ARGUMENT IN FAVOR OF RAILWAY CONSOLIDATION UPON A WIDER BASIS THAN THAT PEOPOSED BY THE TEOY & BOSTON AND VEEMONT & MASSACHUSETTS EAILEOAD COMPANIES, ADDRESSED TO THE RAILWAY COMMITTEE OF THE LEGISLATURE OF MASSACHUSETTS, FEB. 7, 1873, BY x ^ DERBY. * BOSTON : PRINTED BY RAND, AVERY, & CO. 1873. ARGUMENT OF HON. E. II. DERBY. Mr. Chairman and Gentlemen of the Committee, I have the honor to appear here to-day in behalf of the Fitchburg Railroad, to advocate consolidation upon a larger scale and more comprehensive plan, and to point out the deficiencies of the plan already presented. I shall deal first with the last suggestion, and point out the deficiencies of the present plan, and notice the leading argu- ments which have been brought forward in favor of it. The subject is one to which I have devoted a considerable portion of a lifetime. It is now thirty-four yeai^s since I had the honor to be chosen a director of the Western Railroad, to serve there several years, to invoke the aid of the State, and to remain in the direction of the company until the great work was consummated, and the line carried over the mountains. In the course of the investigations which were then made in the early surveys for the Western Road, I found the true route to the West was under, and not over, the mountains. I had occasion to fall back upon the plans for a tunnel, which originated with Loammi Baldwin, which were subsequently advocated by Gen. Bernard, who planned the fortresses of the United States (an engineer of Napoleon), and which were after- wards advocated strenuously by Gen. Dearborn, but which were set aside, when the railroad came to be built, by the energy and wit of David Henshaw of Leicester, by the Blisses of Spring- field, the Pomeroys of Pottsfield, and the Lincolns, and other distinguished men, of Worcester: so that a route was adopted over the mountain, instead of under it, in the first instance. 4 And probably it was fortunate for the State that this tunnel was not then grasped for a canal, or for the first railroad to the West, because it would have been premature, and might have led the State into a large expenditure ; and a canal would have proved unremunerative, like the Westfield and Blackstone Canals. It was fortunate, also, that the line was carried over the mountain, instead of under it; for, if it had been carried under it, we should have had no railroad to Pittsfield, and possibly none to Springfield ; the route being so much more easy for the passage of the mountain on the one line than upon the other. But I will make no further preface to what I wish to say. I do not rise to make a florid speech, but to present a series of points, in which I shall endeavor to deal with the facts and arguments which have been adduced here in favor of an im- perfect system of consolidation. I shall present to you points, rather than a speech, in support of our plan. I will first deal with the suggestions which were made here by Mr. Allen ; and I take the ground that the State of Massachusetts, as well as the Fitchburg, and Vermont and Massachusetts Railroads, are as free as air, so far as any ar- .rangement to terminate this road at Troy, and to consolidate upon the city of Troy, has been made. There are no agree- ments leading to that, except such as have either been set aside by the course of events, or such as do not bind either the State or companies to which I have referred. 1. My first point, then, is, that the State is not hampered by any contract, nor are the Vermont and Massachusetts, or Fitch- burg Railroads, hampered by any engagement. It is true, that, in the charter of the Troy and Greenfield Railroad Company, there was a clause that it might connect with any railroad in New York or Vermont. But that did not identify it with Troy. It was a broad provision, sufficient to reach any rail- ways beyond the mountains, and did not confine it to the city of Troy. Then, in regard to the lease of the Vermont South- ern Road, — a little road of six miles. Some allusion has been made to a suggestion for the consolidation of the roads made by that road, — a road out of the State, in the State of Ver- mont. There is something said upon that subject in the con- tract as to that branch by the Troy and Greenfield Railroad Company; but the Troy and Greenfield Railroad is absorbed by the State. It has been surrendered to the State. The Southern Vermont Road is out of the State; and any compact, perfect or imperfect, made for that road with the Troy and Boston Road, by the Troy and Greenfield, does not bind the Fitchburg, or the Vermont and Massachusetts Railroads, or the State. But really there is no compact of that kind now obligatory. If there were one, it has been modified (and that is my second point) by the changed circumstances and changed posture of the railroads and canals of New York. 2. At the time when this road — the Troy and Boston — was started, Troy was considered one of the objective points, be- cause the canal terminated there, and carried two-thirds or three-quarters of the freight which came through the State, The Erie Canal was the great avenue of trade : the railroads of the State were almost a sealed book. Very shortly before, I had written in one of the Buffalo papers that the lion of the West should no longer be trammelled like a Northern bear through the winter; for there was a prohibition against carry- ing freight upon the railroads. And when the prohibition was removed, partly at our instance, there came up the question of tolls; and a toll was put upon the railroads for the benefit of the canal. When the Troy and Boston Railroad was started, the railroads were carrying less than a million tons ; while the canal was carrying four millions of tons. But now that is all changed. Lumber and corn remain upon the canal; but nearly all the valuable freight, such as seeks the railroads, is carried by the New-York Central and the Erie Railroads. The canal has become a mere droger, a carrier of coarse freight, and d remains as it was twenty years ago, or with very slight increase : so that now the objective point is not Troy to meet the canal, but it is on the railroads which are carrying ten mil- lions of tons across New York. That *is one great change. Then there was no bridge at Albany; and Troy was looked to, because there was a bridge at that point across the Hudson. 3. I come now to the third point, which is this : that there was at that time a survey made, which was alluded to by Mr. Robinson this morning, — a survey for a railroad from Eagle Bridge, upon the Troy and Boston Road to Saratoga, and from Saratoga to Sackett’s Harbor. One of the objective points when the Troy and Boston line was begun was Sackett’s Har- bor. It was not Troy alone; for Troy was on the road to New York. We were looking westerly and northerly, to the vast traffic upon the St. Lawrence and upon Lake Ontario; and Sackett’s Harbor — which, during the last war, grew up to be a great port of the Lakes — is delineated upon a map by Mr. Ed- wards, in his printed report (which I shall bring here, and put into the case before your sessions close) as the terminal point. Therefore, not having bound ourselves to Troy, having said we were going towards the Lakes, and the canals and railroads hav- ing changed their relative positions, there are strong reasons why we should make our objective point upon the Lakes. Another reason for this has sprung up. At that time, most of the railroads chartered in the State of New York were Bos- ton railroads. The Auburn and Rochester Railroad, I think, originated in Boston; the Utica and Schenectady Road and the Buffalo Road were aided by Boston. Some of our large capi- talists — the Welds, the Thayers, and others — were largely inter- ested in them ; and there were transfer offices here. But in a little while these roads ceased to be Boston roads, and became New- York roads. They were consolidated, and finally the whole line from Buffalo to New York became a New-York line, known as “the New-York Central and Hudson-river Railroad.” We were no longer looking to friends, but to foes, competing for the trade of the West with our Boston roads, to lines beginning at Lake Erie, and terminating at the city of New York ; and, if we should ■come- to Troy, we were doming there to connect not with a Boston, but a New-York enterprise, which had been watered to the extent of eighty per cent : we were placing our- selves and the State of Massachusetts in a state of dependence upon Mr. Vanderbilt, who watered the stock. All these, gentle- men, seem to me to be reasons why we are precluded from con- solidating the Troy and Boston Road with this line. We must look to the interests of Massachusetts rather than to the inter- ests of New York. 4. I have another suggestion to make upon this subject, which springs from an examination made within the last few weeks. I will put into the case, from the reports of the State of New York, an extract from the report of this Troy and Boston Rail- road. You will find that the capital of this line of thirty-five miles, which was originally built for about two milions of dollars, • ex) mo thing -like sixty or seventy thousand dollars per mile, has now been carried to thirty-five or thirty-seven hundred thou- sand dollars. Four years ago it stood, according to the reports of the State of New York, with a capital of six hundred thousand dollars, and with a debt short of two million^ dollars. To-day it stands with a debt substantially the same amount , — a little less than two millions, — and a stock of a million and a half. A small amount