360 Kansas Academy of Science. 



The speaker knows of one railroad being built that is bonded for 

 a certain amount per mile, and when a man buys a $1000 bond he 

 also receives $400 in common and $400 in preferred stock, which 

 means that four-ninths, or almost one-half, of the entire capital 

 stock is water. 



The ninteenth annual report of the Board of Railroad Commis- 

 sioners of Kansas gives the entire capital (which is the stock plus 

 all outstanding indebtedness) per mile for the Santa Fe as $51,474, 

 Rock Island, $44,196, and the Union Pacific, $133,535. From these 

 figures one is easily persuaded that all railroad stocks are watered. 

 At this point the question naturally arises, Shall the capital stock 

 of railways and the dividends thereon be limited ? If so, to what 

 amount, and what shall become of all earnings in excess of a speci- 

 fied amount ? 



The speaker can only give his views on this subject, but he be- 

 lieves that they should be limited to an amount such that the money 

 received from the sale of stock and bonds will just be sufficient to 

 build and equip the line. Also, that the minimum price at which 

 the stock and bonds are to be sold should be controlled ,by the 

 government. 



In order to accomplish these things in the simplest manner, I 

 would suggest that all railroads be placed in charge of the federal 

 government, and directly under the Interstate Commerce Commis- 

 sion, and that all state railroad commissions be abolished. Then, 

 before any company could build a new line, or make any improve- 

 ments on an old line extensive enough to require a bond issue, it 

 should be required to submit to the Interstate Commerce Commis- 

 sion an estimate of the cost of such work. If after a thorough ex- 

 amination by the Commission's engineer this estimate be found 

 correct, then let the company be authorized to issue stock and 

 bonds, or bonds, for a sufficient amount to cover the cost of the 

 work. 



If these things were regulated as suggested, so that a prospective 

 bond buyer would know that every dollar he invested in a bond 

 would be used in the construction of the road, he would be much 

 more willing to invest in railway securities. 



The Interstate Commerce Commission should be given authority 

 to reduce the capital stock and bond issues to an amount that would 

 cover the actual amount of money invested, or the present physical 

 value, if that be more than the original cost. 



This may seem severe, but it is no worse than for the bondholders 



