198 



CONGRESS. (PACIFIC RAILEOAD INVESTIGATION.) 



Mr. Edmunds, of Vermont, in arguing for an 

 advance in the amount to be paid into the 

 treasury annually by the Pacific Railroads from 

 25 per cent, to 40 per cent, of the net earnings, 

 said: 



" Now, let us see first where the United 

 States stands as respects its securities for the 

 advances that it made. I have here the statute 

 itself of 1862, which is precisely like that of 

 1864 as far as these matters are concerned, ex- 

 cept that by the act of 1864 the first-mortgage 

 bonds, as they now are, of these two railway 

 companies were then second-mortgage bonds, 

 but they were transposed and advanced over 

 the United States subsidy bonds by the act of 

 1864. But so far as it respects the mortgage, 

 the lien, the right of the United States for se- 

 curity for the forty, or fifty, or sixty million 

 dollars of its advance, the act of 1862 will an- 

 swer my purpose, as I happen to have it be- 

 fore me. 



" Let ua see on what property the security 

 of the United States rests as to the Union and 

 the Central Pacific Rail way Companies. I am 

 speaking now chiefly of the Union Pacific be- 

 cause it is true, as the Senator from California 

 has said, that the Central Pacific has at all 

 times done everything that the statutes of the 

 United States required it to do. Whether it 

 had an offset or whatever, it obeyed the law 

 and awaited its time to get the money that it 

 might otherwise have applied back again. 

 "What does this act provide as to the security 

 of the United States ? The United States shall 

 issue bonds, etc. : 



The issue of said bonds and delivery to the com- 

 pany shall ipso facto constitute a first mortgage on the 

 whole line of the railroad and telegraph, together with 

 the rolling-stock, fixtures, and property of every kind 

 and description, and in consideration of whicn said 

 bonds may be issued ; and on the refusal or failure 

 of said company to redeem said bonds, or any part ot 

 them, when required so to do by the Secretary of the 

 Treasury, in accordance with the provisions of this 

 act the said road, with all the rights, functions, immu- 

 nities and appurtenances thereunto belonging, and also 

 all lands granted to the said company by the United 

 StateSj which, at the time of said default, shall re- 

 main in the ownership of the said company, may be 

 taken possession of by the Secretary of the Treasury 

 for the use and benefit of the United States : Provided. 

 This section shall not apply to that part of any roau 

 now constructed. 



"It took in by provision some roads in some 

 State, I believe. Now, then, the road which 

 Congress authorized this company to build was, 

 as it^has turned out when it is planted on the 

 face of the earth, a road from Omaha to Og- 

 den I am now speaking of the Union Pacific 

 and it was nothing else. The bonds of the 

 United States, to the amount of the dollars 

 that I may mention by-and-by, were issued 

 upon the strength of that security and that 

 rolling-stock and the fixtures that belonged to 

 those 1,034 miles of road as now constructed. 



" Then there was the Kansas Pacific branch, 

 as it was called, which was part of the same 

 system in this incorporation, on which for 365 



miles, or whatever the distance was, bonds of 

 the United States were also issued, which I 

 will come to by-and-by. There was our se- 

 curity for this money advanced for the build- 

 ing of the road. 



" Now the question is whether under the 

 act of 1878, called the Thurman act, the 25 

 per cent, of net earnings is to be computed 

 upon and taken out of the earnings and gains 

 and profits and receipts of the Union Pacific 

 Railroad Company and the Central Pacific 

 Railroad Company for all the other lines in 

 which they are interested besides these main 

 lines." 



Interrupting him, Mr. Morgan, of Alabama, 

 said: 



"I ask the Senator whether or not section 5 

 of the act of incorporation does not cover all 

 the roads that may be in the ownership of this 

 company at the time of the default made in 

 the payment of the bonds, and whether this 

 statutory mortgage does not extend over all 

 the road that it may own at that time and 

 subsequently acquired, being ' all the rights, 

 functions, immunities, and appurtenances be- 

 longing ... at the time of said default.' " 



And Mr. Edmunds continued : 



" I am extremely sorry to say that according 

 to the decisions of the Supreme Court as I un- 

 derstand them and I am afraid they are right 

 in point of law it does not, and I am extremely 

 sorry to say for the interests of the tax-payers 

 of the United States that so far as I know not 

 a single one of what are called these branch 

 roads and extensions belongs either to the 

 Central Pacific or the Union Pacific Railroad 

 corporation as such. They are separate cor- 

 porations, the stock of which is held or con- 

 trolled by these corporations of which they 

 have perpetual leases so that the lien of the 

 United States under this statutory mortgage, 

 when you come to bring it down to judicial 

 determination if the bonds were due yesterday 

 and there was a foreclosure to day, will be the 

 right of the United States to foreclosure upon 

 the line of road from Omaha to Ogden, to 

 take the Union Pacific which is enough for 

 my purpose to illustrate this matter, or if you 

 take the Central Pacific from Ogden to Sacra- 

 mento and perhaps taking in the Western Pa- 

 cific with which it was consolidated going 

 down toward and perhaps to San Francisco, 

 but not the vast system of State railways that 

 the Central Pacific got the control and real 

 ownership and possession of which were not 

 under the mortgage at all. 



" That being the state of the case, let us see 

 how much money was paid out and how much 

 land was paid out on that kind of security. I 

 have the report of the Railroad Commissioner, 

 who stands impartial between the tax-payers 

 and these corporations, for 1885, in my hands, 

 and then I have later that of 1886, which does 

 not state differently at all on this question of 

 how the matter stands. 



" We find by this report that in respect of 



