The record-union., 1896-12-25

gage on the whole line of railroad and
| telegraph line, together with rolling
stock. fixtures and property of every
kind and description. AS already
| noted, the act of 1864 authorized the
| issuing OF first mortgage lien and
provided that the lien of the United
States bonds shall be subordinate to
| that of the bonds authorized to be is
sued.
To anyone honestly seeking clear
| understanding of what is proposed by
| the funding bill, these recitations are
| important. Their brief recapitulation
may assist in clearer understanding.
A land grant In amount 1880 acres to
| the mile, provided that amount could
| be found in odd numbered sections
within twenty miles of the road, was the
| gift of the Government in aid of the
| construction of a railroad and tele-
graph line from the Missouri River to
| the Pacific Ocean. In addition to the
| land grant the credit of the Govern
ment was loaned in the form of bonds.
| the Government agreeing to be Secur-
| ity for the principal and interest of the
| bends. and the interest on the bonds
: was made payable ''in United States
| Treasury notes. or any other money or
currency which the United States shall
make or shall declare lawful money
and legal tender (Act OF 1862 The
amount of the Government bonds issued
and delivered was SCI, 800, ,2o2.
| Thus the Pacific railroads when con-
| structed had incurred two debts. A
| first mortgage Indebtedness to the hold
/ hn fy~ct
mortgage and public Indebtedness to
the Government of the United States
in the sum of the principal and interest
of the Government loan of credit.
AN IMPORTANT CONSIDERATION.
Whoever desires to discuss with can
dor the provisions of the funding bill
will do Well to remember that the Gov
ernment issued the bonds and delivered
them to the Pacific railroads as each
company engaged in the construction
became entitled thereto, issuing two
lirds of the amount apthoriZed by law
and reserving one-third to secure the
completion of the roads. Subsequently
the roads being completed, the entire
issue of Government bonds was given
to them. The railroad companies them
selves sold these bonds. 1t must not
be assumed that they sold them for
their face in gold. On the contrary, con-
struction commenced in 1864 when the
Governments credit was heavily dis
counted The interest on the bonds was
payable in what was commonly known
as "greenba ckS'' and the principal Of
the bonds themselves was payable in
lawful money of the United States
Thus the bonds were redeemable prac-
tically in a deprecated currency. There
was discount upon the bonds, when
converted into gold, the average return
obtained for them being about sixty
cents on the dollar. The Government
issue of bonds, therefore, became a lien
for principal and interest at the face of
the bonds, but yielded to the companies
participating in the construction of the
railroads and telegraph line only about
sixty cents ON the dollar. Thus the
company acquired an obligation bearing
per cent and realized about sixty
cents ON the dollar of available money
with which to construct the road. The
debt against the railroads accumulated
at the rate of 6 per cent. ON the 500,
but as the railroads themselves OBJ
tanned but 80 per cent, it became an
accumulation of 10 per cent. on the
amount actually realized from the sale
of the bonds. Thus the Governments S
claim has accumulated against the rail-
road company in a true financial sense
at the rate of 10 per cent of the value
of the credit extended, while the Gov
ernment itself subsequently, was able
to refund its debts at from 3 to 5 per
cent. interest. Notwithstanding this,
the Government has continued to
charge 6 per cent. on the railroad in
debtedness, although it was itself ena-
bled to borrow money at from 3 to ) per
cent.
In the interest of a plain understand
ing of this case, this phase of the sub
ject is capable of the following recapit-
ulation: For every 500 of credit ex-
tended by the Government, the rail-
roads realized $50 Upon each $50 re-
allied. interest accumulated against the
companies at 8 per cent. per annum on
S1OO, which lis 10 per cent. on $50, and
the amount of interest now undis-
charged has practically accumulated
against the available money obtained
from the extension Of the Government
credit at the rate of 10 per cent, not
withStanding the Government was able
to borrow money at from 3 to per
cent.
THE AMOUNT OF THE INDEBTED
NESS.
1t now becomes important to q clear
understanding of the present situation