Chapter XVIII: Conclusion (3)

Of the five sources mentioned, the files of contemporary papers are the most useful. The _Commercial and Financial Chronicle_, the _Railroad Gazette_, the _Railway Age_, the _Railway and Engineering Review_, the _Railway Times_ of London, the New York _Tribune_, the New York _Journal of Commerce_, the _Wall Street Journal_, and many others are generally accurate and trustworthy, though it should be noted as a limitation that they seldom have inside information, and that their comment is not always independent. These papers are supplemented by pamphlets and circulars. Many reorganization plans are published in pamphlet form. Opposition to them is not infrequently thrown into the same shape. Reports of experts are printed in pamphlets. In general, the live literature of reorganization must be put out on short notice, and so is issued in this informal way. The official statistics of railroads are to be found in the reports of the railroad companies themselves, made to stockholders or to supervisory government bodies. These statistics, like the news items in the financial and railroad papers, must be used with care. They are sometimes incomplete, and they are sometimes purposely misleading. Nevertheless, they are useful, and serious inaccuracies in any of them are usually exposed within a few years after their original publication. The material to be found in legislative records is not abundant. Railroads almost invariably, however, appear before the courts in the course of their reorganizations, and in the decisions of these tribunals some facts of interest may be found. The records of the receivership of the Union Pacific have been published in fourteen volumes. The decision of the United States Supreme Court in Pearsall _vs._ Great Northern[729] blocked the first of the reorganization plans proposed for the Northern Pacific in 1895. An earlier decision[730] enabled the Union Pacific to postpone the payment of interest upon the public debt until the principal should have fallen due. The Erie has been at times almost continuously before the courts, and the same is true of the Reading during its reorganizations, of the Northern Pacific, and of other roads. The student is most fortunate when he can uncover testimony before government committees, of men who have taken part in reorganization proceedings, or who are personally acquainted with developments which have led up to railroad failures. Mr. Blanchard, before the Hepburn Committee,[731] and Mr. Fink, before the Hepburn and the Cullom Committees,[732] helped their hearers to understand the policy which finally resulted in the failure of the Baltimore & Ohio. The report of the Poland Committee disclosed the scandal of the Crédit Mobilier.[733] The testimony of Gould, Adams, Ames, Holmes, and others before the United States Pacific Railroad Commission of 1887–88[734] made clear the iniquity of the Union Pacific reorganization of 1880. The statements of Mr. Pierce before the Senate Committee on Pacific Railroads in 1896[735] explained the attitude of the Union Pacific towards the repayment of that company’s debt to the Government. The testimony of Messrs. McLeod, Rice, Harris, and others before the Industrial Commission of 1900 threw much light upon the Reading bankruptcy of 1893. The arguments of counsel in the matter of export differentials, reprinted in the fifth volume of the Elkins Committee report,[736] gave valuable information on the subject of trunk-line competition. Many of the witnesses before these committees are frank in criticism of the railroads with which they have been connected. Others are forced to admissions by the keen questioning to which they are exposed. The only similar material to be found elsewhere lies in memoirs, such as those of Henry Villard,[737] or in biographies like Oberholtzer’s Life of Jay Cooke[738] and Pearson’s An American Railroad Builder[739] which make use of private papers of men prominent in railroad finance. Perhaps White’s Book of Daniel Drew,[740] Depew’s Retrospect of Twenty-Five Years,[741] and the Life of Isaac Ingalls Stevens by his son,[742] should be included in this class.

This enumeration, while in no way exhaustive, indicates the principal sources from which material may be obtained. Secondary works do not exist which treat solely of railroad reorganization. There is an article by E. S. Meade in the _Annals_ of the American Academy,[743] articles by Simon Sterne in the _Forum_,[744] and an article by A. Lansburgh in _Die Bank_,[745] but no books of which the author is aware. Mention may be made of an intelligent discussion of an industrial reorganization by A. S. Dewing in the _Quarterly Journal of Economics_.[746] _Poor’s Manual_ for 1900 contains the most convenient set of general statistics. On railroad receiverships, besides legal works, there is a monograph by H. H. Swain,[747] which has a brief bibliography, and articles in the _Forum_, _North American Review_, and other periodicals.

On the history of the great American railroad systems the literature is also quite inadequate. The Union Pacific has been written up frequently, because of its relations with the United States Government. Works by Davis,[748] von der Leyen,[749] Bromley,[750] Dillon,[751] Crawford,[752] Hazard,[753] and White[754] treat various phases of the company’s development up to its final reorganization, an article by Meyer[755] describes the settlements between the Pacific railroads and the Government, and another article by Mitchell in the _Quarterly Journal of Economics_[756] deals with Union Pacific finance since that time. There may also be mentioned an account by Bailey,[757] which covers the whole of the road’s history, but in a superficial way, and a vicious attack by Robinson upon all the government-aided lines.[758] The student of the Erie has at his disposal the elaborate narrative by E. H. Mott,[759] the chapters by Charles Francis Adams, Jr.,[760] and the sketch by Crouch.[761] Milton Reizenstein has dealt with the progress of the Baltimore and Ohio up to 1853,[762] and for this road there is material to be found in Smith’s Book of the Great Railway Celebrations of 1857,[763] and in a compilation of the Laws, Ordinances, and Documents Relating to the Baltimore and Ohio Railroad, published in 1840.[764] For the Northern Pacific the history by Smalley covers in popular style the period from 1864 to 1883,[765] the careful History of the Northern Securities Case, by B. H. Meyer, treats of an interesting later development,[766] chapters in von der Leyen’s book contain acute and independent discussions of Northern Pacific as well as of Union Pacific finance,[767] and there is a fifteen-page pamphlet by Chapman entitled The Northern Pacific Railroad.[768] Schlagintweit in 1884 described his travels on the Santa Fe and Southern Pacific.[769] Wilson has written two volumes upon the Pennsylvania Railroad,[770] while Worthington[771] and Bishop[772] have described the internal improvements undertaken by the state of Pennsylvania. Ackerman is the author of a Historical Sketch of the Illinois Central Railroad,[773] and Hollander[774] and Ferguson[775] of works on the Cincinnati Southern. Potts[776] and Briscoe[777] have written on railroads in Texas. The Chicago & Northwestern has published a volume called Yesterday and To-day,[778] which contains some information. Hinsdale has worked up the History of the Long Island Railroad.[779] Bishop has sketched the history of the St. Paul & Sioux City Railroad.[780] Bliss is the author of a Historical Memoir of the Western Railroad.[781] Cary in 1893 described the Organization and History of the Chicago, Milwaukee & St. Paul Railroad Company.[782] Phillips discusses in excellent fashion the early history of a number of Southern carriers.[783] The autobiography of George Francis Train[784] and Smyth’s biography of Henry Bradley Plant[785] are serviceable. Works like those of Van Oss,[786] Snyder,[787] Carter,[788] and Spearman,[789] and brief descriptions which have appeared in the columns of the _Railway World_ and in _Moody’s Magazine_, treat of a number of railroads, but make no attempt at a scholarly examination of any one. Some general works like Ringwalt’s Development of Transportation Systems,[790] Adams’ Railroads: Their Origin and Problems,[791] Hadley’s Railroad Transportation,[792] Kupka’s Die Verkehrsmittel in den Vereinigten Staaten von Nordamerika,[793] Singer’s Die Amerikanischen Bahnen,[794] Myers’ History of the Great American Fortunes,[795] Bancroft’s History of the Pacific States,[796] and Chronicles of the Builders,[797] Davidson and Stuvé’s Complete History of Illinois,[798] Hollander’s Financial History of Baltimore,[799] Sanborn’s Congressional Grants of Land in Aid of Railways,[800] Haney’s Congressional History of Railways,[801] and Million’s State Aid to Railways in Missouri,[802] contain incidental information about individual railroads.

