The morning call., 1895-01-27
AGAINSr A FOREcLOSURE.
Debts of Pacific Railroads Discussed IN
a Senate Committee Report.


q Senate Committee Report.
WASHINGTON, Jan. Ex-senator Brice,
chairman of the Senate Committee on
Railroads, to-day presented report from
that committee concerning the Pacific
railroads. The report is not based on any
bill before Congress, and is intended SIM
ply to supply the Senate with all the in
formation attainable in the indebtedness
of the Pacific railroads, together with a
brief sketch of the history of both the
Union Pacific and Central Pacific systems,
which is done under the following heads
as regards the Union Pacific:
First-The charter, construction of roads
and subsequent legislation.
Second-The roads composing the system
at present and their financial status.
Third-Policy of owning and controlling
branch lines of road and other outside in
vestments.
Fourth-Measures of relief.
The part of the report devoted to Pacific
railroads deals with the charter and legis-
lation, roads embraced in the system, in
debtedness, assets and earnings. The re-
port makes no direct recommendations,
but urges the importance of taking up the
question of the Pacific road Indebtedness
in the following terms
1.-THE present practical question of the
Indebtedness of the bond-aided Pacific
railroads is of vast magnitude and of the
highest importance. It's solution and set
Element and final adjustment of the rela-
tions of the Government with these roads,
looking to the ultimate discharge of this
Indebtedness and the rehabilitation of the
roads, so that they may subserve the pur-
pose for which they were originally Gre
ated, is imperatively demanded, not only
by the United States and the roads them
selves, but also by the communities and
people which they serve with railroad facil-
tiles and by the holders of valid securities
issued or guaranteed by the railroad COM
panies.
1.-The measure of relief to be provided
ought to be comprehensive and far-reach-
ing enough to embrace all these interests.
1t should especially aim to preserve the
rights of the United States in the premises
and to be such as the roads can live under.
Whatever of partnership relations exist
between the United States and these roads
should be terminated in such manner as
shall be to the interests of both. In deal
ing with this subject more regard must be
had for present conditions than for past
grievances. Recollection of the Credit
Mobilier and other unjust manipulations
should not oyerbalance the sober business
thought of to-day or outweigh considera-
tons and conditions obtaining at the pres
ent time
After discussing various methods making
secure the Government Indebtedness on
the Union Pacific the report says:
h1ny, Loft
open by the Government under the sixth
section of the act of 1852, which provided
that the grants were made upon the con-
dition that the company should pay the
subsidy bonds at maturity. This is con-
dition subsequent, and for breach of the
same the United States may, at the ma
turity of the debt, proceed to forfeit the
charter of the company and wind up its
business through a receiver and take its
chances for recovery of whatever portion
of the debt it may be able to obtain. From
what we have said above we think it sure
that the amount would be very small
indeed. 1t is a question, however, on the
whole, if it might not be the best thing
under the circumstances to do"
To this the report adds:
'Your committee, however, does not
wish to be understood as recommending
this measure of relief, but merely suggests
it as an alternative in case other remedies
believed now to be better should fall
Positive ground is taken against the Gov
ernment's foreclosing the liens and operat-
ing the roads. To this plan they say there
are many grave objections, and adds:
tNo considerable number of citizens of
the United States, certainly not a majority,
have ever declared for the Government
control of railroads, and fewer yet have
ever seriously entertained the idea that the
Government should enter the field of rail
reading as the owner and operator of but
one transcontinental line of railroad, and
thus come in competition with the other
transcontinental lines as operated by pri-
vate individuals. Besides the main line of
the Union Pacific and Central Pacific
which were entered by Congress to make
and constitute one transcontinental line
there are now in the United States four
other lines reaching from the Mississippi
River to the Pacific Ocean, and having
their connections with Eastern trunk
lines We think it clear beyond question
that, as financial investment, the opera
ton of the bond-aided Pacific roads by
the Government would be fat failure;
and we are abundantly satisfied that on
the question of governmental policy it
would at present and under existing cir
cumstances be unwise, and would be
fraught with serious consequences to the
republic and with results far-reaehing and
in the end Injurious
In case of the failure of these plans they
suggest that the only alternative would
seem to be to refund the Union Pacific debt
for considerable period of time, at rate
of interest commensurate with the earning
capacity of the road.
"This," says the report, sis the plan
which has the most favor with financiers
and those who have given this subject
much attention"
As to the period for which the debt
should be extended, and with respect to
the rate of interest, no special recommen-
dation its made.
That, says the report, will be a mat
ter for future adjustment, when the details
of the plan shall be more fully developed.
At present our recommendations will be
confined generally to the matter of refund
ing of the debt for such period and at
such rate of interest as shall enable the
company, under ordinary and business
conditions, to meet the current interest and
a portion of the principal of the debt each
year, so that at the expiration of the period
for which the extension is granted the
debt may be wiped out. In this arrange
ment, two plans have been suggested:
First-The continuance of the sinking
fund and the payment into it of larger
share of the net earnings than is at present
paid into it.
Second-Periodical payments of a fixed
oroo1lnt into the treasury of thp limited