STOCK WATERING AND INFLATION. 343 



commend the summing up of the &quot;Wisconsin Commissioners re 

 port : 



It were well did the evil of mismanagement confine itself to 

 the period of construction. On the contrary, however, it is well 

 understood by all those who are familiar with the management of 

 railroads that there are many ways in which officers can, if so in 

 clined, accumulate fortunes without using capital of their own, and 

 wholly at the cost of the stockholders. Among them is the use of 

 company funds for the handling of grain and produce ; paying 

 therefor a price enough higher than unaided buyers can afford to 

 pay, to give them the command of the market, and shipping the 

 same over their own lines free of charge, or at nominal charges. An 

 other is, to arrange with buyers privately to carry their shipments 

 at a price next to nothing dividing the profits. 



Practices like these are believed to be common, and help to ac 

 count for the rapidity with which railway officials sometimes grow 

 rich on moderate salaries. They also suggest the reason why rail 

 roads are sometimes made to facilitate the commercial growth and 

 prosperity of one town or village to the great disadvantage, perhaps 

 total ruin, of another. If private speculations on the part of rail 

 way managers are not discovered in all such cases, it is more than 

 likely, because pains have been taken to conceal them. 



The same sort of evils appear in another guise, and on a larger 

 scale, where a private inside &quot;ring&quot; is formed for the purchase of 

 lands, mines, docks, and harbors, and the sale of them for a large 

 advance to the company the &quot; ring&quot; officially represents. The stock 

 holders are duly advised of the great importance of the property to 

 the future of the road, while congratulating them on the very favor 

 able terms on which it was purchased, and there the matter ends. 



But the giant evil under the head of dishonest management is un 

 due inflation of stock. A fraudulent contract, the building and 

 buying in of roads to be foisted upon the company managed, as well 

 as the building up and killing out of cities and villages, usually re 

 quire time, skill in maneuvering, and careful concealment of the 

 operator s hand. Not so with stock watering. Here the cardinal 

 qualities are, daring and deafness to the protestation of justice. 

 The law is silent, and up to a certain limit the public must have 

 transportation, no matter what the cost. This practice is probably 

 confined to no one country, but it is doubtful, perhaps, whether any 

 other railway managers in the world have a genius for it equal to 

 the American. For illustration of the magnificant scale on which it 

 is sometimes conducted, we have but to look at a single through 

 line from Chicago to New York the line formed by the Lake Shore 

 and Michigan Southern, the New York Central and Hudson River 

 Railways, whose total ivaterinys within the past few years are alleged 

 to exceed in amount $80,000,000. The interest on this sum at eight 

 per cent is $6,400,000. And since the tariffs on these several roads 

 gauged to yield that per cent, on nominal capital, it is manifest that 

 this one through line of railways is annually laying this enormous 

 tax of over $6,000 000 upon the earnings of those who support it, in 

 order that the holders of the stock may reap an annual dividend of 

 some sixteen per cent, on the real cost. 