These books are of service. Their number is, however, small and their scope limited. It is surprising that a field so rich as that of the history of American railroad systems should have attracted so little attention from competent students. It is not too much to say that the history of the Erie by Mott is the only comprehensive work of the kind which our literature possesses, and that is already thirteen years old.

FOOTNOTES

[1] Milton Reizenstein, The Economic History of the Baltimore & Ohio Railroad, Johns Hopkins University Studies, July-August, 1897.

[2] Reizenstein estimates the original cost of the first 379 miles to have been $37,612 per mile, and, adding the cost of reconstruction and extension to 1853, he gets a figure of $41,237 per mile. Vide infra, p. 75.

[3] 6th Annual Report, 1832, p. 4.

[4] 35th Annual Report, 1861.

[5] Testimony of Mr. Blanchard, Hepburn Committee Report, p. 3171. See also Chron. 20:547, 1875.

[6] The Baltimore & Ohio had no line to New York. The Pennsylvania had had one since 1873, and over it Mr. Garrett was forced to send all his New York business. Disputes arose over the proper pro-rating of charges. President Garrett alleged that the terminal charge of four cents per 100 pounds which the Pennsylvania Company imposed on freight coming to or going from New York was exorbitant, and that he was paying for 100 miles of transportation when the real distance was only 90. President Scott replied that the rates for terminal services in New York were not sufficient to cover the cost of doing the business, and that the Pennsylvania’s New York and Philadelphia line was open to the Baltimore & Ohio on the same terms as to all others. R. R. Gaz. 7:71–2, 1875.

[7] R. R. Gaz. 6:8, 1874. The outcome was an agreement whereby the Baltimore & Ohio restored rates and fares, and the Pennsylvania agreed to haul two of the former’s trains daily each way between West Philadelphia and Jersey City, to sell through tickets West over the Baltimore & Ohio, and to give that road all necessary facilities for the handling of through freight.

[8] Sugar, coffee, salt, etc.

[9] The traffic between Cumberland and Baltimore was mostly coal. In an interview the last of May or first of June, 1875, President Garrett said that as soon as the right was conceded to his road to enter New York over the Pennsylvania Railroad as he had been doing for thirty years, and to make such rates from Baltimore and Chicago as he chose, he was ready for peace and not sooner.... The Saratoga combination, which had been gotten up to ruin the Baltimore & Ohio Railroad, had only served to establish the road and give it a standing in the West.... It had been and was now his firm object to maintain the freight rate on fourth class, the principal freight shipped from the West, at 35 cents per 100. This was a reasonable rate and gave his company a fair profit. The other lines had to submit to this rate or there could be no peace. R. R. Gaz. 7:237, 1875.

[10] R. R. Gaz. 7:261, 1875; Ibid. 7:270, 1875; Ibid. 7:289, 1875; Chron. 20:593, 1875. The compact was to last for ten years, the companies to agree upon and to maintain moderate rates between all competing points. Each board of directors was to appoint a special committee to which was to be referred all differences which might arise. The Pennsylvania opened its lines to the Baltimore & Ohio between Philadelphia and New York on the same terms that it gave other connecting roads at Philadelphia.

[11] See Interstate Commerce Commission, Railways in the United States in 1902, part 2, entitled, “A Forty-year Review of Changes in Freight Tariff,” p. 79.

[12] For an account of the differentials at different times see the argument of counsel and the opinion of the Interstate Commerce Commission, “In the Matter of Differential Rates to and from North Atlantic Ports,” April 27, 1905, in Elkins Committee Report, vol. 5, Appendix E. See also 7 I. C. C. Rep. 612.

[13] Albert Fink, Report on Adjustment of Railway Rates; also Testimony of Mr. Blanchard, Hepburn Committee Report, pp. 3171 ff.

[14] “Additional Arguments on the Division of [Dead] Freight from Cincinnati of the Atlantic & Great Western,” etc., N. Y. 1879, p. 5. Speaking from the standpoint of an impartial observer, Mr. Fink declared that $1,840,494 had been lost between December 19, 1878, and May 1, 1879, through the failure of the Michigan Central, Lake Shore, Pennsylvania, and Baltimore & Ohio and their connections to observe their published tariffs. Chron. 28:578, 1879.

[15] By agreement of March 11, 1881, the chairman of the Joint Executive Committee, Mr. Fink, was given authority to proclaim a general reduction in published rates when it should be shown that any pool line had been accepting traffic at less than the regular rate. This authority he exercised in April. Rates were restored almost immediately by special action of the Joint Executive Committee, only to be reduced again in June for similar reasons.

[16] The actual outbreak of the war was due to the conviction of the New York Central that traffic was being diverted to other roads by secret departures from the published tariff. R. R. Gaz. 13:347, 1881.

[17] Hepburn Committee Report, vol. 3, p. 558.

[18] Cullom Committee Report, vol. 2, p. 98.

[19] In January the Pennsylvania announced that it would take provisions from Chicago to New York for ten cents per hundred pounds. R. R. Gaz. 14:28, 1882.

[20] See Albert Fink, Report upon the Adjustment of Railroad Transportation Rates to the Seaboard, 1882; also, Letter to a New York Merchant, by the same, Hepburn Committee Report, vol. 2, Exhibits, pp. 106–119.

[21] For agreement see Chron. 34:116, 1882. The Commissioners’ functions were purely advisory. They reported in July that “no evidence has been offered before us that the existing differentials are unjust, or that they operate to the prejudice of either of the Atlantic seaboard cities.” Senate Committee on Interstate Commerce Report (Elkins Committee), 1905, vol. 2, pp. 1243 ff.

[22] The question was passed upon by C. F. Adams as arbitrator in November, 1882 (Chron. 35:603, 1882), and by the Trunk-Line Board of Arbitration in January, 1884 (Chron. 38:31, 1884).

[23] The attempt of the Pennsylvania to cut off the New York connection of the Baltimore & Ohio caused especial bitterness between those roads. See Chron. 39:420, 1884.

[24] Chron. 41:393, 1885.

[25] Cullom Committee Report, vol. 1, Appendix, pp. 237, and 240 ff.

