: M: ITHI BACH. If $30,000,000 for the operation of 31 trade routes jrts of the world is excessive, what, as the result of the investivo: carried on, would you deem to be a reasonable figure? Kow: Of course, it has been my personal view, since you t. st, that sufficient aid should be given to insure the operation over the essential trade routes, but they should not be perto Ilike excessive profits. CHAIRMAN. We will agree with you as to that. Chowiny. And that such aid as is necessary from time to be given to such concerns. CHAILMAN We would like to get the figure, if possible. SWICH Mr Crowley, I would like to ask you a few questions. ave not had a chance to read this report, but I find in the message e i res, ¡ent to Congress the President says that the Government aving annually about $30,000,000 for the carrying of the which wond cost, under normal ocean rates, only $3,000,000, t. at the $27,000,04) is a subsidy and nothing but a subsidy. arer,ty, the Government is paying today $27,000,000. and the purpose of this meeting is to find out some scien- and honorable method which could be used to subsidize Lent marine, to develop the merchant marine, not only to foreign commerce of our country, but to be auxiliary boats war if the occasion should come along. 15 thanking over the problem of a subsidy, because we have vest form.ia before us of how we can arrive at an adequate subla protest the service and interests that are operating our mercrine, we have to consider the following factors: t, in order to have a successful merchant marine, we have to ritte cost of construction of an American ship with American a. as compared with foreign ships that are constructed in foreign ith foreign labor. LOWLEY. Correct. OVICH So that when we compare the difference in cost of on of a foreign ship and an American ship, the difference Alerian standard of living should be taken into consideration rst fundamental concept we should consider, therefore, is -rentia in cost of construction. And since it has been stated ted meetings of the Merchant Marine Committee that the -1 ip is 20 years, that difference between the American cost of „tion and the foregin cost should be amortized and we should American merchant marine on the basis of one-twentieth of -.ly every year, so far as construction cost is concerned, to on a parity, on an equality. in order to develop an American merchant marine that is o be operated by American seamen, 100-percent American the difference in cost of maintaining the merchant marine * -prcent American crews should be taken into consideration; the isbor of seamen in foreign countries is cheap and the an standard of living is a local differential; so that the second at would have to be considered in a subsidy in the principle the difference between the cost of operating a ship with eres crew and a foreign crew. d we must take into consideration that over 75 percent of our today are traveling in foreign bottoms and 90 percent of our American public are traveling on foreign ships, so that we must take into consideration the third factor-the element of transportation, so far as cargo is concerned, and see how we can equalize the difference between the freight on foreign bottoms and our own, and including our passenger traffic. Fourth, we have to develop certain routes that were never before operated and we have to take into consideration the competitive feature that the American operator has got to contend with of companies subsidized by foreign countries, and trade facilities and tariffs and other things that are being given as subventions to those foreign groups, and our American merchant marine has to contend against that. So it is my theory if we take into cnosideration the four factors, first, the difference in cost of construction; second, the difference in cost of labor; third, the difference in cost of freight and passenger traffic; and fourth, the cost of developing new routes in competition-if we take these four factors together and amortize them over a period of 20 years, we ought to give that difference to the American merchant marine operator so that he is placed upon a parity with his foreign competitor, and that should be a subsidy which we should be glad to pay, because we are doing away in the meantime with the profits which are going to the foreign countries today. And if a scientific formula along that line could be elaborated and developed we could develop an American merchant marine that would be second to none, because the English tonnage, as I understand, is about 20,000,000 tons today and we have about 14,000,000; Japan has about 4,000,000; Germany about 4,000,000; France about three and three-quarters millions and if we went ahead in a scientific way, as the President of the United States rightfully states, and called a subsidy by its true name and developed it by giving to our American merchant marine