The Dallas daily herald. [volume] (Dallas, Tex.) 1873-1887, 1875-11-12

pbe rruc Case.


The Chicago Tribune says:
"ln the case Of the Union and Cen
trail Pacific railroads, the Government
loaned to them the bonds of the Unit
ed States to the amount of $50, 100000.
These bonds bear interest at 6 per
cent, and are payable at the end of
thirty years; the agreement Of the rail-
road companies Is to pay to the Gov
eminent principal and interest at
maturity. The railroad companies
have paid out about one-third of the
interest which has become due, the
rest and the principal remain to be
paid-the Government holdinga Sec
ond mortgage on the property. That
is conceded to be subsidy, the United
States paying annually about two and
II half millions more interest on the
bonds than they receive from the rail
road companies, The other PROPOSE
ton is that the United States shall
guarantee the payment of the interest
on the bonds OF the railroad company
these bonds to be issued ut the rate OF
$40, 900 mile for 1900 miles, the inter
est to be at the rate of IS per cent in
gold and the bonds to run for forty
years. The property of the company
IL to be mortgaged to the principal Of
the bonds at maturity, and then to re-
fund the principal. This gives us the
following result: Whole amount Of
railroad bonds issued, $4,000, 900.
Annual interest thereon at B per cent.
IN gold, 81 100000. Total interest paid
in forty years, in gold, $27700O,O00.
Security, II second mortgage. This, it
is said, is not subsidy
The Tribune wholly misconeeives
the subject which il attempts to dis.
cuss. Ii says rightly that the proposed
guarantee from the Government eX-
tends only to the interest on an issue
of bonds by the railroad company, but
every thing else is erroneous.
We will state the case properly: 1t
is asked that the government guarantee
the interest on five per cent. loan, to
be issued Mt the rate of S35, 600 to $40
600 per mile, and to receive rs indom =
nifty against loss by reason of such
guarantee, first mortgage lien on the
whole line, which may be covered by
such bonds at the rate of issue speci.
fled, together with the whole land
grant. To the extent Of its guarantee
the government would be preferred
creditor, taking precedence pro tdHtO
over the purchasers Of the bonds. The
property would he first mortgnged to
the government for this interest, and
the lien of the buyers of the bonds
would be n first mortgage subject to
that reservation. If any default In
interest payments should accrue the
government would, of course, satisfy
its claims before the bond-holders
could ioreclose.
Would bonds be saleable under these
conditions? They would, obviously,
irrespective of the confidence Of the
investing public in the value of the
property aud prospective business of
the road, as they are to run forty years,
on perfectly secured investment re-
turns of five per cent. per annum.
Moreover, the amount OF bonds is
sued will be regulated, of course, by
the length of the line mortgaged
About $50 miles are already completed
aud the Texas and Pacific absolutely
requires aid only for the construction
of 400 west from Fort Worth. 1t
might be proven that II would be better
| for the railroad as well as for the COM
pany to borrow on the whole route,
however-better for the railroad as Sc
curing sufficient means for elfecting
eastern terminal connections, aud bet
ter for the Government, ms that por-
ton OF the line east of Fort Worth is at
present more valuable.
Neither Is the Government to be
rendered liable for interest on $4,000
per mile, as $1,000 of $4,000 per mile
is to he placed in the treasury as an
additional guarantee for the interest on
the residue, which may be sold by the
Government for that purpose or hot,
as may be thought best.
If only 400 miles are mortgaged at
$4,000 net per mile, the total loan
would amount to about $4,000, 600 aud
the total annual interest to $1,000 900,
instead ofthe Trbune's so-caled sub.
sidy of SSS,0OOOOO, with S4,4O0,O00 i'll
terest. The total interest payments in
forty years would be 500, 100000 in
stead of SIG, 100000
1.-THE whole route should be mort
gagged on guaranteed bonds of $4,000
per mile net, which would be the wiser
policy, the loan would amount TO ST.
100000, with an annual interest charge
Of $500, 900. This interest charge
would amount to 81 100 per mile, while
the Union Central Pacific is earning
nearly four times as much per mile,
aud the fragment of the Texas and
Pacific, IN operation In Texas, Is al
a "A. ~.