Evening star. [volume] (Washington, D.C.) 1854-1972, 1896-04-08
HOW NOT TO Do 1T.
The Funding Bill Will Increase L
Railroads Debt to the Govern IN en-

Railroads. Debt to the Government.
To the Editor OF The Evening Star:
The two congressional COMMITTEES on Pa
cifc railroads, that of the Senate and that
of the House, recently appointed joint
subcommittee to draft a bill for the settle
ment of the Indebtedness of the Union
Pacific and Central Pacific roads. This bill
has been printed and submitted for ap-
prevail to the two full committees, but at
this date has not been reported to either
house. l hope to be able to show why it
should not be reported, and, at the same
time, why 1t probably will be. AS early as
Monday of last week / had the bill before
me. 1t deals with the two roads somewhat
differently, owing to the different way in
which their enormous debts are placed; but
the rate of interest and payments the
principal are the same. Let us consider tie
case of the Central Pacific only, which
ewes. deducting the amount in the sinking
fund held in the United States treasury and
Ger tain credits for service, the sum, in round
l rmbers, of $6o,W1,GN. On this sum the
company is to pay interest at the rate of ,
per cent annually, in semi-annual Install
ments. The principal is to be paid" as
follows On the first day of January of each
year beginning in 1899 for period of ten
years. 1t is to pay $'oOcrO. For the next
period of ten years this annual payment is
to be $3OO,O9O, and thereafter $7JOOO0 until
the debt is Notwithstanding simple
but tedious calculation shows will require
ffnety years.
There is everything (says the San Fran
cisco Examiner) in the way thing is put.
When We say that the Central Pacific is
to pay per cent interest for ninety years,
and to clear off the principal by INSTALL
MT nts beginning at $}00,U00 year and in
creasiIg to $750,0O0, it. seems as if there
might be something in the offer. But sup
pose we say that it is to pay nothing but
interest, at rates ranging from % to 2:,S
nj of
such payments the debt is to be considered
wiped out, without any provision for the
principal at all, and the road is to become
the unincumbered property of the stock
holders how does this proposition look
then? Would any congressional committee
venture to offer it in that form. especially
when the government was borrowing the
money at 3ls per cent interest, with an OBJ
legation to repay the principal in full? And
vet that is precisely the same thing. 1t is
form"
To bring it to that form is merely q mat
ter of bookkeeping; we have only to con-
slider the principal as unaffected by the an
nual installments and credit these to the
interest account. That will make a varying
rate of interest. but that rate will never
reach the BIZ per cent which the last two
issues of United States bonds fixes as the
tate paid by the government In Carrying
this same debt. As the Examiner says:
In the first ten years the Central Pa
cif1c would pay the government for prin-
cipal and interest combined, about $685.
eOo less than the government would be pay-
ing its own creditors on the same amount
of debt for interest alone. In the next ten
years the deficiency would reach 5000, 600
IN the next seventy years it would be s,S.-
10000 In the whole ninety years during
which the Central Pacific would be 'sextin-
gushing" its debt it would fall $50 4OOOw
short of meeting the governments interest
payments, at 312 per cent. The government
would lose the entire principal of the debt
In addition, making its total loss from the
Centred Pacific $129, 100000. or more than
of the debt, principal and interest"
me factS are little worse. According
to an estimate of the Secretary of the
Treasury the debt Of the Central Pacific is
not to,OOO,OOO, but $tO.92o. $3.50; so the in
terest loss to the government would be- not
500, 1900, but 81, 337 ,6S5. Adding that to
the principal, we find that under the pro-
visions of this astonishing bill the exttn-
gushing sum will fall $132, 263 1855 short of
the sum to be extinguished, 1t is perhars
not surprising that Mr. Huntington and his
associates should have fallen under the
grave suspicion of having close rela. lions
to this funding measure.
Bear in mind that this calculation does
not include the debts of the lines east of
Ogden, which would bring the aggregate
loss up to something like S2GO 100000, nor
does it take any account of compromising of
interest. Is it uncharitab BILE to fear that the
bill may find favor with the gentlemen of
the Union Pacific also?
AMBROSE BIERCE.
Since the foregoing was written I have
learned that the joint subcommittee has
altered the annual payment on the prfnct-
pal for the first ten years from $780, 600 to
$365, 600, and that for the second ten years
from 100000 to $55O,OOO. This amounts al
together to an additional reduction of only
81, $50, 0O0-too small materially to affect the
computation. A. b