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value as mail routes. They were intended, of course, to establish an American merchant marine, and that the subsidies would be used to build a merchant marine as well as to provide, incidentally, an adequate postal service, and we have concerned ourselves principally there with the mail and the proper manner of handling it, and that is all we are concerned with now at this time, that is, so far as the Department itself is concerned. We feel that some other department, some other agency of the Government, that is better equipped to administer the subsidy should administer it, providing, of course, for the carrying of our mails by those lines that obtain the subsidies.

The CHAIRMAN. In the report of the Post Office Department, the statement is made there were 220 vessels sold to operators by the Shipping Board that are being used in mail-contract services, the original cost of which was $516,174,249.48. Those were war-time prices, were they not, Mr. Crowley?

Mr. CROWLEY. Yes, sir; that was the original cost of the vessels, as I understand it.

The CHAIRMAN. Do not you think it would have been better, for the general information of the public, in a report of this kind going out, if it should have been made known those were war-time prices and that the ships were not being sacrificed in making a sale of those ships as they were?

Mr. CROWLEY. Well these figures state the facts.

The CHAIRMAN. But the ships were built at a time when everything was high and were really built for the purpose of carrying on the war; were they not?

Mr. CROWLEY. That is correct.

The CHAIRMAN. So that would not be a measure at all of the value of the ships in making a sale and it is rather unfair—I am not saying of the Post Office Department, but I mean as a fair proposition—to consider the value of these ships as the war-time prices; is not that true?

Mr. CROWLEY. I do not know what you mean by “unfair." We have stated the facts as they appear from the records.

The CHAIRMAN. I am not criticizing the Post Office Department for stating the facts

Mr. CROWLEY. These ships cost some five-hundred-and-odd million dollars. They were kept in excellent condition and repair, according to the testimony by the Shipping Board; they were depreciated to approximately $64,000,000 on the books and they were then sold to ship concerns at about $41,000,000 and, of course, as I understand it the reason for that—there were several reasons, possibly, for the reduction in price, but the main reason was to establish our commerce and, of course, as you say, the vessels had been built at a big price and they were not worth that much; they were not worth the original cost and were depreciated almost 90 percent in order to place them in the hands of private operators.

The CHAIRMAN. You speak of that depreciation and you say they were appraised in 1923 and subsequently depreciated. Do you know what was the appraised value that was made in 1923?

Mr. CROWLEY. I think that is the figure of $64,972,000.

The CHAIRMAN. There was no possibility of selling the ships at that figure, was there?

Mr. CROWLEY. I do not know.

The CHAIRMAN. As a matter of fact, was there a possibility of selling ships at any figure, except a few of them, until the ocean-mail

contract was provided for, which was an inducement to purchasers to buy these ships?

Mr. CROWLEY. Well, I do not know about that. There were a large number of vessels that had been sold prior to the 1928 act and there were many well established trade routes and each ship-sales agreement contained a provision whereby the purchaser agreed to operate the vessel over an established trade route for a period of 5 years, and in some cases more, and provided a bond guaranteeing the performance of that service. Just what would have been done if that had not been done, I do not know.

The CHAIRMAN. Regardless of what the value of the ships may have been shown on the Shipping Board's books, the real value of the ships would only be the price at which they could be sold and, if there was nobody to purchase them at the price at which they were carried, they were not worth that much, were they? Mr. CROWLEY. I suppose not. The CHAIRMAN. And there were no purchasers. The reason I asked that question is because I cannot understand why $23,561,229.90 should be carried as a Government aid given to contractors when there was no available market for ships.

Mr. CROWLEY. I think the record shows there was an available market for ships. The CHAIRMAN. Where was it?

Mr. CROWLEY. Among the very operators who bought these ships, and that they were given these liberal terms in the purchase of the ships in order to establish those routes in commerce. I think that is shown by the records of this committee.

The CHAIRMAN. I do not know whether you examined our hearings in 1928, at the time this ocean-mail contract was provided, but the evidence we developed at that time was to the effect that they could make no sales of ships and that these routes would not buy the ships at the then figures without some provision for Government aid; and we were already paying out anywhere from thirty to, I think, forty and fifty million dollars for the maintenance of these routes that could not be sold; and the Shipping Board, as I understand, was always ready and willing to sell these ships if they could find a purchaser, but they could not find a purchaser.

