Fort Worth daily gazette. (Fort Worth, Tex.) 1882-1891, 1886-07-21
..WATERED" STOCK

that there shall be no watering OF stock
In the construction Of railroads. and
there Is more good sense 10 this PROPOSE
ton than IN any other advanced by that
element II Is, primarily, one OF the
doctrines Of the knights Of Labor, who
are the principal sufferers from watered
railroad stock and the knights have
pressed the question upon the country
until people have begun TO Investigate,
and have learned Of rs perncIous effects
II immediately affects the knights, who
compose most Of the working force on
the railroads, by making the fixed charges
Of the roads heavier; and as those
charges can be met only by the earnings
Of the road, any increase H. them dimin.
ishes the amount remaining 70 be paid IN
salaries. Therefore "cuts" In the wages
Of the workmen.
This question has become Of serious
enough importance in Texas to lead a
prominent candidate for United States
senator 10 make IL the chief issue In his
campaign. lie announces II as his inten-
tlon, ii elected, TO use his influence and
vote 10 secure the passage Of laws that
will squeeze the water" out Of such &C.
tltiously enlarged stock, and prohibit
such methods in the future. The legisla-
ture 70 be elected this fall will have TO
deal with the same matte, and the tenn
per Of the people leaves no doubt that
there will be strong feeling in the legis-
iature TO use radical measures toward
what 10 considered an evil Of the times.
We may expect some extreme legislation
upon IL that will, perhaps, swing as much
too far IN the opposite direction as we
have gone IN the way Of lenleDcy toward
corporations.
Henry Clews, the eminent tinancier,
thought the matter of Importance enough
to go ont Of his way, In the course of
Fourth Of July address, and conAne him
self almost entirely to this one topic OF
watered stock--a very extraordinary
topic, indeed, for Fourth Of July ora
tlon. In the course Of his remarks, he
explained the meaning and process Of
"Watering" stock, In this wise: "Under
the laws Of the state OF New York-which
are a fair example Of the laws OF most
other states-a number Of persons form a
company, under the general railroad
laws registering at Albany the proposed
rou,e Of the road, the amount Of capital
stock and bonds to be Issued, and few
other particulars in the articles OF lncor-
poratlon. The lncorporators then pro-
coed 20 form themselves into syndicate
OF company, for the purpose of contract
ing TO build and equip the road. Here
comes the first step in the system Of
crooked hnancierlng. In their capacity
Of incorporators the same men
make contract with themselves
in the capacity Of constructors. OF
course, they do not fall to make
a bargain 10 suit their own interests
They would be more than human If they
did not. Usually the bargain Is that the
construction company undertakes &c
build the road for 30 to 100 per cent. Of
the face value Of the first mortgage bondi
with an equal amount Of stock, and some
times also an equal amount OF seconC
mortgage thrown in, virtually withou
cons Iteration The first mortgages ar,
supposed to represent the real cash out
lay on the construction and equipment
but az a matter OF fact the true cash COS
OF the work done and materials furnishe,
ranges from 60 TO 80 per cent. OF tn
amount OF first lien transferred to Tn
constructors. The construction compan,
disposes uf the bonds, partly by negotla
ting their sale to the public, throug
bankers, at an advance upon the valuu
ton at which they had received them
! and partly by using them In payment TO
rails and equipments. Beyond the profit
made from building the road for the tlrs
Z mortgage bonds there remains In tn
r hands Of the constructors the entire capl
Q tai stock anG any second mortgage bond
they may have received, as clea
bonus"
: This IS the way large majority OF on
: railroads are constructed, II will thus b
. seen that the actual cash cost OF raj
= road is ordinarily less than 90 per cent
a Of the stock and bonds issued against tn
h property. That is, the road cost aboI
half the amount 1t is capitalized for, an
a upon this capital 1t is expected to pay
a dividend. II II pays this dividend It doe
n so at the expense OF the men who wor
the road. This, then, is the grievance {
the knights OF Labor; and who shall "a
/ that II Is entirely without foundations
q
DELAYED THE FATAL DAY.