Conversation 060-003

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Good morning.

I would like to tell you how I set up this meeting.

The interesting thing is that sometimes the passive conversation in the White House is different from something you're in the White House.

In fact, many months ago, we were in a meeting in the White House, and all of a sudden, the White House was shaking hands with me.

Discuss the problems of the business, where they are, what the future is, what the government role should be, what it should come to.

Now, actually, as you can imagine, the demands for this economy is complex as well.

It's so great that you can't sit down with too many things.

But I want to begin this conversation by saying that

There is no need to make it sale as far as I am concerned.

I do not see any great industrial economy, particularly not in the United States.

We've got a strong railroad system.

You've got to have it.

I'm also against it.

I would say it's about the same thing about all the agencies that deal with the airlines.

I've met with the airline executives.

And regulations and so forth were set up for the airlines.

And the airlines and railways in the U.S. 34 years ago are completely wrong with the problems of airlines today.

So we've been taking it to the past to get an increase in 7% of rates, to get them to knock off the fuel, to be non-paid flights and so forth and so on.

They do take more than 100 years, more or less, in terms of the government role, the railroad role, so on and so on.

So I'm aware of the importance of railroads in terms of problems.

So I think what would be very helpful for my team servers to hear directly from you, and I'll start since I've been inside of this whole thing, the idea in the first place, start again, what you consider the major problems to be,

How it can be changed so that it can be helpful without the same judgements.

It can be completely unrealistic in terms of how you can get through.

And my mind is to, if you can, give it a hold about your future, so that I can reflect on it and grasp on it in the future.

That's the order today.

Very good.

I'll let John wind up at the end.

You know that he does have it.

I want to thank you very much, Mr. President.

I think our problems are basically the problems of the regulatory situation, the problems of inequity.

and the labor problem.

And I'd like to just talk briefly about, I guess, some of the things that relate to the first two.

You see around here, ten members of the president and chairman, but anyway, each man is

with the exception of the Penn Central, which is presented by Bill Moore.

These are all by railroad industry standards, prosperous railroads.

By industrial standards, they are not prosperous companies because the rail returns is nice, but they're unable to get together enough capital to each year install the necessary improvements to keep their business up with the growing demand for transportation.

Let me ask you, what is the rate of return of shelter savings and railroads that are developed across this?

For the entire industry, it's less than 2%.

For the southern railroads, it's about 4%.

For the southern railroads, it's about 3 or 3.5%.

That's the rate of return.

For the southern and the western roads, you're doing better rate of return.

Steel is, for example, steel is 2.5% at the present time.

That's one of the reasons that these later negotiations are so enormous.

Thank you.

If they get a big weight increase, it goes far beyond productivity increases.

You can see what's going to happen when I agree on that.

What will happen is actually the prices, and then what happens is they're going to be in a position to.

In this group around the table, you can see represented about 65% or 70% of the gross income of the entire global system of the United States.

This group arose, made about $434 billion in net income last year, and because of the losses of the industries, the net income for the total of the industries, the tax net income, was down to $127 billion of the whole industry.

And that

This, what is it?

That's 127,000.

That's ten and a half.

Out of those, it's about 11 and a half billion.

So, it's...

small from the standpoint of a rate of retirement, small from the standpoint of gross carry down, the percentage of gross carry down, and that, in addition to that, practically every company that's represented around this tech is a diversified company that has substantial income from other than federal sources.

And so if we just look at the picture of that railway operation in Texas,

The other issue that you have to use your outside income to generate capital that is used in improvement of the railroads and plant and equipment.

Like the job of a farmer.

We had to get some sort of a legislative program up.

before the public and before the Congress, we commissioned George Snyder, Senator Snyder from Florida, who was the author of the Transportation Act of 1958, to help a small group of railroad experts analyze very carefully what was wrong, where we had been, where we are now, and how we got there, and what it takes to get us out.

Well, that study bears the name of

The ASCO report, America's Sound Transportation Review Partners, it's a pamphlet, a little bit for a small community.

And the unfortunate part about the ASCO report is that it's sort of about the capital center of the country.

And that result has been that

It's been very slow, very difficult to get it.

But it analyzes the problem.

It proposes changes in the regulatory structure.

It makes recommendations for federal health financing and equipment and focuses on the problem that we have and the question of

Also, that program needs to be extended to city streets and county roads, and not just the federal highway system.

The results of the trade highway provision are the same, whether it's on the county road or on U.S. Navy.

And it is a broad program that points out the problem.

I think that

Many people who have been informed on the program have expressed their views on it to their representatives in the Congress.

At the same time, we have...

to talk to members of the administration and to Secretary Baker of the Department of Transportation about the administration's program for regulatory reform.

And we've seen a great conflict of views or ideology.

We think that in these two programs there is certainly a great deal that can be done that will help restore the

Railroad industry and the state of viability that it must have is going to be controlling transportation needs of this country.

