company was to build 100 miles per year after the second year and complete its line by 1877. There was much opposition to this measure and the time extension was cut down and the requirements increased as compared with the original resolution." It was felt that the company was seeking to hold its huge land grant as long as possible in order to secure enhanced values and at the same time continually press upon Congress the question of a subsidy. The next step on the part of the company was to secure Congress' consent to a bond issue. This was attained by a joint resolution passed in 1869, which authorized the issuance of bonds to be secured by mortgage on the company's railroads and telegraph line. Puget Sound was also interpreted to include all waters connected with the Straits of Juan de Fuca within the United States. Then, in 1870, an act was passed' which authorized a bond issue for construction and equipment, having as security a "mortgage on its property and rights of property of all kinds and descriptions, real, personal, and mixed, including its franchise as a corporation."" Under this authorization the company proposed to issue $100,000,000 in bonds and actually issued some $30,000,000. These bonds bore the high rate of 7.3 per cent. In 1869 a contract had been made with the banking house of Jay Cooke and Co., which firm had risen into great prominence in connection with Civil War financiering, and through this agency the bonds were slowly disposed of at par, the holdings being widespread. During the three years, 1870-1873, 529 miles were constructed. This meant that construction was rapidly pushed, but the mileage added was not profitable and was by no means able to pay the high interest charges. Thirty million dollars funded debt was too much for less than 600 miles of line to bear. Nor could the company's lands be relied upon to furnish any considerable immediate funds. Then came the crisis of 1873-partly the result of the prevalence of situations similar to the Northern Pacific's-and the Cong. Globe, 1867-68, pp. 2624, 2689. * Statutes at Large, 15: 346. Ibid., 16: 378. For discussion, see Cong. Globe, 1869-70, pp. 1584, 2480, 2539. company defaulted its interest payments, going into the receiver's hands in April, 1875. A vain attempt had been made to induce Congress to guarantee interest. In August a committee representing the bondholders purchased, and a reorganization ensued. The bondholders got 8 per cent. cumulative preferred stock at par. Thus the bondholders, the real investors-those whom the great stockholders had intended to have little share in the profits and no voice in the management-secured control. There was no Credit Mobilier in the Northern Pacific, but the original stockholders undoubtedly intended to make large profits through their control of the valuable franchise secured by very small actual investments, their plans being frustrated only through the collapse of bond sales, bankruptcy of Jay Cooke and Company, and the crisis of 1873. The desire of Congress to encourage widespread small stockholdings was not realized, an investigation in 18729 showing nominally 184 stockholders with considerably greater concentration in fact. Jay Cooke and Company headed the list with 23,188 shares; J. Gregory Smith came next as trustee for 1,552 shares and holding 934 in his own right; G. W. Cass, J. E. Thompson, and R. D. Rice held 934 shares each. The bonds, on the other hand, were largely purchased by "the people," Jay Cooke's name being one to conjure with. Bills to extend time for construction failed, but in 1877 work was resumed and the road was completed in September, 1883, the land grant not being forfeited. Funds had been secured through the issue of 40-year 6 per cent. general first mortgage bonds, of which there were outstanding over $44,000,000 on June 30, 1886. The history of the Northern Pacific illustrates on a colossal scale the failure of the long cherished scheme of building great railways chiefly by means of land grants; nowhere does the policy more clearly appear as an attempt to put the cart before the horse. 8 See H. Misc., 1873-74, no. 272. Gives much information. H. Misc., 1871-72, no. 228. A long, valuable report by the House committee on Pacific railroads on the actual condition of the Northern Pacific. CHAPTER XI ISTHMIAN RAILWAY DEVELOPMENTS The first half of the nineteenth century closed with no railway crossing the narrow land bridge between North and South America, the boats and stages of the Accessory Transit Company between Greytown and San Juan del Sur being the most practicable transportation agency. The Panama route was also used. In 1849 the petitions of Aspinwall and others for a subsidy were not granted, but when, in 1855, they opened the Panama Railroad annual appropriations were made for carrying the mails across the isthmus by this line. The Panama Railroad Company was incorporated in New York in 1849. Its road extended from Aspinwall (Colon) on the Atlantic to Panama on the Pacific, a distance of some 43.75 miles. Constructed chiefly to meet the demand for a route to California, it came to be of considerable importance in trade between New York and San Francisco and in commerce with the Orient. During the second half of the century agitation for isthmian railways was largely focused on the Tehuantepec route. Inasmuch as no railway was built during the period between 1850 and 1887 there is perhaps small need to dwell on the subject. But during the first four years and again from 1881 on there was some agitation for other railways which may be briefly outlined. During the 1851-52 session President Fillmore sent a message to Congress in which he spoke of the recent project to connect the Atlantic and Pacific by means of a railway over the Isthmus of Tehuantepec.2 A convention between Mexico and the United States had been drawn up and had been ratified by the latter. 