Mr. MAHAFFIE. The members of the committee are not under Section 77 entitled to compensation. We have so held many times, and I recommended, as a matter of fact, when the act was amended that nobody get compensation out of these estates. But the Judiciary Committee compromised my position after hearing from people who took the opposite view and provided that members of the committee be not compensated, but that they be authorized subject to maxima to be set by us and subject to approval by the court to collect their expenses including their lawyers fees.

Senator TOBEY. The Commission was also empowered, was it not, to determine whether any security-holders' committees or groups should be permitted to solicit proxies, to pass upon their circulars and decide what might be said or might not be said?

Mr. MAHAFFIE. Yes, sir.

Senator TOBEY. And to consider who should be allowed to intervene in reorganization proceedings?

Mr. MAHAFFIE. Well, the Commission has that authority. My recollection is it has it under the Interstate Commerce Act rather than under section 77.

Senator TOBEY. In all such work, as well as in studying proposed reorganization plans and in drafting Commission reorganization plans, the staff of the Finance Bureau were the technical staff aiding the Commission or its Finance Division; is that right?

Mr. MAHAFFIE. In the main; yes, sir, though a Commissioner can, if he wants, use other staff members including the men in his own office. Senator TOBEY. That would be the natural procedure?

Mr. MAHAFFIE. In the main that is correct.

Senator TOBEY. When this new work placed on the Commission by section 77 was assigned for staff purposes to the Finance Bureau, it was not only added to the work of the preceding decade with respect to new security issues, but was molded so far as possible into the processes and methods established for that earlier financial work; is that true?

Mr. MAHAFFIE. That is subject to this qualification: We set up a separate section when we were given this assignment, and we brought in men almost wholly for that section from other Bureaus of the Commission than the Finance Bureau, mainly the Bureau of Valuation. And that section-Loans and Reorganization, we call it, because at that time we had to pass on RFC loans also-that section has continued to be manned by persons other than people who had earlier experience in the Bureau of Finance.

Senator TOBEY. Insofar as new methods had to be developed, did Division 4 or its chairman or the Finance Bureau consult you for suggestions and advice?

Mr. MAHAFFIE. Well, I was on the Division 4.

Senator TOBEY. You were?

Mr. MAHAFFIE. So I probably made some suggestions myself. Senator TOBEY. We all do that and sometimes they are pretty good

too.

Mr. MAHAFFIE. I am sure.

Senator TOBEY. That was the custom, was it not?

Mr. MAHAFFIE. I was in all of that work.

Mr. MAHAFFIE. Yes, sir. I was only making the point it was as a member of the Division rather than

Senator TOBEY. This is very practical. If anyone on the Commission would be consulted beside members of the Finance Division, it would naturally be yourself, would it not?

Mr. MAHAFFIE. Well, I was a member of the Finance Division.
Senator TOBEY. Yes.

Mr. MAHAFFIE. And I don't know———

Senator TOBEY. We will put it this way: And of the various Commissioners who from time to time were in that Division, you at all times had greater knowledge of the way the Finance Bureau works and of its staff than other Commissioners, did you not?

Mr. MAHAFFIE. I doubt if I had much closer knowledge than Commissioner Meyer.

Senator TOBEY. I think you are pretty modest. Have not your services on the Finance Division as one of its members extended for over 20 years?

Mr. MAHAFFIE. Yes, sir.

Senator TOBEY. Has not your period of service on that Division been much longer than any other member of the Division 4?

Mr. MAHAFFIE. Longer than any other member at the present time, yes, sir.

Senator TOBEY. Yes. When you take into account your 8 years as Director of the Finance Bureau, is not your special participation in finance matters far greater, in point of time and in number of cases, than any of the other Commissioners?

Mr. MAHAFFIE. Than any other Commissioner now on the Commission.

Senator TOBEY. Yes.

Mr. MAHAFFIE. I think so, yes, sir. I suspect Commissioner Meyer, having started in 1920 on that work, probably had a longer experience than I had.