Mr. Volpe's forecast indicated we'll have about a 50% increase in transportation demand by 1980.

Our own projections out in the west and the southwest, where Southern Pacific, Santa Fe, and Union of Syria serve the territory, indicated there should be a doubling of transportation demand by 1985.

be much more canonical from the overall application of public funds to preserve the railroad system and make it possible for it to expand its capacity to carry this large amount of transportation that needs to be carried, that it will be to look for public funds to be spent in doubling and tripling the highway system, in doubling and tripling the waterway system and the airway system.

So, from that standpoint, I think the nation has a real stake in

channeling its transportation decisions to the place where the most capacity can be gotten for the least amount of money, and this is just a certain thing in the world of industry.

And all of the things that we're talking about, whether they're in the Castro report, or whether they're in the administration program, all move in that direction.

To give the industry more freedom to price, to give it the opportunity to conduct its affairs more like a business without so much...

resorting to administrative procedures, where resorting to administrative procedures are necessary.

We all feel that there should be definite time limits on the amount of time that the ICC or the CAB or the FMC or any of the agencies should have to consider these things.

We all know the problems that are involved in due process and everything else, but even so, we

the delays that surround the handling of matters, important matters, to these agencies that are in our country.

They're expensive, and very often the parties lose track of the reasons, for instance, why they wanted to break.

So the Rock Island case that was before the United States Commerce Commission for seven years, seven years, the Union Pacific, Southern Pacific, Rock Island case.

So I think we have a, there's a great deal of

commonality of interest and viewpoint in the OSCE program and in the administration program.

From our standpoint, we think it would be very important to get the administration program on the table as quickly as possible so it can be considered so possible and be transformed into legislation.

On the other side, I think

of the ledger where the work has been done on the ASCO program.

We already have pending freight car bills.

There are several bills pending in the Senate.

Mr. Glader and I have testified to the industry in connection with the ones that the industry sponsored.

Large numbers of shippers have testified.

I understand the Department of Transportation will testify about the safety of this land.

So, we do have two sets of formulae really covering pretty much the same subject.

I think there's no reason for there to be a disparity of views or any conflict in getting these things out on the table and before the Congress in such a way that we can begin to muster support.

The ASCO program itself

has a broad base of public support already.

I mean, shippers, relevant employees, and chairs of Congress, and people of that sort, already have taken the steps to endorse this thing in principle, without specific legislation.

Of course, no one takes a firm position, but we do have support for this in principle.

And we have the machinery set up so we can use the same kind of machinery on other things that will result from the administration's program.

with the feeling that we can move forward and get something out into the open where it can be debated and bolded whatever the climate is so that we can really go to work and do the job that we all like to do and that's the job of moving the commerce system that's about my story I think if you want to stay on

The regulatory situation and the financial situation, we can skip around a grand platter.

I think it's more or less prepared to talk about our labor situation.

If you want to jump over into that, we can go this way.

Go ahead.

Mr. President, I'm going to meet the labor union people on Monday.

I'm going to meet the Biden administration.

I heard about this meeting.

I think we might differ as to which of our problems is the most urgent, but everyone I think would agree that certainly right near the top of the list is our labor problem.

Isn't it really?

Isn't it work rules?

Yeah, and the key to the labor problem is productivity.

This is, I think, a more accurate and a better way to put it than the somewhat overworked word of feather bedding.

But this is the affirmative side of feather bedding, is prototyping.

We have a reason that I'm so interested in this subject, is that the settlements deal strike in 59.

Never forget that experience, because it was ten days before Christmas, Roger Blom, and his top letter, and to his brother, Jim Mitchell, when the secretary was there, David McDonald had to steal what was an article, but at least we mentioned it.

I had to remind him, Jim, I had to remind him.

If you read the paper, you'd think that's what it was all about.

The real sum of that was how much.

That wasn't what it was all about.

As far as the energy was concerned, there wasn't.

The greatest increase was in getting some modification on the work tools.

It railroaded the coal better than that.

The whole point is that in this whole area, that the industry then, and today, is much the same.

It's much more in the market.

The industry that would have been glad to pay more if they could get more right to run the damn business.

That has been our position from the beginning.

We have the technology right in hand developed to operate our properties with very substantially fewer people than we are now using.

We could even reduce the workforce even more and do a better job if we spent some money to develop things that are well along.

But there's no use spending money for labor-saving devices if you get them and are not allowed to use them.

But we have in hand the devices to do it now.

Now, I'm cautiously optimistic about this.

is perhaps an extreme position to take.

And I am because of the progress that's been made as a result of your emergency board, number 178, the big emergency board of some months ago, that granted what we thought at the time, I must say frankly, was shockingly high wage increases over a three and a half year period.

But they tied those increases to at least a start on this problem.

