Library of Congress to the most active locations , embargoed shipments to the most congested areas and ensured the movement of only fully loaded freight cars . By July , only 60,000 cars were stuck at East Coast ports ; the car shortage of “ empties ” had shrunk to only 33,000 .
Those voluntary actions taken by the railroads were somewhat successful in lessening the congestion of the nation ’ s railway network . However , by early November the number of loaded railroad cars at the East Coast ports rose again to more than 180,000 . Moreover , the movement of cargo-laden vessels ready for overseas trips to Europe was hampered by the chronic lack of coal deliveries — a condition also related to the railroad system ’ s congestion . At the same time , the car shortage that had declined during the summer rose again to more than 148,000 . Shippers wary of their ability to obtain the cars when needed began to keep as many empties as they could at all times .
In late November , the RWB took the drastic action of ordering the railroads to pool the use of all locomotives , freight cars , terminals and trackage rights everywhere east of Chicago . Only a week later , however , the ICC sent Congress a special report suggesting that the voluntary actions the companies had been taking could never succeed in sufficiently improving the functionality of the nationwide railway system . It advised the federal government to either 1 ) help the railroad
American Red Cross railroad car , 1917 .
industry operate as one consolidated organization by suspending most anti-trust laws or 2 ) take federal possession and control of the entire railroad system .
The day after Christmas , President Woodrow Wilson used his authority under the Army Appropriations Act of June 1916 to take possession of the nation ’ s railroads as a war measure . In proposing the legislation needed to formalize the details of this takeover , he asked Congress to 1 ) guarantee the government would maintain the companies ’ assets in good repair and 2 ) to pay them a sum equivalent to their average net operating income in the three years ending June 30 , 1917 , plus another amount to cover the costs of maintenance . ( The total payment eventually came to just over $ 1 billion .)
The President appointed Treasury Secretary William G . McAdoo as director general of the new United States Railroad Administration ( USRA ). McAdoo understood the government could not on its own direct the operations of more than two million railroad workers . He wisely used the backbone of the organizational scheme developed in early 1917 by Daniel Willard in his work as one of the most effective members of the only minimally functional National Defense Advisory Committee ( NDAC ). McAdoo adjusted that structure by organizing the industry into seven geographic regions ; he also created specialized supervisory sections for the coordination of Accounting , Capital Expenditures , Finance and Purchases , Law , Labor , Operations and Traffic .
The director general filled the roles of regional director , district director and other supervisors with experienced railroad managers , i . e ., the key employees of the nation ’ s railroads . He made it clear that as employees of the USRA , those executives should suspend their dedication to their individual companies . They were to work solely for the goal of using the national railroad system to help the country deal efficiently and effectively with its participation in the war .
The March 1918 Federal Control Act included provisions calling for maintaining the railroads ’ assets in good repair and paying the companies a sum equivalent to their average net operating income in the three years ending June 30 , 1917 . It also suspended all anti-trust and anti-pooling laws , permitted the USRA to approve new rates , fares and regulations without requiring time-consuming ICC oversight hearings and committed the government to returning the railroads to their private owners within 21 months of the signing of a peace treaty ending the war .
In building on the moderately successful actions of the RWB , the fully empowered USRA mandated many policies that went beyond the desires or the authority of that voluntary organization . The most impactful involved the joint use of locomotives , freight cars , terminals , railroad yards , engine houses , repair facilities and other assets . The agency made changes in various operational areas , some of which are noted below .
• It directed railroads to ignore shippers ’ designation of a specific route if they believed an alternate route would offer better speed and efficiency .
• It made the pooling of freight cars much more complete than had the RWB and waived the previous practice of paying per diem charges for hired cars .
• It rationalized and streamlined 40 railroads ’ use of multiple terminals , passenger stations and switching yards within Chicago ’ s 2,500 square mile terminal district .
• It permitted one operator ( Baltimore and Ohio ) moving freight between McKeesport and New Castle , PA , to use the tracks of two others ( Pittsburgh & Lake Erie , and Pennsylvania Railroad )
36 FINANCIAL HISTORY | Spring 2024 | www . MoAF . org