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A BILL TO AMEND THE MERCHANT MARINE ACT OF 1936

AND FOR OTHER PURPOSES

P100-28

32437

PART 9

JANUARY 26, 1938

Printed for the use of the Committee on
Commerce and the Committee on Education and Labor

UNITED STATES

GOVERNMENT PRINTING OFFICE

WASHINGTON: 1938

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EXECUTIVE SESSION

AMENDING THE MERCHANT MARINE ACT OF 1936

WEDNESDAY, JANUARY 26, 1938

UNITED STATES SENATE,

COMMITTEE ON COMMERCE, AND COMMITTEE

ON EDUCATION AND LABOR,
Washington, D. C.

The committees met in executive session at 10 a. m., pursuant to adjournment, in the committee room of the Senate Committee on Commerce, in the Capitol, Senator Royal S. Copeland, chairman of the Senate Committee on Commerce, presiding.

Present: Senators Copeland, Thomas of Utah, Caraway, Clark, Overton, Donahey, Guffey, Maloney, McNary, Johnson of California, Vandenberg, and Gibson.

Present also: Senator McAdoo; Joseph Kennedy, Chairman, United States Maritime Commission; Rear Admiral Emory S. Land, United States Maritime Commission; Max O'Rell Truitt, General Counsel, Bon Geaslin, Counsel, United States Maritime Commission; Rear Admiral H. G. Hamlet, United States Coast Guard, retired; John W. Mann.

The CHAIRMAN. The committee is pleased to have Mr. Kennedy with us this morning.

STATEMENT OF JOSEPH P. KENNEDY, CHAIRMAN, UNITED STATES MARITIME COMMISSION, WASHINGTON, D. C.

The CHAIRMAN. Mr. Kennedy, we are glad you are here, and shall be glad to have you state anything you care to present.

Mr. KENNEDY. Do you want me to make a statement regarding the west coast situation?

The CHAIRMAN. If you please.

Mr. KENNEDY. On my recent trip to the west coast, I touched the principal port cities from Los Angeles to the far Northwest. It was apparent that a majority of the ships now employed in foreign commerce, with the exception of the two ships of the Matson Line, furnish an inadequate service for that part of the country. And when you consider that the subsidy granted the Dollar Line was granted primarily to keep that company from going into bankruptcy, and thereby completely finishing off our American-flag services to Japan and China, you can judge the gravity of the general situation. It was not solely a question of putting the company through a 77B reorganization. Their cash position and financial position did not justify a subsidy until the officials had made some arrangements to

reorganize the company itself. The situation facing the company was so very bad that we decided something had to be done. We made several suggestions. They went ahead and with the aid of their creditors fixed up a reasonable plan.

One immediate problem in the Dollar Line situation was that unless you made some provisions-stretched our conscience a wee bit-the entire trade there might be lost to America; this company's going into the hands of a 77B trustee and probably into bankruptcy unquestionably would have tied up the ships. Under the existing circumstances I seriously doubt if any Federal judge out there would have permitted the service to continue. In the first place, almost all the ships were below the legal requirements of the Bureau of Marine Inspection. So they were all in bad shape, and a good deal of money had to be spent on them; it seems to me that the judge, in fairness and equity to creditors, could not have permitted their continued operation.

That is the condition we found first. We have now, with the assistance of creditors, realigned the financial structure of the company and granted a temporary subsidy for 6 months. Some people outside of the Commission are making efforts to reorganize the company to get it going again on a long-term basis. When it is reorganized-I doubt very much if we will be able to get new capital into it-and I doubt very much if we can get new ships running to China and Japan. We are hoping that during that period we shall be able to work out some satisfactory plan so that the service may be maintained; and then you gentlemen will have had a chance to pass judgment on the larger problems of the merchant marine, to see whether the elements that I am going to discuss with you, can come into being.

We found that the Matson Line was all right. As we went north we went to the American Mail Line, a subsidiary of the Dollar Line, running out of Seattle. We found it in about the same condition: The company is in fair shape, financially, but the ships are old and the service must be improved. We investigated all ships along the coast, to find out just how much cooperation may be expected of the Federal Government and the kind of service that the communities want. That information will be furnished.

The ships in foreign trade are not good enough. There is no question of that. And apparently there is no way in which you can secure enough money to get good ships.

Senator MCADOO. Are you talking about the Panama-Pacific Line? Mr. KENNEDY. No; I am talking about the lines on the west coast engaged in foreign trade.

Senator MCADOO. I see.

Mr. KENNEDY. So the prospect there is not particularly pleasing, when you consider the maintenance of a private-ownership system. The next thing we struck out there was the unrest in connection with the prospective removal of the intercoastal vessels. People could not understand how the service to the west coast could be eliminated and why these ships should be placed in the South American trade. I told them, on the west coast, that I doubted very much the possibility of a subsidy, because I felt that would be another dislocation of what I hope some day will be a real national economy, so we shall know at least where we are headed. And the

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