/ yyiZMA^ of^-'UKi L/y^^uiAjy-' LJyimMyU//yUMA^ o^^-' \ i" .. REMARKS c. p.'nujsrTiisrGTOisr, // BEFORE THE I 8^21'"- l^oo COMMITTEE ON THE ^'^Bi^i^a^ 'Wt % Pn^^^ Saturday, November 17, 1877, PUBLISHED FOR THE USE OF THE COMMITTEE. r c_yf?/' yya/n-c "T T-ay^t. o o /J Buioroh Libfl^ emcroft Library Eemarks of C. P. Huntington. Mr. Hu:r^TiKGTON. Mr. Chairman, I do not pro- pose to say anything about the legal aspect of the case, but to try to show you that it is for the interest of the Government and our own interest, that we come to an amiicable settlement of these matters, and much that 1 have to say relates to the great cost of the road w^hen it was built, and as it was built, and showing what assets we have, and our ability to do what w^e propose. My associates and myself have been in business a great many years ; I have, for almost forty-three years been in business for myself, and never had any paper go to protest in all that time. I had some out in 1837, and in all the great panics since. And I do not w^ant to have anything go to protest connected with the Central Pacific Railroad, though it is not a personal matter of mine. While these learned gentlemen have been discussing the power of Congres-^, under the Constitution, to change and alter these Pacific Railroad contracts, it has seemed to me the real question before*u^ is'^nOt s'6much a legal as a business one. Whether these legal gentle- men are able to convince you that Congress has no au- thority over the subject, or not, I think I can make it clear to you, that, as a business transaction. Congress cannot afford to take advantage of its own construc- tions of the statutes, because it would not be for its in- terest, nor for its credit, to do that which would be con- demned among honorable men. Laying one side of the legal bearings of the matter, let me try and present it from the business standpoint. . C2 H^ I am one of the few persons who originally associated and organized for the purpose of building a material portion of the Pacific Railr^md. Every one of the Boards of Directors which began and carried on the work of constructing the Central Pacific Railroad, came into the enterprise at my personal request. Before do- ing so, each one of them wanted to understand the con- tract with the Government, and to know if these terms could be depended on. We sought the opinion of the most eminent counsel thereon, and they all gave the same answer : that the contract could not be changed without our consent, so long as the Company was not in default. All our fortunes were embarked in the im- mense undertaking upon this ground, wliich we are still advised is unassailable. Without this assurance, none of us, I am sure, would have been diverted from our ordinary gainful pursuits to the task of creating a highway for the use and bene- fit of the. Government. Could we have foreseen that a grave committee would, at this time, when the work is done, and the country has reaped incalculable benefit from it, be called upon to consider the power and pro- priety of changing the terms of that contract to our injury, I certainly should never have chosen for the de- clining years of my life, so riskful and arduous a ser- vice, and should have been spared this appearance be- fore you. My understanding was, that these words you have been discussing, were inserted in the fear that the companies might fail to complete the roads, and out of a spirit of abundant caution, this power of alteration w^as reserved in case it was necessary to put the work into other hands for completion ; but it was well understood (and the debates will bear me out) that there was to be no forfeiture and no change to our detriment, so long as we were in good faith carrying out our part of the work. As I said, the proper question for our consideration is, not so much whether Congress may, at its pleasure, alter this contract and impose new terms and conditions, as whether it w^ould be fair, reasonable, advantageous and honorable to attempt to do so, or to evince a desire so to do, without our consent so long as we are faithfully fulfilling our part of it. No impar- tial or unpredjudiced referee would, I am con- fident, entertain any serious doubt about our right to go on, as we have done, complying with the law for the remaind'T of the thirty years and demanding that the Government should do the same. But inas- much as doubts have arisen, apparently, in some minds it may be well here, and now, to do away with all simi- lar misunderstanding for the future. The Central Pa- cific Company cannot accept, nor will it give its assent to, any new covenant which leaves this question open. Any phraseology which accords to Congress the right, or privilege, to alter the terms and conditions of its agreement with us, so long as we comply with them, may as well be abandoned, if our consent is expected. If we, on our part, should fail in any particular, then, of course, there can be no such objection. Fair dealing, business usage, and self-respect require no less, and no more at our hands. Lest some of you may have been misled as to the origin, nature, outlay and results of this transaction with the Government let me offer a few pertinent facts: First. As to thf value of this franchise and con- tract when w^e first accepted it. It is commonly spoken of as a munificent and underserved bounty to a few individuals, in the face of the fact that the advances are treated as debts to be paid at maturity, and the lands are, after we have put a road through them, so lightly regarded as not to be worth the application upon a second mortgage claim not due for