One company doing an insurance business happened to be in a building in which I was, and had been for some 15 years, in Wall Street. We occupied about a third of a floor, and all of a sudden we were told that they were going to take three floors and they moved up and the rest of us had to get out. That is just an indication of the way in which the business of those insurance companies doing maritime business, when they went into war insurance, increased in size, and their profits must have been enormous. After their business has been closed with immense gains, they are now to be surprised, if these plans succeed, by the receipt of millions of dollars to be distributed as dividends, without consideration, for the premiums were probably entirely taken and paid for on a basis of total loss with no help from the Government.

The insurance written before we entered the war was done as neutrals, when neither insurer nor insured was looking for protection or indemnification through our Government; and being, as between them, a matter of contract, and not of tort, the understanding of the parties must govern. If a different understanding arose and was acted upon after we entered the war, that is a fact to be shown by the insurance companies, through a diminution of rates, or in other ways; but the presumption is, that the companies simply clung to their established advantage.

Recognizing fully that the rule of subrogation for the benefit of insurance companies should not be interfered with and that to break down that principle would be to destroy one of the foundation stones of our commerce. However, unless such subrogation was contemplated, these claims have no support as meritorious. To cause American citizens to again put funds into these companies would not be to do equity, and it is the province of equity to step in where the rules of law are deficient. If, nevertheless, there is to be a distribution based on a certain order of payment, other claims of merit should come before these.

Mr. HAWLEY. Do I understand from the first part of your remarks that you would not pay such claims as arise out of the sinking of the Lusitania?

Mr. BLYMYER. I would not, no; because there is no international law which upholds such a principle.

I have presented here a brief which was worked up by a committee of the advocates in the Lusitania case, in which we combed all of the authorities on international law, and there is nothing in it in the nature of conventions, treaties, or of court authority in textbook authorities to uphold that principle. There have been a number of textbooks written in recent years and based upon a statement that was made by a young nephew of the great English admiralty justice, Doctor Lushington, which is to the contrary. He undertook to cite a couple of decisions from the law books, but those decisions have no bearing upon the principle which he announced.

I have given a copy of that brief to the clerk of this committee, and he has stated that it might be published, but it would have to be referred later to the committee. I should like very much to have a copy of that added to the records of the committee, for it has been prepared with extremely great care and by some of the ablest advocates in New York City.

Would that permission be given?

The CHAIRMAN. We have that, I think, in the hearings.

Mr. BLYMYER. Yes; but it has not been ordered printed with the record.

The CHAIRMAN. We have these hearings so expanded that if we keep on nobody will be able to sift anything out of them, I am afraid.

Mr. KEARNS. I think the witness stated that he would not be willing to pay such claims as those arising out of the sinking of the Lusitania. Do you mean that you would not render any judgment against Germany for the sinking of the Lusitania?

Mr. BLYMYER. No. I think that there is no international law which holds that that is a case of piracy; it was an act of war. That is what has been determined by the courts in the State of New York, and it accords with international law.

Mr. KEARNS. How about these private claims?

Mr. BLYMYER. I claim that none of them should be allowed, that to do so would be simply an act of gratuity; the giving away of the people's money to these claimants; or worse, the taking of the money from the Germans without any basis of right and giving it to them. Mr. KEARNS. Would you render a judgment against Germany, or the German government, for that?

Mr. BLYMYER. I would not; and may I say just a word with regard to that?

We should not insist upon the payment the damages for what seems to be something awful unless there is a basis of law for it, because we are going to have international relations with Germany and other countries in the future, and they are going to be continuous; and we must insist upon a due regard for law and nothing but law, and consequently we must not, when we have an opportunity to take advantage, as we have this time, everything being in our hands, to take more than we should.

Mr. KEARNS. My understanding is that the Mixed Claims Commission, a part of which was formed by Germany, has already rendered judgment in these cases.

