Savannah morning news. [volume] (Savannah) 1868-1887, 1881-08-26

that could be issued by the railroad COM
pany itself, was far more than sufficient
to construct and equip the railroad. The
projectors of the railroad had therefore
in sight a large amount of surplus
money; and the question, perhaps not
unnaturally, suggested itself to them
how to secure a large part of this as profit
The construction company afforded
the solution. 1t was organized to re-
ceive from the railroad company the
greater part of its assets; to have the
road built and paid for out of these assets
as cheaply as possible, and to divide the
balance. The success of this scheme
was so great and so well known that the
device has been popular ever since.
There is one ear mark, however,
about such schemes, by which the
public may always judge quite closely
whether or not the use of a construction
company is legitimate and necessary.
If the principal officers and directors
of the railroad company are also the
principal officers and directors, or stock
holders, of the construction company. the
latter is liable to great suspicion. If A.
B, c and d are officers and directors of q
railroad company, the common law
will not allow them to make
contracts individually with the
company which they manage, and
for their own Individual profit. If now,
the same parties arrange themselves in a
different order, say D, G, B and A, and
call themselves a construction company,
and then make a contract between the
railroad and the construction company.
they are taking a good deal of trouble to
accomplish indirectly what the common
law will not allow them to accomplish
directly, and it is but reasonable to sup
pose that this trouble will not be taken
without ample compensation.
A, B, c and d, for instance, may pro
pose a railroad scheme, and by much
advertisement of it in the papers, taking
advantage of flush times when the pub
lie has money to invest freely, they may
get up an appetite on the part of the
public for the bonds of the proposed
road, which will absorb, for in
stance, thirty thousand dollars of
bonds per mile. The road can
be built, let US say. for twenty thou
sand dollars per mile; but it would be
pity that the public having an appetite
equal to thirty thousand should be re-
stricted in satiating it.
Here then is an opportunity for the
use of a construction company. 1t is
formed of the same men, but in reverse
order, d, G, B and A. A, B, G
and D, the railroad company,
issue the thirty thousand bonds per
mile, and give them to D., c., B. and A.
The latter company sub-lets the contracts
for building and completes the road for
twenty thousand dollars per mile, sells
the public the bonds to the amount of
thirty thousand dollars per mile, divide
their profits and dissolve the company.
Communities which are anxious to see
railroads built, however, are often very
indifferent as to how it is done,
and what fortunes are made
from it, provided they get the
railroad. The whole United States even
looks with some equanimity upon the
the results of the Credit Mobi-
lier. The country got a railroad of
great importance to it, and it must be
said, also, that the construction compa-
ny in this case did assume unusual risks.
No such line of road had ever been sue
cessfully built in the world. 1t crossed
a stretch of country of nearly two thou
sand miles. entirely without population,
roamed over by hostile Indian tribes,
destitute of timber and often water, and
intersected by numerous mountain
chains, presenting the greatest engineer
ing difficulties. But the success of
numerous smaller schemes which have
followed and are still following in its
wake has not been such that the public
can always congratulate itself on having
reaped at least some benefit from their
operations.
Unfortunately the flush times which
are prolific in the birth of such schemes
are periodically followed by times of de-
preston, when the public appetite for
bonds is nauseated.
When this happens. what is the result?
The construction company is unable to
dispose of its bonds. II has no other
property, and its stockholders are not
liable for its debts. The sub contrac.
tors, therefore, are unable to get
their money, and cannot pay
their hands or the merchants
and farmers with whom they have dealt
for provisions, forage, clothing, and all
the articles which sub-contractors usually
supply to their laborers. The laborers
also are suddenly thrown out of work,
with arrears of pay due them. The ma
jority of these laborers are generally
brought from distance, and often have
not even the means of returning home.
The farmers who have given or sold
their rightof-wsy under the expecta-
ton of having a railroad are
left with their farms cut up with I'M
finished excavations and entertainments,
which are but mOckery of their hopes.
Even these unfinished excavations and
entertainments are usually so covered
with mortgages that there is nothing left
to levy upon for creditors. The credu-
lOus public who may have bought
the first bonds put upon the
market. now that the sale is
stopped, may whistle for their money.
The credit Of the whole State is injured
in the eyes of discriminating foreign