Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1889-05-18

tneir ODlRstl0nS at maturity. The percentage
called Tor III no case exceed the amount required
10 attain the proposed object. Under the de
clslons OF the Courts. all sums required to keel
the roads in full and efficient operation and IL
comp etc repair, and such payments for thu
construction and betterment As are propeil,
chargeable to income, are to be allowed befor'
the net earnings are asc .rtained. The Onl.
burden, therefore, is placed on the stockholders
case 99 Z. S., ZOO, it is the duty of the corpora
ton TO make provision for the discharge of it
obligations before making any division what
ever among its stockholders"
Mr.. Mitchell then had the Secretary read thu
statement of the Secretary of the Treasury
showing the condition of the sinking funds O
the Pacific railroads and continued:
while thai statement presents in a certain
form the present ccndItion of the sinking fund
1t is in sense misleading that is TO say, there
does not appear from this statement very
clearly the amount paid by the Government il
the way OF premiums on The securities in which
these investments have been made. 1t give'
SIMPLY the face value of the securities in which
the funds have BEN invested and the marke
value OF thosa same securities on the LIST day o.
February, 1889. and ii gives IN another column
the receipts from Government transportation
withheld under the Act of May Z, 1873. and the
cash payments by the companies under section
4; but, as say, it does not appear very plainly
TO say the least, from this statement whal
/, amount was paid out in premiums.
have that statement here unotficially, and
propose to call attention TO it for the purpose o.
suoWlDS now hDSOlutelV ABSURD ana lueIucleu
has been the operation of this sinking fund, and
how unjust it has been both to the Government
and the railroad companies. In word, it may
be stated in this wise: These fund, were in
vested in securities at very high premium. Oh
course they do not bear interest upon the amount
OF the face value and the premium, but only
upon their nominal value: and not only that
but as the time betw, en- the date of the pur
chase of these securities and the date when
they mature becomes lessened. as matter OF
course the premium on the securities becomes
gradually lessened from day to day and from
year to yea, SO that the Secretary of the Treas
ury, conforming to the provisions of this fund
ing Act, has been from time to time paying i'm
me- Sc premiums on securities in order to gel
an investment for these funds. and then when
the bonds are called of course there is an i'm
mense loss upon the premium, and the result is
that neither the Government nor the railroad
companies get any benefit from the investment
but On the contrary suffer an absolute loss.
For instance, it will be seen from the state
mept which has just been read at the desk stat.
ing the situation Oh the LIST of this month that
s., 5S4 GOO OF Central Pacific funds were invested
in United states currency SKIES. 1t does not
appear from this statement what premium was
paid on that investment, but have it here in
an unofficial statement from the Department
which shows the exact amount paid by way OF
premium on each investment made.
That s., 5S4 600 was invested at eight different
times July |, 1887, $4,000 were invested in
United States currency skies, and on that
amount premium of SS5, los was paid. Again
securities, on which a premium of Sill, 33(
was paid. July n, 1887, 100000 were invested
in the securities, and a premium of S204, 255 81
was paid, aud 81. Without stopping to &c
through the whole list, the matter NAV be
summed up with The state that on those
lnves mens, amounting in the aggregate tC
s2.5si 900, premiums were paid to the extent Of
SS7S, 129 ".
These premiums of course were constantly
falling CT, becoming less and will continue &c
become less from year 10 year. When the bond:
are Called in they will perhaps be worth par
ana no more. The result is, unless the Interest
on the securities amounts to more than the los
by way of premiums, there is an absolute los.
both 10 the Government and the railroad com
panles. In fact there was a loss, as appears
from one OF the reports made recently think il
is the report OF the Pacific Railway Commission
and l think the same thing is Incorporated
in the report made by the Chairman of the
select com Gittee, the Senator from Maine (Mr
frye), that on certain securities called at a Ger
tain time there was an absolute loss of some
siS 900; that Is to say, the amount for which the
securities sold was less by S4S, 900 than the in
terest that accrued on them while they were ir
the sinking fund.
But we go a step further and we find thai
S995,O9O of this Central Pacific sinking fund
were invested in Central Pacific first-mortgage
ana Union Pacific first-mortgage bonds, an or
those investment. premiums were paid to the ex
tent OF S94 ,49l Is. What is the result AS the
time OF maturity approaches the premium con
stantly goes down, and the result will be when
"a
ton IN premium perhaps nearly or quite To the
extent of the interest the securities brought
in while held in the sinking fund.
