The New York and Erie Railroad
In 1839, the people of the southern counties feared that the company would never succeed in accomplishing the enterprise, and the company itself seemed inclined to relinquish the undertaking. The State was importaned to assume the work. A bill
that purpose passed the Assembly, but was defeated in the Senate. It was deemed unwise for the State to embark in such enterprises.
In 1840, the effort to make the road a State-work was renewed unsuccessfully. The State, however, agreed to loan the company $100,000 for every $100,000 previously expended in the construction of the road, and for every $50,000 thereafter paid from the funds of the incorporation, the Comptroller was directed to issue stock to the amount of $100,000. No more than $3,000,000 were to be thus contributed.
This law was considered highly favorable, and enabled the directors to commence work with apparent vigor. The people of the southern counties who had importuned the Legislature for benefactions to the company, now hoped to witness a speedy consummation of the long-sought improvement; but their hopes were soon dashed to the ground. Everything was mismanaged, The State-stocks were forced upon the market at unfavorable times, and sold for less than their nominal value. The proceeds were wasted in speculation, and in testing wild theories. Among the latter was a crotchety idea that railroads could be made to span valleys and other depressions of the earth's surface, by upholding the track with posts and spiles. Instead of experimenting on a limited scale and at a small cost, the plan was tried on a magnificent basis and at enormous expense, and resulted in a corresponding failure. Three millions received from the State, and all that was paid by stockholders was gone, and but fifty miles of the road in operation, while the company was bankrupt. The State had more than paid for all the work alone, and had a prior lien upon it for $3,000,000. The franchise of the company and all that had been accomplished by and through it were not worth that amount, and the difficulty of obtaining further subscriptions, while the road was thus pledged to the State for more than its value, was insurmountable.* The company affected not to perceive this difficulty; but gave another and unfounded reason to account for their troubles. They pretended to discover in 1841 that the public had no confidence in their work on account of the obstacles to be overcome in Sullivan and other counties adjacent to the Delaware and Susquehanna!
*The most shameless frauds were committed. The old stockholders were called upon to pay no more installments. Each contractor was required to take pay in stock to the amount of one-third of his contract, and the company agreed to pay him nearly one-third more than his work was worth. When he had gone sufficiently far with his contract, certificates of stock were issued to him, and affidavits made that the work had been paid for from moneys collected of stockholders. Armed with these affidavits, the managers demanded of the State double the nominal expenditore made. In this way the State paid for nearly all that was done.