675 A consolidation in 1905 of the Arkansas Southern Railroad Company, the Arkansas & Louisiana Railroad Company, and the Little Rock & Southern Railroad Company. See the Annual Report of the Chicago, Rock Island & Pacific Railroad Company for 1906.

676 See letter from Mr. C. W. Hilliard, vice-president of the Colorado Southern, New Orleans & Pacific Railroad, and comptroller of the St. Louis & San Francisco Railroad Company, in Chron. 84:507, 1907.

677 After October, 1906.

678 Ry. World, 51:531, 1907.

679 Chron. 85:468, 1907.

680

Carl Snyder, American Railroads as Investments (N. Y., The Moody Corporation, 1907), offers, inter alia, an analysis of the results of operation of the railroads considered in the text.

681 The lien of a floating debt is inferior to that of a bond when unsecured, except as it represents arrears of wages and payment for supplies. But it is usually very well secured.

682 In the case of the Rock Island in 1902 there was no floating debt to be considered, while in 1885 the Erie funded overdue coupons and issued a 6 per cent mortgage on its Jersey City terminals to cover accumulated liabilities, but did not disturb its outstanding mortgage bonds, and cannot, therefore, be said to have reorganized.

683 This was, in fact, a prominent feature of the reorganizations between 1893 and 1898. The Atchison surrendered the St. Louis & San Francisco; the Erie absorbed the New York, Pennsylvania & Ohio into its system instead of continuing the lease thereof; the Northern Pacific surrendered the lease of the Wisconsin Central and cancelled various unprofitable traffic contracts and traffic agreements; the Reading gave up the Lehigh Valley and its New England extensions; the Southern reduced its mileage by over one-half; and the Union Pacific shrunk from 7674 miles in 1892 to 5399 in 1899.

684 See Interstate Commerce Commission: In the Matter of Consolidations and Combinations of Carriers, etc., 12 I. C. C. Rep. 319.

685 Testimony of C. F. Adams, United States Pacific Railway Commission Report, 1887, vol. 1, p. 45.

686 “It is only by the fullest knowledge of the affairs of the company that a correct judgment of the best manner of meeting its wants can be formed, and there is no other practicable way to manage the business of the company to its best advantage than for the stockholders to elect directors worthy of confidence, and to leave the management to them.” Annual Report, 1887, Robert Harris, President.

687 In the case of the Atchison, old income bonds were retired by new second mortgage bonds, with the result that the aggregate value of creditors’ holdings was largely increased.

688 Speech at Columbus, Ohio, August 19, 1907.

689 Forum, September, 1890, and March, 1894.

690 The percentages for the Atchison are corrected according to the report of Mr. Little. Owing to the lack of available detail it has been necessary to increase operating expenses by the total amount of the errors which he discovered, and this figure is, therefore, unduly inflated.

691 In 1893, after the Northern Pacific failure, the consolidated 5 per cent bondholders formed a committee; Mr. Brayton Ives invited bondholders to send in their names and addresses to him (1894); and later in 1894 the falling off in the railroad’s earnings induced the formation of the Livingston and Van Nostrand committees, and the announcement of the consolidated committee that it would accept the deposit of second and third mortgage bonds. Finally, within four months after the Atchison failure of 1893, four important reorganization committees were asking for deposits in the United States and one was soliciting deposits in London.

692 The officers of bankrupt roads have no need of committees to make their wishes known, but only so far as they are bondholders, or in so far as they can influence bondholders by argument do their opinions carry weight. President Ives of the Northern Pacific in 1893 was able to use his position to fight his opponents through the courts, and secured besides appointment on a stockholders’ protective committee, but exercised no great influence on the reorganization; President Jewett, of the Erie, gained the confidence of the visiting committee of English bondholders in 1875, and had some voice accorded him; but generally speaking officers have to rest content if they can successfully defend themselves against charges of inefficiency and mismanagement. They are, in fact, both the choice and the representatives of the stockholders, and the stockholders having no authority in the event of bankruptcy can delegate none. Officers of the courts which are in control of bankrupt railroads enjoy sometimes a different position from officers of the corporations themselves, in that they do not represent or depend on stockholders, and may not be connected with the circumstances which have caused the ruin of the road. Thus the receivers of the Union Pacific in the nineties were called to testify before Congressional committees, and those of the Erie chose a committee which prepared the first reorganization plan suggested, but in both cases the functions of the court officers were purely advisory, and so they must always be.

