Los Angeles daily herald. [microfilm reel] (Los Angeles [Calif.]) 1884-1890, 1889-11-08

FRl0AY. NOVEMBER 8. 1850.
The Mortgaged Railroads.
The San Francisco Chronicle affects to
believe that if the Government should
foreclose it's second mortgage on the Cen.
trail and Union Pacific railroads, the
great corporations would come to the re-
lief of the debtor corporations, for the
reason that they would all be fearful of
the effect upon themselves of the Gov
eminent assuming control OF an extern
sive and important line OF railroad.
"They would reason shrewdly," says the
Chronicle, "that if the Government
should take the Central Pacific and oper-
ate it, either directly or by lessee, the
people would begin to ask themselves
why the Government did not OPP
crate all the railroads, and then
the days of great railroad COR
porations and immense profits would
be at an end" This fine picture is
somewhat blurred, and the argument, If
it have any, is answered. in the succeed
ing sentence OF our contemporary when
it admits that it is possible that the Gov
ernment would operate that road at a
loss. It is not only possible, but it is
more than likely it would do SO. We
are hardly ripe for the practical carrying
out of the Bellamy principle, and but few
of our people are prepared to increase
the patronage Of the Federal Government
TO the extent of giving it the manage
ment and operation of our railroads.
The Government has now about as
much as it can stagger under in
the vast patronage which it has to give
cut every four years. If in addition to
dividing the spoils of Office every time
there is change of administration, the
operation of great systems of railways
should enter into politics, and active
partisanship should be rewarded by rail,
road positions, we fear the end of popular
government would not be far off.
We do not believe that any satisfactory
solution of the railroad mortgage ques-
ton can be reached in this way. What
ever we may say about the management
of the mortgaged roads in the past,
the fact stares US in the face
that Congress will hs obliged to
take immediate measures to meet
the question. The bonds, with the accu-
Nulsted interest will reach maturity in
1892, and if there is any practicable way
in which the loan can be secured and
the Government made safe, it ought to
be carried out. There are only two ways
open to the Government to recover its
loan. One is to foreclose and take
possession of the roads. That means
their operation by the Government.
This solution is hardly entertainable.
The Government is not prepared
to 20 into the railroad bust.
ness, nor are the people willing
that 1t should. The other mode of
settlement is that proposed by a
bill, introduced last winter-to call In
the matured second mortgage beads and
issue new bonds to cover the indebted
ness and the interest of the roads, these
bonds to run for fifty or one hundred
years, and to bear 2 per cent. interest.
Then provide sinking fund that would
meet the new Issue at maturity. These
bonds would have value in the market
which would make them sell readily at
par. The present second mortgage bonds
would have no market value whatever
if it were not that the interest (6 per
cent? is guaranteed by the Government.
The Senatorial committee that recently
visited Los Angeles is particularly
charged with the treatment of this ques.
ton, and from what we have heard we
are inclined to believe they will favor q
scheme something like this: The Cen
trail Pacific Company to give first mort.
gage to the Government not only on the
G. P. road. but in addition on the whole
of the Southern Pacific plant FROM San
Francisco to Ell Paso, and on all their
local lines in the State. Then the Gov
eminent to issue new guaranteed bonds
sufficient to take up all the outstanding
bonds in both the Central Pacific and
Southern Pacific Companies, these bonds
to bear interest at 2 per cent. per year,
to run for one hundred yesrs, or payable
sooner, at the option of the debtor road.
To fix a sinking fund sufficient to redeem
the bonds within the time desig-
mated, and to loan them to the
companies to an amount sufficient
to redeem all outstanding liens and
charge the same upon the first mortgage
from the two companies. This would
secure the Government with the whole
plant of the Southern Pacific Compa
and enable it to meet the sinking fund
and interest from all the roads instead of
from the business Of only one road-the
Central Pacific. 1t is believed that a
plan of this kind would work we'll, and
would enable the company to build
needed auxiliary branch lines as feeders
and thus 30 materially aid in increasing
the business of the Coast as to result in
great benefit to the State by
developing industries that are at
present dormant. The Government
would certainly by this method
have far more valuable and reliable
security than it has now with it's second
mortgage upon single road that is do
ing little more than paying it's current