understand, that was not billed beyond either to the south or the north, and might have been for the canal purposes or for use locally or anything else I do not know what the ultimate destination of that freight was, but it remained on the Isthmus for local consumptionthe total of that freight from the United States and Europe to the Isthmus of Panama in 1904 and 1905 for local consumption

Senator ANKENY. You run from June to June, do you, Mr. Schwerin?

Mr. SCHWERIN. On this proposition here we are taking it differently. Our fiscal year runs differently from this statement here, because this is from the 1st of the year to the 31st of the following year.

Senator ANKENY. I thought you ran from June to June?

Mr. SCHWERIN. No, sir; this is from the 1st of January, 1904, to and including the 31st of December, 1905, and from the 1st of January, 1905, to and including the 31st of December, 1905.

Senator ANKENY. I did not know what your practice was.
Mr. SCHWERIN. That is, in making up these statements.

In 1904 there were 17,262 tons. In 1905 there were 29,046 tons-an increase of 11,784 tons, equal to 68 per cent. Now surely 11,784 tons in addition to the lumber that has been sent to the Isthmus should not cause this terrible demoralization that has been getting worse and worse for nearly two years.

Senator DRYDEN. That is a pretty large increase by percentage though, if the road was worked to its capacity before. That would be a pretty heavy burden to put upon it.

Mr. SCHWERIN. But, Senator, this is not 68 per cent of the total 400,000 tons. It is only an increase

Senator DRYDEN. Sixty-eight per cent increase on the previous amount?

Mr. SCHWERIN. No; merely local business to the Isthmus, which was only 29,000 tons in 1905 as against 17,000 tons in 1904.

Senator DRYDEN. I see; that refers only to the local business?

Mr. SCHWERIN. Merely to the local business. Now, what I wanted to bring out was this: That the gross business of the Isthmus has not very materially increased; the increase would be the natural growth of business to the Isthmus, and that has only increased 11,000 tons, and the mere 11,000 tons should not cause any such demoralization as now exists in the handling of commercial freight.

Senator KNOX. I would like at this point to repeat the question that I asked a moment ago, and I will put it in a somewhat different form. In view of the increased demands upon the railroad, caused by the handling of Government material and the preparation for the construction of the canal, what is your suggestion of a remedy for this commercial condition?

Mr. SCHWERIN. Might I answer that to a certain degree in another way, Senator, and perhaps explain myself better?

Senator KNOX. Answer it in your own way, but we want it answered. Mr. SCHWERIN. I was for more than twelve years manager of the purchase and supply department of the Southern Pacific Company, and Mr. William Hood was the chief engineer. We did together some very large pieces of work, with expenditures running into the hundred of millions of dollars. I have sent Mr. Hood from a million and a half to two millions' worth of material before he ever "struck a lick;" and then I fed it into him where he would have several thousand men

working, scattered over a territory of perhaps 5,000 miles. Now, there was a strenuous effort all that time to keep the material moving, and at the same time the ordinary traffic conditions of the road were being provided for, and I had my fights with the traffic officials to keep Mr. Hood's material going. Suppose that they had turned over the operation of the road to Mr. Hood and myself, we would have taken mighty good care that our material would have moved, and the rest of the traffic would probably have had to be sidetracked, and there would have been confusion to a great degree; and whereas our material would have been the smaller percentage that passed over the road, at the same time that small percentage would have demoralized the great percentage of the commercial traffic. That is the condition that is created, and that is the situation in Panama.

Senator KNOx. Will you now answer the question a little more categorically?

Mr. SCHWERIN. Now, directly, I think that the question of the operation of that railroad across the Isthmus should be under its own officers, and the canal material should be handled just the same as commercial material, and the operating officers held responsible for the prompt receipt and delivery of canal material, just exactly the same as they should be held responsible for the prompt receipt and handling of the commercial business.

Senator KNOX. Would you give the Government material no preference?

Mr. SCHWERIN. The French did not.

Senator KNOX. Well, I am asking you if that is your idea.

Mr. SCHWERIN. No, sir; no, sir.

Senator KNOX. You would put it all on a parity?

Mr. SCHWERIN. Then they would take care of their requirements and be in much better condition to know what they were doing and what they are doing now. This confusion has resulted in great loss to everybody. The claims that will come in from this business-they are slow in coming in, you know, but they will begin to come in-will be enormous. We had a lot of tonnage dumped on us the other day, and we were asked if we could not get rid of it for the Panama Railroad. All identification had been lost; requesting if we had claims to which we could apply this stuff to such claims.

