Mr. CAMPBELL. My recollection is that Mr. Peacock this morning told you that there was $89,000,000 of construction loans still outstanding. That would be $89,000,000 out of the 75 percent of the $140,000,000, as I recall the figures.

Senator CLARK. That is a pretty high percentage, $89,000,000 out of 75 percent of $140,000,000.

Mr. CAMPBELL. That is true. Those loans had 20 years to run. Those loans have been paid off as they matured.

Senator CLARK. I understood Senator Guffey to ask how many loans were in default, what percentages of the loans were in default.. Mr. CAMPBELL. I did not understand that.

Senator GUFFEY. That is what I asked, what percent of the loans were in default.

Mr. CAMPBELL. We have no figures on that.

The CHAIRMAN. Mr. Peacock gave you some figures this morning. Senator GUFFEY. He is worrying about the investment that the American shipowners had in this thing. He was crying about the evils of that bill. I want to see how they are carrying out their contracts.

The CHAIRMAN. They are going to be a lot more worried unless. they give us some help, more than they have given us today.

Mr. FRANKLIN. There is less than 2 percent in default of the total

amount.

Senator GUFFEY. How much is overdue?

Mr. CAMPBELL. We have no means of telling that.

The CHAIRMAN. Mr. Peacock said this morning that 21 out of the 42 contracts might survive for a little while.

Senator CLARK. That is not the question, Mr. Chairman. Senator Guffey was asking how many of them owed money to the Govern

ment.

Mr. HAAG. I think I can answer, Senator.

The CHAIRMAN. All right, Mr. Haag.

Mr. HAAG. In the consideration of construction loans, that loan began with the act of 1920. It was expanded into the act of 1928. Altogether there was $181,000,000 worth of ships constructed and $135,000,000 in loans on those $181,000,000 worth of ships. There was $51,000,000 paid back and there is $84,000,000 still owing. I think there is four or five million dollars that is in default.

The CHAIRMAN. Does that answer you, Senator Guffey?
Senator GUFFEY. Yes.

Senator CLARK. Mr. Franklin, I understood you to say a while ago that your company now owns no foreign flagships.

Mr. FRANKLIN. That is right.

Senator CLARK. Does your company still have anything to do with the ownership of a ship by the name of Minnekahda?

Mr. FRANKLIN. Yes, sir.

Senator CLARK. What flag is that under?

Mr. FRANKLIN. The American flag.

Senator CLARK. How long has it sailed under the American flag? Mr. FRANKLIN. About 10 years it has been under the American flag. She qualified for mail pay under the 1928 act.

Senator CLARK. Did your corporation contribute to the fund for the passage of the Jones-White Act?

Mr. FRANKLIN. I never knew of any fund for the passage of the Jones-White Act.

Senator CLARK. Well, there has been evidence before another committee of the Senate, testimony by the custodian of the fund, that at least $250,000 was spent by three shipbuilding companies in Washington for the purpose of the passage of the Jones-White Act. The custodian of fund testified, as I recall, that he rented a house, I think at $150 a month, and the total expenditures which he testified to for the passage of the act amounted to in excess of $250,000. Did your corporation have anything to do with those expenditures?

Mr. FRANKLIN. No, sir.

Senator CLARK. Or any other expenditures?

Mr. FRANKLIN. No, sir.

Senator CLARK. Propaganda for the passage of the Jones-White Act?

Mr. CAMPBELL. Did you say the shipbuilders?

Senator CLARK. Three shipbuilding concerns. To clarify the record, the witness was Mr. Lawrence Wilder, who was at that time the president of the American Brown Bovari Co., which at that time controlled the New York Shipbuilding Co.

The CHAIRMAN. Did that include his own expenditures?

Senator CLARK. Yes; it did. His personal expenditures appeared to be a very large proportion of the expenditures, which naturally is a very large proportion of any lobbyist's expenditures.

The CHAIRMAN. With that further information I can understand it, but there was no evidence on the hill of any money being spent, and if they spent $250,000 I did not see any of it.

Senator CLARK. I was not suggesting that the Senator from New York knew about it.

The CHAIRMAN. I understand.

Senator CLARK. That was testimony put in before the Munitions Committee and not contradicted from any source.

