National Republican., 1885-09-26
The Pacific Railroads.

The Pacific Railroads.
The recent action of Secretary Lamar In
directing that the Pacific railroad COM
panics cease paying a subsidy to the Pacific
Mail Steamship Company shows that he in
tends taking up the whole question Of the
Pacific railroads and dealing vigorously
with the matter. These companies have
practically deled the government ever since
they were organized, and have had their
own sweet will in paying, or rather not pay
ing, their Indebtedness to the United States.
few facts in regard to their history will
be Of interest.
The Union Pacific road was constructed
with $5i,0C0,00O Of first mortgage and gov
ernmcnt subsidy bonds. The company also
issued S37, 100000 of stock, on which only
$2lS, 600 was paid in. After the road was
finished and accepted there was issued
Sl0,0O0,0OO Of land grant bonds and also
Sl0,G00,GO0 OF income bonds, which were
appropriated by those who had built the
road. The income bonds had ten years to
run at 10 per cent per annum, the interest
of which, 1t will be seen, amounted to
SlO,0O0OOO by the time they mature1. This
amount was paid out of the earnings OF the
road. The present sinking funl bonds,
amounting now to about Sl3,O00,01), were
issued to replace the income bonds. These
are s per cent. bonds, and the interest
amounts to over million an-
nually. Interest has already been
paid on these bonds to the amount OF about
$S,OC0C00, all out of the earnings OF the
$6l,0O0,0O0, and dividends have been paid
ON IT TO the extent of $23,000,0 900, which,
with the other interest that has been paid
out of the earnings Of the road, makes q
total Of $41 100000, which should have
gone into the treasury the United States.
The Union Pacific bought the Central
branch of the Union Pacific road for Jay
Gould and his friends at the rate of $3.50 per
share, and this stock is included In the pres
ent capital stock of the Union Pacific
proper. The Central branch never earned a
dividend and probably never will. The
same is true In regard to the Kansas Pacific
and the Denver Pacific. The Kansas Pacific
was bankrupt financially and physically
and the stock was purchased ut au average
of IS per share and sold to the Union Pacific
for 500 per share. There were Sl0,0OJ,000
Of the Kansas Pacific stock aud 81 900, 900
Of the Denver Pacific.
Under this consideration the Union Pa
cific was made to guarantee the interest on
all the bonds of both the Kansas Pacific
and Denver Pacific roads, and these roads
never earned dividend.
The Union and Central Pacific roads have
for several years past paid the Pacific Mail
Steamship Company a sublidy of 81 1000, 900
year for no other reason than that the
Pacific railroad magnatCs are interested in
the Pacific Mail stock, and for the further
object of deprlving the railroads of so much
Of their net earning, theieby lessenng the
amount that they would have to pay to the
government under what is known as the
| Thurman act.
The Union Pacific management evidently
think that they have perfect right to dis
| pose Of any and all assets held by the road, ,
and probably this view would be correct If
they did not have to borrow money to pay
some Of the dividends which were declared
on the stock, and to also borrow to pay in-
tercst on some of their bonds. This is the
way in which the large floating debt was
made. The Union Pacific people, and those
representing the government interests in
the road, had probably forgotten that there
is law making It q criminal offense to de-
clare or pay any dividend TO stockholders
which has not been earned; and, further,
such payment is prohibited while the roads
are in arrears TO the government. This law
was passed in 1875 and the offense is made
punishable by fine OF $4,000 and imprson-
ment for twelve months. Any director who
shall vote for the payment of such dividend
under such circumstances, beside being sub
! ject to the criminal penalties, is further
liable for the whole amount paid personally.
| This ofTense has been committed repeatedly
without any protest from the government
authorities, and IL Is certainly time that
some action should be taken TO protect the
interests Of the government. Secretary
Lamar will find, in his efforts to bring these
roads to time, that he has undertaken a
heavy task. All the government directors
are said to be men who are controlled by
| he railroad influence, and the railroad com
missioner, while very cstlmable gentle.
man, is wholly unacquainte1 with the sab
ject, and is possibly too old TO learn. The
whole Office is generally believed to need a
thorough overhauling.