The herald., 1894-07-29
THE REILLY FUNDING BILL,
A Minority Report Written by
Mr.. B0atner.
1t Fayors Foreclosure Of the Pacific
Railroads.
A Forcibls Arxana~at in Favor of tho
Seizure and Operation OF tho
Property by tho Gov
erument.


states that Messrs. Boatnsr, Snodgrass
Harris and Cooper. members of the
house committee on Pacific railroads
differ from the majority of that body
on the Reilly funding bill reported last
week, and will on Mondav present q
minority report written by Mr.. Boatner
OF Louisiana. 1t will be followed by q
resolution directing the secretary Of the
treasury, in the event OF defalcation
OF the payment of the first interest and
bonds due, to take charge OF the road in
the name OF the United States, under
section OF the act OF 1862, and the at.
torney-general, to protect the rights Of
the government, as provided BY the
same act, shall also proceed against the
directors and stockholders, according to
the act Of 1878.
The minority report says: "The only
reason which would induce congress to
extend the time OF pay yment by the sew
eral bond.alded railways, to the United
States, on the bonds issued in aid OF
their construction and the interest paid
thereon, would be to obtain security
which would insure the payment OF the
debt, relieve the treasury of the neces-
sity OF providing for the pay ment OF the
subsidy bonds as they fall due and re-
imburse it for the payments of interest
already made. amounting to $50, ,724,775.
The measure reported by the committee
does not, in our judgment, fill any OF
these requirements to = sufficient degree
to justify the extension OF its grants"
Continuing. the report says: "The
United States holds lien on the rail-
nd fol
fixtures and property OF all kinds, which
bonds, the pay ment OF which must be
provided for by the companies as con-
di.ion precedent to the issuing OF the
collateral bond. The legal effect Of such
payment would be to extinguish the frst
mortgage and to constitute the govern
ment lien the frat incum brance. The
collateral bonds being secured by sub
sequent mortgage. certainly would not
afford additional strength to . first
mortgage upon the secured property.
The laws OF congress- are the supreme
laws of the land, therefore. If it
had power to create a statutory
lien to secure the payment OF bonds is-
sued in aid of the Pacific railroads, it
han the power to extend the lien and
apply it as it will. provided no contract
or other righta are infringed, and thence
we conclude that it ia perfectly com.
petent tc apply the existing lien to any
bonds or obligations which may be
taken in payment of the debt now due
to the United States. Considering that
the collateral bonds, as authorized by
the bill, will be entirely valueless, and
they will afford the United States no
additional security and serve no useful
purpose, it Is submitted that they might
not be issued.
1.-THE principal. by ths terms of tho act,
beare no interest, and hence ali pay
mepts OF interest on the collaterals
would be imputed to the credit and ex-
tinction pro tanto of the principal. Jue-
tice requires the statement that no such
result WAS intended or expected by the
committee, and that it was caused by
the change in text OF the act, which pro.
vided that the bonds should be accepted
as collateral security. instead of in set.
tlement and liquidation OF the debt as
originally written in the act. The act
is to become operative only when the
companies provide for the pay ymsnt OF
the first mortgage bonds, which now
have priority over the lien of the
United States. These bonds mature in
1895, 1896. 1897, 1898 and 1899. No time
is fixed in the act when provision for
payment is to be made, nor lie there any
thing 10 indicate what provision is con-
templated.
I'VE do not perceive how payment of
bonds held in the general market, am
ply secured and drawing 6 per cent in
terest, can be paid in advance OF their
maturity. If it is expected that they
are to be retired at or before the matur.
ity of the first instsllment of subsidy
bonds, issued by the United States, the
bill is utterly impracticable and cannot
be carried into effect. If, on the con.
trary, by providing for their pay.
ment, is meant any undertaking or
contract to do so, as they mature,
the United States will be giving up the
benefit of the sinking funds, amounting
to $50, ,795, 1872, extending pay yment of the
sums due it for over so years and OBJ
tanning no additional security or advant.
age whatever. When it is considered
that the United States has paid q total
Of $50. .724, ,775 interest on its bonds, is.
sued in aid OF these roads, in excess oi
all credits on which it is to receive NO
interest, and which Is proposed to be
repaid in the manner above stated, the
gross iniquity OF the transaction be.
comes apparent.
IF the debt was proposed to be re-
funded on terms which would enable the
United States to substitute the bonds OF
securities which it received for its own
bonds, as they fall due. and to sell the
remainder 30 as to reimburse the treas
ury for the $50 900, 900 it has paid in in
terest on account OF these roads, it would
be best, from financial standpoint, to
grant any reasonable extension,
100 years if necessary, to carry
such q plan into effect; but to
consent that the United States
shall pay the bonds now outstanding,
amounting to a principal of $64 623 5l2.
and to meet the interest thereon at
per cent until maturity, and to receive
therefor collateral bonds, worthless as a
merchantable security and worthless to
the government, and to be held until the
debt 10 paid in the manner above stated,
is, in our Judgment. beyond all reason /.
I'm the sbeence of any proposition
from the several companies, or any OF
them, to settle their indebtedness to the
United States on fair terms, we recon-
mend the foreclosure of the lien of the
United States and OF the enforcement oil
their righta according to the provisions
OF the act OF 1862 and the acts amend
atory thereof.
"fhe question OF liability of stock.
holders of the Central Pacific, under the
laws OF the state of California. is one OF
great Importance, and its decision ought
ut In 1sssI