bjork@navajo.UUCP (08/11/86)
Plundering of a Railroad The spirit of Jay Gould lives on, to the detriment of the railroads. I am referring to the kind of manipulation that strips a railroad of its assets and leaves it unable to maintain its physical plant. The current problems of the Southern Pacific and to a lesser extent the Santa Fe are an example of this form of pillage. The original pattern was set by Gould in the late 1800's. His approach was quite direct since he was unencumbered by any of the federal regulations that exist today regarding sales of stocks. Basically the clearest example of his manipulation was to purchase at bankrupcy prices the stock of railroads that to some extent could offer a threat to the Union Pacific (the railroad to be plundered). The Kansas Pacific and Denver Pacific were bought at low prices and then sold off to the Union Pacific in a scam of this sort. Chapter 11 of R.E. Reigel's 'The Story of the Western Railroads' has the details of this transaction. Another example of railroad plundering is the failure of the Penn Central. Partly due to poor financial decisions and the changing nature of the economy and partly due to the over-regulation of the federal government, the Penn Central conglomerate went bankrupt. The unprofitable railroads were dumped and the reorganised holding company went on to become profitable and is still around today. Thats right, strip the railroad of its assets and dump the corpse by the road... A rational look at this disaster is done by S. Salsbury in his 'No Way to Run a Railroad'. The holding company for the Southern Pacific and the Santa Fe has so far followed the footsteps of the Penn Central merger. The holding company known as the Santa Fe Southern Pacific Corp. has stripped both railroads of their assets built up over the years in part derived from the original land grants from the 1800's. The sale of Sprint for $750 million and the sale of Ticor for $250 million left the pre merger Southern Pacific Transportation Corp. with a Billion (yes, thats right, $1,000,000,000) dollars cash. Rather a juicy plumb, no? Seems obvious that the looters want to make off with their profits before they have to put any of it back into the railroad... I find it outrageous that the federal government allows private interests to get away with such outright plunder of properties that serve the public interest as common carriers. Unfortunately no clear policy exisits to guide the ICC or other branches of the government in decisions that affect the course of the railroads. As is shown by the Penn Central scenario, we can expect the Southern Pacific and the Santa Fe to be allowed to deteriorate past any reasonable expectation of survival on their own. Comments from Libertarians, political science majors, rail freaks, Ayn Rand fans, and others are welcome. Somehow it feel like I've overlooked something... --Steve Bjork BJORK@SCORE.STANFORD.EDU ...decwrl!glacier!navajo!bjork