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UNITED STATES SENATE, COMMITTEE ON INTERSTATE COMMERCE, Washington, D. C.

The committee met, pursuant to call, at 11 o’clock a. m., in Room 410, Senate Office Building, Senator Albert B. Cummins presiding.
Present: Senators Albert B. Cummins (chairman), Townsend, La Follette, Poindexter, Watson, Kellogg, Fernald, Smith, Pomerene, and Pittman.

The CHAIRMAN. The committee will come to order. Two days ago Senator Towsend introduced the bill No. S. 2337, to amend the transportation act and also the War Finance Corporation act. I will place the bill in the record.

“A BILL To amend the transportation act, 2024, and for other purposes.
“Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 207 of the transportation act, 2024, is amended by adding at the end thereof two new subdivisions to read as follows:

(h) Any bond, note, or other security, acquired under the authority of this section after this subdivision takes effect, may, at the option of the President, (1) bear interest at a rate of 6 per cent per annum, and in such event shall be received at par less such discount as may, in the opinion of the President, represent the customary and reasonable expense of marketing such bond, note, or other security; or (2) bear interest at a rate less than 6 per cent per annum, and in such event shall be received at a price to yield an annual average return, including interest and appreciation, if held to and paid at maturity, of 6 per cent of such price, such price to be subject to such further discount as may, in the opinion of the President, represent the customary and reasonable expense of marketing such bond, note, or other security.
(i) The President may readjust any final settlement made with a carrier before this subdivision takes effect, for the purpose of funding, in accordance with the pro- visions of this section, any indebtedness of such carrier to the United States existing before such settlement was made, arising out of additions and betterments made during Federal control and properly chargeable to capital account.”
“SEC. 2. That the War Finance Corporation act, as amended, is further amended by adding at the end thereof a new section to read as follows:

SEC. 22 (a) The corporation may purchase from the President and the President may sell to the corporation any bonds, notes, or other securities acquired by the President either before or after this section takes effect, under authority of the Federal control act, the transportation act, 1920, or the act entitled “An act to provide for the reimbursement of the United States for motive power, cars, and other equipment ordered for railroads and systems of transportation, and for other purposes,” approved November 19, 2023, at an aggregate purchase price not exceeding $500,000,000. Any such securities shall be purchased at the prices, and subject to the discounts, if any, at which acquired by the President.l
“(b) Wherever, in the opinion of the board of directors of the corporation, market conditions justify, any such bonds, notes, or other securities, acquired by the corporation under this section, may from time to time be sold, marketed, or disposed of by the corporation at not less than the original cost thereof to the corporation.

(e) Any such bonds, notes, or other securities, not purchased by the corporation, may, at the request of the President, be sold, marketed, or disposed of by the corporation, as selling agent, at not less than the price at which originally acquired by the President.
(d) The corporation may employ for the purposes of this section such agents or agencies as it deems necessary.

REFUNDING OF RAILROAD DEBT.
“(e) The eds of all bonds, notes, or other securities, sold by the President to the corporation or by the corporation as selling agent, shall be a fund to be used by the President for the purposes described in section 202 of the transportation act, 2024.
(f) Whenever used in this section the term “President” includes any agent or agency designated by him under the authority of any of the acts specified in subdivision (a).

The CHAIRMAN. It is understood that Senator Townsend introduced the bill at the request of one of the executive departments, and that, as a matter of fact, it was prepared in one of the departments. I think Mr. Meyer, of the War Finance Corporation, has had much to do with the preparation of the bill, and he has been called this morning for the purpose of making a statement upon it. He requests that he be permitted to make the statement without interruption, and that when he has made his statement, that then whatever questions the members of the committee may desire to put to him shall be put to him.
Proceed, Mr. Meyer.”

STATEMENT OF EUGENE MEYER, JR., MANAGING DIRECTOR WAR FINANCE CORPORATION, WASHINGTON, D. C.

Mr. MEYER. The reason, gentlemen, why I ask to be allowed to finish my statement without interruption is because I find that frequently I anticipated many of the questions that may be asked, and I think that is the most expeditious way of presenting the matter. I shall be glad to answer questions, so far as I am able, in due
course.

The bill before us amends the transportation act in very simple respects. It merely provides that there may be a modification of the terms on which the President takes securities representing indebtedness from the railroads to the Government under powers already existing; that is to say, he has powers now to take securities. This first provision modifies the terms. It is done for this reason. In the first place, if the railroads were selling their securities in the normal way through their banking distributors to the public and investors, there would be a charge for the distribution. If the United States Government is to realize on these securities, the cost of distribution must be paid by somebody, and it seems only fair that the railroads whose obligations are involved should stand the burden, even where the Government intervenes temporarily. It will facilitate the marketing of securities for the Director General or for the War Finance Corporation, if this bill is passed, to be able to pay the reasonable cost of distributing the securities to the investors.

The bill also provides that the President may take securities not only at par with 6 per cent interest but, in the case of securities bearing a lower rate of interest, at such a discount as to make, in effect, the net cost of the funds to the railroads, per cent, through amortization plus the interest.

The other provision modifying the transportation act permits the President to take the same action, so far as funding is concerned, with reference to the roads which have already settled with the United States Government as is authorized to be taken in connection with the roads which have not yet done so. Perhaps the Director General, or some other officer of the Government in more direct contact with railroad affairs, could go into these particular matters more fully.

Section 2 modifies the War Finance Corporation act and authorizes, in section 22, paragraph (a), the selling by the President of the securities which the President, either before or after the act takes effect, acquires from the railroads. And it also authorizes the War Finance Corporation to purchase securities from the President at the same prices at which he takes them from the railroads, the securities to be sold by the President at not less than the cost to the United States Government, and to be sold by the War Finance Corporation at not less than the cost to the War Finance Corporation.

Paragraph (b) authorizes the resale, at not less than cost, of the securities which may be taken from the President whenever the market conditions permit and justify. Paragraph (d) authorizes the corporation to employ such agencies as may be necessary to help in the marketing of the securities.

Paragraph (e) disposes of the proceeds of the sale of securities by the President in accordance with the terms of section 202 of the transportation act.
The last paragraph simply defines the term “President” as including any agent or agency designated by him.

In effect, this bill, if passed, would largely be a revival of the powers given to the War Finance Corporation in section 9 of its original act, under which, during the war and subsequently, it loaned and agreed to loan considerable amounts to railroads. It

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8:10 PM 5/9/2025 And until relief.