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Mr. Burr. One moment, Mr. President; will you wait just a second? You mean what August Belmont paid for the bond that was given by McDonald?

The Witness. Well, he- Mr. Belmont put up a million dollars in cash and $5,000,000 surety bond, and a million dollar continuing bond, and he obligated himself and the company for carrying out all of the terms of the contract with the City.

By Mr. Burr:

Q. Well, for that he had the shares which were allotted him, or the interest which he procured in the company? A. Well, he paid for his interest, the same as the others did.

Q. That is, we will assume that he did. A. He did.

Q. And for the $1,500,000 which was paid him he procured a franchise of this company in City Island and Pelham Park there, at an expense of $25,000 or $30,000? A. No, sir, the expense was some two or three hundred thousand dollars, I don't remember just exactly what it was, and that included of course his forming the Construction Company and the operating company and getting the subscribers, which was not an easy thing at that time. The capitalists were not failing over themselves to enter that venture; in fact, he had considerable difficulty getting anybody to put money into it, and he was voted that sum for his services.

Q. Well, I suppose. Mr. Fisher, that this voting of the moneys to Mr. Belmont for services and for the acquisition of this franchise duly appears in the minute books of this company? A. Yes, sir.

Q. And the reasons are given there, I suppose, in detail? A. Are all set out, yes, sir.

By Mr. Quackenbush :

Q. Have you got them here, Mr. Fisher? A. I have not got the minute books here, no, sir.

By Mr. Bruckner:

Q. Mr. Fisher, is that Pelham Road the old Monorail?
Mr. Quackenbush.—Yes.

A. It is, yes, sir.

Q. And they paid a million and a half for that? million and a half for that, and services to get it.

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Q. What did they sell it for? A. I don't remember now. Q. The Union Railway, I believe, got it? A. Yes, sir.

Q. The Third Avenue system. That road is now abandoned, is it not? A. I think so, yes, sir.

Q. Entirely abandoned? A. I think so, yes, sir.

Mr. Burr.- It was actually sold, Mr. President, for $27,000. Mr. Bruckner. But I mean, what good is it today?

Mr. Riegelmann.-There were two roads there, were there not?

The Witness.-Yes

Mr. Bruckner.- Just a moment, Mr. President.

Q. The Union Railway did not operate along the same line as the old Monorail; they changed the course and went up City Island Avenue to Belden Point? A. I understood they followed the old line.

Mr. Bruckner.- No, they did not.

Mr. Quackenbush.- No you are right, Mr. President.

Q. In other words, what they bought they never used, and it never had any value, that million and a half? A. It was never used, because it was found that it was not necessary to use it.

Mr. Bruckner. It had no value.

Mr. Quackenbush.-Now Mr. President

The Chairman That was discovered after the million and a half was paid.

Mr. Quackenbush.-The million and a half was paid, as the Secretary says, for the acquisition of those two lines and for the services, commonly called promoting services if you please, of August Belmont. The reason for the acquisition of it was that at that time the contest against the subways of the owners then

of the service lines made them think that they needed a railroad franchise to use with the subways.

Mr. Bruckner. I understand.

Mr. Quackenbush.-- Subsequently they were able to find another way to do it, and then of course they did not need it, and of course, as you say, it was sold to the Third Avenue System.

Mr. Bruckner.-Wasn't there a franchise on the green car lines in the Bronx at that time?

Mr. Quackenbush.--That was another transaction. The New York City Interborough Company was an entirely different thing; it was organized as a feeder.

Mr. Bruckner.—Why did they not use that franchise, Mr. Quackenbush?

Mr. Quackenbush.--That was organized later, I say.

Mr. Bruckner.- How much later, do you know, Mr. Quackenbush?

The Witness. It was several years later.

Mr. Quackenbush. It has no connection with it, Mr. President.

Mr. Bruckner.--What I mean is, could they not use that franchise instead of the one they bought?

Mr. Bruckner.- No. I am entirely familiar with this matter, and I may add for your information and that of the members of the Board that this question of the million and a half of stock paid to Belmont for these lines and for his services was the subject of litigation brought by minority stockholders, tried out in Brooklyn, resulting in a judgment sustaining the validity of the payment to Mr. Belmont, and affirmed all the way up; and if you are interested. anybody, to get further facts, I will produce that record.

Mr. Bruckner.-You don't want to put over more than one of those in a lifetime to be a rich man.

Mr. Riegelmann.--A million and a half isn't much, after listening to these figures.

Mr. Quackenbush.-You are quite right, Mr. Riegelmann; a million and a half is much less than the ordinary promotion costs. of an enterprise involving $77,000,000. You will find all through the books everywhere of instructors in political economy, writers on political economy like Dr. Weber, in rate cases—

Mr. Riegelmann.-And financiers who let themselves in.

Mr. Quackenbush (continuing). In rate cases, that you cannot put up a factory, you cannot put up a hotel, apartment house, you cannot build a railroad without paying somebody a promotion fee for financing. Mr. Belmont got a million and half.

Mr. LaGuardia.- But, Mr. Quackenbush, I don't believe your comparison is a correct one. Promotion of a venture where the return is doubtful is one thing, and promotion of a Traction Company with a guaranteed contract, as you had here, is another thing.

Mr. Quackenbush.-Oh but, Mr. President, just think; you are thinking now of the guarantee of 1913, after it had earned six millions a year; but put in your mind's eye 1900 and the years before that.

Mr. LaGuardia.-- Yes.

Mr. Quackenbush.

When the City of New York was unable

to find anybody with courage

Mr. LaGuardia.— True.

Mr. Quackenbush (continuing).- To make a contract, except August Belmont, who ought to have a monument, in my judgment, built to him out here in the City Hall Park.

Mr. LaGuardia. Yes.

Mr. Riegelmann.-For getting the million and a half.

Mr. Quackenbush.-He had the courage, when the Metropolitan operators, Messrs. William C. Whitney, Thomas F. Ryan, Dolan, Elkins and the others didn't dare to put a dollar into the

building of a subway, August Belmont and his associates had the courage and the vision to put these millions of dollars at stake, and it turned out, against the opinion of everybody, to be a profitable venture. Now when you consider that for a long time—as you will as you get through the history of this thing, because you will notice I am going right to the foundation, and I propose, as the Corporation Counsel said, once and for all to get the real facts-you will notice that for years they were quivering on the verge of insolvency all the time. They expected to make a large profit out of construction. They made no profit. We got nothing

Mr. LaGuardia.—Yes, but Mr. Quackenbush, there was a contract with the City of New York, drawn as it was, giving them a monopoly on the subways. The subway was not a new venture; the Budapest subway had been built, the Paris subway had been partly constructed, had it not, and some of the London subways had been constructed. Am I correct in that? So that this promoting service, after all, cannot be compared to going out and promoting a new enterprise at all; at least, that argument makes no impression on my mind, Mr. Quackenbush.

Mr. Quackenbush.- Well, I will not pursue that subject any further.

The Chairman.-Now the next thing in order is a recess for lunch, I think.

Mr. Quackenbush.- I think that is right, Mr. Mayor.

The Chairman.- How many witnesses will you have after lunch?

Mr. Burr.-Well, Mr. Quackenbush has Mr. Fisher, and still we will have Brother Gaynor with us for a little while, because there are many of these facts to be gone through.

The Chairman.— All right.

Mr. Riegelmann.-Are you ready to go on after lunch?
Mr. Burr.-I will be.

The Chairman.- We will take a recess until 2:15.

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