TP TP "TV /r A TP "T?" C2
JtrO n i Ja£L JtrO . rS. o
A
OF
Senators and Members
IN THE
37TH CONGRESS,
^ On the Passage of the
ACTS OF JULY 1,1862, and JULY 2,1864,
PROVIDING FOR THE
PACIFIC RAILROAD,
Showing, in particular, their views upon the
nature of the financial relations set up ■
between the Government and the
Railroad Companies,
And as to the time and manner of the repay¬
ment of the Bonds issued to aid in the
construction.
n mm pi 'i war wn
Publisher for the Un*
Ntral Pacific Railroad Companies.
( June, 1876. ,
LIBRARY
G " RAILWAY
" Y ;*I i N C TO N.
PACIFIC RAILROAD SUBSIDY BONDS
Tlie measure providing for the issue of national credit to
assist the construction of a railroad between the Missouri
River and the Pacific Ocean had been discussed in the news¬
papers and magazines, for twenty years, had been urged
upon the Government by various commercial bodies, had
been anticipated by the several Government surveys, had
been made an object of special care by both Democratic
and Republican party resolutions, and had already passed
the House in 1861, but failed to pass the Senate, when at
the 37th session, it again came up for consideration.
Considerable debate ensued as to the proper agency for
constructing the road, whether it should be wholly by cor¬
porations authorized by the States, or in part by a corpora¬
tion chartered by Congress. Also in regard to the location
of the eastern terminus, and the several branches reaching
the Missouri River.
The following are the principal utterances on the subject
of the form of the security which the Government should
retain on the road for the bonds advanced, and as to the
mode in which the bonds and the interest thereon should be
repaid:
IN THE SENATE
Mr. Wilson said, June 17th, 1862 (see page 2,754, Cong.
Globe):
" I give no grudging vote in giving away either money or
land. I would sink $100,000,000 to build the road, and^ do
it most cheerfully, and think I had done a great thing for
my country if I could bring it about. What are seventy-
five or one hundred millions in opening a railroad across
4
the central regions of this continent that shall connect the
people of the Pacific and Atlantic, and bind us together ?
Nothing." * * * * * " I have studied the railroad
system of this country and its condition, and I make the
prediction here to-day, and let it go upon the record, that
the man is not born in this country, nor is there born the
grandfather of the man in this country, who will ever see
this nation get back this money. It is an impossibility.
The road will never be worth it." * * * * "I do not
expect any of our money back. I believe no man can ex¬
amine this subject and come to the conclusion that it will
come back in any other way than is provided for in the
bill; and that provision is for carrying the mails, and
doing certain other work for the Government of the United
States. In that way we are to get our compensation, and,
in my judgment, it will be ample and complete; but the
idea that the $16,000 or the $18,000 a mile which we paid
into the road is ever to be received back into the Treasury
of the United States, is as visionary as anything that ever
entered the brain of man."
And again (page 2816):
"We propose to embark in building a Pacific Railroad.
It is the interest of the United States to induce the capital
of this country to go into that road. Every dollar put into
that road is so much security to the United States. Every
provision of this bill that prevents the capitalists of the
country from putting money into the road is so much
against the United States. If we embark in this road, and
put millions of dollars in it, we shall go through with it if
it costs ten millions more than you find in this bill. . The
great object is to make a bill that shall bring into the road
the capital of the country, and, in my judgment, this
amendment repels capital. You provide in the bill that
the road shall do certain work for the Government by way
of -payment—carry the mails, munitions of war, &c. I
believe that it is the most fatal amendment that could be
adopted, and if it stands in that bill the bill is not worth
the paper on which it is written."