693 In 1895 the final Atchison reorganization plan announced the following arrangement: “A contract has been made with a syndicate to furnish an amount of money equal to the assessments of non-assenting or defaulting stockholders, and such syndicate, by such payment, shall take the place of the non-assenting or defaulting stockholders, and shall be entitled to receive the new common and preferred stock, which non-assenting or defaulting stockholders would have been entitled to receive if they had deposited their stock and paid their assessment in full. Syndicates may also be formed to furnish the money needed, in case of foreclosure, to pay the non-assenting bondholders their pro rata share of the proceeds of sale, and to advance any cash which may be required during the reorganization and for other purposes.” Chron. 60:658–62, 1895. The reorganization plan of the Baltimore & Ohio in 1898 contained the following: “A syndicate has been formed ... which agrees: 1st, To purchase $6,975,000 of the new preferred stock, and $30,250,000 of the new common stock, and to offer the same for sale to depositing holders of old 1st and 2d preferred and common stock of the Baltimore & Ohio Railroad Company.... 2d, To purchase $9,000,000 3½ per cent prior lien bonds; $12,450,000 1st mortgage 4 per cent bonds; $16,450,000 preferred stock. 3d, To protect the new company in the ownership and possession of the properties covered by $49,974,098 ... of the existing mortgage bonds of the old company of different issues by agreeing to purchase from the new company the new securities not taken, but to which the holders of such bonds would have been entitled if depositing under the plan, at a price equal to the principal of the respective old securities, and also to make advances and perform other obligations essential for the purposes of the plan.” Poor’s Manual, 1898, p. 1381. Similar provisions appear in the plans of the Erie, the Northern Pacific, the Reading, the Southern, and the Union Pacific.

694 In 1894.

695 H. V. Poor (Manual, 1900) compiles the following statement for 57 selected companies reorganized between 1886 and 1898:

Securities provided for other corporate purposes of new companies

696 Where stock- or bondholders are compelled to subscribe to an issue of new securities the operation becomes an assessment and not a sale.

697 Among the reorganizations of the eighties, for instance, the Denver & Rio Grande levied $8 per share in 1885 upon its $38,000,000 common stock; the Pittsburgh & Western assessed its common stock 4 per cent in 1887; the New York, Chicago & St. Louis assessed its common $10, and its preferred an equal sum; and the Central Iowa levied 2½ per cent on its debt certificates, 5 per cent on its 1st preferred stock, 10 per cent on its 2d preferred, and 15 per cent on its common. See Chron. 40:480; Ibid. 44:212, 370, 653.

698 A syndicate guaranteed the assessment in each case between 1893 and 1898. The Reading assessment is calculated on a par of $100.

699 The assessments before 1893 were as follows: The Erie levied 2½ per cent on its common and preferred in 1859, and a minimum of $4 on its common and $2 on its preferred in 1877, with no allowance of new securities in either case. The East Tennessee assessed its common stock 6 per cent and its income mortgage 5 per cent in 1886, and gave to the one a corresponding amount of 2d preferred, and to the other of 1st preferred stock. The Reading assessments in 1886 ranged from 2½ per cent on the deferred incomes to 15 per cent on certain junior securities, with an assessment of $10 on both classes of stock. Preferred stock was given for all assessments up to the full amount of the sums taken.

