Falcon48 The problem the government faced in 1970 wasn't so much that PC was "too big to fail" Rather, it was twofold.
The problem the government faced in 1970 wasn't so much that PC was "too big to fail" Rather, it was twofold.
Well, just being thorough, trains magazine doesn't seem to agree with your position.
Going back and reading the January '99 issue (Dedicated to Conrail btw, titled "Mission Accomplished) on page 77 it reads " Penn Central was created February 1, 1968, by merger of Pennsylvania and New York Central. PC entered bankruptcy on June 21, 1970. Because of PC's failure and it's size, the federal government created Conrail, to which PC was conveyed on April 1, 1976"
This issue is, tremendous reading in light of some opinions expressed here in this thread.
SALfan erikem It also didn't help that the physical plant of the RR's got run down in WW2 due to the high level of traffic causing maintenance to be deferred, and forced to pay tax on the "income" resulting from the deferred maintenance. This was particularly a problem for the lines that made up Conrail. - Erik P.S. Paul D. North posted some PRR ads from late WW2 referring to the tax on deferred maintenance. Understand, I don't hold myself out to be an expert, but I don't know that the railroads were all that rundown at the end of WWII. One of the ways RR's could avoid the "excess profits tax" put in place during WWII was to spend money on track, facilities and new cars, and from what I've read most of them spent all they could (given wartime material and manpower shortages) on those things. In a two-part article in TRAINS in 1979 (I think), one of the reasons given for KCS's physical plant near-collapse in the late 1970's was that they had replaced crossties like mad during WWII, and hadn't replaced any since then.
erikem It also didn't help that the physical plant of the RR's got run down in WW2 due to the high level of traffic causing maintenance to be deferred, and forced to pay tax on the "income" resulting from the deferred maintenance. This was particularly a problem for the lines that made up Conrail. - Erik P.S. Paul D. North posted some PRR ads from late WW2 referring to the tax on deferred maintenance.
It also didn't help that the physical plant of the RR's got run down in WW2 due to the high level of traffic causing maintenance to be deferred, and forced to pay tax on the "income" resulting from the deferred maintenance. This was particularly a problem for the lines that made up Conrail.
- Erik
P.S. Paul D. North posted some PRR ads from late WW2 referring to the tax on deferred maintenance.
Understand, I don't hold myself out to be an expert, but I don't know that the railroads were all that rundown at the end of WWII. One of the ways RR's could avoid the "excess profits tax" put in place during WWII was to spend money on track, facilities and new cars, and from what I've read most of them spent all they could (given wartime material and manpower shortages) on those things. In a two-part article in TRAINS in 1979 (I think), one of the reasons given for KCS's physical plant near-collapse in the late 1970's was that they had replaced crossties like mad during WWII, and hadn't replaced any since then.
In the case of the PRR, they wanted to set aside money for covering deferred maintenance (sounds like ethical accounting to me), but were told by the government that the set aside money would be treated as profit even though it was clearly deferring spending due to giving priority to wartime traffic. Had the government officials making that call been corporate management in the last couple of decades, they would have been facing SEC charges.
oltmannd One of the alternatives that was considered was "firewall" Conrail. The eastern half of the RR was really a big terminal RR serving the NEC with almost no alternative for service. There was still a lot of rail traffic flowing into the area, even as the amount flowing out was continuing to wane. The western half was mingled in with NW, C&O and B&O most places Conrail went. You could have set up Conrail as a Pittsburgh/Buffalo east "terminal" railroad that almost certainly would have remained a ward of the state and sold the rest off to the highest bidder. I think being stuck with subsidies forever was less palatable than taking the chance that "Big Conrail" could succeed.
One of the alternatives that was considered was "firewall" Conrail.
The eastern half of the RR was really a big terminal RR serving the NEC with almost no alternative for service. There was still a lot of rail traffic flowing into the area, even as the amount flowing out was continuing to wane. The western half was mingled in with NW, C&O and B&O most places Conrail went.
You could have set up Conrail as a Pittsburgh/Buffalo east "terminal" railroad that almost certainly would have remained a ward of the state and sold the rest off to the highest bidder.
I think being stuck with subsidies forever was less palatable than taking the chance that "Big Conrail" could succeed.
Yes, and that was the reason for Conrail.
I remember the Pittsburgh "firewall". The idea was that no railroad could be economically viable east of Pittsburgh under the then in force government regulations. There were several willing purchasers for Penn Central lines west of Pittsburgh. There were no such willing buyers for the lines east of Pittsburgh.
So, the choice was to either: 1) basically shut down rail service east of Pittsburgh or, 2) have a government take over that would loose money and be a permanent drain on the taxpayers. The politicians and bureaucrats went with the later.
Then the politicans and bureaucrats got their own noses stuck in the pig sty they had created. The head of Conrail told 'em that they would either deregulate or Conrail would be a permanent drain on the US Treasury. The politicians and bureaucrats then chose to deregulate.
