Eight months after the United States enters World War I on behalf of the Allies, President Woodrow Wilson announces the nationalization of a large majority of the country's railroads under the Federal Possession and Control Act.
The U.S. entry into the war in April 1917 coincided with a downturn in the fortunes of the nation's railroads: rising taxes and operations costs, combined with prices that were fixed by law, had pushed many railroad companies into receivership as early as late 1915. A year later, in a last-minute bill passed through Congress, Wilson had forced the railroad management to accept union demands for an eight-hour work day. Still, many skilled workers were leaving the cash-poor railroads to work in the booming armaments industry or to enlist in the war effort.
By the end of 1917, it seemed that the existing railroad system was not up to the task of supporting the war effort and Wilson decided on nationalization. Two days after his announcement, the United States Railroad Administration (USRA) seized control. William McAdoo, Wilson's secretary of the treasury, was appointed Director General of Railroads. The railroads were subsequently divided into three divisions—East, West and South. Passenger services were streamlined, eliminating a significant amount of inessential travel. Over 100,000 new railroad cars and 1,930 steam engines were ordered--designed to the latest standards--at a total cost of $380 million.
In March 1918, the Railroad Control Act was passed into law. It stated that within 21 months of a peace treaty, the railroads would be returned by the government to their owners and that the latter would be compensated for the usage of their property. Consequently, the USRA was disbanded two years later, in March 1920, and the railroads became private property once again.