They ordered as a condition

that certain work rule changes

important ones and obvious ones.

They then set up, ordered to be set up, a standing committee of labor management and outsiders that would work together to tackle this problem.

And if we had the contract that was proposed in effect, we would have two full years until the middle of July of 1973 of labor peace in which we could tackle this problem.

So that was a real step forward.

And Mr. Ussery, the Assistant Secretary of Labor, did an incredible job.

I'm glad he's a strong man physically, because he did an incredible job in working this out, so that we were able to have an agreement with the clerks, the largest of the non-operating unions.

Exactly this.

We then were able to reach an agreement with the senior operating...

We cut that short and reached an agreement with that on the same principles.

We now have hanging out just the UTU, which is the biggest of the group of other operating unions headed by Charlie Newman.

If we could reach agreement on this same line with Charlie Newman, we would have two-fold years from now in which to have the standing committee work up work rule changes on a pattern that I know George Shultz understands, because he did this with the meatpacking industry.

And this would be a means to do it.

Now, this procedure is too slow for the penitential.

The penitential has got its own program, and they have to.

They're desperate.

They can't wait.

The rest of the industry, we say, God bless them.

We'd like to be able to go that path, too.

But realistically, we are prepared to follow your emergency bulletin procedure.

And I think it offers a great opportunity to tackle this problem and make progress

For the first time in years, but in the way is the UTU.

Without the UTU, we can't do the thing.

If we have the UTU signed up, the other unions in one of our properties in this industry, we have to deal with about 20 of them.

Nevertheless, we feel that the rest will fall in line.

We'll settle the rest of these unions.

And have this two years of labor speech to work with this standing committee, we can get over this one hurdle with the UTU.

Now, the longer-range problems, though, even after this is over, I think, can only be solved on the basis of the principles which are set out in your bill that went up to Congress.

We must, in cases when we really can't settle these transportation problems, labor problems, we must have a means of settling them, other than this problem.

The strike is just not a satisfactory means of settling the labor dispute in the public service area, and particularly this area.

We have no bargaining power on our side under the circumstances.

The public gets hurt.

The strike is never permitted to run its ordinary course as it is in an industrial company, and it can't be.

And we are now, Steve Bales here, president of the AAR, and a group are working with the secretary of labor on your bill and some ideas we have about it that I think are constructive and they're making considerable progress.

We feel that this type of solution, this principle of finality, when that has to be reached, is essential for the long term termination of these impossible problems.

work stoppages in the rail transportation field.

So those are the two things.

The long-term thing is what we have called the gravity of finality bill, the means of disposing of it.

The short-term thing is that we can manage to get this UTU problem settled on the basis that the others have settled it.

We've got label pieces for two years, and I think with working with label and with outside help, we can make some real progress on this product.

And of course, even if the government took over the railroad industry, and God knows that's the worst of all possible solutions, the productivity problem doesn't go away.

It just gets worse.

So the productivity problem is the key problem to this expansion.

of the rail transportation in the United States, no matter who runs it.

You know, this miserable situation in New York City today, the last few days, let me say that in regard to this...

The very novel approach is novel, only in the sense that other than it has been suggested before, some suggestions for military arbitration, so that it is to a certain extent.

If our transportation bill, for the rest of time, has sat there for a year and a half, then it has been very likely that it will start in the night as it will.

And they won't do anything about it, not in this country, perhaps, maybe.

This is the kind of approach that has to be used for all public service drives.

You can't have drawbridge operators.

You can't have any, as a matter of fact,

The railroad is a quasi public service, and of course there cannot be any strikes by the public employees, period.

By that I mean, when I'm getting out of your field, they can come, you start, everybody has to go to the police, and they shouldn't strike back, and others say, well, the firemen shouldn't strike back, and they say, the hospital workers shouldn't strike back,

It's Kennedy Greger.

It's what about other people?

What's an individual who moves into the public service?

In fact, he should get certain compensations when he has to put up some things for it.

You allow that principle to strike if you start a building in a public area.

You see, if any public concerns and everybody else strikes the same way, the whole place slows down.

That's been the experience.

France has been the experience.

So, we think this bill, which has only got some public support lately because of your last stoppage, this bill, we can get it at some point, at some point, we can move it to Congress, anything, and it can work.

It's a quite dramatic approach to this kind of industry where you simply can't go through a strike.

At the other side of the coin is where you have an industry which does have an enormous impact.

The automobile industry is one.

The steel industry is another.

It has an impact on the economy too.

My brother didn't have to have it.

But there, the best thing to do is to sit back and let them fight it out to the end.

But you can't do that.

So they would do it.

In fact, no, you've got to keep the roads going.

That's why the right is striking.

That's right, and this is such an enormous and potent weapon.

You can't stockpile and trade over the service like you can't steal the dollar.

You can't catch, it's all there to catch up.