of capital may have been paid in and applied to the reduction of the debt; but nearly all the residue recently created is watery. Some step has been taken by which this road has been carried up from its original cost (less than two million^ pi dollars) to a cost of thirty-five hundred thousand^/ yOf dollars, for the pur- pose, as it seems to me, of putting it on a footing, first with the Vermont and Massachusetts, whose capital and debt is three millions and a half, and then on a par with the Fitchburg 8 Railroad, which Avith a hundred and forty miles of track in the place of thirty-five miles, and with a property worth to-day seven millions/o^dollars, is to have the Troy and Boston Road put upon a fooung of equality with it. A year or tAvo ago the capital of the Fitchburg Road Avas but three millions and a half. The Troy and Boston Road — Avith one-quarter of its miles of track; with less than half the engines that are to be found upon the Fitchburg Road, and perhaps a quarter or a third of the cars; without any extensiA r e docks or wharves, like those of the Fitch- burg; without a quarter of a million in cattle-yards; without the large amount of surplus property held by the Fitchburg, Avith- out a mile of neAV track — is brought up by this imaginary capi- tal to stand on the same footing Avith the Vermont and Massa- chusetts and the Fitchburg lines; Avhile its actual capital is but a trifle, perhaps two or three hundred thousand dollars, beyond its debt, and it stands representing really an excess of only two or three hundred thousand dollars, from growth in value beyond its debt as reported to the State. Such are our objections to this road, which, without any adequate capital, within eighteen months, came forward and proposed to purchase the tunnel either for itself, or for some one who stands behind it. We think there are serious objections to consolidating this road — a road out of the State, and beyond the control of Massachusetts — with the Vermont and Massachusetts, the Fitchburg, and the tunnel, to make a line between Boston and Troy, while the objective point is upon Lake Ontario. These are the suggestions which I have to make in reply to what has been said in favor of the consolidation of the Troy and Boston Road in the enterprise which is now presented. Judge Thomas. — I understand that the Fitchburg Railroad is opposed to any consolidation with the Troy and Boston. Mr. Derby. — We prefer to have the consolidation made with Massachusetts roads, and then to lease, or make ar- 9 rangements with, the Troy and Boston Road. We are opposed . to making the Troy and Boston Road the basis of consolidation under these circumstances. Judge Thomas. — You are opposed to consolidating with that road ? Mr. Derby. — My preference is to hire that road, rather than consolidate with it. Judge Thomas. — I speak of the position of your clients, the Fitchburg Road. That road appears here to-day, as I under- stand it, opposed to any consolidation with the Troy and Bos- ton Road. Mr. Derby. — Record it so, if you please. I believe I am correct in so saying. I object to it. Judge Thomas. — The road objects? Mr. Derby. — Yes, sir. 5. The fifth point which I propose to submit to this commit- tee, and through them to the State, is that the objective point to which we look to-day is Oswego upon, Lake Ontario, with its te^elevators, having a capacity of two million^>/ bushels ; with its population of twenty thousand; with water-mills to turn out eight thousand barrels of flour daily; standing as it does at the outlet of seven lakes, — all those interior lakes of New York, — with probably the finest water-power on this continent, with a hundred feet o/f fall from those seven lakes down into Lake Ontario; being to-day the terminus of a railway that will be finished by August, coming down from Niagara Falls, along the line of the lakes, upon the shore of the lake, connecting by the new bridge at Queenstown with the Great Western and Grand Trunk of Canada, with the Michigan Cen- tral, and so with Chicago, — Oswego, I say, is our objective point. And when w r e get that, and make our connection, we shorten the journey to Chicago more than a hundred and twenty miles from what it is to day by Cleveland and Toledo, the route fol- lowed by the Vanderbilt line on its way to Chicago. 10 Mr. Bates. — How do you get the distances? Can you give it in detail ? Mr. Derby — I will put it in evidence. I have not the figures on this brief, which is a very short one. 6. I now come to a suggestion made by my friend Judge Thomas, that he comes here to favor a continuous independent line to the West : that I understand to be his statement. Judge Thomas. — I will make my statement when the time comes. I have not opened my case yet. You may take care of yours, and I will of mine. Mr. Derby. — I will refer, then, to the introduction of Judge Thomas. I will not call it an opening. In his introduction, he spoke in favor of a continuous and independent line. I sug- gest that the line he proposes may be a continuous one, but is not an independent one; and that is all I have to say in answer to the very brief and happy introduction of my friend in starting this case. His argument was a short one : mine is shorter. Judge Thomas. — I understand that the Fitchburg Road wants a line to Oswego. Mr. Derby. — It wants an independent line, and one of its objective points is Oswego; and it comes here to secure both. I make these points, and will not attempt to strengthen them. I leave them to stand on their merits. I mean to be clear as a bell, and I believe I have stated them distinctly ; and at any rate they will be recorded, and the committee will have an opportunity to see them. 7. I come now to my seventh point, which meets the sugges- tion of Mr. Bates, — that consolidation must deal with direct lines only. His idea is, the State is divided between three or four lines, and that we are to deal with the direct lines alone. I have not heard my brother cite a single statute, or a single de- cision of the legislature of Massachusetts, which confines us to direct lines. The consolidation in other countries has been on 11 a different theory: it has been the consolidation of lines and branches. We shall favor here the consolidation of two lines in one county, Middlesex; and I cannot understand that there is any thing in the legislation of the State that precludes consoli- dation of lines parallel to each other for a short distance, or which run in the same county. I repel the idea that we are con- fined in consolidation to direct lines. That is my brief answer to Mr. Bates. By consolidating other lines, great waste may often be avoided. For instance, if the Fitchburg Road should be con- solidated with other lines going through Middlesex County, a very great benefit might be conferred, — first on the Fitchburg. Road, by having added to its resources the large docks and ele- vators which are now in process of construction, and adapted to the through business of the West; second by adding to the Boston and Lowell Railroad all the piers, wharves, and water- front of the Fitchburg Railroad. If you trace each mile of railroad of the last of these lines, you will find three or four miles of piers and wharves adapted to the local business of the country. The union of the piers and docks of the Fitchburg Railroad with those of the Boston and Lowell Railroad will accommodate the whole interior of the country, in- cluding New Hampshire and Vermont ; while the great pier of the Boston and Lowell Road, and its extensive docks, and the spacious elevator it is about to commence in a very appropriate spot, will accommodate not only the upper line of the Fitchburg Road, but the great interior traffic, giving facilities in which the Fitchburg Road is at present deficient. I can see that these lines consolidated will be of great benefit to each other, and that con- solidation will save a waste, which I think may be estimated as high as three or four hundred thousand dollars a year in their expenses. By combining these two roads, a wasteful expendi- ture in construction also will be avoided. This will be elucidated in a case subsequently to be presented ; and I will but allude to it to-day. 12 8. I pass, gentlemen, from that point to the eighth, which I propose to present to you, — that strong companies, with branches, should be formed to do the business of our State and of the interior, and the business of the West. Such is the poli- cy of Europe. First in Great Britain. And I here put into this case a mag- azine which I hold in my hand, published in London, Jan. 11, about three weeks old, and which gives us the latest informa- tion which has reached this country upon that subject. I shall submit it to you as showing the consolidation in England, not merely of lines that are end to end, but lines which are collate- ral, which are connected with each other ; with respect to which consolidation will allay idle and useless competition. 