The CHAIRMAN. Was not Mr. Wilder at that time attempting to explain to us how he could build a ship bigger than all outdoors. and have the smokestacks on one side so they could be used for airplane carriage?

Senator CLARK. That is unquestionably true, Senator; but the fact also appeared in the record that Mr. Wilder was here as the authorized representative of a combination of shipbuilders, to wit, the Newport News Shipbuilding Co., the New York Shipbuilding Co., and the Bethlehem Shipbuilding Co., that he expended some $250,000, that he had associated with him the famous Mr. Sheridan, "Big Drum" Sheridan. My question has been answered by Mr. Franklin, who says that his corporation did not contribute to that fund or any other fund for that purpose. Am I right, Mr. Franklin.

Mr. FRANKLIN. That is right, sir.

Had

The CHAIRMAN. Now, Mr. Campbell, I want to ask you a question. You do not have to answer it unless you want to, of course. you heard the news that the Appropriations Committee had recommended a cut of 222 millions from the appropriations bill? Mr. CAMPBELL. I have heard you state it.

The CHAIRMAN. Yes. Let us assume now that that will be enacted into law, that recommendation, and that no ship subsidy bill is passed. Then what becomes of the American merchant marine? Mr. CAMPBELL. It is destroyed.

The CHAIRMAN. What?

Mr. CAMPBELL. It is destroyed, without a question.

The CHAIRMAN. You feel that way about it?

Mr. CAMPBELL. Certainly.

The CHAIRMAN. And yet you come here today and tell us that the way to do it is to reenact the Jones-White Act?

Mr. JONES. NO. May I speak on that, to make it clear?

The CHAIRMAN. Go ahead.

Mr. CAMPBELL. We came down here today in response to your invitation to comment upon S. 3500.

The CHAIRMAN. As amended.

Mr. CAMPBELL. As amended. We got that notice I think on last Friday and we were summoned down here to discuss this important measure in that short time. Now, what we have done is to devote ourselves to a consideration of the invitation which you extended to us, and that was to come down here and give you our honest views on S. 3500 as amended. We did not come down here to lay before you our own proposals as to what we thought should be the details of the legislation which you ought to enact.

The CHAIRMAN. In view of that I have not been very courteous to you.

Mr. CAMPBELL. I think your criticism is unfair to us. The CHAIRMAN. All right, I will withdraw all that. Now, I will ask you, as competent witnesses, to tell us how we can fix one of these bills and pass it and keep the American merchant marine from destruction, because you yourself have said if the mail contracts are obliterated and no ship subsidy bill is passed that the American merchant marine is ruined.

Mr. CAMPBELL. I can tell you in fairly simple terms.

The CHAIRMAN. All right.

Mr. CAMPBELL. If you will provide means by which the existing contracts can be adjusted fairly under the laws as they exist today, and on their own terms

Senator CLARK (interrupting). What do you mean when you say "their own terms"?

Mr. CAMPBELL. On the terms of the contract, the terms of the law. If you provide a law which, in effect, will say that if a satisfactory adjustment cannot be made that the parties may resort to the Court of Claims with their rights as they now exist under the contracts and under the law, you have taken the first step. We believe that there is no question but what a very large proportion of these contracts can be properly and amicably readjusted. No doubt about it.

Having taken that step, if you pass an act which will provide for new ships so that we could obtain them at a parity of capital costs, and give us aid, that will make up the difference between the cost of American operation and foreign operation, and then perhaps in some instances you provide an aid for trade penetration, particularly for the steamship lines running out of the southern ports of the United States, you can have an American merchant marine. In other words, if you take your own bill, S. 3500——

The CHAIRMAN (interposing). No, no; we are going to take Senator Guffey's bill now, because he provides for the building of a merchant marine. He is going to build the ships and let you run them. That is the way to do it, is to let the Government build the ships and let you operate them.

Mr. CAMPBELL. I cannot see why you cannot create a Commission to be appointed by the President of the United States and give it authority to sit down with these contractors and attempt to adjust their contracts and provide, if you please, that the President of the United States may fix the just compensation which can be handed to them, and if his award is not satisfactory, following the precedent of other acts, that a proportion be paid to the contractors and leave them then to their rights in the court of claims.