[26] Chron. 45:692, 1887.

[27] The amount of issue was £2,400,000 ($11,678,400) at 4½ per cent, maturing April 1, 1933, and placed through Brown, Shipley & Co. of London. Chron. 36:426, 1883.

[28] Chron. 40:453, 1885.

[29] Chron. 41:555, 1885.

[30] Chron. 43:190, 1886.

[31] The Staten Island Rapid Transit possessed an extensive water front on Staten Island, besides franchises for two ferries from Staten Island to the Battery, New York City. Some trouble was experienced in securing permission to bridge the Kill von Kull between Staten Island and the New Jersey mainland. Congress passed an act permitting construction, New Jersey protested, and the courts upheld the authority of Congress. Stockton _v._ Baltimore & New York Railroad Co., 32 Fed. Rep. 9.

[32] R. R. Gaz. 19:170, 1887; Ibid. 19:490, 1887. For an account of the Richmond & West Point Terminal Railway & Warehouse Company see the chapter on the Southern Railway.

[33] R. R. Gaz. 18:49, 1886. Interview with Mr. Albert Fink. A passenger rate war between the Pennsylvania and the Baltimore & Ohio took place early in 1886, and resulted in the indirect cutting by the former of the pool rate which it had agreed to maintain. Chron. 42:73, 1886.

[34] From $34,713,696 in 1884 to $56,868,201 in 1887.

[35] Such as connecting lines, iron bridges over the Ohio River, elevators, wharves, terminal facilities, etc.

[36] The lowest average price of the common stock before announcement of the measures taken for relief was 160, from which point the quotations rapidly dropped to 125, and on January 5, 1889, to 85.

[37] Chron. 45:304, 1887; Ibid. 45:824, 1887.

[38] About $5,000,000 of the floating debt in March, 1888, consisted of advances by the syndicate, for which they held 50,000 shares of Western Union Telegraph Company stock, and 15,000 shares of United States Express Company stock, which at current prices about covered their loan. Statement of President Spencer, Chron. 46:344, 1888.

[39] Ry. Age, 12:640, 1887.

[40] “If it [the stock] is sold,” said a statement in the New York _Tribune_, purporting to represent the views of Senator Gorman, a large stockholder, “it will place the control of the road practically in the hands of the syndicate.... It is clearly preferable to keep the control of the stock here [Baltimore], as the road is a city and state institution of the first importance to our business interests.” Ry. Age, 13:44, 1888. Another objection was that an issue of additional preferred stock would postpone indefinitely dividends upon the common.

[41] Mr. Spencer had succeeded Robert Garrett in December, 1887.

[42] Chron. 46:319, 1888. In connection with this proposition President Spencer made the following statement: Of the $11,148,007 floating debt, December, 1887, $7,769,314 consisted of loans and bills payable. This is now reduced to $6,446,173. There will probably be added to this $1,400,000 for equipment, already either under contract or to be constructed in the company’s shops. In addition there should be, in the near future, not less than $2,000,000 additional put into this property for the purpose of improvement. The total requirements are thus $10,000,000. Of this $5,000,000 will be disposed of by assets in the hands of the syndicate as collateral, or in the hands of the company. Of the remaining $5,000,000, $1,500,000 is floating debt. This will be more than provided for by the $2,500,000 of consolidated bonds remaining in the hands of the company for its future use after the sale of the $5,000,000 to the syndicate. The remaining $3,500,000 needed for equipment and improvements it is the desire of the company to provide for by that portion of the $2,500,000 not required for the floating debt, and by the $2,500,000 in the sinking-fund loan of 1890. Chron. 46:344.

[43] Ry. Rev. 28:192, 1888.

[44] Ry. Age, 12:728, 1887.

[45] R. R. Gaz. 20:417, 1888.

[46] Ry. Rev. 28:192, 1888. The amiability of the syndicate was profitable to it. On May 21 the subscription books of the $7,500,000 mortgage were opened in London and New York, and the whole issue was subscribed in London before the inhabitants of the American city, in spite of their proverbial alertness, were out of bed. In September, 1888, the Baltimore & Ohio was reported as “having all the funds needed for the present.” R. R. Gaz. 20:343, 1888.

[47] Ry. Rev. 28:163, 1888.

[48] Ibid. 28:236, 1888.

[49] Ry. Rev. 28:678, 1888; Ibid. 28:689, 1888. The coincidence was so suggestive that it was thought necessary to “credibly inform” certain bankers that the investigating committee was expected to continue its investigation and to make a full report. In December the committee was instructed by a directors’ resolution not to report till its full statement was ready, and further notice does not appear.

[50] Ry. Age, 16:882, 1891. At the same time the directors decided to sell $5,096,600 additional common stock to meet expenditures which would be necessary in connection with the World’s Fair at Chicago.

[51] Chron. 47:575, 1888. It is impossible to give an adequate account of these wars without straying too far from our subject. Some of the methods by which rebates were granted are revealed in the case of Jacob Shamberg _v._ Del., Lack. & W. R. R. Co. _et al._, 4 I. C. C. Rep. 630. The differential question took on a new phase in 1888 through the demand of weaker roads for protection against stronger. This had long been a demand of the Grand Trunk, and had been conceded to it in the last part of 1887. In January, 1888, the Pennsylvania and the New York Central agreed to allow besides a differential rate to the Erie, the Lackawanna, the West Shore, and the Baltimore & Ohio, which should vary from five cents per hundred pounds from Chicago to New York on first class to one cent on fifth and sixth classes. R. R. Gaz. 20:26, 1888; Chron. 46:57, 1888. This did not prevent active warfare throughout the year.

[52] Known as the Presidents’ and Bankers’ Agreement.

[53] There was, however, a shortage in the wheat crop in 1888.

[54] The comparative peace of 1889 was due as much to the abundance of traffic offering as to the efficacy of the agreement concluded in February of that year. According to the Chronicle the apportionment of traffic then contemplated proved difficult to carry out, and considerable discontent arose. Chron. 50:892, 1890.

[55] In 1890 difficulties occurred through the competition of the Canadian Pacific, and more particularly through the attempt of the Lake Shore to reduce the differential formerly granted to the Grand Trunk. Chron. 50:850, 1890. The matter was left to arbitration, Chron. 51:625, with the result that the lines north of Lake Ontario were allowed to charge two and one-half cents less per hundred pounds on dressed beef to the seaboard than the lines further south. R. R. Gaz. 23:64, 1891. This had the effect of putting the Canadian Pacific on an equality with the Grand Trunk. Late in 1892 still another agreement between the trunk lines was found necessary to maintain rates. Chron. 55:857, 1892.

[56] Ry. Rev. 30:382, 1890.

[57] Chron. 50:800, 1890; Ibid. 50:833, 1890; Ry. Rev. 30:348, 1890; R. R. Gaz. 22:448, 1890.

[58] Application for listing of Trustee certificates, Chron. 54:369, 1892.

