The work of devising a reorganization plan was done in the various bondholders’ committees. Late in 1893 a committee of consolidated 5 per cent bondholders had been formed, with E. D. Adams as chairman and General Louis Fitzgerald as vice-chairman; which declared itself to be independent, but was regarded as affiliated with the former managers of the road. In March, 1894, this committee announced that, having received responses from the holders of a majority of the consolidated bonds, it had prepared an agreement and had secured its acceptance by the German bondholders. All consolidated bondholders were requested to deposit their securities with the Mercantile Trust Company, which would issue engraved certificates of deposit, which the committee would endeavor to have listed on the Stock Exchange. Mr. Ives was opposed to any step toward reorganization of this sort, and objected particularly to the composition of the committee; he therefore asked bondholders to withhold their acceptance of the agreement, and gave various reasons to lend weight to his request. In April, as a counter-move, he invited bondholders to send in their names and addresses to him, together with the amount of their holdings, saying that this action would not commit the bondholders, and was desired only to enable the company to furnish information respecting its affairs, and, when the proper time should arise, to confer about a reorganization plan. The rapid falling off in earnings soon imperilled the interest of the second and third mortgage bonds, superior to the consolidated mortgage. In July the Adams Committee appealed to the holders of these issues, and secured a considerable number of deposits. Henceforth it planned to act as a general reorganization committee. On the other hand a committee headed by Johnston Livingston competed for deposits of the second mortgage, and one headed by C. B. Van Nostrand for deposits of the third mortgage bonds. It was urged that holders of the earlier issues should not deposit with the consolidated committee, because its interest lay in cutting down prior liens; whereas the Van Nostrand Committee declared that the road could earn the interest on the third mortgage, and that these bonds should not accept less than par and interest in cash. Nevertheless the Deutsche Bank’s London agency announced in September that it was prepared to receive second mortgage, third mortgage, and consolidated bonds on behalf of the Adams Committee, and to forward the same to New York for deposit. Various rumors were afloat at this time concerning reorganization, and suggestions were made for converting the third mortgage bonds into 5 per cent income bonds and the consolidated bonds into preferred stock;611 but the only result was to stir up protests from the third mortgage bondholders, who still insisted in August that earnings were more than sufficient to pay the interest on all prior liens. Late in the year there was talk of selling the road under foreclosure of the second mortgage, but this too came to nothing.

Meanwhile the operation of the road went on. Receiver Rouse reported on the condition of the property in January, 1894. He estimated that $10,000,000 would be required to bring the permanent way into the most effective condition for economical operation. Exceptional causes, said he, had contributed to make the earnings for the previous three years exceptionally large, and this fact, together with the prevailing depression, the competition of the Great Northern, and reduced rates, would decrease the gross earnings in the immediate future at least 27 per cent. Although Mr. Rouse believed in the value of the Northern Pacific’s branch lines, his report was not encouraging.612 In September, on the approach of the annual election, President Ives issued a long circular. The serious decrease in the earnings of the road, he said, had affected for the worse the position of the stockholders, and these holders should understand that no one of the reorganization committees was working for their interest. He announced the appointment of a committee to receive proxies, and revealed the embarrassment of the management by a request for contributions of $12.50 per hundred shares in order to pay the expenses of the officers. So far as the officers should have any voice in the matter, President Ives assured the stockholders, contributions should be credited on any assessments which might be made thereafter. On the day of the election no opposing ticket was presented, and the Ives party were reëlected to their positions. This is where matters stood at the beginning of 1895. The hostility of the opposing committees was in no way abated; but the Adams Committee had secured deposits of nearly $21,000,000 of the consolidated mortgage bonds, $1,000,000 more than a majority of the third mortgage bonds,613 and $3,000,000 less than a majority of the second mortgage bonds, and with the hearty support of the Deutsche Bank was steadily strengthening its position.614