One of our paradoxes, Mr. President, is that in some areas we have too much machinery.

We have too much machinery to dissolve the scoops.

We have all the parts.

We have loads of machinery, great scoops.

No public opposition, whatever, to the Illinois Central GM.

No.

No public opposition.

What's the situation?

Four years.

It's a waiting final decision from the State Congress Commission.

The Department of Justice is opposing it on the usual competitive grounds of the Brotherhoods because they do not have the word cool.

What is this one over there?

Give me this one.

Why the Justice Department, when the Justice Department took its position of opposition, was to say, this is the administration that was created.

At the outset, sir, previously, there we are.

And there probably are people over here who wouldn't want to do that.

I'm sure.

I want to know what the story is.

I won't.

I can't.

Mr. President, our problem, of course, is that we can't direct those.

It seems that we can direct the Department of Justice.

We can sure direct it.

That's one way to do it.

Part of the legislative program, certainly, can be to put timelines on all the agencies and consider them.

That's another point.

A great deal of this is the laws themselves.

We all take credit.

It would be very easy for me to say here that what I'll be presenting are very, very difficult problems.

With the present makeup of the Congress, the Congress isn't about me.

This Congress is not about me.

If enough people, like that's why the New York thing was important, that's why they re-secreted it, if enough people get disturbed about it, the move of the Congress may change, or the Congress may not make change, and then something will be done.

You were never, all of you who were around had hard dispatch.

It would never have been passed if it had not been for the enormous work stops at that point, and the people just got fed up with the tea.

And everybody was to catch what these little kids were doing.

Whack!

They took them off.

Now in this case, in present time, my guess is that if you were to vote in New York's congressional delegation,

Try to put a vote to that with regard to some regulation.

They could vote 100% for it, but they wouldn't be re-elected, depending on what happens in New York.

But, so I would say this, like our transportation, we put it up, we're working for it.

Lakers side, you couldn't have a better man than us reworking.

You know, he comes from, oh yeah, he's from a private airline, but we wouldn't have had a postal site on us reworking.

A lot of people were reworking.

We need to do is to build a record of public support

Or new labor legislation.

We gotta have some.

I know that.

I said this incidentally last week to another businessman around this table, the representative Ryan.

It's very easy for me to say, I was on the labor committee that wrote Chad Carson.

And I know what we went through, the slave labor act and all that sort of thing.

And they sent in the union money, the PAC money to beat us the next year when I ran for the Senate.

But, I know it was the right thing to do, it was a good piece of legislation.

As a matter of fact, in my respect, it didn't go far enough.

But, I know Griffin came on later, and said it'll be good, but not particularly good.

Now we're at another place.

You're not going to get any Congress to go.

None of you would be talking in such terms.

Well, we're going to bust the unions and the snack unions are here.

They have their place to play.

You've got your place to play.

But, where you have the practices of either unions or management,

making an American industry non-competitive and non-productive and non-profitable, then you've got to change the rules, and that's what's involved here.

And so he says, but I think you can be sure that our position, my position, is strong.

And I said this with the Secretary of Labor straight back in Nigeria.

He knows how we feel.

We're a group that will take the fight, but we do need the support

The support must be generated from the public.

I say if we could break the breakthrough on the transportation first, then we could make some breakthroughs.

I think that the strike in the first wall sequenced you 13,000.

It did more to focus public attention on the local situation.

It had all of the switchmen and the trainmen and the competitors.

Not one man...

It was tough and dangerous

You know, I just did a couple of crashes a couple of nights.

I just think of a couple of crashes a period of time.

That's what I was waiting for.

Well, on the union thing, as I say, it's usually just preaching to the choir.

I don't know what the situation is here.

I have good relations with the personal relations with the leaders.

Never their support.

And it will continue to happen.

You've got to work with them.

They're here.

But I think that this country now is in a position where we've got to face up to some of these obsolete regulatory agencies and regulations that affect an industry like this.

And your point is too much regulation.

The other point is we've got to look at it in terms of what is politically feasible compared to Obama.

Well, again, as long as congressmen and senators are not yet ready to bite the bullet on them, they will be in time.

I think they will be.

That's where it stands.

Yeah, I'd say we're in a better situation.

I think we've got a more critical and immediate situation than any other area of the country.

We own, for instance, the Northwest Nose here in Lackawanna, which is at the present time the only railroad operating in New York, which is not in Magnuson.

And it's...

And I would say to you that I think that unless something is done in the way of legislating, you know, in the next 12 months, you're going to find a real crisis.

And what I want to say to you is that...

I think we have worked up a program which contains some short-run and long-run things.

I think the public transportation has too.

I think the most important thing is to get something started right now, because if the administration doesn't,

I would say that there's a real risk that you come for a crisis which the administration has not prepared for.

What I want to get you to do is to urge the department to come forth with some program.

Maybe it depends on how it's different from ours.