700 The quotations six months after reorganization are for the combined securities given in exchange for the old preferred stock. In the case of the Baltimore & Ohio e. g., this was 150 per cent in new common; for the Northern Pacific it was 50 per cent new common and 50 per cent new preferred. Only $5,000,000 of Baltimore & Ohio preferred stock were outstanding before the reorganization of 1898, and no record of quotations can be found. Quotations are similarly unobtainable for the Reading in 1886.

701 The very large increase in the Baltimore & Ohio quotations was doubtless due to the lateness of the reorganization.

702 Chron. Investors’ Supplement, January, 1894.

703 Ibid. 62:641, 1896.

704 Chron. 45:792, 1887 (reorganization plan). See also Chron. 49:269, 1889.

705 Pages 84–5, supra.

706 Chron. 50:141, 1890.

707 Ibid. 58:762, 1894.

708 Chron. 62:829, 1896. Poor states in his Manual for 1900 that of $96,094,960 of assessments levied on securities of fifty-seven selected companies, $86,972,703 were on stock and $9,122,257 on bonds.

709 The figure of $9,043,944 is the true figure for the Reading fixed charges after reorganization, eliminating duplications. In computing the percentage of charges to earnings in 1898, however, the unrefined figure of $12,210,291 is used in connection with a similarly unrefined figure of earnings.

710 The reorganizations omitted are those of the Union Pacific in 1880, which did not alter fixed charges, and of the Erie in 1859 and the Northern Pacific in 1875, for which precise figures are not available. In this last charges were almost entirely removed; its exclusion, therefore, tends to lessen the percentage of reduction shown for the reorganizations before 1893.

711 The six reorganizations before 1893 include that of the Atchison in 1892, which was not caused by inability to earn charges, and consequently made no attempt to lower their figure. Excluding this reorganization, the reductions in charges before 1893 overbalanced the increases. H. V. Poor calculates the absolute reduction in fixed charges for sixty-eight railroads reorganized between 1885 and 1897 at $24,007,490. (Manual, 1900, p. cvi.)

712 The decrease in charges per mile for the Reading in 1880 was due, not to any reduction in charges, but to an increase in mileage through the lease of the Central Railroad of New Jersey. In this case the increase in absolute charges better represents the real effect of the reorganization.

713 It is perhaps unnecessary to warn the reader that these tables can be taken as generally indicative only. The percentage of charges to earnings varies not only with charges but with earnings; and an increase or decrease in the latter may conceal a decidedly contrary movement in the former. Since the reorganizations were accomplished at different dates the error is not in all cases in the same direction, and in particular the percentage of charges to earnings for one road cannot be compared with the percentage for another. The figures of charges per mile of line are somewhat more reliable, but are nevertheless to be used with care. Different railroads report their mileage differently, and it has not been possible in all cases to use the homogeneous figure of mileage operated. Further, the significance of high charges per mile varies with the character of the mileage. A reorganization which lops off many unprofitable branch lines may conceivably cause thereby an increase in the charges per mile of road remaining, and yet place the system in a much stronger position than before. This difficulty disappears if the figure of charges per mile be used in connection with the percentage of charges to earnings, and in general the three columns given correct each other.

714 These figures do not include the comparatively small amount of bonds for which no interest rate was specified.

715 Income bonds sometimes, though rarely, possess the right to vote.

716 E. S. Meade, Annals Amer. Acad. Pol. and Soc. Sci. March, 1901.

717 The figure for the Reading in 1880 is affected by the lease of the Central of New Jersey, which took place simultaneously with the reorganization. Excluding the increase in rentals, the remaining increase in fixed charges amounted to only 9.5 per cent. The East Tennessee reported no rentals in either 1885 or in 1887. The data for the Southern Railway are not in such shape that rentals and interest can be compared. Its reorganization reduced rentals, however, very greatly.

718 The 32 per cent paid has been included under rentals.

719 Government Debt.

720 In considering the capitalization of the Erie before and after the reorganization of 1895 the securities of the New York, Pennsylvania & Ohio have been excluded.