1 have in my hand a list of ten roads consolidated in England, one of them comprising fifteen hundred miles, which has pending before the parliament of Great Britain to-day a plan for consolidating with another road, which has five hundred miles of road running nearly at right angles. One is the old London and Birmingham Road, now known as the London and North-western, which with its branches embraces fifteen hundred miles; and the other the Yorkshire and Lancashire Road, running across the island with many branches. It is proposed to consolidate these two roads ; and, when consolidated, they will have two thousand miles of railroad, — two or three times as many as the lines will have which you will be asked to consolidate. Here, gentlemen, are ten roads set forth in this magazine ; and they comprise eight thousand two hundred miles of railway. They form two-thirds of all the railroads of the United King- dom. They have originated under several hundred acts of par- liament with different charters; they have been melted down into ten, averaging eight hundred and twenty miles of main line and branches consolidated roads ; and I am happy to say that all, or nearly all, of these consolidated lines are successful, while many of the roads which are not consolidated are the re- verse. It has proved a successful thing in England, — successful in allaying wasteful competition, successful in cheapening and expediting transit. It has accomplished both objects. The conclusion of the European world, as I have read it for the last thirty years, is, that the competition on railroads is often waste- ful ; that consolidation usually brings benefits, while competition tends to saddle the country with unnecessary roads, with more than it requires, the interest of whose cost must be paid by the people who live upon their borders. I have given you the consolidation of England. In this same magazine is a list of six or eight of the principal railroads of France ; and one of them, between Paris and Lyons, both across through the country on either side, comprises twenty- eight hundred miles of railroad, — nearly four times the length of France. It is one of the most successful roads of Europe, running with low fares and low freights ; and the others, four or five in number, comprise the principal railroads of France. The same thing is true in Italy and Austria. The policy of the European world is towards consolidation on a large scale. That is the policy of Europe ; and I adduce it as an argument in favor of a large consolidation here. Mr. Chisholm, (of the committee). — -You say that you have there a list of the consolidated roads in England, and that one of them has a petition before parliament for consoli- dating with another road. Is it not the fact that that is mak- ing quite an excitement in England, and that they are investi- gating now the effect of consolidation on the public ? Mr. Derby. — They are, sir. Mr. Chisholm. — Is the testimony contained in that maga- zine, so that we can have it ? Mr. Derby. — I think there may be some objections to consoli- dation ; but I think it meets with very great favor. And I will say that the plan now before parliament is on a larger scale than any thing yet attempted. It is taking two of the largest roads .14 of England, — one with fifteen hundred miles of track, and the other with five hundred, — and putting them together ; and very likely there are some people who would suggest that it may be impolitic to go so far. It may be in my power to place this discussion before you. Mr. Chisholm. — My point is, that, if that is the case in England, we ought to have the testimony as to the effect of consolidation and competing lines in England. Mr. Derby. — I will state on that point, that being a con- stant reader of the English railway magazines, reading them weekly, I have found that consolidation meets with very high favor. Within the last four months, I have travelled through England, Ireland, and Scotland ; and I can bear testimony to the admirable management of some of the largest roads. I travelled on twenty ; and I found that the consolidated roads were the best managed, the most punctual, and the most cor- rect in their mode of conducting their business. Mr. Chisholm. — My impression was, that it was claimed, that, while it was beneficial to the railroads, it was not so beneficial to the public. Mr. Derby. — There may be some who hold that opinion. Mr. Bates. — Is it not like this, that there are two claims in reference to consolidation, — one relating to consolidation for the through or long traffic, which is for the benefit of the peo- ple ; and the other the consolidation of competing roads to create a monopoly? I understand that these two classes of consolidation are now being brought up in parliament, and dif- ferent views are entertained ; almost everybody in England favoring the consolidation of lines in the interest of the people, but the question coming up very strongly, whether it is advisa- ble to consolidate for the purpose of creating a monopoly and destroying competition. Mr. Derby. — I think the evidence is the other way. The evidence is, that the consolidation of roads running near each 15 other which are throwing out unnecessary branches is most important. I have an illustration of it in the case of the Lon- don and Brighton Road, which was earning four or five per cent : but competing roads were chartered on each side of it, which obliged it to make branches ; and dividends were brought down to one or tvvo per cent, and the road seriously injured. Rates were put up in consequence of these branches. England had occasion to regret the extent to which she had gone in competition. Within a short time, the building of such branch- es has been stopped, and the London and Brighton Road has begun to reduce its prices ; but they stand higher than upon continental lines with which the London and Brighton con-* nects, where this system of competition has not been adopted. But I will give you an illustration nearer home, — the case of the Eastern and Boston and Maine Roads, — which has recently occurred in the State of Maine; where, in consequence of a difference as to the use of a road which was run for the common benefit of both for many years from Portsmouth to Portland, a wasteful expenditure has been made of three or four millions to make a parallel road side by side with the other;, the inter- est upon which must become a charge upon the public. This would have been avoided by consolidation, and the construc- tion of a second track, if the business had required it ; which I believe was not the case. I wish to state, gentlemen, in this connection, that the policy in Europe is decidedly in favor of consolidation as the best mode of promoting cheap freights and cheap fares. 9. I have enlarged upon this point, more than I intended to. I come to the ninth point: that it is important to have a strong consolidation here, — one strong enough to carry the lines of Massachusetts forward to connect with those of Canada and Michigan. You have had some evidence with respect to them. There are two or three roads (perhaps twenty or thirty miles apart) through different parts of Canada, tending towards the same point, which will create additional business. There has been on the Michigan Central a very large expenditure in straightening the line, and furnishing steel rails and other improvements. I think the expenditures of the Michigan Cen- tral within eighteen months reach five or six millions; and its improvements will be completed during the' present year. The Michigan and Canada lines are virtually Boston lines. The Great Western is run in connection with the Michigan Central, and under the guidance of Mr. Joy. The Michigan Central is controlled in Boston, has its offices in Court Street, and its treas- urer is here. To connect with these lines, we want to reach Lake Ontario. To accomplish this, there must be a stronger consolidation than that which is presented for your considera- tion ; for there are a hundred and thirty-eight miles of rail- road yet to be built to reach Oswego. 10. My tenth point is, that a strong consolidation is essential to the success of the tunnel. The Boston and Albany Road carried last year, according to its reports, two millions eight hundred thousand tons of freight, a large proportion of which crosses the mountains; according to the estimate of Mr. Ap- pleton, fourteen or fifteen hundred thousand tons. For many years, the whole through freight carried on the Boston and Albany Railroad, then known as “the Western,” was not more than fifty or sixty thousand tons a year; for fifteen years it did not exceed one hundred thousand tons of through freight yearly. It has now wonderfully increased, under the influence of low prices based upon steel rails, steel tires for the locomo- tives, second tracks, and the construction of suitable depots at the terminus here : these have followed consolidation. The de- pot of the Boston and Albany line at East Boston is six miles beyond our depots ; but by the improvements which the Bos- ton and Albany line has made, and the large capital which it has expended, it is doing this large business. Now, in regard to the tunnel : we do not want to do the insignificant business IT which was done for twenty years by the Boston and. Albany Railroad. We want to begin where the Boston and Albany has left off, or at the point of progress which it has reached. We wish to attract, if possible, two millions of tons of freight from the West. A very small toll upon this amount of freight — a toll no larger than the toll which is charged at the Albany bridge, according to the testimony this morning, — twenty-five cents per ton on two millions tons of freight (five hundred thou- sand dollars) — will pay the interest upon the cost, and accu- mulated interest on the tunnel. The tunnel, as I understand it, will have cost seven millions of dollars ; I mean for labor expended upon it, some of it, perhaps, unwisely applied. The accumulated interest, when the tunnel is finished, will carry its cost to about ten or eleven millions: it is erroneously stated in the papers at thirteen. That is merely an assumption ; but the