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10 that Cunard had paid him on account of contracts, as progress payments, ap- proximately $3,700,000. In this case the Cunard Co. was the agent for the government and we stood in the shoes of Cunard in that particular case. I think it is the only case on record where we bought contracts and con- tractural rights, because we were deal- ing with a government. We set up a charge to Hannevig of $3,700,000 as a payment that had been made ito him by Cunard. The award had been made on that particular matter. They have not accepted it, but it is in principle the same as the others. Seeks General Policy When Judge Payne took hold of that position down tiere, he endeav- orec first to establish a big principic to govern each big transaction, and not to trade individually. Second, he went out to get the records of the corporation in harmony with that big transaction. Third, he went out to chart each big transaction so that when he himself had these matters up before him he would be able to pass on them quickly. In other words, he went out to build up the records of the corporation so that judgment and decision might be made on the rec- ords. We afterward paid Hannevig $16.50 net profit per deadweight ton on each ship that he produced. We made an award of just compensation, allowing him amortization, cancella- tion charges, and profit. I think we allow him a profit on the whole trans- action of about $7,100,000, but we say to him. "We charge you against that with having received $3,700,000." The government has made no profit in operating its ships. We_ have never made depreciation or interest on our ships, and have absorbed none of the war amortization on our ships. "The war operation of the merchant marine, constructed or taken over as the result of war, has not been a profitable operation to the government. There is no other relief at this time, however, and the government must carry on. The ships are here and if 1ot operated they will depreciate much more rapidly. The government paid for its ships about $3,800,000,000. At the present time it has possibly 1300 biz steel ships. Now, you must take the value of those ships at the price at which ships will go in order to dc- termine whether or not you can make a profit on those ships. In other words, it is not fair to the govern- nent or to any shipping board that operates in the future to hold those ships at $220 a deadweight ton in order to make a test as to whether they can make a profit. You must bring them down somewhere around a proper THE MARINE REVIEW value, possibly somewhere between $125 and $140 a deadweight 'ton. Taking charge of these vessels, aiter the war was terminated, was in the nature of a liquidation proposition. It will continue as such, under the mandate of congress, up to the time the board has disposed of all the ma- terial, all the ships we now own, and until the shipping boara can function normally, taking care, like the inter- state commerce commission, of the pe- culiar problems that involve a mer- chant miarine. : There is no ready market for ships today. 1 believe there was a ready market io absorb, last December or January and February of this year, -at least 300 or 400 or 500 of the big steamers, cargo boats. I think there was a ready market because the finan- cial coudition of ihis country was then sound, and had we then dropped the price to a proper level--somewhere around $130 or $140 per deadweight ton--something could have been done. In other words, if the government had permitted the shipping board to take that position, that it could sell, and then given a long term in which to pay, the arrangement we afterward worked out, I believe there would have been absorbed by the American mar- ket, somewhere between 300 and 600 of those boats. In December, 1919, the shipping board went up to the commerce com- mittee at the senate, and went up to the merchant. marine and fisheries com. mittee of the house, and they held sessions on the matter of selling the boats. All the reflections were given back and forth, and the opinion of congress, as given by the two commit- tecs having charge of the shipping board, was to the effect that thev should not drop the price of stezi boats, passenger boats or the tankers In other words, the shipping board had the power to sell but, under Judge Payr.e, he made it a point to go to the committees of congress that had charge of the matter so that there might not come any criticism, feeling that congress represented the people. So if there was any error of judgment mad>, it was made because of inability to take care of this big amortization that is now apparent, not only in ship- ping, but in all 'the big underlying' se- curities of America as we see it on the stock market in all the big raw materials, as we see it across the sea and across the country, in cotton and everything else. The United States government cre- ated a preat merchant marine. It paid a big terrific profit. It could no more hold its prices up and sell these boats than the little retailer can hold ithe price of his cotton goods up. In other January, 192] words, Uncle Sam must bravely and courageously meet ,the situation and sell these ships at their value for use in private operation. If it is the intention of congress, as set forth in the Jones bill, to meet this situation, it must courageously and bravely do what Mr, Houston, the secretary of the treasury of the United States, is ask- ing everybody eise to do; the govern- ment inust do the same thing. In my judgment, if the shipping board 'had sold its ships in December, 1919, had induced American investors to buy boats at $185 a .ton, and "had: eqiq. them 600 boats at $185 a ton, they would have broken every shipping company in America that bought at $145 a ton. And they would have de- stroyed any opportunity of ever hav- ing the American people invest in ship securities; because it is a new line of business in this country. Had the ships been sold at that figure, it would have done' just what the shipping board did 'to those who purchased ships from us at $225 and $200 and $185 « ton--they are all in financial trouble now, because the government did not absorb the war amortization, and they have tried to absorb it, with the result that ship securities are today a drug on the market, with even just that little itouch in the situation. In that regard, the government is the owner of 1200 to 1500 ships. It must create a good, clean market in America, so that when the farmer or the laboring man or the widow or the orphan buys from a "trust company, they must have a stable security, and the government must take up and change the contracts already made where it has involved the ship securi- ties across the United States, on past prices. Must Stand Loss The government is not in any differ- ent position than the big business in- stitutions of America, who have to seil their goods in the American market to American investors. In other words, you must have an American investing market in ship securities, or the American people will never absorb these ships for years and years. That means you have got to come down in price; you have to readjust the prices to pioneers who were courageous enough to come in. You must treat the pioneers right. and the government must be courageous enough to take amortization. Before 1914 it 'cost to produce a tanker from $5 to $8 more a ton than it did a steel cargo boat. These figures may be a little bit off, but I take it I may, be pardoned if I do make an error in that as I am not a shipping man myself, although I do investigate