This is an action bill.

Yes.

Get the package out on the table, and the package should include something to take care of the immediate needs of the eastern railroads.

And give Congress the time to look at it.

We suspect that Congress is going to take its time.

It's not going to do anything until there is a real crisis, especially one that's precipitated by Penn Central.

All I have it out there is that they're in an interlake.

Nothing is done until the last minute.

It's the Congress' responsibility, not the administration's responsibility.

We feel, I feel very strongly about that point.

That's what I want to urge you to do.

Because some of the senators say to us, well, what's the administration?

And until that is publicly announced, they have a handy excuse to hang out.

And Mr. President, we're getting a real round of public support and all this national support.

We're going there again and again.

We're trying to get every flooring to get five loaves of them by nine flooring.

So we're going to take the railroad to that representative steer and watch.

And you'll be amazed at some of the five loaves of coppers that we're getting from all sides of the world.

And that is beginning to be a problem.

I think it's a massive problem.

Right now, the time is, as well, it seems to me, it's getting similar to that.

Yes, sir.

I may also go back to this.

Yes, sir.

The Department of Transportation sent over its financing bill to the NID last week, and it is now out for comment by the agencies, and I would expect that a bill on financing would be ready to go up by the end of the month.

Where is the bill for regulation?

Regulation?

You directed that the Cabinet Committee study that problem.

They have submitted a report, and Mr. President, we have an awful problem getting the Congress behind us.

and we probably couldn't get any.

That is currently under consideration, both with our congressional supporters, Mr. President, and with your cabinet committee.

And I would hope that not long after the finance bill, we'll have a deregulation bill up there.

So I, of course, consider going somewhat further than what the Congress would do.

I'm not sure that you can...

I have one question.

In deregulation, please.

I was in on President Kennedy's efforts to do some deregulation on H.R.

6700 six, seven years ago.

It founded on an antitrust problem, changes proposed to be made, and the procedure presumed at which the rate hunt will set the rates.

The shippers want to keep that.

We think we have to keep essentially that system or we can't operate it.

Now, the two of us, Steve Ayls and I, are both antitrust lawyers by practice.

We just got into the railroad field by accident.

We would like very much before the deregulation bill really freezes to come over and talk to the people working on that bill on this problem

Because if the bill ends up making substantial changes, there are changes to be made, and we can live with it, and we can go with it, but if they really change the system, the system in which...

The rates have been measured in the trucking industry and in the railroad industry.

And with the participation of shippers, if that system gets wrecked, the shippers will be against it, the truckers will be against it, and we'll have to be against it.

And we think that can be avoided if we can get in.

This is a technical problem, but a terrible problem.

This is a regulatory bill, and if Steve Adams and I could come over and work with the people who are working on this bill, before it gets so far down the line and it's gotten all the approvals and can't be changed, we think we could save a lot of time and a lot of effort.

We don't have any drug exemptions to make the joint rates and through rates.

We are a national system, and you have to have free interchangeability of rate from

...where the railroads have actually acted contrary to the public's... ...it doesn't have to be any conspiracy still, it will reach down or up.

I can see your point that you want to build something up that's going to mobilize all of your clients.

The one thing that will get everybody agreed to never agree on anything... ...it's hard to get the truckers and the strippers and the railroads to agree on anything.

The one thing they will agree on is to oppose any bill that destroys the Section 5A procedure.

Because the rates situation is so complicated, and the danger of discrimination between shippers is so great, that all of them want to preserve this system under which rates are made through the Bureau method.

In which they participate.

In which they participate, where they have a hearing.

We see no real problem, but we see the need for discussion.

That's all.

The only thing the Congress does is regulate it, doesn't it?

We understand the problem.

Of course, we are also trying to reduce the regulation of bureaucracy, but the current proposal does not do away with the rate bureaus as they relate.

Are there any barriers?

It's where the Department of Justice, other than what I was talking about a moment ago, about this thing, that the Department of Justice is taking a position, or has taken a position, that it could change.

That is,

I don't know the extent of which the Department of Justice has been interested in this specific problem.

I'm not entering into this specific problem.

I'm entering into all, overall, I don't know, mergers and everything else.

There's been every merger here.

I think the best history in all mergers, yes, right?

I think the best history you can get is to look at the Burlington Northern merger, which is the largest railroad merger that's been had.

We were nine years from the time that

Hearings were held until Ms. McLaren made the final argument in the Supreme Court before the Supreme Court finally ruled favorably in the 7th of November.

I want to see all cases in which the antitrust

We're doing that in other fields.

I'd like to know what's happening in this studio.

My knowledge is not to say the railroad industry, but...

I want to take, for example, we're doing this for the airlines, right?

Yes.

We're coming.

We're trying.

And the railroad people, it seems, it is imperative to take, to get some speed among these things, and they're going to allow it.