twenty years. Well, this munificent bounty, the great charter which is now sometimes spoken of, as an extravagant bargain, 6 was not always so regarded. At the first meeting called to organize tbe Union Pacific Company at Chicago, sub- scriptions enougli could not be found to comply with the act, and for months afterward the wliole franchise, with allits much criticised privileges, was hawked about, and might have been had for the asking. The Central Pacific, it is true, raised money enough to build and equip nearly forty miles of road, reaching up into the mountains, before Congress came to our re- lief, in 1864 ; but there never was a time during the years while the road was climbing the Sierra Nevadas (neither before nor after that amendment was passed,) when my associates would not gladly have sacrificed a part of their investment, if a purchaser could have been found. There were then no capitalists anxious to shoulder such a load, (while it was not even whispered that Congress might break its faith,) so uninviting did the induce ments appear. Our utmost efi'orts in this direction were in vain. No parties could be found to- put their money into it, but our few selves ; and I discovered that the credit of my business firm was injured by our connection with it. My partner and myself were re- peatedly admonished that we should sink our entire fortunes in the work, and get back no returns. The assistance we received from San Francisco, Sacra- mento, and other counties, contributed for local reasons chiefly, gave us some help in getting through the hard- est work we encountered in the Sierra Nevada Moun- tains. Being remote from the great money centres, the company wasjcomijaratively unknown, and without cred- it. My few associates and myself, called in gold loans for large amounts we had outstanding, well secured, drawing two per cent, per month, to meet the labor pay- rolls at the high prices then prevailing, in order to con- tinue the work. The first million and a half of first mortgage bonds could only be negotiated upon condi- tion that we should give our personal guaranty for the payment of the interest for a period of ten years which we did ! No government bonds were received until May, 1866, ten months after the passage of the later act, although, the work w^as done more than half the distance up the Sierra Nevada s. Great difficuly was experienced in get- ting bonds from the Department, or money from any source, until we bad reached the summit, and had got- ten through the hardest and most difficult portion of all our work. . After we did receive the bonds, we found their markel value had shrunk far below their estimated value when the contract was made, in 1862. As fast as the bonds came in they were converted into gold to pa}^ for labor ; one Jarge lot of our first mortgage, I distinctly remem- ber, being sold for less tlian their face value in currency and turned into coin at the rate of 222. Senator CoNKLiNG. I do not understand that. Mr. Huntington, We sold our bonds and bought gold at 222. We paid $2^2^ in currency for a dollar of gold. We had to sell our bonds for less than par, al- though the Central Pacific never sold its securities very low. The companies received no help, but rather hindrance, from the government in marketing these currency bonds. 'I'he then Secretary of the Treasury declined to receive them as security for bank circulation, and al- though they were full government bonds, they were added as an appendix to the Monthlj^ Debt Statements, instead of being incorporated with the other issues as ii the}' were not part of the public, but a private rail- road debt thus casting a suspicion upon them and de- pressing them in the estimation of investors. My recol- lection is that some of them changed hands as low as 90 cents in currency' . Measured by their gold value, or by their purchasing power of labor or railroad supplies, there was even a greater loss. Our books show that the proceeds of the $25,885,120 of government currency bonds, was $19,119,- 552.95. Senator Tii u rm an . Gold ? 8 Mr. Huntington. Yes ; with which to build and equip nearly 750 miles of railroad through an uninhabit- ed and mountainous country, affording neither timber, fuel, water, ballast, food nor forage, for the most part, and many thousand miles distant from its base of ma- terial supplies, and yet there are many persons affect to believe that the road was built and equipped out of the proceeds of the Government assistance. Many wild and absurd stories have been put in circu- lation as to the cost of these railroads. Allow me to furnish you with a few facts which will show you the real elements and conditions with which its builders contended, many of which did not exist when we entered on the work. This is to show the great cost of tlie work then neces- sary, and the small amount it could be built for now in comparison, as affecting the relative value of these second mortgage securities : so that we see the necessity of making the most now out of our assets. Take the item of rails, for instance ; iron rails com- manded during the period of construction more tlian $100 per ton. Steel rails can now be bought for $40. Freights, an important element with us, ranged from $20 to $33 per ton. The last lot I shipped to San Fran- cisco I paid $5 freight per ton. This was within the last week or two. Insurance, also a heavy item of expense, during the war was as high as 17 per cent., whereas now the regular rate is 2^ per cent. Locomotives, for which the government was a large customer, cost us as high as $32,500. I will say here that we paid six per