac L. Rice, who is a gentleman of considerable ability, and who has a large following among the Jewish element in New York, and outlined my plan to him. We thought it it best to wait until the fall. At the same time, through my brother, Captain John C. Calhoun, I was brought in contact with Mr. H. B. Hollins, who undertook to get up a syndicate for the purchase of the Central stock. We started, my brother and I. to purchase that stock in July at about $70 a share. We continued to buy it during the summer. Early in October the difficulties between the Danville and Terminal culminated by Mr. Clyde, the president of the Terminal Company, calling the stockholders of the com pany together, stating that the company was exceedingty embarrassed, and that the stockholders would have to take steps to protect it. It was generality stated that its debts were being carried by the personal guaranty of the direct ors. The meeting was called, bm recollection is, for the 19th of November certainly for some time in November, 1886. We went then actively to work, not only to get our friends, but others, to buy the contiol of the Terminal Company. So successful was the movement that the stock of the Terminal Company began to rise very rapidly, and as we kept buying it the price in November rose to 77. The con trol passed out of the hands of those who formerly held it into ours.
The Chairman: Who do you mean by that when you say, "we kept buying it?"
A. I mean our party the Richmond Terminal party, as distinguished from the Danville party.
Q. Who were they ?

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A. General Logan and his following formed one factor

and my brother and a number of different people in New

York, including Messrs. Rice, Lehman and Sully, formed

the other. But my object I want to be perfectly frank

about it from the beginning to the end was to bring about

this alliance of the three properties. I cant say whether at

the date the agreement (referring to Central syndicate agree

ment of November 12th, 1886,) was signed, whether Mr.

Sully had been actually made president of the Terminal

Company or not; but if he had not been, he was in a very

few days thereafter. General Logan and his followers had

bought up a large amount of the stock of the Danville, his

view being to buy up the control of the Danville and in

that way secure a settlement of the difficulties with the Ter minal. Mr. Rice and some oi his friends made some oppo sition to General Logan and a difference arose with General



Logsin. which grew partly out of his former connection

with the Danville and partly because his large interest in

the Danville stock caused a number of Terminal stock

holders to feel some distrust of him. The result of it all

was Mr. Sully, Mr. Lehman and Mr. Rice went on the Term

inal board as what we called pure Terminal stockholders,

representing those stockholders who had made the cam

paign for the control of the Terminal who had no interest

in the Danville. General Logan, Mr. Stone and Mr. Ruth

erford became the other three directors, representing both

their Terminal and Danville interest. As soon as we saw

our way clear through the Terminal control I called on Mr.

Hollins and urged him to go on buying the Central stock.

He said to me that he thought we had better wait a year

later; but as soon as Mr. Rice and Mr. Lehman and

Mr. Sully saw their way clearly through ihe Terminal fight,

I went 1o Mr. Rice and said to him I wanted him to help in

the purchase of the Central, and askeii him if he would come

in and form this syndicate. I was satisfied that we could

obtain control of the Central Railroad. I believed we could

carry out my plan for bringing the three properties together.

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So the formation for the original contract for the purchase of this stock was with a view of bringing these properties into closer relationship to each other. Practically, by the middle of February, 1887, the alliance between the proper ties was made. Mr. Sully, Mr. Lehman and Mr. Rice were directors of the Terminal. Mr. Sully, Mr. Lehman and Mr. Rice were a majority of the five trustees who were appointed under the syndicate agreement of November, 1886, to buy the Central stock, and early .u February, 1S87, the Terminal Company secured control of a majority of the stock of the East Tennessee.
The Chairman: You speak about the East Tennessee, Virginia and Georgia. It was sold under the hands of a re ceiver?
A. Yes, sir. It had been reorganized under a plan which gave the eleven million first preferred o per cent, stock the control of the property for five years, or until two consecu tive annual dividends of 5 per cent, had been paid. The first preferred stock elected eight out of the fifteen directors, and the balance of the stock elected the other seven.
Comtnitteeman Berner: Who purchased the East Ten nessee when it was sold at the receivers sale?
A. It was purchased by a purchasing committee. My impression is that Mr. Olcott, of the Central Trust Com pany, was one, and Mr. Charles McGhee, of Knoxville, was another member of that committee.
Q. Did they represent the bondholders and the creditors? A. Yes, sir. This purchasing committee had been formed under what is called a reorganization agreement. The plan of reorganization had been agreed to by the security holders before the sale or purchase; so that these parties purchased for the benefit of the creditors and stockholders on a cer tain basis, and distributed out to the old creditors and stockholders securities in the new company in the propor tions agreed upon. By the purchase of the majority of the first preferred stock by the Kast Tennessee, which was then controlled by the parties who controlled a majority of the

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Central Company, the alliance between the southern roads was practically effected in 1887. It was the plan of Mr. Sully and others to have perfected this alliance at that time, and Mr. Sully and others used every effort in their power to bring it about every legitimate effort in their powerto bring about the purchase by the Terminal Company of the stocks it has since acquired. For one cause and an other they were defeated in that purpose. Differences then arose in the Central syndicate, and differences arose in the Terminal. Those differences widened and broadened until it resulted in Mr. Sullys resignation in 1888 in May, I think and the contest for the control of the Terminal Company, headed on the one side by what was known as the Rice-Libbey committee, and on the other by Messrs. Brice, Thomas, Scott and others. The result of the contest was the election of Mr. Inman, who succeeeded Mr. Sully, and the election of my brother, Captain John C. Calhoun, as a director of the Terminal Company. The various con tests that had arisen throughout these divisions in the Georgia Company and the Terminal Company had pro duced, naturally, some bitterness of feeling, and a good deal of temper at one time and another had been engendered. The acquisition of the control of the Terminal Company by our wing in the Georgia Company to some extent intensified the feeling in the Georgia Company; and owing to pome subsequent transactions in that company, we found that a change should be made. Our party made a proposition to buy or sell to the other party, giving them the right to name the price. They declined to buy or sell, and we com promised upon a sale to the Terminal company.
Committee-man Berner: By a sale to the Terminal Com pany of what?
A. Of the stock of the Georgia Company. After we ac quired control of the Central, as you know, in January, 1887, we held the stock in the syndicate until the spring of 1887.
The Chairman : I see in one of these contracts to make

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the purchase of stock, you restrict the sale of stock to 150; that these parties shall not be permitted to sell the stock for less than $150.00 per share?
A. Yes, sir. Q. What was the purpose of that? Was that the value of the stock at that time? A. Not its market value, sir, but it was what we thought it was worth; the minimum of what it was worth. Q. What was the object of that? A. A protection of those in the minority, sir. After the first efforts to perfect the combination in 1887 had failed we were left with this stock, the stock of the Central. It looked at the time the Georgia Company was formed as if the alliance with the Terminal could not be made, and the efforts to bring about a sale to the Terminal Company having failed, the Georgia Company syndicate determined to organize under the charter which I had obtained from the Georgia Legislature in 1883; and the syndicate agreed to purchase that charter. I urged an organization in Geor gia. They oojected to the charter, but I have never con sidered the objection well taken. Under one of the clauses of the constitution the Legislature of Georgia is limited to chartering only a certain class of corporations, and the wide power given to this corporation it was contended took it out of that class. We then thought of organizing in South Caro lina, and I went so far as to take steps in that State, but the other members of the syndicate preferred to take out a charter in North Carolina on the ground that the taxes were lower; but I thought at the time it was better to enable them to keep my brother and I off of the board by organ izing a company entirely independently of us. So strong was the contest between us that they declined to allow us even a representation at first on the Georgia Company board. That company was organized, as you see, gentlemen, some time in the latter part of May or early in June, 1887. The amount of bonds that was issued on it has been correctly set forth in Gen. Alexanders affidavit. Four millions of

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collateral trust bonds and twelve millions of stock. I didnt organize the Georgia Company and bad no further part in the organization of that company than a suggestion of a plan for organizing some company of that character.
Q. What are the powers of this company which you con trolled, which were never organized?
A. Well, sir, they were very v?ide and very broad, giving you the right to own stock in another corporation, etc.
The Chairman: What was the name of that company? A. The Georgia Investment and Banking Company, chartered, I think, in 1883. I was then trying to perfect some plan to enable me to carry out the plans that I had been subsequently able in a moderate way to assist in perfecting. Committeeman Lamar: As I understand it, Gen. Alex ander said that the reason they took the charter out in the courts of North Carolina was that they couldnt get one with the powers in Georgia? A. I so understood Gen. Alexander, and I called his at tention to it, and he remembered what I said, and my recollection is that he either corrected it or intended to cor rect it. The constitutional objection urged at that time was the constitutional objection of which I have spoken. Q. Not the constitutional objection that they could not buy stock in another company? A. No, sir. Q. Nor that they couldnt make a contract? A. No, sir. I dont know that I heard that portion even discussed at that time. I cant say what other people may have discussed, but my recollection is at that time we didnt discuss that feature of the matter at all. If it was discussed at all in my presence, or by me, it cut but a very small figure. A member: What was the assets of the Georgia Company? A. 40,000 shares of the Central Railroad and Banking Company, and $400,000.00.

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Q. Its ^abilities were four millions of bonds? A. Yes, sir. Committeeman Berner: Who bought these bonds? A. They were taken, sir, by a syndicate composed of Mr. Belmont, Mr. Hollins, Mr. Rice, and Mr. Lehman and other gentlemen. Q. That was the first issue of bonds on that $40,000 that you referred to? A. Yes, sir. A member: Your stock what was the market value of that? A. Somewhere between 120 and 130. Q. I mean the stock of the Georgia Company the twelve million stock? A. The lowest price, I think, was $18 a share. Committeeman Lamar: Those bonds were 5 per centbonds? A. Yes, sir. That left us 3 per cent, from the Central Railroad stock after paying interest on the bonds. What we had to pay was 5 per cent, on the bonds, which was equivalent to 5 per cent, on the par value of the stock, leav ing 3 per cent, net, or 1 per cent, of the par value of each share of Georgia Company stock, which was equal to 5 per cent, at $20 a share for each share of Georgia Company stock. I dont know that that statement makes it very plain; but as we got a margin of three dollars over the amount that we paid on these bonds for fifty years, you see we could have paid 1 per cent, dividend on three shares of Georgia Company stock. Now, that is equivalent to 5 per cent, on the value of a share of stock selling at 20, our theory being that on a 5 per cent, basis each share of that stock, without any speculative value, was certainly worth $20 a share. In addition we expected, for many reasons, a higher value of the future. Among others, a great many of the bonds of the Central Railroad, which you will find de scribed in their report, bear a high rate of interest, and we expected to save a very large sum of money in refunding that indebtedness at a lower rate of interest.

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Committeeman Berner: I understand you had $100.00 in bonds issued to the share, and that you would pay $5.00 interest on that, you would be making $3.00 for the $20.00?
A. Yes, sir. Q. What would that be? A. 15 per cent. Committeeman Lamar: That was 1 per cent, on each share of Georgia Company stock? A. Yes, sir, or as Mr. Berner puts it, we were really by that transaction making 15 per cent, on our actual invest ment. But as we paid in $10.00 per share cash into the treasury of the company and sold our bonds at 95 we really had an investment of $35 on which we were making $3.00, or very nearly 10 per cent. Our object was to give our company credit and financial standing; and I dont think any of us contemplated taking the dividend out of it for four or five or six years, but to allow our cash steadily to accumulate in our treasury to give us power and strength to aid and carry out our financial plans. In other words, if the scheme of inducing these gentlemen to buy up these properties failed, then we wanted as the next best thing that could be done an organization of the Georgia Company patterned after the old Pennsylvania Company to enable us to financier to aid in building up the system that we controlled. Committeeman Berner: Who got the four million dollars of bonds? Did they go to pay for the 40,000 shares of stock? A. Not entirely, sir. The parties who organized the Geor gia Company took the position that they wouldnt give my brother and myself representation on that board, and we insisted that we should have a representation whether we took any bonds or not. In the meantime they had per fected their syndicate for taking the bonds. Q. That four million dollars worth of bonds went to pay for the four million dollars worth of stock less five per cent, that you lost ? A. Yes, sir.

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The Chairman: Gen. Alexander stated that since the Richmond Terminal Company purchased the Georgia Com pany it proposed to retire those bonds ?
A. His answer was, the Terminal Company had made a mortgage to secure about 24,000,000 of collaterals trust bonds, and that the Terminal Company had reserved four million trust bonds to retire these four million Georgia trust bonds. The object of that provision was to solidify, as far as practical, the Terminal securities, so that it would stand in a stronger financial position, because it is simpler to have one class of mortgage bonds rather than a collateral trust bond based upon securities already pledged to secure certain prior existing bonds.
Q. Now, the Central Trust Tumpany received the Central Railroad stock to secure four million dollars worth of bonds?
A. Yes, sir.
Q. And when those bonds are retired, then the stock be longs to the Georgia Company?
A. It would fall immediately behind this Terminal col lateral trust bond, and it would then he pledged for all of these collateral trust bonds instead of being pledged first for the four millions of Georgia Company bonds, and sec ond for the Terminal collateral trust bonds.
Q. You mean to say that the bonds for which this stock was pledged, having been paid or cancelled, it has been repledged for the others ?
A. It is already pledged for the others. A member: Does the Georgia Company have any vital ity now?
A. We have discussed, sir, doing away with the Georgia Company entirely, and I suppose that will be done; but so far as I know, that has never been done, and I dont know that it will be done. I believe sooner or later it will be done. I apprehend that if it had actually been done I would have been notified.
The Chairman : Have you no officers at present ?
12

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A. Oh. yes. sir. Mr. Hall is president and Mr. Rauh is secretary, and I am general counsel.
A member: Was the cash paid in, or was it in the form of securities?
A. Paid in cash. Committeeman Berner: Who were the parties who got up the charter? A. I dont know, sir. The Chairman : Who is D. Schenck? A. I dont know, sir. I think it is Judge Schenck, of North Carolina? Q. Did he ever have any interest in the Georgia Com pany? A. I dont know. I presume he merely took out the charter for the other parties. I dont know whether the law of North Carolina requires a charter to be signed by residents of the State; but it would be very natural, whether that is true or not, for anybody outside of the State seeking to obtain a charter to get some parties in the State to make the application. For instance, when I thought of taking out a charter in South Carolina under the general law, I requested local parties there to sign it and obtein it for me simply to save my going to Carolina. It was claimed by certain parties interested in the Central syndicate that a charter in North Carolina was taken out because the taxes there would be leas. I had an idea at the time that the S3ndicate did not avail itself of my Georgia charter because they wanted to obtain a charter entirely in dependent of my brother and myself. There was an effort made not only to keep us off the Georgia Company board, but to prevent our obtaining any representation upon it. I controlled the charter in Georgia, and if they had organized under that charter it would have been impossible for them to have kept me or my representatives off of the board. This difference in the Georgia Company, as I have stated, grew and widened until we finally, by a compromise, made a sale of the Georgia Company stock. I used every effort in my power to bring about that sale.

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Q. How did the Georgia Company get this four millions of shares of the Central Railroad?
A. Bought them from the original syndicate. Q. Who was it made to ? Direct to the Georgia Company from the syndicate ? A. I cant say, but my impression is that it was direct to the Central Trust Company. Committeemnn Berner: When the gentlemen who com posed this syndicate turned over their shares to the Central Trust Company did they receive cash on bonds ? A. Some received bonds and some cash. It was done differently. Q. What did you .all pay for the Central stock? A. My recollection is it cost an average of 117. Q. What was the highest price the Central stock was bought at? A. I think 133. Q. You began to buy at 70? A. Yes, sir, but not by this syndicate. My brother and myself bought with one or two friends before we enlisted Mr. Hollins. Q. How much did you buy? A. I think about 2,000 shares; and then we enlisted Mr. Hollins, and then he came in and bought; and we bought a large amount, and when we carried the stock into the syn dicate it was taken by it at par. The Chairman: What does it mean by this agreement that was made afterwards, dated September 12th, 1887, between the Georgia Company and Belmont and Gen eral Alexander? There dont seem to be any consigning about it? A. Let me see that one moment, and I think lean explain it to you. Q. The only question I desired to ask was, what was the meaning of this: You agree to accept as payment in full for the said shares so deposited $95.00 for each share, etc.; what ia the meaning that you were to receive on that $95.00 per share for each share?

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A. We receive $95.00 for each share of Central stock deposited, less $10.00 and certificates for three shares of Georgia Company stock.
Committeeman Berner: That got three shares of Georgia stock for each share of Central?
A. Yes, sir. Committeeman Lamar: Where were all of these nego tiations conducted? A. In New York. Q. Was anything done in the State of Georgia at all? A. Not one single thing, sir, that I recall, in the way of these contracts with these companies. Q. None of these trust agreements, mortgages, sales? A. None, sir. A member: You bought stock in Georgia, I suppose, where you found it? A. Originally we did,sir, but that was before the Georgia Company had anything to do with it at all. Committeeman Berner: That was the contract, 25,000 shares of the stock. Have you got the contract of the second pooling here? A. I dont know, sir, whether I have or not. Q. Five years, and upon that basis the Georgia Company was organized. I have not seen that? A. I furnished every contract that the Committee called for, and if there is any others not here I will furnish them. I will now go back to the historical statement I was making. In the fall of 1888, a lease contract was negotiated between the Richmond and Danville and the East Tennessee, Vir ginia and Georgia Q. The Chairman : Right while you are upon that, may I ask you this question: Before that lease was made, or be fore the combination was made, wasnt the East Tennessee a railroad that competed with the Richmond and Danville system for the business of Atlanta? A. Through the Norfolk and Western. You allude to the eastern business?

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Q. Yes? A. Yes, sir. Q. At that time the Richmond Terminal Company owned the Georgia Pacific? A. Yes, sir. Q. Was that part of the Richmond Terminal system com peting for the business of Atlanta? A. I dont think so, sir, except in this way: There are scarcely any two lines in America running anywhere that are not in a certain way competitive. Q. Werent they competing between here and New York? Didnt the East Tennessee Railroad and the Richmond and Danville, known as the Air-Line, compete for business of all sorts between here and New York ? A. I should say yes, in connection with other lines. Q. But was it not made by business arrangements seek ing to secure business over the East Tennessee Road to New York by that route? A. Just exactly before as it does now. Q- It does now? A. Yes, sir, to the same extent as it did then. Q. Does it compete with the Air-Line now? A. Some people may so consider it, but I do not. Q. You mean by that that without these other connecting roads it could not reach New York ? A. Yes sir. Q. But with the Norfolk and Western it was a competing line A. Yes, sir; just then as it is now. Q. Is the Norfolk and Western a part of the system now? A. No, sir. Now, in considering the question of compe tition between two roa>ls: in determining whether in a legal sense they are competitive, we should not look beyond the two lines themselves. We should not go beyond their termini as laid down in their charters. If you do, then it is questionable if there are any two roads of any importance in the country that are not competitive. Now, in one sense,

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this Georgia Pacific Road would compete it is a competi tive road with the Western and Atlantic Road in this way: Georgia consumes so much meat. Now, this line, Western and Atlantic and the Cincinnati Southern, the road that brings bacon from Cincinnati or from Chicago, would com pete with this line of road formed by the Georgia Pacific, and the road that runs from Kansas City to Arkansas City that brings meat from Kansas City. Now, this road from Kansas City to Arkansas City that brings grain to New York would compete with the trunk lines which go out to the Northwest, and it gets gniin from that country and brings it way round to Norfolk and the southeast. There are no two general systems that I know of in this country of any importance that may not be said to be in some de gree competitors in the wider sense.
Q. The Norfolk and Western road, is that a part of the East Tennessee system ?
A. No, sir. But there was an effort made some years ago to consolidate the Shenancloah Valley, the Norfork and Western and the East Tennessee Company. An agreement was proposed between them for merging their stocks and securities one with the other, and during the period of time that would elapse before the consolidation could be per fected they provided for the joint management of the traffic of their roads. I thought I brought and left with you a copy of that agreement. I have been hunting for it in my office, but have been unable to find it. They wished to consolidate the three roads into one system. Now, I want to illustrate what that means. With one head at Harrisburg, Penn.. and another at Norfolk, with one foot on the Mississippi River at Memphis, another in Central Mis sissippi at Meridian, another on the Gulf at Mobile, and another foot reaching down through Georgia to the At lantic at Brunswick, the interest of that great system of properties would be to drain that vast country tributary to it from southwest to northeast. It would form a great trunk line going through from Memphis to Norfolk, with a

183
branch from Roanoke to Harrisburg, and on to New York, with feeders reaching down into Georgia, Alabama and Mississippi. It would be a northeastern and southwestern system of roads, and you will see at once that the line in Georgia from Rome to Brunswick becomes a mere branch. It was after this proposed consolidation and before the Terminal acquired control of the East Tennessee that it was stated in a meeting of the Atlanta Chamber of Com merce that the East Tennessee might sell that part of its line from Atlanta to Brunswick. Perfect that system and it would draw the entire commerce through that vast region of country to the northeast away from the South Atlantic seaport. Chattanooga and Rome are the important diverg ing points on the East Tennessee Road. Now, let us see what would be the interest of the East Tennessee as sepa rate and when consolidated with the Norfolk and Western: The distance from Chattanooga to Bristol is 242 miles, from Bristol to Norfolk is 408 miles, making 650 miles from Chattanooga to Norfolk. From Rome to Norfolk is, I think, about 730 miles and to Bristol 322. From Chatta nooga to Brunswick is, as I remember it. 389 miles; from Rome to Brunswick is 309 miles. Now, you will see at once that the interests of the system formed by the consoli dation of the East Tennessee with the roads from Bristol to Norfolk and from Roanoke to Harrisburg, would be to get the haul of 650 from Chattanooga to Norfolk, and the haul of 730 from Rome to Norfolk, instead of the haul of only 389 from Chattanooga to Brunswick and 309 from Rome to Brunswick; while the interest of the East Tennessee separated from those roads is to get the haul of 389 miles from Chattanooga to Brunswick, instead of the haul of 242 miles from Chattanooga to Bristol. When we acquired" control of the East Tennessee it de feated the Norfolk and Western combination. Now, what has been the practical results? I speak in round figures. We acquired the control of the East Tennessee Road in February, 1887. The cotton re-

184
ceipts of Brunswick the season before, 1885-86, were 8,000 bales. The season we acquired it, 1886-87, the receipts went up to 30,000 bales. The next season, 1887-88, the receipts up to the 10th of April ran up to over 130,000 bales. And Brunswick, from being one of the dead towns of this country, has become one of the most prosperous and flour ishing cities in the South.
Committeeman Lamar: Now, as I understand it, you own the Central Railroad system, or are interested in it, that makes your interest in Savannah?
A. Yes, sir. Q. Brunswick and Savannah are competitive markets. Now, how could you disable the market at Brunswick? Wasnt there something else that induced the cotton to go there ? A. Yes; the enterprise of the people; that contributed to it unspeakably. It would be a mistake to suppose that any place can be developed by railroads alone. It must be de veloped by the people and those who live there. All the railroads can do is to give the people facilities in the con duct of their business. When they have done that, and put the trade centres, as near as they can, on an equality, the roads have performed their full duty to the public, and in my judgment have pursued the wisest course for themselves. Now, it would be absurd to say that the East Tennessee road alone has done this work at Brunswick. I would not detract from the business capacity of the men who have built up that town. But I only mean to say that the inter est of this road under our combination is to let the business go there, and the interest under this other system (the Norfolk & Western) would be to discriminate directly against that point. We found in the Norfolk & Western an active Wdder for the East Tennessee stock. When we got ready to lease the Bast Tennessee, we found that the Norfolk & Western was opposed to it; and again it sought to control the East Ten nessee by buying from the Terminal Company the East

185
Tennessee first preferred stock held by the Terminal. The object of the lease to the Danville was to give a fair and equitable control for a number of years of that property. As soon as the lease was made, we found the Norfolk & Western interests attacking it in the courts of Tennessee; and no sooner had the purchase of the Georgia Company stock been perfected than this State was flooded with circu lars denouncing railroad monopoly in Georgia. This circu lar contained certain articles taken from certain newspapers in New York and Philadelphia against the lease and against the so-called monopoly. Here is one of them. I under stand that there was another circular published in Tennes see. These circulars, it is evident, were not inspired by Georgians, and yet they started the railroad agitation in this State. Now, of course, after we purchased the Georgia Companys stock, the next step was to financier it. We thought of one way and another. My idea was to pay for it in the common stock of the Terminal Company, but so bitter were these attacks of our rivals that our stock greatly depreciated in value. Bills were introduced in the Georgia Legislature, in the Tennessee legislature and in the South Carolina Legislature, all of which met soon after the pur chase of the Georgia Company stock. Thus the Terminal stock, which had been purchased at high figures by those of us who believed in the future development of this section of the country, began steadily to depreciate.
The Chairman: Did you have a copy of the deed? (refer ring to deed of trust securing Terminal collateral trust bonds.)
A. Yes, sir, I furnished it. It became necessary to finan cier this Terminal property, and I suggested this plan, which the board did me the honor to adopt. But our ene mies were not content in seeking to arouse the people of Georgia, Carolina and Tennessee against us and in attempt ing to destroy us by acts of the Legislature. About the time our notes for the money we borrowed to pay for the Georgia Company stock were to fall due, some one attempted to

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bring suit in Virginia to forfeit the charter of the Terminal Company. The application had to be made first to the At torney-General. It was made, and of course, the AttorneyGeneral declined to proceed to forfeit the charter of the Terminal Company, but it had to be argued and fought over; and, in the meantime, our credit -was seriously im paired. In this instance, as in Georgia and Tennessee, our enemies sought to conceal their identity, and while, as I am informed, no applicants name was mentioned in the appli cation to the Attorney-General, the counsel of the Norfolk and Western were present and argued it.
Committeeman Berner: Did the Attorney-General do it alone, or did the Governor go with him?
A. The Attorney-General alone. Q. What time was that? A. That was during last spring. I should say in January or February, just before our notes fell due in February for the purchase of the Georgia Company stock. There are many other details in connection with these matters, but what I have said gives outline of the facts. Committeeman Lamar: Is there any statute in the State of Virginia on the subject of competition? A. I could not answer that, sir. I presume that there is, but about that I could not say. Q. What was the ground on which that application had been made to the Attorney-General? A. That the Terminal Company had exceeded the pur poses for which it was chartered; that it was organized as a warehouse and railway company. Q. What was the capital stock of it? A. Forty-five millions. Q. How many miles of railroad have you got? A. We have got Q. I mean the Richmond and Terminal? A. It has from Richmond to West Point, some thirty miles I think. Committeeman Lamar: What are the assets?

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A. The reports will show. My impression is fifty-nine millions. I have here a complete statement of the financial liability of every property in bur Terminal system. This was a statement we made up to help in preparing our financial plans and to show just where we stood. Now, the result of that statement and it shows everything in connec tion with these properties is that all the stock not owned and outstanding per mile is $18,000. That includes all the Terminal common stock, the whole forty-five millions of the Terminal. All the bonds outstanding per mile are $17,292. So that the emire outstanding capitalization pet mile is $18,000 of stock and $17,292 of bonds. We practically retire a security when we put it into our treasury and get out our own security against it. Instead of water ing the stock of those properties we expect to reduce the outstanding capitalization. It is not proper to count as outstanding both the stock of the railroads we hold in our treasury and our own stock that we issued to buy it. To illustrate: While we may have to increase our capital stock when we buy a security of higher value than the price of stock, we decrease the outstanding capital of these prop erties when we buy stock worth less than ours and issue our stock to pay for it. There is $27,500,000 of East Ten nessee common stock. It sells at 10. If we could exchange one share of our stock for three of East Tennessee common, as has been proposed, we would greatly reduce the capitali-" zntion. So much so that I think if we could perfect our plans the average capitalization per mile of the whole Ter minal system would not exceed $13,000 per mile in stock
and $18,000 per mile in bonds. This would be, I think, a less capitalization per mile than any great system in the country, and less than is authorized in many of the char ters granted by the Georgia Legislature. The Norfolk and Western I think is capitalized now at about $85,000 per mile.
Q. Isnt it a fact that the Richmond Terminal Company holds an agreement by which it controls the East Tennessee Road?

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A. By holding the first preferred stock. When I speak of the capitalization of the Terminal company, it is proper always to remember that I am including the steamships also. The line from Savannah to New York is estimated as if it were 250 rail miles.
Q. Is there any other steamship property owned by this company?
A. Yes, sir; from West Point to New York. I wouldnt say that they actually own all of that last, but my impres sion is that they own some steamers.
Q. Do you know anything about this litigation in East Tennessee?
A. Only generally. Q. Do you know whether or not it is a fact that General Thomas, in his answer to that bill, claimed not to be operating the road in Georgia under the Georgia charter? A. Yes, sir, I think so. Q. That is a fact? A. That is a fact, as I remember it. On motion of Mr. Lamar the committee adjourned till 8:30 oclock to-morrow night.

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Committee met at 8 oclock p. m., September 17th, 1889 with the following members present: Messrs. Bartlett Chairman; Lyle, Lawson, Berner, Lamar and Glenn.
Patrick Calhoun examined. Q. (By Mr. Bartlett.) The question I asked you the first session was whether or not the East Tennessee, Virginia and Georgia was a competing line with the Richmond and Danville I mean the road from here to Richmond? A. Yes, sir; I understand. Q. For freights from the North and West to Atlanta, you answered in a certain sense, taking into consideration the N. & W.? A. Yes, sir. Q. Well, why is it not a competing line with the N. & W., Mr. Calhoun? A. Because, sir, it stops at Bristol, at the Virginia line. It might also be said to be in one sense, if you use the Cin cinnati Southern from Chattanooga, to be a competing line. Q. Then the N. & W. may be said to be a competing road over the East Tennessee. Virginia and Georgia with the Richmond Terminal systems? A. Yes, sir. Q. Well, does not the N. & W. connect at Lynchburg with the Virginia Midland ? A. Yes, sir. Q. And that is part of your system? A. Yep, sir. Q. Well, why is it not true that even without the N. A W. that the East Tennessee, Virginia and Georgia Company is a competing line with the Richmond and Danville sys tem? A. Because, sir, it does not reach the same points. Q. You are familiar with the charter of the Richmond and Danville system, are you not?

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A. I think I am. Q. You are acquainted with the workings of that system? A. Yes, measurably. Q. Well, why is it not true that even without the N. & W. the East Tennessee is a competing line with the Richmond and Danville? A. Because it does not reach the same points. It really could not, under those circumstances, be a competing line, strictly speaking. It would be impossible. Why, just glance at the map; that wiL show any one. Q. You are also familiar with the Cole charter of the Cincinnati and Georgia Road, are you not? A. Yes, sir. I do not know it as the Cole charter, but I know it as the charter of the Cincinnati and Georgia Rail road Company. Q. Well, you know this charter as the charter of the Cin cinnati and Georgia Railroad Company, do you not? A. Yes; I said I did. Q. This was the charter under which the East Tennessee, Virginia and Georgia Road was built from this point that is Atlanta to Rome? A. Yes, sir, from Macon to Rome, too. Q. You are right, sir. Now, you say you are familiar with this charter? A. I think so, sir. I have read it. Q. There is a certain clause in it, is there not, which for bids " that the sale of this road shall be made to any cor poration not a competing line within the State of Georgia?" And I desire also to call your attention to this section: " Any railroad or express company controlling or running a competing line of railroad, either as owners or as lessees of railroads owned and run by an individual or individuals, shall be or become at any time the owner or owners of a controlling interest in the said interest herein chartered, or should such parties, individual or individuals at any time become so interested, then the charter herein granted shall be and become void, and the franchises, powers and privi-

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leges thereof shall cease and determine absolutely," etc., etc. (Section 2 and 17 of this Act, and the Acts of 1880, pages 250-252). Now. you have read this section, have you not?
A. Yes, sir. Q. Well, was there not a competing railroad there as either owner or lessee thus interested in the East Tennes see, Virginia and Georgia Railroad by lease ? A. You must understand, Mr. Chairman, that that lease is no longer in operation. Q. Well, at the time it was made ? A. That is a pretty broad question, and one that involves a principle of law, and I would have to answer it pretty fully to make my views understood. I have held that under the decisions of the Supreme Court of the United States, and other high authority, that the lease made by the Rich mond and Danville Railroad Company of the East Tennes see, Virginia and Georgia, even under the strictest construc tion, as a connecting line of road could be upheld, and for this reason: It has never been pretended that the N. & W. road, running from Bristol down here by Burkesville down to the sea, would not have the right to control the East Ten nessee ; but, on the contrary, those who have attacked the lease by the Richmond and Danville of the East Tennessee, Virginia and Georgia Road have held that a lease made of the N. & W. would have been perfectly legal under the law allowing connecting lines of road to lease. Q. Did not the N. & W. at one time lease the East Ten nessee, Virginia and Georgia Road? A. No, sir; but they did propose an actual consolidation of their system. Q. You stated that when a party claimed the control of a road that it would not be legal? A. I do not think you caught me. I was explaining the fact that under the strictest construction of the law that the lease of the East Tennessee to the Richmond and Danville would be legal, and that I had heard those who attacked

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the lease maintain that a lease to the N. & \V. would be legal on the theory that it was a connecting and not competing system of road. Now, under the law, in my opinion, we can consider, in dealing with railroad corpora tions, only the competition which exists between the lines of the respective railroad corporations themselves, and not the competition which exists by virtue of their connecting lines of road. If, in determining whether or not competi tion exists you can consider the latter class, then you would say at once that the East Tennessee, Virginia and Georgia Railroad Company would compete for freights, etc., from New York, both by Norfolk and the Shenandoah Valley route and the Richmond and Danville, for all business coming into the territory along its system southwest of Morristown, Tenn. My own theory of the law, though, and I think I am sustained by authorities which may not be easily controverted; my own theory of the law is, I say, that contracts made for the carriage of freight by any railroad beyond its terminal points are purely voluntary acts; that their whole duty begins and ends with the carriage of freights on their own lines. If they undertake to carry them for any foreign lines from any given point to any given point, the act is a voluntary one on their part. If they hold out to do this for one person, of course they must do it for anybody; but I know of no law to make a railroad, whose charter ends at Bristol, carry freight any further unless it voluntarily engages in that business, or makes some voluntary arrangement for that purpose, dic tated entirely by its own idea of what would best subserve its own interests.
Q. Then what would be the use ot a railroad at all asking for business to be carried beyond its own terminus, beyond the terminus of its own road, if it was not influenced by this fact, if it could not know that its freight would be carried, eh? How is that, Mr. Calhoun?
A. Absolutely by their own interests, but not any actual legal obligation which they owe either the State or their

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own patrons. Nothing but their own self interest, as I have said, induces them to do this.
Q. Would not the force of competition compel them to do this?
A. I think that whether competition exists or not that their own supreme interests, would compel them, in any event, to get all the business that they could. But when viewing a railroad property, under the fundamental law of the State, we are dealing with a distinct person, a distinct legal entity, and we must look at it in this light. It has the option to refuse or accept business beyond its termini; to propose or not to propose arrangements with other corpo rations for through business. Any arrangement whatever of this kind it may make is voluntary, and it may make it or not, as its interest dictates; but with this limitation on its power, if it does make it for one it would have to do it for all. Now, therefore, in a proper legal sense, neither the Norfolk and Western nor the Richmond and Danville are competitors of the East Tennessee; but if you consider com petition as existing with connecting lines, then the route to New York formed by the East Tennessee and the Norfolk and Western, and the route formed by the Richmond and Danville and East Tennessee are competitive. The N. & W. would necessarily be a competitor in this territory along the lint of the East Tennessee with the Richmond and Danville over the line coming this way (pointing on map); and as this road (pointing) coming that way. Now, here is Burkeville, a common point on the N. & W. system, and the Richmond and Danville system. If you will glance at the map you will find it is very little longer around to that point by that line (pointing) than by this line around to this point (pointing).
Q. Just name your points? A. From Burkeville to Morristown, Tennessee, by the N. & W.. via Bristol, and by the Richmond & Danville over the Western North Carolina via the Paint Rock route. From Morristown to the sea via Burkeville to Norfolk, and
13

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from Morristown to the sea via Burkeville to West Point is almost the same distance, both lines forming continuous connections for the East Tennessees business; one almost as much a continuous connecting line as the other. If we are to consider competition as existing beyond the char tered termini of a railroad corporation, then the Richmond <fc Danville, on the principle that one corporation cannot lease a competing line, could not lease the East Tennessee, because it would destroy the competition created by the N. & W., and the Norfolk & Western could not lease the East Tennessee, although it touches no part of the territory reached by the East Tennessee except to connect with it at Bristol, because it would destroy the competition created by the Richmond & Danville. I must say that in such a state of things I see much harm. I see no reason why, situated as these roads are, there should not be a consolidation alike beneficial to themselves and to the country they go through.
Q. Is it not both a theory and a fact that a combination has a tendency to destroy competition and increase monop oly?
A. I think so; but in one sense I should say that that was only qualifiedly true; there are exceptions to that gen eral rule or principle; or, to put it in another way, modifi cations which illustrate the difference between the two schools of thinkers those who are against and those who favor railroad combination.
Q. You have read Prof. Hadley? A. I know of whom you mean. Q. Well, this Prof. Hadley he is very much on your side, is he not? A. Well, to some extent. Q. The question I asked you almost the exact words I asked the question in, I got out of this book. A. Yes. Q. I notice that he might be classed on your side and in favor of your theory ?