Senator TOBEY. Commissioner Eastman had many years on Division 4. did he not?

Mr. MAHAFFIE. That is correct.

Senator TOBEY. During some of the most crucial years in the reorganization work, was not a considerable portion of his time taken up with his work as coordinator and with other special matters-I refer to his work as Federal Coordinator of Transportation and other absorbing tasks outside the area of railroad reorganization?

Mr. MAHAFFIE. Coordinator, I think, didn't interfere much with it, but ODT did, and the time he was on ODT he had comparatively little to do with the finance work.

Senator TOBEY. Do you know of any action by the United States Supreme Court overruling any reorganization plan issued by the Commission under section 77 of the Bankruptcy Act?

Mr. MAHAFFIE. Yes, sir.

Senator TOBEY. What was that?

Mr. MAHAFFIE. The first one I have in mind was the Milwaukee. Senator TOBEY. And subsequently?

Mr. MAHAFFIE. Subsequently we revised it and they didn't disapprove it.

Senator TOBEY. Do you know of any action by the Supreme Court overruling any forfeiture provisions of any Commission plan under section 77?

Mr. MAHAFFIE. The members of the committee are not under Section 77 entitled to compensation. We have so held many times, and I recommended, as a matter of fact, when the act was amended that nobody get compensation out of these estates. But the Judiciary Committee compromised my position after hearing from people who took the opposite view and provided that members of the committee be not compensated, but that they be authorized subject to maxima to be set by us and subject to approval by the court to collect their expenses including their lawyers fees.

Senator TOBEY. The Commission was also empowered, was it not. to determine whether any security-holders' committees or groups should be permitted to solicit proxies, to pass upon their circulars and decide what might be said or might not be said?

Mr. MAHAFFIE. Yes, sir.

Senator TOBEY. And to consider who should be allowed to intervene in reorganization proceedings?

Mr. MAHAFFIE. Well, the Commission has that authority. My recollection is it has it under the Interstate Commerce Act rather than under section 77.

Senator TOBEY. In all such work, as well as in studying proposed reorganization plans and in drafting Commission reorganization plans, the staff of the Finance Bureau were the technical staff aiding the Commission or its Finance Division; is that right?

Mr. MAHAFFIE. In the main; yes, sir, though a Commissioner can, i he wants, use other staff members including the men in his own oflice. Senator TOBEY. That would be the natural procedure?

Mr. MAHAFFIE. In the main that is correct.

Senator TOBEY. When this new work placed on the Commission by section 77 was assigned for staff purposes to the Finance Bureau, it wa not only added to the work of the preceding decade with respect t new security issues, but was molded so far as possible into the proc esses and methods established for that earlier financial work; is tha true?

Mr. MAHAFFIE. That is subject to this qualification: We set up separate section when we were given this assignment, and we brougl in men almost wholly for that section from other Bureaus of the Con mission than the Finance Bureau, mainly the Bureau of Valuation And that section-Loans and Reorganization, we call it, because a that time we had to pass on RFC loans also-that section has continue to be manned by persons other than people who had earlier experienc in the Bureau of Finance.

Senator TOBEY. Insofar as new methods had to be developed, di Division 4 or its chairman or the Finance Bureau consult you for sus gestions and advice?

Mr. MAHAFFIE. Well, I was on the Division 4.

Senator TOBEY. You were?

Mr. MAHAFFIE. So I probably made some suggestions myself. Senator TOBEY. We all do that and sometimes they are pretty goo

too.

Mr. MAHAFTIE. I am sure.

Senator TOBEY. That was the custom, was it not?

Mr. MAHAFFIF. I was in all of that work.

Map. Yes, sir. I was only making the point it was as Division rather than--

IY. Tas is very practical. If anyone on the Commiscsulted beside members of the Finance Division, it Tay be yourself, would it not?

*.*. Well, I was a member of the Finance Division. Lor. Yes.

Mo. And I don't know——

1. We will put it this way: And of the various Comfrom time to time were in that Division, you at all Verknowledge of the way the Finance Bureau works and a”, other Commissioners, did you not?

vær. I doubt if I had much closer knowledge than Com

Mover.