Mr. BLYMYER. The Germans have conceded it because of the fact that they signed the treaty by which it should be arbitrated, and then they went further and agreed that the umpire to decide should be an American, and they thereby tied their hands. I know that they feel just as I do with regard to the matter, because there are no two ways about it. The authorities are gathered from the English decisions, and they are most abundant upon that point, and there is nothing to the contrary, and they see that that is the way things are going, but their hands are tied, that they have not any opportunity of coming before anybody or anyone to express their real feelings in the matter; but they have their feelings, nevertheless, and some day we may regret very much that we are taking this step.

The CHAIRMAN. I fear that you have overlooked the fact that those who have laid down the principle to which you refer did not start out with the same premise as in this case. The claim for damages sustained by people who were on board the Lusitania was based on the fact that it was a violation of the laws of warfare, a violation of international law as applied to the rules and principles of warfare when the Lusitania was sunk. It was not an ordinary act of war.

Mr. BLYMYER. Well, we come back to this principle of international law, that every now and then there has been some new invention. There has been gunpowder, there has been the airplane, there has been the submarine, etc., and then poisonous gases and bombs, and

The CHAIRMAN (interposing). Let me ask you this, and perhaps it would make your position clearer: Do you think that in case of war an enemy has a right to torpedo a passenger vessel without giving any warning or asking it to surrender, or anything?

Mr. BLYMER. I think that no nation has a right to use a passenger vessel for the purpose of transporting munitions of war.

The CHAIRMAN. That is a question as to which there has been much dispute.

Mr. BLYMER. I think that the rule has always prevailed, and is still the rule, that the object of maritime warfare is the destruction of the property of the enemy on sea. The second Hague conference would not change the rule with regard to enemy property, but did provide with regard to the safety of neutral vessels. It balked when it came to any ruling with regard to the protection of enemy vessels, belligerent vessels, save those that happened to be on the sea at the time that the war broke out.

The CHAIRMAN. Our Government has maintained a very contrary doctrine. Our Government has never been willing to admit that in case of war the enemy had a right to torpedo passenger vessels without giving any warning or any demand for it to surrender, or to halt, or anything of that kind.

Mr. BLYMYER. I wrote a number of letters to President Wilson upon the subject shortly after the torpedoing of the Lusitania, and then I brought the matter before him in a letter which was supported by cases, etc., in February of 1917, just a couple of months before he appeared before Congress to urge our going into the war, and if there was ever an occasion on which to use the argument that the sinking of the Lusitania was an act of war, casus belli, it was then; but Mr. Wilson, if you will remember, in his address before Congress did not mention the Lusitania.

We are spending hundreds of millions of dollars to maintain an effective Navy. In a possible war with Great Britain, the greater part of her fleets would be in the North Atlantic where we could not venture with surface-borne vessels. Is Congress, in this matter, to establish a principle by which passenger vessels may bring munitions and men undisturbed by submarines to Canada, simply because some of our simple-minded citizens believe, that the first rule of warfare is to care for the lives of passengers aboard belligerent vessels; that the right to travel in them is inalienable, although never enunciated heretofore; and that, if the British crowd in so many women and children that they can not be taken off by the submarine, we must allow them to proceed and behold that our efforts with our Navy have been rendered vain by our own act?

The CHAIRMAN. Well, if the committee should conclude that the torpedoing of the Lusitania was a perfectly justifiable act on the part of Germany, probably they will concur in your views.

Mr. BLYMYER. If the committee goes thoroughly into it and looks arpon both sides, and sees the great detriment it may be to the United

States to advocate such a policy and insist upon it, I think that the committee will decide the other way.

Now, that is set forth in this brief.

The CHAIRMAN. And the brief is on file.

Mr. BLYMYER. There is just one copy of it, unfortunately, for such a large committee.

The CHAIRMAN. Probably you would be able to furnish extra copies for the members who might want to read it.

Mr. BLYMYER. I have a couple that I can give.

The CHAIRMAN. Very well. The committee will stand adjourned until 10.30 o'clock to-morrow morning.

(Whereupon, at 4.46 o'clock p. m., the committee took an adjournment until Wednesday morning, November 24, 1926, at 10.30 o'clock a. m.)

HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, November, 24, 1926.