cent. Government tax on all these things over and above their prices. The same kind can be bought for $7,000 at this time ; and I paid as high as $4,000 freight on engines taken over the Isthmus. The same machines can now be shipped over- land by. rail for less than it cost then to take them down and box them to be sent as they were then. Powder, an article of which we consumed immense quantities, was not only high-priced and hard to get, but it was also hard to ship, as special permission from the War Department was for a long time required. So of rolling stock of all kinds, telegraphic imple- ments, and many other articles, they were very much higher at the time we needed them than before or since. Supplies for man and beast had to be hauled from the terminas of the line, as the country through which the work was done afforded next to nothing. Only one white man lived between the Big Bend of the Truckee and Bear river, a distance of about 600 miles. The water, both for drinking and steam purposes was, for long distances, unfit for use. We had to analyze the water, east of the Sierras, before we dared use it for steam purposes. At the very best we had to haul it in trains for long distances ; and even now, after comple- tion, we are obliged to convey water in many places by iron pipes, in som3 instances twenty miles, for the use of trains and workmen. Water along the line of the road does not make steam. It has soda and other minerals in'it which pre- vents our using it. The difficulties from fuel were hardly less troublesome. We were required to haul fuel eastward over 600 miles for the use of trains ; and even at this day we are com- pelled to burn coal mined in Australia on i3ortions of our road, at an expense of more than six times that of some eastern roads. After we had gotten the track laid across the moun- tains, it became a problem whether we could keep it open for traffic in the w^inter season. We commenced putting the road under cover, and after serious en- counters Avith the snow, but with very slight interrup- tions, we have now reached assurance by building nearly forty miles of snow sheds, all of very substantial char- acter, and which include miles of snow-galleries built strong enough to sustain tlie passage of avalanches of snow, at a cost of over $100,000 per mile for covering 10 alone ! These structures, and tlie road under them, are maintained at a heavy expense, summer and winter, so as to guard against the slighest interruption from storm or fire. No railroad in the world, so far as I know, has been constructed at such disadvantage, or is maintained with similar outlay. Often we have had to put ten lirst- class engines behind one snow-plow. Notwithstanding that the road was constructed and equipped with as much (^.conomy as was practicable, the officers of the company using the same diligence and frugality in this, as in their private business, the Central Pacific Railroad, built at the time, and under the circumstances it was, during a period of turbulence, of inflated pHces, and of inordinate demand for money and supplies for railroad purposes, necessarily cost a large amount of money . There is no difficulty in ac(5ounting for the aid rectiiv- ed from the government, the proceeds of its mortgage bonds, and the sums derived from all other sources ; and looking back upon it now, my wonder is how we ever managed to get through as well as we did, in view of the discouragements and opposition we encountered. For one large addition to ourexpeuditures the govern- ment is indirectly responsible ; or, at all events, is the chief beneficiary, while the burden must apparently be borne wholly by the companies, who profited noth- ing by it. By directing the Pacific Railroad to be constructed from either end toward a point of junc- tion, Congress instigated (I think purposely, and per- haps wisely for itself) a rivalry between the eastern and western parties, in order to hasten the completion of the through line without adding to the government assistance for this accelerated speed. The circumstance that there was no point for junction so suitable as the settled and fertile valley on the east bank of Salt Lake, which is adjacent to the only coal deposits along the route, led to an exhausting and unparalleled race in build- ing on the part of both corporations to reach the coveted 11 spot. The cost of many items was doubled by this tremendous exertion. By this greater haste the govern- ment and the country got the use of the through line more than seven years before the allotted time, and thereby saved several millions a year in disbursements ; while we, in common with the eastern company, lost proportionately by not adopting the more leisurely policy of linishing the road last July, which was the time allowed by the acts. The difference to this company between the prices paid for labor, gold, and materials, added to the difference between the prices realized for our own and the government securities and those since prevail- ing, would, I estimate, amount to many millions of dol- lars ; all of which we might have saved by consuming ten years in the construction of the last six hundred miles, as the law allowed, instead of two years, as we did. The loss to the government by the delay would have been very much more than we suffered by this great haste, and it would have appeared in the treasury led- gers as disbursements, although their pages contain no equivalent credit to us. An allusion has been made by some member of the committee to the vast sum of the nominal indebtedness of these companies if interest were compounded. Lest there be som