interest on the cost will carry it above ten millions. Now, if we can, by energetic action, attract to that tunnel a business of two millions of tons (less than the amount of freight carried upon the Boston and Albany line to-day), and put the toll down to twenty-five cents a ton, it pays the interest upon the cost and on the accumulated interest ; and it brings about a result which I have most ardent- ly desired and most confidently predicted, — that the State will not lose in the construction of the tunnel. I venture to predict, that if you will carry out the plan which will be pre- sented to you, which will furnish the capital requisite for doing an immense business, this tunnel will soon pay the five per cent or less interest which the State is paying, not only upon the cost of the tunnel, but upon the accumulated interest. As a man representing to-day the views of many of the peo- ple of the Commonwealth, I stand upon the ground that the State ought not to part with its interest in the tunnel. It can hold it more easily than any one else at four and one-half to five per cent interest. s 18 It should prescribe a low rate of toll upon it, and confide it to some company strong enough to use it efficiently, the rate of toll to be diminished as the business increases; thus making it for the interest of the company to increase the business as fast as possible. It should be required to carry the passengers and freight from connecting roads at the same toll which it pays for its own business, with a fair rate for haulage, — say two cents per ton, and passenger per mile, with a moderate charge for marshalling trains at the junctions. It should give connecting roads every incentive to exertion, and give the company which will run the line from Boston up to the tunnel the power to carry the business through. It will be best to have this done by one company (that I concede), and it should be done by the line which has kept the communication open for years; but it must be strong enough, and have capital enough, to do it well, and do it immediately, not lingering by the way, or form- ing a partnership with the tunnel, and then using it to build up a weak credit. We would not have the tunnel put into the market to go into the hands of stock-jobbers and speculators. We want it held by the State, so that the State can fix the rates of freight, and prescribe that the parties running it shall take the freight of the connecting roads at moderate specific rates. That, gentlemen, is the solution which I present to you of the question, “What will you do with it?” — a question so well discussed in Blackwood by the illustrious dead. Adjourned to Thursday at ten and a half. Thursday, Feb. 6, 1873. The hearing was resumed at ten and a half o’clock ; and Mr. Derby continued his remarks. Mr. Derby. — I am happy to meet you, gentlemen, afresh this morning, and to finish the argument of yesterday. I respond first to the call from my friend Mr. Bates, who desired the distances. The distance from Boston to Chicago by 19 the new route is 920 miles against 1,042 via Toledo, showing a saving of 122 miles as compared with the Toledo and Cleve- land route, and the Boston and Albany route, along the south- ern side of Lake Erie. This line is through Canada. Mr. Bates. — What I wanted was how you made it up. Mr. Derby. — Here it is in the sheet. I will put it into the case. I also put into the case, Mr. Chairman, a letter from Mr. James F. Joy, dated March 25, 1872. Mr. Joy is the president of the Michigan Central Road, and runs his line in connection with the Great Western Railroad of Canada; and in this letter he gives the distances through Canada, and upon the Michigan Central; and he gives them as I stated them yesterday. I will not detain you by reading the letter; but he makes the distances in Canada and on the Michigan Central 447 miles. I have here his letter giving the distances, which I believe is per- fectly reliable. He expresses the warmest sympathy with this enterprise, and a strong hope that the independent line will succeed. Mr. Thomas. — What line do you mean ? Mr. Derby. — An independent line by the way of the tun- nel, along the shore of Lake Ontario and across Canada. The Chairmans — You stated yesterday that the difference in favor of the new line was 140 miles. You correct that now ? Mr. Derby. — If I was understood to say so, I was misunder- stood. It was 128 miles. I add to the 122 miles the saving of the distance between Boston and East Boston, which is six miles ; the freight depots of the Boston and Albany Railroad being at East Boston, six miles from the terminus which we propose, on the Charlestown shore.* * The distance given by Mr. Joy in his letter was 447 miles from Lewiston to Chicago. It has been suggested to me by Mr. Appleton, that, in this letter, the figures 4 and 7 may have possibly been transposed. If so, the distance would be 474, in place of 447 miles. In such case, the saving would be 101 miles, in place of 128, — a very material saving in either case. 20 I now put into the case the Inst two reports of the Michigan Central Railroad Company. I have marked the passages to which I refer; and, as time is valuable, I will not stop to read them, but will state the substance. The Michigan Central Railroad Company, which had been carrying yearly some six or eight hundred thousand tons of freight, found themselves sud- denly called upon last year to carry more than a million of tons. The result was, that in mid-winter they were obliged to take up their rails for thirty-five miles, at great inconvenience and expense ; they have been obliged to lay down sixteen thou- sand tons of steel rails, to renew their track, and put down a second track; they have been obliged to add several thousand cars, and have increased their number to four thousand. This is an important lesson for us upon this line. They have also purchased fifty-seven locomotives ; they have determined to equip the road, and provide it with cars and engines sufficient to do the business which is crowded upon them ; and they say that the effect of not being ready for the business has increased their expenses from sixty to seventy per cent. They apologize to their stockholders for reducing then' dividends from ten to eight per cent, because this rush of business has come upon them, and increased their expenses, and diminished their profits, as they had not the means to do the business successfully. 11. I come now to my eleventh point, which is, that our line, in order to succeed, must have steel rails, and must have a second track. We have a double track from Boston to Fitch- burg ; but from Fitchburg onward, and eventually to the Lake, we shall require a double track, with steel rails from end to end ; and to purchase these (I leave you to make the computation : I have made it) calls for four millions of dollars for the double track and the steel rails. To do the business which is now done upon the Boston and Albany line, we shall require forty- two hundred cars, and engines sufficient to set these cars in motion. On the Boston and Albany line, they reported, a year 21 ago (I have not yet received the report for the past year), that they had in the vicinity of four thousand cars, which I under- stand have been increased to over four thousand during the last year, and they were doing a business of two million eight hundred thousand tons. To do a business of three million tons, which I hope we may do upon the tunnel line, demands over four thousand cars, and demands more than fifty heavy engines. To purchase these, four millions of dollars will be re- quired. Then, to construct the railroad in New York, there will be required for the 128 miles at least four millions of dollars. Now, I am not going to suggest .that the consolidated line alone will build that road; but I do suggest that capital is needed for that road ; and we want a road strong enough to encourage it, possibly to take a lease of it, to give it a lift in some way. To do that, a large amount of capital is required. I presume, when that road is built, the contractors will take part of the stock ; that part of the cost may be provided for by bonds ; that part may be taken by the Michigan Central; that part may be taken in Canada, by the Great Western Road, part by the new line along Lake Ontario, now nearly done, which regards this as a feeder and an important line. But some one must have funds to set it in motion; and I submit that there is something like four millions of capital required. This suggestion with regard to equipage, the suggestion as to rails, and the suggestion with regard to the additional road in New York, make three points, — the 11th, 12th, and 13th. 14. I make another point, that this line calls for elevators : it calls for steamboat docks. The freight will not come unless you have the means, to send it beyond Boston. Pro- visions are wanted in Europe. The demand is increasing. The artisans of Europe have begun to eat meat. They formerly lived on bread and cheese, and very often dispensed with the latter. But since the rise in wages, the effects of which I no- 22 ticed while travelling in Europe the past summer, an immense demand has sprung up for provisions, prices have risen; and we want the facilities to move these provisions across the ocean. It is undoubtedly the policy of our country to provide ships ; but, until it does legislate in their favor, we must take the ships of other nations, that can furnish them on the basis of a low rate of interest, and a low price for iron. The time will come when we shall furnish them ourselves ; but we cannot get either for- eign or domestic ships unless we have the docks to receive them. There must be provided spacious docks, spacious elevators, to load the ships, and piers and sheds to receive their cargoes. Be- fore we can attract freight from the West, these elevators must be provided. I believe it costs fifty cents a bushel to provide an elevator, and as much more to provide docks and piers, — some- thing like a dollar a bushel. If we transport a million bushels every fortnight, we require a million of dollars for this purpose : if we carry two millions of bushels, we require two millions of dollars. To attract this business of the West, there must be expended thirteen millions of dollars. It must be done gradually, eco- nomically ; but the money must be had : and the question will ad- dress itself to you, gentlemen of the committee, whether this con- solidation which is proposed, of a weak road in Massachusetts and Vermont, and a still weaker one in another State, can furnish the requisite capital. 