Senator KNOX. That is all I want to ask you.

Senator DRYDEN. Do you know whether they have increased or decreased or kept stationary in regard to the freight cars, the engines, and such as are used for transporting this material?

Mr. SCHWERIN. I know that they had, when the Government took hold, about 600 cars available for tonnage-between six and seven hundred flats and box cars. I know that Mr. Wallace promised that cars would be ordered. They were ordered, but they were dump cars. I know that Mr. Stevens and Mr. Shonts have promised equipment, and we have not seen it yet. We have heard of it. We have been promised all this. It has not materialized, although they are now going on the second year since the Government has taken charge.

Senator DRYDEN. But they have about the same number of cars and engines that they had before?

Mr. SCHWERIN. I think there has been some slight increase. My agent reported to me that he heard they were putting some cars together on the Isthmus. Now, Mr. Walker told me that they were

going to have 30 and 40 ton cars, and they were going to have big engines, and were going to haul big loads. That would mean that all the culverts and bridges and everything would have to be practically rebuilt or strengthened before they could handle them. I have no doubt they are doing all that; but meanwhile here is a situation which confronts us, and for some reason we are held up to the ridicule of the American people when we have been trying to do our best, struggling to keep that line going. There is no money in it. There is no money in that line. I would like to show you gentlemen what that line has done for the last four years.

Senator DRYDEN. You mean the steamship line?

Mr. SCHWERIN. Yes, sir.

Senator KNOX. I do not know that that is particularly relevant to anything we are inquiring about.

The ACTING CHAIRMAN. No; I think that is unnecessary, unless some member of the committee desires it.

Mr. SCHWERIN. The only reason I said that, Senator, is because the question has been to punish the Pacific Mail Steamship Company for this neglect of its duty as a connecting carrier with the Panama route. The proposition is, Can it be punished through its mail contracts?" Well, you can take that $2.880 away; that is something.

The ACTING CHAIRMAN. I call your attention, Mr. Schwerin, further to the statement of Mr. Secretary Taft made before this committee January 11, 1906, and read

"Senator MORGAN. Allow me to make this inquiry right there: Does the Pacific Mail Steamship Company claim the rights of the coastwise trade between Panama and San Francisco, for instance?

"Secretary TAFT. Oh, yes, sir; they are claiming those rights. "Senator MORGAN. They claim those rights?

66

'Secretary TAFT. Oh, they have those rights; yes, sir; so that no company could go into that business, under your coastwise laws, without having an American registry."

What have you to say about that statement?

Mr. SCHWERIN. We have no rights on the west coast. The ships that we operate are ships of American bottom, and the franchise granted to the Panama Railroad Company gave the right of conducting freight from New York to San Francisco and vice versa as though the Panama Railroad was an American bottom and the route was practically a coastwise route. But we have no claim on that route over anybody else-none whatever. As a matter of fact, any other American steamship company can go in that business; and they have got to compete not only with us, but with the Kosmos Line, with the Messagerie Maritime Line, and with schooners and sailing vessels that are operating up and down the coast.

The ACTING CHAIRMAN. I again read from the testimony of Mr. Secretary Taft:

"Senator GORMAN. Mr. Secretary, this suggestion as not to putting on proper steamers between Panama and San Francisco and leaving the freight to accumulate is the result of your order breaking up the monopoly, is it not?

"Secretary TAFT. Yes, sir."

I will ask you to state what the fact is about that.

Mr. SCHWERIN. I deny the Secretary's allegation that we have done anything of the kind. On the contrary, we have got larger steamers

on now than we had when we had a contract with the Panama Railroad Company, as I have stated before; and we have tried to maintain our schedule and give the service that our obligations to Central American and Mexican countries and the United States shippers required.

The ACTING CHAIRMAN. You have larger steamers than at what time?.

Mr. SCHWERIN. Than we had before, two years ago. The City of Peking, a steamer of 5,000 tons, replaced a steamer of less than 2,000 tons. The City of Para, a steamer of nearly 4,000 tons, replaced the Colon, a steamer of about 2,000 tons.

The ACTING CHAIRMAN. And how does the volume of business at the present time compare with the volume of business two years ago? Mr. SCHWERIN. The volume is about the same.

