Esch-Cummings Transportation Act 41 Stat. 456 (1920)

• Author: David Gordon
• Pages: 922

Page 922

Congress favored the return of the railroads to private ownership and operation after government control during WORLD WAR I. This act accomplished that objective and altered Congress's regulatory approach. It did not seek to prevent abuses so much as to strengthen the industry and foster the public interest. The act granted the Interstate Commerce Commission extensive new powers including the authority to set minimum rates, oversee fiscal operation of the roads, regulate acquisitions and consolidations, and supervise services. One provision prescribed a rate-making rule to assure "a FAIR RETURN upon the aggregate value of the railroad property," allowing the ICC to determine what constituted such a return. A recapture clause, inserted to protect weaker lines, required that roads earning a return over six percent divide that profit between a reserve fund for their own stability and a general fund (administered by the ICC) to compensate those railroads earning under four and one-half percent. The Supreme Court sustained this clause in DAYTON-GOOSE CREEK RAILWAY V. UNITED STATES (1924). The act...