15. Now, gentlemen, I submit to you, as my fifteenth point, that the consolidation of the Vermont and Massachusetts and the Troy and Boston Roads will not furnish thirteen millions of dollars. The New- York Road has cost less than the debt upon it, according to the evidence in this case, to which I refer to you, striking out what is put down for engineering and agencies (four hundred thousand dollars), which is a fanciful charge, covering the sacrifices made on the bonds, and every thing of that character. Its value consists in the rise in prices, if there has been any, — simply in the rise in value beyond the debt. The original invest- ment was but five or six hundred thousand dollars beyond the debt; and for many years the road did not pay interest upon its debt. The Troy and Boston Road, gentlemen, brings no strength to this consolidation ; it is not good for half a million additional capital. And the Vermont and Massachusetts Road, a stronger road than the Troy and Boston, a very valuable road directly on the line which, at all events, must be adopted, — the Vermont and Massachusetts has not the capital adequate to carry on these improvements. I wish to speak of it with the utmost kindness. I regard it almost as one of my children, having in- voked the legislature to grant it a charter. But I say it has not the requisite capital. It has a debt of seven hundred thou- sand dollars ; and the value of its stock, beyond the debt, is not over one or two millions. It has not the requisite basis to raise the capital for this great undertaking. For five years past, its dividends have been one and a half per cent on the average ; and that would represent the inter- est on a very moderate capital, less than a million ; and that is all the basis upon which it stands. When you have con- solidated the two lines together, without the Fitchburg, you have consolidated, perhaps, a million and a half of capital. There it is, gentlemen, called upon to provide the greater part of thir- teen millions of dollars. Can it do it? Has it the power to do it? And do you wonder that it should put its arms around the Fitchburg Road, and try to embrace it, when that road is free from debt, and has a capital, which, with its increments, must be considered seven millions of dollars at least, and possibly eight? Without the Fitchburg Road, there is insufficient capital ; with the Fitchburg Road, there is insufficient capital. More capital is required to carry on this enterprise, and that capital must be sought somewhere else. 16. My sixteenth point is, that a larger consolidation is re- 24 quired than the one which is suggested in order to provide additional means. Now, gentlemen, if an association can be formed of two impor- tant trunk lines of Massachusetts in Middlesex County, — and I will not go into any details about it, because that case is not now before this committee — I will suggest to you how savings will be effected, and how capital will be found. There will be a saving in annual expenses of nearly four hundred thousand dollars in conducting the business of three lines. Any gentleman who is conversant with railroads will know the fact, that, by putting these lines together, the expenses will be greatly reduced ; and my position is, that, when the two or three important lines which we may hope will form the basis of this enterprise are as- sociated with the Vermont and Massachusetts, there will be an annual saving of from three hundred and fifty thousand to four hundred thousand dollars. You will see by the report of the Boston and Albany Railroad for the last year, that the small elevator at East Boston, with its inferior docks, has yielded a hundred and ninety thousand dol- lars. When a large elevator is built by our lines, it becomes immediately and directly a source of revenue ; and it will proba- bly add two or three hundred thousand dollars a year to the revenue of the companies, which will strengthen the consoli- dation. 17. Then comes in the revenue to be derived from the equi- page. If millions are invested in cars (for I take it you may rate each car at a thousand dollars, if you include the portion of engine that goes with it), four millions in cars, will pro- duce eight or ten per cent, making a return of three to four hundred thousand dollars a year, independent of the business. The cars will find employment if they are put on this line, and will earn money. They will earn it somewhere. But, with this equipage added, the associated lines will add to their 25 receipts. If you associate lines whose property is worth to-day ten or fifteen millions of dollars, and they put additional capi- tal into equipage, second tracks, and steel rails, — which cheapen business greatly ; for a steel rail outlasts twenty iron rails, — they will be strong enough to carry on this enterprise, which the Vermont and Massachusetts line, and its distant and feeble partner, would be unable to carry. This is my position with regard to the association of these lines. 18. The next point, gentlemen, which I wish to present to you is, that the plan before you is defective in this respect, — that it calls on one of the lines to be associated to resign its dividends. You heard the testimony of Mr. Richardson. He gave you to understand, that, for two or three years to come, the Fitchburg Road might possibly lose its dividends : at all events, they would be jeopardized. Mr. Bates. — I did not so understand him. Mr. Derby. — I refer you to the evidence. There was a risk, a peril to be incurred. He declined to have the Fitchburg Road guaranteed any dividends during the time. Although it was earning eight per cent from its local business, it was to be required to come forward and form this association, at the risk, certainly, of losing its dividends for a time. Well, gentlemen, the association would be a union of a living capital with a dead capital, and the association would be something like this: Two young men, energetic and spirited, go to a capitalist engaged in a good business, receiving dividends upon his property invested, and say to him, “We wish to go into partnership with you.” — “What funds have you?” — “We haven’t enough to go to market with: but we have energy, spirit, pluck ; and we wish to associate ourselves with you. You have plenty of money in your pocket ; you have enough capital: and we propose to bring in our old uncle, who has a large amount of real estate. We propose to bring him into the partnership ; and perhaps he will mortgage his property, 4 or let us pledge it for him, to carry on the concern.”' — “But, meanwhile, what am I to live upon ? How am I to provide for my wife and children ?” This is the view I take of this plan. The dead capital of the tunnel, still dead capital, — a tunnel yet to be finished, yet to be tested, — and these two roads (the Troy and Boston, and Vermont and Massachusetts), with little or no capital, are to be associated with the living Fitch- burg Road ; and thus this enterprise is to be carried on. Why, gentlemen, when, dreaming of this subject, it presented it- self in my visions thus: I was in a country dairy, and was looking at the shelves, and saw three pans ; one had cream, an- other milk, and the other buttermilk or skimmed milk ; and it was proposed to the dairy- woman to amalgamate them all; and then the question was, how the owners of those pans were to divide the butter, and which would produce it. That is the kind of association suggested by the gentlemen, in the bill upon which I have the honor to address you this morning. 19 . Now, gentlemen, I come before you with the experience of thirty-four years, during which I have been either a director of, or counsel of, railroads. I am not now a director of the Fitchburg Railroad, as one of the reporters suggested ; for I retired eighteen years since. As soon as the tunnel line was secured, I ceased to be a director ; and the result at which I have arrived is, that you want these improvements immediately; you want prompt and efficient action. These are not to be secured by harnessing together two weak companies in different States, but by uniting in the bands of wedlock two strong ones, who are competent to go forward with reproductive power. You want the steamships at once ; you want the steel rails and the double tracks immediately. But one million tons additional business yearly can be done without them ; but you want several millions of tons at once, and you want an annual increase. You must secure immediate results by bringing in capital. You want the British steamships, and you must be ready to receive them. 27 They are ready to come, but they want the facilities, and these facilities must be accorded ; without them you will not have the steamships. 