In May, 1895, the Adams Committee reorganization plan came out and marked the first serious suggestion for a rehabilitation of the property. It proposed a sale, under foreclosure, of the old company and the formation of a new company under special arrangements for this purpose. The new company was to issue $100,000,000 in shares, and a maximum of $200,000,000 in gold bonds free from taxation, secured by a mortgage lien on the whole Northern Pacific system, including the St. Paul & Northern Pacific Railway, and bearing interest partly at 4 per cent and partly at 3 per cent, all under the same mortgage. A sufficient amount of these bonds was to be reserved to replace the existing first mortgage, besides a further amount to acquire independent branch lines or for new construction at a maximum charge of $20,000 per mile. The principal and interest of the new bonds were to be guaranteed unconditionally by the Great Northern Road, in return for which the Great Northern was to receive one-half of the stock of the new company. The new board was to consist of nine directors, of whom four were to be nominated by the Northern Pacific Reorganization Committee. Each $1000 Northern Pacific second mortgage bond was to receive a $1125 new Northern Pacific guaranteed bond; each $1000 third mortgage bond a new $1000 3 per cent guaranteed bond, and at least $250 in shares; each $1000 5 per cent consol at least $500 in new 3 per cent guaranteed bonds and $300 in shares. Overdue coupons of the second mortgage were to be paid in cash at the rate of 5 per cent annually, those of the third mortgage at 4 per cent, and those of the consols to be adjusted at the rate of 2½ per cent in new 3 per cent bonds. The floating debt of the receivership was to be paid by an assessment of about $11,000,000 on the old stock. The reorganization and the raising of the necessary working capital were to be secured by a syndicate headed by J. P. Morgan & Company and the Deutsche Bank.615

Briefly stated, this plan proposed to decrease somewhat the funded debt, while reducing also the interest rate from 6 and 5 to 4 and 3 per cent. The reduction in fixed charges which would have ensued it is impossible to estimate without further details. The amount which bondholders were asked to give up was, however, considerable, and for this compensation was variously given in new bonds and in new stock. The floating debt was not to be funded, but was to be paid off by the commendable method of an assessment; and provision was made for working capital, although at what cost in profits to the syndicate was not stated. But more important than the details of the plan was the guarantee of the new issues by the Great Northern Company for which it provided. The question of consolidation between the Northern Pacific and the Great Northern was said, on what purported to be good authority, to have originated on the side of the Northern Pacific among men to whom an alliance seemed necessary to the prosperity of the latter road.616 Mr. Hill was said to have been at first reluctant, and to have consented only on condition that a majority of the Northern Pacific stock should be placed within his hands. It can scarcely be supposed, however, that he did not welcome such a union; and the petition of the Northern Pacific receivers for the cancellation of contracts with the Great Northern and the Minneapolis Union railway companies617 made consolidation especially desirable at this time. To the end of this consolidation the Adams Committee plan was chiefly framed, and on its execution the adequacy of the plan depended. If the Great Northern could have been induced to guarantee the principal and interest of the new Northern Pacific bonds the likelihood of a default would have been reduced to a minimum, even on the indebtedness outstanding before the receivership; and a scheme for paying the floating debt and for providing a certain amount of new capital would have been all that would have been required. But it is clear that a proposal for a consolidation of two of the principal lines serving the Northwest brought the consuming and producing public to an interest in the Northern Pacific reorganization which they had not felt before. So long as a reorganization plan dealt merely with exchanges and manipulation of securities by and among securityholders, the influence of any settlement on outsiders was very indirect; but when it operated to reduce competition in a large section of the country the effect was plain and striking. Certain conservative financiers suggested a holding company to hold the Great Northern and Northern Pacific stock, in order to throw some sort of a veil over the proceedings, but Mr. Hill would not consent.618 Late in August, 1895, therefore, a bill in equity was filed to prevent the proposed coöperation, and on September 17 Attorney-General Childs, for the state of Minnesota, brought suit for an injunction on the ground that the combination was contrary to the laws of the state and would prevent competition. It was said that Mr. Childs was supported by the practically unanimous sentiment of the people of Washington and Montana. The matter came before the Supreme Court on suit by one Pearsall, a stockholder of the Great Northern, and this tribunal held that the combination was contrary to the laws of Minnesota and should, therefore, be enjoined, affirming the principle for which Mr. Childs contended.619 This settled the fate of the Adams reorganization plan; and an entirely new scheme had to be devised.