Mr. Collamer said (page 2813, 37th Cong.): This bill
5
carries the idea, and in this section provides for the repay¬
ment of this loan, as gentlemen call it. In a subsequent
section it is provided the payment shall be made in the
carrying of mails, supplies, and military stores for the
Government, at fair prices, and also that five per cent, of
the net proceeds or gains shall be set apart for the Govern¬
ment. That is all the provision there is in the bill for the
payment. * ■ * * * * * *
Mr. McDotjgall said: I wish to say, with regard to this
obliquity, the gentleman seems to perceive in the appear¬
ance of this bill that it was not designed that the Govern¬
ment should foreclose a mortgage on this road if the road
was completed in good faith, and did the Government busi¬
ness. As I have had occasion before to remark, the Gov¬
ernment is now paying over seven millions per annum for
the service which this road is bound to perform. That is
about one hundred per cent, more than the maximum of in¬
terest upon the entire amount of bonds that will be issued
by this United States when the road is completed. The
Government is to-day, on the peace establishment, without
any war necessity, paying for the same service one hun¬
dred per cent, more than the entire interest on the amount
of bonds called for by the bill. Besides that, it is provided
that five per cent, of the net proceeds shall be paid over to
the Federal Government every year.
Now, let me say, if this road is to be built, it is to be
bnilt not merely by the money advanced by the Govern¬
ment, but by money out of the pockets of private individ¬
uals. If there are to be great sacrifices in the accomplish¬
ment of a great national purpose, and this is admitted to be
a great national purpose, one demanded as a political neces¬
sity, why should the Government draw from the pockets of
private citizens $50,000,000, to be embarked in an enterprise
that will have no net proceeds, that will pay no cent of divi¬
dends %
Upon the hypothesis of the Senator from Vermont, this
Government should build the road if it costs $100,000,000,
and then spend $5,000,000 to run the road. A better pro¬
position^ has been advanced here in this bill. It is proposed
6
that the Government shall advance $60,000,000, or, rather,
their bonds at thirty years as the road is completed in the
course of a series of years ; that the interest at no time can
be equal to the service to be rendered by the road as it
progresses; and that the Government really requires no
service, except a compliance on the part of the Company
with the contract made. It was not intended that there
should be a judgment of foreclosure and a sale of this road
on a failure to pay. I wish it to be distinctly understood
that the bill was not framed with the intention to have a
foreclosure.
* * * * * * * *
In case they failed to perform their contract [i.e., the
contract to finish the road]. That is another thing ; that is
a stipulation ; that is a forfeiture in terms of law, a very
different thing from a foreclosure for the non-payment of
bonds. The calculation can be simply made, that at the
present amount of transportation over the road, supposing
the Government did no more business, that that alone would
pay the interest and the principal of the bonds in less than
twenty years ; making it a direct piece of economy, if the
Government had to pay them all. However, I am not dis¬
posed to discuss this matter. I say that it was not under¬
stood that the Government was to come in as a creditor and
seize the road on the non-payment of the interest. It is the
business of the Government to pay the interest, because we
furnish the transportation.
Me. Wilsox said : Now, sir, until the road is completed,
we have reserved a certain percentage for the security of the
Government. I think we have taken ample security in this
matter, and I think every word or idea in this bill that tends
to keep capital out of the road is so much injury to the
Government of the United States.
The senator says the bill goes upon the idea that this
money we loan for building this road is to be repaid. I
know that is the theory of the bill; but there is not a prac¬
tical railroad man in the country who expects the Govern¬
ment to get back its money, unless this road can so manage
as to earn money enough to pay it. When you consider
7
the length of this road, the mountains and the deserts that
it crosses, the sparsely settled population, the enormous
cost of the road and of the running the road, the nation and
the world will be satisfied if we can build it at a reasonable
cost; and then if the road can pay the Government the
interest, and keep on running and do the business of the
nation, and the commercial business of the country, every¬
body would be delighted at the idea.
I must say I fear it cannot do all that. I am very confi¬
dent it could not do it without the liberal aid of the Govern-
-mient, not only in completing the road, but a liberal dealing
with the road when it is completed.
I regard it as a national necessity of transcendent import¬
ance, against which seventy-five or one hundred millions
do not weigh anything. What are seventy-five or one
hundred millions to the American people to have a railroad
completed connecting the Atlantic and Pacific shores, and
opening the interior of the continent to this nation % It is
not even as dust in the balance.