[59] Certain extensions had been made, which it is not necessary to describe at length. The most important had been those of the Pittsburgh & Western in 1891, Chron. 52:238, 1891, the Akron & Chicago Junction, Chron. 53:756, 1891, and the West Virginia & Pittsburgh, Chron. 54:725, 1892. In 1893 the Baltimore & Ohio Southwestern and the Ohio & Mississippi Railway companies consolidated, and the Baltimore & Ohio guaranteed the principal and interest of the first consolidated mortgage gold bonds of the consolidated company for $25,000,000. Chron. 56:332, 1893.

[60] Chron. 59:696, 1894. In October, 1893, the Baltimore & Ohio was borrowing in London on one year 5 per cent promissory notes, and 2 per cent commission, paying, therefore, an equivalent of 7 per cent interest. Ry. Times, 64:499, 1893.

[61] Chron. 60:42, 1895.

[62] In 1895 the directors speak of the unremunerative rates prevailing. Chron. 60:711, 1895. At the end of the year Mr. Alexander Shaw, chairman of the board of directors, felt called upon to say, “The two subjects which are giving the new board of directors the most to think about are the floating debt and the future management of the property. We have to fund the former, and as to the latter there is a difference of opinion among the directors.... I deny specifically that the January interest on the bonds of the company will be passed; that a receivership, either friendly or otherwise, is contemplated; that the Baltimore & Ohio and the Southern Railway systems are to be consolidated; and the statements that there has been an irregularity in the manner of keeping the books of the company.” Chron. 61:1153, 1895.

[63] Ry. Rev. 36:138, 1896. The receivers were appointed February 29.

[64] Chron. 62:777, 1896.

[65] The period covered was from September 30, 1888, to November 30, 1895. Report of Mr. Stephen Little to General Louis Fitzgerald, chairman of the reorganization committee.

[66] Chron. 64:999, 1897.

[67] President J. K. Cowen, Vice-President Oscar G. Murray.

[68] Chron. 62:907, 1896.

[69] Ibid. 69:128, 1899.

[70] R. R. Gaz. 28:781, 1896; Ibid. 29:563, 1897; Chron. 65:110, 1897; Ry. Rev. 38:628, 1898. The status of the Baltimore & Ohio stock was somewhat peculiar, in that when first issued to the state of Maryland it had been accompanied by a guarantee, or conditional guarantee, of dividend payments; and Johns Hopkins University, to which the stock had been transferred, maintained that this contract, added to the continuous payment of dividends for over fifty years, gave them rights even against the bondholders.

[71] Chron. 66:1235, 1898.

[72] The prior lien bonds were “to be secured by a mortgage upon the main line and branches, Parkersburg Branch and Pittsburg Division when acquired by the new company, covering about 1017 miles of first track, and about 964 miles of second, third, and fourth track and sidings, and also all the equipment now owned by the company of the value of upward of $20,000,000, or hereafter acquired in any manner by the use of the $34,000,000 reserved first mortgage bonds, as hereinafter stated.”

[73] The first mortgage 4s were to be a first lien “upon the Philadelphia, Chicago, and Akron divisions and branches and the Fairmount, Morgantown & Pittsburg Railroad, covering about 570 miles of first track, and about 332 miles of second, third, and fourth track and sidings, and also on the properties now included in the present Baltimore & Ohio Terminal mortgages of 1894, when said lines and properties are acquired by the new company; also on the Baltimore Belt Railroad, if and when the same shall be acquired by the new company. They will also be a lien subject to the prior lien mortgage upon the lines, properties, and equipment covered by the latter.”

[74] Annual Yield of Old and New Securities:

_Annual return
_Previous _Annual return from new
annual from new bonds and
_Loan_ return_ bonds given_ stock given_

B. & O. Loan, 1853 $40 $40.87 $46.47
Consol. Mtg. 5s, 1887 50 41.75 44.35
Loan of 1872 60 40.41 42.01
Loan of 1874 60 40.41 46.81
Parkersburg Br. 6s 60 41.75 41.75
P. & C. 1st Ex. 4s 40 40.87 42.70
P. & C. 1st 7s 70 40.00 40.00
B. & O. 5s, Loan of 1885 50 40.00 44.00
P. & C. Consol. 6s 60 40.67 48.67
Chicago Div. 5s 50 46.30 50.30
Phila. Div. 4½s 45 40.00 50.60
B. & O. 4½ Term. Bs 45 40.00 40.00
Akron & Chicago Junc. 5s 50 40.00 42.00

[75] Headed by Messrs. Speyer & Co. and Kuhn, Loeb & Co. of New York, and Messrs. Speyer Bros. of London. R. R. Gaz. 30:733, 1898.

[76] The Western Union stock was sold to the same syndicate which took the Baltimore & Ohio’s securities, at a price said to be about 90. At this price the yield would have been $3,420,000; so evidently very little other stock was sold.

[77] In fact they were never quite so low as this.

[78] Chron. 69:128, 1899.

[79] Chron. 67:27, 1898.

[80] Ry. Rev. 38:656, 1898.

[81] R. R. Gaz. 31:500, 1899.

[82] Ry. Age 28:570, 1899.

[83] The chief addition has been that of the Cleveland, Lorraine & Wheeling.

[84] Chron. 72:1079, 1901. In February, 1906, the Pennsylvania Railroad and three other companies which it controlled owned $28,480,000 of Baltimore & Ohio preferred and $42,900,000 of Baltimore & Ohio common stock out of an authorized capital of $60,000,000 preferred and $125,000,000 common. Report of the Interstate Commerce Commission on the Pennsylvania community of interest, February 6, 1906.

[85] See Chron. 76:102, 1903; and Interstate Commerce Commission, Report on Discriminations and Monopolies in Coal and Oil, January 25, 1907. The interest of the Baltimore & Ohio in the Reading dated from 1902, and was influenced in turn by the ability of the Reading to control the Central of New Jersey, over which the Baltimore & Ohio reached New York. The latter’s holdings of Reading stock were shared with the Vanderbilts. Both the Baltimore & Ohio and the Lake Shore sold a block of their Reading stock in 1904.

[86] See statement by the Pennsylvania management in Chron. 83:563, 1906.

[87] It is not necessary to do more than to mention the recent contest between the Baltimore & Ohio and the Hill-Morgan people over the Chicago Terminal Transfer Railway. By arrangement with this company the Baltimore & Ohio had enjoyed terminal facilities at Chicago on favorable terms. When the Terminal Railway went bankrupt the Baltimore & Ohio paid off the first mortgage bonds in order to prevent the loss of its privileges. Litigation followed, to end finally in an agreement between the Hill and Baltimore & Ohio interests for joint ownership of the Chicago Terminal by the Burlington and the latter, and for the use of its facilities in accordance with an equitable division of its trackage. The Pere Marquette and the Chicago Great Western, which had shared in the use of the property to that time, were left to shift for themselves. Ry. World, August 23, 1907.

