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1 by a carrier, if, but only if, it finds that such transaction 2 constitutes a proper use of the funds, assets, or credit of the carrier or subsidiary, and will be compatible with the public interest, and that the terms and conditions of the proposed 5 transaction are fair and reasonable, and shall approve such a transaction by a noncarrier subsidiary (other than a transaction in securities issued, assumed, or guaranteed by a carrier), if but only if, it finds that such transaction is com9 patible with the public interest in transportation, will not 10 adversely affect the carrier or carriers in control of such sub11 sidiary, and will not impair the ability of such carrier or carriers to perform their service to the public.

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(b) The provisions of paragraphs (3) and (4) of section 20a shall apply to applications under this para15 graph (2).

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(3) (a) The provisions of paragraphs (1) and (2) of this section shall not apply to any acquisition which has been authorized by the Commission under any other provisions of 19 this Act, and shall not prohibit a carrier or subsidiary from 20 investing its funds in obligations of, or guranteed by, the 21 United States of America, or such other obligations as are 22 permissible for investment by savings banks and trustees under the laws of any State in which the carrier is incorporated or in which the principal operating or executive office of the carrier is located.

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(b) The provisions of paragraphs (1) and (2) of this section shall not prohibit any carrier or wholly owned sub3 sidiary of such carrier from using its funds or assets for the 4 payment, retirement, or purchase of (i) the lawful obligations 5 issued, assumed, or guaranteed by, or which are a lien upon 6 properties of, such carrier existing on the effective date of this section or thereafter lawfully incurred, or (ii) securities issued or guaranteed, or obligations assumed by, or which are a lien upon properties of, another carrier operated by such carrier, or in respect of which securities such carrier is 11 lawfully obligated or liable as lessor, lessee, guarantor, en12

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dorser, surety, or otherwise, or (iii) securities issued 13 by or which are a lien upon properties of a company 14 operated or owned or used by such carrier and one 15 more other carriers as a joint facility, or (iv) securi16 ties issued or guaranteed, or obligations assumed, by another 17 subsidiary of such carrier if, at the time of such acquisition, 18 95 per centum or more of its outstanding voting securities 19 are owned by such carrier or by a wholly owned subsidiary 20 of such carrier, or by both. As used in this paragraph, the term "wholly owned subsidiary" means a subsidiary all of whose out22 standing voting securities (exclusive of directors' qualifying 23 shares) are owned by a carrier or by a company which is a 24 wholly owned subsidiary by virtue of this sentence, or by both. Nor shall such provisions prohibit any subsidiary (whether or

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not a carrier) from using its own funds or assets (but not 2 funds, assets, or credit furnished or supplied to such sub3 sidiary, directly or indirectly, by any means or device whatsoever, by a carrier which controls such subsidiary) for the 5 payment, retirement, or purchase of its lawful obligations 6 existing on the effective date of this section or thereafter lawfully incurred.

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(c) The provisions of paragraphs (1) and (2) of this 9 section shall not prohibit any carrier or subsidiary from 10 exercising conversion privileges or subscription rights with 11 respect to securities lawfully acquired, nor from acquiring 12 securities in exchange for lawfully acquired securities in 13 merger, consolidation, or reorganization proceedings, nor 14 from receiving obligations issued for the purpose of extend15 ing, renewing, or refunding obligations held at the effective date of this section or lawfully acquired thereafter, nor from 17 acquiring obligations secured by purchase money liens upon 18 the sale of real property, nor from receiving securities in 19 whole or partial satisfaction of lawful claims in bankruptcy or insolvency proceedings, nor shall such provisions prohibit any carrier, or subsidiary which is engaged (wholly or par22 tially) in a commercial or industrial or other nontranspor23 tation enterprise, from accepting notes (other than notes 24 issued by a carrier or secured by securities issued, assumed, or guaranteed by a carrier) in the ordinary course of busi

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1 ness of such enterprise for property sold or services (other than 2 transportation services) rendered on credit.