The committee met at 10.30 o'clock a. m., Hon. William R. Green (chairman) presiding. The CHAIRMAN.

morning.

Colonel McMullen is the first witness this

FURTHER STATEMENT OF LIEUT. COL. J. I. MCMULLEN

Colonel MCMULLEN. Mr. Chairman, at the request of the committee, I have revised the plan to include the new figures furnished by the Alien Property Custodian. I should like, if it is agreeable to the committee, to proceed to present the plan and then to suggest any alternatives the committee desire.

The CHAIRMAN. Very well; we will let the colonel proceed and conclude his statement, then, before we ask questions.

Colonel MCMULLEN. The plan suggested yesterday was to set up an agency as a sort of clearing house to which would be assigned all of the assets. Those assets would include the seized alien property amounting to $266,537,000; the undisclosed enemy assets amounting to $5,000,000; the unallocated interest amounting to $26,000,000; the estimated value of the ships, radio station, and patents $40,960,000; reparation payments amounting to $25,000,000, to 1928; army of occupation payments amounting to $27,725,000-making a total of $391,222,000 of so-called assets.

Now the proposed disbursements from this fund by the agency I have spoken of would be, first, the payment of the awards of the Mixed Claims Commission amounting approximately to $250,000,000. Mr. HAWLEY. Going back for a minute to the amount of the assets, you gave the total as $391,000,000. If I have figured it correctly, I only make it $299,000,000.

Colonel MCMULLEN. There are $266,537,000 of alien property plus the undisclosed enemy assets.

The first payment would be the awards of the Mixed Claims Commission, estimated at $250,000,000; then a pro rata distribution to alien enemies of the value of the seized property, including

the ships, radio station, and patents. This would amount to $141,222,000, leaving a balance due the enemy aliens of $166,275,000. This amount could be reduced annually by payments of the reparation and Army of occupation costs, amounting approximately to $25,000,000 per year, which would complete the payments in six years and eight months.

Thus the amount returned at once to the alien enemies would amount to 45.9 per cent, leaving a balance of 54.1 per cent of the property at present held and adding to the amount we now return the amount returned under the Winslow Act, it would amount to $189,907,000, and would, in percentage, amount to 53.3 returned.

The advantages of applying such a plan to the settlement of this situation are several. First, it would require no bond issue or other drain upon the Treasury or taxpayers of the United States; it would require no bond issue in Germany, which might otherwise embarrass them in meeting their obligations under the Dawes plan, and would be helpful to Germany in meeting her obligations in that the reparation payments and army of occupation cost payments would be paid directly to German nationals in Germany in marks, and would not involve the conversion of German money into foreign

currency.

Another advantage of the plan is that it would place any burden of waiting for payment upon the German nationals, on whom it must be admitted it properly belongs; but, at the same time, the burden on them would be only nominal-that is to say, their payments would extend over a period of six years and eight months, as compared with the delay the American nationals would have to suffer if the plan of making them wait for the payments on the reparations payments is adopted, which would extend over a period of approximately 80 years.

Another advantage is that the Germans would immediately receive at least 45.9 per cent of their former property and would not, as they would if we adopted the plan of holding it until the other was settled, have to wait for it for 80 years.

I would set up an agency to determine the value of ships, patents, and radio stations to the United States and limit the authority of that commission only to the extent of requiring it to base its awards, under any of the heads or categories, upon a fair value, under the principles of American law, reduced in each case, as might be affirmatively shown, by reason of use of that property inimical to the neutrality or the national defense interests of the United States, or a use which militated against the public health of the United States. To the tribunal mentioned would be submitted the question of any alien property seized other than the classes just enumerated, and if affirmatively shown that such property was used in a manner and with an intent inimical to the neutrality or the national defense of the United States, or to militate against the public health, such property would not be compensated for or returned; or, in the light of the facts, would be reduced in accordance therewith. That would only be in case it were affirmatively shown that there were such use. Mr. GARNER. It would not affect any awards that have now been made by the Mixed Claims Commission.

Colonel McMULLEN. Not at all.