26.4.03

WHO FRAMED ROGER RABBIT RESEARCHED: Professor Newmark did some digging into the National City Lines case and the conspiracy (if there was one) to replace streetcars with buses. Very well researched. He commends this paper, which does a good job debunking the technological-lock-in-by-deep-pockets-sponsor argument (which likely would make such a paper popular at North Carolina State.) I have a couple of nits to pick with the paper. First, I believe it was Walt Kelly (of Pogo, how do I make this thing display in Old English Hymnal Type) who most famously paraphrased Commodore Perry. More significantly, the paper neglects one symptom of the decline of the streetcar that was forestalled by the transit cartel. If, as the paper correctly notes, streetcar companies are regulated utilities granted an exclusive franchise in exchange for supervision of its fares, that social compact means the police power gets used to arrest unauthorized competition, such as Model T owners helping meet the payments on their cars by offering a lift in exchange for a nickel. (That practice got the name "jitney" and most municipalities outlawed them, restricting cars-for-hire to franchised taxicab companies, although the jitney offered faster-than-streetcar service, particularly off-peak, for less-than-streetcar fares.)

Reader Patrick Sullivan, who has contributed to the Roger Rabbit discussion, requested a bit more information about the effect of the Public Utility Holding Company Act on transit properties. The Public Utility Holding Company Act arose in reaction to the fallout from downward-leverage which was particularly lurid in power companies during the Great Depression. Lots of leverage coupled with lots of irreversibilities turns into lots of losses, particularly to owners of the topmost holding company stock. During the run-up of stock prices in the 1920s, those companies were particularly attractive investments for buyers of odd-lots or small numbers of lots, because the leverage in the upward direction can be particularly rewarding. (So, some people thought, was paying $3000 for a warehouse with $10 of earnings and a website. Plus ca change ...)

The Public Utility Holding Company Act is one of these obscure pieces of legislation, I recommend locating the first edition of Clair Wilcox's Public Policies Toward Business, which provides as a hypothetical a particularly lurid collapse of a holding company, as well as presenting the corporate structure of the Insull holding companies at the time of their bankruptcy in 1932. What effect did the Holding Company Act have on streetcars? According to Hilton and Due, The Electric Interurban Railways in America (I'm quoting from the original at p. 179, that's in the government regulation chapter if you're using the 2000 paperback), "In 1935 Congress enacted the Public Utility Holding Company Act; the Securities and Exchange Commission interpreted the provisions concerning the elimination of holding-company systems to require that the power companies divest themselves of their electric railway affiliates and dissolve the pyramided holding company structures. As a consequence, the interurbans that were elements in the holding company systems were separated, usually by public sale of the stock. This was the fate of Illinois Terminal, originally owned by Illinois Power Company, the West Penn, the Ohio Public Service, the Portland Traction lines, the MIlwaukee system, the Monongahela West Penn, and others. Most interurbans had been abandoned before the act became effective." What connection, then, to National City Lines? The conspiracy began in 1937, meaning at about the same time that divestitures of the remaining transit properties began. (In 1938, for example, "Milwaukee Electric Lines" became the short form of The Milwaukee Electric Railway and Transit Corporation, the "Transit" referring to trackless trolleys and motor buses, no more Light, no more Tom Moore Likes Rats and Eats Cooked Onions.) Significantly, the properties named by Hilton and Due, and many of the properties not named (most notably the Chicago interurbans, L system, and surface lines) were among the better interurbans, and some of their home cities are spending large sums of money to replace parts of them today. Perhaps in the absence of the divestitures, the transit divisions of power companies in larger cities could have continued. There may not, however, be sufficient information to determine whether the post-1937 bus conversions were any faster in National City Lines cities than in other cities, or any slower in former holding-company cities than in cities with independent streetcar companies.

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