From “The New York Times”
Feb. 19, 1893
Part of the report of the Special Investigating Committee appointed by the stockholders of the Northern Pacific Railroad as to the condition of the NP.
Regarding the Seattle, Lake Shore and Eastern Railroad:
“The acquisition of this property for the price paid and under the conditions existing at the time seems to have been an act of stupendous and incredible folly. It was as evident in 1890 as now that the Eastern Division of fifty miles must be useless to the Northern Pacific, as it practically paralleled one of its own lines, duplicated terminal facilities at Spokane which it did not need, which were inferior to those it already possessed, and which it now rents to a rival road at an unremunerative rate. If it was supposed that strategical advantages would be gained, that supposition has proved to be contrary to fact, as the Great Northern has carried out its plans of reaching Spokane and Seattle undeterred by this action of the Northern Pacific. The Seattle, Lake Shore and Eastern was started a half dozen years ago as an adjunct to a land speculation. The construction company which was building it became embarrassed and went into the control of a syndicate of wealthy money lenders, who took the bonds of the road at 80 per cent, with a bonus of 50 per cent of stock which cost them nothing. Operated by itself, there was no chance, as the result shows, that the road could earn the interest on its bonds for years to come, and its stock was intrinsically worthless. Nevertheless, the Northern Pacific Company paid $45 a share for this stock, and guaranteed the interest of the bonds and their payments at par. The only part of the Seattle, Lake Shore and Eastern which promises to have and productive vaine for some time to come is that running north from Seattle to Sumas City, 125 miles, which the committee is advised could have been built for but little more than the stock had cost the company up to the present time. The line to Salal Prairie, thirty-eight miles, had very heavy grades, is most expensive to maintain, involves large operating expenses, and thus far has but little business. In brief, the Northern Pacific assumed directly and indirectly a burden of about $7,500,000, when it could have acquired substantially the same advantages by spending less than $2,500,000. With such financiering it is not strange that its own preferred stock sells for the same price that it pays for a bankrupt concern.”