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A. I think Prof. Hadley does not go so far in the railroad situation as I do. I believe in a qualified governmental control. I do not believe that the railroad problem of this country can be settled without a certain amount of govern mental control.
Q. Yon mean a control under ownership? A. Well, upon that point I am not prepared to be definite just now. Q. Do you think it will come under governmental owner ship? A. That I cannot say; if this question of combination and competition continues goes to such an extent as it looks likely to I think it possible that there will -be some thing of the kind. Q. Governmental ownership? A. I do not think it will be governmental ownership, for a long time at least, but a stronger governmental controL Q. Do you mean the general government? A. Both general and State. Q. (By Mr. Lawson.) Because it takes both to cover the whole sphere of the question? A. Yes, sir. But, Mr. Chairman, to go back to your question in regard to competition and to answer it mote fully, such combinations would, in my judgment, inevitably lead to a destruction of a certain amount of competition. But, the combination might produce more competition than it destroyed. Q. (By the Chairman.) You mean by that it does not lessen competition? A. I mean by that that any combination of roads is bound to lessen a certain class of competition. But it may materially widen the doors, and in that way increase, in stead of lessen competition. Take our system. I am look ing to the competition for the commerce of this continent. Our system of roads, if they actually become consolidated, would necessarily destroy a certain amount of competition, but this wider competition of which I speak would, and

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must be, I think, wonderfully increased. As we stretch out to the southwest the increase of competition will be enor mously greater than its destruction. A certain amount of local competition is inevitably destroyed, but no one can assert that larger benefits will not flow from having created the wider competition for the commerce of the southwest. It would be folly for any one to assert that if there existed an actual consolidation of the roads between Atlanta and Macon that some competition would- not be destroyed at both places; but combine these roads of the Terminal Com pany into one system and the natural results that would flow from it would be to create competition with the roads north ofthe Ohio river for the commerce of the southwest, and the result would be that both places would be benefited by an enormous increase of commerce from other roads.
Q. How is that? While you might lessen the competi tion at two points in a State, you greatly increase it in the markets that would benefit those two places?
A. Not only competition of markets but of roads. Q. You mean that if there were factories at these two points that such a combination would cause them to enlarge their out-put, increase the value of their operations; that they would reach out wider and wider each year and go into territory where there is now no competition? A. Yes, sir. Q. How will that benefit the people of Georgia where these lines of road in Georgia are run in this way? A. In this way: By widening the markets, increasing the commerce of our people and the tonnage of our roads with out increasing the rates of freights or destroying any advantage now possessed. Take these two lines from Macon to Atlanta, and which are strong competitive lines for freight, and which have for many years run only *a few miles apart, the rates on these two lines are now, and for many years have been, the same without, I may say, the smallest variation on all classes of commodities, so that actually in the matter of carrying freights between these two

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cities it makes no material difference to the merchant or fanner at either point by which road he ships his freight; nor do I think, in view of this state of things, that either now or in the many years past in which these lines have been competing, that the competition between them tends in the slightest degree, or has tended, to the development of the country through which they run. What improvements have come arose from increased facilities, and not from competition in rates.
Q. Is it not true. Mr. Calhoun, that a man who ships his freight over the East Tennessee, Virginia and Georgia Bailroad gets a cheaper rate than the man who ships his freight over the Macon and Western ?
A. I think not, sir. I really think not, sir. Q. But does not the East Tennessee, Virginia and Geor gia Railroad Company fix the rate? A. Yes, sir, I believe it does. Q. Then the Macon and Western Railroad Company cuts down to the East Tennessee rate, does it? A. Yes, sir. Q. Then, as a matter of fact, Mr. Calhoun, the short line fixes the rate ? A. Naturally. Q. You say naturally;" is this always the case between competitive lines? A. It is generally the case, sir. Q. Is that not competition ? A. In a sense, yes, sir. Q. Has there not been a time, years ago may-be, when rates were so cheap that the Central was threatened with bankruptcy? A. I dont think it ever threatened the Central with bank ruptcy. Q. When Mr. Fink had charge of it? A. He had charge of it, and he has charge of it now; and When he was receiver of the road there was a more active cutting of rates.

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Q. The distance from Atlanta to Macon by one road is shorter than by the other, as you are well aware; it is from eighty-seven to ninety-one miles over the East Tennessee route, and a man purchasing a ticket at Macon for Atlanta pays three cents a. mile over ninety-one miles, but when he gets to Bolivar he buys over the lower rate. Now, the man that goes to Macon gets almost as cheap a ticket as I do when I go to Forsyth, does he not 7
A. I think there must be some mistake. Q. No, sir, of course not. The East Tennessee line being the shorter route between these two cities, which we have used as an illustration, Atlanta and Macon, naturally, as I have said before, fixes the rate of passenger traffic, and when a man buys a ticket he buys it over ninety-one miles of the East Tennessee road, and not over the Macon and Western. When I go to buy a ticket at Forsyth I buy it with reference to this competition ? A. I question that proposition. I think that that is a mistake. If the East Tennessee, Virginia and Georgia Bailroad Company fixes that rate it is a mistake. As I under stand the law, if that road had been built by the Central Railroad and Banking Company instead of the East Ten nessee, Virginia and Georgia Company, and by that route had run ninety-one miles, and if it had owned them both absolutely in fee simple, then the rate would be as much fixed by the shorter line as it is to-day. It would either have to put down its rate or it would have to lose all the business on the other line, and give much less accommoda tion. The rate being fixed by the shorter line is not the result of two separate ownerships. Q. When were you first interested in railroad manage ment, Mr. Calhoun ? A. In January, 1887. Q. You first became connected with the Central ? A. Yes, sir. Q. What was the connection between the Central and. the Richmond and Danville?

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A. None whatever. Q. What roads did the Central then control ? A. It controlled the road from Savannah via Macon to Atlanta. Q. Was that the original Central system? A. No, sir. It only ran to Macon. The Central also controls the Southwestern, running down here [pointing on map] to Blakely, and down to Eufaula and Columbus. It also controls the road from Eufaula to Montgomery; then it controls this Columbus and Rome Road, and the East Alabama road here [pointing to map], and the Western Railroad of Alabama from these points [showing on map] around to Selma, and the road to Columbus out here to Birmingham [showing on map], commonly known as the Columbus and Western, now the Savannah and Western. It also controls the Port Royal and Western Carolina, a road made up of three separate small roads the Port Royal and Augusta and others. Q. They had also their connection by sea their steam ship line? A. Yes sir; from Savannah to New York, Philadelphia and Boston. Q. This was under the Wadley regime? A. Yes, sir. Q. The next move then was to bring up the agreeement with the Richmond and Danville Road? A. No sir, there was no agreement between the two roads, brought about directly or through the W. P. Q. What was the next step? A. The next step was the completion of the Columbus and Western and the building of the road from Clayton to Ozark, and the road from Blakely to Columbia. Q. The Central, through its water lines, was a competitor of the Richmond and Danville for the coast trade? A. Yes, sir. Q. The Richmond and Danville, with its connections,
was one system? A. Yes, sir.

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Q. And your system, with its lines of .steamships, was another ?
A. Yes. Q. Other systems also had their lines of steamships, did they not? A. Yes, sir; there was the Plant system.. Q. And each one touching at New York and other ports? A. Yes. sir. Q. By virtue of their connections touching these ports by virtue of these connections ? A. Yes, of course. But let me correct one impresssion that might prevail. When you say competition to the SeaBoard by the Richmond and Danville system and the Cen tral system. They were not in competition there. They come in competition in Georgia at Augusta, Athens, Gainesville and Atlanta. Q. (By Mr. Glenn.) The East Tennessee was a competi tor of the Richmond and Danville in South Carolina, was it not? A. No. Only at Atlanta and those small points (show ing on map). Q. The present Western competitors are what? A. The Western and Atlantic and the East Tennessee and its Western connectrons. Q. What are your present Western connections? A. Besides these two, there is another built and one in process of construction. Q. I am speaking of the present status? A. Yes, I know. Q. The Chattanooga, Rome and Carrollton has not been built? A. Yes, sir; but the Marietta and North Georgia is not yet finished. Q. Using Atlanta as the point of departure, what are the competitive roads? Is there no competitor of the Georgia Pacific in that direction? A. I would say there was no competitor in Atlanta for that business.

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Q. Well, from Atlanta to Birmingham. That is, towards the West?
A. Well, you might go from here down around by Opelika to Birmingham; but that would be, I think, a very round about way.
Q. You say that that would be a very round-about way competing line, down to West Point and up to Birmingham?
A. Yes, sir. Q. That is, in railroad language, a competing line? A. Yes, sir. Q. And rates would be fixed by the short line the Geor gia Pacific? A. Yes, sir; in that case. Q. Take the Central Railroad and the Savannah. Florida and Western? A. Yes, sir. Q. Is not that a competing line? A. Yes; as far as Albany.
Q. All that section of country?
A. Yes, sir. Q. Did not the Supreme Court hold that they are com peting lines? A. Yes, sir; I think they are myself at Albany. Q. (By Mr. Glenn). I was asking about the date of the contract with the S. F. & W. and the Plant system of the B. & W. Railroad; if the same management which controls the Richmond and Danville should secure control of the Western and Atlantic, would there be any other line enter ing the State of Georgia, or departing from it? A. Yes. Q. What? A. The Chattanooga, Rome and Columbus that enters the State of Georgia. Q. What parts of Georgia can it reach without passing over some lines of the consolidation ? A. As it stands, only to Carrollton. Q. It would have to pass over some of them ?

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A. Yes. unless other lines were built. I did not finish; but I should say that the Marietta and North Georgia Rail road, which is in rapid process of construction, is one.
Q. It woud not take long for such a powerful system to crush that road, would it?
A. I suppose they would have money enough to buy it. Q. You could handle that one very easily? A. I do not expect that it would be very hard. Q. Then, if that state of affairs were true, there is abso lutely no competition in the State of Georgia except from the Chattanooga, Rome and Columbus and the Marietta and North Georgia? A. I did not finish. There seems to be a proposed exten sion by the Chattanooga, Rome and Columbus manage ment which will reach ihe Plant system. Q. But the Plant systeui only reaches the lower part of the State? A. Yes. Q. What are their terminal points? A. Well, Bainbridge and Albany on one side and Savan nah on the other. Q. But, by its contract, or traffic arrangement as you call it, is not this road in combination with the Central? A. I apprehend that the contract which exists between these two roads cannot be considered as sacrificing the inde pendence of the S., P. & W. system. While we are on that point I will say that since this combination has been brought about between these railroad?, this system has been pro jected (pointing to map); it runs from Chester, S. C., and includes the Sea-Board and Roanoke system running along here, from Chester via Athens to Atlanta, as the map will show, a projected line. This line have sold their bonds to build straight from Chester to Atlanta. At Athens the Macon and Covington has been built, and I think is running from Athens to Macon, where they meet the Georgia Southern. Q, And that could be as easily managed as the Marietta and North Georgia?

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A. If we had money enough; but I do not think that is a matter even in contemplation. The Georgia Southern goes through to Waldo, and another road goes through to meet this Sea-Board and Roanoke. and the Chatttanooga, Rome and Columbus are going to get across to Warm Spring near that point and meet the Georgia Midland, and then it is also proposed to build down through Columbus to Albany and arrange to have it run to some point down in Southwest Georgia, down to a connection with the Florida Railway and Navigation. When these roads are built it will give a mileage in Georgia not as much as the mileage which we hold but one which is considerably over half of what we own.
Q. But depending for its outside connections upon your lines?
A. No, sir. That system when perfected, would be ab solutely free from our system. It would get its own out side connections by entirely different routes. Mr. John Robinson controls the Sea-Board and Roanoke system, and I have heard that Brown Brothers are backing him in this effort. They are projecting this system to go down into this country (Central and Southwest Georgia), and on the eaet they would have an interior system reaching a great many points in Georgia and meeting another system which looks out to the northwest.
Q. And these roads, i. e., that you represent whatever may be their legal status they are controlled by one and the same policy and one and the same set of men, are they not?
A. Not necessarily. Q. Well, with reference to their foreign relations ? A. I should say yes. Q. This IB now not all that is contemplated by this sys tem, is it? A. No, sir. Q. They are looking forward to still extending their con nections westward? A. Yes, sir.

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Q. So as to open up the connection with the west you have spoken of?
A. Yes, sir. Q. To do that through the medium of the Birmingham lines, making your ultimate points in Kansas? A. No sir; I do not know that this is germain to the inquiry. I do not know that it would be proper to dis close our future plans at the present time. We have active rivals in the field, and it would not be proper to the inter ests I represent to put our enemies in the railroad situation in the possession of our plans. But I would nay generally that so far as I know, it has not been contemplated that we would go further than a single step across the Mississippi. Our purpose is to go to the Mississippi, which we look upon as one of the basic points, and make such arrange ments with Mr. Goulds or some other line, as may be most judicious. Q. Does not the Memphis aad Charleston take you to the Mississippi ? . A. Yes, sir. Q. And you are rapidly filling in that gap [pointing on the map to the Georgia Pacific] ? A. Yes, tir; it is filled. Q. Run trains to Greenville? A. Yes. sir. Q. You would then have two lines to the Mississippi ? A. Yes, sir. Q. One at Greenville and one at Memphis ? A. Yes, sir. Q. And then from the East you would have two otherlines? A. Yes, sir. Q. The result of that would be to make this State the point of departure for the whole traffic arrangement? A. Yes. My theory is that Georgia is the central State of the Southeast, and that her geographical position is the reason of Atlantas growth. A glance at the map here will

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be sufficient to show you that this section is the natural commercial and geographical centre of the Southeast. You turn the Blue Ridge Mountain ridges at Atlanta and you turn the Lookout range at Chattanooga, so that the inevit able result of our combination would be to put tins region (the centre of this section of this large portion of the coun try) upon the one or two of the great trans-continental lines of America, which will, of course, result in the opening out of the extent and influence of our general commerce, in creasing the value of our manufactures, enlarging the opera tions of our merchants; and, in short, if our people could and would occupy the large territory thus given them, would give them a value which they have no conception of.
Q. Thereby developing competition between this country and that out there ?
A. Yes, sir. That is the reason I have always striven so hard to carry out these views I am advancing and was ad vancing before I went into the railroad situation at all. These views are founded on strong convictions after careful study. I feel that the development of this system, starting at Washington and coming thence down through this coun try, and the development of the East Tennessee, in combi nation with the N. & W. starting at Harrisburg and run ning down by Selma, and from there to Mobile would necessarily tend to discriminate against all that portion of Georgia which lies southeast of Atlanta; and if these sys tems of roads were allowed to develop on the line of general policy that roads commonly develop on continuous through lines, and cannot be brought into combination, the inevit able result would be that it would drive away trade for the benefit of other sections, as can be easily seen.
Q. It is to your interest, as well as to the interest of the State, to prevent discrimination against it?
A. Undoubtedly. Q. Take that whole theory, presume that branch lines were thrown out the sole object of that branch would have been, the tendency of this line if alone, would be to discriminate against Georgia?

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A. If the people in Atlanta owned every share of that stock, the Richmond and Danville, their interest in run ning that road for no man will run railroads except aa his interest dictates their interests would be to discrimi nate against Georgia ports. While they might be forced to make connections, their direct interest would be to keep the Central out of their territory. The Central would be an interior system to the Richmond and Danville and the EastTennessee, Virginia and Georgia companies, and it would be to shut off at these points (showing on map) Sparteuburg, Greenville, Anderson. Athens, Atlanta, Birmingham and Selma, from which it would have but one possible escape, viz: to get a sufficient amount of money to build further west. Then when it got there, if it stood alone, it could not make as strong a combination as it could if these three properties were combined. What I hope to do, and what I believe bur system tends to do, is to open up on fair and equal terms all the commerce of the State of Georgia lying east and southwest of Atlanta, and to put these roads into a position where it is not to their interest to discriminate against Georgia. Beyond that, I have not expected abso lutely to control this commerce for the State of Georgia. That would be impossible. I do not hope to monopolize it, but merely to put. our system of roads and our people in this State in such a position as would be of most benefit to them and to us, and to enable us to do this by reaching out to the Mississippi.
Q. And the roads in South Carolina?
A. (Interrupting). I think I can answer that by an illus tration here (pointing to the map). These roads I have named (pointing to the lines owned by the B- & D. in South Carolina) have been, as I said, absorbed by the Rich mond and Danville under this branch and continuous line theory. The result has been that the bulk of the business along these lines from the coast goes that way over the Richmond and Danville. It is to the interest of the people of Charleston to allow that road (the South Carolina) to

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come into our system, and if that were done our interest, on the other band, would be not to take the cotton around the way just described (pointing to map), but to allow it to seek its natural outlet at Charleston, and to let the commerce of this section (upper and central Carolina) instead of being directed out of its natural channel, seek its outlet where it chooses. We have sought to open up the natural avenues of commerce by more perfect system of lines, or combinations, and in doing that, all we have accomplished, so far as any of these roads are effected, has been the purchase of the stock of the Georgia Company, which had purchased a ma jority of the stock of the Central, and the purchase of the stock of the Richmond and Danville, and a majority of the first preferred stock of the East Tennessee, Virginia and Georgia Railroad Company, which, as I explained, controls the East Tennessee, Virginia and Georgia Railroad Com pany for five years, by an election of eight out of fifteen directors, or until two consecutive dividends of five per cent, have been paid. We have never gone so far as to affect the integrity of either of these three systems of roads, but by bringing about mutual interest we obtained a control which we could have done by purchase as individuals if we had been rich enough and strong enough, it being our aim sim ply to bring these properties into greater harmony and give them a greater capacity, combined to benefit both ourselves and the people among whom we had our property.
Q. Is not the Georgia Railroad from Atlanta to Augusta a competing line to Atlanta, which runs by way of Macon and Millen up to Vugusta?
A. Yes, I should say it was. Q. After Judge Gibson delivered the decision, what be came of the East Tennessee Road? A. They first attempted to remove the case to the United States Court, and it was then remanded, and my impres sion, sir, is that it is pending now in the Supreme Court of Tennessee. Q. You have started about purchasing the preferred stock?

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A. No. We did that in February of 87. Q. Why then did you lease the road ? A. As a method of management. Q. You answered Judge Lawsons question the other night on this point ? A. Yes. Q. Will you not please explain it again? A. There are two ways by which we could acquire control of the East Tennessee, Virginia and Georgia property. Through the eleven millions of 1st preferred stock, which, under the plan of reorganization, controls for five years or until two consecutive dividends have been paid (two con secutive dividends of five per cent, on those eleven millions of dollars of the 1st perferred stock.) We purchased a majority of that stock in February of 1887. That property was reorganized in 1886, and the control will absolutely expire in 1891. There are two ways of continuing our con trol: either by leasing or by purchasing the junior securi ties that is the eighteen million, five hundred thousand dollars of second preferred, and the twent3-seven million five hundred thousand of the common stock. The directors who are elected are chosen hy both the junior security holders and the holders of the preferred stock. Q. Who are the directors of the East Tennessee Company? Are they both on the Richmond Terminal, too? A. Partly, sir. I will telegraph to New York and have made up a list of the directors of these roads since Feb ruary, 1887. They are in many respects entirely distinct, but you will find in looking over them both prior to this purchase and since some of the same men. Q. (By Mr. Barlett.) You have spoken of General Logans connection with the Richmond and Danville road? A. I believe so. Q. Did he not at any time control the Norfolk and Wes tern road? A. No, sir. Q. At no time?
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A. No, sir If General Logan or his friends ever had any important interest in the Norfolk and Western it ter minated before I ever had any interest :n the Terminal Company.
Q. Now, I understood you to say the other iiighl that you knew it to be a fact that in the answer filed by the East Tennessee Road the position was taken that they did not operate their road under a Georgia charter; is that so?
A. Yes; nor do I think they do. Q. That position was taken by reason of what? A. That depends upon a legal question. Q. That position was taken by reason of the alleged vio lation of the charter and the situation of the State? A. I think so. Q. Then it is true that as a legal proposition it is true that they did not have any charter in Georgia by which they operated this road? Or operate it now? A. They operate the road by the potentiality of their own charter, and there I would like to answer more fully. Under the terms of that charter a clause of which you read I hold this: The Cincinnati and Georgia charter was made looking to a connection with the west and gave the right of an absolute sale, not only of its franchises, but of itself, to a connecting line of road; it prohibited a sale of its charter to a competitive line of road. The eviuent object was to form a connection between Georgia and the west. When the charter had passed and its property had passed into the control of the East Tennessee. Virginia and Geor gia Railroad Company, which was a connecting line of road, the purpose for which it had been granted had been fully complied with, and that connection had been estab lished. In a case with which you are familiar that was got ten up to put the East Tennessee Road into the hands of a Receiver, I suggested the point afterwards confirmed by the Supreme Court, viz: that the sale of the Cincinnati and Georgia Road made a corporation of the East Ten nessee in Georgia, and the Supreme Court so held.
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Q. (By one of the Committee.) Yes; and Mr. King is said to have made a very convincing argument.
A. (Mr. Calhoun resuming.) Now, under nn actual sale of all its property passed over to the East Tennessee, and the whole theory on which we proceeded, and on which the Supreme Court based its decision, was that the actual pur chase was broad enough to carry with it Life, and that, therefore, the East Tennessee was doing business in this State as a- Georgia corporation. Under that power they issued this blanket mortgage which was foreclosed. That property went through the foreclosure proceedings. When the foreclosure (tame to an end, and all of the property was sold, the company was never reorganized except, as I have said, under the laws of Tennessee.
Q. Do I understand you to say that the East Tennessee is not now operated under the East Tennessee and Cincin nati and Georgia Railroad charter ?
A. I think so, sir. CJ. How is that? A. We now operate it by the potential power of the East Tennessee charter; just as we operated the road from Cleve land to Red Clay prior to the Cincinnati and Georgia char ter. A license was granted to that road a great many years ago. And just as it operates the road from Dalton down to the State line. A case was before Mr. Justice McCay, in which that road was held to be operated hot under its former charter, but as under the then East Tennessee, Virginia and Georgia Railroad Company, and that such operation did not make the East Tennessee a Georgia corporation. The case is in 4th Woods. Q. It is, however, not now operated by the East Tennes see, Virginia and Georgia Railroad Company? A. No. (j. By whom, then ? A. By the East Tennessee, Virginia and Georgia Railway Company; it is part of the system. Q. Is it railroad or rail way? A. It is railir-ni/ now.

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Q. Do you know when the East Tennessee, Virginia and Georgia " Railway " Company was chartered ?
A. I think in 85 or 86. Q. Where? A. In Tennessee. Q. They were chartered then looking to this same object? A. Under this re-organization, yes; it was in either the one or the other of these years 85 or 86. Q. And the road at the time of the lease was being oper ated by the East Tennessee charter in Tennessee under the charter of the " East Tennessee, Virginia and Georgia Rail way Company?" A. Yes, sir. Q. You spoke of these contemplated systems of the Chat tanooga, Home and Carrolltorv ? A. Yes. Q. If it goes through as far as Carrollton it damages you, does it not? A. Yes. Q. Now, in case you decline, or your system should de cline to pro rate with them on freight from the West to Augusta and Savannah, what effect would that have on the business of the Chattanooga, Rome and Carrollton Railroad? A. If we were to decline to pro rate with them it would have a tendency to destroy their through business unless they chose to lower their own rates and pay our local charges. Q. What legitimate reasons could there be for your declin ing to prorate? A. I do not know that there would Ix- any. Q. How could it benefit you? A. I see no way by which it could benefit us. Our inter est, as I before said would be directly to take on fair terms all the business offered us; all that they would give us. Q. Then, in a word, not to take all the business offered you for or by them would be simply to affect their interests not to benefit you but to injure them? A. I should sav so.

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Q. (By Air. Lawson.) Suppose your scheme was per fected ; your roads extended to the Mississippi; and through your system make connection with other roads and bring freight to Georgia; what benefit even then would the people of Georgia derive? Would the people of Georgia be ben efited in any way?
A. Necessarily. Q. How? A. By a reduction of rates to start with, and by the great development which the country would receive; in creased prosperity all over the State that that sort of thing would necessarily bring about. This is really a very im portant question, and one to which I have given much attention. Take an example: The average rates on the New York Central are 7 fa mills per mile per ton. They bring a great deal of grain to New York. We have got a short line from Kansas City to the sea, and if we bring that grain to this country we must bring it as cheaply as the New York Central does. The inevitable result would be that the great increase of business would force a great decrease in rates. Last year there was a merchant in Kan sas City who wanted to ship five millions of bushels of grain. We could not handle it as cheaply as the northern lines, but if that grain were to start through Georgia com ing from that section of country we would have to reduce our rates. If we could reduce our rates to the sea it would enable rates to be reduced in the section of country behind us, and at all the great distributing points, as a matter of course. \Ve would be compensated by that reduction by the great increase in our busi ness. Then, these cars coming down here, and the commerce starting that way would produce a closer rela tionship between the northwest and southeast. Those grain cars would have to go back either empty or loaded, and we would strive purely out of regard for our own in terest, to build up every manufactory along our lines to get into these empty returning cars any sort of freight that

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would simply pay more than the cost of transportation, . which would necessarily produce a great prosperity in all our lines of industries in the southeast. Our whole theory is this: In the southeast as the base for industrial develop
ment is the cheap production of raw material, it is here that there should be a great manufacting section of country. \Ve have got the short linos to the entire southwest and lower northwest, and it would be to the railroads in terest to develop all industrial enterprises here, as well as to give cheaper rates from the southwest and northwest. That is our aim. Take Atlanta as a center; ronsider that we are here as far west as Cincinnati; take our coal, iron, cotton and it does seem to me that there is a great field for true enterprise. If wt could do this it would be seen at once that the country would greatly develop. How would that make us money? The average earnings of the Ter minal system of to-day is about three thousand nine hun dred dollars per mile. That enables us to pay all our fixed charges, and to declare some dividends on some properties. If we can do that on gross earnings of three thousand nine hundred dollar* per mile, then if we could develop manu facturing enterprises it would be a fair expectation to feel that we might give up the earning power of one-half of what the State Road is now earning, which is about nine thousand dollars per mile, or nearly two and a half times as much as the Terminal system is earning. So that our whole eventual success is necessarily based upon contrib uting to the material progress and prosperity of the coun try through which our line? run through the section con tributing to them.
Q. (By Mr. Lawson.) You think then that this general prosi>erity would more than compensate the people for what they might lose by want of competition ?
A. I would not like to be understood for a moment as ad mitting that we are damaging or trying to damage the peo ple of the State of Georgia. Our combination tends to in crease railroad building; tends to put way stations or

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local points nearer on a footing with competitive points an<l to increase individual competition within the State.
Q. Suppose that the Legislature should conclude that yoviv scheme is* contrary to law and should enact .someclause dissolving the whole thing, would that frustrate your scheme at all?
A. Entirely, sir. Q. Would not you rely on some agreements or traftiiarrangements to carry out your purposes? A. If we had the same power, or some power to do it, we might; but our scheme contemplates not merely a traffic arrangement, but getting a great deal of money to aid in financiering, and we have got to get some means to do that : we are not simply stopping with the absorption of the stock of these roads. Ft antagonistic legislation were passed, its direct effect would be to destroy our credit and perhaps force us into liquidation, which in turn would have a tendency to greatly depress all railroad bonds and securi ties, f do not desire to go into this part of the question at this late hour, but 1 will say that the direct effect of such action would be to enormously depreciate the securities in innsystem, and a great deal of capital would be drawn away from us which we would have been able to control. Committee adjourns.

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Committee met September 24th, 1889, at 4:30 oclock i>. M., with the following members present: Messrs. Bartlett, Chairman; Lamar, Lyle, Berner and Lawson.
E. P. Alexander (recalled.) Q. (By Mr. Calhoun.) General, throughout this exam ination we have spoken of these systems as if they were consolidated, and the word " consolidation "" has been fre quently used. As a matter of fact, there are no contracts between the Richmond and Danville, the East Tennessee or Central Railroad at all? A. None whatever, any further than I have several times stated to the committee the association called the Southern Railway and Steamship Association, which is some fifteen years old. Q. The status of these properties and their relation to each other have not been changed at all l>y any of those purchases made l>v the Terminal Company? A. No. Q. Their integrity as corporations lias been fully pre served? A. Entirely. Q. Do you, in your relations with the Richmond and Danville and East Tennessee, Virginia and Georgia, recog nize any differences now that did not exist lx>fore? A. Only so far as this, for instance: If I got some coal for my engines in any coal territory they reach, I would rather give them the hauling of that coal than give it to any outside line. But there is no contract or agreement, or anything to that eflect, but it is simply a teeling that we are all friendly. Wheu I have any patronage that I ctn bestow I give it to them, and when they have any business to liestow they give it to me. Q. The relations are simply harmonious, and the ex change of business is more reciprocal than before? A. Yes.

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Q. And the only tendency of the alliance has been to open, as far. as possible, the territory on each others line?
A. Yes; and we are a little more jealous of the other getting into each others territory.
Q. (By the Chairman.) You mean to say. General, that you do not compete with one another for business like you did before?
A. I can illustrate it better Q. That is a simple question, General, and yov\ can illus trate afterwards. Do you mean that or not that by reason of this friendly feeling or whatever you call it, that you are more friendly and get along easier because you do not strive one with the other to get business away from each other? A. No; that is not true. 1 would say this: I allow them facilities for competition in my territory which I denied them before. As an illustration : At Columbus I will now furnish my agent with through bills so they can get cotton from Columbus on a through Richmond and Danville bill, when, before that. I would only issue it on my bills, and when it went over my roads the fellow would have to ex change hip bills. That was some slight advantage. That illustrates a more friendly feeling. Q. (By Mr. Calhoun.) It opens up the territory then on each others lines between these three great systems? A. Yes. Q. But the fixing of rates or the competition that might result in the competition is still fixed by the Southern Steamship and Railway Association ? A. Entirely and absolutely. .Q. In every other respect do you still compete with each other anil try to furnish better facilities, improve your road-bed, put on heavier cars and use more trains ? A. As might naturally be supposed, the object of the dif ferent officers managing the different roads is for each one to make his the best road in every way. The Richmond and Danville arc building, or have built, a thousand cars

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with air-breaks in order to get quicker time down here and be able to better compete not only in this territory but in all the competitive territory in the South by an all-rail line. I have no all-rail line to compete with, but I am building a faster steamer than I ever had before; and each of us is straining every nerve and trying to get every dollar we can to improve our facilities, and the managements of the dif ferent roads are just as earnest as ever before, each in tr3Ting to make the best possible showing for his own line.
Q. Isnt it a fact that on your own line between here and Savannah you have laid down a great deal of heavy rail and naturally haul freight with better speed ?
A. Yes. Q. And isnt it true you have established a system of bal last on your main stem ? A. Yes.
Q. And isnt it true that you are endeavoring to put on the sixty-eight or seventy pound steel rail and thoroughly ballast your road and bring it up to as high a standard as any road in America?
A. That is what we are earnestly working to do to do this even more rapidly than our earnings even will permit. Not only that, but, as I said before, with the friendship of the Terminal people we have increased our Terminal facil ities in New York, as by an agreement with the Pacific mail we get additional pier there, and we bought $450,000 worth of property in Hoboken to make additional terminal facil ities there. In other words, we are preparing to do a big business, not only to do the business we have now better, but be able to reach out and get business from a more dis tant territory.
Q. I will ask you if you have not purchased larger cars and heavier engines?
A. Yes, a great many. Q. And the direct effect of the consolidation of this sort is better equipment, heavier engines and larger cars, heavier rails and more thorough ballast to enable you to handle your business cheaper?

