Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1889-05-18
RAILROAD INDEBTEDNESS.
SENATOR MiTCHELL,S SPEECH IN
THE U. 5. SENATE.
Facts and Figures Of Interest to
Every Dweller on the
Pacific Slope.


70 motion to adjourn when this subject was
last before the Senate on Monday last, the legis-
latlon heretofore had in regard 10 the general
SUBJECT OF the Pacific Railroad indebtedness has
always dealt with the two companies, Union
facific and Central Pacific, as one general SUBJ
Ject. had further suggested in that connec-
ton that all efforts heretofore made by Congress
TO provide means for the creation of sinking
fund that would eventually and in the end Sc
cure TO the Government of the United states the
payments OF the debts due the Government by
the Union and Central Pacific Railroad Compa-
MES had been failures. In that connection had
rehearsed to a certain extent the history of leg
lslation, and the proposed legislation heretofore
enacted and proposed at different times in he
Senate in regard to the matter. When Welded
to a motion TO adjourn, had placed in juxta-
position SO far as as could the Funding Act of
loIS known as the ThuImsn Act, and the bill
known as the Matthews bill, reported from the
Committee on Railroads of the Senate at about
the same time that the Thurman bill was re-
ported from the Judiciary Committee of the
Senate.
My purpose in doing that was to show. as
think can very clearly, that the Congress of
Thurman bill into law instead of the Matthews
bill, made very great mistake in so far as the
interests of the Government are concerned.
Now, Mr., President. propose to examine the
Thurman Act and the Matthews bill. Iproposa
TO show, as l think every one now comedies,
that the Thurman Act now in operation some
thing over ten years, has been in every essen
tiai par ocular an absolute failure
Let us examine briefly what has been accom-.
pllshed under the Thurman Act; what progrsss
has been made towards the liquidation Of the
great debt; how much of a sinking fund has
been accumulated under its provisions; and
viii first inquire as to the situation at the expi-
ration OF eight years and five months from the
date of its passage, or down to October l, 1856.
According 10 the letter of the Secretary of the
Treasury OF January p, 1887, there was in the
Treasury of the United States a sum total in
cash and bonds to the credit OF the Pacific rail-
roads on October l. 1856, of only $40 l73. 962 S.
OF this amount but S. 467, $50 81 were invested
IN bonds and accommodating interest while
nearly one-half of the whole amount or the
balance OF -, 1892 81, was uninvested and
Just SO much dead capital in the vaults of the
treasury credited 10 the sinking fund.- earning
nothing, either for the companies or the Treas
ury of the United States. The account between
the TWO companies, Union and Central Pacific
respectively according to this letter. is stated
follows:
There was to the credit of the Union
Pacific October l. 1856, bonds, the
market value OF which on that
And cash uninvested. 1859 SO
To the credit of Union Pacifc..S6 SIS. 512 O5
The account of the Central Pacific Company
stood as follows
Bonds. the market value of which
on that date, October l, 1856. was-.sl0 i2,004 81
Cash 276, 446 81
Total to credit of Central Pacific s3 31S, $50 SO
In other words, the sum total of cash and then
present market value OF bonds OF both compa-
MES In the Treasury of the United States to the
credit OF the sinking fund ON October l. Isl g.
was but Sl0, ia, 962 IS, and of this amount but
IS, 467,370 81 were invested in bonds and accu-
mulating interest, while the balance of 81,
592 81 was lying idle in the vaults of the Treas
ury as unproductive capital bridging in moth
ing either to the Government or the railroad
companies.