1 See Bul. of U. of W., Econ. and Pol. Sci. Series, 3: chap. XX, for developments prior to 1850. 2 Sen. Docs., 1851-52, no. 1, p. 9. All that was needed for a vigorous prosecution of the work was ratification by Mexico. On this score, however, some difficulty was being experienced, that government appearing to fear territorial aggrandizement by the United States. In his message of December 6, 1852, the president stated that the "rejection by the Mexican congress of the convention which had been concluded between that republic and the United States, for the protection of a transit-way across the Isthmus of Tehuantepec, and of the interests of those citizens of the United States, who had become proprietors of the rights which Mexico had conferred on one of her own citizens in regard to that transit, has thrown a serious obstacle in the way of the attainment of a very desirable national object." The whole situation is laid bare in a document of the same time, and it indicates that the relations between the governments involved became very strained. A grant of right of way having been made to Don Jose de Garay in 1842, time was extended to him in 1846 by the provisional government of a General Salas. This extension was not held valid by the Mexican Republic and in 1849 Garay was notified that his time had expired. He, however, had proceeded to assign his rights to certain Englishmen who in 1849 turned them over to a United States company headed by P. A. Hargous and New Orleans interests. Early in 1851 a satisfactory treaty was made, but a change in government immediately followed and Mexico persisted in holding the Garay grant null and void and demanded that the treaty with the United States concerning transit over the isthmus be considered apart from the grant. In accordance with this attitude work was suspended and the employees of the company were expelled. The Mexican representative wrote that the Americans had acted "as if the privilege in question had really belonged to them; and in contempt, and almost in derision of the government of the republic, they disposed . . . of the lands, rivers, and woods on the Isthmus of Tehuantepec, and of everything that the government of Mexico possesses there." On the other hand, Mr. Webster, our secretary of state, main Ibid., 10: no. 97. Correspondence between U. S. and Mexico respecting a right of way across the Isthmus of Tehuantepec. tained that the action of General Salas in 1846 was a binding contract and threatened Mexico rather openly, though assuring her that her fear lest the Isthmus become another Texas was unfounded. In 1852 Hargous put in a bill against Mexico for property and franchises confiscated. Then the committee on foreign relations brought in resolutions to the effect that the existing status of affairs was not compatible with the dignity of the United States and suggesting such measures as would "preserve the honor of the country and the rights of its citizens."4 In speaking on these resolutions Senator Mason said Mexico's action was not to be taken so much as an indignity as an indication of her imbecility. He pitied her. But the United States owed it as a stern duty to herself to take the action contemplated. We had bought California, and, just as when one buys a field hemmed about by the property of the seller he may have a way in, so we had a right to this short cut to the Pacific.5 Senator Seward took the opposing view. He argued that the doctrine that the government should interfere to maintain the contracts of its citizens was limited by the justice and absolute certainty of their rights, concerning which there was some doubt in this case. Under the Mexican constitution the action taken by President Salas could only be exercised by Congress. When we acquired our Pacific possessions we had offered to buy a right of way, but Mexico had refused and we assented to her stand and waived our demands. She was not now refusing transit, but wished to grant it on other terms than the Garay grant, even offering to indemnify Hargous and his company. Action upon the resolutions was postponed. Without further detail it may be stated that the Garay grant was not utilized. The close relationship between transcontinental and isthmian projects is illustrated in a message by President Pierce submitted in 1853. He stated that the great expense, delay, and, at times, fatality attending travel by either isthmian route had. demonstrated the advantages of an inter-territorial railway. Cong. Globe, 1852-53, p. 458. |