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A. Yes. Q. I will ask you if you are not looking forward by the improvement of your property to the time when the rates will necessarily be reduced, and to off-set that reduction you will be able to haul heavier and longer trains of cars and do your business more cheaply ? A. That, I think, is absolutely essential to the future prosperity of the road that we put ourselves in that posi tion. We are necessarily bound to make up for the reduc tion of rates that is going on, by an increase of business. Q. The reduction by classification and the increase in carloads has been very great recently? A. Very great. Q. And that means a reduction even where there is no printed schedule of reduction ? A. There is a constant reduction of rates. Q. Glance at that map, General; you say the main factor in the making of rates in America is the canal and water ways to the east? A. Yes. Q. And you are looking forward to bringing a certain amount of grain and western products into the south and to the southern seacoasts? A. Yes. Q. Do you recognize the fact that it would be impossible for you to get the business from that section of country unless you brought your rates down throughout your line to approximate the rates north of the Ohio river? A. I cannot participate in it without meeting their rates. Q. And an increase of business west of the Mississippi river could not follow unless there was a decrease of rates in the south? A. Yes; that is, a decrease first on the through freight, which would necessarily bring about a decrease in all the intermediate locals. Q. Then the direct effect of the combination we are making, is a reduction of rates on all the products that are brought into this country? Is that correct?

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A. Yes. Q. When these cars then come here from the west with western products, in your judgment is not the direct effect of the combination we are muking to stimulate and de velop all the lines of manufacturing industries in the south and make it of interest to our system and pour that busi ness back to the west as return freight? A. Yes. The hulk of the business being from the west, we will necessarily have a number of cars going back empty, and it will be our policy and to our interest to stimulate l>y low rates the products of Georgia, such as lumber, naval stores, rice, agricultural products of all kinds, watermelons, plows, wagons and all of those things. Our only chance to load our cars back will le by development of that business. Q. (By _Mr. Lamar.) General, are we in a position to send manufactured goods lo Kansas City? A. Yes. We ship factory products to all those places. We publish a list showing maybe five hundred or a thousand points, little distributing centers, in Arkansas. Illinois, Nebraska, etc., all over the west. All tuose are furnished to enable persons to sit in their offices and know the through rates. They are printed by the Southern Hailway and Steamship Association. Q. As a fact, do we sell any manufactured articles in tinwest? A. I think a very large number. My impression is that our mills sell half their product west. I am not sure about that, but I know it is quite large. I had the figures in the little pamphlet I had here the other day. Q. What sort of mills do you mean ? A. Our cotton mills. Q. Is Birmingham selling any of its iron in the west? A. O, yes, sir; it sells by far its largest product in thewest. I should say that it sells eighty per cent, of it in the west. Q. Any of the iron interests of North Georgia sell any in the west ?

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A. I do not know of any furnaces in North Georgia; I know of none south of Chattanooga.
Mr. Calhoun : There is one at Cedartown. Mr. Alexander: I did not know of that. The Chatta nooga furnaces send some.pig iron our way and the Bir mingham people send quite a good deal. Q. Do you ship any manufactured products from the north, coming by Savannah and going out west? A. We ship a good deal, and are getting gradually more into that business. For instance, in the month of June we had about ninety car loads of shoes from Boston for Kan sas City. Not long before that we had ten or fifteen car loads of dry goods from New York for the Mormon co operative store at Salt Lake. Q. ( By Mr. Berner.) What is the freight from New York to Kansas City by your line? A. My recollection that the first-class is one dollar and twenty-seven cents by tho direct trunk lines, and that it is one dollar and twenty-two cents by the Stonington boat and the Vermont Central, and we are working on the one twenty-two rate. By the canal and lake is one dollar and two cents, which is lower than either of us. Q. Then how can you hope to get that freight so long as the hike route is twenty cents less? A. The lake, route takes so much more time that I can command some business at a somewhat higher rate. For awhile we put on a rate of about one-ten, making a slight difference there, and got a large quantity of the business. The trunk lines were aroused and threatened to make re ductions in our territory, and in this territory, here from Birmingham to Kansas City, and our connections refused to pro rate a rate lower than one twenty-two. By that rate we get some of the business, because we can do it faster than the Canal and Lake lines. Q. (By the Chairman.) What effect does the refusal to pro rate have on competition ? A. This is about the effect: It left me too little money.

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When these fellows would not pro rate with me I decided to hold off and not work for the business until they consent to pro rate with me instead of asking arbitrary divisions.
Q. It has the effect then to lessen competition? A. It has the effect to reduce my earnings out of it. Q. You both compete for the same business to the west ? A. Yes. Q. When they will not pro rate with you does not that have the effect of destroying or hindering your competition with them for this business ? A. It has the effect of making the business less profitable for me. My competition is not against them, but over their roads against northern trunk lines. Q. (By Mr. Berner.) It is one dollar and six cent? from
Macon to New York ? A. I think it is. Q. And one dollar and fourteen to Forsyth? A. Yes. Q. And one dollar and fourteen to Atlanta? A. Yes. Q. It is one dollar and fourteen to the end of your line
say to Birmingham? A. Yes. Q. How far is it from Birmingham to Kansas City? A. I should say it was five hundred miles: I forget ex-
actly the distance. Q. Not further than that? A. I do not think it is more than five hundred. It may
be a little bit more; it is somewhere between five and six hundred miles, I suppose.
Q. What is the rate to Kansas City? A. One dollar and twenty-two cents. Q. How far is it by your line from Macon to New York ? A. The actual distance is about nine .hundred and fifty miles, and our pro rating distance is about four hundred and fifty. Q. (By Mr. Calhoun.) There has been considerable com-

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plaints for the last three or four years on the part of our merchants occasioned by this fact, that the rates from the west to the seacoast were lower to Atlanta and to interior points as to the western products. That it went down as it reached the coast. That was caused as I understand by the fact that it went up by New York then into the interior by these northern lines on account of their sujM.rior facilities, and being enabled to work cheaper than our line.
A. That is correct. ( J. Let me put it this way: (Georgia and the southeast can only consume a given amount of corn, bacon and ma terial of that character? That is true? A. Yes. Q. Xow, would it not be a fact if you established a through line from Kansas City to the east that in order to Set that business you would have to reduce your rates to the aea? A. Yes. Q. And along with that reduction would necessarily fol low this dirt-crimination against the points in the interior? A. Yes. Q. Xow, looking to perfecting that and recognizing the fact that that road from Memphis to Kansas City declining to prorate with you, would n<>t this be true: that if you made the Missouri Pacific or any one of the great western systems your preferred western connection they would make you their preferred eastern connection, and that there would be enormous inducements on each side to make such arrangements. A. Certainly. Q. Isnt that then the basis that the terminal people are looking forward to. establishing as a means to perfect this great combination with the northwest and turning that business of the northwest to the south? A. Yes, sir; that is what we are hoping to do securing a large business in that way over our lines.

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Q. Now, General, without you were able to offer some tremendous inducements of that character to some one of these northwestern systems would it be practicable to change the commerce of this continent and bring it to the south, do you think ?
A. Never. Q. Now, I want to call your attention to another point: have you seen any talk in the papers in reference to a re ported interview with Mr. John H. Inman, sent out in 1888, in reference to the building of new lines of roads? A. I think I saw something a month or six weeks ago, but I have seen nothing that I recollect of since. Q. There has been a reported interview with Mr. John Inman, made in June, 1888, in reference to the building of new roads in the South, of a reported scheme, that was said to have been gotten up prior to the time that the Central was brought into the Termin,alto prevent the building of new roads by one system into another. F want to ask you if it is not a fact that if you separate those three systems now controlled by the Terminal Company that their direct interest would then be to hold exclusively, each for itself, the territory served by its line, and that each would view with jealousy and alarm the building of any line that would take its business away from it and give it to any one of the other three? A. Certainly it would. Q. In June, 1888, it looked as if the Central would not jet into this Terminal consolidation, didnt it ? A. It did. Q. Is it not a fact, during our original plan to bring to gether these three properties at that period, June, 1888, was the most critical, and that was the time it looked more stronglv that the plan would be entirely defeated ? A. Yes. Q. Immediately on the idea of the defeat of that plan, do you know whether or not there was a general discussion in reference to getting up some scheme to keep these roads from building into the territocy of the other?

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A. J do not remember about that especially. Q. Now, Genera), taking any one of these lines that might be extended each into the others territory, if that line (in dicating) was extended by the Richmond and Terminal, would -it not draw business from the Georgia Central, the two properties being separate? A. Certainly. Q. This road here could build in your territory and draw business from you ? A. Yes. Q. Although one of these lines might have been bene ficial to the Richmond and Danville and the other to the Central, the direct tendency would have been to prevent the building of cither? A. Yes. Q. With the roads combined, would not the general good of the two override any littly injury that would be done to either of these properties ? A. Yes; that is true. Q. I want to call your attention specially to the Savan nah, Florida and Western. You entered into a contract with that road for the Georgia Central, did you not ? A. Yes. (I. One of the articles of that contract was that they would not build or encourage the building of any roads into your territory, and you would not build or encourage the building of any into theirs, was it not? A. Yes. Q. General, in your judgment as A railroad man, if those roads were combined or there was a common ownership of the two, do you think such a contract as that would have been necessary ? A. Certainly not. Q. Dont you think it would nave been to the interest of both roads to have fostered and promoted the building of any road that would have promised profit to either ? A. Without doubt.

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Q. Take that road from Milieu to Jesup, and let us as sume that we control absolutely or had a mutual interest in the Savannah, Florida and Western. As a railroad man, dont you think the same reasons would have prompted the building of that road that would have prompted you to have built a road from Eden across to Amerieus?
A. Certainly it -would. If the S., F. & W. and the Cen tral were combined, or these up here (indicating) with the Central, that rond, T have no doubt, would be very soon built.
Q. In order to open it to the Florida travel all through there ?
A. Yes. Q. Taking the Savannah, Florida and Western as a sep arate road, would you not say it was to the direct interest of that road not to have that line built? A. Certainly it is. Q. (By Mr. Lamar.) Does that principle that you speak of now apply simply to that road from Milieu to Jesup? A. The principle lias different local applications. The general principle is that wherever a desirable cut-off can be made it will be to the interest of the joint property to make it. just as I have recently milt this cut-off. Columbus to Amerieus, because it is a desirable cut-off. Q. Your cut-off from where? A. From Birmingham into Florida. Q. The one you have started to make ? A. That one is finished. lam now building another from Eden to Americus. Q. Are you building that road now? A. Yes. Q. How n^uch of it have you built ? A. There arc about seventi-live miles from Savannah under contract to a place called Sterling, and there we meet the Americu?, Preston and Lumpkin. It comes up and meets us there. We meet there and unite and work the whole as one line,
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Q. (By Mr. Calhoun.) You have also built the line from Americus to Columbus?
A. Yes. Q. (By Mr. Lamar.) When was that? A. I have bnilt it since last January. It was open for business in June, I think. Q. Of this year? A. Yes. Q. Where is it from? A. From Americus to Columbus. Q. Isnt it true that there was a little road built from Beuna Vista to Andersonville originally? A. Yes. Q. In this general scheme of getting a through line across from Birmingham to Savannah you took that little local road and practically rebuilt it and changed its ter minus from Andersonville to Americus? A. The terminus was changed from Andersonville be fore. That was done largely by the Americus people. Q. But with the consent of the Central? A. Yes, and by our financial help. Q. You practically rebuilt that road? A. Entirely rebuilt it; took up every foot of rail on it; straightened its line; rebuilt it and extended it to Columbus. Q. (By Mr. Berner.) You say the Central first built the Savannah Western. A. Yes, out as far as Sterling. We will not build beyond there at present, because we will there meet Col. Hawkins
road. Q. (By Mr. Calhoun.) As a matter of fact we own the
stock of the Savannah and Western and will advance the money to build its road?
A. To state the facts accurately, they are building it themselves, but we are lending them the money. We own the stock.
Q. Who does? A. The Central Railroad and Banking Company. Q. The majority of the stock?

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A. The whole of it. Q. (By the Chairman ) Did not the courts declare that act void ? A. No. Q. (By Mr. Lamar.) Why is not the building of that road from Americus violative of the contract with the Savannah, Florida and Western ? A. It is not. That contract expressly provides that either road can build any cut-off between points on its own line. Q. (By Mr. Berner.) Isnt it true that in that combination you got above the line? Your line runs from Savannah to where the Ocmulgee and Oconee join, and then up to the line of Dodge county, and then out to Albany? So the Savan nah and Western is in your territory ? A. Yes, that is in our territory.
Q. (By Mr. Calhoun.) General, it is some burden upon these railroads to build new roads, and they are not going to bnild them unless it is to their interest ?
V Not that I ever heard of. Q. Then when you have separate roads lying in con tiguous territory to the vulnerable points of the two sys tems there is a very strong reason why neither road should "knock the chip off the other fellows shoulder," as we say in common parlance ? A. That is true. The Hawkinsville jjeople for years wanted us to extend the Perry branch to that place, but it would be knocking the chip off the East Tennessees shoulder and we did not venture to do it. Q. Yet if there was a perfect mutuality of interests dont you think it probable that the Perry road would be ex tended over to the East Tennessee ? A. I do not think there is a doubt luit what it will bt> built. Q. In addition to the ordinary interests that would gov ern two corporations in this contract with the Savannah, Florida and Western was there not a very much larger ter ritory to serve.

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A. Yes, there was every inducement to make that arrange ment with the Savannah, Florida and Western, as you will see at a glance, so as to get all their Florida business. We wanted it for our steamship line instead of having them to haul it on to Charleston and give it to the Charleston line. They might have had one hundred miles longer haul by taking to Charleston, and I know some t>f their people always favored it, and it was for that I wanted to make a contract with them, to make them give us all that business for our steamship line.
Q. (By Mr. Lamar.) If it was such a disadvantage to their line to lose that one hundred miles of business-, what inducement could you offer them ? What inducement did you actually offer?
A. The only inducement we offered at all is that we had the best service, and the pro rating distance gave them a slight advantage in freight rate. Any distance on their line that is less than one hundred and seventy-five miles, I think it is, we call one hundred and seventy-five miles. I am not certain that I am correct in my figures, but it is about that. We gave- them that slight advantage in pro rating on short business as compensation for giving up their long rail haul. \Ve had an old arrangement with them that has been going on ten or fifteen years, and I agreed to continue that, and they, Im the other.band, were to give me an equivalent advantage of a pro rating of passenger business from the north into Jacksonville. They will accept from me at Sa vannah the same pro rate on a, through ticket to Jacksonville j-s they can get out of a passenger if he came by all rail ^errwwn those points; and so there is some compensation in it.
Q. (By Mr. Calhoun.) Isnt it true that some business is controlli d by the Southern Express Coiipany people, and as an inducement to give that business to us at Savannah, wo also give them all the express business of our line?
A. Yes. Q. In other words, your effort has been to tie that busi ness to the port of Savannah and your steamship line

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A. Naturally. Q. Several years ago one of your predecessors undertook to purchase the stock of what was then the Atlantic and Gulf Railroad, with a view of controlling that business at that time for the city of Savannah, and your company was enjoined on the ground that the Savannah, Florida and Western was a competitor with the Chattahoochee river section with the Central and Southwestern, and for certain reasons they decided they had no right to purchase that stock, and I have understood the result of that decision was to cause a loss of several hundred thousand dollars to the State of Georgia a direct loss of several hundred thousand. In your opinion, has the Slate of Georgia ever reaped one dollar of direct or indirect benefit of having those two roads separate ? A. No. On the contrary I think it has been a loss. Q. Now. under this competitive theory,if the Central could have purchased the Savannah. Florida and Western, would it not have permanently tied that system to Savannah ? A. Yes. Q. Under the through line theory of allowing that system to be owned by the same people who own this system north, of it, and prohibiting the Central system from owning it to here (indicating), was there created a direct interest to dis criminate against Georgia and induce that system to carry its business away from Georgia and take it up to Charleston? A. Yes. It created a decided interest in that road to send everything through by thai line instead of letting it stop at Savannah to the great benefit of Savannah; and I am endeavoring to cure this evil by my contract with these people to repair the damage done by the hostile ownership, as it were, of that line. Q. If that road had been owned in common, would not another direct interest have l>een to open a line from Thomasville and havt made that the terminus instead of Albany? A. Without any doubt.

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Q. Isnt it to the interest of that road, represented as a separate system, to haul those people by Savannah?
A. That gives them the long haul. Q. (By Mr. La mar.) At the time that decision was made was the Atlantic and Gulf Railroad in the system of the Savannah and Charleston Railroad ? A. No. Q. Its terminal point was then Savannah? A. Yes. Q. Where is the terminus now? A. Charleston. Q. I will confess I cannot see when they can have the long haul tho principle of diverting that freight at Savan nah instead of sending it to Charleston ? The pro rating distance to Charleston is the same ? A. From Charleston is two hundred and fifty miles. Q. (By Mr. Calhoun.) You give them then a pro rate of one hundred and seventy-five miles to that particular line? A. Yes; I give them, I think it is, possibly more than one hundred and seventy-five. Q. (By Mr. Lamar.) If a box of oranges are shipped from Jacksonville you pay as though it was two hundred? A. We cut the rate in half that is, he does not take less than half rate, and if it comes from way down in Florida where it is more than two hundred and fifty miles he will get more. Q. (By. Mr. Berner.) Let me see if I understand. The advantage he gets in pro rating is that by the time it gets to Savannah he makes it pay him just as much as if it had been shipped over his whole line to Charleston? A. Nearly so, I think. Q. Isnt it about equal? A. I give him enough to induce him to do it. Q. (By Mr. Lamar.) Does that add anything to the price of freight the shipper pays? A. Not a bit. The price is fixed by Mr. Clydes direct isteamvr from Jacksonville to New York, and we have to

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meet their rates, and Mr. Clydes r:\tes arc very little more. I do not know how much, hut I imagine very little more than our direct rates from New York to Savannah. So if a box of shoes from New York comes to a man in Savannah and another box to a man in Jacksonville, from the man in Jacksonville we do not get as much freight as we do from the Savannah man, simply because we have to meet Mr. Clydes rates.
Q. (By Mr. Calhoun.) In other words, the plant system having the express company and a line into Savannah, and desiring to put its express business over your line, you are willing to give them an additional advantage to succeed in tieing them to the port of Savannah?
A. Yes, and that is the only way I can hold them. Q. Is it not a fact that the tendency to consolidate has created a direct interest in that corporation for the port of Savannah? A. Yes. Mr. Calhoun : Mr. Chairman, I am through with the ex amination of General Alexander now. but on reading over his testimony it, may be that I will want to examine him upon one or two points, and have him re-called for that purpose. The Chairman: You can do that. Q. (By the Chairman, to Mr. Alexander.) With the com binations or consolidations, or whatever you may call it, what roads in Georgia compete with you lor eastern busi ness? A. They compete with us at different points. At Albany the East Tennessee and the Savannah, Florida and Western. I think those are the principle ones; at Colum bus there is the Georgia Midland and the East Tennessee and the Richmond and Danville. Q. AtMacon? A. At Macon only the East Tennessee, the Richmond and Danville and ourselves. Q. Does not the Georgia Railroad compete with you there?

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A. Yes, the Georgia Road; I forgot that. Q. At Atlanta, what roads compete with you for eastern business? A. The Richmond and Danville, the East Tennessee and the Western and Atlantic and Charleston line via Augusta. Those are the principle ones, but over each of those lines there will be several connections north. Q. What roads compete with you for western business at Macon? A. The East Tennessee is about our only competitor for western business at Macon. Q. What road does the Chattanooga Home and Columbus compete with? A. It competes with us at Carrollton for Carrollton business. Q. From what point? A. At Carrollton. Q. Business from what point ? A. Say to New York, or to Atlanta, or to Savannah, or Brunswick, or to anv point. Q. Is it a competitor of the East Tennessee road also? A. It is a competitor of the East Tennessee in working from Chattanooga down. We pro rate with the Chatta nooga, Rome and Columbus, and give it equal privileges with other friendly connections, and they compete there fore with the East Tennessee and the State Road. Q. Under the pro rating arrangement, or with an arrange ment, say to ship its freight to Augusta, Macon and eastern points in Georgia, it would be a competitor with both the East Tennessee and the Western and Atlantic Railroad ? A. Yes. Q. (By Mr. Lamar.) Augusta is a point where you would not only have the consolidated system of the Richmond and Danville, the Georgia and the Central to Port Royal, but they also have an independent line running from Augusta to Charleston, and also a line by the Savannah river ? A. Yes.

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Q. I will ask you what has been the effect on freights at that point since the consolidation ?
A. I do not think there has been any change there at all. Q. Before or since ? A. Within the last eighteen months I have heard no change there at all that I remember. I think the rates at Augusta have been entirely unchanged, except the general reduction by classification that has been referred to before. Q. (By Mr. Berner.) General, one question: Before the combination did not the East Tennessee have an outlet through by Norfolk and another up bv Harriaonhurg to New York ? A. Yes; it had two outlets, and still has one by Nor folk, the Great Southern Dispatch, and then by the Shenandoah Valley. Q. You do not control those? A. No. Q. You do not ship over those lines? Since the combi nation the freight that used to come that route and down the East Tennessee now comes by the West Point Ter minal? A. No; the consolidation has not made any difference that I have noticed at all in the amount of freight that the East Tennessee receives over the line of the Norfolk and Western and its Great Southern Dispatch line. Q. Does it get consigned and unconsigned freights both? A. The East Tennessee really is fed by three lines. The Richmond and Danville gives it all it can control through its territory by what is called the Paint Rock route, and the Norfolk and Western all it can control at Bristol, and the Pennsylvania Central gives it all it can control at Roanoke by the Shenandoah Valley route. Each of these routes are controlled by different corporations, and they have their soliciting men in the field, and each gives for his route whatever he can. Q. (By the Chairman.) Suppose you want to ship un consigned freight from Atlanta to New York, which- way would yon ship it?

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A. Either you please. Q. Which is the cheapest; out here and go out by Nor folk ? A. The rites are the same by all the routes. Q. What is the advantage to your company of pro rating? Mr. Alexander: I do not understand you. Q. How do you pro rate with these lines up here ? A. That line up there (indicating), I would have no con nection with business from Atlanta going by it. It would simply go that route and those people would divide the freight among themselves. Q. You own that (indicating) that is the Terminal people? A. Yes. Q. And the Terminal owns that (indicating)? A. Not altogether. Q. They own enough to control it? A. Yes! Q. Are they not two competing lines? A. Yes. Q. They own the Richmond and Danville and enough of the East Tennessee to control it? A. That is my understanding. Q. You first leased the East Tennessee? A. Yes. The Terminal did. Q. Now, that was set aside? A. Ye?. Q. Then in order to avoid that judgment you bought enough of the first stock to control it? A. Yes. The Terminal did. Q. (By Mr. Calhoun.) You do not mean to say, General, that we bought that preferred stock after the lease? A. No; that preferred stock was bought two and a half years ago, I think. Q. (By Mr. Berner.) What about the last issue of pre ferred stock ?
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A. I saw in the papers, which is all I know ahout it,that the Terminal people have bought twenty thousand shares of that stock.
Q. Xow, General, arc you certain that two and a half years ago we owned enough of that preferred stock to con trol the East Tennessee?
A. I am reliably informed, though I have no official con nection with it, that about two and a half years ago, about February, 1887, to be exact, the Terminal people bought a majority of the preferred stock, and that majority had the power to elect a majority of the Board of Directors, which they did, and they leased it to the Richmond and Danville.
Q. What. I want to get at is this: if this line had through connection like yours to New York it would be a com peting line with yours?
A. It is a competing line. It has lots of connections. Q. Do you not ship unconsigned freights down this way (indicating). A. I would not like to answer that certainty. Q. Would it not be to the interest of the Terminal Com pany to send them that way? A. No; they would send them this way. We start here (indicating). Q. Then it would be to their interest to send it that way? A. Yes. I think they do send that way anything that is unconsigned, and whatever the agents of these people are able to drum uo in Chattanooga, but what the others drum up in Chattanooga goes that way. Q. If the Savannah and Western had been completed out to Americus, would it not have been a competing line with your line from Americus around hy Macon to Savannah ? A. No more than if anybody had a crooked road Q. I understand that, General; but would it not be a competing line? The Supreme Court has decided this is a competing line with the Savannah, Florida and Western, and if that decision is correct then the Savannah and West ern would be a competing line with yours?

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A. If it belonged to another man it would be a com peting line. So I imagine if it belonged to another man I could not buy it, but there is no restriction on my building it myself.
Q. (By Mr. Calhoun.) You cannot destroy competition with a road that is not built?
A. Certainly not. Q. (By the Chairman.) If it is a competing line and owned by the Plant system, how does it become a non-com peting line when owned by the Central ? A. I did not say that. Q. Is that not :x legitimate inference from what you said? A. No; I say this: If the line from Savannah to Americus was built, and belonged to another road Q. You did not understand me. You say the Savr.nnah, Florida and Western is a competing line to the Central, when it is in the hands of another party ? A. It is; and it is in the hands of another party. Q. Is it a competing line if it should happen to be in the hands of the Central? A. I did not say it was not. Q. Is it a competing line, is what I asked, if the Central bought it now ? A. Certainly not. One man cannot compete with him self. You have confused Savannah and Western" with * Savannah, Florida and Western." The latter is Mr. Plants road, and a very different line. Q. (By Mr. Calhoun.) You were speaking of the Savan nah and Western road. There was an unoccupied territory through which no road was built? A. Yes. Q. And your theory was you could not destroy compe tition that did not exist? A. Certainly. Q. And they did not get any business until you built the road? A. There was nobody there to compete with.

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Q. (By Mr. Berner.) Was the America. Preston and jLumpkin Railroad built along there before you got hold of the Savannah and Western?
A. No. They stopped at the river. Q. They were ploughing along through that country ? A. Yes; but they had no charter through there and no plan to build, that I ever heard of, until long after we formed a plan to build a cut-off from Eden to some point along there. Q. How do you know that ? Has anybody ever been able to find out what Jlr. Hawkins proposed to do? A. I would not guarantee it; there was no charter. Q. Didnt he obtain charters as he went alone; ? A. Yes. Q. Isnt it a fact that the Auiericus, Preston and Lumpkin Railroad, if it had been built through to Savannah, would have been a formidable competitor of yours ? A. Yes.
Q. Now, what is the condition of that road ? Do you all own it?
A. No more than you Q. I want to ask you if it is not true that the Americus Investment Company bought the controlling interest in the Americus. Preston and Lumpkin Railroad, and did not the Central Railroad make an offer to them for their share of it? A. Yes.
Q. Was the offer not at a large profit to the holders of the stock ?
A. I will tell you: When we first decided to build from fiatonton to Americus I realized that that building would necessarily hurt this road, which was a narrow gauge, very considerably, and that it might be an ad vantage to us and an advantage to them if we could come together and unite. I met Col. Hawkins, and I showed him my plan, and I offered to take his road and change it to a broad gauge, and to pay himself and associates not only all the cost, but a very fair profit upon their expenditures.

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Q. Didnt you offer him three hundred thousand dollars? A. My recollection is that I did not mention any sum or make any more definite offer than that, its cost and a profit to them. He replied with a definite offer to me, which was rather a complicated one, something about bonds, stocks and so on, and as his offer to me amounted to much more than I could build for I could not see it to my inter est to accept. Q. Did you not offer the Amcricus Investment Com pany
The Chairman: That, Mr. Beruer, is, I will suggest, rathet outside the scope of this investigation.
Mr. Berner: I had not thought of that, Mr. Chairman. The examination had rather led up to that, and it was a matter of some interest to me.
Mr. Alexander: My recollection is that I did not make a direct offer. I made :m offer in general terms, but never came to any definite figures.
Q. (By Mr. Berner.) After a boat line was put on from Abbeville to Savannah what was the reduction of rates from Savannah to Americus?
A. I do not remember. Q. Was it not considerable? A. I think it was. Q. You did reduce it immediately on your line, did you not? A. Yes. Q. And that was the result of competition, was it not? A. Yes. Q. (By Mr. Calhoun.) Isnt it a fact, General, that on the Americus business the rates have been reduced from the west as well as from the east? A. Yes. Q. From Louisville and all those points in the west? A. Yes. Q. Isnt it a fact that reduction did not take place until the Columbus and Western was built through to Columbus?

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A. Yes, and als o in the last six months we reduced the western rates. We had shortened the line for one reason, and the other reason was because having made the reduc tion from the east to Americus, we were obliged to make one from the west to satisfy our western connections and put both markets on the same footing. All these things illustrate what I have before stated. It illustrates how competition on one side not only reduces the rates on that side but the competition of markets brings about a reduction on the other side.
Q. (By Mr. Lamar.) You say it Avas water connection that produced the rates at Americus?
A. Yes; they struck a boat line at Abbeville. Q. (By Mr. Berner.) General, at the time did you think that was feasible? Didnt you ridicule the idea of estab lishing a boat line from Savannah to Abbsville to connect with the Americus, Preston and Lumpkin, and tvas that notdiscussed as an impracticable scheme ? A. I never heard of it, but I thought it could have done a good deal of business without there being much money spent on it. Q. (By tho Chairman.) General, if the Savannah. Florida and Western Railroad was in the hands of the Plant sys tem and the Central Railroad and not competing lines, why does not the same rule apply to the other that of the Richmond and Danville and your line? Why does not the same rule apply to those roads? A. Your question is based upon a misunderstanding. When I spoke of the Savannah and Western, when I said it would not he a competing line because we owned it, that was the line that we ourselves built, I did not mean the Savannah, Florida and Western ; I did not say that would not be a competing line under any circumstances. Q. (By Mr. Lamar.) General, I desire to ask a question as to Americus. A good many have spoken to me and have referred to a reduction of rates as the effect that com petition does have somthing to do with controlling rates.

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In the conversations they said the reductions were caused by the building of the Southern Georgia and Florida. I will ask you what effect the building of that road had upon the Americus rates ?
A. I do not think it had any effect at all. The only changes had been forced already by this boat con nection bringing in eastern goods, and the dissatisfaction arose on account of the, western goods being kept at a higher rate, and then the shortening of our line from Americus to Columbus also affected it.
Q. (By the Chairman.) Before the Georgia Southern and Florida Railroad was built, so far as Macon and these points up here are concerned, there was only one rate to Americus ?
A. That is true. Q. When that road was built and crossed the Americus, Preston and Lumpkin Road, there were two routes ? A. Yes. Q. And there was a shorter route? A. No; it was a longer route. Q. (By Mr. Calhoun.) Let me ask you one question: As a matter of fact, hasnt there been a good deal of complaint on the part of the Americus merchants that they were not put on an identical basis with Macon ? A. Yep. Q. Isnt it true when this road was extended to Birming ham, and the Central built from Columbus to Americus, that our general freight agent went before the tariff asso ciation and moved to make that reduction in order to carry out this view to group those cities and give them the ad vantage of the same rates? A. Yes. Q. And was not that really, after all, the controlling factor in making that reduction, together with the road across here (indicating)? Is that correct? A. That is correct. The building from Columbus to Americus participated in the bringing about of a reduction

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from the west. The reduction from the east had been made before.
Q. Suppose Mr. Hawkins road had not been there at all, and you had carried out your plan of building that short line and the extension to Birmingham, would not Americus, in your opinion, have gotten the same rates it gets now?
A. I think almost certainly it would. It would have been brought as near Savannah as Macon is. Newnan, for in stance, is getting the same rate where there is no other system, and so is Opelika.
Q. The tendency, then, of this railroad combination has been, as far as possible, to group these points together where they are practically equal ?
A. Yes, sir. Another illustration of that is that Wash ington. Georgia, has the through rates where there is no competing line at all. There is a general disposition to give these points equal advantage.
Q. (By Mr. Lamar.) This view has occurred to me: As I understand it, you start out with the suggestion originally that the short line made the rates and the long line took it, or was forced to take it ?
A. That is generally the case. Q. Now, then, you count two miles, or two and a half, or three miles, as equalling one on land ? A. Yes. Q. Now, I will ask you what is the pro rating distance from Americus to Savannah by that river, and is that the rate that is given and taken ? A. No. The rule I have stated only applies to ocean transportation not river and to long voyages compara tively. In the river rate here there is no uniform rule, or, indeed, any rule for equalizing and pro rating rail and water mileages. The Americus, Preston and Lumpkin bought those boats and own them themselves. Q. What would be the pro rating distance ? A. A boat line can work a great deal cheaper than either
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rail or ocean lines. You can figure for yourselves. The whole investment in that boat line would be, maybe, six or eight thousand dollars for the boat; say, on four boats, thirty thousand dollars. Now, that would cost no more than two miles of railroad; yet those four boats will pad dle along and come from Abbeville to Savannah right fre quently, and carry a pretty big pile of freight every time. It is hard to estimate how cheaply they can do it, but they can, with the investment equal to only two miles of rail road, do it very cheaply, indeed, much cheaper in propor tion than an ocean steamship.
Q. (By Mr. Berner.) Isnt it nearly as far from Abbeville to Savannah as it is from Savannah to New York ?
A. I hardly think so. Mr. Berner: It is four hundred miles. Mr. Alexander: I do not know how that is. <J. (By Mr. Berner.) When did Mr. Plant become intersted in the Terminal system ? A. I do not know. Mr. Calhoun : About June, 1888. It was either May or
June. Q. (By the Chairman.) Mr. Walter Chisolm, who is a
vice-president of the Plant system, has been a director since when ?
A. Last January. Q. (By Mr. Calhoun.) This Savannah and Western con tract was practically made eighteen months before this combination ? A. Oh, yes. Q. While it was not signed and finally executed, it went into operation ? A. A preliminary agreement was made and acted on for a year or more before. Q. (By Mr. Lamar.) General, what has been the change in rates over the Savannah, Florida and Western since this combination w*e made ? A. None whatever, to my knowledge. The committee adjourned.

