The morning news. [volume] (Savannah, Ga.) 1887-1900, 1888-01-18

made TO said companies by the government
thus obliging immediate payment to its
debtor to the other half of said charges
and that the lien of the United States to Sc
cure the reimbursement of the amount ad-
vanced to said companies in bonds which
lien was declared by the law of 1862 to con
stitute first mortgage upon all
the property of said companies,
should become junior lien, and
be subOrdinated to a mortgage which the
companies were by the amendatory act
authorized to execute to secure bonds, which
they might from time to time issue, in sums
not exceeding the amount of the United
States bonds which should be advanced to
them. The immense advantages to the com
panies of this amendatory act are
apparent, and in these days
w5 may we'll wonder that
even the anticipated public Importance of
the construction Of these roads, induced
what must now appear to be rather reckless
and unguarded appropriation of public
funds and the public domains.
PRINCIPAL OF THE BONDS.
"Under the operation of these laws the
principal of the bonds which have been ad-
vanced is $64 ,023, ,512. AS given in the
reports of the commissioners the interest to
Nov. l, 1887, is calculated to be 76024.2O6,
making an aggregate at the date named of
GltbOtG 40. ne luleIGSJ CdlCuidutl " pIlC
maturity of the bonds added to the princi-
pal, produces an aggregate of $l7S, ,SS4, 159.
Against these amounts there has been repaid
by the companies the sum of $50, ,955,039.
1t is almost needless to state that the com
panieS have availed themselves to the
utmost extent of the permission given them
to issue their bonds and mortgage their
property to secure the payment Of the same
by an incumbrance having preference OF
the governments lien and precisely equal
to it in amount.
at will be seen that there was available
for the building of each mile of these roads
$4,000 of United States bonds due in thirty
years, with per cent. interest, $4,000 IN
bonds of the companies, secured by first
mortgage on all their property, and ten sec
tons of government land, to say nothing of
the stock of the companies.
"When the relations created between the
government and these companies by the
legislation referred to is considered it is
astonishing that the claim should be made
that the directors of these roads owed no
duty except to themselves in their construc-
Uion, that they need regard no interests but
their own and that they were justified in
contracting with themselves and making
such bargains as resulted in conveying
to their pockets all the assets of the COM
pany. The government was vitality inter
ested in the amount of the mortgage to
which its security had been subor ilnated,
and it had a right to insist that none of the
bonds secured by the prior mortgage should
be issued fraudulently or for the purpose OF
division among these stockholders without
a consideration. The doctrine of com
plete interference on the part of the
directors of these companies, and their
freedom from any obligation to
care for other interests than their own in
the construction of these roads seems to
have developed the natural consequences of
its application, portrayed, ,as followed, In the
majority report of the commissioners. The
result is that those who have controlled,
and directed the construction and develop
ment of these companies have become
possessed of their surplus assets through
issues of bonds, stocks and the payment of
dividends voted by themselves, while the
great creditor, the United States finds itself
substantially without adequate security for
the repayment of its loans.
GENEROUS TO A FAULT.
"The laws enacted in aid of these roads,
while they illustrated prOfuse liberality and
generous surrender of the governments
advantages, which, it is hoped, experience
has corrected, were nevertheless passed upon
the theory that the roads should be con-
structed according to the common rules of
business, fairness and duty, and that their
value and their ability to pay
their debts should not be i'm
paired by unfair manipulatiOns; and
when the government subordinated its lien
to another it was in the expectation that
the senior lien would represent in its amount
such bonds as would be necessarily issued
by the company for the construction of
their roads at fair prices, agreed upon IN an
honest way between real ana substantial
parties. For the purpose OF saving or I'M
proving the security afforded by its Junior
lien, the government should have the right
now to purge this paramount lien OF all that
is fraudulent, fictitious or unconscionable.
If the transfer to innocent hands of bonds
of this character. secured by such first
mortgage, prevents cancellation, it might
be well to seek remedy against those who
issued and transferred them. If legislation
is needed to secure such remedy Congress
can readily supply it.
HOW IT CAN BE DONE.
81 desire to call attention also to the fact
that if all that was to he done on the part
of the government to fully vest in these
companies the grants and advantages CON
templated by the acts passed in their IN
tereSt. has not yet been perfected, and ii the
failure of such companies to perform in
Good faith their part of the contract justl-
fies such a course, the power rests with Con
press to withhold further performance on
The part of the government If donated
lands are not yet granted to these companies,
and if their violations of contract and OF
duty are such as in justice and in morals
forfeit their rights to the lands, Con
oresslonal action should intervene to pre-
vent further consunmatlon
"1he executive power must be exercised
according to the existing laws. and execu-
tive discretion is probably not broad enough
TO reach such difficulties. The California
and Oregon railroad is now part OF the
Central Pacific system, and is land grant
road Its construction has been carried
ON with the same features and incl
dents which have characterized the other
constructions of this system. | have in my
hands for approval the report of the com
missioners appointed to examine two com
nletnd sections of this road. Upon such
aDnroval the company, or Central Paclf1c
company, will he entitled to patents for
large quantity off public lands. | especially
commend to the attention of Congress this
condition of affairs, in order that it may
determine whether or not IL
should intervene TO save these
lands for settlers, if such course Is Justlh
able. 1t is quite time that the troublesome
comnlications surrounding this entire sub
iect which has been transmitted to us as
ieeacy from former days, should be adjusted
and settled.
woNT BE ABLE TO PAY.
"No one. | think, expects that these rail
h. tnp1r