Note 537 — Chapter VII · UNION PACIFIC

Testimony of Mr. Harriman before the Interstate Commerce Commission. It is true that the Northern Securities stock held by the Union Pacific system had been pledged as security for an equal amount of Oregon Short Line 4 per cent and Participating 4s, and that when these bonds were refunded there was pledged for the new issue whatever the Union Pacific interests should receive in exchange for their Northern Securities holdings, and any other shares or bonds at not exceeding 80 per cent of their appraised value. But the purchase of the Southern Pacific and of the Northern Pacific stocks had been previously financed by an issue of convertible collateral bonds for which other collateral had been pledged. From 1904 on, the rising price of Union Pacific stock made conversion desirable and rapidly released the securities back of the original issue. These released securities, with $18,000,000 Southern Pacific preferred stock paid to the Union Pacific in 1904 (with $2,460,960 cash), proved a sufficient pledge for the Oregon Short Line refunding bonds, and the Great Northern and Northern Pacific stock shares were therefore free for other purposes.