FLIMFLAM BACK OF THE CAPE COD SALE
Howell, R. B.
Flimflam Back of the Cape Cod Sale Only Reason Financial Interests Will Sell Canal Enterprise is to Recoup Distressing Losses at Public Expense By R. B. HOWELL (United States Senator from...
...All are endorsed—nearly $2,500,000...
...Result of Ten Years* Lobbying BUT HOW about getting Congress to pay $11,400,000 for a $1,700,000 going concern...
...If public ownership will terminate or recoup distressing losse.s, or result in a highly profitable sale of a decadent utility, then public ownership is embraced with open arms...
...Instead of paying interest and dividends on $13,000,000, after twelve years of operation it will not pay 7 per cent on one-seventh of that amount...
...In view of these conditions the Board concludes that it is not advisable for the United States to acquire the works and franchises of the Cape Cod Canal at this time...
...Why, the bill is already through the House...
...It is a most extraordinary thing that private individuals should assume that they can come to Congress and sell a commercial enterprise for more than, indeed for five times as much as, they could have obtained therefor in the open market...
...As a matter of fact the loss of life about Cape Cod averages low in view of the length of coast line involved, and public ownership of thia canal will not terminate such fatalities...
...The only authority to bind the Government in any way is found in an amendment to the Rivers and Harbors Act of August 8, 1917, offered by the late Senator Weeks of Massachusetts...
...That there is little to this argument is rendered evident by the fact that marine insurance companies, which know no sentiment, have charged the same rate on vessels and cargoes passing through Cape Cod Canal as upon those passing outside and around the Cape...
...But do not be too confident and leave it to Boston and Massachusetts alone...
...However, if public ownership results in jiVerference with private profit—even with unreasonable exactions of a private monopoly—then it is dangerous, inefficient, expensive to the public, subversive of our form of government, and finally, socialism...
...The board has no doubt of the advantage of a sufficient depth...
...Not Mural Obligation P IN ALLY, it us urged that we are morally A bound to take over the Cape Cod Canal ir...
...Calvin Austin, before the House Committee on Interstate and Foreign Commerce: "Mr...
...and it is "dead horse" for all endorsers, to the tune of $250,000 each, if this bill fails...
...Thus the directions of Congress had been carried out and the matter rested...
...Insurance Rate the Same IT IS URGED that this canal should be taken over by the Government, enlarged, and made free to shipping on the ground that it would mean a great saving in vessels and cargoes now lost as a result of rounding Cape Cod...
...In this connection I quote a statement made during a colloquy in the House on August 3, 1917, by Representative Joseph Walsh, from the congressional district in which ("ape Cod Canal is located...
...Of course, in view of the financial condition of the company this could jiot have been accomplished without the guarantee of these notes by certain members of the canal associates...
...Last year, 1925, after allowing for operation and proper maintenance, this canal's net earnings were sufficient to pay a return of but 7 per cent on approximately $1,700,000, 6 per cent on $2,000,000, and 4 1-4 per cent on $2,800,000...
...Small...
...Congress served notice upon all that it would be the final arbiter as to purchase and the price to be paid...
...Although his efforts were unsuccessful, the readers of LA FOLLETTE'S will find much valuable information in the excerpts from his speech protesting against the purchase by our government of this "white elephant.'' The Rivers and Harbors bill is loaded down with more pork barrel projects than any measure which has passed Congress in recent years, and the Cape Cod Canal affords a glaring example of the claims to economy of the Coolidge Administration.— (Editor's Note) R. M. L. Jr...
...Of course, put the Government in business by selling it the canal— a losing enterprise—for $L1,4W,000, and then urge that it be made free to all shipping...
...It may be bought at a fair price as a going concern if Congress insists that it will pay no more...
...This would mean, also, that one Boston steamship corporation would be relieved of paying in excess of $280,000 per annum in canal tolls by also virtually shifting these charges to the American people...
...Would anybody ehse reap any benefit except the steamshjp company...
...In short, the profits of that corporation will be increased $281,000 or more annually...
