Evening star. [volume] (Washington, D.C.) 1854-1972, 1896-02-24
THE PACIFIC ROADS
Gen. Hubbard Speaks for the Sol
vency Of the Southern Pacific.
IT HAS, Re CLAIMS, BEEN HONEST
Performed All It's Obligations and
Violated None.
NJ A TT Err OF FITS

The Pacific railroad committee of the
House today continued their hearings Mr..
Thomas H. Hubbard, representing the Cen
trail Pacific. appeared in behalf of that
road to argue that so far as the Central
Pacific was concerned, it had fully per-
formed its obligations to the government.
He undertook to answer the allegations in
the Anderson report. Whatever existed in
the minds Of the public which was adverse
to that road vas embodied in that report
The difference between the two suggested
methods OF settlement in the report Of the
commission and the Frye bill was that
the former proposed to extend the debt for
nifty years at per cent and the latter for
one hundred years at per cent.
Iaklng up the minority report of the
commission. made by Gov. Patterson, he
characterized its statements as exagger-
ated. producing as it did fabulous figures
as to the profits of the constructors of the
road, based on compound interest for thirty
years. Applying the same method of reas-
the government by the increase of it's land
values. etc, he said the result would be
equally fabulous.
Statements Reviewed.
He challenged also some of the figures
given. The report placed the amount real
lied from sold lands at 81, 100000 when. in
fact, the latest estimate was but $500 600
SO realized. He then took up the majority
report, and called attention to It's conclu-
sion regarding the several requirements of
the acts in aid of the road. He said that
1t was apparent that the road had been
built according to the requirements, and
had been completed six years before the
agreement called for its completion. 1t had
performed its obligations also in the trans
DOrtdtiOn ptS
from its earnings. In the light of these
facts, he said. it seemed strange that the
companies were constantly referred to as
1nSolvent. or as undeserving, and the
question was constantly asked: why not
make the Pacific railroads disgorge? Why
not force them to make restitution
The grounds upon which these questions
were constantly reiterated were not that
the obligations of the company had not
been performed, but that the assets OF the
company mad been diverted by undue profits
during construction. But unless the profit
10 the contractors was limited by the pro-
visions of the act, who was to measure
what the profit should be?
Enhancement of Stock.
AS matter Of fact the profits had re-
suited from the enhancement CT the value
of the stock which was entirely unstable
when the roads were completed. Several
years afterward, however, much of this
stock was sold abroad and its value in
increased until it was worth 80. 1t had
since been high as 30 and as low as 10
or Is. Gen. Hubbard thought that the
question of settlement should be considered
as business proposition and the contract
as one between individuals. The question
OF what profit each party to it had made
should not enter. The fundamental error
| In the minds Of the public was that the men
VINO had built the road were treated as
trustees. The government wanted road
across the continent and it did not want to
bonds, the latter to be ultimately redeemed
The constructors were expected to do the
OF profit.
The sensible settlement would ha inst
such settlement as business men would
make. They would not get angry and de-
Eounce each other with having made undue
profits. If they were angry they would
foreclose. If they were not they wouid do
what was done i'll the case of every rail-
| road mortgage.
What Should BE Done
No one ever thought Of paying a railroad
mortgage In cash. without permission to
issue more bonds. If railroads had to
| meet their obligations in cash every one
CT them would be insolvent. The United
States treasury would be insolvent The
proper thing to do was to make an extern
sion With such a rate Of interest as would
tract. wa
The government wanted to avoid the pay.
| ment OF Its bonds. The chief thing for the
government was to avoid the payment OF
the principal This proposition was that
the government should take care of the
| interest and the railroad would take care
of the principal as it became due To try
| to do both would be for the present Soc
much of a tax on the roads. In answer to
| questions from Mr.. Patterson and others
he amplified his proposition. The sinking
fund, he said. could be applied on the prin.
| cipal, which would reduce it to a poin,
where the roads could take care of it. For
| the payment Of the accrued interest he
| would issue ffty-year 2 per cent income
bonds, one-half of the excess of the earn.
| ings over per cent to go to a sinking
| fund and one-half to the stockholders. Ii
was important, he thought. that the stock
| should pay divfdens and not be extinguish.
ed. The railroads, he asserted. could COM
| ply with such a plan.
Gen. Hubbard said that he would confer
| with representatives Of the Union Pacific
railroad. and, if possible, devise some plan
| satisfactory to both, to settle the difficulty.
| Gen. Hubbard will appear before the COM
| mittee again next Wednesday.