Recapitulating, we find the face value of these
securities 80, al 200, whereas the actual cost
which Was 81, 10 '62l II, while the present value
Is but CD S20,902 3d. or loss to-day if the matte
were closed out on those investments alone O
50 ST. 129 II, while if the matter is not closed our
if these bonds are not taken up until maturity
| the loss to the companies and the Government
would be 1867 ,621 II, or the total premium. o
course the interest, whatever it announced to
would have to be deducted from that in esti
mating the actual loss.
So the effect of the Thurman Act of 1878 ha,
been to cause millions of this fund in the frs
place, for several years TO lie idle in the Treas
ury, bringing in nothing; and. secondly wher
by change in the law the Secretary of the
Treasury was permitted to invest in the bond,
OF the companies instead of United States secur
premiums. all OF which, il the securities are uot
redeemed until they mature, will be lost to the
Government.
Under the Thurman Act, owing to the greal
number OF important questions of fact and law
left open to determination under its provisions
ever since that Act went into operation there
has been continual and aggrayating contro
yersy-legisiative judicial. departmental and
otherwlse-going on between the Government
and these raj road companies as to what con
stituted the net earnings of the roads, and as to
the proper construction OF the Act in determin
ing what are net earnings and other important
matters.
AS railroads have sprung into existence
throughout the Western country, paialleling in
many instances, to great extent. the aided
roads; some of these owned and controlled nv
persons largely interested in the aided roads
lnnumerdble questions us TO good faith upon
the part of The companies-Guestions rs IA
whether the aided roads are being discrimln
ated against and freights diverted to non-aided
roads, thus depriying the aided roads OF theiI
legitimate business and consequently reducing
the amount OF net earnings upon which the y
per cent. Is, under the provisions OF the Thur
man Act 10 be paid INTO the Treasury: and all
manner and kinds of controversies have arisen,
and the result is, and has BEEN a hand to-haud
conflict between creditor and debtor no concer,
OF acton toward common, desirable and
honorable end-that IS tie payment of an
honorable, just debt on the one hand, and is
collection in reasonable, just and proper
manner on the other.
Examination. recrimination, accusation and
resentment have been The order OF the dav
and as a result, after ten years and over of pro.
longed contention, nothing being permanently
settled nor any good results achieved, the Gov.
ernmeut fiads Itself, under the operation of the
Thurman Funding Acc, not only falling to re-
duce the aggregate OF the indebtedne IS. hui
actuslly permitting its increase annually fol
several years TO the tune OF over fifteen hun
bred thousand dollars; and hence after nearIy
ten years experience, Congress was forced act
ualiy driven, to the n-cessity, il would sean II
order TO ascertain the exact relations between
these companies and the Government which
Il
tain under the provisions of the Thurman Act
TO inaugurate an investigation at an expense .
100000 and over and a delay of over two years
such has been some OF the effects In the inter
est OF the Treasury of the United States. OF
more prop rly speaking, in direct opposition L
such interest, of the originally much laudet
Thurman Act.
How that great lawyer and universally-con
,, ceded honest man. Hon. Allen G. Thurman anC
the equally great juriss and conscientious Sen
ator, the present distinguished Chairman OF tb,
Committee OF the Judiciary Of the Senate. apC
through whose great efforts it became a law
could have been 50 iearfully mistaken as to tn,
probable effects of the BILL is one of those mys
teries not easy OF so utioD. leu years ago h,
who dsr d express an opinion here or eIsewhert
IN opposition to the Thurman bill or the Thur
man Act, was branded in:erentially, if not di
rectly, as a traitor 10 the best interests of tno
Government, rs being an ally OF corporations
as false TO his Official trns., while to-day
not solitary officer OF the Government
either high or low, in official station
not a statesman In all the land, can bt
found 70 acknowledge it success, while
ators VINO were the authors OF that piece of leg
isatiop. are, in the light of its practical opera
tons. reluctantly compelled to admit its lota
ineficiency and absolute worthlessness.
the principle of the Matthews bill was based
upon the theory OF cooperation and mutua
corning the adjustment and payment by the ore
and the collection by the other of one of III.
largest debts ever incurred by private individ
ua.s in the business transactions of the world
IL sought a final solution OF this gigantic ones
ton by an amicabie arrangement whereby upon
reasonable terms. alike honorable aud ,air bCtl
TO the Government and the companies in view
of all the surrounding circumstances, func
could be created and an arrangement perfected
that would secure 10 the Government a rein