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The committee met September 26th, 1889, at 4 oclock p. M., with the following members present: Messrs. Bartlett, Chairman; Rankin, Lawson, Glenn and Lamar.
Patrick Calhoun (re-called.) Q. (By Mr. Glenn.) When was it you first became con nected with the Central Road or interested in it ? A. I became interested in the stock in the summer of 1886. but did not take any part in the management of it until in January, 1887. Q. When you became interested in the Central Road, what lines did it control or what did it consist of ? A. It then controlled what we call the Central proper, that is the road from Atlanta to Savannah. The south western system running from Macon down to Albany, out. to Columbus, to Eufaula, and to a little place called Blakely. in Georgia. It controlled the Mobile and Girard, or had a large interest in it, but my impression is that the lease of that road had not been fully perfected at that time. It controlled the Montgomery and Eufaula, and the Colum bus and Western out to a little place called Goodwater, in Alabama; the Western Railroad of Alabama, which runs from West Point to Selma; the Georgia Railroad, or a half interest in the lease of that road with the Louisville and Nashville, and that carried with it the right to vote some stock in the Atlanta and West Point Road, and a half inter est of the half interest the Georgia Railroad had in the Western Railroad of Alabama; the Port Royal and Augusta Railroad; the Augusta and Knoxville, from Augusta up to a point in South Carolina, I do not remem ber what place was its terminus; the Greenville and Laurens, and the Shenandoah Valley. Those roads in upper Carolina are now called the Port Royal and Western Car olina. Q. It had no connection at that time with the Richmond

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and Danville, the Georgia Pacific or the East Tennessee and Georgia ?
A. None whatever, except the contract which we have already spoken of with the Southern Railway and Steam ship Association.
Q. What was the next property that passed into the con trol or management of the Central system, or the same gentlemen who control it under the consolidation ?
A. To finish with the Central first; the next move made by the Centra) was to build an extension from Blakely to Columbus; to build a road from Clayton, in Alabama, to Ozark; to build a road from Goodwater to Birmingham, and to change the terminus of the road from Andersonville to Americus, with a view of extending it across from Americus to Columbus.
Q. What was the next change on the board ? A. The Central has from that day to this remained thoJoughly intact. It has, so far as I know, made no other contracts with its Southern systems except the ordinary contract of business, except the contract with the Savan nah, Florida and Western. Q. That is called a traffic arrangement ? A. Yes, sir. Q. When did the gentlemen controlling the Central Railroad acquire control of the East Tennessee, Virginia and Georgia Roau? A. The gentlemen controlling the Central Railroad never acquired control of the East Tennessee. Virginia and Geor gia Road. The Central directors, who, of course, controlled the Central Railroad, remained the same, except the death of one of the directors, from that time to January, 1886, when there was a change made in the Central directory by the displacement of Mr. Henry Blumm, of Savannah, and Mr. Harrold, of Americus, and the election of the Messrs. Inman, of Atlanta. In January, 1889, Messrs. Comet, Gordon and Raoul, of Savannah, were asked on the board. Mr. Lutchen, of New York, was displaced, and the only

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New York representative left on the Central Railroad board was my brother, John C. Calhoun. The law requiring that eleven of the thirteen directors must be Georgians.
Q. Is it not true that to-day the same gentlemen con trolling the Central, as it then was, when you first became connected with it, also control the Georgia Pacific, the East Tennessee, Virginia and Georgia and the Richmond and Danville systems ? Isnt it true that all of these rail roads, with the Macon and Western from here to Macon, and the East Tennessee on down from one end of the State to the other, and the Richmond and Danville in all its sys tems, are controlled by the same gentlemen ?
A. I would say not. There is a vast difference in the personel of the directors of each of the separate properties. Of course, a majority of the stock of the Central, nearly all of the stock of the Richmond and Danville and a ma jority of the first preferred stock of the East Tennessee, Virginia and Georgia, that carries a qualified control, as I explained before, is controlled by the Terminal Company, and some one or more of the members of that company are members of each of these others.
Q. Then in some way, either through official position or by owning a majority of the stock in these companies, they are all managed and controlled by one general policy, are they not?
A. Yes, sir; by one general policy. Let me qualify that: we are steadily attempting to form one general policy; I cannot say that general policy has yet been fully perfected.
Q. And to extend that toother lines of road? A. I cannot say that. Q. You have filled in your gap between Atlanta and Greenville? A. Yes, sir. Q. You control the Memphis and Charleston? A. Yes, sir. Q. And you expect to extend that Jine from there on to connect at Kansas City?

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A. Not by building. Q. By making arrangements? A. Yes, sir; by perfecting arrangements. Q. So as to bring that traffic from the west over this line and through this part of the country? A. Yes, sir. Q. And by steamship connection to New York? A. Yes, sir. Q. You will then have the East Tennessee and its con nections to New York; the Richmond and Danville and its connections to New York, and the Ocean Steamship con nection to New York? A. Yes, sir. Q. Three through lines from the south to the east? A. Yes, sir. Q. Is it not true that the line from Savannah . and Charleston to New York is a competitor of the Richmond and Danville system and the East Tennessee system? A. Through their connections I would say yes. Q. Isnt it true that the Richmond and Danville, through its connections, is a competitor of the other two? A. Yes, sir. Q. And the East Tennessee is in the same attitude as the other two? A. Yes, sir. Q. And yet all are controlled by the same general policy? A. Yes, sir. Q. In reference to the west, there are no lines reaching it except the East Tennessee, the Western and Atlantic and the Georgia Pacific, are there, from this point ? A. No sir, not directly from Atlanta; of course you will also add the Atlanta and West Point to the southwest. Q. Those are the short lines directly to the west? A. Yes, sir. Q. And each of those is a competitor with the others for the western trade? A. I should not call those lines to the west competitors

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at all, because they do not reach a common point, but run through widely different sections of country. A glance at the map will show you that. The distance I should say is one hundred miles between them after you pass Birming ham, and they steadily diverge from Atlanta. I do not think under the strictest sense, they could be called di rectly compel itive lines.
Q. You would not say that as to the East Tennessee and Western and Atlantic, would you ?
A. No sir; they run to Chattanooga and are directly competitive. Under another sense all of these lines are, of course, competitive that is under the sense of competition in markets. I mean this: Georgia consumes only a given amont of pork, bacon and corn. That may come from different directions in to Georgia; it may come to Geor gia from New York; it may come to Georgia from Cincinnati; it may come to Georgia from Chicago and St. Louis, or it may come to Georgia from Kansas City. So if we take competition between roads in its broadest sense, and include competition between markets, as I stated the other day, there are no roads of importance in this country, whether running in continuous lines or in parallel lines, that are not competitive. I think that a very impor tant point in the railroad situation. Simply as au illustra tion of it: at Atlanta and along this ridge merchants com plain that the freight rates as you go towards the sea on western products get lower, and as they go west they get lower, creating almost a ridge, if you can so term it, in the price of freights coming through this Piedmont region. That is produced by the competition of the eastern trunk lines flowing around by sea with the lines coming directly from the west, so that the east and west lines are neces sarily directly competitive at any point in this southeasternterritory in the transportation of grain, meat, furniture or any of the great articles of commerce. I think here, if you will pardon me now, I will tall your attention to a very important fact in this connection, and I do it to show

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what a great change there has been in the growth of the transportation of different articles different commodities used in the south and southeast. I read from a report made in 188(> by Mr. Virgil Powers to the United States Government and published in this work, entitled
" Prior to the completion of the Western and Atlantic Railroad to Chattanooga, Tenn.. in 1850, and the comple tion of the Nashville and Chattanooga Railroad in 1854, and the completion of the East. Tennessee, Virginia and Georgia Railroad from Knoxville, Tenn., to Dalton, Ga., in 1885, all the merchandise, provisions, grain, flour, etc., came into the State via Savannah and Charleston by sail vessels from the east. After that a part of the provisions came from Tennessee, Kentucky, etc. Up to 1861 nearly all of the merchandise for Georgia, Alabama, upper Mis sissippi and Tennessee passed through the ports of Savan nah and Charleston, in the States of South Carolina and Georgia. Tudeed, up to 1870 nearly all of the merchandise business took these routes and the route via Norfolk, Vir ginia.
" Western produce, grain, Hour, cheese, butter, whiskey, meat, hay, etc.. began coming in from the west as early as 185(5, and by 1870 nearly all of that business for the interior, and nearly half for the coast points, came from the west and northwest by railroad. It is proper to say, however, that prior to 1865 little western produce, compared with the present imports, came into Georgia from anywhere, as a large portion of the supply was made within the State. Up to 1876 very little merchandise came into or through Georgia, the Carolina.*, Alabama, etc., from the west; nearly all of it came from the east to the southern ports of Savannah, Charleston, Norfolk, Mobile and New Orleans. From about 1875 it commenced changing, and has gradually in creased, until now eighty or ninety per cent, of all the furniture, agricultural implements, carriages, wagons, musical instruments, etc., as well as a large percentage of

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other things, huch as iron products, hardware of various kinds, caudles, soap, and various other things, come from the northwest, which formerly came from the northeast. Thus the ports of Georgia and South Carolina, as well as those of Alabama and Louisiana, have lost the transfer of an immense business, as well as the loss of the carriage to the railroads of the South. Now, a large amount of these things are carried through the State from the west even to these ports, and but for the increase in other things, and a large increase in business of all kinds, the southern roads would be seriously damaged by the transfer of so large an amount of business from the east to the west."
So, sir, it is impossible in the wider sense, not to con sider any of the roads of any length in this country, wheth er running east and west and directly meeting each other and forming straight continuous lines, or whether parallel lines, as in some degree competitive, nnrl to a very con siderable degree competitive.
Q. What roads are there that pass beyond the borders of the State that are not controlled by the parties you have mentioned, that pass out of the State?
A. The Savannah, Florida and Western; the Marietta and North Georgia, which, as I understand, is already completed beyond the limits of the State, and th Chattanooga. Rome and Columbus.
Q. And the Western and Atlantic ? A. And the Western and Atlantic. Q. (By Mr. Lamar.) Dont you put in the South farolina Railroad ? A. Yes, sir; and the South Carolina Railroad; and the Georgia Midland and Gulf, of course, runs to the border. The Georgia Southern and Florida. I think, passes beyond the border. In addition, there is a line projected to come down from the Sea-board ar.d Roanoke, which controls a sys tem of roads as far as Chester, South Carolina; a road to Atlanta through Athens, which, I am informed, is in

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process of construction, and which will be completed as rapidly as men and money can complete it.
Q. Do you remember, to speak in round numbers, what the percentage was of the change in freight rates in the south in the last ten years ? .
A. There has been, from the published reports, and from all the information I can get, very decided reduction in freight rates.
Q. Can you give the per cent. ? A. I cannot give accurately the per cent. I have a letter here on that subject which I want to read to the committee. It is from our traffic manager. Mr. W. F. Shellman : " The benefits of railroad consolidations are so numer ous and far-reaching that it would be impossible to com pass them in any one communication gotten up in a limited length of time. I will, however, mention a few that occur to me just now from my experience on this system, which now controls several different railroads in this State. Formerly the passenger trains of the Central Railroad ran between Savannah and Macon only; passengers going to At lanta had to change at Macon. It then took about as long to go from Savannah to Macon as it does now to go to Atlanta from Savannah. The passenger train service has been vastly improved in safety, comfort and speed. Really, our fast freight trains make about as good time between Savannah and Atlanta as the passenger trains formerly did. We now have a freight train leaving Savannah at 2:01 P. M., arriving at Atlanta at 6:30 A. M. next day. I have used Savannah and Atlanta merely as examples. Improvements have been made on all portions of the system. I would say, too, that the passenger fare has usually been cut down on the roads controlled by this company soon after they were acquired. The improvement in freight transportation and the large reduction in freight rates has been marvelous. Our freights are pushed through to all the extremities of the system with great dispatch, and the rates to and from the principal markets of the country have been on a down-

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ward tendency for years prior to the present railroad commission law. Consolidation tends at once to cheapen transportation of both freight and passenger, while, at the same time, giving improved service and better facilities continually. The consolidated management is more liberal than that of small corporations; hence private enterprise receives greater encouragement in every way. Casual inquiry into the comparative status of private enterprise on this system now and a few years ago will disclose won derful developments. I would also call attention to Rule No. 1 of the Railroad Commission of this State to show an important feature to the public in consolidation, viz: All connecting railroads which are under the management and control by lease, ownership, or otherwise, of one and the same company shall, for the purpose of transportation, in applying this (standard) tariff, be considered as consti tuting but one and the same road, and the rates shall be computed as on parts of one and the same road unless otherwise specified. Thus it is seen that as soon as there is a combination of two or more railroads the high rates between points on one road and those on another, created by a combination of local rates, are very largely reduced."
One effect is that the consolidation of parallel lines oftener reduces the rates of freights than a consolidation of continuous lines. Where there are two serving a given section ot country and are parallel to each other, that re quires separate officers and separate agents and separate solicitors, and they only get a given amount of business, the combination of these two roads under the control of one company greatly reduces the cost of handling the busi ness.
Q. They must necessarily have separate offices? A. Not necessarily. On the contrary there would be a great saving and great reduction in the offices if controlled by one company, and the result of that would necessarily be a reduc tion in the cost of handling the business, and a decrease in the price of freight. To illustrate what I mean: take the New

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York Central Railroad system. It controls first the New York and Hudson River, and it controls the New York and Harlem, which makes a little bend out to he east and conies back to the same point; and then it controls the West Shore that runs ou the opposite side of the river, practically two, and a part of the way I think three, con tinuous lines from New York to the west. Now the result of that combination must necessarily be an economy in the handling of the business of each of these parallel lines of road.
Q. (By the Chairman.) How can that be? They both have to be run by the same number of engines and the same number of men, dont they?
A. All of the general offices not all of them, but a large number of the general offices of the road would of course be consolidated.
Q. You mean you would have only one general superin tendent and one traffic manager?
A. In a large system like that they would have several, but not as many as the several roads.
Q. You mean it would be immaterial to them over which of the roads the freight would be carried ; is that what you mean?
A. To some extent, yes. Q. They would have one traffic manager and otherwise reduce the number of officers, and it would be immaterial to them over which line of road the traffic was carried? A. That is one reason, and the other reason is the econ omy in transacting the business. Q. (By Mr. Glenn.) Theoretically that may be correct, bat practically isnt it true that the various roads forming the Richmond and West Point Terminal combination, the Central and the others have the same number of officers? A. Undoubtedly true. I never spoke of that as a rail road consolidation. I was applying my remarks to the consolidation of roads. I have never regarded what has been done in the Terminal Company as a consolidation of

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the roads in any cense of the word, and I think during this investigation where the word consolidation has been used it is liable to be misleading. As a matter of fact between our systems there has been no consolidation whatever.
Q. (By Mr. Lamar.) Come back to the illustration of the New York Central and Lake Shore. You claim that busi ness there can be more cheaply transacted. Now the con verse of that would be if you built parallel lines freights would go up?
A. Yes, sir; I believe that to be true. Q. I have been furnished with the information that therehas been an increase of freight rates over the Western and Atlantic Railroad since the construction of the East Ten nessee, Virginia and Georgia, which is said to be about fourteen per cent, more than it was four years ago? A. I understand that to be true, and it is not only demonstrated by the facts but it stands to reason like the other proposition. Given a limited amount of business, with a limited territory to be served, it is necessary for both roads to live in that territory, and while they may for a little while cut rates, the general result must be to raise the rates, and give the people a higher rate to sustain the life of both roads than existed before. Q. (By Mr. Glenn.) They do that through the medium of the Southeastern Tariff Association, which is practical consolidation. A. I would not call it consolidation. I would say that the Tariff Associations were really provoked by that condi tion of affairs. There is no practical way that I know of in law that would prevent the presidents of two corporations from agreeing upon the price they will handle their pro ducts or their freights, except the commission laws or the regulation of the freight rates themselves by the Govern ment. It is impossible so far as I know, (it has been proven practically so in this country,) to prevent a sched ule of rates.

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Q. (By Mr. Lamar.) Explain that condition of affairs between Chattanooga and Atlanta? It certainly becomes an important factor in the discussion of the Western and Atlantic Railroad lease bill, and if the fact is that competi tion has increased the freight rate fourteen per cent, it is directly in the face of what was stated at the time of the building of the East Tennessee?
A. I had some rates furnished me by the secretary of the Tariff Association, and I have no doubt they are correct, and the rates have unquestionably been increased a very large amount. Mr. Virgil Powers is probably as fine a railroad authority as can be found in the Southern States. I do not profess to be a practical railroad man myself, and in my replies I give what I believe to be true from my reading and from a study of the railroad situation. His position is this, written to the United States government over two years ago :
" Competition not only produces discrimination, but it causes higher rates. Where there is not more business than can be reasonably done by one line, and another or competing road is built, they cannot by increased facilities double the business for years, and it requires more to sup port two roads and pay interest on their cost than it does to support one; therefore it follows that the tolls must be higher and the road managed much more closely, and the physical condition of the roads allowed to de preciate, or the investors go without income from their investment. The latter has usually been the result. These competing lines benefit the trade centers somewhat by opening new buiness to their merchants, and to some ex tent the surrounding country, by giving the farmers a market for their small products, by increase of population in the cities, but do not benefit the general community, as they j?ay higher rates of freight than they would if there were only roads enough to do the business satisfactorily."
I believe, sir, that if the Western and Atlantic and the East Tennessee Railroads were under a single management

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to-day, if such a thing was possible a line such as made by the New York Central and the West Shore Roa.I that the business would be handled more cheaply, and the tendency would be rather to a depreciation in rates than to an increase.
Q. You say if the. East Tennessee and the Western and Atlantic were under the same management?
A. Yes, sir. I understand the fact to be that the rates on the Western and Atlantic to-day from Chattanooga to Atlanta and from Atlanta to Chattanooga are actually higher than before the East Tennessee was built; that, too, in spite of the fact that rates to points beyond, to St. Louis and Louisville and the further western points, which are effected by wider and more general conditions, have steadily de creased.
Q. (By Mr. Lawson.) What is the effect on East Ten nessee.
A. They both charge the same. Q. (By the Chairman.) When was the East Tennessee completed. A. I think in 1881. Q. (By Mr. Glenn.) Does not this effect exist not because there is competition between them, but because there is no competition between them on account of submitting these rates to these tariff associations? A. I think it is the direct result of competition. I think a competition that puts two roads in direct antagonism has had but one result in this country with which I am familiar: that though the rates may be cut for awhile they finally come to some fixed agreement or quasi agreement or perhaps some general understanding what they called in New York somtime ago the "gentlemans agreement." Q. You know of no instance by which this has been left to work itself out? A. I know of no case but what sooner or later the roads have agreed upon a shedule of rates. Q. (By Mr. Lawson.) If a road is built which takes bus-

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ness from another road, isnt it true that the other road is obliged to increase its rates to make up for that loss?
A. I think so. If it did not it would go into bankruptcy. Suppose there is only enough business to support one, and . two are built directly parallel to each other. Now they both want to live, and they will live, or one or both are going into bankruptcy, and they are compelled to increase their rates.
Q, (By the Chairman.) The Western and Atlantic and East Tennessee: those two roads are in what is known as the Southern Steamship and Railway Association?
A. Yes, sir. Q. Now what is that? What does it purport to do? A. As I understand it, this Southern Railway and Steam ship Association was formed about fifteen years ago. It was formed at a time when a great many southern roads were in an embarrassed condition, and it was one of the first steps taken in this country towards the solution of these evils that grew out of competition at given points and a discrimination that invariably resulted from it. Q. It was first managed under a pooling system until the constitution of 1877, was it, not? A. I think the pooling arrangement formed a part of the Southern Railway and Steamship Association. Mr. Charles Francis Adams, many years ago, in speaking of the railroad situation in this country, spoke of this Railway and Steamship Association, and spoke of it as one of the greatest steps taken to a solution of the railroad problem. Now that association fixes, as I understand it, the rates on all the roads that belong to it each road, however, having a veto power. The result is that the rates are practically not made by the railroads themselves, but arepractically made by what is known as a rate committee of this Southern Railway and Steamship Association. Q. Mr. Glenn asked you the question whether or not the rates were increased by this Association. Does that asso ciation fix the rates between here and Chattanooga as be-

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tween the East Tennessee and the Western and Atlantic Railroads ?
A. I so understand it, sir.
Q. (By Mr. Lamar.) What elements enter into the fixing of rates?
A. Take a rate like that from Atlanta to Chattanooga. The two controlling parties in the tariff association who own those railroad properties would naturally have a potent voice in fixing that particular rate, because it only affects these two: just as the Central Railroad had a potent voice in reducing the rate to Americus this summer. When this new road (Savannah and Western) was opened, Mr. Whitehead asked a certain rate to Americus. Those rates that relate to those particular roads are managed in that way. as I understand it.
Q. Are there any roads in Georgia that are are not mem bers of the Southeastern Tariff Association ?
A. If so, they must be small roads. I do not know whether there are any or not.
Q. (By the Chairman.) The Cincinnati Southern was. in it?
A. Yes, sir; it and the Louisville and Nashville. Q. The Savannah, Florida and Western is in it? A. Yes, sir. Q. The Chattanooga, Rome and Columbus is in it? A. 1 do not know, sir. Another reason I think the rates have been higher since the East Tennessee was built than before is that there has been a tendency in the country towards an equalization of local rates with rates to competi tive points. The rates from Atlanta to Chattanooga are almost like they are in Georgia that is, the adoption of the Georgia rates as fixed by the commission up to the line. That equalization of rates between local points and competitive points has been going on by the force of consoli dation, by the force of the railroad commissions, and by the force of the more enlightened management, acted upon by a more enlightened public sentiment. We recognize

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that what is wanted in railroad rates is equality and uni formity, and the effort is to retaove discrimination. Now, these forces, working one upon the other, have unquestion ably had a tendency in America to a great equalization of rates between uompetitive points and local points. That now is a striking fact, and it is one that ought to be appre ciated in order to understand what the effects of this present railroad alliance is. You will see at once that the Central Railroad, left entirely alone, would naturally have a desire to control all the business in its particular ter ritory. The result would be, if we take Forsyth as a point (it was used :is an illustration the other evening), any New York business going to Forsyth, the Central would naturally charge the Richmond and Danville a local, or, if it could do it, put an arbitrary rate from Atlanta to For syth in order to shut the Richmond and Danville entirely out of that territory. Now. the moment you rn.-ike a con solidation of these lines, or an alliance, so as to produce mutual benefits, all the territory on those lines is opened to the manufactured commerce of each line. So that con solidation, while it may tend to destroy competition at certain competitive points, necessarily tends to a uniformity of rates throughout the whole local territory by opening up all. the territory on each of the local lines to the business of the other system, and the protection of commerce that grows up on each of the systems of roads. I do not know that I make myself perfectly clear. Take Forsyth again: If the Central could absolutely control it, free from com mission?, the business would be driven down to Savannah, and all of F irsyths business would come in and go out that way. But if this Central Road was actually consoli dated with that Danville Road, necessarily the busiiiess from Forsyth would be allowed to go either around that way to New York or <-ome down this way. as it would be a matter of complete indifference to the road if not complete, of greater indifference by which route it was shipped. That would also be true if the Richmond and Danville con-

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trolled a class of products or a class of business that was needed on the Georgia Central. The two roads separate would each charge a local on that business. The two roads together would simply charge the one through rate. Now. seeing the importance of that, as far as I understand it, the Georgia Railroad Commission, so far as it can con trol the matter, have passed a rule which I have here. It provides that where two lines have passed under one con trol they shall not charge two rates, but only the one rate. " All connecting railroads which are under the manage ment and control, by lease, ownership or otherwise, of one and the same company, shall, for the purpose of transpor tation, in applying this (standard) tariff, be considered as constituting but one and the same road, and the rates shall be computed as on parts of one and the same road, unless otherwise specified." This has a direct tendency to greatly reduce the rates on both of these roads. Now, what is true of the locality or the two localities, within the State, con trolled by the commission, is also true in a much larger sense of those localities on the consolidated line which stretch beyond the State limits.
Q. (By Mr. Lawson.) There are some twenty or more very large systems in the United States made up of differ ent roads, are there not?
A. I think so. Q. You know whether or not in these combinations gen erally the rates have been lower since the combination was made than before ? A. Yes sir; that is true. Of course I gather my knowl edge only generally from my connection with the railroads. Q. The roads that have hot entered into the combina tion : have the rates on those roads been maintained ? A. There have been fluctuations, but it has been univer sal that the independent lines of roads charge higher rates than those in great combinations. So much is that true that it was the case, and I think still is the case, but I will not say positively, the Railroad Commission in Georgia classified the roads.

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Q. (By Mr. Glenn.) You mean by independent roads, those running to points where they meet no other road?
A. No, sir; not at all. They may be running through territory that other roads also run into.
Q. If these results have been brought about by competi tion, and this consolidation has resulted in the lowering of rates, it is at last traceable to competition, is it not ?
A. T should say it was traceable directly to combinations. Q. (By Mr. Lamar.) What is the result of competition without consolidation ? A. My study on that question has resulted in the belief that if left alone it has resulted in direct increase of rates, r.nd necessarily must result in an increase of rates. This question of consolidation of railroads is a very wide one. We now have a great deal ot experience in the transporta tion system of the country. It has been only a few years ago that an able expert, Mr. Fink, wrote an article to show that roads could not carry business under less than one cent per mile. Yet, for some reason or other, the roads are able to carry through freight at a much less rate. I belong to that school of thinkers who believe that has been pro duced more by the consolidation of roads into great sys tems, thus allowing them to improve their road-beds, get better cars and engines, and cutting down expenses than by any othor element in this country any other known factor. Q. (By Mr. (llenn.) When you speak of the evils result ing from competition you speak of competition as between parallel roads, and when you speak of the good of consoli dating you include not only that of parallel roads but also that of continuous lines? A. I include both. Q. Therefore, in the one case you charge up all the evils on the one side and yet when you take the other side you take the benefits resulting from it? A. I am very far from saying that consolidation itself can correct all the evils ot railroads. I do not believe

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that it can. I do not know that we can ever absolutely correct the evils arising out of railroads, and neither con solidation or competition can be charged entirely to it. To explain that: God, in making this country has enormously discriminated in the disposition of its products. We find Memphis on a great river that reaches a country that is full of varied resources where everything necessary to human life and human comfort can )>c. if necessary, brought there by water. Now, there was a direct discrimi nation by Nature in favor of Memphis. Take the iron and coal and other interests of Alabama and Tennessee. There we find that nature has placed in close juxtaposition raw material that it has denied other sections of this country, which enables them to manufacture very cheaply. Now, that was a direct discrimination in favor of that locality. I believe that more than by any human agency or inven tion that the world has ever seen that the railroad has gone further to remove the discriminations that nature has made; it is steadily removing those discriminations: under a sys tem of railroad competition I mean railroad competition left absolutely unchecked instead of those discriminations being destroyed there is a tendency to increase them, if any thing, or to create artificially at some other point a dis crimination against other sections or other localities. Now I believe that railroad consolidation has a tendency not only to remove these discriminations that nature has planted, but has a tendency to prevent the growth of arti ficial discriminations at given points.
Q. Let us use consolidation for designating the purpose of bringing together competing continuous lines from these places where nature has distributed these products, and combinations for designating the bringing together under one management the different railroads proceeding from these places from which these products are to be dis tributed ; now it is true that the great merits that you speak of is the result of consolidation, and not the result of combination, isnt that true?
A. I should sav it was the result of both.

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Q. Wouldnt it be better in a country of that sort that instead of having a number of consolidated and com bined lines to have them separate and distinct ?
A. I should say in that condition it would be better to have them consolidated and combined. Take our own sys tem. I would cheerfully give to-morrow, if it were possi ble or practicable for me to do it. the small line like from Macon to Atlanta, if I could actually consolidate all the balance of these lines where they are supplemental, in one great system. If I could have brought about an actual consolidation of all these roads where they are supple mental at a price
Q. Are you using that term as comprehensive of the term we have agreed upon?
A. I was trying to answer that. You find frequently systems really supplemental to. each other that are also at given points necessarily competitors, because they have grown with the growth of the country, and were not laid down and made to order, so that when you come to deal with practical questions you are forced to recognize both the consolidation of roads and the combination ol roads.
Q. (By Mr. Lamar.) Is there any state in the United States in which there is no such thing as consolidation or combination?
A. None that I know of. Q. Are there any two states in the United States that you can take and draw a comparison between combination and consolidation ? A. I do not know of one. Q. Is it possible to take it and compare it with any two sections of any large State? A. No sir; I dont know that you could. Q. Do you mean to say there is no state in which the railroads are without consolidations ? A. There are different localities in different groups, and I do not know where you could find a competitive road that is not a competitor of the consolidated line itself; hence

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what would bring down the consolidated rate would force down the local rate. Now. the result of that is to bring about bankruptcy on the weaker road. That has been the result the bankrupting of the weaker corporation.
Q. (By the Chairman.) Those roads out west that some time ago were directed to charge a certain rate, replied by saying that it would end in bankruptcy. Was that in the nature of the thing you speak of?
A. That was between systems of roads, and not inde pendent roads themselves. On that point let me call atten tion to a matter to show how far this consolidation has extended. This is the map of the Pennsylvania system of roads. You will see how interlaced that system of roads is.
Q. (By Mr. Lawson.) There are four roads there? A. Yes, sir; but this is a separate road (indicating). Take the parallel roads that interlace each other. Q. (By Mr. Lamar.) I would like to know what is the difference in freight rates in that territory? A. There is, of course, the lowest freight rates in this country. Q. (By Mr. Crlenn.) There is a vast number of roads* not connected with that system ? A. Yes, sir; there are two there. Q. (By the Chairman.) Why do you say that the low rates there, if that is true, is ascribed to competitive sys tems instead of combination? A. I do not think it can be ascribed to either. I do not know of a distinct case where we can draw that distinct comparison except in a particular locality. I think one of the main reasons of the low freights in that country is the reason given .by Gen. Alexander the other night, and that is that this water line down here was a basic factor in making the rates in the country. This is the map of the New York Central system (showing map). The West Shore runs here (indicating). This is the Harlem, and this is the Hudson river that small line coming down

264
here parallel to it to that point. Here is a direct parallel line of road from New York to Buffalo.
Q. Does the West Shore run to Buffalo? A. Not all the way. It is made up of different lines un der the control of the New York Central. This is what is called the Lake Erie and Ontario that cuts off here and comes along here. The New York Central controls both. Q. Does the New York Central control the Delaware Canal Company? A. I could not say. Q. (By Mr, Glenn.) Are these powerful, combined and consolidated systems not competing with others equally as powerful that aie consolidated against them? and isnt that the reason freights are lower there? A. No, sir. These systems arc unquestionably great sys tems of road built up in competition with each other, but a large portion of their territory gets low freights in which they are not necessarily competitive lines. The tendency of a great through system of that sort is to lower rates, not merely .at the competitive points, but to bring down the rates over the whole territory. These systems have their separate territories like the Savannah, Florida and Western and the (Jeorgia Central have theirs. While they are com petitive at points, they have an exclusive monopoly of a vast region of country. Q. They are all competitive between the great centers? A. A great many of them are. Q. (By the Chairman.) From Buffalo to Cleveland there are two roads? A. Yes, sir. The New York Central owns both. Q. The Nickle Plate Road and the road from Cleveland to Buffalo both belong to one system ? A. Yes, sir. Q. Do you know anything abovit what effect building the Nickle Plate had upon freights ? A. It may have effected them temporarily, hut I do not think it had an)7 material effect upon rates. I cannot answer it.

265
Q. Does the New Vork Central also control this grand trunk line through Canada ?
A. No, sir; I think that ii> si separate road. The}- con trol the Michigan Central. This is the Chicago and North west system (exhibiting map).
Q. (By Mr. (rlenn.) Is it proper to attribute anything to the result of combination unless the combination embraces everything within the territory?
A. I do not think we ought to attribute anything to rail road combination.
Q. Or to anything unless that combination included all the rights to the point in dispute?
A. Railroad combination. Mr. Glenn. necessarily carries with it the control of a given territory. Where you speak, therefore, of railroad combination you will find necessarily that they do control a large amount of given territory. Whether that territory is large or small you must judge it bj7 the same principle. It is so with every road in America. I brought these maps to illustrate what I said to Mr. Berner the first night of my examination, when 1 stated that the Terminal was the most supplemental and the least competitive of any great system I know of in America.
The committee adjourns.