[88] E. H. Mott, Between the Ocean and the Lakes—the Story of Erie. N. Y. 1899.

[89] Ibid. pp. 79–80.

[90] Mott, p. 129. Default was also made on the first, second, third, and fifth mortgages.

[91] See Adams’s Chapters of Erie, Boston, 1871.

[92] The capital per mile rose from $81,068 in 1864 to $117,760 in 1872.

[93] Chron. 12:203, 1871; Ibid. 16:489, 1873.

[94] R. R. Gaz. 6:100, 1874. See affidavit of S. H. Dunan in the suit of John C. Angell against the Erie Railway Company and others, reprinted in Hepburn Committee Report, vol. 2, Exhibits, pp. 591–610.

[95] Hepburn Committee Report, vol. 2, Exhibits, pp. 623–643.

[96] Angell suit, R. R. Gaz. 6:269, 1874.

[97] R. R. Gaz. 7:224, 1875.

[98] Chron. 20:520, 1875.

[99] From a loan of £3,000,000 placed in London, the company had received but £1,232,029 in cash; £508,431 being retained by the London Banking Association and by James McHenry for claims and commissions on which the critical condition of the company enabled them to insist. Chron. 20:500, 1875. For statement of the physical condition of the property, May 26, 1875, see Extracts from joint letter to Hon. H. J. Jewett, Hepburn Committee Report, vol. 2, pp. 517–518, Exhibits.

[100] See R. R. Gaz. 7:423, 1875.

[101] R. R. Gaz. 7:423, 1875.

[102] R. R. Gaz. 7:479–80, 1875.

[103] Chron. 21:277, 1875.

[104] R. R. Gaz. 7:511, 1875.

[105] R. R. Gaz. 7:533, 1875; Chron. 21:612, 1875.

[106] R. R. Gaz. 8:818, 1876.

[107] Chron. 22:233, 1876.

[108] R. R. Gaz. 8:178, 1876.

[109] Chron. 22:423, 1876.

[110] Amounts received from assessments to January 18, 1878, were:

$3 per share on 23,372 Preferred, $70,116
$2 58,095 116,190
$6 72,982 Common, 437,892
$4 698,095 2,792,380
----------
Total, $3,416,578

Shares forfeited for non-payment,—Preferred, 3902
Shares forfeited for non-payment,—Common, 8923

R. R. Gaz. 11:30, 1879. Report of Pres. Jewett, Chron. 28:67–8, 1879. Shares with assessment paid sold in October, 1878, at $15 for common and $30 for preferred. R. R. Gaz. 10:516, 1878.

[111] Chron. 23:233, 1876; Ibid. 26:419; Ibid. 29:358, 1879; Hepburn Committee Report, vol. 2, pp. 252–7, Exhibits.

[112] Chron. 26:419, 1878.

[113] Ibid. 26:469, 1878. For indenture executed by the new corporation and for text of the first and second consolidated mortgage and of the second consolidated funded coupon mortgage, see Hepburn Committee Report, vol. 2, Exhibits, pp. 315–50.

[114] Mott, p. 268.

[115] Mott, p. 269.

[116] Annual Report, 1882.

[117] Chron. 36:427, 1883. For the necessity of Erie’s extension westward see testimony of First Vice-President Felton before the Senate Committee on Transportation Interests of the United States and Canada, 51st Congress, 1st Session, Report no. 847, pp. 130–1.

[118] For some account of the trunk-line rate wars see the chapter on the Baltimore & Ohio.

[119] Chron. 39:234, 1884.

[120] Annual Report, 1884, p. 12.

[121] R. R. Gaz. 16:421, 1884.

[122] Chron. 39:349, 1884.

[123] R. R. Gaz. 17:446, 1885.

[124] For terms of reorganization see Annual Report, 1890; also R. R. Gaz. 19:188, 1887.

[125] Annual Report, 1886.

[126] Upon such redemption a corresponding amount of the original coupons were to be cancelled.

[127] Annual Report, 1886.

[128] From .662 in 1887 to .610 in 1892.

[129] Testimony of Messrs. King and Felton, Senate Committee on Transportation Interests of the United States and Canada, pp. 44 and 121–2.

[130] Annual Report, 1887.

[131] Mott, p. 272.

[132] In 1890 a traffic agreement was made with the Cincinnati, Hamilton & Dayton, to take the place of that with the Big Four. R. R. Gaz. 22:314, 1890.

[133] Figures for 1891 were, fixed charges, $4298 per mile; net revenue, $4897 per mile.

[134] Chron. 57:179, 1893.

[135] Mott, p. 273.

[136] Chron. 57:938, 1893; Ibid. 57:1083, 1893.

[137] Ry. Times, 65:3, 1894.

[138] R. R. Gaz. 26:18, 1894.

[139] Ry. Times, 65:120, 1894.

[140] Ibid. 65:152, 1894.

[141] Chron. 58:264, 1894.

[142] Ibid. 58:383, 1894.

[143] Ibid. 58:430, 1894.

[144] According to the law of 1892 the bonded indebtedness, including mortgages given as consideration for the purchase of real estate and mortgages authorized by contract prior to May, 1891, could not exceed the amount of the paid up capital stock.

[145] Ry. Rev. 34:181, 1894.

[146] R. R. Gaz. 26:472, 1894.

[147] Ibid. 27:554, 1895.

[148] New York, Pennsylvania & Ohio voting trustees agreed to foreclose and deliver the New York, Pennsylvania & Ohio property, subject only to the prior lien, equipment, and leased-line securities for which reservation was made.

[149] Chron. 61:368, 1895; R. R. Gaz. 27:583–4, 1895.

[150] The following was the rate of exchange of Erie securities for New York, Pennsylvania & Ohio securities on payment by the latter of $12 per new share:

_Old securities _To be exchanged for_
in amounts of_ _Prior Lien _1st _2d _Com.
Bonds_ Pref._ Pref._ Stock_

1st mortgage, $5,000 $1000 $500 $100 $750
2d mortgage, 500 100
3d mortgage, 1,000 100
Pref. Stock, 6,000 100
Com. Stock, 10,000 100

[151]

Capital Stock—
_Common_ _Preferred_
_Before reorganization_
Erie, $77,837,000 $8,536,600
N. Y., P. & O., 34,999,350 10,000,000
------------ -----------
$112,836,350 $18,536,600

_After reorganization_
Erie, $100,000,000 $46,000,000
Nypano, 20,000,000
------------ -----------
$120,000,000 $46,000,000

[152] This real rental was increased somewhat by the assumption of New York, Pennsylvania & Ohio prior liens.

[153] Chron. 61:831, 1895.

[154]

Capital— _Stock_ _Bonds_

1896 $146,000,000 $137,704,100
1907 176,271,300 209,633,900

[155] Calculated. Poor gives the figure of 340.3 miles of _track_. In 1867 the miles of track were reported as 418.1, and the miles of line as 147, the latter being 35.1 per cent of the former. Supposing the proportion to have been the same in 1862, to 340.3 miles of track there would have been 119.4 miles of line, which, divided into a capital of $23,094,829, gives $193,417.

