New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1894-08-13

cial Establishments could not mitigate his aus
terlty. nor Apolnaris water irrigate his spleen
II the Union Pacific managers, so pictur-
escuely described by the champion Of public vr-
tue as a "pratical SET" were ever tempted TO
favor the branches at the expense of the main
line the stockholders Of the former can testify
that they successfully resisted the temptation.
Ill
Whoever examines carefully the legislation OF
Congress in relation to the Pacific railroads will
observe that il is mostly Of hostile character.
and bears the marks OF ignorance. passion and
haste. For more than twenty years Congress has
been fumbling over this matter aiming APP
parently at tripping up the bad men engaged in
cheating the Government, and only succeeding
in tripping up the Government. Extremely good
and wise men. such as our statesmen are. should
not indulge in angry demonstrations against even
the ungodlX for it often happens that between
the unscienyhc thrusts OF the truly good and tho
dexterous lodging Of the experienced sinner the
knuckles Of the anonted get barked. Congress
succeeded in placing enough obstruction In the
way Of the bad men to weaken. II not to imperl,
the Governments security for It's debt, but the
bad men got there all the same"
There was no great difficulty in lodging the
law of 1873. II simply question Of resort
ing to costly indirec: methods instead Of going
straight ahead in honest fashion In the case
OF the Oregon Short Line It only necessary
TO incorporate an Independent company in
Wyoming Territory a starting point and upon
this procure charter from Congress covering
the then Territories Of Wyoming. Utah and Idaho.
Under this charter the company was organized
upon a basis OF about $4,000 per mile. equally
divided between bonds and stock The actual
cost Of building the road was probably less
than the $4,000 per mile for which 1t
was bonded. 1t is at any rate within bounds to
say that ne whole issue Of bonds at their face
value was sufficient to build the road. But. Of
course these bonds unsupported could not be
negotiated at par. strong Endorsement or
guarantee was necessary to give them any value
in the market. The Union Pacific was prevented
from giving this by the same legislation which
had driven them to the device of Independent
company. Again evasion and indirection be-
came necessary. Though II could not guarantee
the principal Of the bonds the lawyers thought
there was no legal hindrance to It's guaranteeing
payment of the interest them by binding
itself to furnish enough business from the main
line to accomplish that result. This was done by
means Of traffic contract entered into between
the Union Pacific and the Short Line. by which
the former agreed to such division Of joint
earnings as shall be sufficient with the other net
earnings Of the Oregon Short Line TO provide
for the payment Of the interest as II becomes
due" This was simply a traffic contract; not
a mortgage pledge made on the future earn
ings Of the company" which had been pro-
hibited by Congress.
Guaranty OF interest payments, however. was
not enough 10 float the bonds at par, and 1t was
not the design Of the Union Pacific to hold all OF
these securities itself while paying for the CON
structon out Of It's own treasury 1t accordingly
offered its stockholders the privilege Of SUBJ
scribing for the bonds. every holder Of fifty
shares Of Union Pacific stock being awarded.
upon a cash payment OF $1,000 a bond
for that amount and a certificate for FIVE
shares $500 Of stock Of the new COM
pany. The plan was successful Privileges sold
at a premium, and about s1200oO00 Of bonds
were disposed Of at par. carrying with them
about 100000 Of stock, so that at the compile
ton Of the road the Union Pacific had in its
treasury majority 81 the stock Of the COM
pany and about SO, OOOO 900 in It's bonds The cost
Of construction had probably been fully met in
the bond sales. Il not Improbable
transaction for either the company or its stock
holders During the year 1882 the bonds sold at
1O5 and the stock al Sc. The sincere patriots
who were caught short Of these securf-
ties considered the transaction "iniauitOus"
Precisely what the Congress that passed the
restrictive legislation of 1873 driving at does
not clearly appear. AT this distance Of time the
performance looks very much like that Of the
angry boy who kicks the root he has stubbed his
zoe against What 1t had accomplished up to
this time was plain enough. 1t had compelled
the Governments largest creditor 10 resort 10
roundabout methods to develop by the only
natural and legitimate process the business upon
the success Of which depended the Governments
only hope for the final payment Of its loan.
Through the business skill and sagacity OF the
managers Of the property II had resulted also
that the Union Pacific Railway Company. against
which the hostile legislation was directed had In
course of the circuit known as whipping the
devil around the stump" gathered into its treas
ury as clean profit several million Of bonds and
some 600 miles of railroad. not a dollar or a mile
Of which went TO strengthen the security Of tho
Government, while the stockholders individually
had enjoyed the opportunity Of participating in
a profitable transaction This is sometimes
called craftsmanship.
The necessity for evasion did not by any means
end with the device Of An independent charter.
II has been shown how II was found necessary
under that charter, in order 10 raise money for
construction, to guarantee the interest on the
bonds by traffic contract. and throw IN" with
each bond bought at par Chrome OF five
shares OF stock The essential feature was the
traffic contract. 1t was necessary that this
should be so drawn to leave no doubt as to
the guaranty the one hand. and on the other
10 avoid any complication with the Government
nv an APPARENT diversion Of net earnings from
the main line to of its branches
II should be promised that the almost invar-
able usage among railroads in transacting bust
ness with their connections branches is to make
the divisions upon the basis Of constructive mile
age allowances previously agreed upon. That Is.
branch or connecting road Of 100 miles with
small volume OF traffic, being obviously unable TO
transact business at as low a cost per mile as the