* * * * * * * * *
Right in view of all these facts, we propose to drive a
hard bargain with the men who invest their money in this
road ; and I tell you, nine dollars out of ten that go into
this road will go into it to accomplish the result, and not
with the idea of making money. There is not a man in
this Senate who would put $1,000 in that road with the idea
of making a good investment. The road is a national ne¬
cessity ; and yet we propose to put it in this shape: That
when the time comes, if the road fails to meet its obliga¬
tions, the Government is not to consider the exigencies of
the road or of the country, but it is at once to take posses¬
sion of the road, and hold it on the part of the United
States. We do not want it any way. The bill provides
that the Secretary of the Treasury can do it; it is at the
discretion, therefore, of the Government of the United
States. If the road is to burst, if it fails to do what it can
do, the Government will unquestionably bring the corpora¬
tion up; but it ought to have the privilege to regard their
condition and their necessities. I say, unless we are to
8
deal liberally with this road, I think we shall repel the
capital of the country from going into it. We may begin
to ask too much, on the idea that we are to give lands that
are valuable, and put some money in the road; but if we
embark in this concern, I tell you, if its costs $100,000,000,
this nation is going to put it through. Every dollar you
keep out of the road by illiberality, will come out of the
Treasury of the United States in the end; therefore I con
sider this amendment as an amendment against the Treas¬
ury of the United States. I have no doubt upon that point,
and I hope the Senate will reconsider it; for, when I vote
for this bill, I want to vote for the bill with the conviction
that, at last, after twelve years' struggle, we have got a bill
that looks like making a Pacific Railroad.
c_>
Mr. Latham said (page 2,818, 37th Cong.):
" That was the theory and purport of the bill; that they
might go on and invest their capital with the Government
aid given to them. If it prove successful, as they under¬
stand, they will pay it all off. If it does not prove success¬
ful, they will apply certain proceeds, as stipulated in the
bill, for the extinguishment of the principal, pro rata, until
all is extinguished ; and if it is never extinguished, as the
Senator from Vermont has said, the bill does not purport to
be a mortgage, but it is really a donation, a gift to them.
That is the theory of the bill, and nothing more nor less."
Mr. Wade said (page 2835, 37th Cong.):
Sir, your money will not be lost. In a pecuniary point of
view it will be a gain to this Government to make these
facilities for settling this wilderness. It will strengthen us
in a military point of view. It will strengthen this Union,
which is more' than all. It will do more for the country
than we have done for any number of years past. Let us
not jeopardize it then by this narrow policy that will stiike
out these collateral roads, and thereby probably defeat the
measure at this session. For twelve long years this nation
has struggled to perform that which is now within our grasp,
and which stands trembling in the balance through the false
economy of some gentlemen here.
9
I hope, sir, it will not prevail, and I trust we shall not
eternally reiterate our arguments and reiterate our proposi¬
tions so that we cannot get through.
I hope that now, to-day, this great measure will receive
the final sanction of the Sec ate.
IN THE HOUSE.
Mr. Campbell, the Chairman of the Committee, said, on
reporting the measure, April 8 (see page 1,578) :
"The people in conventions assembled, of all parties,
have resolved this railroad shall be constructed. Executives
have called attention to the subject until the stereotyped
item has no longer attracted public attention. Secretaries
have urged and recommended in vain. . Explorations and
surveys have been made, and reports, embraced in huge
volumes, encumber our libraries, and convert Congress into
a publishing house, while committees of both Houses have
investigated and reported, time and again, on the utility
and practicability of the work in question. Hay, more
than this, in a recent imminent peril of collision with a
naval and commercial rival—one that bears us no love—we
ran the risk of losing, at least for a time, our golden posses^
sions on the Pacific for want of proper land transportation,
and shall we still pause, while the nation, sensible of the
peril and the escape, call loudly on us to organize and push
on this, the greatest enterprize of the age." * * * * *
" When all the bonds shall have been issued (which will
necessarily be at the completion of the road) the aggregate
annual interest will be $3,892,080. I have shown that the
army and navy transportation and postal service to the Pa¬
cific, cost the Government, annually, $7,357,781. Take,
then, the annual interest from the annual expenditure, and
we have left a sinking fund of $3,465,701, a sum more than
sufficient to extinguish the bonds before they become due, or
what is the same thing in effect, saved to the Government
by cheapening expenditure in that direction."
10
Mr. Kelley remarked : "I cannot feel that the time was
ever more propitious for beginning this work than now.
What immediate expenditure does it require % None in the
next year ; but in two or three years hence probably an ex¬
penditure of $180,000, increasing, semi-annually, to about
five millions of dollars per annum. Can there be any ques¬
tion that our country can bear such an augmentation of its
annual expenditure? Or will it harm us if posterity, ■ being
blessed by the work, should, perchance, hare to pay the
principal of the credit invested ?"