But more than that, it's probably imperative that they allow them to go.

I mean, I'd rather have one railroad that was profitable than six that were losing money.

Maybe we should first get to the listing, where we are.

I want to know the cases, though.

Let's get down to you, also, for representing this city.

And I trust the people.

We have power.

On this field, where we have the power, we've got to take a hard look at those words.

I'm not sure we can, but let's still find out.

Yes, sir.

Mr. President, one of the interesting things in that connection is that Professor Charrington of the Department of Transportation admitted to me that the Department of Transportation had no objection from a transportation policy standpoint.

However, they must defend that the Department of Justice represents a viewpoint that the Department of Justice reached a different view

So, they expressed the antitrust policy, which went to the opposite position from the Constitutional Law.

And that's where we got stuck.

Now, when Lou Lang won his case in the Supreme Court over the objection to the Department of Justice, and he won it unanimously when he did it,

There is still a vast area of railroad monopolies.

Well, believe me, the only reason they're handling it is that the founders could be interested in it because they don't make much money out of it.

The minute the rates come up to the right level, they will be heading into the business overnight.

You can buy a truck and get into the business.

No certificate required.

And I think that behind all of this attitude against the Department of Justice and so on, it's still the idea that this whole monopoly is still there.

The confusing percentage of traffic handled with exclusive rights to that traffic in our territory, I don't know of a single bit of traffic that can't be taken away from.

So it is a subject of discussion at all levels and all commodities.

Well, as a matter of fact, it's subject to comment and commentation on a different basis than we have to compete with.

I see.

But let's cast the prices out, then the shipper will pay more.

The point is, there's no such thing as a real amount of money.

It might be interesting, Mr. President, to have Mr. Barnett say a little bit about taxes.

There are a lot of things that, of course, can't be done.

We do have a...

Yes, I'd be glad to talk on that subject, Mr. President.

I was over in the Treasury the other day testifying in support of the present suggestion

The laws of flexibility and depreciation were permitted to go 20% above or 20% below.

This would be administrative action, not required?

Yes, it would be.

But I should say at the same time that there's a lot of argument about this.

A lot of theoretical argument.

But this, I understand the Treasury is proposing to do this as an administrative matter, and I want, on behalf of the railroad industry, to give strong and urgent support of that proposal.

The opposition comes principally from...

Professors and I guess the New York Times, the New York Times and its article wrote this thing up under the headline that this is a three and a half billion bucks tax break or bonus for businesses.

Which, of course, is a lot of sheer malarkey.

It isn't any such thing as the deferred income taxes that you need to defer them.

And we have had other tax deferral plans, and one reason why in the Union Pacific we have the liability set up for deferred taxes of $259 million, which we're going to have to pay for the next five years or so.

That tax reduction is being proposed by the Treasury.

The direction of the president, he said, I want to know how much we can do by executive order so we don't have to put it into the trap.

The Treasury is going to go with it, and as soon as the hearings are over, I would expect that that would be...

They haven't had hearings, and that's right.

They haven't had hearings because the opposition was...

I understood it was expected to be a couple of weeks.

Another thing that could be done is a matter of writing off the costs of tunnels, for example, have it require legislation or a venture in the city line.

It could be done administratively, Mr. President.

We have a couple of former ex-ANI trust lawyers here.

I'm a former tax lawyer.

I know that.

And it would be helpful, for example, if we have 160 million of temples that we capitalize in past years against which we have had.

Oh yeah.

We've been working on these for years.

Actively.

It could be done in Australia and Asia.

It would be very helpful.

Certainly.

Did you see that on the ground?

Yeah, that's true.

That's why it's great.

That's why it's great in the telephone.

When you're in the Secretary of the Treasury, you have a very realistic, hard-line front of business.

And...

She's going to do all right over there.

She's going to have to be, I don't know, that's a tax matter, so I'm going to call you to go directly.

I told the boys down below, they're all right too.

I'm going to call you to go directly, what the problem is.

If there is something we can do administratively, we'll take a little time.

But I don't know what the problem is.

I don't know what the history is.

It's new to me, but I don't know.

I mean, I think it's been true that the guy that comes in and out, well, even if it's a woman, certainly it was a lot of stress.

I've never heard of this.

Well, it's major, Mr. President.

It's major.

And, well, there's Tom.

Bill Moore just said, well, it wouldn't have been possible.

It wouldn't.

But this industry is tied together.

We're not just tied together by law and by economics.

We're tied together physically.

And any problem Bill Moore has, we're in this all.

Sure.

We're one of the few industries that has major, gigantic investments in our properties which in no way can we write off against our tax bills to the government.

If we would recover that investment through a deduction, then we would reinvest.

This is our problem.

We've been investing for the past ten years about one and a half billion dollars in private money a year.

We need to invest three and a half billion over the next ten years.

One and a half to three.

We need two billion more.

