| Bonds | Lands ($1.25 per acre.) | |
|---|---|---|
| Union Pacific | $27,200,000 | $14,100,000 |
| Kansas Pacific | $6,300,000 | $7,500,000 |
| Central Branch (U.P.) | $1,600,000 | $278,000 |
| Sioux City and Pacific | $1,620,000 | $54,000 |
| Central Pacific | $25,800,000 | $10,000,000 |
| Western Pacific | $1,970,000 | $567,000 |
| $64,623,000 | (about) $32,536,000 |
The primary investment of the United States in this pioneer road was thus considerable. Despite elaborate sinking-fund provisions, the combination of speculation, fraud and mismanagement in its affairs, rendered even the payment of current interest charges impossible. Matters went from bad to worse, especially after 1883 when several new competitive routes were opened—the Southern and Northern Pacific roads, the Atchison and the Burlington. Bankruptcy ensued in 1893, a state of affairs which, as it soon appeared, could not be bettered until provision should be made for settlement of the government's claim.[28] Various proposals for partial payment proved unsuccessful. Until at last, in 1897, under threat of foreclosure proceedings, the banking interests in charge of reorganization agreed to a settlement in full—$27,200,000 principal and $31,200,000 interest. The outcome a year later on the Kansas Pacific, was less fortunate. The United States received payment of the principal of its lien, $6,300,000; but was obliged to forego the interest, amounting to about as much more. Then, in turn, in 1899, the Central Pacific claim, amounting to $27,855,000 principal and $30,957,000 interest was disposed of by being refunded in notes payable semi-annually over a period of ten years. Thus, with unexpected ease and despatch, was the direct interest of the United States in railroad affairs brought to a brilliant conclusion.
A striking characteristic of American transportation history, emphasized by the foregoing account of land grants and subsidies, is its essentially speculative character. Railroads were more often constructed in advance of population and settlement than to accommodate traffic already in existence. Speculation, as will appear in another volume, has permeated all of our railroad finance. In the early days the most extravagant visions of development were indulged in on all sides. In the words of a Wisconsin legislative committee in 1854 protesting against the passage of further laws for the encouragement of railroad construction: "In imagination every acre of land from Walker's Point to Snake Hollow has been plowed, sowed, fenced, and is bearing forty bushels of wheat.—Such estimates are quite delusive.—It takes money to make railroads. It takes money to make the mare go; much more the iron horse." True indeed, then and now! But a review of our transportation history makes it plain that without this national note of optimism and adventure, the vast capital creation in railroads of the present time could never have been called into being. Public aid and private enterprise and sagacity were alike needed to accomplish the great work in hand.
The dominating events in our later economic history, so far as railroads are concerned, have been the period of severe distress and prostration following the panic of 1893; a subsequent revival of prosperity, with unprecedented demands for transportation during the ten years thereafter until 1907; and a movement toward consolidation of the railroad net into great territorial systems, notably during the two years after 1898, as a result of which competition was practically eliminated from all railroad business. The long decline in freight rates was succeeded after 1900 by a steady rise of charges; the phenomenal prosperity and consolidations led to wild speculative outbreaks on the stock exchanges, especially in 1901 and 1906; and the spread of industrial consolidation enormously emphasized the evils and abuses of personal discrimination and favoritism. As a result of these influences there arose in turn, after 1900, an irresistible demand for greater governmental supervision, both of rates and of finance. Taken all in all, these later years have witnessed both a public and private interest in railroads, greater perhaps than at any earlier period of our history. But these later events, aside from being set in their proper relation to the whole in this preliminary general survey, require detailed analysis each one by itself. Where not considered within these covers, they will be treated in a second volume dealing primarily with matters of finance and corporate organization.
Note
No attempt at an exhaustive historical account is herein attempted. Except as specially noted, the main reliance has been placed upon the following standard works:—
Bogart, E. L. The Economic History of the United States, 1908.
Callender, G. S. Selections from the Economic History of the United States, 1765-1860, 1909.