But while once more progress toward reorganization seemed to have ceased, sensational developments occurred in the factional conflicts to which we have already referred. To Mr. Ives, barred from all participation in the management of the road, denied a salary, and unable to obtain the removal of the receivers by Judge Jenkins, came the idea of appealing to another court. It will be remembered that, the original receivership suit had been instituted in the circuit court of Milwaukee, Wisconsin, and that that court ever since had been regarded as possessing primary jurisdiction. Since no compulsion existed on other courts to recognize this jurisdiction of the Milwaukee court, the orders of which were supreme in its own district only, and the smooth working of the receivership was due to a respect for “comity,” it was possible, as Ives well knew, for any circuit court along the line to throw existing arrangements into the direst confusion. Relying on this fact, President Ives sent the General Counsel of the company to present applications for the removal of the receivers to one court after the other along the road.620 In September, 1895, judges willing to take jurisdiction were found in Seattle, in the far northwestern corner of the United States.621 Petition was made in two parts: first, that the Seattle court take jurisdiction; second, that it remove Messrs. Oakes, Rouse, and Payne. Judge Hanford of the Federal Court of the Washington District called Judge Gilbert of the United States Circuit Court to sit with him, and deciding on the question of jurisdiction first, according to the request of the receivers, the two judges held that the principle of comity did not of necessity apply in the Northern Pacific case because no part of the railroad was within the jurisdiction of Judge Jenkins’s court, and any court along the road could more properly and efficiently administer the trust. The court, therefore, directed the receivers to answer the charges of malfeasance, and to file their answers in Seattle by October 2; also to file their accounts with the clerk of the court at Seattle,622 and to file each a $100,000 bond.623

The result was the prompt resignation of the receivers, who in a letter to Judge Jenkins made their feelings clear. “Your receivers manifestly cannot administer the trust,” said they, “with justice to the parties interested, or themselves, if subject to the orders and instructions as to the general administration from two or more independent tribunals. We cannot abide, nor can we ask our sureties to abide, the danger of the differences of opinion between courts, each assuming to be controlling as to the expenditures of the receivership in the general administration, in view of the immensity of the interests involved.... Unless your receivers recognize, as they understand it, that that honorable court [the Seattle court] is the court of primary jurisdiction they will of necessity be in contumacy.... Your receivers are not willing under any circumstances to file an additional bond in such jurisdiction, nor are they willing to put themselves in a position to endanger their right to challenge the jurisdiction of that honorable court.”624 Judge Jenkins accepted the resignations and appointed Messrs. McHenry, chief engineer of the Northern Pacific, and Bigelow, a Milwaukee banker, receivers.625 The hitherto respected principle of comity had, however, lost all force. On September 30 Judge Sanborn at St. Paul confirmed Judge Jenkins’s appointments for the states of Minnesota and North Dakota; on October 1 Judge Hanford at Tacoma refused to accept the resignation of the old receivers, but removed them and appointed Andrew F. Burleigh for the district of Washington; on October 2 Judge Billinger concurred in Burleigh’s appointment for Oregon; on October 7 Judge Knowles at Helena, Montana, confirmed the above for the districts of Washington and Oregon, and appointed Captain J. H. Mills and E. L. Bonner for the district of Montana; and in the week ending October 26 Judge Beatty appointed Burleigh receiver for Idaho. The only conservative action was that of Judge Lacombe in New York, who deferred his appointments as often as the matter came before him, in the hope that the Western judges would come to an agreement.

The situation at the end of October, 1895, was as follows: in Wisconsin, Minnesota, and North Dakota there were two receivers, Messrs. McHenry and Bigelow; in Montana there were three receivers, Messrs. Mills, Bonner, and Burleigh; and in Idaho, Washington, and Oregon there was one receiver, Andrew F. Burleigh. It was a condition of affairs which could not be endured. In each of the Western States orders were made compelling all agents or persons connected with the road to deposit all money collected in that state, and it was at any time in the power of the receivers in any state to appoint operating officers distinct from those managing traffic over the other parts of the line. On January 9, 1896, Judge Gilbert simplified the situation by retiring Messrs. Mills and Bonner, and by appointing Andrew F. Burleigh sole receiver for the district of Montana. This reduced the number of receivers to three, and left Burleigh in control of the road west of North Dakota, and McHenry and Bigelow in control of the rest. Application was now made to the Supreme Court of the United States, and on January 28, 1896, four justices of this tribunal, acting as justices assigned to the several districts in which the Northern Pacific Railroad Company had property,626 decided that Judge Jenkins’s court for the Eastern District of Wisconsin should be considered the court of primary jurisdiction, and issued each an order to this effect to take effect in his particular circuit.627 The various circuit judges hastened to conform. On February 21 Judge Lacombe confirmed the appointment of F. G. Bigelow and E. H. McHenry as receivers for the Second Judicial District, and similar action had by then been taken by the judges of the other districts except that of the state of Washington. There Judges Gilbert and Hanford refused to discharge Burleigh, although recognizing that the general orders for the management and control of the railroad property were henceforth to issue from Judge Jenkins’s court.628 The judicial strife was thus at an end. President Ives obtained the removal of the receivers to whom he particularly objected, but did not overthrow the authority of the Milwaukee court, nor secure any material gain to compensate for the great trouble which he caused.