...If public ownership will terminate or recoup distressing losses, or result in a highly profitable sale of a decadent utility, then public ownership is embraced with open arms...
...Of course, taking over the canal by the Railroad Administration during the war entailed no obligation to purchase any more than in the case of the railroads...
...In view of such inconsistencies, there is but one conclusion—that to such interests public ownership is not a question of principle, but merely one of profit and loss—yes, often a mere matter of unalloyed selfishness...
...Such guarantees were afforded and as a consequence, if Ou> Government does r.ot come forward and help out this bankrupt company by the purchase of the canal, the associates in question eventually will have to pay these notes, and some of the associates have underwritten them to the extent of $250,-000 each...
...If we had free tolls, we would not have to pay $193,000 as we did last year (1921...
...Such improvements would mean an additional expenditure of at least $20,000,000, Then the proposed purchase of this canal, and these improvements, would total about $32,000,-000, making a charge upon the American people for operation, maintenance, and interest, at 4 1-4 per cent, of in the neighborhood of $1,« 600,000 per annum...
...To recapitulate: Some 19 individuals, all with addresses in the New York financial district, and the Rothschilds of Ix>ndon, organized to build the Cape Cod Canal as a purely commercial enterprise...
...For about nine years Cape Cod purchase propaganda has been developing and lobbyists have been at work...
...However, if public ownership results in interference with private profit—even with unreasonable exactions of a private monopoly—then it is dangerous, inefficient, expensive to the public, subversive of our form of government, and, finally, socialism...
...So great a financial interest means tremendous pressure upon congressmen and other public officials...
...Of course, the shipping interests of Boston are backing the Cape Cod Canal associates with all their energies...
...Mr...
...Ten years of lobbying will tell...
...That will make them all, for the time being, so-called radicals, working radicals for public ownership...
...And this particular item...
...They admit they are discouraged and hopeless...
...view of what has transpired since the beginning of Federal control during the war...
...But the proponents of this purchase have in mind the doubling of the width of the canal, and a depth increased to 35 feet, also a tide lock at one end, with a breakwater in Cap* Cod Bay...
...It is merely the Senate now...
...Baker, might first attempt to negotiate a reasonable contract for the purchase of the canal...
...Wr...
...Again, in a report to the Chief Engineer of the Army in 1918 the Board of Engineers fo* rivers and harbors, after stating that the earnings of the canal at that time on a 4 per cent basis corresponded to a total investment of but $2,500,000 and that "this amount, therefore, is apparently an upper limit of any justifiable expenditure by the United States to acquire public ownership for commercial purposes," added: "The work (canal) is apparently affording reasonable accommodations for existing' commercial, military, and naval needs, without imposing undue charges for services rendered...
...However, in 1931...
...Military Argument Fails IT IS further urged as highly desirable that the Government should own and deepen this canal bcause of the advantages that would be afforded as a military and naval asset in case of war...
...However, it was further provided that no contract nor the finding of any court as a result of condemnation proceedings should bind the Government unless finally and specifically approved and ratified by Congress...
...It is commended, urged, insisted upon to legislative authorities, as in this case...
...This argument is thoroughly disposed of by a letter from the General Board of the Navy which was approved by the Joint Board of the Army and Navy when considering the improvements required for the operations of the fleet of defense in 1916...
...It indicates an undermining of the force of our ideals of government, of the transaction of public business...
...There is no obligation...
...It is a case of the unlimited competition of the Atlantic Ocean...
...It is unnecessary for us to put our hands into the National Treasury, take out money and make a gift of millions to the Cape Cod Canal associates in order to acquire this property...
...Hoch...
...It is commended, urged, insisted upon to legislative authorities, as in this case...
...In short...
...This amendment provided that the Secretary of War, then Mr...
...jprr i • HAT the record may be clear I proT| pose to restate briefly some of the I facts in connection with this pro-I J posed canal purchase, gm^gh, j The Cape Cod Canal has been in RSpSsrs I operation twelve years...
