The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1894-07-29

the House Committee on Pacific Rail-
roads, differ from the majority of that
body on the Reilly fuding bill, reported
last week, and will, on Monday, pre-
sent minority report written by Mr..
Boatner, of Louisiana.
It will be followed by resolution di-
recting the secretary Of the treasury,
in the event of a defalcation in the pay
ment of the first interest and bonds due,
to take charge of the roads in the
name of the United States under sec
ton of the act of 1862, and the attor-
ney-general to protect the rights of the
government as provided by the same
act and also to proceed against the
directors and stockholders according to
the act of 1873.
The minority, in stating that it is
unable to join the majority of the COM
mittee in recommending the passing of
House bill 7,79S reported by them as a
substitute for all bills pending before
the committee, which provides for the
settlement of the obligations of the Pa
cific railways to the United States, sub
mits its objections to the plan adopted
by the committee as follows:
Why Time Was Extended.
1.-THE only reasons which induce Con-
3
by the several bond-aided railways to
the United States on the bonds issued
in aid Of their construction and the in
terest paid thereon, would be to obtain
a security which would insure the pay
ment of the debt, relieve the treasury
of the necessity of providing for the
payment of the subsidy bonds as they
fall due, and reimburse it for the pay
ments of interest already made,
amounting to $50, 724,775.
1.-THE measure reported by the COM
mittee does not, in our judgment, fill
any Of these requirements to a sufficient
degree to justify the extension of it's
grants, and is Objectionable in the fol-
lowing particulars:
"Ffrst-The mortgage bonds which
the several companies are authorized to
issue are to be received by the United
States merely as collateral security for
the debts due 1t, as aScertained and
liked in the act and are of no value
whatever, because the mortgage which
the companies are to execute to secure
their payment will be subordinate to all
other liens and mortgages on the prop
erty mortgaged, and we are, therefore,
taking as collateral security a junior
mortgage on the property of which we
have a prior statutory lien
Second-The act fails to provide that
the debt due the government should
bear any interest.
'Third-The act is to become opera
tive only when said companies, or eth
err of them, provide for the payment of
the first mortgage bonds which have
precedence over the lien of the United
States
These bonds mature in 1895, '96, '97,
SO, SO, and just what is meant by pro-.
vide for their payment does not ap-
pear, nor in what manner this provi-
sion is to be made. The collateral bonds
authorized to be taken will be worth
less as a security
Laws of Congress Supreme.
Continuing, the report says: "The
United States holds lien on the rail-
road and telegraph lines, rolling stock,
fixtures and property of all kinds, which
is subordinate only to the first mort
gage bonds, the payment of which must
De provided for by the companies, as a
condition precedent to issuing the col
lateral bonds. The legal effect of such
payment would be to extinguish the
first mortgage and to constitute the
government lien first incumbrance; the
collateral bonds being secured by a
subsequent mortgage certainly would
not afford additional strength to a first
mortgage upon the secured property.
The laws Of Congress are the supreme
law of the land; therefore, if it had
power to create statutory lien to Sc
cure the payment Of bonds issued in
aid Of the Pacific railroads, it has the
power to extend the lien and apply it
as 1t will, provided no contract or other
rights are infringed and hence we con-
clude it is perfectly competent to apply
the existing lien to any bonds or obi
cations which may be taken in payment
of the debt now due to the United
10
bonds, as authorized by the bill. will be
entirely valueless; that they will afford
the United States no additional securi-
ty and serve no useful purpose. it is
submitted that they should not be is
sued.
The principal, by the terms of the
act, bears no interest, and hence all
payments of interest on the collaterals
would be imputed to the credit and ex-
tinction pro tanto of the principal.
No Such Result Intended.
Justice requires the statement that
no such result was Intended or ex-
pected by the committee, and that it
was caused by the change in the text
bonds should be accepted as collateral
security instead of in settlement and
liquidation of the debt as originally
written in the act. The act is to be-
come operative only when the COM
panies provide for the payment of the
first mortgage bonds, which now have
priority over the lien of the United
States These bonds mature in 1895, 80,
81, '98 and '99. No time is fixed in the
act when provision for payment is to
be made nor is there anything to indi-
cate what provision is contemplated
1--WE do not perceive how payment of
bonds held in the general market
amply secured and drawing 6 per cent.
interest can be paid in advance of their
maturity. If it is expected that they
are to be retired at or before the ma
turity of the first installment of subsidy
bonds, issued by the United States, the
bill is utterly impracticable and can not
be carried into effect. If, on the con-
trary, by providing for their payment
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 $780,
790,73 extending payment of the sums
due it for fifty years and obtaining no
additional. security or advantage what
ever. When it is considered that the
United States has paid a total of $780,
724. IT'S interest on its bonds issued in
aid of these roads in excess of all
credits, on which it is to receive no in
terest, and which is proposed TO be re-
pald 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 or securities which it received
for its own bonds as they fall due, and
to sell the remainder so as to reim-
burse the treasury for the s50,00O,000 it
has paid in interest on account of
these roads, it would be best from a
financial standpoint to grant any rea-
sonable extension, hundred years If