Litchfield enquirer., 1879-02-27
That Novel Railroad Law.


 of the railroad law, enacted last year, which was the subject of Judge Catlin's weIl-deserv- ed satire, you say in your issue of the 18th inst that ''lt was intended to prevent railroads from watering their stock"
 If such was the intent of the author of the law that intention should appear either in the title or the text of the act and the idea might have been expressed in a very few words. The constitution of the state of Illinois pro- vides that no railroad company shall issue stock or bonds for a greater amount than the money, materials and labor received ana used for the purpose for which the company was organized and that all stock dividends ana othor issaee of fictitious capital stock shall be void. The intent of this constitutional pro vision is apparent. It is expressed in less than five llnes while the law referred to con- tans five sections, and requires anexplanatlon from it's author before we can discover his ob- feet in having it enacted. But, granting that it was the intent of the author of the law to prevent railroads companies from watering their stock let us see whether the law, itself, will accomplish the professed object of it's au- thor.
 Take, for instance, the New Haven and Northampton company Commonly known as the Canal road). This company is authorized by it's charter to issue $5.000 900 of capita stock. it has, as yet issued only B, 500, 900 and has the right to issue $5 400, 900 more. Its charter, as amended in 1872, authorizes $2 000 900 of it's stock ''to be issued in such manner as the directors of the company shall determine" Un Ter this clause nearly $6o,- 000 of watered capital has already been issued, and the company had the right to issue at least $1 400 900 more Now unless it can be shown that this provision of the charter of the company was repealed by the law referre'l to. it must be admitted that, in this case, at least, the law is a failure. But let us take compa- ny which has already issued the full amount of capital authorized by it's charter-the New York, New Haven and Hartford for instance. suppose it should come before the present General Assembly, and ask for the privilege of increasing its capital (now fifteen and a half millions to twenty five millions, and give as reason for it's application, that it's road and other corporate property, as shown by the market value, of it's stock, is worth full twen- ty-fve millions; and suppose, further, that the legislature should authorize the increase, and enact that the new stock might 'be issued in such manner as the directors of the compa- ny shall determine; ;" would not the issue of stock under authority thus granted be valid even though the railroad commissioners had not given the General Assembly a license to act in the premises? Further, if Gas the rall- road commissioners, themselves, have claimed) the right to issue stock, 'in such manner as the directors of a company shall determine carries with it the right to issue watered stock ''unwarranted by bona fde investments, " would not this company have full power to pour nine and half millions more of watered capital on to the market?
 The law of last year, or rather the author of 1t, proceeded upon the theory that our three railroad commissioners are, and will, be more intelligent and more virtuous than the nin e OI 1AC liIodN C0AiuliepCO, OAs III fact, than the two hundred and sixty members of the Senate and House of Repre- sentatives He assumed that these, fresh from the people might be reduced into licens- ing the issue of fictitious railroad stock, and therefore they would need the guidance and re- strainng influence of the railroad commission CTS of who have ever lived in an atmosphere free from temptation and are so very innocent that, to this day, they verify believe that "wa- tered capital" and capital actually paid in'' are synonymous terms
 If the well known author of this law seri- ously desires to prevent the issue of watered capital he can accomplish his object by secur- ing the adoption of constitutional amend ment similar to the provision in the constitu- tien of Illinois to which reference has already been made. No law can be enacted to pre- vent ''the vicious practice" which may not be openly repealed by another law or covertly circumvented by special charter subsequent ly granted. The only preventive is consti- tutional amendment such as is now pending before the General Assembly. H. L.. G.
 East Hartford, Feb. 17th, 1879.