The record-union., 1896-12-27
THE FACTs-NOW TIE REMEDY.

In the review of Mr.. Mills exhaustive
yet concise paper on the funding of the
railroad Indebtedness, we on Friday
reached the conclusion Of the statement
of facts in the case, namely that the
two transcontinental aided
roads are indebted to the Government
on 100 cent bonds disposed of at 80 cents
on the dollar in the sum of S121, ,491 ,S31,
of which S107, ,743, 900 is for interest at
6 per cent.
1t was shown that the roads are worth
not more than $4,000 mile; that the
accepted approximate actual valuation
of the properties, on the basis of the
average Indebtedness of all railroads in
the United States is S75, ,440; that there
fore the indebtedness Of the two roads
is Sis, S,401 900 in excess of valuation;
that the first mortgage Indebtedness,
which must be discharged before the
Government can realize on its lien, is
S5S, S,000,0 900, and the actual valuation Of
the 1856 miles of the roads on the basis
stated is 100000, therefore the
equity Of redemption is S13,0O0OOO,
which the Government may dispose of
on foreclosure sale if that remedy is
pursued.
We now come to consideration of the
question, What would judicious and
wise creditor SO situated do?" Senator
Thurston, many years chief counsel of
the Union Pacific, proposed to sell the
Government interest at auction, with
the limit at $40, 100000. But that valua
tion does not tally with the actually as
certained valuation of railroad property
In the United States. But accepting his
basis, the loss to the Government would
be SS1, 100000.
Now suppose this abatement-for 1T
would be that and nothing less-to be
made from the sum due, who would be
the beneficiary? Clearly and unques-
tionably the stockholders in the two
roads. They would consolidate their
first mortgage obligations with the pur-
chase money paid at the auction for the
Governments interest, issue a new first
mortgage to cover the aggregated sum
and take the roads absolutely clear Of
Government claims. Owning as they
do, all the branches and about all that
go to feed a trunk line, outside Of con-
neotions with other trunk lines, who
could possibly enter into competition
with them at the sale?
But as an actual fact the equity of re-
demption in the Government being but
S13,000,000. by foreclosing and selling it
would be actually subsidiZing the pur
chaser; actually presenting to the buy
ers a vast sum of money that the Gov
ernment can by judicious procedure re-
tain to Itself.
But suppose some one on the outside
became the purchaser under foreclosure
at the limit named, $4,000. 600, it would
necessarily be some combination con-
trolling a network Of railroads and
branches. Such a corporation could have
no possible purpose except to conserve
the interests of such n system with its
roads and branches all related to the
Eastern States, the country served by
its system.
Necessarily such an outcome would
make the Pacific lines subordinate to the
greater Eastern system. What advan-
tage that would be to the Pacific Coast
it does not require high grade intell-
gence to understand. But Mr.. Mills
well says that there is not the slightest
probability that any Eastern comoina-
ton Of railroad interests would be the
successful bidder at any such sale. or
that the requirement of the Paclhc
trunk lines would be of any speclai
value to an Eastern system In the face
of the fact that the entire network OF
branch and connecting lines from the
Missouri River to San Jose would ne III
hostile hands.