The record-union., 1896-02-15
WHAT FUNDING MEANS.
Development of the State Will Fol-
low It.
Foreclosure Means Non-Payment of
the Debt and Dfsorganization
of Trade.

(From the San Francisco News Letter.
If the proposal to refund the railroad s
Indebtedness to the Government be de-
feated in Congress, what then? Pre-
sumably, the Attorney General will
commence foreclosure proceedings of
some sort, although of what particular
nature is by no means obvious. 1t is
clear, however, that the Government
cannot acquire possession of the road
until the prior lien of the first mortgage
bonds is extinguished to the last dime.
So long as single bond remains out
standing and unredeemed, so long will
somebody have a standing in court and
Alright to prevent any disposition of the
road that may seem calculated to un-
settle or impair it's capacity to earn in
terest. 1t may well be, and probably is,
the fact that some of those bonds are
in the hands of friends of the men who
built the road, and whom it is now pro-
posed to treat maliciously and venge-
fully. 1t is in human nature to strike
back" and it is almost a matter of
course that the first bondholders would
not consent to the road passing into the
hands of the second bondholders with
out a struggle. 1t goes without saying
that there would be prolonged and cost
~ litigation, in which, according to the
almost invariable result, the Govern
ment might be beaten. It is even possi-
BILE that the Governments entire claim
might be defeated. The courts, in the
case against the Stanford estate, have
already indicated a disposition to hold
that way. They pretty plainly say that
the railroad has rendered the Govern
ment services that in equity must be
taken into consideration in any final
accounting between the parties. Judge
Ross even held that it was not the Gov
ernment'S original intention to enforce
the bonds as against the railroad. Be
all that as it may, it is very certain that
it is easier to say foreclose than to ac-
complish it. Litigation, the outcome
of which would at least be uncertain,
is involved, and, pending that, the op-
erations of the road would be impeded,
if not altogether suspended. It is not
possible to bring about a disorganized
condition of traffic without paralyzing
every industry and the entire trade of
the coast.
But supposing that foreclosure were
as easy as it's advocates would have us
believe, what then? The Government
would have, of course, to first assume the
obligation to pay the first mortgage
bonds, amounting TO 42,000,000 At
the present prices of labor and mate
rials. the road could be paralleled for
that sum or thereabouts. 1t follows
that by taking the road the Government
would lose the entire claim which it is
now proposed to refund; would increase
its liability by S42 100000. and withal
would have but a white elephant on it's
hands, which it could not operate itself
(no sane man believes il could, and for
that which it could not, probably, find
a purchaser. As a matter of fact, the
Governments interest in the road is not
in a purchasable condition 1t begins
at Ogden and ends at San Jose. The
numerous feeders, side lines, terminals
between Sacramento and the Bay of
San Francisco, offices, ferries, ETC., etc.,
form no part of the property covered
by the Governments loan, and there
fore would not go to any purchaser of
the central line. Without those ad-
juncts it is difficult to see how the Cen
tral Pacific could be operated at all. It
would be without an entrance to this
city, and without the side lines that at
present bring to it the most valuable
portion of it's traffic. Who is going to
buy this Samson. sEorn of it's locks?
And how could the Government operate
it profitably or at all. when deprived of
everything that gives it strength in its
rivalry with other roads? The more
this matter is examined the palmer 1t
becomes that it involves considerations
too great and grave to be disposed of in
a spirit of malice and revenge. That is
the spirit, as we all know, which actu-
ates Sutro and his committee of fifty.