World War we found ourselves with this fleet of approximately 2,500 vessels, which we built during the World War. When the 1928 Merchant Marine Act was passed, which mandated the Shipping Board, which had been created by the Act of 1916, to estab lish essential trade services all over the world and to operate them until they could be sold to private interests, to bring about that, in those pioneer times-and the Government did the very best it could to establish them and operate them successfully and efficiently. I indict no one in those days. Mr. SIROVICH. Do you think that, under private ownership and private operation, at that time, when we were pioneering in those days of the World War, that could have been done better than it was under the Government? Mr. CAMPBELL. In my judgment, no. procedure to be followed in those days. I think that was the proper Mr. SIROVICH. Let us go on to the second subject. Mr. CAMPBELL. After those services were established we started out to transfer them to private ownership. I would like to ask Mr. Haag, who is in the hearing room, to state how many operators and services there were. Mr. HAAG. There were 250 or 300 individual operators at the time, operating miscellaneous services; and, when the Shipping Board decided on the consolidation of the services, after the hectic days were over, after the first postwar impetus of world trade ended, they got down on more of a business basis and consolidated miscel laneous services, many of those services to a few. And then, I think, they were reduced to about 75 or 80 services, all told. Mr. SIROVICH. Well then, Mr. Campbell, in view of that statement, we come to the next question. We have had an idea of what national ownership and national operation has done. The next thing we can do is to have private ownership and private operation. Would you say that, based upon the report of Mr. Farley to the President, private ownership and private operation have been more successful than national ownership and national operation? Mr. CAMPBELL. Well, that is a very difficult question to answer yes or no; and I cannot answer it yes or no. Mr. SIROVICH. Answer it in your own way, and then let me ask you a third question. Mr. BREWSTER. Let him answer it if he wants to. Mr. CAMPBELL. Let me go on through. Mr. BREWSTER. I think that you should answer his question. You do not have to say yes or no. You can qualify it as much as you like. Mr. CAMPBELL. All I can say is that I have no doubt that there have been just criticisms directed by the Postmaster General in these reports against certain shipowners, for extravagancies, probably waste. As to whether there is any wrongdoing, I do not know anything about that. But I cannot say without examining these reports in detail; and. knowing something about the way this investigation was carried on down there, I could not pass judgment by reading the report. I could not accept it, because I would have to go into the evidence itself before I could get what had happened. And no other man can do it, in any other case. You cannot take-as in my particular case you cannot take 13 days of solid testimony, that runs into a volume that high [indicating], with hundreds of exhibits to it, and boil it down to a few pages, as has been done there, and tell the exact facts regarding it, and nobody else could. Mr. SIROVICH. Now we will come to my third question in regard to the best way to operate our merchant marine. We have just heard about private ownership and private operation, with all its ramifications, and all the reports we have heard of what has resulted. What is your honest opinion, as an individual, not as a representative of the Steamship Owners' Association that you are called upon to defend here, of national ownership and private operation? Mr. CAMPBELL. I do not think that it will work. Mr. SIROVICH. Why? Mr. CAMPBELL. If you are going to have government ownership and you are going to have private operation, you are going back to exactly what existed at the time I have mentioned, in connection with these essential services, in the period of 1920 on through until they had succeeded in developing those services to the point where they believed they could transfer them to private ownership, which they gradually did by the sale of the ships and the services to new owners, with the guaranty of 5 years of operation. Now, the proposal of Government ownership and private operation, to me, means nothing more nor less than what we did in those days. I believe that if you will take and read back over the history of that time, that Mr. Haag has prepared for you, and see what it cost the Government in expenditures, what the appropriations made for it were, I think that you will come to the conclusion that it is not the most efficient system. It seems to me that Government aid can be accorded where it is necessary; and that it can be done under such circumstances and conditions, and subject to such controls, as will guarantee honesty and will guarantee as high degree of efficiency as a guaranty can give to it. I do not think that it is a hopeless