Monopolies and the People

by D. C. Cloud

The people of Iowa, through their legislature, have always been eminently friendly to the construction of railroads and the promotion of the railway interests. In proof of this, witness the whole history of our legislation; witness our magnificent land grants, subsidies, bonds, subscriptions, and taxes, to the amount of five per cent of our entire valuation, in one year, as free gifts to railroad corporations. And yet some of these corporations have cheated us as people never were cheated before. We have afforded immunities to capital invested in railroads that are not afforded to any other kind of capital in the state. Witness the hitherto almost entire exemption from taxation of that kind of property. But, more than this, we have laws regulating the charges to be made by those engaged in several of the industrial pursuits, while up to the present time there has been no law upon our statute books interfering with the charges made by railroad corporations; and only the right to interfere has been claimed in cases of public necessity, where those corporations are guilty of gross extortion or unjust discrimination.

The first grant of lands to aid in the construction of railroads in our state is known as the "Iowa Land Bill," which passed congress and was approved by the president, May 15th, 1856. Under this act there has been certified to the state, to aid the four original land grant roads, as follows: to the Burlington & Missouri River railroad, two hundred and eighty-seven thousand acres; to the Mississippi & Missouri (now part of the Chicago, Rock Island, & Pacific) railroad, four hundred and seventy-four thousand six hundred and seventy-five acres; to the Iowa Central (afterwards the Cedar Rapids & Missouri River) railroad, seven hundred and seventy-five thousand and ninety-five acres; and, to the Dubuque & Sioux City railroad, one million two hundred and twenty-six thousand five hundred and fifty-nine acres. On the 12th of May, 1864, congress passed an act granting lands to aid in the construction of another railroad across the state, from the city of McGregor, westward, on or near the forty-third parallel, to Sioux City. The lands in this grant were supposed to exceed a million of acres, but were found afterwards to be less than half a million. On the 12th of July, 1862, congress authorized the diversion of a portion of the Des Moines River Improvement company's land grant to the Des Moines Valley railroad company, the amount of which I have not before me. It is safe to say that all these railroad land grants, taken together, amount to over four millions of acres, or nearly one-eighth of the land of the state; or, more approximately, one acre out of every eight and a half acres of the entire area of Iowa has been given away to railroad corporations. In addition to this immense subsidy, the people along the several lines contributed largely toward their construction.

On the 14th of July, 1856, the general assembly, in extra session, passed an act conveying the land to the four first mentioned companies, upon certain conditions. Section 14 of that act (which act is the original "charter" of those corporations), now found as section 1,311 of the Revision of 1860, reads thus: "Said railroad companies accepting the provisions of this act shall at all times be subject to such rules and regulations as may, from time to time, be enacted by the general assembly of Iowa, not inconsistent with the provisions of this act, and the act of congress making the grant."

Under this "charter" the companies went to work, and when some of their roads were extended toward the interior, complaints began to arise that the railroad tariffs were so arranged as to seriously discriminate against the trade and commerce of Iowa towns and in favor of points out of and beyond the state; that these tariff rates were also so arranged as to deprive our people of a choice of markets, rendering the Mississippi river useless as a highway of trade and commerce, and compelling our people either to pay tribute to Chicago or go without a market. The evidence in this matter was of a character that could not be questioned, and although the subject was brought before the general assembly of 1864, we refused to take any action at that time, hoping that the companies which had been so liberally dealt with by our people would, upon remonstrance, deal fairly and justly by them.

When the general assembly met again, in 1866, the matter of railroad discriminations against our people had assumed a still more momentous shape. The greater portion of our time during that session was occupied with that question. Weeks after weeks were spent mainly discussing whether or not the state had the right to prevent unjust discrimination or in any way control railroad corporations as to their charges. The then attorney general (Hon. F. E. Bissell, now deceased) gave it as his official opinion that the state possessed no such right; but that in the matter of tariff charges, those corporations were above and beyond all legislative control. Whether the fact that he was a "railroad attorney," as well as attorney general for the state, had anything to do with influencing his "opinion," is not for me to say. We had able lawyers of the very opposite opinion, but the fact of this announcement gave great encouragement to the railroad party, and was calculated to dishearten those of us who believed that the people had some rights which even corporations should respect. It was now openly declared by eminent attorneys, both in the legislature and in the powerful "lobby" that hung around us, that in the original "charter," or grant, the state, while reserving the right to "enact rules and regulations," had either failed or neglected to reserve, in specific and "express terms," the particular right to regulate and limit tariff charges, and therefore she could not now exercise that right, and could never regain it.