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(4) Within ten days after the incurring or entering into 4 of any obligation, contract, or agreement which is condi5 tional upon approval by the Commission under paragraph 6 (2) of this section, and within such period as the Commis7 sion may prescribe after the expenditure of any funds, the 8 transfer of anything of value, the making or guaranteeing of 9 any loan, the acquisition of any securities, or the incur10 ring or entering into of any obligation, agreement, or con11 tract to acquire any securities, by any carrier or subsidiary, 12 as authorized by an order of the Commission under para13 graph (2) of this section, such carrier or subsidiary shall 14 file with the Commission a certificate of notification to that 15 effect setting forth therein all such facts as may be required 16 by the Commission.

17 (5) Any director, officer, attorney, employee, or agent 18 of a carrier or subsidiary who knowingly assents to or par19 ticipates in any expenditure of funds, transfer of any thing 20 of value, making or guaranteeing of any loan, acquisition 21 of securities, or the incurring or entering into of any obliga22 tion, contract, or agreement to acquire securities, contrary to the provisions of this section, shall be subject to the penalties 24 provided in paragraph (11) of section 20a.

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Senator TRUMAN. It is my understanding that Judge Fletcher and the committee of railroad representatives who, as I have said, are the only people who have indicated any desire to appear in connection with this bill, do not want to be heard at any length on S. 2903. They have informed this committee that the bill will not burden or hamper the regular conduct of their business, and that they have no further suggestions with respect to its form.

Do any of the gentlemen present wish to make any statement about the bill S. 2903?

STATEMENT OF HENRY W. CLARK, GENERAL COUNSEL, UNION PACIFIC RAILROAD SYSTEM

Mr. CLARK. I want to say, Mr. Chairman, merely that I cannot quite acquiesce in the last part of the chairman's statement. From my point of view it is not quite correct to say that the bill as now redrafted will not burden or hamper the regular conduct of the business of the carriers. Certainly that is not correct from the standpoint of the Union Pacific.

I have prepared a short statement, to make my position as representing the Union Pacific and the Union Pacific's position clear. It consists of 18 or 20 lines, and I offer it to go into the record just to make it clear that the Union Pacific is not in agreement that there was any need of this additional regulation. We do not want to be put into the position of agreeing to, consenting to, or acquiescing in this further regulation. I do agree that as the result of our conferences with Commissioner Mahaffie and Mr. Taylor the bill has been put in the least burdensome form that I think such regulation can be put into. I do not ask for any hearing.

May this statement be included in the minutes as part of my oral remarks?

Senator TRUMAN. Yes.

Mr. CLARK (reading):

Referring to bill originally introduced and referred to the subcommittee as S. 2610:

The undersigned, as general counsel of Union Pacific Railroad Co., has participated in conferences and in suggestions made to Commissioner Mahaffie and to Mr. Telford Taylor as counsel for the Subcommittee, to the end that the provisions of the bill be made to propose less burdensome regulation of the railroads and their noncarrier subsidiaries than that originally proposed. The undersigned States for the record that by such participation and suggestions and by failing to appear before the subcommittee in oral opposition to the bill as redrafted, he does not for Union Pacific Railroad Co. assent to or acquiesce in the passage of the bill in its present or any other form so far as it proposes to amend section 20a of the Interstate Commerce Act and to add to that act new section 20b.

On the contrary, the Union Pacific Railroad Co. protests the further regulation of railroads embodied in new section 20b of the bill and protests the extension of governmental regulation to their noncarrier subsidiaries as embodied in both the proposed amendment of section 20a and in said new section 20b.

Senator TRUMAN (chairman of the subcommittee). Are there any further statements?]

STATEMENT OF E. E. McINNIS, GENERAL COUNSEL, ATCHISON, TOPEKA & SANTA FE RAILWAY CO.

Mr. McINNIS. My name is E. E. McInnis. I am general counsel of the Atchison, Topeka & Santa Fe Railway Co. and its associated carrier companies.

The statement which the chairman of the subcommittee has made is a statement in which we concur. I take it that the expresssion with reference to "burden" has the meaning which we attribute to it. All regulation is to some extent burdensome; but we are accustomed to the burdens of orderly regulation and to the burdens which are incident to public control of the affairs of public utilities. This regulation is not a regulation which we invite or which we recommend.