task to accomplish that. Other nations are doing the same thing. You have had Professor Haag and Professor Saugstad read to you and testify to the aid being given by all these other nations. Are we more helpless than they? Cannot we establish the same degree of honesty? Do you think that our shipowners are less honest than the shipowners of other countries? Do you believe that the American people are less honest than the people of other countries? Do you think that our Government is less honest than the governments of other countries? They are no more honest than we are. Mr. SIROVICH. How long have we had private ownership and private operation, Mr. Campbell? In the last 14 years? Mr. CAMPBELL. We have aways had it. Mr. SIROVICH. I mention that because we have always had it, and Professor Haag, whose testimony, I think was especially enlightening to this committee, stated that 96 percent of our tonnage is 10 years and over in age and only over 300,000 tons are under 10 years old. Does that show marked development under private ownership? Mr. CAMPBELL. Yes; but you forget Mr. LEHLBACH (interposing). You are talking about a period of depression. Mr. SIROVICH. We have only had this private operation since 1928. Mr. CAMPBELL. During all of the period when this Government aid was given out-under the 1928 act, it was given out and the contracts were made, with some owners who had purchased their ships from the Shipping Board prior to that time, at low prices but with the obligation of 5 years' guaranteed service. They bought the service and the boats and agreed to operate them. There may have been some owners-for instance, such as the Matson Navigation Co., the Grace & Co., who were already in private business, with their own ships. Mr. SIROVICH. Was Mr. Dollar of the Dollar Lines in business, with private ownership, at that time, when the 1928 act was passed? Mr. CAMPBELL. Yes; I think he was, with a very limited number of vessels. Mr. SIROVICH. With a limited number of vessels? Mr. SIROVICH. That did not prevent him, during the period of depression, from drawing salaries amounting to $1,750,000 for buying five ships from the Government, which would have built a brand new ship. Mr. CAMPBELL. Mr. Congressman, I am not in a position to discuss Mr. Dollar's salaries or withdrawals. I cannot be drawn into a discussion of something of which I have no personal knowledge. Mr. SIROVICH. It is public knowledge. Mr. CAMPBELL. That does not make it possible for me to discuss the matter when I have no personal knowledge of it. I will, however, say this about Mr. Dollar's withdrawals: They were not withdrawn under the Mail Act of 1928. Those withdrawals were made prior to that time; and I will say this, in justice to Mr. Dollar-bear in mind this Mr. SIROVICH. Is not that an injustice to their stockholders and bondholders? Mr. CAMPBELL. Bear in mind this-I do not think that there are any bondholders of that company. I think you will find that the Dollar family owns about 85 percent of the stock of those companies. I know enough about their standing to know that it is one that should be carefully considered in all its phases before judgment can be passed on it; and I do not have knowledge of the facts in that case, and I cannot pass judgment. Mr. BREWSTER. How are we to avoid taking the business practices of the shipping companies into account in determining the policy which may be wise? Mr. CAMPBELL. I doubt, Mr. Brewster, whether a study of all the reports will show any substantial withdrawals out of the treasuries of these companies after mail earnings. Mr. BREWSTER. As I understand it Mr. CAMPBELL (interposing). There may have been some withdrawals. I know what has been said about the Dollar with drawals Mr. BREWSTER (interposing). The Dollar Line's transactions were more complex than that. What was the line operating in the South that apparently made a profit of a million or two and then, with a couple of millions additional on mail contracts-and they drew it out in salaries? Mr. CAMPBELL. I do not know what you are talking about. Mr. BREWSTER. No; I am not talking about Lykes Bros. Lykes is the one that had a lot of subsidiaries. Mr. CAMPBELL. If you want to know about the Lykes Bros. Co., I will give it to you. That is the one company that I happen to know about. If you think that this company has made withdrawals and has not conserved its assets, I will tell you. It is a parent company and it has, as subsidiaries, the Lykes Bros. Steamship Co., the Tampa Interocean Steamship Co., and the Lykes Bros.-Ripley Steamship Co., which held these three mail contracts. There was the Lykes Bros. Steamship Co., the Tampa Interocean Steamship Co., and the Lykes Bros.