The CHAIRMAN. That is perfectly magnificent, and all you have to do is to wait until the 1st of July, when you get no more money, then you can go into court and under the rules of court procedure, and the Constitution of the United States, you can get back whatever you are entitled to in the way of relief.

Mr. CAMPBELL. You will find a vast majority of these contracts will be adjusted, and properly adjusted.

The CHAIRMAN. They may be properly adjusted, but what are you going to do when you haven't got any money? Whether the contracts are good contracts or bad contracts, whether they are legal or otherwise, what are you going to do if the Government does not provide you with any funds? I did not have anything to do with the action of the Appropriations Committee. I was here instead. If I had been there I should have voted against it.

You have got yourself that fine job. You as a lawyer, Mr. Campbell, will have a wonderful time from the 1st of July on for the next 10 or 15 years. That will keep you thoroughly occupied. In the meantime the merchant marine has gone to the devil.

Mr. CAMPBELL. Are we responsible for that situation?

The CHAIRMAN. No; and neither am I, but representing the American merchant marine you are certainly interested in its maintenance, as I am, you are interested as a citizen in its maintenance for the national defense and the building up of the commerce of the United States.

I have been for 2 days fighting the Gibson bill and Senator Guffey's bill, and now I find that my bill isn't any good.

Mr. CAMPBELL. I did not know before that S. 3500, as amended, was your bill.

The CHAIRMAN. I notice, though, that Mr. Franklin did make some references to the part of the bill that I presented. Most of the criticisms were to the Post Office and Commerce amendments. Of course, if I had my way I would throw them all out of the window, but I want a merchant marine, therefore, I am going to take what I can get. In the 13 years that I have been in the Senate I never did get what I wanted, but I always took what I could get, and that is what you will have to do.

Well, if you do not have any more shipmen here that want to testify we might just as well have a field day. Is there anybody else?

STATEMENT OF L. C. PALMER, AMERICAN-SOUTH AFRICAN LINE

The CHAIRMAN. What is your name?

Mr. PALMER. L. C. Palmer, American-South African Line.
The CHAIRMAN. You may go ahead, Mr. Palmer.

Mr. PALMER. Mr. Chairman, I will be very brief with this. I am just one of the members of the American Steamship Owners' Association. We bought a line from the Shipping Board

The CHAIRMAN (interposing): Now, Mr. Palmer, just a moment. I think Mr. Campbell, in introducing Mr. Franklin, said that the Steamboat Owners' Association were unanimous in the presentation of this paper.

Mr. PALMER. I think they were, sir.

The CHAIRMAN. All right.

Mr. PALMER. I am just giving a statement of one of the lines, very briefly.

We bought this line from the Government 10 years ago. We paid the United States 25 percent down, in accordance with the law. We bought it in competition. We paid the highest price that had at that time been paid, and we were $8 per ton ahead of our competitor in price.

This line had been losing for the Government an average of $400,000 a year for the 3 years before we took it. We have paid off everything we owed on those ships, paid them off 4 years before they were due, and when the 1928 bill came through, which required the construction of a new vessel, we constructed our vessel immediately. We did not wait. We started right then and we constructed a new motor ship. We have paid everything that has been due as it has come due, interest and principal.

We have been in this service, which is, I think, recognized as an essential service, because during the complete 9 years we were the only American-flag company in this service, and we had seven competitors, foreign-flag competitors, and we have increased the carrying of American cargoes between our two countries continuously up to the present time.

We have endeavored to put on more ships and we have asked the Government from time to time to put on ships, and for a certain period they permitted it, and after that they said the appropriations were not sufficient. Recently we have had to put on extra ships on our own account, simply to look out for the carrying of American goods.

I would like to say in this connection, as far as carrying a certain percentage of the goods is concerned, a great many of the goods that are carried are specified that they shall go under a certain flag or in certain flag ships.

For instance, goods that come back, that are carried back, a lot of them are owned in South Africa, and some of our goods that are purchased from this country are purchased with an arrangement that they can go on any ship which the purchaser in South Africa designates.

I want to say we have paid everything that was due as it became due, and we have never been in default. We have paid a proper rate, or a fair rate of interest. I think Congress at that time spoke of 314 to 32 percent interest, and we have paid 3% percent.