20. You want, also, immediate returns upon the capital em- barked in the tunnel. I look on that as a source of revenue. I have faith in the tunnel, and ever have had: I have not fal- tered in thirty-four years since I took up the idea. But, gen- tlemen, how is the tunnel to pay, unless freight comes’ to it? You have opened the portals of New York; but it will not do for Massachusetts to stand there idle. You must go beyond the portals, and see that access is open to it there, and facilities accorded : if not, you will wait in vain. On that point let me make one or two suggestions. Let me look at things as they are. We have the Boston and Albany line, terminating at Albany, and there connecting with a rail- road which runs to Buffalo, — the New-York Central line. That line has in common with the Boston and Albany the twenty-three miles of road down to Chatham, and it has a com- mon interest in the bridges. I do not know how much the Bos- ton and Albany Road gets from them ; but, from its toll on the millions of tons crossing the bridges, some one is realizing a very large return. Twenty-five cents on a passenger, thirty-seven cents or more per ton for freight, must yield a large revenue, per- haps fifty per cent. I do not know what the dividends are. I do not think they are disclosed in any of the reports made to the State ; but some one is making very great profit upon those bridges. I presume Mr. Chapin and Mr. Vanderbilt have a large interest, direct, or indirect through the railroads in those bridges; and there is a very strong inducement for them to send freight over them and down over the Harlem Road to Chatham, or down the Hudson-river Road to New York. And when your line is finished to the portals of New York, and you call for freight to come over it, you will doubtless find all the energies of Vanderbilt and Chapin applied to draw the freight another way. Can you expect a # liberal patronage from them when their interests are in the opposite direction ? I submit to you, that more than half of the business of this line must be drawn from Oswego and lines beyond it. Oswego has elevators and granaries, now depressed because Buffalo is favored at the expense of Oswego. They stand there with their arms open, ready to receive you ; and you must push your line as directly and quickly as possible to the Lake at Oswego, which is strong in coal, salt, and iron, to give return loads to the propellers. With two millions returns of tons of freight (without a passen- ger) at twenty-five cents a ton, the tunnel can earn half a mil- lion of dollars a year, or five per cent upon the whole investment of the State, principal and interest. My idea is, that you should have that amount of freight within two years after the tunnel is finished ; and my idea is, that there should be an annual increase of half a million of tons or more for many years to come; and that the toll of the State, beginning with a quarter of a dollar, should be gradually reduced to some almost infinitesimal point, for the encouragement of the commerce of Massachusetts, for that was the object for which the tunnel was made. If the idea of the friends of the tunnel was, that we should go on as the Western Railroad did for twenty years before they got one hun- dred thousand tons of through freight, it was not my idea. It was not for that I devoted time, thought, and labor, and what- ever ability I might possess, to secure the aid of the State in its construction. I advocated the tunnel as a great commercial and financial measure; and I want it to result in benefit to the State of Massachusetts. I wish it to be a blessing to the State; and then I shall feel a pride in having my name associated with it from the beginning to the end. I should take pride in the fact that I stood by it in its weakness ; that I went to Montreal and found the Stanleys; that I introduced them to the work as men competent to complete it, and thus hastened its completion ; 29 that I for two years invoked the State to furnish the two million loan, and with little hope of reward. I shall feel a great pride in the success of this enterprise, and in its brilliant results to the State, which, I venture here to pre- dict, will be achieved through the aid of your committee. 21. The twenty-first point which I present to you is this: that it is not safe to commit this tunnel to two foreign corpora- tions; the one entirely in New York at the outlet of the Cen- tral Road, the other partly in Massachusetts, and partly in Vermont, holding its property with a feeble hand. A million dollars might control the stock of the Vermont and Massachu- setts Road. The Troy and Boston Road is controlled already in the State of New York : put them together, bring the Troy and Boston with its three directors into the same interest with the Vermont and Massachusetts with its three directors here, the Fitchburg Railroad standing out, and you make the tunnel virtually a foreign enterprise, — an enterprise out of the State. I have entire confidence in my friend Mr. Richardson ; but he may not permanently hold his place. There may be, at some meeting of the stockholders, a preponderating interest in favor of New York, other directors may be chosen; and then the whole tunnel enterprise, if you confide it to these two compa- nies, becomes a New-York enterprise, a foreign enterprise. This tunnel is of too great importance to the State of Massa- chusetts to be confided to any companies the stock and prop- erty of which are held to a great extent under other States. 22. But time is passing; and I pass to the next point, that, if you part with the tunnel at all (and I think you should hesitate to do so), you should intrust it to strong com- panies, which are at home, in the State of Massachusetts. Then you have a strong local interest in the tunnel ; then you have our capitalists enlisted more or less in the suc- cess of an enterprise identified with the prosperity of Bos- ton and the prosperity of the State. If you should give 30 this consolidation to two of our strong companies on the sea- board, how easy it would be for them to hire the Vermont and Massachusetts! They could afford to pay a fair interest : they could afford to give it, I think, more than it would earn itself; or they might agree to run it, and share pro rata , to put on the engines, furnish the equipage, furnish a second track, and run it under a long lease. There are many ways in which this thing is done to-day. The Great Western Road, I understand, is run in connection with the Michigan Central. Many roads are certainly run by connecting lines, and the income shared 'prorata. Thus you have the advantages of a long line ; and each road retains its local interests and its local business. Should the Fitchburg Road and any associated road propose to the Vermont and Massachusetts that they would run up to the Troy and Greenfield line, there would be but one objection made that occurs to me ; and that is one which is certainly to the honor of the Fitchburg Road, — that, thus far in the division of the business, the Vermont and Massachusetts Railroad Company have had more than their pro rata share. That is the way they have been treated. I was in the direction of the Western Rail- road when that road and the Boston and Worcester were in controversy; and the difficulty then was to get for the costly Western a pro rata share. The Boston and Worcester held to the idea of very high charges: the Western held to low charges in a more difficult country ; and, when they came to divide, the Boston and Worcester Road actually claimed the lion’s share of the joint business. Such has not been the dealing of the Fitch- burg Road with the Vermont and Massachusetts. You observed how kindly Mr. Richardson spoke of the treatment they had received from the Fitchburg Railroad. They have had more than their share, — a very liberal allowance of the receipts. I know of no objection to running the Vermont and Massachu- setts by the Fitchburg, except this, — that a pro rata would not give them as much as they have been accustomed to receive. 