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New York, March 1st, 1848. 
 
 To SIR ALLAN MacNAB, 
 
 President of the Great Western Rail-Road. 
 Sill, — In reply to the inquiries : , 
 
 1. Whether it avouUI be beneficial to the Company to apply for, and receive 
 a loan through the aid of Government, to assist in the construction of your work, 
 with reference to the value of the Stock ? 
 
 2. Whether in my opinion such aid could be aiForded by the Government, 
 consistently with the public interest und the exercise of its proper functions ? 
 
 3. Whether similar aid had been afforded in the United States, and if so, 
 what had been its effects upon the public interest ? 
 
 I would state that the answer to the first inquiry mupt depend on the 
 expense of construction, and the amoinit of business which would probably be 
 done on the road to be constructed. For the purpose of satisfying myself on 
 these points, I have carefully examined the Report of Major Stuart to the Board 
 of Directors of your Company, dated 1st September, 1847, which has been fur- 
 nished me. I have scrutinized the Survey reported on, as the only means in my 
 power to ascertain the probable expense of its construction. It seems to me to 
 have been made with much care, and the estimates for the expense appear fair, 
 and the allowance for contingencies quite liberal. From these, and my knowledge 
 of the country over which it is located, I have but little doubt that it can be 
 completed within the Estimate, fi-om Niagara River to Detroit, to wit, £1,238,520, 
 Halifax Currency, or 4,954,080 dollars. 
 
 I have also examined the statistics in that Report, and compared them with 
 statistics in my possession, such as the trade and navigation of the Lakes, the 
 Canals, the arrivals and departure and toimage of the several ports, and the Rail- 
 road and Steamboat passenger traffic, &c. It seems to me that Major Stuart is 
 fully sustained by them in his estimates of business and profits. Indeed, I shall 
 be very much mistaken if the profits he anticipates are not more than realized, if 
 the work shall be successfully completed and prudently managed. 
 
 It has been our experience in all improvements, and channels of busir..' i 
 and traffic connected with the Western Country and the Lakes, that they have 
 far outstripped the most sanguine anticipations. This has been strikingly illus- 
 trated in the case of the Eric Canal and the line of Western R ,'ys. 
 
 It may not be improper here to remark, that I regard Major Stuart's Report 
 as the most able document of the kind that has fallen under my observation in a 
 long time. No one can rise from its perusal without feeling a conviction of its 
 
 reliable character. 
 
 If I am right, then, in my conclusion thus drawn, that the work can be con- 
 structed within the estimate, and that the profits will be as large as contemplated, 
 a loan contracted with or without tiie aid of Government, at a reasonable interest, 
 much below the per-centage of profits, for a period of considerable duration, it 
 
 fl 
 
 i 
 
would follow that such a loan of a portion of the capital for constructing the 
 Road, would ma?;c the Stock much more valuable to the holders, because the 
 the excess beyond the interest would go to swell the dividends as much as the 
 profits should exceed the interest, or be applied as a sinking fund to diminish 
 every year and finally extinguish the principal of the loan. 
 
 The second question is not as easy of demonstration, because it depends on 
 more complicated circumstances, some of which are not connected with the 
 immediate W(irk before us. 
 
 It may safely be adopted as our axiom, that all Governments arc or should 
 be administered with reference to the ijeneral interests of their constituents, and 
 that no departure from this general rule should be tolerated, except where the 
 favouring of a local or particular interest will in no material degree prtyudice the 
 whole or any of the other parts. 
 
 It would not therefore be right for Government to furnish capital for a sec- 
 tional road or private improvement, without a reasonable prospect and security 
 for its indemnity ; because the application of it would not be universal, but the 
 money would come from a common fund in which all would be interested. 
 
 It might be adopted as another safe axiom that wherever it can be done 
 without injury or probable injury to the whole or its other parts. Government 
 should lend its aid to advance the interest and prosperity of any class or 
 section of its people. And in ratio to the extent and magnitude of the benefit, 
 is the obligation imperative to put forth a helping hand. In deciding then on 
 the answer to the second question we must be governed by the foregoing rules. 
 I do not think this Railway can be presented as one that will so universally 
 embrace the interest of the people of the Province, as to warrant the Government 
 in embarking in a loan without at least a fair prospect of indemnity; but it is 
 nevertheless a work of very extensive interest; as much so at least to your 
 people, as was the Erie Canal to the people of the State of New York, and as 
 large a proportion of them would participate in its benefits, as did the people of 
 the States in the benefit of the Canal. 
 