-Ripley Co., and it made mail contracts with the Government, which obligated it to build $20,000,000 worth of ships under its mail contracts. Those ships, as pure cargo ships, would cost in the United States $20,000,000 as against $10,000,000 abroad, because, as you will find, the cost of construction abroad, especially on cargo ships, is substantially half the cost in the United States. At the time that the first of these services began, under the mail contract of October 1, 1928, the Lykes Bros. Steamship Co. had a paid-in capital of $700,000; and on December 31, 1928, it had a surplus of $634,518.19, excluding equities in subsidiary companies. On June 30, 1934, after these contracts had been in operation, the paid-in capital had been increased to a million dollars, and the surplus had been increased, from earnings, to $3,422,068.61, including equities in the subsidiary companies being increased in the service to $2,787,550.42. In addition to that, the equity of the minority stockholders in the accumulated surplus of the Lykes Bros.-Ripley Steamship Co., as of June 30, 1934, amounted to $120,680.68; and the equity of the minority stockholders in the accumulated surplus of the Tampa Interocean Steamship Co., as of June 30, 1934, amounted to $207,968.28, or a total equity of minorities of $328,648.96 in the surplus in the companies holding the contracts nos. 45 and 47, that was not reflected in the surplus account of the Lykes Bros. Steamship Co. Those combined surplus of the three contract holders on June 30, 1934, amounted to $3,750,000. Now, the total net mail compensation received by these respondents under the three mail contracts, from October 1 to June 30, 1933 that is, the amount of the mail compensation that was left, after they had paid all operating expenses, after they had paid all operating losses-the total net mail compensation was $3,434,000. The combined surplus of the three contract holders, as of June 30, 1934, exceeded the combined net mail compensation received by them under the three contracts by more than $320,000. In other words, every dollar of the mail pay that those companies received, over and above their operating expenses, is today in surplus. For what purpose? To meet the obligation under that $20,000,000 building contract; and they had to conserve it. How are they going to meet the obligation otherwise? And yet, when you read the report of the Postmaster General on that company, you won't find any such statement as that in it. Mr. WEARIN. Why did not you read the report made by the Postmaster General to the President, on page 203, over to page 204, with the conclusion that the Postmaster General arrived at? And, incidentally, Mr. Chairman, I want to insert that statement in the record. Mr. CAMPBELL. Where is that? Mr. BREWSTER. It is on page 203, of part 1. You have part 2 there. Mr. WEARIN. You have part 2. Mr. CROSBY. Mr. Wearin, do you want to make that statement? Mr. WEARIN. Yes, sir. I want to insert this statement from the Postmaster General with reference to the subsidiaries of the Lykes Bros. Co., and it appears on page 203 of the first volume of the report of the Postmaster General to the President. Mr. CAMPBELL. Beginning with the words "The subsidiary companies" ? Mr. BREWSTER. No; on the page before that, right at the top of the page, giving the record of the net dividends and earnings. Mr. CAMPBELL. Do you not understand that the Lykes Bros., Inc., is not itself-it is an old, old company-is engaged in a very extensive cattle business in Cuba. Mr. WEARIN. That has nothing to do with the report on page 203. (The report referred to by Mr. Wearin is as follows:) The following extracts from the report of Postmaster General Farley to Presi dent Roosevelt on hearings conducted by the Post Office Department on foreign air-mail contracts and ocean-mail contracts, pages 202-205 of part 1, as printed for the use of Senator Black's committee indicate what the facts are about one line and the manner in which it handled its subsidiaries and affiliates. The Lykes Bros. have, as a result of operating Shipping Board vessels and through their several ocean-mail contracts (routes 23, 45, and 57), made large profits on a small original capital investment. The record shows that in their dealings with the Shipping Board and the Post Office Department they have been actuated largely by a desire to obtain as much from the Government as possible upon minimum commitments looking to the upbuilding of the American merchant marine. The following matter appears on pages 5, 6, and 6A of the agreed statement of facts which was certified as being a true statement by Mr. James M. Lykes on behalf of the several Lykes companies. Initial and only investment in the Lykes steamship companies other than from subsequent profits derived from steamship operations, which investment was made in October 1918 (the agency contracts with the United States Shipping Board were signed by Lykes Bros., Inc.). Net profits before income tax from all steamship operations, including operations under mail contracts nos. 23 and 45, from October 1918 to June 30, 1933 (profit under mail contract no. 57 not determined as contract was not effective until Feb. 21, 1933) ‒‒‒‒‒‒‒~ Profits as above, after income tax, October 1918 to June 30, 1933 $115, 439. 13 6, 625, 936. 00 5, 891, 222. 66 (See exhibit A attached which reflects data taken from pp. 1364 and 1365 of pt. no. 3 of Senate hearings.) The above profits were distributed as follows: |