The Wheeling daily intelligencer. [volume] (Wheeling, W. Va.) 1865-1903, 1869-04-02
WATERING RAILROAD STOCKS.

" a
From the NelV York Independent.
The railroad system in the United
States, mainly the growth of the last
thirty years, has become vast power
of convenience and benefit to the coun-
try, Already about 40, 900 miles of rail-
roads have been built, at an average
cost of Sal, 900 per mile, and an aggre-
gate cost of Sl.G40.000, 600. The gross
revenue to the corporators for the last
year was $3.50, 100000. OF this amount
20 per cont. was absorbed in operating
expenses and Keeping tho roads In re-
pair, and 80 per cent. was the return on
capital invested and risks incurred
This gives about 16 per cent. as the net
profit on the total investment, 1t
should be remembered that railroads
in themselves considered, add nothing
to the intrinsic wealth of the country:
they carry, but do not produce, or
change the quantity or quality of what
they carry; and hence the $3.50, 900, 600
paid into the treasury constitute the
tax levied by them upon production
and travel, which must at last be paid
out of the earnings OF the people.
The system concentrates vast
amount Of profitable wealth in u few
hands, and places 1t under the control
and management of legs number of
persons. The people, though greatly
accommodated and benefited by it,
have the inalienable right so to regu'
late the administration of railroads as
to limit their income to q reasonable
amount, to prevent frauds, and guard
themselves against expensive compe-
titiOns where Al single road is abundant
ly adequate to all the necessities OF
travel and business. They are the
creatures of law, and ought TO be gov
erued by law for the protection OF the
general public.
In 1911, Parliament limited the pro-
fits OF railroads in England 10 Ten per
cent. on the capital, and required the
charges to be reduced to this rate. 10
evade this law, the plan of aUGtc1Ing
railroad StOCkS-Or issuing an increased
number of shares without any corres-
pOnding increase in the invested capt
tal-waa first invented in England.
England has the honor or the lhNeh-
tiou; and this country has not been
slow To take the hint. We submit two
or three statements of fhct TO snow how
this watering system works:
The Pittsbulg, Fort Wayne and
Chicago Railroad, as consolidated, has
Il capital stock purporting to represent
ita cost to tho amount OF SIS 6G3 SIJ; ana
yet the shareholders PAID III cash only
about 81, 900, 600 of this amount, ana
their contribution in bonds, lands, ect.,
was only about 81 900, 0,O00-making In
the aggregate 81, 100000. The difference
between this amount and the present
capital stock OF the road has been Tor the
most part made up by dividends paid
in stocks i; which, of course, waIered the
original stock. The Reading Railroad
was, in 1913, represented by capital
stock and Indebtedness to the amount
of 81, Ill ,292 and in 1860 II had reached
S24, l6l, $50, and now amounts 10 the
round sum OF O,000 900. Eric Kali
road has run its capital stock, common non
and preferred, from 6.5OO.O0O in 1856
up TO SGT, ,3O2 ,2lO in March, lS69. rms
increase OF S49, ,SO2,2l0 in about three
years is one of tho most audaclous acts
of modern times. The capital stock OF
twenty.one railroads, quoted at the
Stock Exchange in New York has
been increased from 1857, 81 ,4Sl in lS6Z
to S2G5, ,S25, ,149 in 1867, or at the
rate OF Si.rty-tfUc per cent M FOc
ueaTS, 1t is estimated that the increase
0t RAILWAY stock dealt i'll at the New
York Stock Exchange has been some
S.l5, 900, GOO within the past three years.
The great underlying secret at the Dol
tom of these facts is the system OF 'C@-
tcrinQ stocks i'll the interests OF specuia-
tors and managers, and TO the damage
and increased taxation OF the puollc'
Railroads in this way are made 10 rep
resent MI amount of capital that far ex-
ceeds the actual investment; and an eX.
cessiVo transportation tax Is imposed
upon the people to pay dividends on in
tlated stocks.
The recent movements of the Erie
manarers ought to awaken the ntten-
tion Of the people to this whole subject.
Railroads are II blessing to the country;
but the system of aCatcrimg OF stocks
ought to be broken up by stringent and
severe legislation. 1t is generally, al
though not always, perhaps, a system
of plumber, by which few men enfich
themselves.