USRA and Utah Railroads

This page was last updated on July 1, 2018.

United States Railway Administration (USRA)

December 28, 1917
President Woodrow Wilson took control of the U. S. railroads, as of December 28, 1917:

"Now, Therefore, I, Woodrow Wilson, President of the United States, under and by virtue of the powers vested in me by the foregoing resolutions and statute, and by viture of all other powers thereto me enabling, do hereby, through Newton D. Baker, Secretary of War, take possession and assume control at 12 o'clock noon on the twenty-eight day of December, 1917, of each and every system of transportation and the appurtenances thereof locat ed wholly or in part within the boundaries of the cont inental United States and consisting of railroads, and owned or controlled systems of coastwise and inland transportation, engaged in general transportation, whether operated by steam or by electric power, including also terminals, terminal companies and terminal associations, sleeping and parlor cars, private cars and private car lines, elevators, warehouses, telegraph and telephone lines and all other equipment and appurtenances commonly used upon or operated as a part of such rail or combined rail and water systems of transportation; - to the end that such systems of transportation be utilized for the transfer and transportation of troops, war material and equipment, to the exclusion so far as may be necessary of all other traffic thereon; and that so far as such exclusive use be not necessary or desirable, such systems of transportation be operated and utilized in the performance of such other services as the national interest may require and of the usual and ordinary business and duties of common carriers." (Presidential Proclamation 1419 -- Government Assumption of Control of Transportation Systems, December 26, 1917)

March 21, 1918
The United States Railway Administration (USRA) took over the operation of America’s railroads (including Bingham & Garfield) to improve the efficiency of America’s railroads during World War I. It continued to operate and “administer” the railroads until March 1, 1920. (Railway Administration Act of 1918, Pubic Law 65-107, 40 Stat. 451; Approved March 21, 1918; affirming President Wilson's executive order of December 26, 1917, taking control of the nation's railroads)

March 1, 1920
The United States Railway Administration (USRA) returned control of the nation's railroads (including Bingham & Garfield), from government control due to World War I, back to the railroad companies. Included in the enabling Esch–Cummins Act was a provision to allow the ICC to control the railroads profits and rate of return for investments.

Jeff Asay wrote about the end of the USRA in his book, The Iron Feather, an excellent book about Western Pacific history.

Transportation Act of 1920 -- Congress finally agreed on how to return the railroads to private control with passage of the Esch-Cummins Act, also known as the Transportation Act of 1920, that was signed into law in February 1920, and became effective March 1st. The Esch-Cummins Act was a complex and complicated piece of legislation that ramped up the nature and reach of federal regulation over the industry. Some of it was reasonable; some of it was not. In any event, nationalization did not happen, but Congress substituted more government control instead.

The Transportation Act of 1920 turned out to be one of the more significant railroad laws enacted by Congress. Most importantly, it gave the Interstate Commerce Commission greater control over tariffs, allowing the commission to set both minimum and maximum rates and requiring the railroads to give prior notice of rate changes. Construction and abandonment of railroad lines now fell under ICC jurisdiction, no longer subject to the whims of state railroad commissions. The Act also established the so-called "recapture" provisions, the offspring of the valuation fiasco. Recapture would require certain "excess" earnings (over 6 percent) to be refunded by the railroads to the commission for redistribution to the unfortunate carriers who did not do as well. Lastly, the Act set up a labor board to resolve wage disputes, a job at which it was quite unsuccessful.

The industry's net income dropped by almost 67 percent in the 1919-20 period. This produced a return of about three percent on the tentative valuation of railroad assets as determined by the ICC up to that time, only about half of the target rate (6 percent). (Asay footnote: "Railway Age, August 13,1921, 301-304. The initial rate of return set by the Transportation Act of 1920 was 5-1/2 percent. The ICC added another 1/2 percent as permitted by the Act. Then the ICC reduced the number to 5-3/4 percent in 1922. These percentages were only targets, not guarantees.")

On the cost side, the situation was grim. McAdoo had granted large wage increases to rail labor during his tenure with the USRA. Not only did labor expect to keep those gains, it began to demand further increases in 1920 and 1921. Rate increases to keep pace with wages were problematic, especially with the farm lobby already seeking a rollback on some of the rates that McAdoo had increased. The prospect of labor unrest looked quite likely in the early 1920s as the railroads came to realize that only by cutting wages could they hope to squeeze out a profit.

Against this backdrop, positive and negative, Krech regained control of the Western Pacific Railroad and began to seek retribution against SP and the USRA. Krech had been smacked down handily by the USRA under McAdoo when it ended his control of the WP railroad and the flow of income to the holding company. WP's treatment at the hands of SP and USRA was nothing short of despicable. The first thing WP did was terminate the paired track operation in Nevada effective March 1st when the agreement expired by its terms (the end of federal control). Krech and WP President C. M. Levey did not worry so much about giving up the SP rental payments as they did about putting things back the way they used to be and starting over. Besides, SP's extra traffic had pounded WP's light 85-lb rail into the dirt (much of it wasn't ballasted) and SP hadn't provided enough money to keep it maintained.

While Krech was focused on putting the WP back the way it was before the war, he also wanted to show the USRA that he was not one to forgive and forget. (Asay footnote: "The USRA remained in existence after March 1, 1920 to administer claims and wind up its affairs. It had no real powers, however.")

On April 10, 1920, hardly more than a month after federal control ended, WP filed its damage claim against the USRA for $14,347,007.70, plus the return of funds and equipment that actually belonged to WP but had been appropriated by the USRA. The amount included lost net income far in excess of the $1.9 million originally calculated by the ICC plus losses for equipment and roadway damages.

(Read the Wikipedia article about the Esch–Cummins Act)

(Read the Wikipedia article about the USRA)

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