On the 30th of April, Mr. White, one of the few mem¬
bers of the House who opposed the bill, (said p. 9111):
"Now, sir, I contend that, although this bill provides for
the repayment of the money advanced by the Government,
it is not expected that a cent of the money will ever be
repaid. If the committee intended that it should be repaid,
they would have required it to be paid out of the gross
earnings of the road, as is done with the roads in Missouri,
Iowa, and other States, and not the net earnings. There is
not, perhaps, one company in a hundred, where the roads
are most prosperous, that has any net at all. I undertake
to say that not a cent of these advances will ever be repaid,
nor do I think it desirable that they should be re¬
paid. This road is to be the highway of the nation, and
we ought to take care that the rates provided shall be mod¬
erate. I think, therefore, that this will turn out a mere
bonus to the Pacific Railroad, as it ought to be."
" It will be observed, by reference to the section, that
there is no provision in reference to the payment of the cur¬
rent interest. I therefore move to amend by adding to the
section the following:
" ' It is declared to be the true intent and meaning of this
section that the current interest on said bonds shall be
chargeable to said company, to be by them reimbursed to
the United States within one month after each semi-annual
payment thereof by the United States; and a default therein
shall subject the said company to the same liability and for¬
feiture above provided for in case of the non-redemption of
the bonds at their maturity.'
"The section, as it now stands, does not make any provi-
11
sion for the payment of the current interest as it accrues
semi-annually. It may or may not have been the intention
of the committee that the interest should be paid by the
company. Probably it was: but if not, then this amend¬
ment, of course, will involve a principle which the commit¬
tee has not sanctioned. If it was the intention of the com¬
mittee, and it is the intention of the Committee of the
Whole, that the railroad company shall pay the current in¬
terest, then, to avoid the difficulty and uncertainty which
creditors will have, and to insure its prompt payment by
the United States, this amendment provides that the Govern¬
ment shall first pay it, and the company reimburse it to the
United States within one month. Of course, it will be a
little gain to the company, to the extent of the interest upon
the interest. This is the only way the interest can be
promptly secured to the creditors.
"Mr. Campbell. I suppose, of course, that the gentle¬
man from Indiana is acting in perfect good faith ; but I am
clearly of opinion that the gentleman has not studied faith¬
fully the provisions of this bill. It has been demonstrated
to this House that the cost to the Government of transporta¬
tion to our forts in the Territories is more than double the
amount of the entire interest upon all the bonds proposed
to be issued ; and the bill is based upon the supposition
that the transportation of Government supplies over the
road will be equal to, if not greatly exceed, the annual in
terest upon the bonds issued from year to year. It is not
the intention of the bill that the interest shall be paid semi¬
annually to the Government. It is not supposed that, in
the first instance, the company will re-imburse the interest
to the Government. It will re-imburse it in transportation ;
but if the transportation does not meet the interest, then the
Government is to have a mortgage on the entire road for the
full amount of principal and interest. I hope, therefore,
that the amendment will be voted down.
"Mr. White's amendment was rejected,"
12
AMENDMENT OF 1864.
«
•
In advocating this measure in the Senate, on the 19th of
May, 1864, Senator Trumbull remarked: "I am not for
legislating upon the principle that everybody is dishonest
and corrupt. I suppose we want to pass a bill that the capi¬
talists of the country will be willing to take hold of and
invest their capital in the construction of this road. What
we desire is the construction of the Pacific railroad. * *
* I am opposed to granting by Congress any privileges
to this company that will extend farther than is necessary
to complete this road. All that Congress proposes to do is
to do enough and only enough to induce capitalists to build
this Pacific railway. We shall be indebted to them ichen
they do-that. We want to hold out an inducement to them
to take hold of this work, and not. throw obstacles in the
way of men who have means to build the work. * * *
Here is a great enterprise of national importance. The
country has been demanding for years the construction of
a railroad across the continent. It is a great desideratum
to obtain it. All parties have been for a Pacific railroad."