 It connects Lake Ontario by a direct line with the Upper Lakes. It forms 
 a base lincAvhere nearly all the people of Canada West, and with other and cheap 
 communications, connect. It is a part of a line of Railways that will soon be 
 made, passing through the interior to the Atlantic, and will be a portion of the 
 outlet from the whole region of the Upper Lakes to tl-e sea ; and is a short con- 
 necting link between waters following the St. Lawrence to the Atlantic, and 
 ascending Detroit River to the head of Lake Superior, in all following a demar- 
 cation of 2,000 miles through and along the Province. It gives your people the 
 carrying business and traffic, and makes your country the transit between five 
 Western States, and seven Eustern States of the Union. This must be a source 
 of great profit and advantage to your 2)eoplc, and may become u source of revenue 
 to your Government. In every point of vievv it is clear, that your road embraces 
 an interest general enough to command the attention and patronage of Govern- 
 ment, at least so far as will be compatible with general interests. This brin'^s 
 me to enquire whether the Government can, with safety to its own interest as such, 
 lend you the benefit of its security. 
 
8 
 
 In the first place, all the interest in the road will be pledged for the payment 
 of the loan, and unless that pays more than enough to pay the interest, nothing will 
 go to the Stockholders; they get no dividends. I am not informed as to th(? 
 amount of the contemplated loan, but I will assume it to be one iialf of the esti- 
 mated expense of the work, as I understand the other half is already subscribed. 
 Interest on this sum, say at 5 per cent, would be £.'51,250 currency or ^125,000 
 yearly. To endanger the safety of this loan, then, the profits of the road nnist 
 amount to less than this sum, or about 2i per cent on the outlay. The Utica 
 Rail-road from r.uffalo East parallel with Lake Ontario and the Erie Canal, with 
 which it has had to compete without materially shortening the distance, has 
 averaged over 15 per cent profits yearly since its construction, and the last year 
 has netted about 20 per cent. The ('cntral Rail-way of ^Michigan completed 
 only 144 miles, and terminating in a wilderness, running from Detroit West netted 
 last year 14 per cent. These Rail-ways are mentioned because they are at the 
 tennination of your Road East and West of it, and furnish more approximate 
 data to ascertain the profits of your Road than any other; but they do not in my 
 opinion furnish or possess the advantage for profits that yours does; because yours 
 from Hamilton to Detroit, IGG miles, will oe without a competitor. It will shorten 
 the distance of all the travel up and down the Lakes more than one third, and 
 shorten the time two thirds, besides giving a safer and more agreeable passage. 
 It would appear from these facts that the Government can lend you the aid of 
 their credit without any public injury, or the most remote hazard of loss, and if 
 I am right in this, they can fulfil a duty, render an incalculable benefit to a very 
 great proportion, and probably a majority of their constituents. 
 
 That it is one of tiie proper functions of Government thus indirectly to aid 
 the people in the hnprovemcnt of the country seems to me to be a settled ques- 
 tion, if indeed it ever was a question. 
 
 It is done extensively in England and France; indeed, in various forms, all 
 over Europe, and in nearly all the States in the Union, and by the General 
 Government of the Union. 
 
 Should it be objected that it would be unsafe, even with such ample security, 
 to advance the public credit, because the Corporation may so mismana"e its con- 
 cerns that the Road will not produce enough to indemnify the Government 1 
 answer that the whole Road lies within the Province, and will be under their eye 
 and control, and tliey have the power in their own hands. If the Agents mis- 
 manage the concern of the Road, they can check or remove them, and take the 
 Road under their own control whenever the Government is put in jeopardy by 
 such mismanagement, and thus secure the faltliful payment of the loan. 
 
 In reference to the third question, whether " such aid has been "•ranted to 
 Companies by the States, and with what effect?" I answer, that the State of 
 Massachusetts has guaranteed to Rail-road Companies upwards of Eiglit Millions 
 of Dollars, which has enabled them to carry the means of transportation to nearh' 
 every section of the State, '•.nd to penetrate other States also, and thus to draw 
 their commerce to thoir own State. These Roads, it is believed, have doubled 
 
I\ 
 
 tlie valuation of the laud in that State, and probably more than doubled their 
 commercial business, and the State has never had a dollar of the interest to pay, 
 and seems in no manner of dan;;er of ever being obligcid to pay any. 
 
 The State of New York, about nineteen years ago, loaned to tiie Hudson and 
 Dehnvare Canal Company, by an issue of debentures, 7!);{,000 dollars, which ena- 
 bled tlicm to complete their works. They have always paiil their interest punc- 
 tually, Imvo rtdueod of the; principal about half, and have a surplus on hand suffi- 
 cient to pay the remainder. This Canal has been of very great benefit to the 
 section of Country within the reach of its influence, has made heavy dividends 
 to the Stockholders, and the Stock is now worth over 150 per cent, in Market. 
 
 The State has since made similar loans of credit to the Auburn and Syracuse 
 liail-road Company, the Auburn and Kochester Hail-road Company, the Tona- 
 wanda Kail-road, the Long Island Rail-road, and the Schenectedy and Troy 
 If ail-road Company, all of which have punctually paid their interest and provided 
 sinking funds for the principal, and nearly all of them made large dividends to the 
 Stockholders. No well grounded fears exist that the State will ever meet with 
 any loss by them, and these Works too have increased the biisiness and enhanced 
 the value of property within their influence to an unknown extent. The only 
 Corporations by which the State has suffered by becoming security, are the Can- 
 ncjohanie and Catskill Rail-road Company, the New York and Erie Rail-road 
 Company, the I'tica and Oswego, and the Hudson and Berkshire Kail-road 
 Company. 
 