Listening to these astounding claims, put forth by the attorneys for the corporations, some of us declared that if God and the good people of Iowa ever gave us a chance to reserve, in a railroad charter, the right of control, we would surely do it in such specific and "express terms" as even a railroad attorney could neither mystify nor explain away. The golden opportunity to do this very thing occurred in 1868. A certain state of facts existed regarding the management of the Chicago, Rock Island, & Pacific railroad company, which rendered new legislation necessary. The executive committee, headed by John F. Tracy, had issued and put upon the New York money market nearly four million dollars' worth of "watered stock," and realized the cash for it before certain other parties were aware of what had been done. With this money the Tracy party claimed that they intended to build the road from Des Moines to Council Bluffs (the road at this time being completed only to Des Moines). The immediate result of this "stock operation" was a bitter quarrel between the Tracy and the anti-Tracy parties of the stockholders. The Tracy party were said to be in the minority, but they had the money and the executive committee. Suits were commenced against them in the New York courts to forbid their construction of the road west of Des Moines, and to compel them to disgorge the four millions of dollars for distribution among the stockholders. In the meantime the company had forfeited their right to the land grant in consequence of the non-construction of the road beyond Des Moines, according to the terms of the original act. The consolidation of the Chicago, Rock Island, & Pacific railroad company's stock (a company organized under the laws of Illinois) with that of the Mississippi & Missouri railroad company (organized under the laws of Iowa), needed legislative sanction by the general assembly of Iowa; and further, the directors of the consolidated company wanted not only a legalizing act covering the above points, but also an extension of their term of office for one year beyond the time for which they had been elected by the stockholders.

Under this state of things, the "Tracy party," legally representing the consolidated company, applied to our legislature for relief and protection; and, accordingly, a bill was introduced covering the desired points, and re-granting the lands to the company under certain conditions and restrictions, which, when agreed to by the company, should remain forever a contract between the state and the company.

At this juncture, one of the judges of the supreme court of New York issued a solemn injunction upon the general assembly of Iowa, forbidding that body to legislate, in any way, upon the matters I have above recited. Some of us, not having the fear of New York courts nor the majesty of Judge Cardozo before our eyes, fairly laughed at that judicial functionary's lordly impudence. We thought that the grand opportunity had now arrived when the state could justly step in and pass an act compelling the company to construct the road, for the sake of the extraordinary relief sought, and in that act reserve, in "express terms," as a matter of contract, the right to control the tariff rates of at least one powerful corporation, connecting with the Pacific railroad at Council Bluffs, and thereby control the rates of other lines crossing the state with similar connections. This express reservation of right, in the form of what was known as the "Doud Amendment," was inserted in the act in relation to the Chicago, Rock Island, & Pacific railroad company, and will be found as the first proviso in the second section of that act (chapter 13, on page 14, Acts of Twelfth General Assembly), and is in the following words: "Provided, said railroad company, accepting the provisions of this act, shall at all times be subject to such rules and regulations, and rates for the transportation of freight and passengers, as may, from time to time, be enacted by the general assembly of Iowa."

The company, through its proper officers, accepted the terms of this act, and filed that acceptance in the office of the secretary of state, thus closing a contract between the state and the company, and setting at rest forever the question of controlling and regulating the charges for freight and passengers in favor of the state. The same proviso was afterwards inserted in the act in relation to the Des Moines Valley railroad company (chapter 57, page 63); also in the act relating to the McGregor Western railroad company (chapter 58, page 67); also, in the act relating to the Dubuque & Sioux City railroad company (chapter 124, page 164); all acts of the twelfth general assembly.

The passage of the last named act aroused unusual commotion along the proposed railroad line from Cedar Falls, via Fort Dodge, to Sioux City, in consequence of the railroad managers declaring that not another mile of that road would ever be built until the proviso for control should be repealed. Work ceased along the line; the laborers were discharged; the people who expected a railroad through their country became alarmed. Meetings were held at Fort Dodge, Sioux City, and other points, and extraordinary efforts were put forth to induce Governor Stone to call an extra session of the legislature for the purpose of repealing the so-called "Doud Amendment." A committee of prominent citizens was appointed to visit, in person, the members of the general assembly, and have them sign a request to the governor in favor of an extra session. This committee, knowing my record on this question, did not do me the honor of a personal visit, but they sent me a letter (still in my possession), to which I replied through the public press, strongly opposing their movement, and, after reciting a portion of the facts herein recapitulated, earnestly requested them to let the Doud Amendment alone; for I believed it to be one of the wisest measures ever enacted by our legislature, and, having been one of its foremost advocates in that body, I would still defend it. The effort to call an extra session failed, and the railroad managers in the north, finding their efforts, in that instance, vain, after frightening the people nearly a year, concluded to go to work again, and so the building of that road went on to completion.