The ACTING CHAIRMAN. The monopoly mentioned I assume refers to the contract which in former time existed between your company and the Panama Railway?

Mr. SCHWERIN. The monopoly of through billing, the right to through billing?

The ACTING CHAIRMAN. Yes.

Mr. SCHWERIN. I do not know of any monopoly there. We had no monopoly.

The ACTING CHAIRMAN. Was there any other contract between your Company and the Panama Railway Company relating to traffic except the contract that was annulled July 1 of last year?

Mr. SCHWERIN. That is the sole contract the Pacific Mail Steamship Company had with anybody.

The ACTING CHAIRMAN. And what were the terms of that contract, in a general way?

Mr. SCHWERIN. The terms of that contract were that the two steamship companies would endeavor in every possible way to build up the traffic via the Isthmus route.

The ACTING CHAIRMAN. You refer to "two steamship companies. Mr. SCHWERIN. That is, the Panama Steamship Company and the Pacific Mail Steamship Company. Practically the route was called the union of the two steamship companies with the railroad company. The contract was really a traffic contract. It provided for their cooperation in interchange of business at Ancon; it provided for the mutual making of tariffs and rates; it provided for the division of those rates; it provided for minimum rates, and it provided that the Panama Railroad Company, if at any time it was dissatisfied and thought that we were not doing right and proper, had a right to take our steamers, and if we decided that they were not doing right and proper in regard to building up trade via the Isthmus, we had a right to take their steamers and operate them.

The ACTING CHAIRMAN. I call your attention to the testimony of Mr. John F. Stevens given before this committee January 16, 1906, and read first a letter from Mr. W. G. Bierd. Is that the gentleman that you have been talking about?

Mr. SCHWERIN. Yes, sir.

The ACTING CHAIRMAN. And then certain portions of his testimony.

"OFFICE OF GENERAL SUPERINTENDENT,
"PANAMA RAILROAD COMPANY,
"Colon, January 4, 1906.

"Mr. J. F. STEVENS,

General Manager, Panama Railroad Company,

"Care of W. L. Pepperman, Washington, D. C.

"DEAR SIR: Referring to your cablegram and my reply on the condition of cargo now on the Isthmus, I wired you fully and a little longer than I desired to to apprise you of our exact condition.

This subject has also been under investigation from the New York office, and I attach hereto a copy of my letter to Mr. Walker that will give you full details of our present condition and the causes for the same, and I can only add that unless the Pacific Mail gives us more ships or change their manner of taking their cargo, this accumulation will soon have us blocked again, and the condition is one that is entirely beyond my control.

"I have gone over this situation carefully with their agent, have wired their San Francisco office, and you are now familiar with what has been said both to you and the New York office.

"The true facts in the matter are that the sailing that was suppressed by them was done to divert the ships to the coffee trade, and the small ships that did come left over a large amount of cargo, and to-day they have 6,000 tons of cargo on the Isthmus after their ship, the City of Peking, sails. Therefore, if they offer us a large run of coffee at this time, it reaches us with one-half of our equipment tied up with their freight. We have everthing at Colon very full. I have got one-half of the new wharf at La Boca inclosed, and we began yesterday to store this wharf full of their cargo to release our cars, whereas the same was rushed through to enable us to handle the coffee in the proper way.

66 Yours truly,

W. G. BIERD, Superintendent.

"Mr. STEVENS. In other words, we get the freight over there and they do not take it. The situation is analagous to one like this: Here are two railways, end to end, you may say. Here is a place here where goods are sold and here is where they are to be delivered. There are different stations along this line. Now, the fellow here who takes the freight first carries it over his railroad. When he gets here he is supposed to turn these cars of freight over to the next man to take to these points.

This railroad man says 'No; I won't take them, because I am only running through freight trains. I don't stop at these stations-Smithtown and Jonestown, and all those. I don't stop there and I can't take them. I will take the through freight that goes, we will say, "to San Francisco at this end.' Do you see the point? He does not run any trains for ten days or three weeks or a month; then he runs a little local freight. In the meantime you have got to hold the sack.' And that is what we are doing to-day.

"Senator HOPKINS. That situation comes from the fact that it is more profitable to take the through freight than to take the local freight? "Mr. STEVENS. Yes, sir.

"Senator GORMAN. Have you not got a perfect remedy for that by refusing to allow the ships to unload at Colon unless they take the freight from the other end-from Panama?