In its present form as now proposed the features which appeared in the measure in its original form as S. 2610 in very large measure have been eliminated; and it is the view of the Santa Fe and its system carrier companies that this is regulation under which we can live. It may have some burdens, but they will not be unbearable burdens, and it will not unduly burden us in the conduct of our affairs in orderly fashion.

Senator TRUMAN (chairman of the subcommittee). Are there any further statements?

STATEMENT OF HENRY WOLF BIKLE, GENERAL COUNSEL, PENNSYLVANIA RAILROAD CO., PHILADELPHIA, PA.

Mr. BIKLE. I concur in what Mr. McInnis has said, and I should like to add only this, that I think the consideration which the committee showed us in permitting the discussions that we have had has proved to be a very advantageous way of dealing with this character of legislation. I realize that the Senators, with all their varied and multifarious duties, could not have given us the time to have sat down and dealt with these technical and intricate problems, in the way in which Mr. Commissioner Mahaffie and Mr. Taylor have been able to do; Mr. Mahaffie having the advantage of his long experience on the Commission and Mr. Taylor having the advantage of his experience on the Senate Investigating Committee's legal staff.

I believe, therefore, that the product we have arrived at, at least from the railroad point of view, is a product that represents a real workable basis for the thing that it undertakes to deal with.

I also do not believe that any of us have lost sight of what I consider as the objective that the Senator had in mind when the original bill was introduced.

STATEMENT OF C. J. BEAKES, GENERAL COUNSEL, NEW YORK CENTRAL RAILROAD CO.

Mr. BEAKES. Mr. Chairman and gentlemen of the committee, I only wish to concur in the statements made by Mr. McInnis and Mr. Bikle, so far as the New York Central Railroad Co. is concerned. Senator TRUMAN. Are there any other statements, gentlemen?

STATEMENT OF R. V. FLETCHER, GENERAL COUNSEL, ASSOCIATION OF AMERICAN RAILROADS, WASHINGTON, D. C.

Mr. FLETCHER. Mr. Chairman, I do not think I need to add anything to what has been said by these gentlemen. I unhesitatingly join in the expression of opinion that S. 2903, so far as my knowledge is concerned, is one that can be administered without undue burden. I was only anxious to have one thing clearly understood-and I think that Mr. Clark's observation has cleared that up-and that is that this represents the views of these gentlemen on the committee and my own individual views. I have done this, in accordance with my custom, that whenever any draft came to my attention or whenever any memorandum came to my attention that seemed to be of interest to the railroads generally, I have had it sent out by my office as promptly as possible, with only a few hours delay, with the suggestion to the member roads that these are the things under consideration and that if they desired to be heard they should indicate their purpose so to do. I have heard nothing, beyond what has been stated here, of the desire of any particular railroad to submit any observations or suggestions about this bill. I doubt that it can be said that the bill has been critically examined by all of the railroads in the country; and the record will have to stand upon the statements made by the committee of counsel which has made observations on the subject to this committee.

Senator TOBEY. I should like to make one comment with reference to Mr. McInnis' remarks. He said that he believed that, notwithstanding this legislation, the railroads could live or could continue to live. I would like to say to the gentleman and to the others assembled here that I should hate to have it appear in the record by inference, at least, that the attitude of this committee or of the Congress in general is merely to let the railroads of this country live. We have a desire that transcends that. We want to see them prosperous. And while there may be some doubt in the minds of you and your colleagues, there is a realization of the need of having prosperous railroads, having in mind the public interest; and what we do here is in no sense with the intent of making regulation burdensome, but it is to be construed as being for the common good. And you are a large part of the welfare of America.

Mr. McINNIS. I think, perhaps, Senator, that the language which I used was subject to the implication which was drawn, but it was certainly not so intended. The bill in its original form was in such shape that very important enterprises of my company could not have lived under it. The bill as now drawn has been changed to what we may speak of as a livable bill. And in that we cast no reflection on the committee or on the authors of the bill. It is a bill that will let us go forward with the orderly transaction of our business, subject to the regulation that is contained in the bill; and that regulation, as I have stated, is not regulation that is really unreasonable or that will cast an undue burden upon us.

My remarks really were addressed to the fact that the word "burden" was used as an unqualified word in the statement of the chairman. I think the chairman meant "undue burden" when he made the statement that there was no burden. All regulation in