Mr. Sargent, in advocating the measure as one of
economy to the Government, cited, with approval, the re¬
port of Jefferson Davis, a former Secretary of War, con¬
taining the following passage:
" In the first years of a war with any great maratime power, the communica¬
tion by sea could not be relied upon for the transportation of supplies from the
Atlantic to the Pacific States. Our naval peace establishment would not furnish
adequate convoys for the number of storeships which it would be necessary to
employ; and storeships alone, laden with supplies, could not undertake a
voyage of twenty thousand miles, passing numerous neutral ports, where an
enemy's armed vessel, even of the smallest size, might lie in wait to intercept
them.
"The only line of communication, then, would be overland ; and by this it
would be impracticable, with any means heretofore used, to furnish the amount
of supplies required for the defence of the Pacific frontier. At the present
prices over the best part of this route, the expense of land transportation alone,
for the annual supplies of provisions, clothing, camp equipage and ammunition
for such an army as it would be necessary to maintain there, would exceed
$20.000,000; and to maintain troops and carry on defensive operations under
those circumstances, the expense per man would be six times greater than it is
now; the land transportation of each field twelve pounder, with a due supply
13
of ammunition for one year, would cost $2,500; of each twenty-four pounder
and ammunition, $9,000; and of a sea-coast gun and ammunition, $12,000.
The transportation of ammunition for a year for a thousand sea-coast guns
would cost 110,000.000. But the cost of transportation would be vastly in¬
creased by a war; and, at the rates that were paid on the northern frontier,
during the last war with Great Britain, the above estimates would be trebled.
The time required for the overland journey would be from four to six months.
In point ol fact, however, supplies for such an army could not be transported
across the continent. On the arid and barren belts to be crossed, the limited
quantities of water and grass would soon be exhausted by the numerous
draught animals required for heavy trains, and over such distances forage
Could not be carried for their subsistance. On the other hand, the enemy
could send out his supplies at from one-seventh to one-twentieth the above
rates, and in less time—perhaps in one-fourth the time—if he could command
the Isthmus route. Any reliance, therefore, upon furnishing that part of our
frontier with means of defence from the Atlantic and Interior States, after the
commencement of hostilities, would be vain."
Mr. Steele stated the case thus: "Everybody• under¬
stands that the whole system of legislation, with regard to
this great national work, has been upon the supposition
that it was a great national necessity ; that the entire coun¬
try was interested in it, and that Congress was justified in
making large appropriations of land and money for the
purpose of carrying it forward.
"The last Congress made appropriations of money, and
in order to encourage the men who should undertake to
build this road with the hope that they may some day repay
that money, or, at least, repay the interest, they provided
that the freight for carrying the property of the Govern¬
ment over this road should be applied to the payment of
the money which the Government advanced. * * *
Why was it that the 37th Congress was willing to give
such an amount of money and land for the purpose of aid¬
ing in the construction of this road % Because it was con¬
sidered a great public necessity. It was considered that all
they could give, provided the road was built, would be re¬
paid in a thousand ways to this great country. * * *
Now it was because this was a great public work that the
last Congress thought it wise to give this aid. They
thought that this company, if it was organized, would be
able to pay back this money. And I apprehend that the
moment this road is in operation, the business of the Gov-
i4
ernment may, and probably would in time of war, absorb
so much of the entire working stock of the road that they
cannot go on and pay their expenses, except by receiving
some compensation for it. And it was thought that if the
transportation which the Government received was credited
upon advances, it would be equitable and fair"
In the same debate Mr. Stevens said: " It is also charged
that we allow these companies to issue their own bonds and
give a first mortgage. * * * It is very clear that unless
the second mortgage is to be got in this way the road will
never be finished, and will never earn a dollar. I doubt not
that when this road is finished, and the vast trade between
the two oceans sets in over it, when the business not only
of this country, but the commerce of the far East shall be
brought across this continent on its way to Europe, as it
will be the only short thoroughfare, the road will be so pro¬
ductive as not only to pay its liabilities, but to make its
stock very valuable."
"Although the bonds of the Government maybe post¬
poned to the others, the Government will receive vast ad¬
vantages from the very fact that the road is finished, and
pours the wealth of California into its coffers, besides keep¬
ing together the Union as it now is. That was the view
that actuated the committee. The committee did aspire to
look at the question in a statesmanlike point of view."