Do you really want this force to put it back in?

Yes, sir.

How much is your average?

One and a half?

It's one and a half percent.

That's pretty good.

We need about 36 billion in the coming ten years.

We know how to do it.

But we have a new set of safety rules, and we have far too many accidents somewhere else, but we've got to live with these safety rules.

And where are we going to get the money to rebuild the roadbed?

That's not the kind of money you can raise, except on general credit, and a third of our industry has no general credit.

Mr. President, most people don't realize that while a prosperous railroad can raise money by freight cars, up to, if you understand, we can borrow to do that, we on the southern side of the most prosperous railroad really have no access at all to capital funds to rebuild our railroad.

We want to rewrite it.

We've got a number of places where we'd like to move our railroad 20 miles and make a much better line and eliminate grades and restrictions and those sort of things.

That money has got to come out of retained earnings, or out of savings that we can get by a fast amortization, or tax savings, or something else.

We cannot borrow money for that.

All of our right-of-way is mortgaged on the first and the second.

Mortgage is long-term, and because of the return on investment in this business, you can't go out and borrow.

We can't put out defenses in the mortgage, except at exorbitant rates, and maybe not even then.

Let me ask you, did you use the figure here in the last five years?

Is that one and a half billion a year or for five years?

One and a half billion.

Very good.

You could use... You could.

You could.

The truth of the matter is the railroad industry is gradually, physically, the plans carry forward and forward and forward because they're not taking the money.

That's the whole problem.

They're so cheap.

They're so critical.

They should just let it fall in the mouth.

And this is what Jack Bishop is talking about because ultimately a day is going to come when this thing breaks down.

Let me ask a general question.

Is it correct to say that most of you that have seen the practice believe the future of railroads is really just in the briefings?

I would say more so than any other submarine.

It's hard to travel.

It will continue.

A lot of old folks go down.

And you want to ride the train.

That's a special situation.

To have a train run at a distance like four.

The truth rain coming from San Diego through Los Angeles and the Bay Area to Seattle.

I think you're going to see a lot of rain.

There won't be a rain.

There's going to have to be a lot of rain.

We're pretty good about technology in the past because the airplane produces the sea fire.

Do you want to say something, John, before we break up here?

Well, just very quickly, if I may express it.

These men have not overstayed their case, I should say, but we've been sitting with them for over two and a half, almost for a half year now.

And one of the things that I could give you, and he says the same thing, but when I read that, and I keep talking about it when someone tells me who needs the railroads, I got it.

I just want to say that we have done a great deal.

I'm sure that you appreciate the fact that during your visit and between the...

I think that I just want to say that I think Peter Flanagan has been tremendously helpful together with Charlie Baker and my shop.

We're working very hard at producing the build which is just about ready now to

I concur with these men very definitely that the quicker that bill gets up on that hill, the quicker we're going to get the bank back.

We just don't want to get them on their back, we want to get them to the end.

Well, I think they can be done, too, because we have to support them.

That's why, as Peter said, we will be working with them.

They forget very quickly when they have the last strike.

They forget these things.

A lot of it always matters.

They forget that the penitentiary will have problems.

They will have another problem.

I think so.

But we have, with the summary of our railroad legislation, I think we're fine.

These men were fine.

But John, I think that the point is that we've made, if there's any question that we've got, it's probably as much as the time that we've spent in the lobby against Hunter and so forth.

And of course, we've got zero account of what people are asking.

So we're on that line.

And we also don't have these other problems of safety.

Certainly, there's

I think what you've talked about here today

We're aware of all this.

It does the problem.

I mean, when you really come down to it, you're temporizing the problem.

What we have been able to do the day that you said this, what we've talked before, we temporize the problem.

You get the guts of the problem.

But it's the railroad industry.

It doesn't have any future unless the railroad industry finds a way to get capital

Maybe you're going to change the tax rules, maybe you're going to find the problem of government.

It's very difficult.

We have a problem with Lockheed up there.

A lot of good business.

Our problem is where else are you going to get 50,000 jobs?

We want to get out of that business.

The Russians have knocked out the SSC, the Russians and the French, so we don't build the Airbus.

Maybe we'll get Douglas to build it.

That's one last thing.

We won't argue that one.

What I'm simply saying is this.

I'm keenly aware of the fact, we're all keenly aware of the fact, that much as we have tried to do, and this is, we have been accused by the New York Times of this, is a business-oriented administration.

As much as we have tried to do, we still haven't gotten to the guts of your problem.

The guts of your problem are the three that you mentioned.

You're aware of it.

We're going to work on it.

I think it's very important that you set up this outside group and that you're building public support for it.

All Lives Matter, for example, is enormously important.

You know, that's on the democratic side.

Very good relations with all of us.

But we haven't done more.

It isn't because we don't know the problem.

The reason we haven't done more is because we have the enormous political problem in the Congress, you know, who sit around and hear competitors, let's face it.