Mr. Crowley. Really, I do not know much about the early history of this.

The Chairman. I understand that; and I am not trying to embarrass you on that, but I am just trying to bring out the facts.

Mr. CROWLEY. I'would have to confine myself to the more recent developments.

The Chairman. But those are important facts to be considered by this committee in working out a question of the merchant marine.

Mr. MANSFIELD. I have heard it said that these ships, many of them, were of a type that was more or less obsolete. Can you give us any information in regard to that?

Mr. Crowley. Judge Mansfield, the best evidence we have about that is that these ships have a normal life of about 20 years. They were built in 1920 and 1921, for the most part, and they are slow vessels; that is, the vessels that were sold by the Shipping Board. They are mostly 10-knot ships; there are very few that will

make more than 10 knots.

Since these ships were built, other nations of the world have continued too build much faster vessels and that is what we mean by "obsolete"; that, as compared to these other ships that they must sail in competition with, they are obsolete and are becoming more useless every trip.

Mr. MANSFIELD. A slow ship cannot compete very successfully with a fast ship, can it?

Mr. CROWLEY. That is what the evidence shows; the operators make that statement.

The ChairMAN. I am perfectly willing to agree with you on that and I do not know whether you are able to answer this question, but how in the name of Heaven will the American people ever build up an American merchant marine when every policy they advocate is being shot at all the time?

Mr. CROWLEY. Well, the American people have spent several hundred million dollars since this 1928 act was passed and I think the Postmaster General in his report shows that very little of that has gone into the upbuilding of the merchant marine. The Post Office Department is not shooting at the merchant marine.

The CHAIRMAN. I do not say that you are.

Mr. CROWLEY. We have only attempted to get such facts as were necessary to comply with the President's order.

Mr. LEHLBACH. May I ask a question, Mr. Chairman.

The CHAIRMAN. Yes—and let me say, Mr. Crowley, these questions are not asked in criticism, but we are just trying to build up the facts.

Mr. LEHLBACH. We are just trying to get the facts in the record. You spoke of the sales of ships before 1928. Do you refer to all sales or more particularly to sales of ships outright, or to the sales of ships in connection with their serving a particular specified trade route?

Mr. CROWLEY. The ships I referred to were the ships that were certified to operate over the so-called mail routes. We have not attempted to investigate all the sales of ships.

Mr. LEHLBACH. How many such services were operated either by the Government itself or by the purchasers of such service routes and the ships operated on them, before 1928?

Mr. CROWLEY. You would have to get that information from the Shipping Board.

Mr. LEHLBACH. Well, they started out with almost 100 and got down, I think, at the time of the passage of the act, to something like 35. Now, how many of those 35 trade routes, which were certified to be essential for the operation of an adequate merchant marine under the American flag, were sold previous to the ocean-mail contracts to private operators?

Mr. CROWLEY. I could not give you that information offhand.

Mr. LEHLBACH. Can you name any other except the United States Lines, and the American Export Line?

Mr. Crowley. Well, it would be more or less guesswork without having an opportunity to look up the records on it.

Mr. LEHLBACH. You know, of course, the United States Lines went broke and the Government had to take the ships back?

Mr. CROWLEY. Well that is quite a story They did get involved in financial difficulties.

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Mr. LEHLBACH. Now, have you any idea what it cost the Government itself in operating these trade routes which were finally boiled down to 31, as compared to what it cost the Government to sell these ships and to pay mail contracts and grant construction loan funds for replacement? Have you any idea of that in comparison to the cost to the Government to maintain the same merchant marine services?

Mr. CROWLEY. No. I am sure you can get that from the Commerce Department, however.

Mr. LEHLBACH. Would you be surprised to know that it cost six times as much for the American Government to operate its own merchant marine, as it has to pay all of these benefits and have private operators do it?

Mr. Crowley. No, sir; I would not be surprised at anything much that would happen in this shipping business.

Mr. Culkin. I understood you to say, Mr. Witness, that $200,-
000,000 had been appropriated for the purpose of rehabilitating the
merchant marine and that it had not been successfully or properly
applied. Is that your statement?
Mr. CROWLEY. No; I said the Government had provided some-
thing more than that much money to aid in the establishment of the
merchant marine, I believe.