 The two first failed because the amount of Stock subscribed, and the loans 
 guaranteed by the (jovernmcnt, were not more than one-fourth sufficient to com- 
 plete the Roads, and when this was expended the Roads ware oidyjust begun 
 and unproductive, and being a doubtful Stock, they co\dd raise no more money to 
 complete them. The two latter Koads were located where there was neither 
 travel nor business, and the income scarcely enough to support the Roads. Yet it 
 is believed the Government will yet be indenmified for the loan to the Kerkshire 
 and Hudson Company by a sale of the Koad. All these unfortunate loans were 
 made at a time of great expansion of currency and connnerce, when t^he nominal 
 value of real estate was every where swollen, and the public excited by these 
 fictitious prices almost to mania. The Govermnent partook of this excitement 
 to a dangerous extent. In short they were most improvident guarantees, and 
 a little prescience ought to have foretold the disastrous issue. 
 
 No inference mifavorable to Government guarantees for internal improve- 
 ments can be drawn froju the failure of the loans to these four roads, any more 
 than would an improvident loan to an insolvent individual, where the mort- 
 gaged property was without value, and a defective title given, be evidence against 
 a provident loan with good security and perfect title. 
 
 I would not advise that Government should lightly or without most satis- 
 factory evidence of safety, loan its credit to a Comi)any. Nor would 1 think it 
 advisable even in cases otherwise holding out strong assurance of indemnity to 
 loan more than half the amount of the Capital. It appears to me too that the 
 Government should require, in all cases, that there should be an annual sinking 
 
(I 
 
 i 
 
 i 
 
 fu,.d to be applied to a ...luctiou of tl.e Pri^-,clpul. Wl.cre one l.alt ot the 
 Capital i. l-uv;.Lhe.l by Stuckla. lor, tbeirn-iUir.,..es. to u.vest and g.ve tlu, loan 
 a preference un.l n.ake their own l.olden for it, furnishes one very notable .tem of 
 infornuaion to the (lovernn.ent in dcternuning the safety of the loan. 
 
 The State of Maryland has loaned about four nulhons ol dollar to the 
 Chesapeake and Ohio Hail-road Con.pany. This lload is con.plcted to the Cum- 
 bel,Kl Mountains, is carrying on an extensive traffic, and saving the Government 
 
 '"'"ItTbenents to Maryland are beyond calculation. Kecently the State of Tencs- 
 see which is nearly free fron. debt, and in this respect dee.ned very prudent and 
 
 aut 1, has loaned its credit to a Kail-road Co„.pany for $800,000. Indeed 
 
 t r-indec.d it is practiced by n.ost of the States of the Un.on n. a greater 
 
 or less degree, and where reasonable caution has been used, always, so far as 1 
 
 have learned, with excellent ctfects. . . «• „j 
 
 S„,no o M,c „cw S::,.» in the south «c,. p.m of U,o U„io,„ anx,o„, .0 afford 
 
 c„en.-,v<, co„,„u.c.ial f.oUite., to force tl.cif business "'to. <=°">I"; ■"»";'*;*: 
 
 Iamorcco,nn,cvcialncigl.bo..riug States, l.ave 1-' '1--"»1" " „ e'rl 
 rsomc cms to Banks connected ,vl.h Uail.,-ond,. Suel, loans have gen rally 
 " T lure, and involved the States. The States ot this k,nd are. AlaW , 
 
 M ■ i ™,1 Arkansas- each of these has entailed upon itself a heavy. cumbrous, 
 M,ss«„i>l" andArkansas each ^^^^^ ^ ^^^ 
 
 nnrl in =iome cases a reimdiatcu ueut. luc uuji-i >j<- , ,,. i • 
 
 hen seUrb then Je debts are IVnnsylvania. Indiana. lUino.s and M.clngan^ 
 Be the debts of these States were incurred by lend.n»the,r cred.^o 
 Corporation,. They undertook to make their improvements direct ly by th Gov- 
 erZen and not b encouraging individual enterprise. None of «- *«' ™ 
 ale h came surety for any Company, ccept Miclngan m one sn,g e ease. «h,ch 
 va. carried through successfully, and the Government saved harmless 
 
 1 have thus Sir, given you my views on this subject, and have avo.ded as far 
 ■ 1 all m«cr, forei-n, to > matter in hand, t am under an nnprcs- 
 
 I' Xt* . i::;™^- - - --°^-°" r "rr """ """ °"' 
 
 unconstructed work now before the public, within my knowledge. 
 
 1 am, with great respect. 
 
 Your obedient servant, 
 
 (Signed,) LCT CLARK. 
 
 J.