721 The difficulties which prevent wider extension of these tables consist partly in the absence of quotations for certain classes of bonds, and partly in the lack of sufficiently detailed and precise information in some of the early reorganization plans. Thus there are no quotations recorded in 1874–5 for the 2d consols and convertible bonds of the Erie Railroad which were disturbed by the subsequent reorganization; and no detailed figures of the exchange of new bonds for old appear in the reports of the reorganization plans of the Reading in 1881–3, and of the Northern Pacific in 1875. The reorganization of the Union Pacific and of the Chicago, Rock Island & Pacific in 1880 did not disturb the bonds outstanding.

722 The twenty-six railroads are as follows: Canad. Pac.; Canad. So.; C. & O.; C., B. & Q.; C. & E. I.; C., M. & St. P.; C. & N. W.; C., R. I. & P.; C., C., C. & St. L.; D., L. & W.; Ill. C.; L. S. & M. S.; L. & N.; Manh. El.; Mich. C.; M., K. & T.; Mo. Pac.; Mob. & O.; N. Y. C. & H. R.; N. Y., O. & W.; So. Pac.; Wabash; Tex. & P.; C. of N. J.; L. E. & W.; St. P., M. & M.

723 The securities in the table are taken from the following companies: St. P., M. & M.; Wabash; N. Y. C.; C., B. & Q.; C., M. & St. P.; L. & N.; D., L. & W.; Penna.; W. U. Tel.; B., R. & P.; Can. So.; Long I.; P. C. C. & St. L.; Tex. & P.; C. & N. W.; I. C.; C. & E. I.

724 See Annual Report for 1906.

725 Chron. 54:369, 1892.

726 Investors’ Supplement, April, 1897; Chron. 62:41.

727 Chron. Investors’ Supplement, April, 1897.

728 Chron. 79:2087, 1904.

729 161 U. S. 647.

730 138 U. S. 84.

731 New York, 1879.

732 49th Congress, 1st Session, Senate Report, No. 42.

733 42d Congress, 3d Session, House Reports, No. 77.

734 50th Congress, 1st Session, Senate Executive Document No. 51.

735 54th Congress, 1st Session, Senate Document No. 314.

736 58th Congress, 3d Session, hearings before the Committee on Interstate Commerce, United States Senate, in Special Session, 1905.

737 Memoirs of Henry Villard, 1835–1900. Boston, 1904.

738 Ellis Paxon Oberholtzer, Life of Jay Cooke. Philadelphia, 1907.

739 H. G. Pearson, An American Railroad Builder. John Murray Forbes. Boston and New York, 1911.

740 Bouck White, The Book of Daniel Drew. New York, 1910.

741 C. M. Depew, A Retrospect of Twenty-five Years with the New York Central Railroad and its Allied Lines. New York, 1892.

742 Hazard Stevens, The Life of Isaac Ingalls Stevens by his Son. Boston, 1900.

743 Annals of the American Academy for Political and Social Science, March, 1901.

744 Forum, September, 1890, and March, 1894.

745 Die Bank, July, 1911.

746 Quarterly Journal of Economics, November, 1911.

747 H. H. Swain, Economic Aspects of Railroad Receiverships, Economic Studies of the American Economic Association, April, 1898.

748 John P. Davis, History of the Union Pacific Railroad. Chicago, 1894.

749 Alfred von der Leyen, Die Finanz-und Verkehrspolitik der Nordamerikanischen Eisenbahnen, 2d ed., Berlin, 1895.

750 I. H. Bromley, Pacific Railroad Legislation. Boston, 1886.

751 J. F. Dillon, Pacific Railroad Laws. New York, 1890.

752 J. B. Crawford, The Crédit Mobilier of America. Boston, 1880.

753 Rowland Hazard, The Crédit Mobilier of America. Providence, 1881.

754 Henry Kirke White, History of the Union Pacific Railroad. Economic Studies of the University of Chicago, 1895.

755 Hugo R. Meyer, The Settlements with the Pacific Railways. Quarterly Journal of Economics, July, 1899.

756 T. W. Mitchell, The Growth of the Union Pacific and its Financial Operations. Quarterly Journal of Economics, August, 1907.

