The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1896-02-01
Such a Proceeding Would Cause
an Increase of Rates and
Diversion of Traffic.
a PLOT BEHIND THE SCHEME.
In Ten Years Huntington Would Be
Willing to Turn Over Two Rusty
StreakS of Iron.

NAohlN01ON, u. u, an. 3l.-Repre-
sentative .Magnirc spoke for three hours
before the House Committee on Pacific
railroads to-day in opposition to the re-
funding bill. For the first time during the
hearings the entire committee was present
and great interest was manifested by all.
Mcguire commenced by saying that a
great storehouse of reliable information
concerning the Pacific railroads would be
the report of the Pacific Railroad Com
mission, which is now almost inaccessible
even 20 members of the committee, and
entirely SO to most of the members of the
House, who will be called upon to vote on
any bill reported by the committee. He
regretted to learn that the committee yes
terddy decided not to order even the
volume containing the majority and
minority reports of that commission
printed.
Chairman Powers said that the commit
tee equally regretted that it was forced to
that action because the cost of printing
the report would alone exceed the limit of
expenditure which the committee is au-
thorized to make for printing.
Mcguire then asked if the committee
would support resolution offered In the
House for printing the report. Chairman
Powers said the committee would support
such resolution in the House and he was
sure that every member of the committee
would urge its adoption.
Mcguire said that he would Immediately
introduce a resolution to that effect and
proceeded with his argument. He ana
lyzed the offer of settlement by the Cen
tral Pacific Railroad Company, showing
that each piece of suscaifei additionai Sc
curity FOR the Government debt is already
mottgaged far beyond its value and really
added nothing whatever to the security
already held by the Government. He said
that the so-calIed blanket mortgage of
S16,0o0,00 resting as the third mortgage
on the entire Central Pacific system is a
first mortgage on the Oakland mole and
other terminal property of the company
in Oakland and is vastly in excess of the
value of all that property.
The effect of the Smith refunding bill.
if adopted. would be to extend the Govern
ment mortgage over all of these branch
roads and terminals, making the Govern
ment mortgage subordinate to all mort
cages and liens now resting upon such
property. This would, for all practical
purposes under the refunding scheme,
make the Government mortgage subor-
dinate to the $16,o00,0O0 third mortgage.
because the whole Central Pacific Rail-
road, including terminals was to be treated
as the system covered by the Government
refundIng mortgage. The payments re-
served on account of the Government
mortgage are to be paid out of the earn.
ings OF the Central Pacific Railroad after
the payment of all operating expenses
and other fixed charges, including interest
on all branches.
'Now the blanket mortgage" sid
Mcguire, twill be a prior encsreoSance
upon necessary part of the system. Ro~
are you going to segregate that mortgage
so as to make any part OF it subsequent to
the Government mortgage under the Smith
bill. You. cannot do it without the con-
sent of bondholders, and they will not
consent, because as third mortgage their
lien will be worthless, and their only
cnance of securing payment is by insisting
on priority The result is that under the
refunding scheme the whole so-called first
mortgage indebtedness of $27, 800, 600, the
Lathrop and Goshen mortgage of SIS, SOC, 900,
the Niles and Oakland mortgage of
S70O,O0o the California and Oregon mort
gage of at least SIC, 300. 900, and the blanket
mortgage of $16. .000, 900, aggregating $780,
SOC, O,0OO will be made prior to the Govern
ment mortgage amounting with interest
now to about $59, 900, 600, and after deduct
ing the sinking fund and earnings, grand
total of sis, 500, 900, upon all of which the
road must in some way be made to pay
interest, if the refunding scheme is to be
carried out.
"How is that to be done2 1 say it can
not and will not be done. Butts promoters
have some very well-settled purposes,
which will be accomplished by it to the
great injury of the Pacific Coast and the
ultimate loss to the National Government
of substantially all that the Central Pacific
Railroad Company now owes it. tits plain
that any attempt to carry out the refund
ing scheme will involve the necessity on
the pars of the Interstate Commerce Com
missior to fix freights and fares over that
road atrates high enough to pay all of the
fixed charges, including interest upon all
the present mortgages upon the system oe-
fore and in addition to the payments re-
served 20 the Government under the re-
funding bill. The commission cannot re-
duce freights and fares below that without
wilfully interfering with the effort of the
Government to collect the money due it.
now that necessary course OH the part
OF the commission must result in one OF
TWO thlngs-it must either produce the
necessary revenue from the rates so fixed
10 maintain in the same excessive charges
over us own roads or the refunding scheme
must speedily fail under the pressure of
competltion, In which case the United
states Government will be IN a far worse
posltion than it now is with reference to
the collection of money due it.
THE refunding scheme will place the