Mr. LEHLBACH. Since 1928?
Mr. CROWLEY, Since 1928.
Mr. LEHLBACH. Can you break that down?
Mr. CROWLEY. That would include Shipping Board loans and

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mail pay,

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Mr. Culkin. And your claim is that it has not been used efficiently or properly; is that your claim? Mr. CROWLEY. I do not think the records show it has. Mr. LEHLBACH. Now, won't you please break that down? How much did you say-$200,000,000?

Mr. Crowley, Well the Shipping Board has loaned for construction and reconditioning $107,593,957.32; the mail pay up to June 30, 1934, has been $119,257,756.63.

Mr. LEHLBACH. Over what period does that mail pay of $119,000,000-plus run?

Mr. Crowley. That is the mail pay that has been paid since the
contracts were awarded under the 1928 act.
Mr. LEHLBACH. Sometime during the year 1928?
Mr. CROWLEY. Yes, sir.
Mr. LEHLBACH. And down to
Mr. CROWLEY, June 30, 1934.

Mr. Culkin. Now, your general proposition is that that has not
resulted in a proper adequate merchant marine by reason of misap-
plication; is that true?
Mr. CROWLEY. Yes, sir.
Mr. Culkin. Now what is your suggestion as to the procedure?
Mr. CROWLEY. As I have stated to the chairman-
Mr. Culkin. I was late and perhaps you have already gone over
this matter.

Mr. Crowley. The Post Office Department is not equipped to administer a subsidy. I think the President's message makes it clear as to his views on it, and it is the views of the Post Office Department that this subsidy, if it is to be paid, should be administered by

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some other agency of the Government than the Post Office Department; providing of course, that on such ships as the Government desires to carry mail they should be afforded proper facilities for that without cost. But as to the details of what the subsidy should be, how it is to be administered, what agency is to be set up, or where it is to be put, I think that is a matter for experts in shipping and in commerce.

Mr. Culkin. But you do believe, as a general proposition, that an American merchant marine must be subsidized in some form in order to stay on the seas?

Mr. CROWLEY. I think the evidence shows that.
Mr. CULKIN. There is no question about that?
Mr. CROWLEY. I do not think there is any question about it.

Mr. LEHLBACH. I asked you about the cost, the break-down, and you said it showed an item of $23,000,000 as aid, that being the difference between the real market price of the ships that were sold under the act of 1928 and their true value. Is that included in this $200,000,000?

Mr. CROWLEY. No, it is not; this two-hundred-odd million is actual cash that has been paid to shipowners.

Mr. LEHLBACH. In the maintaining of these 31 trade routes, 3 of which I think are still operated by the Government, the Government paid out, since 1928, approximately $20,000,000 per year in mail contracts?

Mr. CROWLEY. Something like that.

Mr. LEHLBACH. And at the same time there were being built to replace obsolescent ships and to keep the merchant marine up to the point where it was capable of continuing to serve as a merchant marine, $107,000,000, all of which is to come back to the Government and is supposed to be backed by adequate security. Now, have you any idea what it cost to operate these trade routes under the only other alternative, by the Government itself, except Government aid? Either we give up the merchant marine, or the Government runs it itself (and it has tried that), or it pays a subvention of some sort which, under a mail-contract system, has been about $20,000,000 per year. Now, do you know what the previous system, Government operation through the Emergency Fleet Corporation, cost per year?

Mr. CROWLEY. No, sir; I do not. Mr. LEHLBACH. Well, they were taking great credit to themselves when they reduced the cost to $60,000,000 a year, which is three times that amount. Now, is it the contention—I have not heard the report, but is it the contention of those who have made this investigation and have made recommendations that $20,000,000 a year is grossly excessive for the maintenance of 31 trade routes running to all parts of the world?

Mr. CROWLEY. Well, the figure is more nearly $30,000,000 per year; it is about $29,000,000. I think the position of the Department is better set out in this report to the President and I am sure you gentlemen have copies of that.

Mr. LEHLBACH. I am not confining it to the attitude of the Department. If you have views of your own, I would be glad to have them given expression. You guided a rather thorough investigation into this situation, did you not?

Mr. CROWLEY. We tried to; yes, sir.

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