Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1888-03-21

THE THURMAN BILL
The Chairman-What was the effect of that
| Thurman bill sinking fund?
Senator Stanford-It disappointed its promot-
/ ers. The mode of investing the fund was a
| failure and, even If the business had not fallen
| of by reason of competing lines this defect in
| the bill rendered IL worse than useless.
| Senator Dawes-How much money is there in
| the Treasury now to the credit of the company
| under the provisions OF the Thurman Act?
Senator Stanford-That fund has not accumu-
| lated. The Secretary of the Treasury has in
vested the money which the company has raid
| under the Thurman Act in Government bonds
| and paid an average premium therefor OF 81 per
| cent There has been paid in by the Central
| Pacific Company under the Thurman Act 49,
| l6S 500. The loss on which in interest aud pre-
miums up to August, 1887. was 81 .6l2 966. In
| fact all interest on the fund has been lost and
for all practical purposes there is less money in
that sinking fund than the amount paid il by
| the company by over half million dollars.
BONDS BOUGHT AT PREMIUM.
Mr Chairman-That is on account Of the pur-
chase of bonds at high prices?
| Senator stanford = Yes; the Government
| bought these bonds at a premium of 40. They
| took the money that we paid in to buy these
| debt at the rate of 100 cents on the dollar. so
| that there is about 100000 of value to US less
| in that fund than We have put in it.
Senator ButleT-By reason of these high pre-
| miums?
Senator stanford-Exactly.
Senator Hiscock7-But it cancels the interest in
| the meantime?
Senator stanford-These bonds are running at
| per cent. interest, and that money is lying
| idle. OF course the bonds are Cancelled, but II
| is better to be idle than Tor them to pay Is per
| cent. on the dollar.
Senator Hiscock-But the credit goes into the
| sinking fund, and is used in the end TO pay off
| the debt.
HIGH PREMIUMS.
| Senator Stanford-But, for instance, they buy
| $40 600 bond and pay this high premium, and
at Its maturity 1t Will count for only $40 600 and
nYfnnr
| ernment paid; they take out our money and the
| premium that is paid we lose.
| Senator Buter-lhe interest which accrues
| on these bonds in that sinking fund lust SQUARES
off the premium which you pay ior them at
| maturity.
Senator stanford-Yes; but we are paying
| per cent; interest on the bonds and the premium
| is a loss TO us.
Senator Hiscoek-And you do not get any
| benefit from the interest on the bonds pur-
| chased
| Senator Stanford-The bonds draw interest,
| but only affects the interest on the bonds that
| the Government loaned us. We get that ben
| ett-6ut how small il is
Senator Butler-Did the operation of the
| Thurman Act interfere with what you call your
| private sinking fund, or is that going on?
| Senator Stanford-That is going on still.
| HYPoTHEcATED BONDS
Senator Davs-You said moment ago that
| you hypothecaed the Government bonds during
| the war on account of your confden e in the
| Government Was that done on your individual
| credit?
Senator Stanford-Our credit was oftentimes
| better than the credit of the railroad company
| Senator DaviS-Did the promoters of the rail
road pledge its credit when they hypOthecate
| the bonds?
| Senator Stanford-For a long time during the
| construction of the road we borrowed ali the
| money necessary on our own credit. We used
| the frst-mortgage bonds and the Government
bonds collateral feeling confident at the time
| that all the time they would not depreci5te in
value. We held them as long as possible, and
| when we could not help ourselves, we sold
them and we sold our own firstmortgage bonds.
| We realized 12 cents on dollar FIR each class
| of bonds; but there was time when we sold
our bonds and realized only Il little more than
| 40 cents on the dollar.
IN GOLD COIN.
| Senator Hiscock-You mean III gold?