Conrail was an unfortunate, but necessary, step that forced the government to remove silly, generally never good, certainly obsolete, economic regulations. It took the destruction of the New York Central and Pennsylvania to get the government to act. People lost their jobs and their invested money because of the dumb regulations. But absent a crisis laid on their doorstep the government would not act.
That's why Conrail was necessary.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
Murphy Siding oltmannd Worse than that, the railroad assets that Conrail purchased from PC were price less than scrap value! (meaning there was negative value in being forced to operate the assets as a common carrier railroad) Can you explain this a little better? Conrail forced to buy assets at a higher price than their scap value?
oltmannd Worse than that, the railroad assets that Conrail purchased from PC were price less than scrap value! (meaning there was negative value in being forced to operate the assets as a common carrier railroad)
Worse than that, the railroad assets that Conrail purchased from PC were price less than scrap value! (meaning there was negative value in being forced to operate the assets as a common carrier railroad)
Other way around. Conrail paid $6 a line-foot for assets. PC could have scrapped the property for more than that. Still, it was fair value, because the assets came with the stipulation you had to run them as a railroad - which had a negative net value.
If anybody wants to know the truth and what was done, find the USRA reports on hearings and ascertainments they made at the time. Then go to the library and check out Loving and others' books about Penn Central and Conrail. The thing to remember is that a lot of these proceedings, despite what they portray, were interpreted not on service merits but on income merits vs investor and stock merits.
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Convicted One Progressivism can be challenging to absorb.
Progressivism can be challenging to absorb.
Convicted One Murphy Siding Ironicaly, it sounds like the answer, was to pare back, and rebuild basic infrastructure, but government policies would not allow that. Once the government did that, by way of Conrail, then the private investment came back. I know somebody will jump all over me with the "new engine in a junked car" analogy, but I have to brin this up as well. With the NYC/PRR merger, so much of their combined plant was redundant, that when that paring away was complete, such a huge chunk of their net worth became worthless, the best remedy was to let it crash upon the rocks. And get a fresh start. All those bridges and stations no longer needed, still represented a lot of stranded capital that would NEVER do the combined entity any good, Couldn't even borrow against it.
Murphy Siding Ironicaly, it sounds like the answer, was to pare back, and rebuild basic infrastructure, but government policies would not allow that. Once the government did that, by way of Conrail, then the private investment came back.
Ironicaly, it sounds like the answer, was to pare back, and rebuild basic infrastructure, but government policies would not allow that. Once the government did that, by way of Conrail, then the private investment came back.
I know somebody will jump all over me with the "new engine in a junked car" analogy, but I have to brin this up as well.
With the NYC/PRR merger, so much of their combined plant was redundant, that when that paring away was complete, such a huge chunk of their net worth became worthless, the best remedy was to let it crash upon the rocks. And get a fresh start.
All those bridges and stations no longer needed, still represented a lot of stranded capital that would NEVER do the combined entity any good, Couldn't even borrow against it.
Murphy Siding What I do have difficulty with, is writers that try to explain something in the past, using present day perspectives.
What I do have difficulty with, is writers that try to explain something in the past, using present day perspectives.
MP173 I am very late to the party...it is one that is of interest to me. A few points: 1. Take a look at Penn Central in 1970 Official Guide. The problem is obvious in the map. 2. Industry was leaving the Northeast. 3. PC and others were left with short hauls into the region at unfavorable divisions of rates. 4. Labor contracts were brutal - 4 and sometimes 5 men crews. 5. New Haven. 6. Forced passenger and commuter service. 7. Very difficult marketing obstacles (ICC). 8. Poor infrastructure within the PC due to deferred maintenance. 9. Green team/red team. 10. Low historic returns in the industry, even outside the territory in question. This would have kept "strong" railroads from entering the market. These and other reasons are listed in the above replies, but I thought a summary was necessary. There are other issues also. So, was the government needed for the rescue? I think reason #10 above basically santlyys no one would have invested in the area without the other 9 issues being addressed. Staggers and other factors cleaned up the mess. Yes, jobs were lost and lines were abandoned, but what is left (CSX and NS) is pretty darned good. Ed
I am very late to the party...it is one that is of interest to me. A few points:
1. Take a look at Penn Central in 1970 Official Guide. The problem is obvious in the map.
2. Industry was leaving the Northeast.
3. PC and others were left with short hauls into the region at unfavorable divisions of rates.
4. Labor contracts were brutal - 4 and sometimes 5 men crews.
5. New Haven.
6. Forced passenger and commuter service.
7. Very difficult marketing obstacles (ICC).
8. Poor infrastructure within the PC due to deferred maintenance.
9. Green team/red team.
10. Low historic returns in the industry, even outside the territory in question. This would have kept "strong" railroads from entering the market.
These and other reasons are listed in the above replies, but I thought a summary was necessary. There are other issues also. So, was the government needed for the rescue? I think reason #10 above basically santlyys no one would have invested in the area without the other 9 issues being addressed.
Staggers and other factors cleaned up the mess. Yes, jobs were lost and lines were abandoned, but what is left (CSX and NS) is pretty darned good.