757 W. F. Bailey, The Story of the First Trans-Continental Railroad, its Projectors, Construction, and History. Pittsburg, 1906.

758 John R. Robinson, The Octopus. A History of the Construction, Conspiracies, Extortions, Robberies, and Villainous Acts of the Central Pacific, the Union Pacific, and Other Subsidized Railroads. San Francisco, 1894.

759 E. H. Mott, Between the Ocean and the Lakes; the Story of Erie. New York, 1899.

760 Charles Francis and Henry Adams, Chapters of Erie and Other Essays. Boston, 1871.

761 George Crouch, Another Chapter of Erie. New York, 1869.

762 Milton Reizenstein, Economic History of the Baltimore & Ohio, 1827–53. Johns Hopkins University Studies, July-August, 1897.

763 W. P. Smith, The Book of the Great Railway Celebrations of 1857. New York, 1858.

764 Laws, Ordinances, and Documents Relating to the Baltimore & Ohio Railroad Company. Baltimore, 1840.

765 E. V. Smalley, History of the Northern Pacific Railroads. New York, 1883.

766 B. H. Meyer, A History of the Northern Securities Case. Bulletin of the University of Wisconsin, July, 1906.

767 Alfred von der Leyen, v. supra.

768 W. W. Chapman, The Northern Pacific Railroad. Washington, 1880.

769 Robert von Schlagintweit, Die Santa Fe und Sudpacificbahn in Nordamerika. Köln, 1884.

770 W. B. Wilson, History of the Pennsylvania Railroad Company. Philadelphia, 1899.

771 T. K. Worthington, Historical Sketch of the Finances of Pennsylvania. Publications of the American Economic Association, May, 1887.

772 A. L. Bishop, The State Works of Pennsylvania. Publications of Yale University, New Haven, 1907.

773 W. K. Ackerman, Historical Sketch of the Illinois Central Railroad. Chicago, 1890.

774 J. H. Hollander, The Cincinnati Southern Railway: A Study in Municipal Activity. Johns Hopkins University Studies, January-February, 1894.

775 E. A. Ferguson (Compiler), Founding of the Cincinnati Southern Railway; with an Autobiographical Sketch. Cincinnati, 1905.

776 Charles S. Potts, Railroad Transportation in Texas. Bulletin of the University of Texas, Humanistic Series, March 1, 1909.

777 P. Briscoe, The First Texas Railroad. Texas Historical Association Quarterly, Austin, 1904.

778 Chicago, 1905.

779 E. B. Hinsdale, History of the Long Island Railroad. New York, 1898.

780 Judson W. Bishop, History of the St. Paul and Sioux City Railroad, 1864–1881. Minnesota Historical Society, Collections, vol. x, pp. 399–415. St. Paul, 1905.

781 George Bliss, Historical Memoir of the Western Railroad. Springfield, 1863.

782 Cary, Organization and History of the Chicago, Milwaukee & St. Paul Railroad Company. Milwaukee, 1893.

783 U. B. Phillips, A History of Transportation in the Eastern Cotton Belt to 1860. New York, 1908.

784 George Francis Train, My Life in Many States and in Foreign Lands. New York, 1902.

785 G. H. Smyth, The Life of Henry Bradley Plant, Founder and President of the Plant System of Railroads and Steamships and also of the Southern Express Company. New York and London, 1898.

786 S. F. Van Oss, American Railroads as Investments. New York, 1893.

787 Carl Snyder, American Railways as Investments. New York, 1907.

788 Charles F. Carter, When Railroads were New. New York, 1909.

789 F. H. Spearman, The Strategy of Great Railroads. New York, 1904.

790 Philadelphia, 1888.

791 New York, 1887.