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Committee met at 4 oclock i. M., October 1st, 1889, with the following members present:
Messrs. Bartlett, Chairman; Rankin Lyle and Lawson.
Patrick Caihoun, (recalled.) The Chairman : Mr. Caihoun you were explaining some maps when we adjourned the last time? Mr. Caihoun: I merely desire to call the attention of the committee to the maps of all these systems. I will not take up the committees time to call attention to all these maps, but there are one or two that [ would like to call your attention to. This is the map of the Missouri Pacific system of roads. These red lines constitute the Missouri Pacific system. Now, in addition to that, Mr. Gould con trols the Missouri, Kansas and Texas; and the Texas Pa cific from El Paso and all these lines in there (Northeast Texas) form a part of it, and on to New Orleans, so that it gives him practically the control of the southwest and the lower part of the northwest. Now, we speak of the few competitive lines in our own system of roads that we are trying to build up; yet look at the innumerable parallel lines in the Missouri Pacific system. Q. These were separate and independent systems once and afterwards purchased by him and combined in his system? A. Yes, sir; that is the history of it; and in addition to that he owns those other lines of road which have not in fact gone into the Missouri Pacific system. Then he has bought recentlyTM and* now controls this line the Missouri Arkansas. and Texas. It comes down in this way. He reaches, by virtue of his Texas Pacific and other roads, New Orleans, Kansas City, Memphis, Cairo and St. Louis. I will now call your attention to the Union Pacific, and I will show you the parallel and competing lines which they also con-

267
trol. You see from Kansas City to Denver there are two directly parallel lines, and from Denver to Cheyenne a line of road that will compare favorably with our East Tennessee and Central between Macon and Atlanta.
Q. What distance are those roads apart? A. These two are one hundred miles or more, but these two, of course, are not. Then they spread out again. Q. (By Mr. Lawson.) Have you any map showing the New York and Pennsylvania system? A. Yes, sir. Q. (By the Chairman.) These lines here are roads not in that (Gould) system? A. Yes, sir; these are lines not in the system. Here is a similar one running through it. Q. There are other parallel lines in that territory? A. Yes, sir. This Union Pacific, as I understand it, was the first one built into that territory. Let me also show the Northern Pacific, and you will see that somewhat the same thing is going on, although it is comparatively new. When you get out here there are lines of parallel roads, and these lines they are extending steadily. That road controls comparatively few competitive lines. It has been built in recent years, and yet even there you will see the same tendency going on. This ia the New York Central. They own absolutely that system those two lines there. There is the Hudson River and this is the Harlem. You will see on this side of the river is the West Shore. Follow it with your eyes and you will see it goes right along there runs* sido. by side with it many and many a mile, just with the river dividing it. You see when they come on here how they branch, and how they have practically, therefore, two lines all the way to the west, and then they have this one for some distance out of New York, making three lines from New York to Albany. Q. This originally was the New York Central and Hud son River? A. Yes, sir; but they call them both the same.
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Q. Is not the Pennsylvania one of the strongest in the United States?
A. Yes, sir; that and the New York Central are great systems. There are practically supposed to be four, or not more than five leading trunk lines the Pennsylvania, the New York Central. Baltimore and Ohio, the Erie and the Grand Trunk of Canada. They practically control all this business that comes from the west to the east. Therefore, Mr. Chairman, I repeat the statement that I made before, viz: That the Terminal is one formed out of the least competi tive and most supplemental lines of any of the great sys tems inaugurated in this country. You wHl see that by looking at the maps and comparing it with the great sys tems of the country. On this point of the growth of other systems rests a great deal of what we ourselves are doing. 1 will show you in a feiv moments a table prepared several years ago by Mr. Edward Atkinson, in which he shows the tonnage and the passenger travel on the four divisions of railroads in America the New England States, the Southern States, the Middle States and the Western States. You will see from a glance at that table that the amount of freight carried per mile by the southern roads and the amount of freight carried by the roads of any other section of the union are in great disproportion. You will see that the number of passengers transported per mile is very much less than that of any other section of the country. J have sent for the book, and when it comes I would like to read to the committee a passage or two showing Mr. Aikinsons views in regard to low rates. The fact is that the im mense traffic built up north of the Ohio river on the east and west lines enable those roads to transport their freight at the lowest possible cost. That, with the water line formed by the lakes and canals, and the Mississippi river and the Gulf of Mexico, with the Atlantic Ocean, has pro duced a direct tendency to discrimination against the southeast; so that the very pinnacle of rates majr be said to be found in our own section of country. Something

269
must be done, in my judgment, to correct this tendency. It materially affects our prosperity and the extension of our commerce. General Alexander explained to you how grain went around from the northwest to New York and Balti more, and came down the sea coast to Savannah, Charles ton and other southern sea ports, and then into the inte rior until it met the same class of products as came directly from the west. So that those living in Atlanta and in this Piedmont section find there is a down-grade of rates from this section to the sea, and a down-grade of rates from this section to the west, creating, as it were, a ridge running through this Piedmont region of the south. With our small traffic, our sparse population, with the im mense commerce passing over the great trunk lines, my own view has been that nothing could ever destroy this ten dency to shut in the southeast except a great system of roads that could reverse to some extent the commerce of this continent, and pull the business from the west directly to. the sea, practically, as it were, tunnelling under this ridge of rates made in the south. It is impossible for any system of roads, witli only a small amount of business, to do that business as cheaply as the great systems of roads with very heavy tonnage. If you will glance at this table of Mr. Atkinsons I will not take the time to read it all you will see there the proportion of passengers per mile carried in New England and those carried in the south. In New England, 11,446 are transported annually on each mile; in the south, 668. In the west, which comes next to the south, there is 1.885, more than twice as many as the number transported in the south. I would remark just here, predicted on some data which I have at home, and which I will furnish the stenographer, that I undestand the mileage in Massachusetts is one mile to every four square miles, and if we were built up in Georgia in the same pro portion to the railroad mileage that they have in Massa chusetts we would then have about thirteen thousand miles of railroad in Georgia instead of about five thousand. Yet,

270
the roads of New England transport 11,446 annually per mile to where our roads transport 668. Now, the freight movement is equally as striking, but there you will find that the Middle States, the region of these great consolidated systems, are greatly in excess of any of the other four sec tions ; so much so that the Middle States transport 10,900 tons per mile ancl the south 1,187 per mile annually. Mr. Atkinson says:
" In the New England States, where the manufacturing and mechanic arts give employment to the largest number of persons, and where the population is dense, we should expect to find the largest number of passengers to each mile of road. In the Southern States, where population is widely scattered and is chiefly engaged in agriculture, and where almost all the crops are light in weight, we should expect to find the least number of passengers and tons of merchandise per mile.
" In the Middle States, which are both manufacturing and commercial, and through which the heavey western crops are moved, we should look for the greatest quantity of merchandise per mile, and in the grain-growing States of the west we should look for heavy traffic in merchandise and a small number of passengers per mile.
" The facts fully justify the theory, and although the two following tables do not absolutely follow the same rule of sectional division, yet the analogy of the respective laws of distribution is very plain.
" Proportional movement of passengers and merchandise shown by sections, the divisions being made according to the nature of the traffic:
Section 1 New England States Food and fuel, moved in; Manufactures, moved out and distributed.
Section 2 Middle States (New York, New Jersey, Pennsyl vania, Delaware and Maryland) Food, moved in and through; fuel and metal, moved out; manufactured goods, moved out and dis tributed.

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Section 3--Western States (Ohio, Michican, Indiana, Illi nois, Wisconsin, Minnesota, Iowa, Kansas, Missouri and Nebraska)--Food and timber, moved out; manufactures, moved in: fuel, etc., distributed.
Section 4--Southern States--Cotton, wool, hemp, tobacco, and some metal, moved out; food and manu factures, moved in ; local distribution.

Proportions of the persons in each 1,000 ol all who were occupied in any kind o( gainful employment in the census year--Total number, 17,392,099. I. Farmers and farm laborers. II. Professional and personal service. III. Travel and trans portation. IV. Manufacturing, mechanical and mining.

I.--IN THE WHOLE COUNTRY._____

I.-F. * F. L. | II.--Prof. 4 Pers. I III.--T. & T

441

234

|

104

IV.--M. A XI.

1.000

II.--SOUTHERN (OR LATELY SLAVE) STATES. INCLUD ING DELAWARE AND MISSOURI.

I.-- F. & F. M6

II.--P. & P. 196.

III.

IV.--M. & M.

is;

ST..

1.000

III.--NEW ENGLAND STATES.

I.--F i F. 192

II.--P. A P. ! III.--T. <t T.

iK

j

1:14

IV.-M. * XI. 451.

1,000

IV.--MIDDLE STATES, EXCLUSIVE OF DELAWARE.

I.--F. <t F. 197

II.--P. i P.

III.--T. A T. 157

IV.--Mss.: A XI. 1.0IM

V.--WESTERN

| 1.--F. i F, I

I

197

1

AND NORTHWESTERN TERRITORIES.

11.- P. & P. I III.-- T. & T.

-'

1

!07

STATES
IV.-- XI. & XI. J09

AND
I | 1,000

Section 1. N.-E. Section 2, Middle Section:), West Section 4, South

Miles R. R. 6,::s! 17,131 60,525 26,l:!5

TABLE I.

Passengers Carried.
72,377,556
126,354,067 S!.!:,759 17,453,579

Passengers Per Mile. 11,446 7,376 ],3Sf> 668

Proportions Per Mile. -

TABLE II.--FREIGHT MOVEMENT.

Section 1. N.-E. Section 2, Middle Section 3, West Section 4, South

Miles R. R. 6,323 17,131 60.;>2f> 26,135

Tons Carried. 30,670,21:; 186,73G,ft>4 144,853.216 31.014,619

Tons Per Mile.
4,850
10,flOO
2,398 1,187

Proportions Per Mile. -

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Section 1, N.-E. Section 2, MiddleSection 3, Went Section 4, South

TABLE HI.

Tons Carried One JHle.
285,797 936,890 356,585 1-26,292

Proportions to Each Mile. ------

The importance of this classification is very apparent when we. consider the relation which volume of traffic bears to rates of charge for such service. While it does not fol low absolutely that the more freight and passengers a rail way system is culled upon to move the lower may be it? rates; yet it is a law that unless a '.ailway system is worked up to the capacity of such equipment as it must have in order to work at jill. its rates of charge must be higher in inverse proportion to the amount of its traffic. Hence it follows that after all due consideration has been given to grades, length of haul, terminals, fuel, and to the quality of the traffic; and after the rates have become adjusted no as to meet all these complex and confusing elements of the pvoblwn, tht- mimber of tons and of passengers will then constitute a finally controlling element. Those railways which are in the great lines of movement of grain (now about one hundred million tons per year), fuel (now about ninety million tons), timber and other heavy substances must and will be worked at A much less cost and at a innrh lower charge per ton than those railways whose traffic con sists almost wholly of fibres (two million tons), medals (six million tons), and general merchandise or food for local distribution." (Continuing, Mr. Calhoun said):
Now. sir, our southern railroads have adjusted themselves to all these various problems that enter into the cost of transportation; and I think that the finally controlling element in rates must be the number of tons of freight and the number of peovle we transport annually. With this serious problem presented to the south it seems to me in entering upon the practical movement in railroads that the most important question that any man can ask himself is: How are we to alter it? If we are to allow the great trunk

273
lines of road north of the Ohio river to continue to absorb the great business west of the Mississippi river, we find necessarily that they must and will always remain the roads that will be able to handle freight of all character at the lowest possible cost. The inevitable result of that is to give to that section the permanent and lasting commercial supremacy of the United States. As long as that remains true the tendency of discrimination in freight from the west against the southeast must necessarily be increased rather than diminished or lessened. Every year that that goes on these northern roads and the great consolidation of roads north of us must get more and more absolutely the control of these western markets. The necessary effect of taking large amounts of productions from the west directly to the east is to induce the great trunk lines, and to make it directly to their interests, to take back at the lowest possible cost, controlling, as they do, those western markets, every class of manufactured products. The practical question is: Can the railroads of the south do anything to meet that problem? If they can, it must be apparent that the com mercial importance of the southeast, her manufacturing importance and every element that enters into her pros perity must receive a great impetus and be enormously strengthened and benefited. Of all the elements that enter into the development of any given section of country I should say that the two most important are the cheapness of money and the lowntss of the cost of transportation. II we glance at the map we see that the south has a short Hue from her centres of greatest production--that is from Central Alabama, Georgia, Tennessee and the Carolinas-- that she has the shortest lines to all of that market west of the Mississippi river and south of Kansas City, and short lines from Kansas City to a large portion of the territory northwest of Kansas City. Those lines which lie east of the Mississippi river are the least heavily capitalized--I will say the southeastern lines--are the least capitalized of any of the great trunk lines of important systems of this
18

274
country. The Terminal system, with all its lines of road, has, as I stated the other night, a bonded indebtedness of about seventeen thousand three hundred and twenty-two dollars per mile, and a stock indebtedness, including all the stock capital of the Terminal Company itself, of about eighteen thousand dollars per mile outstanding. We are earning in round figures----
Q. (By the Chairman.) You mean the bonded liabilities and the stock liabilities amount to between thirty-five thousand and thirty-six thousand dollars per mile?
A. Yes, sir; that is the average liabilities of the system. We are earning enough over the whole system to more than pa}T the interest on our bonded indebtedness and to pay two or three per cent, in addition--I will say two per cent, in round figures--on the present capitalization. If we can get a system in the southeast powerful enough to make terms with a system west of the Mississippi river we would earn far more, controlling a large portion of the business of that territory which we can reach with ease west of the Mississippi river--I should say all of that territory com prising Arkansas and on. that latitude to the west and a portion of Kansas. Our plan has never contemplated the raising of rates in the south, but having a sufficiency out of our local rates to make our fixed charges and to meet the actual running operations of our road, we have felt that if we could divert a large part, or even a fair proportion--at first a comparatively small portion--of the great business of the west, we would be able to add enormously to the earnings of our system, and make our money in that way; recognizing that the tendency of the freight would be down ward, and that we would have to make up lor that down ward tendency by the increased value of oar business. Now, sir, glance at the map, looking from Savannah to Kansas City, and recognizing that if you go on a straight line north, from Savannah that you would pass through Charleston, West Virginia, and considerably west of Pittsburg, and that a short line from that western country to the sea comes to Savannah or through Georgia soil to one

275
of the south-Atlantic seaports, it seems perfectly reasonable that if we started to bring that traffic to this country,-if we could bring it at all, we would be compelled to bring it as cheap as those trunk lines. If we did not do that we would not bring it at all. Now, if we brought that business to the south-Atlantic coast as cheap as these trunk lines cany it the much longer distance, the inevitable result is to abso lutely cut down and let fall the whole fabric of freight rates in the interior of the southeast. The result would be an equalization of the freights to all of this southeast section of country, a prevention of discrimination and an enormous lowering of the cost of all the products imported from the west to the people of the south. Then, as our cars are com pelled to go back empty unless they took southern products or got products around from New York and the east or from Europe to come in here to our south-Atlantic seaports, the inevitable result would be that the greatest facilities would be offered to all the manufacturing interests in all their varieties in this Piedmont section of the southeast for distribution back to the northwest; and our natural advant ages--the cheapness of coal and iron and the cheapness of raw material for every variety of manufacture--would be permanently felt, and the southeast would become the worthy rival of the northeast in every feature of manufac turing and commercial prosperity. I speak from thorough conviction when I say that the future of this southeastern country, if that line of traffic could be turned in this way, would be so great that any man speaking from the stand point of to-day would hate to make a prediction in regard to the future, lest he should be considered wild and vision ary. And the next step would be direct trade from the south-Atlantic seaports with Europe and South America. All the movements made in that direction for a great many years past have failed. They necessarily must fail unless they are based upon something that is tangible and some great system of transportation that can furnish the business for them to transport to the country l\ving behind the seacoast in which the commerce, or the articles of commerce

276
that would come from abroad can be in turn distributed. Now, Mr. Wadley, with only a comparatively small system of roads, succeeded in eatablishing a very successful line of steamers from Savannah to Philadelphia, New York and Boston. My opinion is that with this great system formed --not immediately, not next year or the year after, for all these matters are. of comparatively slow growth--but in the very near future, inevitably the result would by this great system, reaching west of the Mississippi river, gather together a sufficiency of products to carry to one of our south-Atlantic ports to make it an inducement to establish their own lines of steamers to Europe or to cause capital to come in and establish it for them. We of the south produce the leading article of export in America to-day; yet a large part of that staple goes to the world from northern seaports; a large part goes from our own. We have a short line to the granaries of the west. The grain being the next leading article of export, it does seem to me, with a great system formed in the south, it would offer every inducement to capital to make them furnish direct transportation to Europe. Then the plan that we have formed meets the two important elements that are necessary to the commerce of this country--cheap money and cheap transportation--because if we form this great system of roads we are able to get our money at a very low" rate of interest for the south; and these other elements that enter into it, as I have explained, would cause us and compel us to transport our freight very cheaply. Then the parties who are interested in this system of roads, necessarily be ing men of large wealth, and necessarily because of their interests in the transportation of this country, being inter ested in using their money to aid and build up that class of enterprises that feed their transportation systems, inter est on money in the south would depreciate and we would get much cheaper money. I want to call your attention again to this report of Mr. Virgil Powers to the United States Government:
"The complaints as to discrimination in rates in the

277
State of Georgia arise almost, if not entirely, from com petition between various lines of transportation and compe tition of markets. They are, as a rule, more imaginary than real.
" The principal discrimination complained of is that of less charges on freight per ton per mile for long than short hauls. For example, the all-rail rate on grain from Chicago, etc., to Savannah, Charleston, etc., on the south-Atlantic coast, a distance of 1,075 miles, is 35 cents per 100, or 65 cents per ton of 2,000 pounds per mile. The distance from Chicago to Augusta, Ga., is 050 miles; the charge is 39 cents per 100, or 82 cents per ton of 2,000 pounds per mile. The distance from Chicago to Macon is 830 miles, and the rate is 39 cents per 100, or 89 cents per ton of 2,000 pounds per mile. The distance from Chicago to Atlanta is 780 miles, and the rate is 37 cents per 100, or 95 cents per ton of 2,000 pounds per mile.
" The complaints at these interior points are that the railroads give a less rate per ton per mile to the Atlantic coast points than to these interior points; that they should haul from Chicago to Atlanta, for example, for the same rate per ton per mile as for Savannah. This looks reason able, and if the all-rate lines had all the businees they coulu do, they could afford to do all their business at these, for them, very low rates. The northern trunk lines, for instance, haul grain from Chicago to New York, 912 miles, at 20 cents per 100 pounds; and to Baltimore per railroad, 800 miles, at 17 cents per 100. or 42 ceuts per ton per mile. They can do this and make some money on the business, for the reason that they have from ten to twenty times more freight to carry than our southern roads. The latter having a more limited business, are obliged to get much higher rates than the northern trunk lines in order to live.
"It may be asked, then, why carry freight to the coast, over 1,000 miles, at 62 cents per ton per mile, if they can not carry it all at that rate? The answer is that they are forced to do this by the rail and water lines' competition via New York and Baltimore, or lose the business entirely.

278
The rate from Chicago to Baltimore, being 17 cents per 100 on grain, and in like proportion on other things, and the rate from Baltimore to Savannah via steamer being 6 to 8 cents per 100, makes the rate from Chicago via Baltimore to Savannah 23 to 25 cents per 1'X). That forces the allrail lines to take the business at the low rate of 35 cents per 100, as against the rail and water lines' rate of 25 cents per 100; and at that difference of the rate they get about 30 per cent, of the business, and that almost entirely bulk grain and meat in car-load lots; and at times they have to reduce the rate to 30 cents per 100 in order to get a share of the business, and make very little on it. If they went out of this business they would lose what they make out of it, and do the interior cities no good, as they could not re duce the rates to the interior cities, and the low rates to the coast points via New York and Baltimore would still continue.
" Further, if the rail lines gave up the coast business, they would of necessity have to increase, if practicable, their interior rates to make up for the loss of this business. Even should the rates remain the same, the roads termi nating at the coast would lose the haul on that business, and to make up for it they would have to join the rail and water lines and take business from the coast on a pro rate with those lines to the interior; thereby reducing the rate to the interior points nearest the coast, so that the competi tion would result in making discriminations against the cities farthest from the coast greater than those complained of now. These discriminations, if they are such, have al ways existed, and complaints as to their existence have been brought about by the building of new lines of trans portation, and the anxious desire of parties in one trade center to extend their business into the territory of any other trade center. For example, prior to the building of rail roads in Georgia, the coast cities got very low rates from the northern and foreign ports, and interior towns had to pay heavy rates by wagons and iioleboats; afterwards by steamboats. When the railroads were completed to Augusta,

279
Macou, Atlanta, and even to Chattanooga, the rates to these places from New York were made by adding the local rates from the coast to the sail vessel, and afterwards the steam ship rate from New York, etc. Then the discrimination, if such it could he called, was greater as against the interior cities than now, all brought about, just as it is now, by the more fortunate location of one city in regard to rates than another.
"The building of competing lines from the northwest into Chattanooga produced competition there between western trunk lines, which have an immense freight business as compared with the southern lines, and could afford to do business for less, and they forced the rates down to Chatta nooga, Nashville, and all that territory. This reacts on the interior cities of Georgia, etc., and produces what is claimed to be discrimination against them. These are about the only discriminations that exist, and cannot be remedied without the ruin of the railroads; and even then it is doubt ful if it could be done to any considerable extent. The complaint is made that the local rates are much higher in proportion than the through rates. This is also produced by competition producing the rates on through business, so that the roads have to have higher local rates in order to live. The local rates of southern roatls, however, on busi ness generally are not higher than the local rates on north ern roads, where they have so much more business to do.
"It is possible, if one power controlled all the railroads and steamship lines doing this business, that the discrimi nations complained of might, to some extent, be remedied, but it could not be entirely removed or done to satisfy a ma jority of the complainants. The other discriminations com plained of in Georgia result from competition of markets.
Take for instance, iron and many of its products. The western cities, Cincinnati, Louisville, Knoxville, Chatta nooga, etc., make bar-iron, nails, horseshoes, plow points, tc. The same articles are made in Richmond, Baltimore, etc., and those markets compete for the business, and the railroads leading from each find it to their interests to foster

280
this business in their respective cities, and in this way very low rates are made into territory where both markets and railroads cempete.
" For example: Richmond wants to furnish the articles above named to points in upper Georgia, South Carolina, etc., and the roads running from their city to that territory are owned by one organization. Chattanooga, Knoxville, Cincinnati and Louisville want to furnish the same terri tory, and the roads from both sides compete strongly for the business, and very often the rates to points at a distance from one side to the other are less than the rates to points nearer home.
" Aa stated before, discriminations are produced by com petition. In some rare instances discriminations may, by wrong arrangements of rates, by some oversight, or to gain some advantage by one line over another, exist, but these instances are rare and are soon corrected."
Our claim, then, Mr. Chairman, is that our plan and our system of roads tend directly to prevent discrimination. They tend to put the local points nearly on an equality with the competing points, and they tend to open territory on each of these lines of roads to the products and manu factured products on each of the other lines of road; they tend directly to a reduction of rates, and at a material ad vancement in the prosperity of the southeast. Are there any questions that you would like to ask me on that line of thought before I pass to another?
The Chairman: None that I think of, Mr. Calhoun. Q. (By Mr. Lawson.) I did think of asking you one, but you have answered it already. The question I was going to ask was if it would not be absolutely necessary to lower your rates of freight to compete with those other lines? A. Absolutely. I am glad you asked me that question, because that is what I desired to impress upon the com mittee and upon the public, and that is that we are the direct promoters of that class of competition that is most beneficial to the south and southeast. We are widening
J

281
and enlarging our competition, and are going out into mar kets that we never have reached before.
Q. Instead of making Atlanta, Alacon, Savannah and Augusta compete with each other, you propose to make Arkansas and Texas compete with the States in the north?
A. Yes, sir; and in supplying us, the manufacturers of the southeast will compete with the States of the north and the Middle States in supplying that great western country southwest of the Mississippi river. We can do it, because we have every advantage over them, except for this dis crimination in the transportation systems of the country. I have tried to stud}' this question of transportation, and of the commercial supremacy of the northeast, impartially, and I think it is proper for me to say that the views I have expressed now are the views that had taken firm possession of me before I ever went .into railroading, and my direct object in going into railroading was to try and get this view before the country, and to get permanently before the world the great commercial advantages of the southeast. I recog nize the fact that everything I now say, while every one would, of course, recognize that what I say, are my sincere convictions, yet they would naturally think those convic tions were influenced by the enormous interests that I have in the railroad system of the south. But I want the com mittee to understand very clearly that my large railroad interests have actually grown up out of these views; and while it is personal, I think, as this is a very important question, that I would be justified in saying further, as I said at the time to my more intimate friends, that if I had announced them to the public before having done some thing tangible I would have been called visionary; that in entering upon these plans I did not expect to be able to amass a fortune--certainly not for many years--but' I thought by perfecting them I would enhance my profes sional position and promote the prosperity of this country. The money I have made out of the system, and the fortune I have accumulated, and expect to accumulate, has been simply the outgrowth of an effort to bring about this pros-

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perity, and made entirely by the enhancement of values

that had been given to the southern railroads by these de

signs. I mean by that that while I sold the Georgia Com

pany stock for more than it represented in the Central

stock, taking the price of the minority as a basis of value,

that these ideas and views and the object of this great com

bination have given to the men on the inside an enhanced

idea, I think, of the real value of southern railroad proper

ties, and they paid liberally for the purpose of attempting

to bring about this combination, and to put it in a solid

and financial shape.

Q. In regard to these northern roads: How is it their in

come is not proportionately larger than that of the south

ern roads? They charge nearly as much for carriage per

mile per ton, do they not?

'

A. No, sir; their charges are very considerably less. You

can understand that even the fraction of a cent per ton per

mile would make an enormous difference in the net income

of the company. The railroad must have the same number

of cars, the same number of engines and the same fixed in

vestment in taking a given number of tons, whether they

take it at four miles or five mills, so that necessarily the dif

ference between four miles and five mills is absolute profit.

That would mean, of course, if it was as large as that,

twenty per cent, in their gross income, and that increase in

gross earnings would be all net. The result is, therefore,

that while the freight rates of the whole country are very

low, and while the lates in the south are rapidly approxi

mating the freight rates of the north, yet the difference in

the two represents a much less net earning to the northern

roads than if they got the same rates as the southern roads.

Mr. Calhoun (to Mr. King) : Mr. King, can you call my

attention to anything I have left out?

Mr. King: In talking about the bringing of freights in

this direction from the west and bringing these systems

together, I want you to state what would be the effect on

the south if these roads were left apart, and what would be

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the effect under a system of a continuous through line con solidation?
A. The necessary result of that would be to lower the rates through that portion of the territory contributary to those through lines. The necessary result of that would be a dis crimination against Georgia and this portion of the south east. If you separate these systems of roads each necessa rily would be pulling for all the business over its particular line of road. As the Mississippi river would be reached in our system only by the East Tennessee system and the Richmond and Danville system, the necessary tendency would be on the East Tennessee system to take that busi ness from Memphis if the proper consolidation with the Noifolk and Western and the Shenandoah was carried out--to take it up by Chattanooga and Bristol and on that way to the east, because, of course, the great trade of the country is moving in east and west lines. It may be taken to the southeast first to be brought up by our pro rate water rates, as was explained the other night. By that line the Memphis and Charleston, East Tennessee and Norfolk and Western, not one foot of it, unless it was a lit tle piece in Dade county, in the edge of the State, would pass through Georgia. That from the Mississippi river at Greenville by the Georgia Pacific would come here (indi cating) to the State line, and right through the State to the Carolina line, and all the benefit Georgia would get would be along that line. Both of these systems would be inter ested in carrying the business of the territory reached by them back through this country to the west, and while we would get the benefit of some low rates along these lines which would in turn permeate down through the balance of the southeast, still that portion of the south east, south and east of the Richmond and Danville sys tem--that is south and east of Atlanta and Birmingham --would necessarily be discriminated against, and the direct interest of these roads would be to shut out as far as possible the Central system and all this territory reached

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and fed by the Central from a participation in that great through business.
Q. Where would it be to the greatest interest of those lines to establish manufacturing interests?
A. Undoubtedly to the northeast of us--Tennessee and the cotton manufactories of the Carolinas--and the ten dency would be to work the business down through this territory. They could not do that fully, because of the nat ural advantages which we possess.
Q. Would not their interests be to establish these manufacturies as far to the east of this line as possible in order to get the long haul?
A. Undoubtedly; because they would have to carry their cars back a portion of the way empty until they came down into our territory. But I doubt very much if that line could be successfully established in the south except to Norfolk, unless this system of ours was formed, and I think the segregation of our sy.-iem would be undoubtedly a trunk line running from Norfolk to Memphis, say a por tion of the East Tennessee, making this branch of the East Tennessee east of Chattannoga in Georgia merely tributary to the main trunk line.
Q. (By the Chairman.) You speak of drawing freight from the west directly through Georgia. What advantage would that be to the people of Georgia if you did haul the freight from the west through the State down to Savannah for transportation east, instead of being transported by the great trunk line? What advantage is that to the people other than those interested in your system?
A. First, it necessarily means they will get the products imported from the west at a very much less cost. We can not bring that business from the west to the south-Atlantic seaports at all unless we are able to compete with those lines north of the Ohio river.
Q. Your competition is for those products being carried east?
A. North of the Ohio river. Q. When you sire competing against the trunk lines for

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products carried easl, how does that give the people of Georgia any cheaper rates?
A. The inevitable tendency, sir, would be that we would be compelled either by intelligent management or by the long and short haul clause of the inter-state commerce act to lower our rates into the interior. If we brought grain from Kansas City to Savannah in large quantities, in competition with the great trunk lines north of the Ohio river, the inevitable result would be a lowering of rates in all of this territory between Savannah and the west. We would have to approximate our rates into this territory for local distribution to our through trunk line rates. That would be the first effect--that the people would get what they consume from the west at a cheaper rate. That would be but a small item, however, in my judgment, as large as it would amount to in dollars and cents, to the enormous indirect advantages that such a line would be. We get our grain here from the west to Savannah, and our cars must go back empty or loaded, and the inevitable re sult would be that we would take the manufactured pro ducts of all of this section of country back to the west ir. exchange----
Q. Your cars must go back where empty? A. To the west. If we start a hundred cars of grain from Kansas City to Savannah, they must go back to Kan sas City empty or loaded. Now, we have seen that the rates of freight by steamer (in Gen. Alexander's testimony and what I have read from Mr. Power's report) from New York to Savannah are very low, five or six cents per 100, because our eastern-bound cargoes are so much more than our south-bound cargoes. The same thing would apply ex actly to the return of our freight trains to the west. We will take our products from all this southeastern country back at any price to get it into that market, and we would have built up a system whose direct interest would be to take and put as much of our manufactures back there as the possibility could put back there. Q. It would not cost anything to put the products there?

