The Louisiana Democrat. [volume] (Alexandria, La.) 1845-1918, 1878-06-26
.o,,s M THE NEW ORLEANS
DV'D PACIFIC.

'lioed to sign the bonds of the New
orleans Pacific Railroad Company,
declared legal by the Supreme Court,
~ the ground that the mortgage OF:
s.red the State is not satisfactory.
As this is a matter of the gravest
,,blic interest, we obtained from the
office of the company a copy of the
OFT of mortgage prepared for the
State and other prospective bond
holders, and on inquiry learned that
The Governor objected to the first
and fifth clauses of the instrument.
The arst clause reads as follows: ft
That if the said New Orleans Pacific
railroad Company, its successors or
assigns, shall at any time hereafter,
after demand, make default, or neglect,
~ refuse, or omit to pay the semi-annual
interest on said bonds or any Of them,
when the same shall become due, and
# any such default shall continue for
the Deriod of six months, then, upon
demand of any holder of any n or
more of said bonds, the whole principal
sum of each and all the bonds then
outstanding, and intended to be hereby
secured, shall forthwith become due,
sxigible and payable,
The fifth clause is to the effect
that, in the event Of such default as
that designated in the first, the prop.
srty of the road shall be sold at pub
lie auction, and that the act of mort
gage itself shall bear and be con
fession of judgment in favor of any
and all the bondholders.
We do not fully comprehend the
Governors objections to these two
clauses in the mortgage, as they are
directly in the interest of the hold
ors of the bonds Of the company, aud
the State will be the largest holder
OF the bonds. There can be no dan
ger that other holders of the bonds
can in any event take advantage Of
their claims to the injury of the
State, since the second clause places
all bondholders on an equality and
provide that none of the bonds shall,
under any circumstances, be entitled
to priority.
The Governor, we learn, holds
that the act authorizing these bonds
calls for forty years. bonds, and
these clauses subject the road to
foreclosure at an earlier period,
which may result in the sacrifice oi
the States interest. 1t is true that
the act provides for forty years
bonds, but it also provides for cou.
pOns payable semi-annually. Now,
il the clauses objected to by the
Governor he stricken out, it seems
to us that it would be detrimental in
two respects. l. 1t would rendei
the So, 800, 900 of bonds, which tbs
company proposes to dispose of, in
depenlentIy of tie State, unsaleable'
because nc capitalist will invest il
bombs, au,l no iron men or car build
ers will accept as security bonds ol
which the company may at any tim'
refuse tie payment of the interes
without mourning any legal conse
quences. 2. If these clauses ar
stricken out of the mortgage til
State, it seems to us, will be withou
any remedy should the company, al
ter they have obtained the State ali
Of 81, 1000, 600, refuse to pay the in
terest on the 81, SOC, 900 of their ow
bonds pledged to the State. .r.
1t was simply because Congress
failed to protect the government
against the Union Pacific Railroa
Company by some such provision
as are embodied in these very claus
es of the mortgage OF the New 0.
leans Pacific, that the former roa
has escaped the payment Of eithe
the interest or any part of the prin
cipal of the immense sums loanedJ
BY the government. The Union Pa
cifc, after it had received the aid G
the Federal government, elaine
that it was under no obligation t
pay any interest," on the loan unit
the bonds matured, when interes
and principal would be paid together
1t was very evident that the objee
of the Union Pacific Company was t
operate the road they had build wit
government bonds, pay neither il
terest nor principal, and when th
bonds matured, abandon the road
the government. 1t is estimate
that by such an operation the con
pany would, in the end, clear til
sum of fifty-six millions of dollar
The position taken by the compan
led to the passage, at this session
Congress, of a bill forcing them
set aside annually a certain percen