31 Then the Fitchburg Road, according to the evidence, has made offers and propositions. Were they unreasonable? It was not willing to consolidate with the line leading down to New York, but was willing to consolidate with the Vermont and Massachusetts on reasonable terms. All it asked was, that it should not be stripped of its local revenues ; for would it be just that it should lose its income of eight per cent by going into an association in which it would furnish nearly all the capi- tal ? Should not the returns now received from the local busi- ness be protected ? Was there any thing unfair or unreasonable in the Fitchburg saying to the Vermont and Massachusetts, “We are willing to consolidate wi.th you, on condition that we have our eight per cent dividend pieserved to us”? Mr. Bates. — Upon what capital? Mr. Derby. — They offered it, as I understand, upon four millions; although their capital is really seven millions, or more. Mr. Bates. — There would be no objection on the part of the Vermont and Massachusetts, if the State chooses. We are perfectly willing to allow it. Mr. Derby. — I will have that suggestion communicated to my clients. But I wish to say that this was a proposition or suggestion by a committee : it was not submitted to the direc- tors or stockholders of the Fitchburg Road ; but the proposi- tion was declined at once, as I understand, by the Vermont and Massachusetts. Mr. Bates. — On public grounds. Mr. Derby. — Any way it was put, it would have been a fair proposition. If the eight per cent was put upon four millions, and was declined, that proposition was a most liberal one. If the company had added the value of the improvements made annu- ally upon it, it would still have been perfectly fair and reasona- ble. Or if it was to have eight per cent on four millions, and share equally above that with the Vermont and Massachusetts, a 32 fair proposition was made ; but it was declined. Mr. Richard- son testified to the tact that it was declined. Mr. Bates. — No, sir, that is wrong. Mr. Derby. — He said they must come in and take their chances. That is the substance of the statement. Mr. Bates. — He was stating his own opinion. Mr. Derby. — I refer to a conference of committees, not con- clusive upon either party. They could not agree upon a basis. The terms of the Fitchburg Railroad were fair, but not accept- able to the Vermont and Massachusetts line. 23. My twenty-third point is, that the plan presented by the Vermont and Massachusetts and Troy and Boston Railroads is one dependent upon an arrangement to be made satisfactory to the governor and council. There is no provision made for any substitute in case that negotiation fails. This is one of the defects of the plan presented, that, if the parties cannot agree, every thing remains in statu quo. In such case, the rails, equi- page, docks, and elevators will not be provided, unless they are provided by other parties. 24. My twenty-fourth point is, that the State is fortunate in having companies at the base of the line, in the county of Middlesex, competent and willing to carry through the enter- prise, to provide the equipage, the rails, the docks, the piers, and elevators which are required, — companies which control in and around Boston and Charlestown more than one hundred acres of land, with some fifteen or twenty more as near as Watertown, with extensive cattle-sheds upon them; and that with them we find ample provision for depot grounds and for water-front, and cannot find it elsewhere; the two companies controlling each side of the Navy Yard, almost all the water- front of Charlestown, the northern side of Boston, with a fair prospect of controlling the Navy Yard itself. 25. Should these companies be united, why should not the country — from the seaboard to the St. Lawrence and to the 33 Lakes, which was roused to life by the crusades of Mr. Crocker when he went out like Peter the Hermit, and woke up the peo- ple of Vermont and New Hampshire — participate in the ad- vantages of these docks and these improvements afforded by the two lines? Is it asking too much to ask that all who inhabit this district of country should find their accommodations here ? and, if a large patronage is given the consolidation on account of its docks and elevators, will not the very magnitude of the business cheapen the rates ? I am requested by my associate to read the testimony of Mr. Richardson on the point discussed a few moments ago : — u Our directors declined having the Fitchburg Road go in as a preferred stock, into a concern of twenty millions. They thought they had better not ask it for themselves; for they were going to make a prosperous line for all time. They thought they ought not to ask it for two years. Q. — In other words, your company and your board preferred to submit the matter in this shape, and to have the whole mat- ter left to commissioners, rather than to attempt any actual proposition, or make any negotiation ? A. — It did not seem that we could.” Mr. Bates. — In other words, your company or your board preferred to leave the whole matter to commissioners, rather than submit any actual proposition, or make any negotiation ? Mr. Derby. — The Vermont and Massachusetts utterly de- clined any negotiation upon the subject, according to the report of the evidence. I have so anticipated three points, the twenty-sixth, twenty- seventh, and twenty-eighth, in presenting the possibility of fail- ure and the offers of the Fitchburg line, and now pass to the twenty-ninth. 29. Dividends are essential to credit. I may have glanced at this point; but I will enlarge upon it. If twelve or thir- teen millions of dollars are to be raised, can a company 6 34 which is paying but one and a half per cent on the average, or even four per cent on two or three millions, go into the market and raise twelve millions at the current rates of interest ? My idea is, that the Fitchburg Road, and the other roads which may be associated with it, can carry on this enter- prise only by preserving their dividends. Without dividends, they are discredited. I can remember, in the history of the Fitchburg Railroad, the time when it felt called upon to lay a double track. It purchased the iron at forty dollars a ton, and laid down a second track in anticipation of the future, thereby saving two hundred thousand dollars on the cost of this track, which, very fortunately for the State, is down, ready for use, at half the cost of such a track to-day. But the conse- quence was a suspension of the dividends for two years ; and the credit of the road was seriously impaired. The stock had been as high as a hundred and thirty dollars per share : it fell to sixty-two ; and it was difficult to raise money except at extra interest, and this the Fitchburg Road never paid while I was connected with it. The Fitchburg line has felt the difficulties attending such a state of things, and does not want to get into it again. It would preserve its dividends as a basis for credit ; and, should it be associated with any other line in Massachu- setts, they must maintain their credit. Without dividends there is no credit; and, without credit, the company has no means to make improvements. You must have the dividends to secure the improvements. 30. The thirtieth point which I present is, that such docks as I have suggested are in progress, and nearly finished, and the results will be immediate. They are moving pari passu with the progress of the tunnel, and will be ready for the reception of the business of the tunnel. 31. The next point to which I advert is, that, by this mea- sure before you, the State permits the tunnel to be mort- gaged. It is proposed that the property of the Troy and 35 Greenfield Road shall come into the consolidation. It takes with it the tunnel. The property of the Troy and Boston and that of the Vermont and Massachusetts, are also absorbed. Their property, encumbered with debt, is to come into the con- solidation with the tunnel ; the property of the State, free from debt, is thus absorbed, and authority is given to the parties to raise money. If they are to raise money, they are to raise it on the credit of the tunnel, as well as on the credit of the other property. I so read and so understand the bill, — that the tun- nel comes in as part of the property, and the State takes its pay in stock. Now, gentlemen, I submit that the tunnel should not be directly or indirectly mortgaged. It is a trust for the whole State. If pledged, it may be grasped and perverted by specu- lators. It should not be placed in such a predicament ; and in behalf of the road that I represent, and in behalf of the whole State of Massachusetts (for I think I represent it in the ar- gument), I protest against pledging this great work of im- provement, which it has taken us so much time to secure. Mr. Allen. — Won’t you tell me what section of the bill allows the tunnel to be mortgaged? There is no section in the bill which authorizes a mortgage of the tunnel. Mr. Derby. — I assume it from the terms of the bill. Mr. Allen. — -Your assumption is not founded upon any thing which that bill contains. Mr. Derby. — I will ask you whether the associated compa- nies are not at liberty to incur debt and to issue bonds. Mr. Allen. — They are not at liberty to mortgage the tunnel. Mr. Derby. — Will you answer my question ? I have an- swered yours. Mr. Allen. — Do you not know that the Supreme Court ot Massachusetts have held that a railroad has not authority to mortgage its franchise ? Mr. Derby. — I do not say that it can make a formal mort- gage; but I say that it has a right to incur a debt, and, when it 36 incurs a debt, it mortgages its property to pay it. The creditors have a remedy against the property. I do not think express and positive power is given to mortgage the tunnel; but the bill virtually gives authority to mortgage it, by combining com- panies that are in debt, and giving the corporation authority to incur debts. When the question of making a State loan to the Western Railroad first came up, it was argued by the late Mr. Hallett ; and I could not reply to it except by admitting the fact, that, by granting a loan, the State was mortgaged. I say, that, under this bill, there would be a virtual pledge of the tunnel. It is made the basis of credit on which money is to be raised ; and, if that does not amount to a mortgage to the creditor, I don’t know what it is. Well, gentlemen, they say that a debt is not a mortgage. It calls for interest ; it may exclude the stockholder. The Fitch- burg Railroad Company do not wish to have their property put where needy companies can pledge it. They favor no such arrangement ; and they hesitate to intrust this property to the care of these parties who are asking power under this bill, to which I will presently advert. 