286 .
A. Anything over the actual cost of the train would be . so much profit.
Q. In order to do that, you have to assume that you own the whole line from the seaport to Kansas City ?
A. Not at all. If we got the whole haul back, that would be so much better; but if we did not get it all, we would get it as far as we went. But the point, Mr. Chairman, is this: " That in order to be able to offer to some great sys tem of roads west of the Mississippi river an inducement to send its traffic this way, we must be able to show them that we can give them a return cargo. Take the Missouri Pacific; why should they bring their business from Kansas City to Memphis, and transport it to the southeast as against the great trunk lines to the east, unless we could give them a return cargo? We would not be able to give them a sufficient inducement to get them, to help us, unless we could show them a way of building up an important traffic for their own lines. These again are practical ques tions. I do not believe that any one single line that went to the Mississippi river could begin to do that. You must be able to offer some great inducement to the great northwestern systems to change their commercial lines. We can do that because we can offer to one great system in the west, an enormous local distribution of business through the south east. If we did not offer them anything that came in at all, we would have enough business concentrated on our system of lines to make an inducement to them. Now, Air. Chair man, you must always bear in mind this rate of freight practically run along the line of the Richmond and Dan ville main stem, and we have to cut under that. Now, then, pass to the next point I desire to call your attention to, which is the wonderful low cost at which railroads are now handling their business. Take a suit of clothes that any of us are wearing to-night; every article of our wearing ap parel probably does not weigh over seven pounds, shoes and everything. But the same proposition would hold good whether they weighed five or whether they weighed nine pounds. We are accustomed to regard the United States

287
mail service as an exceedingly cheap service; yet if we sent that seven pounds to New York or to South Carolina by mail it would cost us a cent an ounce, or one dollar and twelve cents. Now, it has been testified here, that our rate from New York to Atlanta, 878 miles, is one dollar .and fourteen cents, or was one dollar and fourteen cents, before the recent cut in rates that brought it to one dollar and eight cents. But take it at one dollar and fourteen cents as I assume the business cannot well be handled anj* cheaper than that, and the cost of transporting for that seven pounds is less than eight cents. So it is with all the arti cles that enter into the consumption of individuals all over this country. Mr. Edward Atkinson, in his article on the distribution of products, states the proposition, that it costs less to deliver the flour in a loaf of bread from (ilyndon in Montana, or Chariton, Iowa, to Boston by railway ser vice, than it does to deliver that loaf from the baker to the consumer. I will read it to you : " I am prepared to admit that the railway has been a most important factor in distribu ting food among the people :>f this and other lands, for with out it thousands might starve, but I shall also prove to you in the analysis of the loaf of bread, that it has become relatively the factor of least importance, at its present cost, of all the items which constitute the cost of bread to the consumer. Therefore, before you undertake to regulate the railways, and thereby to reduce the price of bread, meat and fuel, you must give your attention to vastly greater elements in their cost, which maj' be more readily made subject to statute law than the railway service can be, if either kind of work is to be taken in charge by the State. I shall take as my unit 450 bushels of wheat to be converted into 100 barrels of flour, and then in to bread, and I shall present to you all the elements of the cost of this bread, both in fig ures and by graphical illustration, as follows: What makes the price of bread in Boston? Foxir hundred and fifty bushels of wheat are required to make one hundred barrels of flour. In the left-hand column it is svssumed that this wheat has been raised near Charitou, Iowa, and milled in
L

288
Chicago. In the right-hand column it is assumed that the wheat has been raised near Glyndon, in Dakota, and milled in Minneapolis. It will be observed that if the railways earn as profit thirty per cent, ot their charge, their profit on each barrel of Iowa flour, moved about one thousand fire hundred miles, is only about thirty-five and a quarter cents,. and on each barrel of Dakota flour, moved nearly two thousand miles, only fifty-nine and a quarter cents. In point of fact, the actual profit on grain and flour carried long distances is much less than thirty per cent, of the charge, and the actual profit for the above dis tances does not, probably, exceed twenty-five cents per barrel and fifty cents per barrel, respectively. The railway charges are now so small that it does not leave you much of a margin to work upon and to save, but you cannot fail to notice that the charges made by the bakers and grocers is very large, and gives you an ample margin for legislative action. If you reply that all attempts to regulate the price of bread have failed, may I be permitted to rejoin that all attempts to regulate the charges of the railways have also failed except, perhaps, in Belgium where the government has once at least been obliged to prohibit the private corporations which own a part of the railroads from lowering their charges, lest the government railroads should be unable to compete with them." That line is there (indicating on page of book) represents the cost of the bread, and this other line the railroad profit on it. We carry iron from Birmingham to Pittsburg at about five mills per ton per mile; water melons from South Georgia to the west at about eight cents per ton per mile; lumber at about six cents per ton per mile; and, as I have already stated before, the steady ten dency is to decrease the rates. Now, when you come to consider how much is in a ton of ordinary merchandise you cannot but be impressed by the wonderful cheapness of the railway transportation service, and what an infinitesimal tribute it levies upon the consumer or the producer of this country. I believe it is safe to say that nothing else in the

289
world renders the same amount of service at the same cost as the railroad does. Another noticeable fact is that the average per ton per mile of railroad transportation in America is less than it is in any other country in the world. The claim of extortion by roads is rather the result of discrimination than it is the result of any excess in the price charged for transporting any given commodity. It is impossible in any system of business, so complicated that deals with such a variety of articles and with so many hundreds of thousands of people, that evils and discrimina tions should not crop out. We claim again that the ten dency of railroad combination is to lessen these. Now, General Alexander testified before you as to another method of lessening rates, and that is by the increased capacity of ears. I have here a table which I will furnish the stenog rapher, and which you can see at leisure. Of course, gen tlemen, everything I have said, when it comes down to its practical value, we find it already in the different books written on this subject, and much more fully than I have been able to give to this committee; and I do not know that there is any material value to any information I have been able to give to the committee, for it all exists in one form or another already.
The committee adjourns.
19

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Committee met October 3,1889, 8 o'clock p. M., with the following members present: Messrs. Glenn, Chairman fro temporc; Lyle, Lawson and Berner.
Patrick Calhoun (re-called.) Q. (By the Chairman.) Here are some questions, Mr. Calhoun, that the chairman desired to have asked, directed to yourself and General Alexander, and as there are several questions embraced in each. I will read the whole and then we can split it up: First When did you two jointly be come interested in the purchase of stock of the Central Railroad and Banking Company of Georgia? Who were your associates? How much did you and your associates buy? Did not you and your associates buy a majority of the stock? When did you two jointly become interested in the purchase of stock of the Central Railroad and Banking Company of Georgia? I will ask you that first? A. We never owned any stock jointly at all. We began the purchase of the stock---- Q. The question is, when did you two become jointly in terested in the purchase of stock in the Central Railroad and Banking Company of Georgia? A. If that means a joint interest in the stock, we did not own any stock jointly; but if it means the purchase of the stock at or about the same time, I do not know when General Alexander began the purchase of his stock first. My brother and myself, with Mr. Kissell and Douglass Green, became interested in the purchase of Central stock early in July or August, 1886. We then associated with us Messrs. H. B. Hollins and E. E. Denston of E. W. Clark & Co. My recollection is that was done in August, 1886. Later still we brought in Messrs. Isaac L. Rice, Emanuel Lehman and Alfred Sully, behind whom there were other parties not active in the purchase of the stock. Messrs. P. G. Goodhart, Scholly Brothers, and I think that the

291
*
Messrs. Wurraser had an interest through Mr. Sully. There may have been, and doubtless were, other parties behind those names with whom I never came in contact.
Q. How much did you and your associates buy ? A. We formed a syndicate agreement in November, 1886--the 12th of November is my recollection--for the purchase of twenty-five thousand shares, in which agree ment my brother and myself and General Alexander re served the right to bring in ten thousand shares more. After that agreement was signed we continued the purchase of the stock until almost up to the day of election, and our purchase exceeded the amount provided for in the agree ment, as I recollect it, about twenty-five hundred shares, making the total purchase up to January 1st, 1887, about twenty-seven thousand five hundred shares. My brother and myself and General Alexander then arranged to bring in ten thousand shares that we had reserved. My. arrange ments for that were perfected about February 1st, 1887. All the stock was not actually owned by us. but was con trolled. Then sometime in the spring of 1887, the amount of the syndicate stock was increased to forty thousand shares, and I understood that additional twenty-five hun dred shares was taken by August Belmont & Co., but we knew in the transaction August Belmont, Jr. Q. Did you and your associates buy a majority of this stock? A. Yes. sir; forty thousand shares is a majority of the stock, the whole stock being seventy-five thousand shares. Q. That answers the first question. Now, the second is, where was the Georgia Company organized? Was it not chartered as at High Point, in North Carolina? If we have not stated the exact name of the company chartered at High Point, N. C., which subsequently became interested in the stock of the Central Railroad and Banking Company, give the correct name. What were the assets of the Geor gia Company, or the High Point Company? Did you not transfer to it, you and your associates, a majority of the

292
stock of the Central Railroad and Banking Company? Now, where was the Georgia Company organized?
A. As I. have always understood, at High Point, in the State of North Carolina. I did not organize the Georgia Company. It was organized at a time when differences existed between some of the other members of the syndi cate and my brother and myself.
Q. Was it not chartered at High Point? A. I have always so understood. Q. Is that the correct name of it--the Georgia Company ? A. The Georgia Company. It may be "Georgia Com pany," but I understand it to be The Georgia Company. Q. What were the assets of the Georgia Company or the High Point Company? Mr. Calhoun : Call it the Georgia Company. Q. What were the assets? A. Forty thousand shares of Central stock plus four hun dred thousand dollars. . Q. Did you not transfer to it a majority of the stock of the Central Railroad and Banking Company ? A. Yes, sir; the whole forty thousand shares. Now, that transfer, to make it perfectly clear, was made through the Central Trust Company, and for the purpose of securing four millions---- Q. As you have stated in your prior testimony? A. Yes, sir--of the collateral trust bonds; so I do not think that the actual legal title to the stock ever passed to the Georgia Company. My impression is that the Georgia Company never appeared upon the books of the Central Railroad and Banking Company, and that the only stock holder that they have ever known for that forty thousand shares since that transfer was the Central Trust Company, of New York. Q. Third. What became of the stock which you and your associates held in the Central Railroad and Banking Company? Does not the West Point Terminal Company directly or indirectly control the vote of the stock of the Central Railroad and Banking Company?

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A. I have just stated as to the transfer to the Georgia Company in the manner described.
Q, Does not the West Point Terminal Company directly or indirectly control the vote of the stock of the Central Railroad and Banking Company?
A. I should say it controlled it indirectly through the ownership of the stock of the Georgia Company, subject to the condition stated in the trust deed.
Q. Fourth. What mortgages or liens of any kind have you and 3'our associates placed either upon the property ot the Central Railroad and Banking Company or upon the stock of the Central Railroad and Banking Company which you held, or upon the stock of the Georgia or High Point Company?
The directors of the Central Railroad placed upon some of the assets held by the Central Railroad and Banking Company a collateral trust bond for five millions of dollars. That money was expended partly in building the Columbus and Western Road from Goodwater to Birmingham, and in buying another steamer, and in extending the road from Claj'ton to Ozark and the extension from Blakely to Co lumbus, and in improving our property generally. They have placed upon the Savannah and Western Railroad Company a mortgage for eighteen millions of dollars at the rate of eighteen thousand dollars per mile. Of this mort gage there has been issued five millions, which are guar anteed by the Central Railroad and Banking Company. That money is being used in the extension of that system and another additional steamer and in the improvement and development of the Central system. The Georgia Com pany placed upon the forty thousand shares of Central stock four millions of the collateral trust bonds as herein before described. The Terminal Company, after the pur chase of the Georgia Company stock, covered by its collat eral trust bonds all of the Georgia Company stock, but reserved four millions of its collateral trust bonds to take up four millions of the Georgia Company bonds, providing in the trust mortgage that the Central stock should come

294
behind the collateral trust mortgage of the Terminal Com pany whenever the four millions of Georgia Company bonds were paid off. That is the full financial history of these companies. When I said how the first five millions were disposed, note that about fourteen hundred thousand in round figures was used in paying off the indebtedness in curred, as I have understood, by the Central management, before we took charge, in building the roads in the upper part of South Carolina.
Q. Fifth. Does not the Central Railroad and Banking Company of Georgia, hold a joint lease with the Louisville and Nashville Railroad Company, of the Georgia Railroad, and does it not by reason of this lease have a large voice in the control of the Atlanta and West Point Railroad Com pany and the Western Railway Company of Alabama?
A. It controls a half interest in the lease of the Georgia Railroad and Banking Company. By virtue of that control it has a voice in voting the stock held by the Georgia Rail road and Banking Company of the Atlanta and West Point Company. It controls the Western Railway of Alabama by special legislative permit, jointly with the Georgia Road,' each property having a half interest. By virtue of its in terest in the lease of the Georgia Road it gets a voice in the control of the other half of the Western Railway of Ala bama. I do not know that I made myself perfectly clear. The Georgia Railroad and Banking Company and the Cen tral Railroad and Banking Company own that property jointly.
Q. Sixth. Has not the West Point Terminal Company control of the Richmond and Danville Railroad by holding a majority of its stock, or by some other means? What connection has the West Point Terminal Company with the Richmond and Danville? Has not the West Point Terminal of the Richmond and Danville Railroad Company made a lease, directly or indirectly, of the East Tennessee, Virginia and Georgia Railroad? Does not the West Point Terminal of the Richmond and Danville Company hold an agreement by which it elects a majority of the directors of

295
the Bast Tennessee, Virginia and Georgia Railway Com pany? The first question is: Has not the West Point Terminal Company control of the Richmond and Danville Railroad by holding a majority of its stock, or by some other means ?
A. It holds nearly all the stock of the Richmond and Danville. My impression is that it owns all the stock ex cept two or three hundred shares.
Q. What connection has the West Point Terminal Com pany with the Richmond and Danville ?
A. The connection just stated.
Q. Has not the West Point Terminal of the Richmond and Danville Railroad Company made a lease, directly or indirectly, of the East Tennessee, Virginia and Georgia Railroad ?
A. My recollection is, that lease was partly executed by the extension of the Richmond and Danville authority over the East Tennessee. Its' permanent execution was enjoined by the courts of Tennessee. Under that injunction, or the orders of that court, the Richmond and Danville surrendered all control that it exercised over the East Ten nessee, by virtue of that lease.
Q. Does not the West Point Terminal or the Richmond and Danville Comp:my hold an agreement by which it elects a majority of the directors of the Kas4 Tennessee, Virginia and Georgia Railway Company?
A. It does not hold, so far as I know, any agreement. I have already stated the method of its control of the East Tennessee. It occurs under a reorganization agreement made when the consolidated mortgage bonds of the East Tennessee, Virginia and Georgia Railroad were being fore closed several years ago. By that reorganization agree ment, which was entered into by all classes of security holders and the committee known as the purchasing com mittee, or the re-organization committee, a majority of the first preferred stock was given the control for five years, or until two consecutive annual dividends of five per cent, had been paid. The West Point Terminal Company controls,

296
I think, about six millions five hundred thousand out of the eleven millions of the first preferred stock of the East Tennessee. It has recently, I understand, made some ad ditional purchases of the first preferred stock, but to what extent I am not prepared to say. The power of the first preferred stock is not an absolute one. It is merely the election of eight out of the fifteen directors, the junior security holders electing, as I understand it, the other seven. Now, Mr. Chairman, I would like to say again in giving my statement as to matters contained in papers, that the papers are in existence, and I do not propose to give them with absolute accuracy. They speak for them selves, but I think I give them substantially correctly.
Q. Seventh. Is not the property operated as the East Ten nessee, Virginia and Georgia Railroad in Georgia owned by a corporation created under the laws of Tennessee, and did not its president, General Thomas, swear, in answer to a bill filed in Knoxville, that it in no wise used the char tered privileges granted by the State of Georgia to the Cin cinnati and Georgia Railroad? Is it not therefore a for eign corporation operating a line of railroad from the Ten nessee line to Brunswick without any permit from the State of Georgia to do so? The Cincinnati and Georgia charter; how is that effected? How does the West Point Terminal now control the East Tennessee, Virginia and Georgia? When was the last arrangement perfected, and does it now matter whether Chancellor Gibson's decision is sustained or reverstd? You can answer the first part of this question. Is not the property operated as the East Tennessee, Vir ginia and Georgia Railroad in Georgia owned by a corpora tion created under the laws of Tennessee, and did not its president, General Thomas, swear, in answer to a bill filed in Knoxville, that it in no wise used the chartered privi leges granted by the State of Georgia to the Cincinnati and Georgia Railroad?
A. I understand that after the re-organization of the old East Tennessee, Virginia and Georgia Railroad Company,

297
as I believe it was formerly called, or Railway then and Railroad now----
Mr. King: The East Tennessee, Virginia and Georgia Railroad Company.
Mr. Calhoun: Well, the East Tennessee, Virginia and Georgia Railroad Company--that the purchasers organized, under the laws of Tennessee, the East Tennessee, Virginia and Georgia Railway Company, and that the purchasing company took, under the order of the United States Court, all the property of the old East Tennessee, Virginia and Georgia Railroad Company wherever found, in or out of Tennessee--I mean all the property described in the fore closure proceedings.
Q. The next branch of ths.t question is, did not its presi dent, General Thomas, swear, in answer to a bill filed in Knoxville, that it in no wise used the chartered privileges granted by the Stale of Georgia to the Cincinnati and Geor gia Railroad?
A. My impression, sir, is, that is true. Q. He did swear that? A. That is my recollection. The basis of that claim is that this new corporation got all of the property and posi tive franchises of the old East Tennessee, Virginia and Georgia Railroad Company, which had gotten the property of the Cincinnati and Georgia, and that the new company operates the road from Rome to Brunswick (the old C. & G.) just as the old company operated the road from Rome to the Alabama State line. To make that distinction clear, I must restate something that was said the other night. In the suit which we filed in this State--Mr. King, Mr. Hoke Smith and others--we set up the claim that the East Ten nessee, Virginia and Georgia Railroad Company was a Georgia corporation as to that portion of its line from Rome to Brunswick, because the Cincinnati and Georgia had sold not only its positive franchises, but its charter, as it had a right to do under the Act of the Legislature incor porating it; that the sale of its charter carried the exist ence of the corporation itself. As to the portion of the

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road it operated in Georgia from Rome to the Alabama State line, it had purchased thai under the foreclosure pro ceedings of the Selma, Rome and Dalton; and my remem brance is that Judge McKay, in the decision reported in 4th Wood, held that that part of the road was operated under the potential powers of the East Tennessee, Virginia and Georgia'8 own charter. Now the claim is that the East Tennessee, Virginia and Georgia is operating all its line in Georgia, just as it operated a portion of its line prior to the reorganization.
Q. The next branch of the question is, is it not, therefore, a foreign corporation operating a line of railroad from the Tennessee line to Brunswick without any permit from the State of Georgia to do so?
A. No, sir; I should say that it was operating the road in Georgia by virtue of a permit from Georgia, but not under a charter from the State of Georgia, the distinction being well established in the Supreme Court of the United States and, so far as I know, in all the courts of this country, that if the corporation is consolidated under the Acts of two States--under a charter granted by two States--it is then a corporation of both States. But if one State allows the positive franchise of a corporation to be sold out to the corporation of another State, the other cor poration, the corporation of the foreign State, would oper ate the road by virtue of its own potential powers by permission of the State that authorized the sale of the road.
Q. How do the West Point Terminal now control the East Tennessee, Virginia and Georgia Railroad?
A. As I have described in a qualified way, by virtue of the ownership of a majority of the first preferred stock, which carries the qualified control heretofore described.
Q. When was this last arrangement perfected? A. The present arrangement has existed since February, 1887. The only change made was the attempt to lease, which failed, and which threw the two companies back in

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the same position towards each other that they had occu pied before the attempt to lease.
Q. Now, does it matter whether Chancellor Gibson's de cision is sustained or reversed?
A. That is a pretty difficult question to answer, sir. I will be perfectly frank. I think it is to our interest that Chancellor Gibson's opinion should he sustained in one sense, not because of its correct legal position, but because I think it wiser that we should own the stock and keep the East Tennessee, Virginia and Georgia entirely*independent, although that view might not be held by others. My own view is, and has been, that the Richmond and Danville, the East Tennessee, Virginia and Georgia and the Central Road should be, certainly for the present, (I do not know for how long, probably forever, but certainly until some express permission was given by the different States to make other disposition,) that their entire integrity should be preserved, and that they should be operated in every sense as separate and distinct properties. The control of the Terminal Com pany's stock in no way affected the integrity or the control by the proper officers of either one of the other great sys tems. Now, with that view, it would make no difference whether Chancellor Gibson's opinion--I mean no practical difference--whether his opinion be sustained or not. In other words, if I had full authority, granted by special per mit of every State, to make the lease to-morrow, I very much doubt whether we ought to do it or not, for purely business reasons. I do not know what my views on that subject would be, but I merely throw these out as sugges tions as they occur to me, and I cannot answer that ques tion any more fully than that.
Q. (By Mr. Lawson.) I saw it stated in the newspapers a few days ago that the Richmond and Danville had effected their lease of the East Tennessee?
A. That is not true so far as I know, and I do not think it is even contemplated. This has been done, and probably is the origin of that report: The Terminal Company has increased its holding of the East Tennessee stock. That

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increase has been partly of the first preferred stock, of which it already held a majority, and partly of some of the junior securities. The main object of that increase was not to get any more control at present than we have now, but in the view of strengthening our financial situation and giving us more assets in our treasury, and with the expectation of eventually carrying out the plan of bringing the stocks of these roads into the Terminal treasury.
Q. (By Mr. Berner.) Let me see if I understand you? Isn't this true: The West Point Terminal owning a ma jority of the first preferred stock and the controlling stock of the East Tennessee and a majority of the stock of the Central, and practically owning all of the Richmond and Danville, and with it the Air-Line, elects a board of di rectors to carry out their views with reference to the accom plishment of this scheme V
A. It elects the boards of directors of each of these prop erties.
Q. And the men elected are, of course, in harmony with the purposes of the system ?
A. Yes, sir. The Chairman : Mr. Calhoun, if there is any other state ment you.desire to make, you can do so. Mr. Calhoun: On this very question, sir, asked by Mr. Berner, I will state that I have here a list of the Richmond and Danville directors for 1887 and 1888, a list of the East Tennessee, Virginia and Georgia directors for 1887 and 1888. and a list of the Terminal directors for 1887 and 1888. and I will furnish the committee later with & list of the direc tors of the Georgia Company--the parties who control the Central syndicate and the Central Railroad board for both these periods. This question, just there, is important to show the full scope of what the Terminal has done and the line of policy in regard to the arrangement of these properties that it is pursuing. This consolidation, so far as the inter locking of directors of each of the properties is concerned, was perfected early in 1887. The actual purchase of the East Tennessee stock was made in February. 1887, and the

301

actual purchase of a majority of the Richmond and Dan ville stock was made in November, 1886 ; so that these two properties have been together from 1887 to date just as they are together now. In additiou to that the president of the Terminal Company, Mr. Alfred Sully, Mr. Rice and Mr. Lehman were three out of five of the original trustees ap pointed under the agreement of November 12th for the pur chase of the Central stock. In the summer of 1887 Mr. Sully, Mr. Rice, Mr. Lehman, Mr. Lehman's brother, Mr. John Inman and Mr. James Swann were made directors, with others, of the Georgia Company. Now, all that the final purchase of the Georgia Company's stock accom plished, and all that the contest we have made in reference to the other properties in the two years has accomplished, so far as the directorships were concerned, was the substi tution of one set of men throughout the whole for the other men who were already in the whole. To illustrate: the substitution of Mr. Inman as president of the Terminal Company, and Mr. Inman in the Georgia Company and through these different properties. I have here a list of the directors of the three properties for the years 1887 and 1888, which I will furnish the stenographer, and which he can incorporate in my testimony:

RICHMOND AXD DAXVILLE DIRECTOKS:

1887.

1888.

J. A. Rutherford,

J. A. Rutherford,

John H. Inman,

John H. In man,

J. C. Moore,

J. C. Moore,

Geo. F. Stone,

Geo. F. Stone,

E. Lehman,

E. Lehman,

T. M. Logan,

Sam'1 Thomas,

J. H. Dooley,

C. S. Brice,

I. L. Rice,

H. C. Fahnestock,

R. K. Dow,

Chas. M. McGhee,

J. B. Pace.

Jno. S. Barbour,

E. D. Christian.

J. C. Maben,

S. M. Inman,

J. H. Hall.

302

RICHMOND TERMINAL DIRECTORS:

1887.

1888.

T. M. Logan,

T. M. Logan,

J. A. Rutherford,

J. A. Rutherford,

E. Lehman,

E. Lehman,

J. G. Moore,

J. G; Moore,

Simon Wormser,

Simon Wormser,

Geo. P. Stone,

Geo. F. Stone,

J. B. Pace,

J. B. Pace,

Ed. Lauterbacb,

Ed. Lauterbach,

Geo. S. Scott,

Geo. S. Scott,

S, Thomas,

S. Thomas,

C. S. Brice,

C. S. Brice,

J. H. In man,

J. H. Inman,

I. L. Rice,

James Swann,

E. D. Chvsolm,

J. 0. Moss,

R. K. Dow.

G. M. McGhee,

John H. Hall,

J. C. Calhoun,

W. S. Chisolm.

EAST TENNESSEE DIRECTORS:

1887.

1888.

T. M. Logan,

T. M. Logan,

S. Thomas,

S. Thomas.

C. S. Brice,

C. S. Brice,

Jno. G. Moore,

Jno. G. Moore,

J. H. Inman,'

J. H. Inman,

Geo. S. Scott,

Geo. S. Scott,

B. J. Sanford.

E. J. Sanford,

A. Snlly,

T. P. Fowler,

J. H. Dooly,

W. S. Chisolm,

Jno. A. Rutherford,

Richard Irwin, Jr.

S. H. Inman,

J. E. Granniss,

E. Lehman,

Jno. Greenough,

Geo. F. Stoae,

W. L. Bull,

I. L. Rice,

C. M. McGhee,

J. O. Moore.

Geo. Coppell,

T. P. Fowler, .

J. E. Granniss.

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DIRECTORS TERMINAL COMPANY, ELECTED XOV. 1886:

Alfred Sully, N. Y.

T. M. Logan, N. Y.

E. Lehman, "

J. A. Rutherford, "

Isaac L. Rice. "

Geo. M. Stone, "

DIRECTORS OF THE GEORGIA COMPANY, FOR 1887-8:

Alfred Sully, N. Y.

E. E. Denniston, N. Y.

E. Lehman, "

E. W. Clarke, "

Isaac L. Rice, "

Meyer Lehman, "

Jno. H. Inman, "

A. Belmont, Jr.. "

H.B, Hollins, "

G. E. Kissel,

CENTRAL SYNDICATE, 1886 :

Alfred Sully,

E. Lehman,

Isaac L. Rice,

H. B. Hollins.

E. E. Denniston,

CENTRAL DIRECTORY:

1887.

1888.

E. P. Alexander, Savannah. E. P. Alexander,

E. M. Green,

"

E. M. Green,

J. J. Wilder,

"

J. K. Garnett,

'

----. Woods,

"

J. J. Wilder, J. K. Garnett, ----- Woods,

A. E. Mills,

"

A. E. Mills,

A. Vetsburg,

"

A. Vetsburg,

Pat Calhoun, Atlanta, Ga. Pat Calhoun,

G. H. Phinizy, Augusta, Ga. C. H. Phinizy,

H. B. Hollins, New York. Jno. C. Calhoun,

Jno. C. Calhoun, N- Y.

----. Lutchen, N. Y.

Henry Blun, Savannah, S. M. Inman. Atlanta,

U. B. Barrel, Americus, Hugh Inman, "

For 1889: W. W. Gordon, H. M Comer, Jacob Rauers and Walter S. Chisolm, took the places of A. E. Mills, J. J. Wilder, ----. Woods and ----- Lutchen.
Mr. Calhoun: On the Central board as it then stood, from New York were Mr. H. B. Hollins and my brother. The change made in January. 1888, in the Central board, so far

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as it related to New York, was the substitution of Mr. Lutchen, a partner of Belmont & Co.. for Mr. Hollins, and the Messrs. Inman for the places of Messrs. Blun and Harrold. After the Terminal got control, the change in the Central, the removal--(I do not want to use the wrong term; it was not a removal caused by any ill-will or any thing of that sort)--the removal of three directors to make place for Messrs. Gordon, Comer and Raoul, the object of that being to give the old Raoul wing of the Central prop erty a full representation in thet board, so that the direct result of the purchase of the Georgia Company stock in getting control of the Central was to more thoroughly local ize the Central's board in Georgia than before, leaving only one New York director (ray brother, Captain Calhoun), these policy of the Terminal board being to localize each of the properties in the territory through which each runs as far as it possibly can bjr bringing'on the board of directors, and in sympathy with the properties, the strongest men that we can get in connection with the railroad interests in their re spective States to aid us in helping to build up our railroad interests by helping to build up the material prosperity of the country through which our roads run. The whole scope of the Terminal Company's power begins and ends with the election of those directors, just as any other stock holder's powers in a corporation begins and ends there.
Q. The identity and separate corporate character of these corporations is in no manner changed or infringed?
A. Not at all. I give 3rou an illustration: The East Tennessee directorship, as it was in 1887, and as it is to day, I think: (Reads list of directors of East Tennessee, Virginia and Georgia, heretofore given.) Now, I think it important that it should be understood that all this Termi nal purchase has accomplished, therefore, was to weed out a certain set of men whom we felt were not as advantageous to the properties as a certain other set of men, and to strongly strengthen Southern influences in the properties, and in fluences more closely indentified with this section.
Q. I suppose the main idea in that weeding-out process

305
you mentioned, was to get men who sympathized with your design as a unit ?
A. No sir, not that alone. The real cause of the weed ing out was because of the serious personal differences and contests that grew vip in the management of the properties in the different wings of it. For instance, Mr. Alfred Sully, who was the president of the Terminal Company, and at one time, influential in each of the three properties, has often discussed the matter of this combination of the three properties, and worked at one time very vigorously to bring it about, and was, as I understood him, as fully in sympa thy with the objects and purposes of the bringing of the three properties in line as Mr. John H. Znman; but dif ferences will arise in the management of great properties of this character, and differences arose there; but it is not necessary for me to go through the causes of all that.
Q. Are there any further points, Mr. Calhoun, you desire to tall the attention of the committee to?
A. Yes sir; there are some other points that 1 desire to mention.
Mr. King: Mr. Calhoun, I desire to call your attention to one matter. The word " consolidation " has been used a good deal here, and without explanation, might cause some misapprehension. I will ask you to explain in what sense it has been used?
A. Wherever used by me, it has been used as a short term; sometimes as descriptive of what we have done, but as I have before explained, not an accurate description. It is a misnomer to speak of our Terminal Company as hav ing consolidated any of these other systems. They may be said to be in combination. 1 should say they have neither been combined nor consolidated.
Q. (By Mr. Glenn.) You use it in the sense we agreed to the other night ?
A. They have merely a common ownership of the stock by the Terminal Company, which had in no sense, mortgaged one property into the other, or in no sense af-
20

306
fected the relation, the legal relation, of one property to the other. That is important in another sense: That we have not, even in the strictest technical sense, destroyed any of the competition that existed between these properties before we purchased the stock. We found a contract existing be tween all these properties and the Southern Railway and Steamship Association, as has been fully stated here before, which fixed a general schedule of rates. The bal ance of the competition, all that class of competition that looks towards better management and improved service, I think, is as intense to-day as it was when we purchased rhe stock, and the fixing of the rates is done now just as it was before we purchased the stock. In fact, I should say that all that class of competition which relates to improved ser vice, better cars and quicker time by these railroad lir.es, in that each one in this combination is striving, and striving very earnestly, to make the best showing for the respective properties. These properties have been agreeing for many years upon the method of fixing the freight rates. And I would like to call your attention further just here to what I believe to be the inevitable tendency of railroads occupy ing the same or adjacent territory. They must come to some common schedule of rates, in my judgment, or the whole business interests of the community would suffer. Take as an illustration, the Western and Atlantic and the East Tennessee--they parallel each other--and let us assume them in a condition where no agreement existed. Now. the probability would be that the Western and Atlantic might charge higher on one class of freight and lower on another than the East Tennessee, Virginia and Georgia did. If thejr came to no agreement, then one would have to be above or below the other in price. That would necessarily precipitate a war of rates until they, either through their subordinates, or the president or traffic manager, came to gether in some shape or form, and said, " here, let us estab lish a schedule of rates between these two points." That seems to be common all over the country, and there must exist one of two conditions--a war of rates, or an agree-

307
ment in some form in regard to rates. In our alliance, the agreement in regard to rates stands now as it did before. Of course, our properties are in closer sympathy with each other, and the steady effort- of each is to cut off discrimina tions where they existed, and to try and make their rates more uniform and regular and their service better.
Q. (By Mr. Glenn.) Then you would not call this cer tainly a consolidation in a legal sense because the corpo rate identity is maintained and preserved, but a corporation because of the other reasons you have given, and by analogy you would say this is a sort of federal association of roads, each striving with the other in the various lines of compe tition where they were personal, if I might use the expres sion ?
A. I think that is a very good definition of it. Q. So far as it affects the system at large, it is a sort of united fund, but on the inside the identity of each is main tained ? You would call it something like a federal asso ciation ? A. Yes, sir; and that would carry with it another thought, and that is, the main object of the Terminal Com pany's ownership of stock is to get better means of devel oping the business of the whole, and to bring together a strong and influential set of men who will not only aid in helping each of the roads, but in helping to develop all of the interests of the southern country. It is just exactly as if we gentlemen sitting in this room, having diversified in terests, were to bring our interests together, we could go into a country and develop it much more rapidly than if we were working on divergent issues; we could get together in a harmonious party and pull together for the benefit of the whole. In dwelling upon that point I do not wish to con vey the impression that we are doing any eleemosynary busi ness. Ours is a business project. We think that our whole business interests lie in the development of the business of the country through which our road runs. Q. An enligthened self-interest would lead you to that conclusion ?