...Suppose the tolls were taken off, what would be the significance of that with reference to the price of cotton, either to the man who sold the cotton or the man who bought it...
...I have voted against the bill (the rivers and harbors bill, including Senator Week's amendment of 1917, respecting the Cape Cod Canal), and expect to vote to recommit it, and also expect to vote against the conference report...
...They overestimated its traffic...
...Austin...
...This advocacy of public ownership by financial intere.sts of New York and Massachusetts is typical of the attitude toward public ownership of similar interests throughout the country...
...However, they think they see a ray of light—a chance to...
...Big Deficit Probable IF THE Government should acquire this canal * at a cost of $11,300,000, the annual interest at 4 1-4 per cent would be $484,500...
...Mr...
...After pointing out that to be of value from a military point of view the canal should be fortified at each end, the Board states: "Such large additional expenses are not warranted by the apparent increased military advantages of having the canal avail-able for the passage of ships requiring a length of over 25 feet at mean low water...
...The great Eastern Steamship Lines, Inc., alone will be relieved of tolls amounting, for 1925, to $281,000...
...President Coolidge urges it upon moral grounds...
...Naturally Massachusetts interests are largely in favor of this purchase...
...Condemnation proceedings were undertaken, but the verdict •was set aside by the appellate court...
...In short, the proposed outlay by WHY PUBLIC OWNERSHIP IS NOW FAVORED The propo.--.su ..^ a cost of $11,300,000 by the Government for this canal does not mean a new waterway—an additional public utility, but merely the transfer of such a utility, now- in use, from private to pufolic ownership at a scandalous price...
...Is it because of the initiation of condemnation proceedings...
...If he failed, he might turn the matter over to -the Attorney General for the initiation of condemnation proceedings...
...Assuming the tolls to be identical with those of iy25, the deficit of public operation would be $365,500 per, annum...
...It is apparent, therefore, that the Cape Cod Canal has been a financial failure, the promoters being confronted with a loss in the enterprise of at least $11,000,000...
...It is shocking to think that such is the case...
...The prospects are good...
...The insistence has been from them and not from any department of the Government, an executive department of the Government, that this canal be acquired...
...Public ownership has advantages indeed...
...the Government for this canal does not mean a new waterway—an additional public utility, but merely the transfer of such a utility, now in use, from private to public ownership at a scandalous price...
...And am opposed to this item because it will involve an expenidture of over $50,000,000 before this Government gets any benefit from it...
...And there are especial reasons for pressure from other sources...
...Austin...
...The canal is already in existence, and will be conducted in the future, as in the past, whether or not it is purchased by the Government, as its income is sufficient to pay all costs of operation and maintenance and 6 per cent dividends on about $2,000,000...
...But with the possibility of powerful interests shunting millions of losses from their shoulders to the Government, besides benefitting a great shipping concern hundreds of thousands per annum—that is different...
...Mt...
...It adheres, however, to its previous expressions, to the effect that military necessity is not soifficiently great to warrant the department in urging the expenditure of public funds to that end...
...It should be remembered that the question presented does not involve the desirability of having a Cape Cod Canal...
...This advocacy of public ownership by financial' interests of New York and Massachusetts is typical of the attitude toward public ownership of similar interests throughout the country...
...In view of these facts it is evident that the canal purchase provision in the Rivers and Harbors Bill now pending is, in ef- . feet, a bill for the relief of the Cape Cod Canal promoters and the Eastern Steamship Lines of Boston...
...They underestimated its cost...
...Dumping It On Public DOES anyone believe that if this canal were a profitable enterprise there would be a demand from ,New York and Boston at this time for public ownership thereof...
...Special Interests to Profit WHAT the canal associates mistake for i moral obligation is a moral certainty they have felt of the ultimate success of their loi>by in unloading their losses upon the Government...
...Weeks, then ex-Senator from Massachusetts, became Secretary of War and he started all over again, entering into a contract for the purchase of the canal at a price that Secretary Baker would not entertain...