[156] Annual Report, 1881, p. 63.

[157] Industrial Commission, vol. 19, p. 445. Area of fields as given in Annual Report for 1881 was: Schuylkill, 146 sq. miles; Western Middle, 91 sq. miles; Lehigh, 37 sq. miles; Wyoming, 198 sq. miles.

[158] An analysis of the Coal & Iron Company’s operations in 1881 (Annual Report, 1881) showed that there had been expended:

For coal and timber lands and leasehold collieries, and
for dead work, colliery equipments and improvements,
real estate and miners’ houses, etc., $39,385,080
For stocks and bonds and loans to secure the control
of tributary properties, 5,672,394
For iron ore lands, iron furnaces, mills, and other
properties, 1,720,566
For profit and loss account in working properties,
including interest payments, etc., 22,454,500
For supplies and miscellaneous accounts, 1,485,426
For bills and accounts receivable, cash, etc., 2,608,702
-----------
$73,326,668

Of which amount there was furnished by the Railroad
Company, 54,886,647
And the Coal & Iron Company’s obligations held by the
public, for which the Railroad Company became
responsible as guarantor, amounted to 14,929,557
Other direct liabilities of the Coal & Iron Company
amounted to 3,510,464
-----------
$73,326,668

[159] Annual Report, 1881.

[160] Part of the difference was due to the inflation of the currency before 1879.

[161] R. R. Gaz. 9:225, 1877; Ibid. 9:146, 1877.

[162] Ibid. 9:284, 1877.

[163] Annual Report, 1881, p. 28.

[164] Chron. 31:46, 1880, Report of the English Bondholders’ Committee, June 18, 1880. This committee was in the interests of the Messrs. McCalmont.

[165] Ry. Age, 5:365, 1880.

[166] R. R. Gaz. 12:363, 1880.

[167] Ry. Age, 5:351, 1880; R. R. Gaz. 12:350, 1880.

[168] R. R. Gaz. 12:542, 1880.

[169] R. R. Gaz. 12:564, 1880.

[170] Chron. 31:536, 1880.

[171] Chron. 31:607, 1880.

[172] R. R. Gaz. 12:609, 1880.

[173] Ibid.

[174] Ibid. 13:11, 1881.

[175] Ibid. 12:704, 1880.

[176] R. R. Gaz. 12:652, 1880.

[177] Ibid. 12:704, 1880.

[178] Ibid. 13:11, 1881.

[179] R. R. Gaz. 13:25, 1881.

[180] Chron. 32:206, 1881.

[181] R. R. Gaz. 13:43, 1881.

[182] R. R. Gaz. 13:132, 1881.

[183] Chron. 32:313, 1881.

[184] Chron. 32:445, 1881.

[185] Chron. 32:469, 1881.

[186] R. R. Gaz. 13:446, 1881.

[187] Ry. Age, 6:528, 1881.

[188] Annual Report, 1881, p. 52.

[189] Annual Report, 1881, pp. 50 ff.

[190] Annual Report, 1881, pp. 50 ff.; see also Chron. 33:177, 1881.

[191] Ry. Age, 6:486, 1881.

[192] Chron. 33:256, 1881.

[193] Ry. Age, 6:628, 1881.

[194] R. R. Gaz. 13:624, 1881.

[195] R. R. Gaz. 13:672, 1881.

[196] Chron. 34:265, 1882; R. R. Gaz. 26:156, 1882.

[197] Chron. 34:409, 1882.

[198] R. R. Gaz. 14:354, 1882.

[199] Industrial Commission, vol. 9, p. 607.

[200] Ry. Age, 10:218, 1885.

[201] Annual Report, 1883, pp. 111 ff.

[202] Annual Report, 1883, pp. 139 ff.

[203] Chron. 37:563, 1883.

[204] Annual Report, 1883, pp. 25–7.

[205] Annual Report, 1883. The proposition was made by Mr. Gowen.

[206] From November 30, 1883, to January 2, 1884, reliable figures subsequently showed a deficit of $2,000,000.

[207] Chron. 38:679, 1884.

[208] Ibid. 39:461, 1884.

[209] Annual Report, 1884, pp. 21–8.

[210] R. R. Gaz. 17:80, 1885.

[211] R. R. Gaz. 17:144, 1885.

[212] Ibid. 17:160, 1885.

[213] Ibid. 17:224, 1885.

[214] Collateral bonds were to be given for the assessment.

[215] Chron. 40:569, 1885. The trustees were to be appointed as follows: One by foreign creditors, two by the general mortgage bondholders, one by the income mortgage bondholders, one by holders of securities junior to the income mortgage, and two by the shareholders.

[216] Ry. Age, 10:314, 1885.

[217] R. R. Gaz. 17:607, 1885.

[218] Chron. 41:307, 1885.

[219] Chron. 41:654, 1885.

[220] Preferred from $846,950 to $36,381,820; common from $36,822,975 to $60,134,462.

[221] R. R. Gaz. 18:138, 1886.

[222] Chron. 42:216, 1886.

[223] Chron. 42:365, 1896. Assessments ranged from 2½ per cent on the deferred income bonds to 15 per cent on certain junior securities and $10 on both classes of stock.

[224] R. R. Gaz. 18:271, 1886.

[225] Ibid. 18:138, 1886.

[226] Ry. Age, 11:376, 1886.

[227] R. R. Gaz. 18:502, 1886.

[228] Chron. 43:368, 1886; Ibid. 43:747, 1886; Annual Report, 1887.

[229] R. R. Gaz. 18:897, 1886.

[230] Ry. Age, 12:692, 1887. These bondholders even proposed a plan of reorganization of their own, which it is not worth while going into.

[231] Ry. Age, 12:746, 1887; Chron. 45:539, 1887.

[232] R. R. Gaz. 22:370, 1890.

[233] Chron. 50:37, 1890.

[234] Chron. 53:408, 1891.

[235] Chron. 54:288, 1892; Industrial Commission, vol. 19, pp. 455–7.

[236] R. R. Gaz. 24:138, 1892.

[237] Industrial Commission, vol. 9, p. 738.

[238] Annual Report, 1892.

[239] R. R. Gaz. 24:420, 1892.

[240] Chron. 55:680, 1892.

[241] Chron. 56:82, 1893.

[242] R. R. Gaz. 25:102, 1893.

[243] Industrial Commission, vol. 9, p. 567, testimony of A. A. McLeod.

[244] Ibid. vol. 9, p. 574.

[245] Ry. Age, 17:109, 1892.

[246] Ry. Rev. 32:507, 1892.

[247] Chron. 55:723, 1892.

[248] R. R. Gaz. 25:386, 1893.

[249] Ry. Age, 18:314, 1893.

[250] Ibid. 18:164, 1893.

[251] Industrial Commission, vol. 9, p. 573.

[252] Ibid.

[253] Ry. Times, 63:265, 1893.

