The morning call., 1892-11-23
THE SUBSIDY BONDS.

The first gun in the coming campaign
over the subsidy bonds was fred on Mon
day by Hon. A. Taylor, Government Com
missioner of Railroads, in a report recoDl-
mendng Senator Frye's plan for solving
the difficulty by extending the subsidy
bonds one hundred years at per cent in
terest. Mr. Taylor's reason for advising
this course is that it would be useless for
the Government to Insist upon terms of
settlement which the railroad companies
would not agree to" and that foreclosure
would involve an additional invest ment
equal 10 the original debt" The latter
statement Is true. Ii the subsidy bonds
were foreelosed the Government would have
to take care of the first mortgage. but the
assertion that the companies are master Of
the situation requires proof. IL the CON-
panies were in a position to dictate terms to
the Government they would not pay a dol
lar, either now or al any period in the fu-
ture.
The extension of debt for three lives at
the nominal rate of interest of per cent is
equivalent to a release Of the debt. In
England. where the statutes of mortmain
forbid the alienation Of eBtailed property.
the d fference between the value of free
hold and emphyteutie lease of ninety years
L
tions, such as Columbia College and The
Sailors Snug Harbor, are not allowed TO
ALLEVIATE their real estate; they lease ii on
long terms, fifty, seventy-fve and ninety
nine years, and the lessee, if he capitallZes
this rent, pays as much. or nearly as much,
for the lease as he would for title in fee.
Ia commercial circles it sometimes happens
that a rich man, desiring TO advantage a
young friend starting in business. lends him
a sum sufficient TO supply him with capital
the loan 10 be repaid in twenty-five or thirty
years with nominal interest; such loan
is viewed by the mercantile agencies as the
equivalent of a gift; the young man 10
rated in their books as commanding so much
capital. Under the same rule the agree
ment of the Government 10 extend its claim
on the subsidized roads for a century at 9 per
cent interest would be regarded by the
public as q release Of the claim. 1t would
be more straightforward 10 say in plain
words that the Government forgves the
debt.
II the builders of the subsidized roads
had impoverished themselves by building
them. and had been for thirty years and
were still struggling to keep their heads
above water. in order TO maintain avenues
OF communication which were essential to
the existence of the nation. il isseasy TO
understand how Congressman could appeal
TO equity and generosity to induce the
Government to forbear pressing its claim.
But. as the official Investigating report
shows, the builders of the Southern Pacific
have for their part flOated, in addition 10 the
bonds and stocks which the road
really cost. S11S,000. 900 Of securities
which represent the profits of the opera
ton, and the other companies have looked
out for their own interests with equal thrift
Upon these Sl1S.000. 900 OF securities the
owners of the Southern Pacific compel ship
pers to pay interest at rates varying from
one to six per cent. Thus, instead of being
impoverished by the construction of the
road, so that they have become fitting OBJ
jscts of national benevolence, four owners
have realized the en- oTmous profit of nearly
thirty millions each out of the enterprise.
Under the circumstances it is as preposter-
Gus for them to 60 into court and plead in
forma pauperis as it would be for the bo-
nanZa miners 10 seek relief from Congress
by way Of rewardiDg them for developing
the Comstock lode.
1t is unsafe business TO set precedent
that q man may escape payment OF his debts
If he is rich and influential and has friends
at court 1t is hard to say whereisuch
rule might lead. When ashpbulder makes
a contract with the Government TO build
an ironclad, he gives security for the
faithful performance of his contract, and If
the contract Is not fulfilled his sureties are
expected TO pay. But if the example is now
set that debtor TO the Government may be
released from his obligation If he says he
cannot pay, though he has divided with his
associates snug profit of Sis, 0O0, 900. the
sureties on future contracts with the Navy
Department may insist on equally liberal
treatment. Il will become rule of prac-
tice that a man who owes money to the
Government may pay or not as he pleases.
Where that rule would land the nation il is
hardly naeessary 70 mint out