A Compilation of the Messages and Papers of the Presidents. Volume 8, part 3: Grover Cleveland, First Term

by Grover Cleveland

The commissioners immediately after their selection entered upon the discharge of their duties, and have prosecuted their inquiries with commendable industry, intelligence, and thoroughness. A large amount of testimony has been taken, and all the facts have been developed which appear to be necessary for the consideration of the questions arising from the condition of these aided railroads and their relations to the Government.

The commissioners have, however, been unable to agree upon the manner in which these railroads should be treated respecting their indebtedness to the United States, or to unite upon the plan best calculated to secure the payment of such indebtedness.

This disagreement has resulted in the preparation of two reports, both of which are herewith submitted to the Congress.

These reports exhibit such transactions and schemes connected with the construction of the aided roads and their management, and suggest the invention of such devices on the part of those having them in charge, for the apparent purpose of defeating any chance for the Government's reimbursement, that any adjustment or plan of settlement should be predicated upon the substantial interests of the Government rather than any forbearance or generosity deserved by the companies.

The wide publication which has already been given to the substance of the commissioners' reports obviates the necessity of detailing in this communication the facts found upon the investigation.

The majority report, while condemning the methods adopted by those who formerly had charge of the Union Pacific Railroad, declares that since its present management was inaugurated, in 1884, its affairs have been fairly and prudently conducted, and that the present administration "has devoted itself honestly and intelligently to the herculean task of rescuing the Union Pacific Railway from the insolvency which seriously threatened it at the inception of its work;" that it "has devoted itself, by rigid economy, by intelligent management, and by an application of every dollar of the earning capacity of the system to its improvement and betterment, to place that company on a sound and enduring financial foundation."

The condition of the present management of the Union Pacific Company has an important bearing upon its ability to comply with the terms of any settlement of its indebtedness which may be offered by the Government.

The majority of the commission are in favor of an extension of the time for the payment of the Government indebtedness of these companies, upon certain conditions; but the chairman of the commission, presenting the minority report, recommends, both upon principle and policy, the institution of proceedings for the forfeiture of the charters of the corporations and the winding up of their affairs.

I have been furnished with a statement or argument in defense of the transactions connected with the construction of the Central Pacific road and its branch lines, from which it may not be amiss to quote for the purpose of showing how some of the operations of the directors of such road, strongly condemned by the commissioners, are defended by the directors themselves. After speaking of a contract for the construction of one of these branch lines by a corporation called the Contract and Finance Company, owned by certain directors of the Central Pacific Railroad, this language is used:

It may be said of this contract, as of many others that were let to the different construction companies in which the directors of the Central Pacific have been stockholders, that they built the road with the moneys furnished by themselves and had the road for their outlay. In other words, they paid to the construction company the bonds and stock of the railroad so constructed, and waited until such time as they could develop sufficient business on the road built to induce the public to buy the bonds or the stock. If the country through which the railroad ran developed sufficient business, then the project was a success; if it did not, then the operation was a loss. These gentlemen took all the responsibility; any loss occurring was necessarily theirs, and of right the profit belonged to them.