[254] Ry. Age, 18:314, 1893.

[255] Industrial Commission, vol. 9, p. 739, testimony of I. L. Rice.

[256] Chron. 57:105, 1893; Ibid. 57:423, 1893.

[257] New York _Herald_, May 29, 1893.

[258] Ry. Times, 63:783, 1893.

[259] Ry. Age, 18:501, 1893.

[260] Chron. 56:905, 1893.

[261] Ry. Times, 63:751, 1893.

[262] Ry. Times, 63:783, 1893.

[263] R. R. Gaz. 25:496, 1893. The deposits required were: general mortgage, $41,828,000; stock, 480,424 shares.

[264] Industrial Commission, vol. 9, p. 737, testimony of I. L. Rice.

[265] Ry. Times, 64:369, 1893.

[266] Ry. Age, 18:897, 1893.

[267] Ry. Age, 18:735, 1893.

[268] Ry. Rev. 34:55, 1894; Ry. Times, 65:87, 1894.

[269] Chron. 58:774, 1894.

[270] Ry. Times, 65:623, 1894. See also the report of the company’s comptroller to the receivers in Annual Report, 1893.

[271] Ry. Rev. 34:307, 1894.

[272] Chron. 59:515, 1894; Ry. Age, 19:557, 1894; Ry. Rev. 34:561, 1894; Ry. Times, 66:571, 1894.

[273] Deposits of bonds were up to the last of January (R. R. Gaz. 27:78, 1895):

_Total Issue_ _Deposits_

General Mortgage $44,663,000 $33,099,000
1st preferred 23,948,133 12,182,300
2d preferred 16,176,326 6,261,600
3d preferred 18,591,099 8,631,400

[274] Chron. 60:43, 1895.

[275] Ry. Times, 68:802, 1895; Chron. 61:1109, 1895.

[276] Ry. Age, 20:625, 1895.

[277] Chron. 63:560, 1896.

[278] Chron. 64:84, 1897.

[279] Chron. 63:923, 1896.

[280] See testimony of Mr. Baer before the Interstate Commerce Commission, 1904, “Synopsis of Stenographers’ Minutes, etc., in the case of W. R. Hearst against the Philadelphia & Reading Railway Company,” p. 55. The managers wished to take no chances.

[281] Organization and scope of the three Reading Companies. The Reading Company owns practically the whole of the capital stock of the Philadelphia & Reading Railway Company and the Philadelphia & Reading Coal & Iron Company, and all of the other stocks and securities which were acquired by the purchases under the sale made by the Trustees and the Receivers. It also owns the $20,000,000 purchase money mortgage bonds issued by the Philadelphia & Reading Railway Company, the locomotives, cars, steam collieries, tugs, and barges constituting the railway and marine equipment, and all the real estate of the old Philadelphia & Reading Railroad Company which was not appurtenant to the railroad itself. This, of course, does not include the depots, rights of way, etc., which belong to the Railway Company. The Philadelphia & Reading Railway Company owns all the roads formerly belonging to the Philadelphia & Reading Railroad Company, and it controls the roads hitherto leased to that company, either by transfer of the old leases or by new leases made since November 30, 1896. It leases from the Reading Company the railway and marine equipment which it uses in the conduct of its business and a number of wharves and warehouses on the Delaware River. Annual Report, 1898.

[282] Chron. 64:84, 1897.

[283] There are certain duplications in both of these figures, but the same duplications appear in each.

[284] Chron. 79:2087, 1904.

[285] See the nineteenth volume of the Industrial Commission’s report for a brief description of the renewed attempt at consolidation in the anthracite coal fields; also testimony in the case of W. R. Hearst against the Philadelphia & Reading Railway Company.

[286] The Virginia state bonds were redeemable in 34 years from April 8, 1853, to September 30, 1854, by the payment of an annuity of 7 per cent. Of this rate 6 per cent covered the interest and 1 per cent, by continuous reinvestment at 6 per cent, was expected to yield the principal sum in the 34 years agreed upon. Annual Report, 1867. Like most new companies, the Richmond & Danville found difficulty at first in meeting its obligations, and was obliged to issue bonds to provide for overdue interest to the state and to keep its floating debt within bounds. R. R. Gaz. 5:499, 1873, and Ibid. 5:507, 1873.

[287] R. R. Gaz. 3:279, 1871. This road stretched from Goldsboro in the eastern part of North Carolina to Charlotte in the southwestern part, via Greensboro. It was principally owned by the state of North Carolina. By the terms of the lease the Richmond & Danville agreed to pay $260,000 per annum for thirty years.

[288] The whole road was opened for traffic in September, 1873. It went into the hands of a receiver in 1874, and was sold in foreclosure in 1876; but the Pennsylvania Railroad relieved the Richmond & Danville from all collateral liabilities incurred on its account. The reorganized line was leased by the Richmond & Danville in 1881. Chron. 32:367, 1881.

[289] Annual Report, 1878.

[290] Ibid. 1874.

[291] Ulrich B. Phillips, A History of Transportation in the Eastern Cotton Belt to 1860. New York: The Columbia University Press, 1908, pp. 372 ff.

[292] Including 37 miles of running rights over the N., C. & St. L.

[293] R. R. Gaz. 5:475, 1873.

[294] Ibid. 6:178, 1874.

[295] Ibid. 8:540, 1876.

[296] The Memphis & Charleston stockholders agreed to the lease in order to avoid bankruptcy. At a meeting in May, 1877, it was pointed out to them that the net earnings of the road had not been enough to pay the interest on its bonds, and that a large amount was due to the state of Tennessee which the company had no present means of paying. Either an assessment on the stock or a lease to the East Tennessee was declared to be necessary. Accordingly, a lease was concluded. The East Tennessee agreed so to discharge the principal of the company’s indebtedness to the state as to reduce the annual interest account from $360,000 to $310,000 as a maximum, and upon the fulfilment of this and of certain other minor conditions took over the operation of the road. Two years later the lease was extended for twenty years at a definite rental amounting to 7 per cent on $4,225,000 or a yearly payment of $295,750. See R. R. Gaz. 9:421, 1877, and Ibid. 11:672, 1879.

[297] The Selma, Rome & Dalton was bought from the purchasers at foreclosure sale for $2,600,000. The Georgia Southern cost $367,369. Outstanding debts were assumed. To provide for these and other outlays $10,000,000 new 5 per cent bonds were authorized. R. R. Gaz. 12:622, 1880.

[298] This line was completed in 1882. Chron. 35:430, 1882; R. R. Gaz. 13:420, 1881.

[299] Chron. 33:357, 1881.

[300] R. R. Gaz. 13:420, 1881.

[301] Prominent among them were Messrs. Clyde, of the Coast Line railroads, Wilson and McGhee of the East Tennessee, Stewart, Plant, Logan, and others.

[302] This had been the Atlanta & Richmond Air Line.

[303] Chron. 37:128, 1883.

[304] Chron. 39:733, 1884.