With the receivership tangle straightened out it became possible to proceed again with the work of reorganization, and on March 16, 1896, the final plan was published, endorsed not only by the Adams Committee, but by President Ives and his Stockholders’ Protective Committee, and by other important interests as well. The feeling had become general that some action should speedily be taken, and that it was in the interest of all parties that the factional conflicts which had raged so long and with so little result should cease. Reorganization was proposed on the following basis:

(a) The abandonment of Chicago as the eastern terminus, and the limitation of the railway on the east by the Mississippi River and the Great Lakes;—the bonds and stocks of the Chicago & Northern Pacific and of the Chicago & Calumet Companies to be sold.

(b) The ultimate union of the main line, branches, and terminal properties through direct ownership by a single company.

(c) The reduction of the fixed annual charges to less than the minimum earnings under probable conditions.

(d) Ample provision for additional capital as required in a series of years for the development of the property and for the greater facilities necessitated by an increased business.

There were to be issued:

$130,000,000 in prior lien 100-year 4 per cent gold bonds, to be secured by a mortgage upon the main line, branches, terminals, land grant, equipment, and other property embraced in the reorganization ... and ... thereafter acquired.629

$190,000,000 in general lien 150-year 3 per cent gold bonds, with a lien junior to the previous issue, but covering the same property, of which $130,000,000 were to be reserved to retire the $130,000,000 prior lien bonds when they should fall due.

$70,000,000 in 4 per cent non-cumulative preferred stock.

$80,000,000 in common stock.

Generally speaking, the new prior liens were to go for old first and second mortgage bonds, receivers, certificates, equipment trusts, collateral trust notes, St. Paul & Northern Pacific bonds, and for new construction; the new general liens for mortgages junior to the second mortgage; the new preferred stock as additional inducement to the exchanges mentioned above, and in part for the retirement of old preferred stock; and the common stock for old preferred stock (in part) and common stock. Existing first mortgage bondholders were not, however, to be forced to give up their old securities. “It is not sought in any way to enforce a conversion of the present general first mortgage bonds,” said the plan, “and this offer is made solely on the belief that on the terms proposed such conversion, while advantageous to the company, is also manifestly to the advantage of the bondholders so converting.” There were reserved $4,000,000 of the general liens for new construction, and $2,500,000 new preferred and an equal amount of common were set aside under the general head “to provide for reorganization purposes or available as a treasury asset.” None of the new bonds were to be subject to drawing or to compulsory redemption prior to their regular maturity. The proceeds from land sales to an amount not exceeding $500,000 in any year were to be devoted to the redemption by purchase and cancellation of the new bonds, purchases to be made of prior liens so long as these could be secured at not over 110, after which to continue of the securities next in rank. The preferred stock was to have a claim for 4 per cent before anything should be paid on the common stock, and was to participate equally with the common after 4 per cent had been paid on each. There was to be a voting trust until November 1, 1901, unless closed out earlier by the voting trustees, after the expiration of which the preferred stock was to have the right to elect a majority of the board of directors whenever for two successive years 4 per cent dividends on their holdings should not have been paid. No additional mortgage was to be put upon the property, and the amount of preferred stock was not to be increased, except, in each instance, after obtaining the consent of a majority of the whole amount of the preferred stock, given at a meeting of the stockholders called for that purpose, and the consent of a majority of such common stock as should be represented at such meeting, the holders of each class of stock voting separately. During the existence of the voting trust the consent of holders of like amounts of the respective classes of beneficial certificates was to be necessary. There was to be an assessment of $10 on preferred stock and of $15 on common. Branch lines were to be consolidated with the main line, but each case was to be dealt with separately, and a fair basis of adjustment arrived at, for which general lien 3 per cents and new preferred stock were reserved. There was to be an underwriting syndicate, formed by J. P. Morgan & Company, and the Deutsche Bank of Berlin, to the subscribed amount of $45,000,000, to provide amounts of cash estimated to be necessary to carry out the terms of the plan, and to furnish the new company with some $5,000,000 working capital for early use in betterments and enlargements of its property. The syndicate’s compensation was not stated in the plan, but was to be “reasonable,” and in addition to it the sum of ¼ per cent of the par value of all securities deposited was to be paid to J. P. Morgan & Company and the Deutsche Bank for their respective services as managers and depositaries. Finally, at the discretion of the managers, the various properties were to be sold under one of the several mortgages in default, and a successor company was to be organized.630

