l Pacific Railroad, including those issued to the
Western Pacific Railroad Company, will have fallen due and been paid or
must on that day be paid by the Government. Without any reference to the
application of the sinking fund now in the Treasury, this will create
such a default on the part of these companies to the Government as will
give it the right to at once institute proceedings to foreclose its
mortgage lien. In addition to this indebtedness, which will be due
January 1, 1897, there will mature between that date and January 1,
1899, the remaining principal of such subsidy bonds, which must also be
met by the Government. These amount to more than $20,000,000 on account
of the Union Pacific lines and exceed $21,000,000 on account of the
Central Pacific lines.

The situation of these roads and the condition of their indebtedness to
the Government' have been fully set forth in the reports of various
committees to the present and prior Congresses, and as early as 1887
they were thoroughly examined by a special commission appointed pursuant
to an act of Congress. The considerations requiring an adjustment of the
Government's relations to the companies have been clearly presented and
the conclusion reached with practical uniformity that if these relations
are not terminated they should be revised upon a basis securing their
safe continuance.

Under section 4 of the act of Congress passed March 3, 1887, the
President is charged with the duty, in the event that any mortgage or
other incumbrance paramount to the interest of the United States in the
property of the Pacific railroads should exist and be lawfully liable
to be enforced, to direct the action of the Departments of Treasury and
of Justice in the protection of the interest of the United States by
redemption or through judicial proceedings, including foreclosures of
the Government liens.

In view of the fact that the Congress has for a number of years almost
constantly had under consideration various plans for dealing with the
conditions existing between these roads and the Government, I have thus
far felt justified in withholding action under the statute above
mentioned.

In the case of the Union Pacific Company, however, the situation
has become especially and immediately urgent. Proceedings have been
instituted to foreclose a first mortgage upon those aided parts of the
main lines upon which the Government holds a second and subordinate
mortgage lien. In co