Ir. I think you are pretty modest. Have not your
France Division as one of its members extended for

Vroer. Yes, sir.

SIFY. Has not your period of service on that Division ger than any other member of the Division 4?

Voz. Longer than any other member at the present time,

•TY Yes. When you take into account your 8 years as Finance Bureau, is not your special participation in

rs far greater, in point of time and in number of cases, of t... other Commissioners?

V Hov. Than any other Commissioner now on the Com

Trir. Yes.

Mn. Its k so, yes, sir. I suspect Commissioner Meyer, gon 1920 on that work, probably had a longer experi

r. That is correct.

Day. Durag some of the most crucial years in the reorwas not a considerable portion of his time taken up sas coordinator and with other special matters-I refer - For Coordinator of Transportation and other side the area of railroad reorganization?

Coordinator, I think, didn't interfere much with it, ; the time he was on ODT he had comparatively little ate work.

1. Do you know of any action by the United States overtag any reorganization plan issued by the tion 77 of the Bankruptcy Act!

1.

Y, xir.

Wat was that?

The first one I have in mind was the Milwaukee. -1. And sul sequently?

1. gently we revised it and they didn't dis

1. Do you know of any action by the Supreme Court ffure provisions of any Commission plan under

Mr. MAHAFFIE. No. And why they upset us on the Milwaukee, was that we had gone further than they thought was permissible in taking care of some obligations that were somewhat junior, as I recall.

Senator TOBEY. In 1943 the Supreme Court had before it one of the first of your section 77 reorganization plans, namely, the Western Pacific; did it not?

Mr. MAHAFFIE. I think that was the first.

Senator TOBEY. And they upheld your plan in that case on March 15, 1943; is that correct?

Mr. MAHAFFIE. They upheld it.

Senator TOBEY. Yes.

Mr. MAHAFFIE. As to the date I am not too sure.

Senator TOBEY. According to the Supreme Court opinion in that case, your Commission ruled that, and I quote:

The claims of the unsecured creditors of the Western Pacific Railroad Corp., and of the Western Realty Co., have no value, and hence no securities or cash should be distributed under the plan with respect to those claims.

Is that correct?

Mr. MAHAFFIE. I should think it is. I haven't it before me.

Senator TOBEY. And the Supreme Court upheld your ruling completely, did it not, in the Western Pacific case?

Mr. MAHAFFIE. Yes, sir.

Senator TOBEY. In upholding the Commission's forfeiture plan the Court relied greatly on your judgment as a body of experts; did it not? Mr. MAHAFFIE. I hope so.

Senator TOBEY. The Court said and I quote:

No official body in the country is better qualified by reason of experience, ability, and specialized knowledge, than is the Commission to find the ultimate facts as to the debtor.

In giving your Commission the green light to wipe out any securities you considered worthless, the Supreme Court referred to

the advantages of utilizing the facilities of the Commission for investigation into the many-sided problems of transportation service, finance, and public interest involved in even minor railroad reorganizations and utilizing the Commission's experience in these fields for the appraisals of values and the development of a plan of reorganization, fair to the public, creditors, and stockholders. Do you recollect that language to the effect that your Commission were specially qualified to develop railroad reorganization plans that would be fair to the public, creditors, and stockholders?

Mr. MAHAFFIE. I know the Court has frequently made statements of that character, and I have no reason to doubt they did in that case. Senator TOBEY. In this Western Pacific case, the plan that you developed as being fair to stockholders wiped out the preferred and common stockholders completely; did it not?

Mr. MAHAFFIE. Yes, sir.

Senator TOBEY. You held the stock to be of no value; did you not? Mr. MAHAFFIE. Yes, sir.

Senator TOBEY. In that same case, the plan you developed as being fair to creditors wiped out some of the creditors entirely and others in part, did it not?

Mr. MAHAFFIE. I don't recall that any class of creditors was wiped out, sir.8