308
A. Bound to do it, sir. Now, on that point I want to call your attention to a few statistics, which I will take the liberty of incorporating in my evidence if it is printed, and that is the fact that the south-Atlantic group of roads has a lower capitalization and a lower bonded indebtedness than any other group in America; that its gross earnings per mile is less than that of any other group in America; either east or on the Pacific Ocean; that the entire interest paid on its bonded indebtedness--the average per cent.-- paid by the railroads south in 1888 was three dollars and fifty-three cents; that the interest on the bond and debt both together, the average was three dollars and sixty-one cents; that the dividends, the average dividends, on all the stocks in the Southern States, was sixty-three-one one-hundredths of one per cent.
Q. Is that all? A. That is all; and that the interest and dividend per cent, on stock, bonds and debt, was only two and seven one-hundredths of a cent. It may be said that that repre sents an excessive capitalization and represents watered stock; but when you remember that the average capitaliza tion per mile is only twenty-one thousand nine hundred and ninety-two dollars in stocks and nineteen thousand three hundred and sixty-seven dollars in bonds, making a total capitalization per mile of only thirty-eight thousand and nine dollars per mile, both bonds and stock, and that that capitalization only earned two and seven one-hun dredths of a cent, a mere fraction over two cents, it is evi dent that the properties have not paid anything like fair interest on their actual cost. Ff you divide that thirtyeight thousand by 4 you will have less than ten thousand per mile, and yet if you multiply the dividend and get what it would be on less than ten thousand per mile, you will find that the railroads of the south are earning, according to " Poor's Manual." less than eight per cent, on a thousand dollars per mile, with all their fixed improvements and equipment of every kind and character. Q. (By Mr. King.) I will ask you if this capitalization

309
on a great many roads in the south is not due to the fact that they had to be rebuilt and equipped after the war?
A. Largely, but after that our capitalization is very much less, as I have stated, than any other section of the coun try.
Q. (By Mr. Glenn.) How- much less is it than the Eastern group here?
A. The Eastern, group in 1888 was fifty-three thousand per mile, the Middle group was one hundred thousand in round figures., the Central Northern group was forty-one thousand, the Gulf and Mississippi Valley was forty-seven thousand, the Southwestern group was forty-four thousand the Northwestern group was forty-six thousand, and the Pacific group was fifty-six thousand.
Q. Now, compare that with the other? A. The interest on the bonds was four fifty-three onehundredths of a cent; on the bonds and debts four fortynine as against three sixty-one; the dividend was two twenty-nine as against sixty-three one one-hundredths, and the average dividend of the stocks, bonds and debt, was three dollars and seventy-five cents as against two dollars and seven cents. So that the lowest group here in mileage and earnings is found in the south-Atlantic States. Q. (By Mr. King.) You mean in capitalization? A. Not only that, but the lowest in earnings. Q, (By Mr. Lavvson.) Do you know what the average capitalization is in the United States? A. It is given here in this book. I think it is sixty-odd thousand. I will call your attention here to the fact that the average capitalization of the outstanding stocks and bonds of the Terminal system is less than the average cap italization ot the systems of roads in the south. Our av erage capitalization is shown by a full statement of our as sets in round figures, which is seventeen thousand a mile in bonds and eighteen thousand in stock, including all the stocks and debts of the Terminal Company, both added to the railroad capitalization, the fact being that the Terminal Company is really decreasing its outstanding capitalization

310
instead of increasing it. To make myself perfectly clear: The East Tennessee common stock is selling at ten on the market; our stock at the present basis is selling at twentytwo ; so if we sold a share of our stock we would be able to buy two shares of the East Tennessee, and so that only one share would be outstanding against two shares of the capi talization. That would go into the treasury and it would be a reduction of the outstanding capitalization of the system.
Q. (By Mr. Berner.) When has the West Point Terminal Company paid any debt of the Central or Georgia Road ex cept by the issuance of additional bonds?
A. It has not paid any debts at all of the Central Rail road or of the Georgia Railroad, but it has paid off a part of its own collateral six per cent, trust bonds. They owed at one time about nine million five hundred thousand of six per cents.
Q. Not since this combination ? A. Yes, sir; since 1887. Their first collateral sixes were made about February, 1887. Q. In connection with this property? A. In connection with the purchase of the East Tennes see stock. That debt has been paid down to about five mil lions five hundred thousand. I do not want to be misun derstood. That particular payment has not reduced the capitalization, because those payments were made by the sale of bonds which they hold in their treasury, so that really when their own bonds were paid off, other bonds came out from some of the other properties. When I speak of the fact that the Terminal's present capitalization is less than the average in the south, I speak of it as it stands to day, with everything outstanding. Now, this is a very in teresting table, found in Poor's Manual, page 13, giving the number of inhabitants to one mile of railroad in each of the States. There is in the south seven hundred and thirtyfive. The number of square miles of territory to one mile. of railroad in the south, is fifty-one and four-tenths, and nine and nine-tenths in the Middle States; twelve and nine-

311
tenths in the New England States. This table speaks vol umes. The gross earnings of the railroads per inhabitants in New England, is fourteen dollars and fifty cents; in the Middle States it is eighteen dollars: in the Western States fourteen dollars and forty-nine cents; in the Southern States it is four dollars and seventy-si scents; in the Pacific States it is twenty-three dollars and sixty-eight cents, and the average in the United States is twelve dollars and eighty cents. So that, according to this table, the average charge upon each inhabitant in the south for all that they con sume and all that they produce, all that they bring in and all that they take out, the gross charge is four dollars and seventy-six cents. Now, we have seen that the profit made on that business is sixty-three one-hundredths of one per cent. Now, the gross earnings per mile of railroad in the New England States, is nine thousand six hundred and eighty-seven dollars; in the Middle States, twelve thousand four hundred and seventeen dollars; in the Western States, six thousand four hundred and twenty-one dollars; in the Southern States it is three thousand six hundred and eighty-seven dollars; in the Pacific States it is nine thou sand four hundred and seventy-seven dollars; and the aver age in the United States is seven thousand nine hundred and forty-seven dollars per mile, the average in the United States being twice as great as the average gross earnings per mile in the Southern States. Now, the percentage of gross earnings and the cost of the railroads in the Southern States is ten per cent. Out of that the roads have got to pay all of their expenses. Mr. Chairman, think of that figure; that out of ten per cent, on the cost of their road the railroads of the Southern States have to pay all of their expenses of conducting one of the most complicated busi nesses that is found in the world. The percentage of net earnings to the cost of the roads in the Southern States, is three and thirty-eight one-hundredths. Mr. Chairman, I will not take up the time of this committee to read from this Poor's Manual, but I would ask the members of the committee to read it themselves, as it contains some very

312
valuable information that throws a great deal of light on this railroad question. The other point that I want to s>ay a few words about, is in reference to the building of new lines of road. My own judgment is, that the Terminal Company's combinations necessarily would contribute very materially to the building of new lines of road. Theiv> are two reasons locally why that must be so. The first is, that we would desire to round out and perfect our own system of roads, where we could build a cut-oflf to shorten the dis tance between two points and handle our business better, just as we are doing the Savannah and Western, and we expect to build other branch roads in the south. This con solidation or alliance of roads would unquestionably very materially aid in building new lines of road to feed it. Second, I believe that the rates of freight have become so low on southern roads and the roads generally, that new roads must get into systems; that the interest of these prop erties would be to aid localities in building branch roads, to aid in building local roads in our territory, even if they took off a little business from a given point, because they would build up the country and they would come to us at one point or another as feeders of our system, whereas, if the three properties were separated, the fear that one or the other of those roads might buy up the new road, would very materially influence the management of each to try and do something to prevent the building of that local road into its territory, and that would tend to create a cessation of building.
Q. In other words, they can build no railroad that will not at some point contribute to the welfare of this system?
A. I would not say no railroad, but most of the railroads would touch us somewhere and help to build up our sys tem. Then again there are many branches of our system that ought to be extended to reach the productive centers. Now, another local reason in that this combination leaves out necessarily a number of local roads in Georgia. There are a number of them. They are given in this book--quite a list. Their interest would be to combine with each other

313
as against our combination. Now, take a broader view : Our combination, if successful, if the men who put their millions behind it are wise in their judgment, will be able to add largely to the prosperity of this country and increase the volume of business. If we were to succeed in reaching out to the west and turning that business through the south, I believe the inevitable tendency of that would be to bring one or more great combinations into the Southern States. It is very difficult, however, to predicate an opinion upon these facts; as you have seen, the percentage paid on the capital invested is so small that it is very difficult to induce capital to go into the building of new lines of roads at all, and there must be nome sort of stimulus or stimulant to bring that about. If rates go on depreciating, my opinion is, with this combination or without it, new and independ ent roads would not be built with any great rapidity, unless the country enormously develops to give additional business to those lines. To illustrate: If Savannah could be a city of one hundred thousand, and Atlanta a place of two hun dred thousand, there would l>e much more temptation for the building of new lines of roads than there is to-day, with the sparse population and the little amount paid j>er capita by the people of the south. I am confident that it is im possible for any one system of roads to permanently con trol this whole section of country; but I believe that the work we are doing, if successful, will directly induce inferior systems to be built up, which, in one way or another, must attach themselves to exterior systems. Now, as I have tes tified, this combination, so far as the directors of the roads are concerned, was practically consummated early in 1887; and yet we find that Georgia has been the leading State in railroad construction. I want to call your attention especially to that and I am done. In 1886, Georgia built one hundred and fifty miles* of new road; in 1887, she built two hundred and thirty-two; in 18S8, she built four hundred and thirty and twelve one-hundredths. The southAtlantic group built in 1886, eight hundred and forty seven, miles and seventy-one one-hundredths; in 1887 eight hun-

314
dred and forty-two one-hundredths; in 1888, with these common directors in all these properties, one thousand two hundred and two and forty-three one-hundredths miles, being the leading group in railroad building, except the Southwestern group. The Southwestern group of which it has been shown that Mr. Gould's Missouri Pacific system and these other great systems are in control, you will find that that country leads in railroad mileage. Now, I would like to call your attention to this map, showing how that country is interlaced with other great systems of roads. With reference to the classification it should be explained that the Gould systems are those in which Mr. Jay Gould and those allied with him, are believed to hold an impor tant, though not always a controlling interest. The total mileage of the six States, Missouri, Kansas, Arkansas, Indian Territory, Lousiana and Texas, is twenty-seven thousand four hundred and thirty-nine miles. The mileage comprised in systems in these States is twenty-four thou sand eight hundred and forty-fi^e miles, leaving two thousand five hundred and ninety-four miles, or nine and one-half per cent, of the whole, as the mileage comprised in local independent lines. In other words, the local inde pendent lines in that section of country are scarcely greater than the mileage of independent systems of roads in this and the States immediately adjoining it. Yet in that section we find the largest raihoad building, and in our section we find the next largest railroad building.
Q. Then the strange fact is presented there that with the greatest accumulation of systems and the greatest combi nation, the tendency is to produce the largest amount of railroad building?
A. Exactly. To understand that and make it clear, un derstand this: Whenever a new road is built, it can only look for business on that particular line of road. When ever the system extends its line of road, it gets not only the business done on that line, but it gets that extension as a feeder to its whole system, too. Now, so small have these profits been, there has been little temptation to build inde-

315
pendent lines, whereas there hag been temptation for the great systems to reach out and get feeders for business over its whole system. Let me say one word in conclusion: This railroad interest has grown to be the most important in the world. It is the one interest of all others that has the least protection for the capital invested in it. It is the one interest above all others that the public seem to be lieve that the remedy for all evils (evils there undoubtedly are. and evils there must continue to be), is through legis lative action and control. Perhaps no interest in the whole world would suffer more by any class of unwise legislation than that of railroads, which has done more than any one element ever found in the world to build up and create the wealth of this country; to destroy discrimination that God himself had implanted; to enable the producer thousands of miles from the market to come into competition with the man who lives near the point that God had most dis criminated in favor of. You will find, on a full investiga tion, that less than on any business in this country of any importance is the percentage of profit made to the capital invested. There is to-day comparatively little temptation to the actual investor in railroad securities, and we are steadily being driven more and more into speculative enterprises; and railroad securities are held more and more as specu lative securities because of the great lack of safety as an investment. The field is a big one certainly. Gentlemen, I am very much obliged for the patience you have given me, because I feel that I have taken up a great deal of your time.
Committee adjourned.

Statement showing the Length of Lines Owned, Shares, Capital, Funded and other Debts, Length of Lines Operated, Gross and Net Earnings, and Interest and Dividends Paid by all the Railroad Companies of the United .States for their respective fiscal years ftovu l&Tl ts> ift&S, both

teiiglU ol Muc
Owned.

Capital Stock.

Kunfled

Othr Debt.

Hue Operated.

Gross Traffic! Earulags,

Ea.tniog.

~X

Dividend Paid.

1871.. 1872.. 1873.. \H.. 1875.. 1876.. 1877.. ISM.. JS79.. 1880.. l&il..
1RM... 1885... 1886... 1887...

, 72,823 74,036 76305 79,208
84,393 W2AO W3.S30 114,401 120./K2
127.729 133,60(5
154,276

,,, 1,990,997 48fi 4,658.208,630 2,248,838,375 2,'3B 13,2i78,598 ,,
3a,s17ii7.i,m3-3.f,1c7N8
3,708,060,683
,, 4,438,41 1,3

2,255",318.650
,. 3,7(Vi,727,IX)ti B,m,W,330 4,li,<:<.U 4,624,035,02:1

,,
^37,604,774 W2,248.556 I 156,881,032 ,
,, . 222,T66,276 270.J70,9(i2 .
259,108,281 280,673,814 '?.H,fi82,071 306,932,689 i

44,614 * 403,S2,20g i* 141,746,404

165,754,873

183,810,662

f!P,273 520,466,038 )

71.7S9

,, KAo t\A\ -rw. ( 4117,257,959

93,559,578

74,294,208 m,039,66S

74,112 472,flO'J,272 170,76,6<7 98,820,927

58,566,314

490,50.% 351 17,575,1.7

7,009 S2,141i

913,733,610

216,544,939 259,557,555

, 107,!<66.328

77,U5,37l i-i

SXJ.tt'l 701 I?SO,82

128,5!t7,S02

1W.971 770,20!l,8!>9

lo4,21K,30 102,031,434

110,414

173,1:S,064 102,or>2,54t*

268.064,486

,,

12^,320 772,568,8*1 1

187,420,035

77,T2,105

l2'.,185 S29,WO,836 |

18<l,|Bf,,:t04

,654,r0

,

vwjii^fv* : o.JJ.JOi>iiiP 803,790,352

I4r,,887 91X1,256,270 ' 301,631.031 : 207,124,288

80,248,047

Recapitulated Statement showing mileage of Railroads in New England a/id Middle Crroup of States at various periods since 18SS,

NMeiwddElenOgltaonadp.Q..i.O...Q. .p.................................................................

1833. 115 654 TC7

184. 517
3,566 ^,088

3850. 2,057 3,105 5,162

1860. 1870. S0. 188Ti. 1886. 1887. 1888, 3,660 4,4M ( f,,917 ,W1,T8 6,9&*.25 ) 6,1.93 6,654.87 8,353 1 }0,B7 1 J5,l 28,475.12 2a,6.SS j I9,0.1S 19,819.60
\,V& { ViK&L 1 21,108 i 24.786.90 25,170.68 | 25,606.08 ) 2S.978.J7

317
Recapitulated Statement of Railroad Construction in the United States 1886, 1887, 1888.

Groups.

j

...........! Middle ................................................... ...........!
....,,._.' ...........i Golf and MtariMlppf Valley................... ...........i
i
............ P>uaflc_........................... ........... ............ ..........ji
;

1886. ' 18S7.

43.08 388.60 i 1,288.87 W7.71 319.9i
*> <U5 **S
2,481.14 313.79 'i
8,128.48 i

1SL03 *v>746 1,784.66 800.42 793L21 5,351.07 3,209.83 685.91
12,983.62

1888.
299.42 900.06 1.102.43 1,025.85 1.W4.15 R79J3 954.17 7,028.15

The committee met at 6 o'clock, October 7, 1889, with the following members present: Messrs. Bartlett, chair man ; Rankin, Lamar and Berner.
John D. Williamson (called and sworn).
Q. (By the Chairman.) Mr. Willisinison, what is your business or occupation?
A. I am president of the Chattanooga, Rome and Colum bus Railroad Company, and president of the Rome Rail road Company. I am actively engaged at the head of those companies, and am also at the head of some other corpora tions.
Q. Are you familiar with the railroad situation in Georgia? A. As much so, I presume, as any man of my experience. I think I am. Q. Mr. Williamson, you are also a practical railroad man? A. Yes, sir; I have been in that business, with the ex ception of a few years that was taken up when I was in the practice of law, (and then I was representing railroad cor porations), since I was sixteen years old. Q. What are the competing railroads in Georgia--roads competing the one with the other? A. I will have to get access to that map there. I want to state, Mr. Chairman, that, following the example of Mr. Calhoun and General Alexander--not in length of their testi mony--some things I may state will be matters that come to my knowledge from experience and observation, and also matters of opinion, as well as matters of fact.

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Q. What roads in Georgia compete with the Richmond and Danville proper?
A. For through business the East Tennessee, Virginia and Georgia is a competitor; the Central Railroad system of Georgia is competitor----
Q. That is ior business outside the State? A. Yes, sir, for inter-State business; for some business that can be reached from Mobile to this territory out here, the Savannah, Florida and Western and the Florida Rail way and Navigation Company. Q. Is the Western and Atlantic Railroad a competitor? A. Yes, sir. I was treating that somewhat as a part of the Central. Q. How about your road? A. The Chattanooga. Rome and Columbus is also a, com petitor, leading from Chattanooga. Q. The Cincinnati Southern is a competitor of the Rich mond and Danville for eastern business? A. Yes, sir. Q. What railroads in Georgia compete with one another for business inside the State? A. Take Atlanta for example: The Georgia Pacific, the East Tennessee, Virginia and Georgia, the Western and Atlantic, and the Chattanooga, Rome and Columbus, con necting with the Georgia Pacific at Cramer, would all com pete. I think you might also include the Atlanta and West Point to compete for northwestern business. Then, for east ern business, the East Tennessee, Virginia a.nd Georgia, the Western and Atlantic, the Richmond and Danville, and the Georgia Railroad, and the Central, and the East Tennessee line to Brunswick, would all be competitors for eastern business. For Florida and Southern business, the Georgia and the South Carolina, and the Central, with a line from Augusta to Port Royil, the East Tennessee to Brunswick, and the Central roads leading down in this direction and connecting at Thomasville with the Savannah, Florida and Western and the Florida Railway and Navigation Com pany.

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Q. How about the South Florida Railroad? A. I think that is also a competing line. Tt connects with the Florida Railway and Navigation Company. I think. Q. Is that a competing line? A. That is a competing line with the Central Railroad, and my information is that the Central people have always regarded that with a good deal of fear. It is an easy line to build, and reaches a wide cotton-growing section. That is a strong competitor of the Central Railroad. Q. Those are all the railroads in Georgia except the Macon and Covington? A. The Macon and Covington competes with the Central for Athena business--in iact, any business that would go from Macon around by Atlanta for Athens. Q. If they had a connection or made traffic arrangements with the Northeastern Railroad, would that not be a com petitor with the Central and the East Tennessee, Virginia and Georgia for eastern business? A. Yes, sir, I think so. Q. Now. Mr. Williamson, what ett'ect does what you call consolidation of these railroads one with the other into one system have upon competing railroads that are not in that system? A. My idea has always been--in fact, the reason why T projected the Chattanooga, Rome and Columbus Railroad, was because I felt it was a natural connection with the Cen tral at Carrollton, and then beyond there to Columbus and to the Florida coast. I have always believed and have always thought that if the Central Railroad remained as an independent corporation, treating fairly all railroads in every direction that might be built, and let it become one of the great arteries of commerce through the State, con necting with steamship line to New York, and subsequently to Europe, would be of inestimable benefit to the State and be of great benefit to the lines of road that would connect with it. The tendency of consolidation or of consolidating the competing lines, for example, the East Tennessee with

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the Central, or the Richmond and Danville with the Cen tral--in fact, absorbing all the lines in a given territory-- the effect is to take the business away from the competing lines, and to prevent construction before they are built, and after they are built to take the business away fioni them and to force them into the courts and be foreclosed or in some manner to be sold out at a cheap price. That would be the effect.
Q. State some of the means by which the}' can effect an injury to competing roads ?
A. I will illustrate that by stating that prior to the pur chase of the Central by the present owners, the people who control the Georgia Company--in other words, when Mr. Raoul was president of that Company----
Q. Prior to the first election of General Alexander ? A. 1'rior to January, 1887--I had assurances from Mr. Raoul, Mr. Comer, and probably some other members of his directory, that we would be treated with gieat fairness in traffic matters. In fact, Mr. Raoul told me that it was one of his schemes to extend that road 10 Chattanooga. When we built the road and opened it for business, we find that at Carvollton, according to my recollection, that we have given about fourteen or fifteen times as much business to the Central Road at Carrollton as they have given us. These figures have been tabulated and sworn to by our general freight and passenger agent, and were filed in a case pending in the United States Circuit Court at Macon. While our road is a new road, and can control but a limited amount of through business, the busi ness running in the old channels, yet, notwithstanding that, we have given the Central Road fourteen or fifteen times as much business at Carrollton as they have given us; so, of course, the Chattanooga, Rome and Columbus could but conclude that there was discrimination. Q. (By Mr. Rankin.) That fourteen or fifteen times as much business: that was freight going south ? A. Yes, sir. Q. What is carried north over any of the railroads?

321
A. A great deal of merchandise. We have had our solicitors to work up merchandise of all classes to Chattanooga and Rome by way of Savannah, and instead of letting us have it they would take it at Griffin.
Q. Isn't it true that over all these routes north a vast majority of the cars run empty ?
A. On some of the roads it is the case. Q. Isn't it true of the Western and Atlantic and the East Tennessee, that a majority of the cars for the north run empty? A.' No, sir; not a majority. There is more bulk of freight coming south over those roads in my judgment than north. Q. (By the Chairman.) Is that proportion of the freight north and the proportion north greater or less than the pro portion of the business you have given the Central? A. The north bound business is much greater than we have received at Carrollton. Q. The amount you have naturally received ? A. Yes, sir. Q. (By Mr. Rankin.) Don't you know the freight trans ported over the Western and Atlantic, which is closely allied with the Central, has been from fifty to seventy-five per cent, less north than south? A. I cannot answer that question. I would think there was some difference, but how much I do not know. Q. Isn't it a very considerable difference? A. I do not know how much. Q. And that road has been a close ally of the Central? A. I have been so informed Q. The East Tennessee, Virginia and Georgia--isn't the freight north over that fifty or seventy-five per cent, less than that transported south? A. That I cannot answer, because I have never had ac cess to their records; but it is quite likely you are correct about it.
Q. Yours being a new road, isn't it quite natural that a much larger per cent, of the freight going north would go over the East Tennessee and the Western and Atlantic?

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A. Our road being a new road, we have comparatively no through business.
Q. Therefore, the fourteen or fifteen per cent, less busi ness given to your road by the Central is not a surprising thing?
A. It would be less surprising if we had a large volume of through business to give to them; but, not having thiit, it is exceedingly surprising that we should give them from our small road fourteen or fifteen times as much as they give us--so surprising, in fact, there is no explanation of it that I can conceive of, except to divert business from the Savannah and North Alabama or our road, or botli.
Q. Would it not be natural for one road allied with another in a continuous line to give the business to that line--the Western and Atlantic, being a close ally of the Central, would get the business?
A. I will tell you---- Q. (By the Chairman.) That being so, that would be an unjust discrimination? A. I think so. The large majority of the stock of the Western and Atlantic is owned by the Louisville and Nash ville, and the Louisville and Nashville, having this large in terest in the Western and Atlantic, would naturally throw its business over that road, yet at Chattanooga they give us sva much business as we give to them. Q. (By Mr. Rankin.) The Central would be more dis posed to give it to the Western and Atlantic? A. For exactly the same reason that the Louisville and Nashville would want to give it to the Western and At lantic ; but, notwithstanding that, they will give us car for car. Q. The Nashville and Chattanooga is a part of the Louis ville and Nashville? A. Yes, sir. Q. And it owns a controlling interest in the Western and Atlantic? A. I so understand it. The Nashville and Chattanooga will give us a car load of freight for one of ours; upon the

323
other band, the Central Railroad will take fourteen or fif teen cars from us at Carrollton to where we get to handle one of theirs. We have solicitors that have the freight con signed to us.
Q. I will ask you if the Central, by hauling it to Atlanta and transferring it to the Western and Atlantic, would not have a longer haul?
A. No, sir: it would be a shorter haul. It is sixty miles from Griffin to Carrollton, and forty miles from Griffin to Atlanta. Therefore, they get a little longer haul by Car rollton. That is what astonished us. At first we did not suppose it was any antagonism to us, but from subsequent developments our people have come to the conclusion that there is a conspiracy on the part of the Richmond and Danville to buy the 'East Tennessee and give us as little business as possible, and to cramp us in every possible way. I state these facts because they are familiar to me. Now, General Alexander--I do not remember, but my informa tion is he said he pro rated with us at Carrollton for south eastern points.
The Chairman : Yes, sir. Mr. Williamson: Mow, I have a letter from the freight and traffic man of the Central Railroad, in which he denies it, and also one from the Richmond and Danville traffic man. I think--I know, in fact--that General Alexander knew nothing of this fact when he testified. Q. (By Mr. Lamar.) Have you noticed to see (reneral Alexander's exact language? A. No, sir. Mr. Lamar: My recollection is he stated they did not give as much business. The Chairman: My question was if he pro rated freight, and he said he did. Q. (By Mr. Lamar.) Any goods that are consigned to your road, of course the Central gives you that? A. Sometimes we get it, and sometimes we do not. Q. When it is consigned, doesn't he pro rate the freight then?

324
Mr. Williamson: Coming from Savannah? Mr. Lamar: Yes, sir. Mr. Williamson : Yea, sir. Take corn, for example, from Chattanooga or points north of Chattanooga to Augusta and Charleston: The Central Railroad refuses to pro rate with us at Carrollton, and the Georgia Pacific refuses to pro rate with us also at Cramer. Q. What do you mean by pro rating? A. For example: From Chattanooga to Augusta they will give a rate of freight over the East Tennessee or the Western and Atlantic, as the case may be, to \tlanta and to Augusta over the Georgia Road or around by Macon. The roads all have the same rate of freight, and each of the roads takes a percentage of that rate. Now, the Central Railroad did that with us until some time ago. Q. Until when ? A. The date of this letter will show. They asked then the full local on that class of business. They say: " We must have our full local rates." Q. (By the Chairman.) When it is carried over lines in the combination,or over lines that have a traffic arrangement, they cbaige through rates, but when brought over your line they charge the local rates ? A. Yes, sir; they refuse to pro rate. This bill that passed the House, we have been looking to it as a means of salva tion, to compel them to pro rate. Of course they can find a great many ways of refusing to exchange business. As General Alexander said the other night, in reference to points west of the Mississippi River, they can demand that the freight be prepaid; they can delay oars, and in a thou sand and one ways delay the shipment until the shipper will not ship by that route. Q. They do not do that with roads in their system? A. Certainly not. Q. Would you not call that a discrimination against you? A. It is unquestionably a discrimination. Q. Mr. Williamson, what effect would that sort of con-

325
duet, refusing to pro rate with you. have upon your com peting with them for business ?
A. We cannot handle that business at all. Q. State, if you can, whether it lessens competition or hinders competition ? A. Their local rate is so great that when we compete with them we find that we have not enough left to pay the operating expenses of the transportation between Chatta nooga and Carrollton, and, therefore, we cannot handle the business except at a loss, and we are compelled to let it go over the other lines that belong to the association. Q. It prevents you from competing for that business? A. Yes, sir. Q. And it encourages them to monopolize that business? A. I so construe it. Of course, if that is kept up on all classes of business, we have but one or two things to do, or
Q. (By Mr. Lamar.) As a fact, is there not such great competition that they so successfully compete with you that you cannot do the business ?
A. No. sir; Take Chattanooga for illustration: You can make a canvass of that city and you will find that threefourths of the business men want to patronize our road.
Q. Don't they offer superior inducements ? A. No, sir. Q. Offer better rates? A. No, they do not. They offer a through rate over the East Tennessee to points and refuse to give us through rates by Carrollton, and we, paying the local rate from Carrollton, which is so great, that it would force us to do the business at an actual loss. Q. (By the Chairman.) As a matter of fact, they so successfully compete with you that you cannot do the bus iness in competition with them ? A. They compete in this way: They discriminate by re fusing to treat us at Carrollton like they do the East Ten nessee and the Western and Atlantic and other roads.

326
Q. They treat the East Tennessee that way because it is a part of their system?
A. I so understand it. Prior to the control or attempted control or lease of the East Tennessee we never had any trouble of that sort. They pro rated with us since that time, or recently. Then, there is another point: We have been handling some business by way of Carrollton to Newnan and over the Atlanta and West Point road to Mont gomery and Selma. Now, if the Western and Atlantic or East Tennessee brings that business they are compelled to bring it to Atlanta and the Atlanta and West Point Road carries it to Selma or Montgomery. If it is not brought in that direction it goes over the Louisville and Nashville. Now, until some days ago, I do not remember the exact time, they have been allowing us the actual mileage between Carrollton and Newnan on that business, and we have been handling it satisfactorily to all parties; but recently they have advised us that they must have full mileage to Griffin. They refuse to take the actual mileage to Newnan, but say they must have the sixty miles.
Q. Why do they demand that? A. The business is not satisfactory to them without that; and that compels us to decline that business; we cannot handle it at all. Q. If left to its natural course it would not go to Griffin? A. No, sir; it has no reason for going to Griffin at all. They want sixty miles for a twenty-five mile haul. It is so many miles over the West Point, so many over the Central, ind so many over our road; they want the sixty miles, which reduces our mileage. Q. How far is it from Newnan to Atlanta ? A. I do not remember the distance, but it must be fortyodd miles. There are only a few illustrations showing the discrimination. Now, take the Georgia Pacific: We have good connections and have put in good terminal facilities at our own expense at Cramer. and we put the cars there and they stand for days. They won't take them. I know of a case where corn going from Carrollton to Augusta from our

327
road was about fourteen days getting there. They simply say the business is not satisfactory.
Q. Does the Georgia Pacific road refuse to pro rate with you?
A. As a part of my testimony I will read an extract from a letter from Mr. Sloan, the general freight and pas senger agent of the Chattanooga, Rome and Columbus road: " At the opening of our line for through business, we had an agreement with the Central and Georgia Pacific by which they accepted business from us to Augusta and Athens at a percentage agreed upon between the lines, and we were faithful, to give them the full proportion of such percentage allowed them. This moved along very well until we were in better condition to compete for through business, and they, seeing that we were going to get at least a small por tion of the southeastern business, began to crawfish out of the rates, and say they did not want the business. This was first done by the Georgia Pacific Road, and then when we began to send business to the Central, they did the same thing. We then told them that if the pro rate as agreed upon was not desirable, we would like for them to tell us what percentage would be desirable, and told them we thought it was to their interest to take the business from us, as it was business they would not get to handle if they did not take it from us, and the only answer we have been able to get is, that they do not want the business." Now, on August 8th, as an illustration, in answer to your ques tion, Mr. Barn urn, the general freight agent of the Georgia Pacific, telegraphed to Mr. Sloan, the general freight agent of the Chattanooga, Rome and Columbus Road: "We can not accept car of corn now at Cramer. Your wire received." Mr. Sloan then replies on August 9th : " Your wire to hand in answer to question regarding car of corn from Cincin nati refused by your agent at Cramer. Do I understand that you will not take any business from our road consigned to points beyond Atlanta ? If you will not take the busi ness at the through rate, what will you take it at? You told me at the meeting on Lookout Mountain that you

328
would talk the matter over with Mr. Harris, and let me hear from you in regard to the exchange of business at that point."
Q. Who is Mr. Harris? A. He is traffic manager and general freight agent of the Richmond and Danville system. Now, Mr. Barnum prom ised to take up this question, and personally and individ ually expressed himself as being in favor of accepting this business, because otherwise his road would not get it, but the East Tennessee would get the business--I mean from Chattanooga into Atlanta. On August 22d he replies to Mr. Sloan. This is his letter, which I will read: "Subject: Exchange of Business at Cramer. Yours of the 9th instant to hand. Mr. Harris will not withdraw his instructions to me. We will have to decline business to points beyond Augusta and Atlanta," and so forth. Here is a letter from Mr. Whiteside---- Q. Who is he? A. He is the general freight agent of the Central Rail road. August 17th, Mr. Whiteside telegraphs Mr. Sloan : " As I have already advised you, we are not willing to par ticipate in business from the west for Augusta via Carrollton. This is also to notify you that the percentages by you are not agreeable." To railroad men, men who understand traffic, of course that means that they decline to pro rate business. Of course, in my opinion, at the time that Gen eral Alexander testified here, he knew nothing of this cor respondence. Q. (By Mr. Lamar.) Let me ask you a question: Do you mean to say that is an arbitrary refusal to haul that freight? A. A refusal to accept that business except at local rates. They will accept business by our paying local rates. Q. (By Mr. Rankin.) If the Central, Western and At lantic, the East Tennessee, the Georgia and the Macon and Western were all independent lines, not combined or con solidated, couldn't they do the same thing? A. No, sir. If the Central was an independent line they

329
would be glad to get every pound of business we could give them at Carrollton.
Q. Is there another line competing with it at Carrollton? A. No, sir. Q. Would they not be more likely to charge you local rates if they were not consolidated? A. No, sir. My opinion is that if the Central was an in dependent corporation---- Q. Couldn't it do so? A. I will answer that by saying that you, as a lawyer, would refuse a fee, or a merchant would refuse to sell goods----
Q. Suppose the Central, the only connecting road with yours at Carrollton--wouldn't it be more likely to charge you a local rate if not consolidated than otherwise?
A. No, sir. In my opinion, it certainly would not charge the local rate if aot consolidated.
Q. Would it not get it anyhow, being the only competing line?
A. We would give it to the Georgia Pacific. Prior to the lease of the Georgia Pacific by the Richmond and Danville, they courted our business and gave us cars; but after the lease there was an entire change in the way of transacting the business.
Q. (By Mr. Lamar.) As I understand you to say, you are looking forward to the passage of this joint rate bill be cause under that the Railroad Commission can control that matter?
A. No, sir; I do not believe they can control it. Q. Why won't they control it? A. I coincide with General Alexander when he says if they determine not to exchange their business, there is no legislation to date, even including that, that will force them to do it. They can demand of us to pay full locals, and the cars can be delayed. The man in Augusta wants his corn in a hurry. They can side-track it, supposing it to have a hot box or is broken down, when it is not true, say it is overloaded, and in many ways they can impede the
L

i
L

330
progress of that car to Augusta; and the competing mer chant in Augusta, in the same line of business has ordered his by the East Tennessee or through by a consolidated line, and receives it two or three days in advance, and this merchant that ordered by the Chattanooga, Rome and Columbus will refuse to ship that way any more.
Q. (By Mr. Kankin.) There is no harm in shipping by that line, if it is a consolidated through line, from Chatta nooga by the East Tennessee and the Western and Atlantic and Georgia Roads? Those are continuous lines?
A. I consider them competing lines. Q. If they are competing lines--if you own another line by Carrollton to Augusta, and General Alexander owns the other line, you would not expect him to---- Mr. Williamson : Your premises are not correct, because General Alexander, as I understand, owns both of these lines to Augusta. Therefore, he can cause the business to be turned over to this route, and what he loses here he gains there, and in that way he diverts the business from this other route. Q. (By the Chairman.) And forces it over another route in the same combination? A. Yes, sir. Q. ( By Mr. Lamar.) As a railroad man and as a business man, and looking at it from a purely business standpoint, do you consider it proper for each railroad to look after its own business interests and to protect itself as far as it can against its competitors? Mr. Williamson : State that question again, please. Q. Looking at it from a railroad standpoint, do you con sider it proper for the manager of a railroad to protect himself as far as he can from his competitors so as to get all the business that is possible? A. I do. I want to say in that connection, if you will pardon me, that in my opinion, if I had the management of this road, for example, I believe, with the lights before me, and the way I understand the railroad situation, that I would encourage all railroads that connect with my line

331
to do business with me. I never, on good business princi ples, have understood why the Central has not treated our road fairly at Carrollton; but, as I said before, I infer that it was because they wanted tj get the complete ownership of this road, which, I am informed, they have not yet got. Now, I want to say that, with a large system like the Cen tral, with the multifarious duties of a system like that, there are a great many things done by his subordinates that he knows nothing about. Furthermore, I believe that it is possible that General Alexander himself, personally, wants to do business with us upon good terms, upon fair terms, to all parties. But sometimes railroad men occupying po sitions at the heads of departments have not got as broad views as men like General Alexander. You can infer what I mean by that. They sometimes let their likes and dis like control them.
Q. (By Mr. Lamur.j Have you taken any steps to call the attention of the authorities to that condition of affairs at Carrollton?
A. Not since these letters. Prior to that time I have several letters on file from General Alexander.
Q. What was the tone of those letters? A. The tone of those letters was that he wanted to treat us fairly, and was surprised that the ideas he expressed in those letters were not carried out. Q. (By Mr. Rankin.) Did you complain to him about those things not being carried out? A. No, sir; I have not had any communication with him since the date of these letters. Circumstances have been such that I have not communicated with him. Q. If this general rate bill becomes the law, can they dis criminate against you to your injury? A. Yes, sir. Q. How? A. In the first place, they can say that they have not got cars enough to give us empty cars back to load at Chatta nooga, or to load cars with freight from that direction.

