Briefly sketched, the history of this indebtedness was as follows: The Acts of 1862 and 1864 had provided for the issue of government bonds for stated amounts per mile on the subsidized portions of the system in aid of construction, which bonds were to mature thirty years from date of issue, and to have a lien on the property covered second only to the first mortgage of the company. The rate of interest was 6 per cent, payable to the bondholders by the Government; and in 1875 the Supreme Court decided that the company was not obliged to repay to the Government the accruing interest before the maturity of the bonds.[493] This ruling was regarded as a victory for the company, but meant the steady piling up of arrears of interest, lessened only by the retention by the Government of one-half the amounts due for government transportation, and, under the Thurman Act, of such additional sum not in excess of $850,000 as, added to the whole compensation for government services and to the 5 per cent of net earnings set aside under the Act of 1862, should make the annual contribution equal to 25 per cent of the net earnings of the company, unless the remaining 75 per cent should be insufficient to pay the interest on the first mortgage bonds; in which case the Secretary of the Treasury was authorized to remit a portion of the 25 per cent of net earnings required.[494] The Thurman Act did not fulfil expectations. The Supreme Court in 1891 held that expenditures for new construction and new equipment could not be deducted from gross earnings in ascertaining net earnings,[495] but the road met hard times and the maximum limit of the contributions to the sinking fund was not attained, and in investing the fund in government bonds the Secretary of the Treasury was compelled to pay high premiums, thus reducing the net interest; so that from the beginning to 1892 the question of indebtedness to the Government occasioned constant dispute and litigation, introduced uncertainty into the affairs of the railroad, and caused hard feelings between it and the Government. In 1892 the necessity for some settlement was near at hand. The principal of the government debt matured as follows: November 1, 1895 $640,000 January 1, 1896 1,440,000 February 1, 1896 4,320,000 January 1, 1897 6,640,000 January 1, 1898 17,342,512 January 1, 1899 3,157,000 ----------- $33,539,512