An examination of this plan shows that the total capitalization proposed, exclusive of bonds and stock reserved for new construction, etc., amounted to $311,000,000; of which $161,000,000 were 4 per cent and 3 per cent bonds and $150,000,000 stock. The reported capitalization of the Northern Pacific Railroad in 1893 had been $218,685,631, including the bonds of branch roads guaranteed; but comparison of this figure with that given by the plan is not fair, because in 1893 the Northern Pacific property had been owned by fifty-four distinct corporations, which the reorganization proposed to consolidate into one. A comparison of the total bonds and stock issued by the fifty-four corporations with the issue under the reorganization plan reveals an increase from $271,949,044 to $311,000,000, or 14.3 per cent. At the same time fixed charges were to be decreased, according to estimates, from $10,509,690 to $6,052,660; to cover which the managers reported net earnings of $6,015,846 for the year ending June 30, 1895, and of $7,801,645 for the average of the five years ending with that date. It will be observed, therefore, that the plan left no margin between net earnings in 1895 and fixed charges, but relied upon an increase in earnings for the future to preserve the solvency of the road. It is, however, only just to say that the net earnings in 1895 were less than they had been in any year since 1887, with the exception of 1894, and that a considerable increase was probable. The large reduction in fixed charges which was to take place was to be chiefly at the expense of holders of the consolidated mortgage bonds of 1889. These unfortunate investors received but 129 per cent in new securities, of which nearly one-half was stock, in return for a reduction in their fixed annual income from 5 to 2 per cent, the reason being the inferior character of their mortgage lien. That securityholders who had consented to exchange their prior securities in 1889 for the consols then issued in the hope of benefiting the road should have fared considerably worse than bondholders who had refused to make concessions is an example of the injustice sometimes occasioned by successive reorganizations and refundings. Of the other securities the second mortgage received prior liens and stock sufficient to bring its return over 6 per cent, providing the road should earn it, and the third mortgage and dividend certificates received general liens and stock sufficient to yield something over 5 per cent except in very prosperous times, when their income would be larger. The underlying principle in these cases was the union of a security with a fixed claim on earnings with a security with a conditional claim only. The first mortgage received no stock, and so was denied participation in future profits, but in recompense gave up only some .6 per cent in the annual income received. The collateral trust notes fared nearly as badly as the consolidated mortgage, but the northwest equipment stock was paid off in cash. In brief, all securities but the equipment stock yielded something, and the greatest sacrifices were demanded from the junior securities. On the other hand, the stock was far from escaping unscathed. On January 2, 1896, the quoted prices were 3½ for common and 12⅝ for preferred. As against this the plan made assessments of $15 on common and $10 on preferred;—sums which could obviously be demanded only because of the probable future appreciation of the shares. A point in favor of the stock was the fact that the reduction in fixed charges brought it nearer a dividend; although it must be remembered that the common stock had to divide any return above 4 per cent with the preferred.