ofthe amount then October l, 1856 in this
sinking fund but very small propo ton had
been paid in cash by either the Union Pacific
Railway Company or the Central Pacific Rail-
road Company. Considerably over two-thirds
otthe whole amount had arisen from transport
alton service, while considerably less than one
third or the amount were cash payments arising
from the % per cent. on net earnings
On January 20, 1856, a little over three wears
ago. according TO the letter OF the Secretary of
the Treasury of that date the sum total in the
sinking fund was 50, DDS, 906 80, made up as fol-
lows:
Union Pacific:
Cash payments............. - ......... 42l ia 46
Interest on Investments. ........ 1863 26I "A
st, 052, $40 %
Central Pacific
Transportation service ............ g. 2S3 933 10
Cash ments-..--................... 633, 1872 As
interest on inyestments.....-......... 259 $40 IS
The exact proportion of each item of trans
portation service, cash payments, and interest
on investments which in October 1886, consti-
tuted the sum of $40 l73 962 IS then in the sink.
ing fund. am not able 10 state, but the proba-
bility is the proportion is about the same as in
the preceding January, which have lust given
That was the condition OF affairs three years
ago, or rather two years and four moths ago
How do the scconnts stand to day? correct
statement demonstrates conclusively that as
the years roA on the situation of the Govern
ment III respect OF the probability of its ever
realizing under the operation of the Thurman
Act any considerable portion of the immense
debt owing from these railroad companies to
the United States becomes more and more des-
perate; and the facts so patent to all, SO preg-
nant with a meaning which cannot be mis-
understood, appeal u the Congress for such
speedy and reasonable action as may result IN
securing the cooperation of these companies
IN the establishment and carrying out OF such
monetary arrangements as may be Just and
honorable, alike to the Government and the
companies, and which will ultimately reim-
burse he United States for every dollar princi-
pal and int est, justly due.
How, then. do the accounts stand to dsy?
what has been the result of the operation
OF the Thurman sinking-fund Act down to the
present hour? But will first attract attention
90 the situation on November l. 1857. fifteen
months ago. From the report of the United
States Railway Commission of December l. 1887
the condition of the sinking fund of the bond
aided Pacific railroad companies ON November
/, 1887. viii be seen. | send to the SecretaJy's
desk ana ask that tne portions l have marked
may be read.
The Secretary read the tabulated statements
in the report showing the condition of the sink
II fund OF the bond aided Pacific railroad M
panies Move mber /, 1887, and the present
values of the debts of such roads and then the
following extracts from the report:
The United States sinking fund above referred
to is the result ot the operation OF the Thurman
Act, passed in May. 1878. Its trainers expectt d
that this fund would reach much larger propor-
tons. but these aoticipations have not been re-
allied. This failure has been due 20 two promi-
neEt causes:
I" first-The very large decrease in the net
earnings OF the company, on which the 25 per
cent. reserved by the Act was to be computed !;
which decrease has, in the main, been caused
by the very large reductions in freight ana pas
senger rates watch have occurred during the
past four years.
: secood-The failure of the fund to earn
compound interest ut the rate OF Eve per cent,
as had been expected.
"0ther causes may have contributed, but the
two named are the controlling causes to which
the failure Of the Thurman Act is due. II is
universally conceded by every person of in.elli-
gencc who has given the subject any study, that
IL Is and will he absolutely impossible Tor the
Union Pacific Railway or system to pay the in
debtedness 10 the United States at It's maturity.
I'm approaching an examination of the sub
ject of remedial legislation, we have endeavored
TO be guided by the directions of the Act. and
10 submit a scheme which shall secure to the
United States full payment of all debts due it
t-oSn said company. with reasonable rate of
interest, having due regard 10 the financial
ability of said company, and the proper con-
duct OF It's business. IN such manner as shall
afford efficient service TO the public.
The principal considerations which have
moved us are the following
FirSt-The system requiring animal pay
rnents Of a percentage of net eartlin Is & tnie-
sirabe. and should be radically altered The
method of percentage of net earnings leads to
endless disputes and difficulties The distri-
button OF net earnings as between the system
and the aided road is complicated and diff
cult problem, requiring Vast amount of ac-
counting and leading. at all points, to differ.
ences of opinion as TO the propriety OF including
oil oil