[305] Chron. 40:29, 1885.

[306] The committee overestimated the net earnings of the next few years. Instead of $1,400,000 each year these proved to be $1,288,343 in 1885 and $1,382,749 in 1886.

[307] Chron. 40:60, 1885. There was some dispute as to the jurisdiction of the different courts in this connection. The Circuit Court appointed Mr. Fink receiver for the whole line on January 7. The next day a state court appointed R. T. Dorsey and E. P. Alexander receivers for the lines in Georgia under another mortgage. This suit was removed to the Federal Court and Dorsey, who had meantime been appointed sole receiver in Georgia, was displaced. Subsequently the Georgia Supreme Court held that the transfer was illegal, and Dorsey vainly endeavored to regain his position. The dispute was ended by the withdrawal of the suit upon which the Georgia application was based.

[308] Son-in-law of George Seney.

[309] This committee was chosen by the consolidated bondholders. Its membership consisted of Robert Fleming, a representative of the foreign holders; Charles McGhee, president of the Memphis & Charleston; G. W. Smith, of Kountze Bros.; Frederic D. Tappan, president of the Gallatin National Bank; E. W. Corlies, vice-president of the Bank of America; and Frederick P. Olcott, president of the Central Trust Company, which was trustee of the mortgages of the company. Chron. 42:155, 1886.

[310] As might have been expected, this estimate was too optimistic. The actual reduction was to $1,167,000. Even this constituted a cut of about one-third.

[311] Chron. 42:186–7, 1886. See also Poor’s Manual for 1886.

[312] The reader will remember that that same year the general manager had estimated the sum required for steel rails, iron bridges, and other improvements at $1,000,000.

[313] It is true that the severity of the treatment of the junior securities caused sharp protest. A number of the stockholders met in New York February 23, and appointed a committee to prepare a plan of assessment and to oppose foreclosure. Under the auspices of this committee, Messrs. William H. Sistare and Harold Clemens filed a suit against the reorganization committee of the East Tennessee Company. The capitalization of the company, said they, had been fraudulently inflated by the members of the Thompson-Seney-Brice syndicate. By false reports these financiers had unloaded upon the public securities which they had previously distributed among themselves, and then had entered upon a scheme for wrecking the property. The suits made specific charges of irregularity, and prayed for relief. Ry. Age, 11:192, 1886.

[314] Chron. 42:364, 1886.

[315] Ibid. 42:575, 1886.

[316] Ibid. 42:663, 1886. In a circular to their constituents this committee said: “That after a full and satisfactory presentation of the case by very able counsel it appeared that the committee had been misinformed as to the material facts upon which their case was predicated. It especially appeared to the Court that there was no ground for the charge of fraud against the directors of the Company or the Central Trust Company. It further appeared that the litigation must be a protracted one, without substantial benefit to either party. Your committee were not willing to assume the responsibility of such a contest, in view of the expressed willingness of the majority to give to the minority the same terms which they had accepted for themselves. It was deemed wise to harmonize all interests, and join hands to promote the future of the property.”

[317] Annual Report, East Tennessee, Virginia & Georgia, 1887.

[318] Chron. 37:344, 1883. The debentures were cumulative income bonds entitled to 6 per cent out of earnings after payment of interest, rentals, and operating expenses, including expenditures made for the repair, renewal, and improvement of existing property and equipment necessary for the proper conduct of the business of the railroad. Certain provisions of the mortgage protected them against the insertion of new mortgage bonds before them. Chron. 37:373, 1883.

[319] Curiously enough the chief saving seems to have been in maintenance of cars, an expenditure which one would expect to be least affected by the syndicate control.

[320] Chron. 36:56, 1883.

[321] R. R. Gaz. 18:138, 1886.

[322] Chron. 42:575, 1886.

[323] The Richmond & Danville guaranteed interest on some $12,500,000 of Virginia Midland bonds.

[324] Cf. Poor’s Manual for 1887.

[325] The very high average price of $200 per share was reported to have been paid. R. R. Gaz. 18:825, 1886; cf. R. R. Gaz. 19:162–3, 1887. The Terminal Company issued $5,000,000 new preferred and $9,000,000 common stock. Of this it sold the preferred and $7,500,000 of the common, giving to every holder of 100 of its shares the right to subscribe to the extent of one-third of the par value of his stock, and to receive for his subscription 33⅓ shares of the new preferred and 50 shares of common. Then to the $5,000,000 cash thus secured the Terminal Company added the $1,500,000 common stock left from its $9,000,000 issue, and turned the whole over to the Richmond & Danville in payment for the securities which it had purchased. R. R. Gaz. 18:825, 1886.

[326] The floating debt amounted to $3,161,325 when Mr. Sully assumed the presidency, and $1,708,700 of it matured January 1. Chron. 44:401, 1887. To provide for it, and for the Richmond & Danville shares, $5,500,000 6 per cent collateral trust bonds were issued, secured by East Tennessee first preferred, Richmond & Danville stock, Columbia & Greenville stock, Virginia Midland stock, and Western North Carolina bonds; and also $16,000,000 common stock. The bonds were sold for cash and the returns applied to the East Tennessee purchase and to the floating debt; $5,000,000 of the stock went for East Tennessee first preferred, and the rest for Richmond & Danville common, Washington, Ohio & Western stock and income bonds, and for other purposes. Chron. 44:149, 1887. Also Poor’s Manual, 1890.

[327] It was reported that the East Tennessee first preferred stock had been offered to the Norfolk & Western before the Richmond Terminal acquired it.

[328] Chron. 47:410, 1888.

[329] Chron. 47:532, 1888.

[330] Chron. 47:532, 1888; Ry. Rev. 28:663, 1888; R. R. Gaz. 20:778, 1888.

[331] Chron. 47:625, 1888.

[332] Chron. 47:663, 1888.

[333] Ry. Rev. 28:679, 1888.

[334] Ry. Age, 13:788, 1888.

[335] Cf. Central Railroad Company _vs._ Georgia, 2 Otto, 665. The Central Railroad was granted certain exemptions from taxation, and the question came up in 1874 whether the right to these exemptions was surrendered by consolidation with the Macon & Western, and whether, if not, they extended to the Macon & Western as well as to the original company.

[336] Including 67 per cent paid in Confederate notes during the war.

[337] See Ulrich B. Phillips, _op. cit._, chap, vi, for the early history of the Central of Georgia Railroad System.

[338] The following is representative from a pamphlet issued by the Rice Committee:

“The matter of the purchase of sixty-five thousand shares of the first preferred stock of the East Tennessee Railroad Company and the circumstances attendant thereon.

“1st. Why did the directors of the Terminal Company purchase sixty-five thousand shares of that stock at par, when fifty-five thousand and one shares would have been sufficient to have given the Terminal Company a majority of that stock, the minority stock at that time selling at about eighty?

“2d. Why was the minority stock of the Danville Railroad Company purchased at the same time at a price which then amounted to about two hundred dollars per share, being a premium of one hundred per cent?