And others were around saying, oh, what about these credit for our railroads?

People are still arguing about, is it the railroads are, in the days back of 1870, 1880, and 1890, with Aaron and Rodney and fancy car and organs?

Well, frankly, the railroads are pretty damn good then.

We can generate a lot of capital ourselves.

Two things stand in the way.

One is terribly detailed...

Regulatory prerequisites to action.

If we can get the review later, but we cannot be able to take action.

Well, the other problem or opportunity is labor.

Regulation and labor deprive us of opportunity.

And then the other thing is capital.

But the great hope of the future lies in this meeting.

Well, you've got an advocate here, and they're safe.

The Secretary of Transportation can deal with his department.

But you see, when we get over to Justice, when we get over to the regulatory addresses, that's a very, very sensitive area to where we've been planning.

Of course, we want to handle that.

Sometimes we have successes.

I think it would be useful if they had it.

Perhaps, if you could, your lawyer, one or two of you, you commonly could hear directly, I'm on the tax front, I mean, I'm going to say, get it simple, you know what I mean, down there, sure, what the deal is, and you should get Cohen in with him.

I think it's Cohen who's a good, good intelligent man.

Get kind and hear it directly, because if he hears it directly, then he'll break a few bones and get it done, and that's what you need in this field.

The Secretary of Transportation has been very helpful before the Commission on expediting a good many matters.

Oh, and if he, if Secretary Bolton's people keep going down there to the Commission, we might even get some internal reform of that legislation.

Why, the Commission is a...

I'm concerned about that.

Not that the Bank is a brother, but if you want to know, it's just the Commission.

As I said, it's just a question that we're moving so fast these times that already...

The commission set up to handle the airlines are obsolete.

They are.

They need 38.

Sure, 38.

Now look what they were dealing with then.

We compare with that right DC-3, you know, you ever take the DC-3 in California?

60 hours, you stop it, Memphis, I've seen the worst restrooms in the world.

One of the things the bank is doing is following transportation where technology would lead us, and that is getting into other forms of transportation.

I think the key here is to recognize the guts of the problem.

And I think the important thing to do is to know that we still have our industry to pass through.

It's great.

We need the truckers, we need the railroads, we need the airlines, we need them all.

And what I think is that if you folks really think you can make it, that's the real question.

There's some of the ways I think railroads are here to stay anymore.

I had that question in the beginning, Mr. Brown.

I know we've had a wonderful hour and 15 minutes of your time here, and I think that's a pretty generous allocation from our standpoint.

I want to thank you.

On behalf of everyone here, but when you say the railroads are going to make it, I want to remind you that we have two distinguished antitrust lawyers and one distinguished tax lawyer.

Any one of them could step out and make a very good living in his chosen field, but I don't see any of them leaving the jobs at all.

That's right.

Well, we did get a little something here, you know.

We hope some of you kept those nice cars.

See you in all these years.

Anytime you want them, Mr. Preston, and I'm the junior member of this club with two months on this job, but anytime you want a car anywhere, just ask.

I don't know if they want you to do it, but you can ask.

That's right.

We went up to

And I have a lot there, obviously.

Well, anytime you want to go, that's a knowledge call, right?

That's right.

Well, I tell you, I like it.

I like it.

But now, the problem, basically, you know, is with the communications and all that you have to use the airport and all that stuff.

Sure.

But I must say that we used to ride that Pennsylvania many times, too.

Okay.

I remember one time you were playing with Walter Thurio and Sam Seed and Bill Rogers.

He was the deputy director.

They're playing along here.

And as we came up, we saw a train chugging up that thing along, and the train crawled until we could go there, and said, there goes our problem, all in cold.

Still does, still does.

We have one big advantage, we can let you off right at your front door, Sam, for money, because then she turns and goes over to the hippies.

Yeah.

They underkip every Saturday, get off at Oceanside.

As a matter of fact, that would be fun.

It could stop there, you know, they have a legislation.

They used to do it, as you know, Franklin Roosevelt.

They did?

They did.

In that house that I have, Franklin Roosevelt, that house is owned by the Department of Transportation.

And Franklin Roosevelt, a day back...

He rode the southern Pacific down there.

The train stopped.

They took him off in his wheelchair and used a bullet contraption to bring him up.

He stayed overnight in that house.

So, uh, could you still get that?

Well, uh, I don't know.

I don't even know it.

People who have tested various gatherings in this circle, we don't really have an agent at this company.

These are the presidential cufflinks with the seal on them.

And so your wives will all wonder where you were.

So you've got to vote for your wife to vote in with the seal also during that.

And don't get ideas because there's no way that you have to support them.

They don't cost that much.

I know this is a bipartisan group.

You can all wear it.

They don't have my name on it.

I think, frankly, getting that two million bucks

Thank you very much.