Paved Roads & Public Money. Richard DeLuca

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       Unfair competition. How was a private railroad, responsible for its own infrastructure, supposed to compete with a publicly built highway network?

      Courtesy of the Hartford Courant

      As a result of decisions made in 1903 by J. P. Morgan (banker to the New Haven) and Charles S. Mellen (president of the New Haven) to expand the company’s operations to other modes of transportation in an effort to create a monopoly over transportation services throughout New England, the debt burden of the New Haven increased dramatically. In the years from 1903 to 1913, Morgan and Mellen increased the capitalization of the New Haven from $93 million to $417 million. Of this increase, only $120 million was spent on rail-related properties and improvements; the remaining $204 million was invested in the acquisition of steamboat and trolley properties, often at prices well above their industry values. To make matters worse, many of the purchases were made in a financially questionable manner, using dozens of subsidiary companies to manipulate New Haven assets and create paper profits designed to deceive stock- and bondholders on the true financial condition of the company.

      An investigation of the New Haven’s shady dealings by the Interstate Commerce Commission led to a federal court decree in 1914 intended to divest the transportation monopoly created under Morgan and Mellen of its more controversial assets, including its controlling interest in the Boston & Maine Railroad, as well as its steamboat and trolley properties. These assets were placed into the hands of court-appointed trustees and marked for sale. However, before divestiture could be accomplished, the federal government in 1920 reversed its long-held position against the consolidation of railroads as an instrument of monopoly. Instead, in the Transportation Act of 1920, Congress directed the Interstate Commerce Commission (ICC) to devise a plan to deliberately consolidate the nation’s major railroads into a number of more efficient, more profitable regional systems. It was hoped that by judiciously combining stronger roads with weaker ones and eliminating duplicate services, financially troubled railroads such as the New Haven could be reorganized into a national network of sustainable, but still privately owned railroads. As a result of this change in policy, the New Haven succeeded in having the court decree of 1914 modified to regain control of most of its divested assets. As the New Haven’s annual report notified stockholders in 1925, the court decree “was so modified that all remaining properties taken away from your company in 1914 were returned to it.”⁶¹

      Meanwhile, study after study was completed to determine how best to consolidate the New Haven and its various transportation services with other New England railroads and thereby increase its competitiveness with automotive highway services. Two main alternatives emerged: either to combine the New Haven and other New England roads with strong trunk line roads from outside the region, such as the Pennsylvania Railroad or the New York Central, whose systems provided access to cross-country rail service, or to combine all New England roads into one large regional system, thereby increasing the viability of what was essentially a terminal rail network, designed to collect and distribute freight throughout the region.⁶²

      After more than a decade of shilly-shallying by the railroads, many of which simply refused to discuss the possibility of consolidation, and with the ICC unable by law to impose a consolidation plan on the railroads, the possibility of consolidation as a means to improved rail service disappeared in the 1930s amid the general economic uncertainty of the Great Depression. Which is not to say that the New Haven stood by and did nothing to improve its competitiveness against the onslaught of automobility.

      To begin with, the New Haven in the 1920s converted the equipment it operated on many of its branch lines from steam locomotives to self-propelled, diesel-powered rail bus cars. With a top speed of forty-five miles per hour and needing only a two-man crew to transport up to forty-five passengers, these cars were able to provide passenger and freight service at a fraction of the cost of a traditional steam-driven train. By the 1930s, some branch lines were abandoned altogether while others were converted to larger, sixty-five-passenger gas-electric railcars capable of speeds of fifty-five miles per hour.⁶³

      In 1925, the New Haven Railroad organized the New England Transportation Company, a wholly owned subsidiary created to transport passengers, freight, mail, and express packages throughout the region. The primary purpose of these automotive bus lines was “to provide a coordinated service with the rail company’s trains, reducing the number of station stops, and permitting the discontinuance of some uneconomical train service.” Within a few years, the company was operating more than 150 buses over more than one thousand route miles.⁶⁴