...Because of these facts it is now proposed that the Government shall purchase this canal at a cost of $11,400,000 and conduct it without charging tolls, as a free waterway This would mean, of curse, recoupment of the canal promoters by shifting about $11,000,000 of their loss to the shoulders of the American people...
...The steamship company would be benefitted...
...Its local significance is indicated by the fact that two-thirds of its tolls are paid by the Eastern Steamship Lines, Inc., of Boston, engaged in traffic between Boston and New York...
...get out...
...Mr...
...As a matter of fact the eanaj's deficit has averaged, for the "12 years of its operation, something over $500,000 per annum...
...Statistics show that over a period of 21 years the average loss of life along this coast from below Boston around Cape Cod to Block Island has averaged about three persons a year...
...That will put Boston and Massachusetts behind the plan, because the great Eastern Steamship Lines, Inc., contributes two-thirds of the tolls, some $281,000 per annum...
...This is evidenced by the following testimony elicited from the President of this company, Mr...
...Walsh...
...and_width to permit the passage of battleships...
...Where, then, is there a moral obligation to relieve these financial interests of their losses...
...Public ownership...
...Lobbyists Are Active XTATURALLY, the canal promoters and this ^ Boston steamship corporation are insistently urging the enactment of legislation for their relief now penidng...
...Negotiations failed...
...When it is recalled that along the water front in Washington the loss of life for the last six years has averaged more than twenty-four persons per annum, it must be realized that thl» argument should be granted but little weight...
...However, it passes more ships in a year than any-other canal in the world...
...In this connection ex-Secretary of War Baker stated in his testimony before the House committee: "The complaint that by brother Whipple makes that his company has been dragged into court * * * it seems to me ought not to l>e addressed to men who know the circumstances and know the facts...
...The New York canal associates must keep everlastingly at it, for, remember, if there is a failure not only will the chance be gone to .recoup $10,000,-000 in losses, but some of them will be rudely awakened to the fact that they will have to pay those notes held by the Guaranty Trust Company of New York...
...The canal is claimed to have cost in excess of $13,000,000...
...In view of such inconsistencies, there is but one conclusion—that to such interests public ownership is not a question of principle, but merely one of profit and loss—yes, often a mere matter of unalloyed selfishness...
...Hoch...
...Never mind consistency, forget the proposal to sell Muscle Shoals—an enterprise of great earning possibilities—so as to get the Government out of business...
...That would mean a reorganization, but the new company of course will not be able to pay interest and dividends on $13,-000,000—not on $11,400,000—but only on about $2,000,000...
...The other creditors, naturally, will take the canal...
...The financial success of this enterprise is impossible notwithstanding the number of ships now using it, due to the fact that if the tolls are increased sufficiently to render the enterprise profitable shipping will use the outside competitive route around Cape Cod which increases any voyage a maximum of but 60 miles over the route through the canal...
...And what is more, the canal company is so badly in debt that its deficit last year, 1925, was more than a half million dollars...
...Thus, it appears that the canal company has borrowed on its notes from the Guaranty Trust Company of New York $?,280,000...
...Consequently, the canal is a financial failure...
...It is 25 l§fllv^%l| feet deep, 13 feet deeper than any other of our intra-eoastal canals, in fact, it is the most commodious canal in the western hemisphere, excepting only the Panama Canal...
...It is urged that its humanitarian aspects are important, as the universal use of the oanaj would mean a saving of many lives because of the danger of navigating around Cape Cod...
...I do not think so in that case...
...Walsh...
...Assuming the normal yearly cost of operation and maintenance at $300,000, as estimated by Colonel Burr, the total annual cost to the Government of owning and operating the canal would be $784,500...
...Flimflam Back of the Cape Cod Sale Only Reason Financial Interests Will Sell Canal Enterprise is to Recoup Distressing Losses at Public Expense By R. B. HOWELL (United States Senator from Nebraska) From Speech on Cape Cod Canal Senator Howell of Nebraska led a valiant fight to eliminate the provision for the purchase of the Cape Cod Canal from the Rivers and Harbors Bill which recently passed the Senate...
Vol. 19 • January 1927 • No. 1
