The record-union., 1896-12-27
SOUND COMMON SENSE.
Bring Il to Bear on a Plain Business
Proposition.
What is the Best Thing to Do in
Regard to the Pacific Rail-
roads Debt ?

(From the Bakersfield Californian.)
What a pity it is that people and pa
pers cannot bring to the discussion of
the funding bill a little plain sound
common sense, and sink political parti
sanship and personal feeling out OF
sight
1t is purely a business question to the
pepole of the entire country, and par
ticularly to those Oh California, and
should be trea ted from a purely bust
ness standpoint.
Here is the proposition: The Pacific
Railroads own two mortgages. One IS
the first lien and amounts to $5S,OOO,-
OO0. This amount is due to the holders
of the first mortgage bonds, who are
scattered all over the world.
The second lien is for $121 ,OOO, 900,
and is the amount due the Government
on account of the bonds issued in aid of
the roads and the accumulated interest
thereon. About $50 100000 of these
bonds were advanced, and the roads
have paid the Government over S49,-
100000 on account, 50 that the bulk of
the present Indebtedness is for ac-
crued interest.
III OTueT 10 ODldlll WIldL tIS uuS LiIc
Government there are just two things
that can be attempted. One is to fore
close it's mortgage. The other is to
extend the time for the payment Of the
debt There is absolutely no other
way.
AS to foreclosure: Should the Gov
ernment do this, as it holds the second
mortgage, it will first have to clear up
the first mortg gage before it can obtain
anything That is, it will have to pay
S.000,0 600. Then its own lien of S121,-
100000 will become due. OF course,
the Government would be the only bid
der under foreclosure proceedings, since
no one would be foolish enough to pay
for the roads more than the amount
of the first mortgage, as they could be
duplicated for less than that. Unless 1t
We're willing to lose the entire amount
due 1t. the Government would have to
bid in the roads, making its interest in
them amount to the enormous sum of
S1S0,000 900.
Having bought in the roads, which
1t would be obliged to do, as shown, or
else lose it's entire debt, what would the
Government have? 1t would have the
right of way" 1t would have no tide
water terminal on this coast, and moth
ing but the actual roadbed and rails,
which in the case of the Central Pacific
etxend only from Ogden to San Jose.
In order to operate the road in any
way at all an investment of several
millions more would be necessary in
terminals, shops, depot grounds, etc.
At least SOC, 100000 would be required,
which would bring the total investment
of the Government up to $500, ,OOO,0 600 or
thereabouts.
There IS the proposition, and the facts
cannot be denied.
In the first place the people of the
entire country will sanction no such
proceeding. particularly in view of the
present financial status of the Govern
1nent, with a constantly increasing de-
} felt on its hands. They are not going to
permit an addition of $500, 100000 to
that deficit.
To pay even a moderate rate of in
terest on such an investment it would
be necessary to impose rates of fares
and freights far in excess of those al
ready paid, and the bulk of the burden
would fall on the people of this coast.
That is something not to be thought
of for a moment. Furthermore, the
/ preponderance of sentiment in any
event all over the country is against
the Government undertaking to oper-
ate any railroad.
But supposing the demands of the
enemies of the railrT ad are complied
with, the mortgages are foreclosed and
the property sold to the highest bidder?
What would be the result? The Gov
ernment would lose the entire debt due
Il, since no one would pay more than
the first mortgage for the lines, mas
much as they can be duplicated for that
amount. The Pacific roads would then
become the property of some Eastern
line which would naturally operate
them on the principle of ''all the traf-
fic will bear" and it would be folly to
expect that they would make any re-
duction from present figures. In fact,
the probabilities are all the other way.
In what possible way, then, would
the people of California benefit by fore