The herald., 1896-04-28
Minority Report on the Pacific
Railroad Bill
THREE COGENT REASONS
Why the Majority Bill Should Not Be
Adopted
Every Disinterested Person Appearing Be-
fore the commlttee fias Advocated Pore.
closure Of the Oovernment Lien
Associated Press Special Wire.

Press Snecial Wire.
WASHINGTON, April 27.-The minor
ity report on the Pacific railroad bill
was submitted to the house today by
Representative Hubbard of Missouri.
1t deals exhaustively with the financial
conditions of the companies concerned
in the proposed funding plan. 1t argued
that the majority bill should not be
adopted for three reasons:
First-The committee has not learned
enough Of the affairs of the debtor COM
panies to be able to tell the house what
is best to do.
Second-The companies made offers
before the committee, and are undoubt-
ediy ready to corcede terms very much
better for the government than those
embodied in the bill.
Third-The propositions in the bill are
neither good nor safe for the govern
ment.
Under the first head it is contended
that most of the parties who appeared
before the committee were interested
in the railroads; that every disinterest-
ed voice advocated foreclosure proceed
ings, not with the view that the govern
ment should operate the roads, but to
protect the government as preliminary
step. 1t was not considered whether
the government has lien on all the as
sets under the Thurman act, either in
view of the acceptance of that act by.
the companies or as a matter of law.
The extent of the lien of the government
otherwise is in much doubt. The re-
port compares the statement of the
Central Pacific earnings made by its
attorney, Mr.. Tweed, with the statement
in Poor's Manual, from 1890 to 1894. In
the first of these years Mr.. Tweed's
statement was $S9S.000; Poor's $6.061,-
986; in the last year Tweed's, $144, 900;
Poor's S4,S54,1 ,112
The report declares that there Is no
assurance that the bill would be car
ried out, because both companies are
insolvent and their undertakings idle;
that so far as the Union Pacific is con-
cerned, it is an option to the companies
successors, unlimited In time and bind
ing on the government.
In regard to the Central Pacific it
says:
1T was advanced before the commit
tee as an open secret that the Central
is saved from default only by the pur-
chase of it's subsidy bonds by its friends,
who carry them without interest to pre-
vent their presentation to the govern
ment for payment, pending the settle
ment. AS ito which of the two COM
panies showed the most strength--the
negotiation offering the same terms to
each was carried TO q POINT where the
Central broke down and the Union still
stood up"
Under the Powers bill the principal
indebtedness would be reduced to about
S23,000,000, while under no other plan
could 1t be less than $35,000,000, exclus-
i've of $20.00OO00 preferred stock, If that
were taken instead of that amount of
second mortgage installment bonds. So
that most of the debt all of the time,
and all of the debt most of the time,
would be secured as part of the first
mortgage, instead of second mortgage
all the time. as proposed in this bill
Assuming that the sinking fund pro-
vided in the bill may pay the Union
Pacific debt in eighty one years, the re-
port assets that the company would
pay $1Ooooo,Oo0 in principal and interest
While under the company's first offer 1t
would have paid in interest in the same
time on S35,000,000 four per cent bonds.
S113000,000. The offer the committee re-
iected is said to be S4s, 900, 900 better than
the bill under which, 1t is held, the
Union Pacific company will practically
never pay the government a dollar in
money.
Mr.. Hubbard holds that for the protec-
tion of the interests of the government
these conditions are nece sary to any
bill:
First-The main lines of the Central
and Union Pacific should be united for
the support Of the common security
which the government must take on
both. va
Second-The United States should
never again rely upon junior encum-
brance.
Third-A bill which purports 70 con-
stitute contracts by the United states
with other parties should deal with
foundation titles and the holders of
them.
Ihere is an exhaustive contention of
a government lien on the subsidized
part of the Kansas Pacific division II
is held that with this lien established
ana the Central Pacific freed from its
lease to the Southern Pacific, the roads
coulo pe restored to their old prosper
ity, and the ability to satisfy the gov
ernments claim be assured.
In connection with the Southern Pa-
cine or Kentucky, it is held that "the
business into which some of the statas
nave fallen of selling charters for extra
territorial operation is manifest evil y
The additional argument is made
against the committee bill that II is In
coniiict with the principles of the anti
trust law. and will create two of the
greatest railroad mOnopolies in the conn
try; that It is contrary to the constitu-
tion or California and that of Nebras ska
which require that stock be issued for.
values only.
1T is said the Union Pacific reorganiza-
ton committee has assembled three
fourths of the first-mortgage bonds. and
is pressing for foreclosure which would
bar the governments secondary lien. To
prevent this the Morgan Brice bill is
recommended.
The report concludes that the secre-
tary of the interior, having held that
the government claim is good and should
not be discounted over 20 per cent, the at
orney-general. assisted by Governor
Hoadley, having drawn bill to deter
mine the government lien, which bill is
supported by Senators Brice and Nor
gan, when the government directors have
said the roads are worth much more
united, have a plan to unite them and
assure congress that capital is waiting
to bid for the property in that shape, it
would be unwise to pass n bill which
declares the government lien to he linn
tied. when the Thurman act said Il