the differences and differentials I have enumerated, we will be in a position to develop the merchant marine through a subsidy and to make us the outstanding nation of the world as we were from 1840 up to the year 1860. Now, if you had a formula worked out along the line I have enumerated, you might arrive at a scientific basis of calculation? Mr. CROWLEY. It might be; but I think you have omitted one important factor; in fact, the most important factor. Mr. SIROVICH. What is that? Mr. CROWLEY. These companies have very little of their own money in the business. If this Government is to give a subsidy to shipping companies, they ought to be required to finance a little of it themselves. Mr. SIROVICH. Well, we are doing that. The CHAIRMAN. Where are they going to get that money? Mr. CROWLEY. I do not know where they are going to get the money. The CHAIRMAN. Is not that a very important consideration, when you are dealing with a thing that has never proven profitable in the United States? Mr. O'LEARY. I thought you just amended the R. F. C. law so that they could get some money. The CHAIRMAN. That is borrowed from the United States. CHATMAN That is right ( way They have been paid more than $119,000,000 mail pay; the Shipping Board has loaned them a great more than 100 million. They bought ships upon - paid either 16 or 18 million dollars and their consoli sistce sheets. I am speaking about them all collectively; me that are in better shape than others show that they the money or few assets above what they owe that is not inse old ships OPAT MAN Taking into consideration the balance that would stopowners for the construction of ships, secured on the voy not think the United States has a better security in those than it has for the larger sums that have been loaned on ghout the country on railroads? owray. Well I, of course, am not qualified to pass on that. HALF MAN. And whatever the amount that may be due the bent, is not the security ample in the ships themselves? CROWLEY. Well, the book value of these ships, according to for; truder of the Shipping Board, is about $186,000,000. The owe $112,000,000, leaving their net worth with the ships at these figures of about $80,000,000 above their indebtedfr as mortgages on the ships are concerned. CHAIRMAN. And is not there ample security for that $80, KoW1F1 I could not state whether there is, or not. The ent has 139 times as much invested in the business as the do and they have a lien of about 60 percent of the maximum ad vessels, on each one of them that has been sold. CHAIRMAN. Have not they a sufficient lien on every ship that Teeth woud to protect the Government for the indebtedness? CROWLEY. They have a lien for the amount. As to what the worth, we have only got these figures here. SILOVICH. On that point, Mr. Crowley, it was brought out ony 5 years ago before our committee, when Mr. Chapman ared before our committee and others who were operating the an Lanes, or the United States Lines in those days, that they toght 29 ships from the Government including the Leriathan **0,000, that they had put up $4,000,000, or 25 percent, and Evernment took back a first mortgage of 75 percent, or $12, that they thereupon went into the market and sold those stock to the public for $36,000,000 and, in spite of all that, in or 1931, the Government had to take them back because they .: sble to go ahead. And when a deal was made between the Total Mercantile Marine, the Roosevelt Line and the Dollarwn Lane and they took them over, this $12,000,000 mortgage ven away for $4,000,000 and the company only had to put up and the Government took back a $3,000,000 mortgage, ey were not able to operate; because, as Congressman Lehlbach tout, it was proven that the Government cost in operating ips carefully, intelligently and diligently would equal six times el as to operate the ships by a private organization, and the rent lost, if I am not mistaken and Mr. Lehlback can correct I am in error about $16,000,000 in operating ships in those days. if the Government lost $16,000,000 in operating ships, how & more adequate would it be for us to give them back to private owners and subsidize them in a rightful and honorable way and let them run them and develop our merchant marine for the carrying of all of our exportable products to the countries of the world? Mr. IGOE. I do not understand this witness contends against that theory; he is for a subsidy if it is honestly and efficiently handled, as I understand the testimony. Mr. CROWLEY. We have never thought of a subsidy on that basis. Mr. SIROVICH. Are you opposed to private ownership based upon a subsidy from the Government? Mr. CROWLEY. Why, personally, I think not; I think, of course, it ought to be in private hands, but it ought to be honestly administered under close supervision of the Government. Mr. SIROVICH. We all agree with that. Mr. CROWLEY. They