The other salient points of the plan were the provision for paying the floating debt, for supplying fresh capital for future additions and improvements, for consolidation of branch lines with the main stem, and for a voting trust. The total floating debt in 1895 amounted to over $20,000,000, of which $4,900,000 consisted of outstanding receivers’ certificates and $8,329,205 of interest matured and unpaid.631 The unpaid interest was provided for in the exchanges which have already been described; the receivers’ certificates were cancelled by prior lien bonds, and the balance was provided for by assessment. This method was a sound one. The provision for new construction, betterments, etc., was liberal, consisting of $25,000,000 prior lien bonds, of which no more than $1,500,000 were to be issued in any year, and $4,000,000 general lien bonds, presumably to be used as needed. One of the great difficulties in the history of the company had been the lack of necessary capital for needed work upon the line, and it was well that future requirements were provided for. The consolidation of the branch lines into the parent company was also wise. “As it [the Northern Pacific system] now stands,” the committee said, “the system, in its form of incorporation and capitalization, is a development without method or adequate preparation for growth. Scarcely any single security is complete in itself. The main line mortgages cover neither feeders nor terminals. The terminal mortgages may be bereft of their main line support. The branch lines are dependent on the main line for interchange of business and the main line owes a large part of its business to the branch lines.”632 The plan contemplated separate bargains with each branch. Negotiations were carried on during 1896, and some of the arrangements arrived at were as follows: The bondholders of the Northern Pacific & Manitoba Terminal and of the James River Valley Railroad agreed to take 50 per cent in new Northern Pacific 3 per cent bonds and 50 per cent in preferred stock, and to allow the Northern Pacific to retain their property.633 Bondholders of the Duluth & Manitoba were given 90 per cent in cash.634 Bondholders of the Spokane & Palouse received 52½ per cent cash, 52½ per cent in general 3s, and 25 per cent in Northern Pacific preferred stock,635 and Helena & Red Mountain bondholders agreed to accept 100 per cent in new preferred.636 A number of the branches were foreclosed and bought in by the Northern Pacific reorganization committee, and the net result was an exceedingly beneficial unification of the system. Finally, the voting trust was designed to secure permanence in policy during the first years of the new company’s existence. The idea has been a common, and on the whole a wise one. In this case the membership represented fairly the interests which had been prominent throughout the receivership, and consisted of J. P. Morgan, George Siemans, representing the Deutsche Bank, August Belmont, Johnston Livingston, and Charles Lanier. The trustees were to fill their own vacancies, except that the successors of George Siemans were always to be nominated by the Deutsche Bank.

In the main the plan was a good one, following a sound principle, and reducing fixed charges to a point which, if not far below the danger-line, proved low enough in view of the subsequent development in business. Current opinion was generally favorable, and criticised only the amount of profits which the syndicate was to secure on the basis of its large subscribed capital. Mr. Hill of the Great Northern said: “I think the Northern Pacific reorganization plan will be successful. The promoters have adopted a conservative policy, and have marked the interest charges down. We are entirely satisfied to have the Northern Pacific securityholders run the road, pay its debts, and be charged with the responsibility of meeting all its proper obligations, rather than to have it operated by the officers of two or three courts which are continually contending as to jurisdiction.”637 By April 23, when the time for deposits expired, the reorganization committee was able to announce that it held over 92½ per cent in amount of general, second, and third mortgage bonds, dividend certificates, consolidated mortgage bonds, collateral trust notes, preferred stock, common stock, northwest equipment stock, and Northern Pacific and Montana first mortgage bonds, and that the plan and agreement was therefore declared operative.638 By June a majority of the first mortgage bonds had been secured, and it was announced that after June 30 the basis of conversion of this issue would be reduced from 135 to 132 per cent in new 4 per cent prior lien bonds. On July 24 the Northern Pacific Railway filed its articles of incorporation at St. Paul, Minnesota, and the next day the sale of the property took place, in spite of suits by the general creditors and the preferred stockholders. The sale was in three parcels, and the property was bid in for $12,500,000 by Mr. Winter, the newly elected president. After the first sale the company’s lands in Wisconsin were offered and bid in for $575,000, and two days later the lands west of the Missouri were bought in for sums aggregating $600,000. Finally, on August 4, the lands in Washington and Oregon were bought in for $1,705,200 and $558,000 respectively. The property of the company was turned over by the receivers to the reorganization committee at midnight, August 31, and on November 7 the final step in the reorganization plan was taken by the formal authorization by the stockholders of the issue of $190,000,000 of bonds.639

