Wichita eagle., 1889-05-22
RAILROAD BUILDING.
How 1t Is Made an fundamentally Il
Robhing the People.

How 1t Is Made an 1nstrumentauty 1o0
Robbfng the People.
The need OF the country for in.
creased railway facilities is not the
reason why 14.S16 miles of new road
have been placed under construction
or contracted for in the first three
months of the present year. The IA
cilities which the issue of new bonds
and stocks offers to spectators to
make money easily is the true explain.
alton of this large increase in mile
age. For every thousand dollars Inc
vested in one of these enterprises, on
an average, bonds and stocks are is
sued representing three times that
amount. These are foated by banking
houses. and then follows struggle to
make the roads earn the fixed charges
and pay a dividend. This effort is
rarely successful, and if it does sue
coed it is at the expense OF fairness
and honesty. Shippers and passen-
gers are charged excessive rates to
pay interest on bonds that do not rep
resent an actual outlay or dividends
on watered stock. But the projectors
of the road reaped their harvest when
these bonds and stocks were marketed,
and they are ready to go On repeating
these tactics as long as they can mar
ket their goods.
The people who are misled into in
vesting their money in these enter
prises are not the only ones TO suffer.
The stockholders in old established
lines are injured by the cut-throat
competition of these speculative roads.
The railroads of the country are now
experiencing the disastrous effects Of
this kind of business. 1t was thought
few months ago that it had been
checked by the promise of reputable
bankers to discountenance the efforts
to market the securities of new enter
prises of this character. But this
proves not to be the case,
as during the first three
months of this year 666 new
lines have been chartered, with con-
templated mileage Of 53. 436 miles, OF
which nearly $1,000 miles are under
contract. Probably the greater part
of this mileage will return fair in
terest on the actual investment. What
is needed more than any thing else is
legislation to prevent the issue OF
bonds and stocks above the actual cost
of constructing and equipping a rail-
road. This is where the trouble comes
in.
Few persons realize the enormous
and perpetual burden imposed on the
people of this country by this system
of .overcapitalization. Mr. Henry
V. Poor, recognized authority on
railroad statistics, estimated that of
the capital stock, bonds and other evil
dences of Indebtedness issued by the
railroads Of this country, amounting
at the close of 1883 to 81, 495, All 81 at
least s., 900, 900, 600 represented what is
known as ''watered stock Another
estimate based on the returns up to 1886
placed this watered stock at 5000, 000,-
600. The people of this country are
paying hundreds of millions of dollars
in the way of dividends and interest
on these fictitious securities. And yet.
instead of this species of fraud having
suffered check, it seems to be on the
increase. Pennsylvania is one Of the
few States that have legislated wisely
on this subject 1t is shameful that
a vital necessity to the whole country
like railroads should be made an in
strumentality in the hands of few
persons for the systematic robbery OF
the people.-Philadelphia Press.