35. I pass less material points, and now draw your attention, gentlemen, to the defects of the bill, or to some of its most glaring defects. The bill provides, as I understand it, that, until the new com- pany is organized and fully consolidated, there shall be chosen three directors on the part of the Vermont and Massachusetts Road, three directors on the part of the Troy and Boston Road, three directors on the part of the Fitchburg Road, and there may be four appointed by the State, if it goes into the consoli- dation ; and full power is given to these directors to expend money for improvements. They may lay down double tracks upon the whole line ; they may do whatever they please. These directors are omnipotent. There are six directors representing inferior interests; for 37 the Fitchburg property is seven millions, the Vermont and Mas- sachusetts property may be two millions, over and above its debt; and the property of the Troy and Boston is less than half a million over and above its debt. The two and a half millions have twice the power that is conferred upon the seven millions: they can vote it down. The Troy and Boston and the Vermont and Massachusetts Roads — one of them a foreign, and the other a partly foreign corporation — have the power to vote down the Fitchburg Road; and, if they could get one of the directors of the State to side with them, they would have a preponderance in power in the whole vote of the directors of this company, should it be joined by the State. Now, gentlemen, I submit to you with great confidence that this is entirely unjust, unfair, and unsafe for us and for the State. It should not be permitted. Why should the power be taken from the Fitchburg Road, and confided to these gentle- men ? What sin has the Fitchburg Road committed ? It began in extreme poverty. For one or two years, the subscription to the stock stood at four hundred and fifty thousand dollars; and there was a clause in the subscription that not a blow should be struck until six hundred thousand dollars was subscribed; and from month to month, as the directors met, as many stockhold- ers died or left as were added to the stock list. The enterprise seemed to be upon its last feet. I recollect very well meeting with the directors one evening in a gloomy room at Earle’s Coffee House, when Mr. Crocker rose from his seat and went to the mantle-piece, where two tallow candles were burning with a flickering light, and blew out one of them, suggesting that the road could afford but one candle in its condition at that time. It had no Boston stock list : Bostonians did not come to its aid. I think I was the only Bostonian in the di- rection ; and perhaps, if I had not held a farm in Middlesex Coun- ty, I might not have been there. I was there, I am happy to say, and did what I could to uphold the spirits of my associates. 38 But finally that prince of contractors, Belknap (let me speak of him with respect, for he is no more), came forward and sub- scribed the remaining one hundred and fifty thousand dollars for the stock; and the road went on. I went out to England with Mr. Crocker, and bought the iron for eighteen dollars and seventy-five cents per ton ; and, when it reached Boston, the du- ty was more than the cost of the iron. But we bought it cheap- er than any road in New England had ever bought its iron down to that period. The road grew up in poverty. It was made a surface line ; it followed the river bank; it was a cheap road ; there were no profits for the directors in that road, no sacrifices upon its bonds or stock. It gradually built up a business. The business was carefully estimated in advance. I signed, with Mr. Crocker, the first estimate of business, which was two hundred thousand dollars a year. I signed the first report after the road was finished ; and I think we reported an income of two hundred and one thousand dollars, within one per cent of the estimate of those who built it. Since then, gentlemen, the business has been gradually carried up to one million, three hundred and twenty-five thousand dollars, — the income of the past year, by thrift, economy, and caution. The Fitchburg, in- stead of watering its stock like the Troy and Boston, has put in from income two millions, perhaps three millions, of dollars in purchases and improvements, which have been consolidated into the road. It has thus made a basis for consolidation. Now, gentlemen, when a road has pursued such a course, attained the credit and the strength which the Fitchburg possesses, are you to punish it by yoking it with a weak helpmate at the other end of the line, and give the same power to a road out of the State, which has watered its stock, that you give to the Fitch- bur^ Railroad at home, — a road belonging to the country people of Massachusetts? Are you to take away the dividend from the widow and the orphan, who represent many of the original stock- holders, for the purpose of benefiting lines out of this State? 39 That is one of the questions which I think presents itself with great force to the committee I have the honor to address. I have but a few more suggestions to make. I have pointed out the principal objections to the bill. You will find other ob- vious objections; and I will not detain you by presenting my remaining points that will readily occur to you. Let me suggest that I want this enterprise to start in strength, and not in weak- ness. The terminal point of this line is not at the tunnel, nor at Oswego. I can see before me, in the future, this line consoli- dated farther on with a line along the shore of Lake Ontario, the contract for which, with the rails laid, is at the rate of twenty-one thousand five hundred dollars a mile, — a contract held by Mr. Phelps, wdio addressed you yesterday. It is a road that is to extend across Canada, in connection with the Great Western. I can see these roads consolidated, and forming hereafter one line to reach Chicago by the Michigan Central, — a Boston enterprise. I see them in the future combined into one. I can see them in the future, gentlemen, reaching the North-Pacific Road, or beyond it, and forming a line to the Pacific. Why should not we have a line to the Pacific? Why should the Pennsylvania Central Road be the only road, or one of the chief roads, to the Pacific? Why should Philadelphia and New York have their lines to the Pacific, and Boston not have her line also? Begin this in weakness, and you lose it; begin it in strength, and you secure it, and make Boston the terminal point on one side, and Puget Sound the terminal point on the other. Lay the foundation for great success. Go in strength, I say again, and not in weakness, for the commerce of the continent, in which Boston is destined largely to partici- pate. If you are true to yourselves, true to the State, and true to Boston, you accomplish what should be accomplished. We are nearer to Europe than New York. You are to take the laurels from New York, and transfer them to Boston. Now, gentlemen, I have brought my remarks to a close. I 40 began with thirty-nine articles, — as many as there are in the constitution of the Episcopal Church, to which I belong. I have made some thirty-nine points, most of which I have sub- mitted to you. They are my articles of faith : I have confi- dence in them. Let me close with one more suggestion. Your committee reminds me of a committee I had the honor to ad- dress for the tunnel loan at the commencement of the enterprise. At that time a highly respected gentleman from Springfield, Mr. George Bliss, for many years the president of the Western Railroad, was speaker of the house; and his intimate friend, Judge Warren, also an intimate friend of Mr. Swift, of the Bos- ton and Albany line, was president of the Senate. They gave us the committee which reported State loan for the tunnel ; and, when I addressed them, I took the liberty to say that I was led to believe that some of them did not favor the enterprise I ad- vocated. “But,” said I, “it gives me great pleasure, gentlemen, to address you. I do not wish to address those who go for this enterprise : I wish to address those who are opposed to it.” Now, I see that the State, in its wisdom, — and I have no douht it has acted very wisely, — has last evening selected the chair- man of this committee to represent its interests as State direc- tor in the Boston and Albany Railroad. I am satisfied they have made a very good selection. I am very happy that they have made it ; but, when I find a gentleman so prominent in the Boston and Albany Road at the head of this committee, I ven- ture to suggest my hope and belief that all minor interests will subside when the great interests of Massachusetts are in ques- tion. I shall look to that gentleman, if our arguments are sound, as I believe they are, to favor in his report the consoli- dation of stronger lines than those now presented to this com- mittee. Mr. Bates. — Do you put the Boston and Albany Railroad company into the consolidation ? Mr. Derby. — No, sir. I think that is unnecessary. They 41 are now doing very well as they are. They are entitled to very great credit for what they have done since they were consoli- dated. Judge Thomas. — If it is not improper, I should like to ask you one question, — you have made thirty-three points here, — and that is, What does the Fitchburg propose to do ? Is your measure confined to the consolidation of the Fitchburg Rail- road and the Boston and Lowell Road, or does it comprehend and include the Fitchburg, the Vermont and Massachusetts, the Troy and Greenfield, and the tunnel, to the New- York line? Mr. Derby. — I propose hot to open the case, which, by the order of the committee, will be presented on Tuesday. .