Before 1876, the only regulation which the associates had to encounter was that resulting from the general railroad law, which required a minimum subscription before a railroad corporation could commence business, established proportionate liability of stockholders, and reserved to the legislature the right to reduce rates when the net income of any company exceeded 20 per cent. These and other provisions of like tenor were little calculated to interfere with the profitable operations of a railroad business except perhaps that the proportionate liability established by the law to some extent discouraged participation in railroad enterprise. In 1874 and in 1876, maximum rates and fare enactments were discussed in the legislature but failed of passage. In 1876, nevertheless, the accumulated resentment of the California public over what it considered the grasping and monopolistic policy of a selfish corporation led to important additions to the law. This resentment had been growing for several years. The Sacramento reporter for the San Francisco Bulletin wrote, in March, 1868:
There is a strong prejudice existing here and daily growing stronger, against the Central Pacific Railroad Company. The members from Placer, Nevada, and El Dorado counties are all of them, I suppose, pledged to endeavor to obtain a reduction of the rates of freight and fare on the line. Petitions, apparently signed by nearly all the residents of the districts which use the road for the transportation of freight and travel, have poured in upon the legislature, asking a reduction of prices. It is said that traders who complain of the rates are discriminated against. A general feeling exists that, considering how liberally it has been dealt with by Congress and the State, the management of the business and affairs of the company is extremely illiberal....
In like vein the Stockton Independent said of the owners of the Central Pacific in 1871:
No set of men on the face of the globe were ever placed in a more enviable position, or in one where by the exercise of a reasonable foresight, they could have retained their popularity and the friendship of the people. It is now hardly two years since this work was completed, and how remarkable has been the change in public sentiment. Along the whole line of their main trunk road from San Francisco to Ogden, as well as along the various branch roads of this company, nothing is heard but one continuous murmur of complaint, and it is safe to assert that this shortsighted, illiberal, and suicidal policy of the company has so completely changed the sentiment of the people that there is not in a single town on any of their lines of road, either in this state or Nevada, one individual who approves of this course, nor one who will speak well of the company, unless it be one of their subsidized agents or strikers.
Beginnings of State Regulation
It is not necessary to dwell at this point on the reasons for the opinions voiced in these extracts from the press. The feeling of the general public, of which these extracts are the reflection, was doubtless due in part to anger at the methods employed by the Central Pacific in promoting subsidy legislation, in part to disappointment over the results of railroad construction, and in part to reaction against policies of the Central Pacific such as have been outlined in previous chapters. However this may be, the result was the passage of the so-called O’Connor bill in 1876, which erected a State Board of Transportation Commissioners, and defined and prohibited extortion and unjust discrimination. The commissioners were not only to enforce these prohibitions, but they were given extensive authority to secure information from the steam railroads of the state, and were charged with the duty of supervising all such railroads with reference to the security and accommodation of the public.[260]
It appears from the report of the commissioners appointed under the O’Connor Act that the railroads in California, and in particular the Central Pacific, refused to render the reports required by the legislature, and that the commission was unable to compel them to do so.[261] Two years later the commissioners were legislated out of office, and a single commissioner was appointed in their place, acting under a statute similar in most important respects to that administered by his predecessors.[262] Mr. Tuttle, the new commissioner, accumulated certain statistics during his two-year term of office, but otherwise did little to which the railroads could object.
The development of railroad regulation was thus temporarily arrested. Yet for several reasons the check to the progress of public control was not lasting. Feeling in the state was running high. The times were hard, both for reasons affecting the whole country, and because of circumstances peculiar to the Pacific Coast. The rainfall of the winter of 1876-77 was slight and, as happens in such cases, great loss of cattle on the ranges occurred, and the grain crop was seriously deficient. At the same time the yield of the Nevada silver mines declined—in fact the dividends of the important Consolidated Virginia mine stopped altogether in January, 1877, to the great disturbance of the stock market at San Francisco. Under these conditions unemployment and suffering were the experience of the working classes, while riots and later, political agitation also resulted. Even the radical labor leader, Dennis Kearney, in spite of his lack of character and self-restraint, or even of unusual mental ability, served as the temporary expression at this time of a real distress, and had some influence on the course of legislation.