332
The}' can say: " We must have the freight prepaid at this point."
Q. (By Mr. Lamar.) Isn't all that the condition of affairs exactly that General Alexander stated existed out here in Mississippi and Alabama?
A. Yes, sir. Q. Showing the absolute necessity of increasing your connections? A. I confirm this much of his statement: That if a rail road chooses not to exchange business with another rail road, there is no way on earth to make them do it. I con firm that much of his statement. Q. Is it possible by any legislative enactment to prevent those little petty offenses--to claim falsely, for example, that a box was hot, or side-track it because the car was overloaded? That is utterly impossible to prevent? A. I think so. It is just like two men. You cannot make two men do business together if they do not want to. Q. (By the Chairman.) The disposition to do that grows out of the fact that they desire to discriminate against you in favor of another line? A. That is the inference--that they want to reduce the earnings of our road to such an extent that the people who are building it will not be encouraged to build further into their territory, or, if they were able to do so, to *orce the road to fail to pay the interest on its bonds, and buy it, if they choose, or have it organized on another basis. In other words, if they did not h:-ve all these roads in their combination so that they would be independent as to what line it goes over, they would seek the business. For exam ple, in my opinion, they can afford to prevent a road from building in their territory, to run at a loss some portion of their line--say from Carrollton to Griffin--they can run that for a year or two years at a total loss, because they get the business over their other lines. But if the Central Rail road proper was a distinct and separate corporation, and had no connection whatever with the other roads, it would, in my judgment, be seeking all the business it could get at

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Atlanta, and would treat its connections fairly--would be glad to get all it could at Carrollton, Birmingham, Mont gomery and Selma, and up here in South Carolina and everywhere else. Any road that would build to them would be a natural business connection, and they would encourage other people to build them if tbey were not able to build themselves, and they would form traffic alliances. That is the natural theory. Why? Because the East Tennessee is reaching into its territory, and the Richmond and Danville is going through a portion of it, and the Savannah, Florida and Western reaches into it, and the Georgia and Florida runs into it. It would cause each road to seek all the busi ness it could get, and in exchange they would give us what business we are entitled to. They would give to the East Tennessee and the Western and Atlantic what they are en titled to in proportion to what business those roads gave to the Central. They would give us at. Carrollton in propor tion to what we gave it. They would give this road from Memphis whatever it was entitled to. In other words, a road like the Central, having egress at Savannah and the ocean, would naturally encourage all roads to build to it. It would increase railroad construction. Now, the way a capitalists looks at it is this: There are these roads in that territory dominated over by one set of men, and if we build a road from Chattanooga to Macon, for instance, what would we get when we got there? We are bottled up. We have to build to the seacoast somewhere or run the risk of these roads not giving us any business in exchange.
Q. Now, take the actual fact in reference to your Rome, Chattanooga and Columbus Railroad----
Mr. Williamson: I want to interrupt you one moment I am only using the Chattanooga, Rome and Columbus Railroad as an illustration, and in giving my opinions in this matter because I am more familiar with the facts.
Q. Isn't it a fact that you are extending that road ? A. My information is--I do not know of my own knowl edge, but my information is--that a syndicate with which I am connected as the president of this road are arranging to

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build that branch from Carrollton to the Georgia Midland Road.
Q. That gets you down to Columbus ? A. Yes, sir. Q. Then there is a road from Columbus to Albany ? A. Yes, sir; that is under construction. Q. Then there is a road that runs out to the Florida line? A. There is a road projected between Albany and Colum bus to the Florida Railway and Navigation Company system. Q. That is not all in the air, is it? A. No, sir, I do not think so. It is a matter that has been under consideration for a long time. In fact, as I said before, the original project was to build this road from Chat tanooga to Carrollton, and we did not know what we would do when we got there. We thought if the Central Road treated us fairly that we would be in as good condition as the East Tennessee or Western and Atlantic to Atlanta. Q. And then, when you found that you were bottled up, you commenced to build on ? A. I want to state personally, for myself, that I am in favor of railroad construction. My personal opinion is that we have not got one-half as nuu-h rsiJroad mileage in Geor gia as we ought to have. Q. Now, isn't it a fact that you found you were bottled up at Carrollton--you had to build on ? A. No; I do not know that that expresses it exactly, but it doubtless caused some members of our syndicate to feel much more inclined to build on and get into position to be independent of the Central instead of relying upon them to give us business there. Q. Upon that line. A gentleman was talking to me re cently in reference to that charter from Dorsey to Bainbridge, so as to connect with the Florida Railway and Navigation Company., and said it was part of the plan that General Hoke's road was also to run out there and connect with your road? A. That has been talked about, but I do not know any thing definite about that. In fact, I know less than you

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have stated. I have heard it, for example, when members of the syndicate would be talking together; they would say it would be a good idea if this road would come and meet us.
Q. Which road?
A. Any road. But as to any arrangement with General Hoke, I do not know anything about that.
Q. Is it the Georgia Midland or Macon and Covington? A. The link of which you speak is to connect the Geor gia Midland with the Chattanooga, Rome and Columbus. Q. Will the Macon and Covington also be in the traffic arrangement with you all ? A. When they build in the direction of Birmingham, they will cross here at some point. Q. And that will put the Macon and Covington in that line? A. It will give them an opportunity to do business with us. Mr. Larnar: We are in hopes that you will build that Augusta and Chattanooga. Mr. Williamson: We have that under discussion now. My opinion is that you might let the Central get as big as it wants to be--I would like to see the Central extend its line into Mississippi and all over this section out there, but to keep itself independent and keep its whole system inde pendent of other competing systems. Then I would like to see the East Tennessee extend to any point as far as it pleases. In other words, I think it is of great benefit to any country to let the roads that iiaturally connect withfc each other consolidate or purchase each other, or build new roads, no as to get the great systems, I believe the devel opment of the northwest has been largely owing to the fact that such great systems as the Chicago and St. Paul, the Rock Island and Pacific, Northern Pacific and the Union Pacific, and probably large systems have been the cause of the development of that country; but they are all com peting. Then, for the same reason, the Pennsylvania sys tem, the New York Central, the Lake Erie and Western, the Baltimore and Ohio and the roads through Pennsylvania and Canada have helped the Middle States and the west

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incalculably, and have lowered rates of freight. Freights from Chicago to New York are probably less than from Chattanooga to Savannah.
Q. A moment ago you spoke of the fact that the beads of these departments did not take as broad views as the presi dent. Isn't it necessary in order to come to the conclusion as to what is competing and what is non-competing to take a broad view ? Look at the map, and you will find that a part of the Central system you do not object to at all, is all interlaced on the map, and in that map we had here the other day it looks like a fence--the lines are parallel a great part of the time--but when you look at it as a whole you find that it is competing with some other system? Isn't that a fact?
Mr. Williamson: I do not exactly catch your question. Restate it, please.
Q. Look at that for example. You find these lines run ning parallel. That is the Missouri Pacific, interlaced as it is,--but I will ask you this question: Isn't it true that while the red lines here represent this system that in that same territory there are other systems that compete with it?
A. I so understand it. In answer to Mr. Lamar's ques tion : Nebraska and Kansas and the Indian Territory, where the Missouri Pacific covers portions of that territory, it has in some cases parallel lines. Is that what you mean?
Mr. Lamar: Yes, sir. . Mr. Williamson: The distinction to be drawn there, I think, is this: If one system like the Central in order to compete with other systems, the East Tennessee for exam ple, or any new system, it is necessary for it to build a line from Macon to Thomaston, although in building it the Central would parallel one of its own lines a short distance. But where these roads are allowed --different corporations-- to unite and consolidate into trusts that is creating such a monopoly as is inconsistent with the interests of the peo ple of the State. Now, I will illustrate that by referring to your map again : If the Missouri Pacific, the Chicago, Bur lington and Quincy, the Union Pacific, the Chicago and

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Northwestern and the Illinois Central were all to combine into one great corporation, I would call it monopoly of the broadest kind.
Q. (By Mr. Hankin.) Tell me this: Those roads running from one point to another would only be competitive at par ticular points, wouldn't the}' ?
A. If they only touched at particular points they would be competitive.
Q. Then wouldn't the intermediate points be the sufferers by the competition?
A. I think not. Q. Suppose the Chattanooga, Rome and Columbus had a direct line from Chattanooga to Atlanta, and the East Tennessee and the Western and Atlantic were competing lines, would not the intermediate points on those respect ive lines really have to pay for the loss by reason of com petition between Chattanooga and Atlanta? A. Practically, I think not. Q. Why ? If you would take freight from Chattanooga to Atlanta at actual cost to compete with those roads at the actual cost of transportation, and you charged the interme diate points local rates, wouldn't you make it up on those intermediate points? A. You are assuming what the railroads would not be likely to do. Q. Isn't it what they have always done ? A. There are times when competing railroads cut their rates. Q. But. they never cut them for intermediate points? A. I will answer the first question first. There are times when they cut the rates for competitive points below the eo*t of handling the business, but that is an unnatural state of things and does not last. Q. They do not cut for local points ? A. They never cut their business for non-competitive points. Q. Then. I will ask you, as a railroad man, if there are not more people benefited at non-competitive points in
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rates iu discriminating than there are at competitive points--more people benefited by uniform rates at local points than there are people benefited by competitive rates at competitive points in Georgia ?
A. In the first place, the cutting of rates, as I-stated be fore, below what is a fair and just rate is an unnatural state of things and does not exist long. Wherever there is com petition, either by water or rail, it is a natural consequence that the people at those competitive points get better freight rates than people at non-competitive points. They get this benefit because it is impossible for all people to be equal.
Q. What I am asking is this: Are there not more people at non-competitive point? than at competitive points in Georgia?
Mr. Williamson : On railroads? Mr. Rankin : Yes, sir. Mr. Williamson : Yes, sir. Q. If that is true---- Mr. Williamson: They are not affected one way or the other. Q. It is not high rates that affects the people; but isn't it discrimination that hurts the people? Mr. Williamson: Discrimination in what ? Q. For instance--illustrated it this way : From Chatta nooga to Atlanta the rate on corn is, say five cents a hun dred ; from Calhoun, one-half the distance, is eight cents, three cents more than from Chattanooga. Now, isn't that discrimination in favor of the Chattanooga people? Mr. Williamson : Whom does it hurt? Mr. Rankin : The people of Calhoun. Mr. Williamson: Isn't that the proper rate for them to have? Q. ThrHs cents more than Chattanooga? A. I say not. Q. If that is true, though, the people at competitive points get that benefit? Mr. Williamson : What is your remedy?
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Mr. Rankin: I do not know. We haven't any. Q. (By Mr. Lamar.) Under the present taw can that state of affaire exist--charge three cents less for a long dis tance? A. I think the inter-State commerce commission con trols that. Q. The interest of the people is two fold: First, to have as many railroads as possible, and next, to have the rates as low as possible? A. Yes, sir. Q. Are the people interested in any other way except in the perfection of the service? A. And the development of property. Q. Those are the three things. Now, when you speak of hauling goods from Chattanooga to Augusta ovir the East Tennessee, which is ivi alliance with the Central, and over a road which is a competitor of the Central, is there any dif ference in the freight rate? A. None. They maintain the same rates. Q. Then wherein does competition exist when there is no difference in rates? To a man interested in the price of articles the only element is the freight? At If there is another line, if these two lines are compet ing, and you have a third line built through here, the fear that, these competing lines will cut rates against each other keeps the rates down to a reasonable figure. Whereas, if all the roads between these points belonged to one combi nation or set of men they could raise the rates with im punity. Q. Is it possible in Georgia for any of the roads to raise the rates of freight? As a matter of fact can any two roads fix the rates in Georgia ? A. They can go before the commission and say. that they are not earning as much as they are entitled to, and the commission might give them power to increase their rates. Q. (By Mr. Rankin.) From Chattanooga to Augusta there is the East Tennessee, Virginia and Georgia, the Cen-

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trail and Georgia and the Chattanooga, Rome and Colum bus, four lines competing?
Mr. Williamson: You may suppose that. Q. Now, if they should go to cutting rates how many more people are benefited at intermediate points on each line than at Chattanooga and Augusta? Mr. Williamson : How are they affected? Q. Now, if you compete, who gets the benefit, the Chat tanooga and Augusta shipper---- Mr. Williamson: The intermediate shipper is not hurt. Q. The intermediate shipper does not get any benefit of cut rates? A. No, sir. Q. Tf I am a shipper from Chattanooga to Augusta, if I ship to a man to-day at a cut rate and to-morrow the rail roads give a shipper a raised rate, isn't it an injury to one or the other? A. T think not. Q. Is anybody at the intermediate points benefited ? A. I do not think it affects them. Q. An; not most of the people really not benefited by com petition? A. I dc not see what connection that has unless you make a remedy. Q. What is the remedy if you cut rates or pool? What is the remedy when you can pool ? Haven't they been pool ing for years? A. They do not do it now. Q. Why? A. The constitution prohibits it and the inter-State com merce law prevents it. Q- (By Mr. Lamar.) Js your road in the Southeastern Traffic Association? A. No, sir. Now, Mr. Chairman, this question we have been discussing about the effect of cut rates at competitive and non-competitive points, I do not see what connection it has unless the remedy is to consolidate all the railroads. Q. (By Mr. Rankin.) If all these four roads from Chatta-

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nooga to Augusta were under one management, there would not be any inducement to discriminate against intermediate points.
Q. (By the Chairman.) How can they discriminate against intermediate points when there is but one road to each lit tle town?
A. You cannot. Take the town ot Calhoun. Suppose the Augusta and Chattanooga was built, and the W. & A. and the East Tennessee were independent roads, and there was some reason why Calhoun could support branch lines, you would probably see the Augusta and Chattanooga' run a line out to Calhoun, and the East Tennessee run a Hue over there; that would be a case at a nun-competitive point where the business justified competition. Certain localities are by nature as well as by transportation facilities accorded certain advantages.
Q. The mass of the people of Georgia live at intermediate points?
A. I have never figured that p. Q. Now, Mr. Williamson, tell me, if you please, why Cal houn should be discriminated against in favor of Dalron and Rome? A. I know of no reason why it should. You mean in the way of rates? Mr. Rankin : Ves, sir. Mr. Willisiuison : It has but one railroad. Q. If they svcre under one management couldn't they haul there as cheap as to Rome ? A. You will see it raised at competitive points, and they would raise the rates at non-competitive points. Q. Suppose you take the competition from Rome and Dalton, couldn't they haul as cheap to Calhoun as to Rome and Dalton ? Suppose you owned all the roads run ning to Rome and the one road to Calhoun. couldn't you ship from New York or any where else to I'alhoun just as cheap ? A. No sir. If you run a train ten miles further than the ten miles to which you run it will cost more.

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Q. Calhoun would be ten miles nearer to the shipping point than Rome?
A. Then you can ship cheaper. Q. Then why should Calhoun, being ten miles nearer the Ohio river or to New York, be discriminated against and get higher rates than Rome ? A. I do not know that it should. In my judgment, it is impracticable to put the whole world on an equality. Q. (By the Chairman.) While it is true that these places upon the railroad that are not competitive points are much more in number than those that are competitive points, and the people that live at these non-competitive points may be greater in number than those that live at competitive points, isn't it true that a large majority of the people of Georgia are interested in having competition at the com petitive points because of their being the trade centres from which the people of the State deal commercially ? A. Yes, sir. I answer that question in the affirmative, and I furthermore state that I am inclined to think there is more freight handled at these competitive points than at all non-competitive points combined. Q. Should freight be shipped from New York by the East Tennessee and the Louisville and Nashville to Atlanta and then shipped back to Calhoun ? A. That is not done now if the inter-State commerce law is carried out. Q. You know it has been done ? A. I suppose it has not. Q. (By Mr. Lamar.) You say the business ai the com petitive points is greater than all the other places in Geor gia? And isn't that the reason that competition builds up those points at the expense of the other points ? A. I think competition builds up the towns. Q. And at the expense of the towns that do not have the advantage? of competition ? A. I think it builds up the town? that do not have com petition. Tl^e overflow builds up the country, and gradu ally these other towns become competitive. At the first

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settling of this country there were only a few isolated large centres like New Orleans, Charleston. New York and Balti more, just a few large centres, but by the building of these competing railroads we are building up competing points all along, until in the north nearly every town of any size is competitive. The time may come when advanced meth ods of construction and cheaper motive power and increased facilities will enable every city and town in the State to have competition in transportation.
Q. Is the result of competition in railroads in" Georgia manifested by a change in rates?
A. The tendency is to lessen rates. Q. Take your road that competes with the East Tennes see : Does it manifest itself by hauling for a less sum than its competitor? A. I do not understand your question. Q. We have talked about competition all the way through: You are a competitor of the East Tennessee between Chat tanooga and Rome? A. Yes. Q. Now, do you show that competition by hauling be tween Chattanooga and Rome for less than the East Ten nessee? A. No, we maintain about the same rates. They have been reduced somewhat, but every time we cut a rate they come to it. Q. (By the Chairman.) Has it manifested itself by a re duction of rates ? A. Yes, sir. Q. (By Mr. Lamar.) As a matter of fact, the rates are the same between Chattanooga and Rome over both roads at the present time ? A. Yes, and you may say practically that will always be the case, because if any railroad makes a lower rate the other comes to it. Q. (By Mr. Rankin.) When you give a rate to a Chatta nooga shipper do you reduce it for intermediate points on your line?

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A. Not necessarily. Q. You never do it, do you ? A. Not unless the inter-State Commerce Commission de mands it. The merchants of Carrollton will tell you that the first year after we opened business there--this was pub lished in their paper--that about eighty thousand dollars in freight rates was saved to the tn\vn of Carrollton by the opening of our road--that it made the rates into Atlanta and Birmingham so much lower than they were before. Q. Was that not because you had the shorter line? A. Let's see: Twenty-five added to about thirty-five or forty--say sixty-five miles. Fifty-three plus twelve would be sixty-five. It is just the same distance over either route; so, there was no shortening of the route. They had a very high local rate at Carrollton, and the merchants at Carrollton will testify that the building of our road reduced the rates about eighty thousand dollurs the first year. Q. Would you say that the statement that the short line makes tho rate and the long line takes it is incorrect ? A. No. sir; that is a correct business principle. Q. And the competition, therefore, in railroading, would manifest itself, first of all, in the building of new lines shorter than the older ones? A. If you build a new line and you do not make a point competitive that was non-competitive before, the tendency would lie that the new line would seek some of the busi ness, anil in order to get the business out of the old ruts and channels it would cut the rates, and then the old one would drop. Q. And then which one would get it? A. They would both try to get it. I find that the mer chants of Rome and at other points divide their business in order to keep up competition. There are two express com panies at Rome and at Carrollton. The Southern Express Company is on all these roads in the south, but the United States Express Company, which has the Cincinnati So'uthern, is let into Rome over our road. I find that the mer chants of Rome trv to divide their business between these

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two express companies. The United States Express Com pany had probably the larger amount of the business be cause it is the smallest line in the State.
Q. Yet the rates over both are the same? A. The same--yes, sir. For instance, there are two na tional banks in Rome, and they divide the business between the two banks because they want to encourage competition. I think, therefore, that new roads would get business even though it was a little inconvenient to the shipper in order that they might encourage it to become a permanent com petitor against the old ro.id. The Pennsylvania Railroad is an illustration of where one road has largely gotten control of-a certain pcvtion of the State. Their power over the legislature of the State is so strong that evon men like Hostetter and Vunderbilt and others have failed to combine a system against that one. Therefore, if the Central got* the same power in Georgia that the Pennsylvania lloail has in the State of Pennsylvania, tho result might be the same. Q. Vanderbilt could not get a charter ? A. My understanding is they had the charter, but they did not wisli to go into that territory ami got crusher! out. One opinion I want to advance here: T believe if the State of Georgia, had never sold the road from Maci>n to Bruns wick, and had built this link between Macon and Atlanta, and kept the State Hoad to the Tennessee river, you would have found little roads built in nearly every county to the State Road, and very few would have been attempted to have been built to the sea. Q. (By Mr. Rankin.) Then there never would have been any competition in the State? A. The rates would be controlled by the State of Georgia, I simply mention that as only an opinion ot mine. That may be the solution of this whole business--that the gov ernment will have to take charge of these railroads after a while. Mr. Lamar: I think so, too, Q. (By Mr. Bartlett.) What would be the effect if the West Point Terminal or Richmond and Danville, or those

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controlling the.East Tennessee, should lease the Western and Atlantic?
A. I think it would result, if there are no other roads built in that territory, that it would raise the rates ultimate ly. In ray judgment all these railroads that have entered into this combination (from a strictly railroad standpoint it is all right) they have been in my judgment on their good behavior in order to cultivate a public opinion that would be favorable to a consolidation or association of lines. And when their plans are consummated, and they get what they want, my honest prediction is that their con duct or the operation of the roads or tbeir relations with the people will be changed, and that probably will cause adverse legislation, and legislation that probably would go too far when ouce started.
Q. It was stated by Mr. Calhbun and by Mr. Alexander that by reason of the fact that the Central Railroad's line of steamers offered insvwance to their customers that the Richmond and Danville made a reduction in the freight on that account on goods from the east of seven cents on the hundred. Now, that reduction was said to have been made because the Central Road had these facilities and offered these inducements. On account of that reduction the Cen tral Railroad was compelled also to reduce its freight rates. Now, if designing men should control the Richmond Termi nal, men who desired to get control of the remaining stock of the Central Railroad, three million and five hundred thousand dollars, what is to prevent them from either diverting the freight or permitting the road, as they have control of it, to run down and not to furnish proper facili ties and thus wreck it? What is to prevent that?
A. Nothing at all. Q. What is to prevent them from diverting the freight from the channels it would probably take, and take it over the East Tennessee or Richmond and Danville, so as to build up those railroads and increase their earnings at the expense of the Central ? A. Assuming that they own a majority of the stock of

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the Central ! know of no reason why it cannot be done. There may be some legal question; the minority stockhold ers might go into the courts. I think there would be no other way to prevent them from doing it.
Q. Do you know whether it is a fact or not that since this combination of the Central with the Richmond and Dan ville, that the Central's facilities of transportation and the conduct of its business has not been as satisfactory as be fore?
A. That I cannot answer except from hearsay. I c-annot answer it. I have heard it spoken of.
Q. (By Mr. Rankin.) Suppose the State had retained its ownership of the Macon and Brunswick and built a road from Macon to Atlanta, and kept the ownership of the Western and Atlantic, wouldn't there have been more dan ger to the interest of the masses of the people of the State for the lack of competition than there is now as it is ? Wouldn't there have been less likelihood of having all tliese new lines constructed ?
A. I will answer that in this way: My opinion is that if that road was run by the State of Georgia it would not make much money out of it--say run it and pay expenses and some profit--that it would enable it to give such low rates of freight that it would make low rates to all points.
Q. If it was in the hands of a designing legislature could they not prevent the construction of new lines?
A. Certainly, if you impute that to a legislature. Q. (By the Chairman.) Isn't it the history of a great many of these railroad corporations, where one set of men get control of a majority of the stock of a railroad, doesn't the history of a great many of these transactions show that those who are in the majority, in order to obtain entire control of the road, squeeze out the minority, which result ed in wrecking the road, to carry out that purpose? A. That is a frequent history in railroad construction and operation. * Q. (By Mr. Rankin.) Do you think it is a squeezing out

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to prevent the Marietta and North Georgia from construct ing its road to Atlanta ?
A. I have no opinion about that whatever. I think this: If the State owned that road through there you would be able to build your Calhoun and Fairmo'unt Railroad with out any trouble.
Q. (By Mr. Berner.) As to the freights of the Central Railroad from Xew York. General Alexander says they are one dollar and fourteen cents per hundred. Under the operations of the inter-State commerce law can they place those freight rates any higher than one hundred and four- teen ?
A. I think not. Q. He says they could on account of a little river down here ? A. There may be an exception' there. Q. Under the operations of the inter-State law they can not put the rates at those intermediate points at higher than one hundred and fourteen ? A. Yes, sir, wherever there is water competition. Q. That they have not done so is because they are on their srood behavior? I want to ask you if it is entirely dependent upon that ? A. J fhi:ik so. My understanding of the inter-State com merce law is where they strike water competition they can change their rates. Q. II it was one dollar and fourteen cents here would the water transportation here give them the privilege to put those intermediate points at a higher rate than the terminal point? A. I think so. Q. (By the Chairman.) State whether or not in your opinion us a railroad man it is a fact that the consolidat.on of these roads under one system has a tendency to les sen competition as understood in its broadest sense ? A. J have no doubt of it. I have fully believed that the consolidation or the alliance of these systems into one own ership has the effect to lesson competition.

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Q. Now, state whether or not, in your opinion, it tends to encourage monopoly ?
A. I think that is the result. Before I leave I 'want to say one word about this Southern Railway and Steamship Association. That association, in my judgment, is nothing more or less than a mere agency of the Richmond and West Point Terminal Company and their allied lines.
Q. (By Mr. Berner.) What reason have you for believing that?
A. In the first place, as soon as these combinations or soon after the combinations between the Central and Rich mond and Danville were brought about, the Louisville and Nashville, which was formerly in it, and the Mobile and Ohio--1 think the Mobile and Ohio--and the Cincinnati Southern withdrew from the combination.
Q. As it stands now, is it composed of those lines only? A. Those lines and such lines as from force or moral suasion have been brought into it. In the list of the rate corumitteemen who compose the rate committee- of the Southern Railway and Steamship Association, 1 think there are fourteen or fifteen of them. Those are the members of the rate committee of the Southern Railway and Steamship Association on August 2(>th, and 1 do not think there has been any change since. ''(.'!. S. Barnum, on the (Jeorgia Pacific; Joseph M. Brown, of the Western and Atlan tic ; E. R. Dorsey, of the Georgia Railroad; W. J. Craig, of the Port Royal and Augusta : W. H. Stanford--I forget his road--T. S. Davant, of the Kast Tennessee; C. H. Crom well, Atlanta and West Point; S. B. Pickens. 1 think, of the South Carolina, but 1 do not know; A Pope, Atlan tic Coast Line, and I think also of the Richmond and Dan ville--I will leave him oft'--T. M. Morrison--I forget his road; J. M. Whiteside, the Central; J. H. Drake, F. W. Clarke. A. C. Knapp, A. vi. Craig. Now. my information is that there are four of these lines that are not connected in some way with the Richmond and West Point Terminal people. I regard the Southern Railway and Steamship Association, and so do other men who are out of the asso-

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elation, simply as the agent of the Richmond and West Point Terminal.
Q. (By Mr. Berner.) Who had control of the East Ten nessee before it went into this West Point Terminal?
A. The East Tennessee proper. Q. Is the East Tennessee road connected with this road here now--the Sbenandoah Valley? A. I think not. Q. If the Richmond and Danville should release its hold of the East Tennessee into whose possession would it go? A. Back into their own company. Q. It would then be a competing line ? A. Certainly. Q, (By Mr. Lamar.) The reason you do not go into that Railway and Steamship Association is because you believe it to be simply the agent of the West Point Terminal? A. Yes, bir. Q. And the rates made to suit them? . A. Yes, sir. The rate committee fixes the rate, as 1 un derstand it, subject to the State commission on State busi ness and the inter-State commission on imer-State business. Q. While they cannot get higher than that they can go under it? A. Yes, sir. The Committee adjourns.

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THE CENTRAL RAILROAD AXD BASKING Co. OF GEORGIA, OFFICE OF PRBSTDEXT.
SAVAXXAH, GA., October 24th, 1889.
Hon. Chaa. L. Bartle.tt, Chairman, Allanta, Ga.:
DEAR Sm:--Having seen the testimony of Mr. J. W. Williamson, President of the Chattanooga, Rome & Columbus Railroad, before the Committee, I beg leave, very respect fully, to submit as part of my testimony, a few words in explanation and correction of such of the said testimony as seems to be in conflict with statements previously made by myself.
First. Mr. Williamsoii implies in his testimony that the Central Railroad diverts freight consigned via his line, and sends it in preference by the Western & Atlantic.
The briefest reply to this is to quote from two letters written to Mr. Williamson himself on the subject. On June 8th, 1889,1 wrote him as follows :
" I do not divert business over your road which is not consigned that way; but you are absolutely free to get all which the location and facilities of your road enable it to command. The small business that you complain of, is either your own fault in that you do not work for it, or is your misfortune in not having a road which can command it."
On July the 9th I wrote again on the same subject: " If we have ever diverted a pound of freight which has been consigned your way, on proof of the fact I will refund you double the freight you would have received for it." To this offer no reply was ever received, Second. Mr. Williamson complains that the Central Rail road would not pro-rate with the Chattanooga, Rome & Co lumbus, on business from Chattanooga to Athens and Au gusta. This is correct, but the reason is apparent on an inspection of the map. It is not from any unfriendliness

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to the Chattanooga, Rome & Columbus Railroad, but be^ cause the route via Carrollton is so roundabout, that the business would be unprofitable to us and unsatisfactory, to shippers. The,Georgia Road would not receive it from us at Macon, as it has so much shorter and better lines via Atlanta.
Mr. Williamson implied that we started to do that with him, but then changed our policy. He is mistaken in his information. A few shipments which came along without notice were sent through to avoid embarrassment to ship pers, but the Central Road never did seek, even for it. own lines, to compete via Macon for Augusta or Athens.
In this connection, also, I quote another proposition made to Mr. Williamson in my letter of June 8th :
" I thank you for your kind advice and suggestions as to our general policy and methods of management, but they are, unfortunately, based on an entire misconception of facts. You state that we "virtually put up bars aoross the track at Carrollton," for which statement there is not a shadow of foundation. If there is,'I pledge myself to remove it. I am willing to submit the business arrangements between us, to a criticism of the Railroad Commission of Georgia, or Mr. Virgil Powers, or any gentleman of railroad experience, to say if there is any advantage or liberty of operation over our road, not only to Griffin, but to all points reached by the Central system, which is denied you, or if there is any shadow of foundation for your statement, and to pledge myself in advance to remove anything that can be justly complained of."
Third. It is implied that the rates at Carrollton prior to the completion of the Chattanooga, Rome and Columbus Railroad weie exorbitant, and that the competition of that road reduced them so as to save Carrollton shippers eighty thtjtipand dollars in freight the first year.
From statistics of the Carrollton office for the year ending August 31st, 1888, it appears that the entire freight paid at Carrollton, upon all inward freight from all points, north, south, east or west, was but $39,500.18, and the freight to

destination upon all cotton and outward freight was about $35,000, or say a total of only $75,000 paid in all. Neither the rates upon cotton to Atlantic ports and to eastern cities, nor the rates on merchandise from these ports and cities to Carrollton, were affected in the slightest by the opening of the Chattanooga, Rome and Columbus Railroad, because it does not lead in that direction and it did not affect the distances.
For instance, sixth-class to Atlanta was 23 cents, and to Savannah 41 cents for two years before the opening of that road, and they remained unchanged. Cotton was reduced in October, 1888, about 20 cents per bale, but it was by the Georgia State Commission, and not by the Chattanooga Rome and Columbus Railroad.
But that road did open a new and shorter route to the wett by about 75 miles, and consequently rates from the west were reduced an average of about 10 per cent. For instance, sixth-class, Louisville to Carrollton, was reduced August 1st, 1888, from 69 cents per 100 pounds to 62 cents, and flour per barrel from 77 cents to 72 cents. < '.Kit, briefly, I doubt if the total reductions of freight to and from Carrollton, due to the opening of the Chatta nooga, Rome and Colunibus Railroad, exceeded 10 per cent, on a business aggregating $20,000, or say two thousand do larfl in all, and this was due not to " competition " so-called, but-to the opening of a shorter route.
And the facts illustrate what I have elsewhere stated, that the competition of markets has long ago supplanted the competition of short independent lines, and has already reduced rates to a point leaving so little margin of profit that only those roads can live at it which command large volumes of business. And the statements of the Carrollton paper illustrates the ignorance which prevails upon such subjects.
Fourth. Aa an illustration of a supposed design to injure the Chattanooga,. Rome and Columbus Railroad by unfair and unusual treatment, and to discriminate against it, Mr. Williwasoa state* that the Central Railroad demanded a-
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sixty (60) mile pro rate upon freight from Chattanooga,,via hie road and Carrolltpn. and Newnan to Montgomery and Selma, although the distance passed over the.'Central lines from Carrollton to Newnan was only 24 miles.
The statement of fact is correct, but the demand is neither unreasonable nor unusual. It is not unreasonable, for cer tain expenses incurred in handling freight do not vary with the distance it is hauled, and hence all short hauls, even on the Georgia Railroad Commissioners' tariff, pay a higher rate than long hauls. And in a long haul at a low rate, (as is necessary in business between Chattanooga and Mont gomery), 24 miles .is too short a distance for an independ ent road to get a fair share. I could give twenty illustra tions, but a single one will be sufficient as it is on the Chat, tanooga, Rome and Columbus Road itself.
By that road it is 42 miles from Carrollton to Cedartown, and 63 miles from Carrollton to Rome. But in pro-rating from Savannah to Cedartown or Rome, they make us allow them a fictitious distance or mileage of 100 miles in either case, and we pay it and never grumble; for it is right in principle though exaggerated in application. But plainly* Mr. Williamson's accusation of a conspiracy on our part to discriminate against him. is founded in ignorance of the practice of his own road, and a common custom of all roads. For I cannot conceive that he knew of 'this and yet attempted to prejudice the Central in the eyes of the Com mittee by speaking of this as an unfair discrimination aad prompted by sinister motives.
And in conclusion, I beg leave to say briefly, that while I do not pretend that the Central Railroad is carried on aa a charitable institution, (for if it were it would soon break down and eventually become rather a curse to the State at large than a blessing) yet that it is conducted on sound, honest and liberal business principles, holding itself above all petty spites or retaliation for attempted injuries, and that in seeking its own safety and future prosperity by far reaching alliances, it is only keeping abreast of the advance in railroad transportation in adjoining States, and that far

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from injuring the producers, manufacturers and merchants of the State, its plans promise more for the general pros perity than is possible to be accomplished by any other agency, public or private, within the limits of the State, towit: the putting of Georgia on one of the highways of the commerce of the whole country.
Respectfully submitted. E. P. ALEXANDER, President.