ought to be required to put in adequate capital of their own and there ought to be some provision made to replace the ships. They are all, or nearly all of them, obsolete and may as well be sunk so far as meeting modern trade conditions in competition are concerned. The CHAIRMAN. Where are they going to get the money, I will again ask you, to do it? Mr. LEHLBACH. Oh, there have been ships built in the last 6 years, or even before that, replacing, in the more important trade routes, these obsolescent ships through the Construction Loan fund and, as you say, $107,000,000 has been loaned for that purpose. Mr. CROWLEY. We have today 29 ships which are now in the ocean mail service that have been built under that provision; in the past 10 years, I think we have had 29 ships built under that fund, and the rest of them are those old wartime-built vessels. Mr. LEHLBACH. Now do you know any maritime nation of any pretentions at all that does not loan government money for the construction of ships? Mr. CROWLEY. I am not familiar with that, but I am sure it is so. But, at the same time, they get the ships; this country does not. In reply to the letter of the chairman, we sent some tables up here that were prepared by Mr. Peacock of the Shipping Board, showing the development of the merchant marines of other countries. This country ranks lower in cargo boats than any other nation on earth with the exception of Spain-I mean any important country. Mr. LEHLBACH. How much did the Lusitania and Mauritania cost the Cunard Line? Mr. CROWLEY. I have not the slightest idea. Mr. LEHLBACH. They did not cost them a pound; the Government put up the money and they paid it back out of earnings which, in large part, were from mail subsidies. The mail contracts and construction Joan funds are the basis of the British maritime governmental policy; the same with Japan and the same with France. Do you know of any maritime nation that pays a direct subsidy? Mr. CROWLEY. No. Frankly, I am not familiar with that. Mr. LEHLBACH. Do you know how a direct subsidy could be measured? Would you take each case individually, or would you make general rules for application of the subsidy-the difference in cost of American operation and foreign cost of operaton? Is it not a fact that the cost of operation of each line varies and some, if you a neral rule, would get too much; and to others it would v good” CROWLEY That is my personal opinion, Mr. Lehlbach. M. LE GRACH Do you think they ought to be treated individu WLEY. That is my personal view about it Laalbach Do not you see the wide field for favoritism and at would be open, if you fixed a subsidy in each particular MY CROW121. Well that is true; but if a subsidy is administered "wxly or some subdivision of some Department and their is taken only after due notice to the public and at open public and there is not any backdoor trading, it might be possible ..ister a subsidy directly in that way and not lay down a hard Some lines need a subsidy, where others can get along .t it That is shown very clearly in the testimony before our Some of them must have some help to get along; can do fairly well even without it. This is just my personal i am not an expert, but this is my own personal impression that it can be done. ROVICH Suppose you and a group of friends organized a to operate a ship and wanted to build a ship that cost , what would you consider adequate capital to put in for action of that ship? V- Ca win. I could not say about that. The Shipping Board od give you some idea about that. VICH They have been over it and they have made it so at orter to help the shipping interests the Government loans them ent on a first mortgage for the construction of their ship, and ive a period of 20 years in which to amortize it. M: GrowIFY These companies, Doctor (Mr. Sirovich), have very ets, net assets, above the ships. KOVICH. But no business has any asset at the present time in meat, temujol, the railroads are broke; the banks are broke, and surely ten hant-marine ships which are supposed to carry freight, exportanaprad jets, have none and are losing day in and day out, just the as any other industry. CROWLEY. Well the total net assets of these companies, over and alive their ships, is equal only to about 4 months' mail pay, or 00,000, the whole bunch together. I except from that conse the United Fruit Co. and Grace; they are interested in other besides shipping. V- SKOVICH. That is because the American Merchant Marine en demoralizing 1. HLBACH. Oh, no. Mr SIROVICH. It has been demoralized. Ninety percent of the .... "z puble travel on foreign ships. U KOWLEY. I think our reports that have been made to the presedent show there have been other causes, too. They have had pretty heavy expenses salaries, bonuses, and dividends. Mr LEHLBACH. Was not Grace an exporting company before it into the shipping game? CROWLEY. That is so. |