| Senator Stantord-IeS that was the kind of
money used in constructing the road. AS have
said, the Government itself submitted to the
| sacrifice of its bonds in every case, except in
dealing with these Pacific railroads. They alone
had to take those bonds and suffer the loss and
they are now drawing per cent In all other
eases the Government sold their bonds in the
market for what Ihev could get, and in every
| instance lost the discount themselves. Now it
seems to me that the magnificent results which
nave been attained by the Government should
! fairly be taken into consideration in dealing
with these questions. That point ! will not
I urge the counsel will present all those things
| to you, but my object in addressing you now
| was to diabuse your minds of the popular no
tion that the Central Pacific road had not lived
up to its obligation; that it has made large
| amounts of money at the expense of the Gov
| eminent; whereas, the fact is II has never made
dollar at the expense of the Government and
all the values that the company has had and
| whatever wealth ii has gather have come from
| its own creation. Every dollar of the Govern
! ment bonds and every dollar of the first-mOrt-
gage bonds went into the construction of the
road and that has developed the country and
created values, and for time this road was
| very valuable. II was earning largely in excess
| of the requirements of a fund necessary to meet
iebf ifS
| bonds
| NO ONE ANTICIPATED DISASTER
The stock was selling at a high price, and no
body anticipated the disaster that afterward be-
| fell II, in consequence of the construction of
| these compe ing lines of railroad 1t is said
that we issued large amount of stock too We
did but 1t affected nobody but the stockholders
II the stock OF the Central Pacific Road were
| to-day gathered in and all excepting seven
| shares were destroyed it would not make any
difference to the Government or anyone else in
! the world. except to the stockholders them
| selves. The value of the property does not de-
! pend on the number of shares that are out
| standing. They are mere evidences of title and
! nobody is or can be interested in them except
| the stockholders and the stockholders are not
| complaining. The testimony will show that we
| built about 6,OOO miles of railroad to help de-
| Velop the country, but we did not do it at the
expense of the Government; we did not 10 it at
| anyboGys expense except our own, realiz d
| from our own resources. For instance, we
| planned railroad aud we concluded TO issue so
| much stock and so many bonds. We had CON
| tract company to do the work. Now who was
| wronged by that? Nobody, it was of no conse-
| quencc TO anybody in the world. The great
| public were interested in having railroads. but
| it made no difference about the stock issued or
| who issued it, provided the railroad was built
except to the stock holders We built, as saw
about SIX thousand miles of railroad in that
| way, and transportation is consequently cheap
all through that country.
EQUITY.
| Senator Hearst-Speaking ofequities the help
| that the Government in the start gave you u
! foundation and ere dit by which you were able
to do this work, you admit is an equity from the
| Government at least.
Senator Staniord-Of course as / have said
! and as well known, the Government paid out
| nothing. heir loan was the credit which they
| gave us. If they had paid out the money the
deot we owe would not have been so much. In
| other words they would have parted with s27,-
| OVO,OUU: 1t would have been worth great deal
| more than we received. and up to this time they
have been receiving the benefits of the roads
| without paying anything but the payment of
Interest. The principal is in their own pockets
J The interest they required us to pay back. If
| the government never gets another dollar back
| IL VIII nave saved over two hundred millions
against what 1t was paying for the service prior
to the construction of the road.
OTHER ROADS BUILT.
! How much value it has been to the Govern
ment to have l,S00 miles of country developed,
| snail not undertake to say. but population has
| gone in other railroads have been built, and all
this as consequence of the construction of this
| IO6u- 90 not DelleYe one OF the other lines of
| roads would have been built through that couu-
! try to-day II this road bad not been pioneer
and shown the possibility of its being done
| With double the land grant the Sou hern Pacific
and Atlantic and Pacific and the Northern Pa
| cltc have been pushed forward, but the IMPULSE
| came from the construction of our road. The
! Northern Pacific road, running through Il mag
nihcent section OF the country, with twice the
land graft that the Central Pacific had only
| completed its road in 1888, while we completed
! our road in 1862 during part of which lime
| the Government bonds and the frst-n ortgage
bonds together did not equal the face value of
| either one. All these results have followed
| from the construction of the road.
DEVELOPED AN EMPIRE
, The early construction of the Central Pacific
| road was matter compulsory on the part of the
| company. ard the sacrifice it made, or was COM
| PEELED to make, in order to preserve that which
| had already been expended on the road: but
| don't care to go into that matter further |
| have stated substantially all that desire which
4 Is that we have no money at the expense OF the
| Government; that all we derived from the
! Government went into the construction of the
| road, as can be easily ascertained, and these
vague and uncertain stories that the compauy
! has made money at the expense of the Govern
| ment have no foundation except in the wild
| rumors started some years ago. Instead of the
| projectors having made money at the expense
! OF the Government it was made entirely GU. of
| the values which Were created by the company
| ana because we developed an empire
I