From 1896 to the present time the Northern Pacific has enjoyed a development scarcely less noteworthy than that of the Union Pacific. Gross earnings have increased from $23,679,718 in 1898, the first full year after the receivership, to $68,534,832 in 1907; net revenue from $13,471,544 to $33,208,840; and mileage from 4350 to 5444. Gross earnings per mile were $5443 in 1898; they were $12,590 in 1907. The retirement of the eastern terminus of the system from Chicago to St. Paul and Minneapolis was accomplished in the course of 1897 by arrangement for connection with the Chicago & Northwestern instead of with the Wisconsin Central, and the sale of the certificates of proprietary interest in the Chicago Terminal Transfer Railroad received by the Northern Pacific under the Chicago & Northern Pacific plan of reorganization; while the improvement of the position of the new mortgages has been vigorously prosecuted by the rapid drawing for redemption of old first mortgage bonds at 110, and by the calling of the entire issue of the Missouri division bonds at par and accrued interest.

In the years following 1897 large sums have been spent for betterments and enlargements. Some $68,500,000 have been invested from the proceeds of the sale of prior lien bonds and of miscellaneous assets, and over $18,000,000 have been temporarily withdrawn from income for the same purpose.640 Grades have been reduced, lines straightened, new branches built, real estate acquired, track relaid and ballasted, bridges strengthened and renewed, equipment rebuilt and increased in amount, and other similar betterments undertaken. It is a work which all the great American systems have carried on, but the Northern Pacific has surpassed even the Union Pacific in the extent of its operations. Ordinary maintenance requirements have not meanwhile been neglected, and in 1906 and 1907 the Northern Pacific set aside $2,000,000 for depreciation of equipment, which is over and above the other sums which have been mentioned. The company owned 1255 locomotives on June 30, 1907, of an average weight of 174,000 pounds; in 1898 it had owned 542 of an average weight of 104,000 pounds. It had 42,000 freight cars in 1907 with an average capacity of over 33 tons; it had possessed 18,500 in 1898 of an average capacity of 22 tons. Seventy-five per cent of the main line was laid with track of 72 pounds or over in 1906, but only thirteen per cent in 1898. In consequence heavier trains are run,641 at a less expense per ton, and the net revenue is correspondingly increased. Even the liberal expenditures which have hitherto been made are insufficient, however, for present conditions, and the stockholders have approved a proposal to issue $93,000,000 of new common stock at par for the purpose of extending the Northern Pacific’s mileage and facilities.642

The endeavor to stimulate traffic to fill the trains has led to important developments. In order to increase the exchange of commodities between their territory and the Middle West, to establish stable conditions on transcontinental business and thereby to secure back loading for their cars, the Great Northern and Northern Pacific in 1901 arranged for the purchase of the Burlington system which connected both their lines with Chicago. The refusal to share their purchase with Mr. Harriman led to the competitive purchase of Northern Pacific stock by rival interests, and to the retirement of the Northern Pacific preferred, but did not prevent the consummation of the deal.643 This purchase has been a profitable one. The Burlington has paid in dividends upon its stock almost enough to cover the interest on the bonds issued to acquire it, and the indirect effects of its control have satisfied expectations. Indeed, the east-bound lumber traffic has so developed that the Great Northern has recently raised its lumber rates in order once more to equalize east- and west-bound shipments.

The Northern Pacific has been openly dominated by the Hill-Morgan interests for the last six years, and probably has been under their control since its reorganization. From the financial as well as from the traffic point of view its position is secure. The voting trust was dissolved in 1901 “by reason,” in the words of the trustees, “of the evidence of financial strength, conservative management, skilful and profitable operation, superior physical condition of the property, and the reasonable prospect of continued prosperity.”644 In 1907, out of a net income of $33,208,840 only $9,575,183 were paid out for interest, rentals, and taxes, and $23,473,929 were left for dividends, improvements, and reserve. This whole sum, which amounts to 33 per cent of gross income, is available as a protection for the mortgage bonds; and a considerable portion could be dispensed with without forcing a decrease in the present rate of dividends.645 It is likely that the coming years will see a check in the advance of national prosperity, but the Northern Pacific is in excellent condition to stand the strain.