Ed
Murphy SidingNot to belabor the issue, but I think that was me, not ConvictedOne that mentioned that.
Correction!! Another misattribution. Due credit where credit is due!! It was a good point, Murphy.
C&NW, CA&E, MILW, CGW and IC fan
schlimmShe [Doris Kearns Goodwin] has also been caught several times plagiarizing large chunks of others works.
"Plagiarize plagiarize
Don't let anything evade your eyes."
--Tom Lehrer, also from Harvard.
schlimm All in good fun. And your point about the presentism fallacy: knowingly using current standards, values and (sometimes) knowledge to judge events of another time is a good one, something any good historian tries to avoid, although unknowingly it does happen. The Lincoln biographer, Doris Kearns Goodwin is a great popular writer, but not a trained historian. That may explain her flaws in analysis. .She has also been caught several times plagiarizing large chunks of others works.
All in good fun. And your point about the presentism fallacy: knowingly using current standards, values and (sometimes) knowledge to judge events of another time is a good one, something any good historian tries to avoid, although unknowingly it does happen. The Lincoln biographer, Doris Kearns Goodwin is a great popular writer, but not a trained historian. That may explain her flaws in analysis. .She has also been caught several times plagiarizing large chunks of others works.
schlimmThe quote "The ones you describe may not even be history" was falsely attributed to schlimm when it was in fact made by John WR.
I think some people incorrectly believe that just because something happened in the past it must be history. That isn't always true. One of my professors used to point out that if a leaf falls from a tree that is no a historical event. We need to consider what is and is not history.
It's okay. It's just their way of showing that I am still loved.
Convicted OneBoy, I really stepped on some toes, didn't I?
No good deed shall go unpunished.
Boy, I really stepped on some toes, didn't I?
Regardless, I don't see that this mistake made any of my contextual points less relevant.
HA!! x2
schlimm Murphy Siding Convicted One schlimm The ones you describe may not even be history. All too often, "the victors get to write the history" And victors generally having a vested interest, objectivity frequently suffers. Often the much maligned "revisionist" is the first critic to revisit the accounts of events with any shred of objectivity. Much to the chagrin of those who prefer the victor's version of the story. I agree, except for the revisions I made to your post above. (Look Ma- I'm a revisionist forum poster! ) Being an avid reader of history, I can appreciate different views of the writers, when writing about the same events. What I do have difficulty with, is writers that try to explain something in the past, using present day perspectives. If, for example, something Lincoln did, was not explained in the context of 1860's America, it loses a lot of validity in my opinion. HA! The above is an example of the sort of inaccuracies that are common with non-historians: misleading or even false citations because of misattribution. The quote "The ones you describe may not even be history" was falsely attributed to schlimm when it was in fact made by John WR.
Murphy Siding Convicted One schlimm The ones you describe may not even be history. All too often, "the victors get to write the history" And victors generally having a vested interest, objectivity frequently suffers. Often the much maligned "revisionist" is the first critic to revisit the accounts of events with any shred of objectivity. Much to the chagrin of those who prefer the victor's version of the story. I agree, except for the revisions I made to your post above. (Look Ma- I'm a revisionist forum poster! ) Being an avid reader of history, I can appreciate different views of the writers, when writing about the same events. What I do have difficulty with, is writers that try to explain something in the past, using present day perspectives. If, for example, something Lincoln did, was not explained in the context of 1860's America, it loses a lot of validity in my opinion.
Convicted One schlimm The ones you describe may not even be history. All too often, "the victors get to write the history" And victors generally having a vested interest, objectivity frequently suffers. Often the much maligned "revisionist" is the first critic to revisit the accounts of events with any shred of objectivity. Much to the chagrin of those who prefer the victor's version of the story.
schlimm The ones you describe may not even be history.
The ones you describe may not even be history.
All too often, "the victors get to write the history"
And victors generally having a vested interest, objectivity frequently suffers.
Often the much maligned "revisionist" is the first critic to revisit the accounts of events with any shred of objectivity. Much to the chagrin of those who prefer the victor's version of the story.
Whoops!! my bad. That's what I get for editing inside my clip board, I deleted the wrong text.
Still, I meant my reply to you for the post of yours that WR was replying to.
I somewhat remember the interim between the Penn Central bankruptcy and Conrail. The newspapers carried articles on the wrangling of what to do with rails in the Northeast.
As the process dragged on, the area effected and railroads to become Conrail became clearer. Management of the railroads involved were not happy.
It has been so long ago, but I recall the ailing railroads themselves proposed merging and produced a route map. Areas facing abandonment howled. Their congressmen said it was unworkable. The government had to take over to maintain vital rail service.
The railroads' merger proposal naturally went nowhere. Conrail abandon more trackage in its start up than the railroads themselves had proposed in their merger plan.
If merging the ailing railroads, giving them a free hand and providing them capital would have produced a different result than Conrail is something we will never know.
These and other reasons are listed in the above replies, but I thought a summary was necessary. There are other issues also. So, was the government needed for the rescue? I think reason #10 above basically says no one would have invested in the area without the other 9 issues being addressed.
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