130 



COMMEKCE AND FINANCE, AMERICAN, IN 1881. 



the property of the American Union, upon the 

 dissolution of an injunction to prevent the con- 

 solidation of the two corporations. The West- 

 ern Union stock was increased to $80,000,000, 

 $22,473,500 of the $38,000,000 increase being 

 assigned the American Union stockholders, and 

 $15,526,500 being distributed as a dividend 

 among the "Western Union stockholders. 



A syndicate, headed by Henry Villard, was or- 

 ganized for the purpose of acquiring a control- 

 ling interest in the Northern Pacific Railroad, 

 in order to connect that line with the roads of 

 the Oregon Railway and Navigation Company, 

 and prevent its extension into Washington and 

 Oregon as a competitive establishment. The 

 passage of a law by the Legislature of Tennessee 

 to pay the whole of its debt eventually while 

 reducing the interest one half, was the signal 

 for active speculation in the State bonds, which 

 were in default, and had fallen to very low 

 prices. In the spring, the Gowen project for 

 bridging over the financial difficulties of the 

 Reading Company, by issuing deferred bonds 

 to meet the floating liabilities, was adjudged 

 by the United States Circuit Court illegal and 

 contrary to the charter. Mr. Gowen was finally 

 supplanted in the management about the same 

 time through the efforts of the Messrs. McCal- 

 mont. The affairs of the elevated railroad com- 

 panies of New York were in an embarrassed con- 

 dition, and the lessee company, being unable to 

 meet the fixed charges, prayed for a remission 

 of taxes. The Attorney-General threatened to 

 dissolve the company by authority of the State ; 

 but refrained, and the concern was placed in 

 the hands of a receiver. Toward the close of 

 the year a consolidation of the three companies 

 was effected. 



The condition of the markets in July was 

 particularly favorable to speculative schemes. 

 The intermittent and frequently stringent state 

 of the money market and the oversold stock 

 market, which had been depleted of its usual 

 stock of floating securities by the purchases of 

 investors, enabled cliques of operators to con- 

 trol the supply of money or of special lines of 

 stock ; while the above-described elements of 

 doubt, amid the general flourishing outlook, 

 permitted them to play upon the hopes or the 

 fears of the speculating and investing public. 

 A general and heavy decline in all but the 

 highest class of securities, which initiated the 

 speculative phase, was precipitated by "the ac- 

 tive co-operation of the great manipulators of 

 values. A curious episode of this period was 

 a slyly effected corner in Hannibal and St. 

 Joseph common stock, a third-class property, 

 by which some of the magnates of the market 

 were forced to pay many times the value of 

 the stock for which they stood engaged. The 

 war between the trunk lines, which was waged 

 by the competitive lowering of passenger and 

 freight rates between Eastern and Western ter- 

 mini, was supposed to have had for its motive 

 the desire on the part of the manager of the 

 New Tor"k Central and its continuations, Will- 



iam H. Vanderbilt, to obtain the revocation of 

 the conditions of the pool entered into between 

 the through lines, which fix the charges for 

 freight on the roads terminating at Baltimore 

 and Philadelphia too low to afford a maximum 

 of business and profit to the New York Cen- 

 tral road, and which draw to those cities a por- 

 tion of the foreign commerce which would go 

 to New York under the desired rearrangement 

 of the covenanted tariff. The competition of 

 the water-route was sufficient, however, to 

 warrant the reduction of freight rates, great as 

 it was, if it did not first prompt it ; for the 

 reports of the roads show an actual increase of 

 the net profits over the previous year. The 

 New York Central company demonstrated its 

 remarkable economical strength, but did not 

 accomplish the object of compelling the other 

 lines to enter into a new compact. The con- 

 test could not be continued when, toward the 

 time for closing the canals, business so increased 

 as to tax all the roads to their full capacity. 

 About the end of October one road after the 

 other set up the old schedule of prices, and 

 all had more custom than they could attend 

 to. 



At the rates ruling in the early part of the 

 year for the new Government bonds, the in- 

 terest received by investors is not above 3 per 

 cent per annum. Of railroad bonds, ten of the 

 larger loans of the highest standing netted from 

 4 down to 3 per cent annual interest, and 

 averaged only 4*20 per cent, calculated on the 

 prices ruling in April, with deduction of the 

 loss of premium on maturity. The majority of 

 bonds, however, gave better returns, the average 

 net rate of interest on all classes standing at or 

 above par being about 5J per cent, including 

 those of many enterprises whose future was 

 not yet assured. States and cities whose credit 

 was sound, issued no new bonds bearing a 

 higher rate of interest than 4 per cent, and at 

 that rate they usually commanded a premium. 

 The rise in the selling value of forty-seven 

 prominent stocks of the par value of $964,000,- 

 000 was between July 1, 1879, and July 1, 

 1881, from $643,000,000 to $1,160,000,000, or 

 over 81 per cent in two years. 



Railroad enterprises, as usual, engrossed the 

 main bulk of the capital offered for investment. 

 Railroads are the most important of the tools 

 which enable the agricultural resources of the 

 country to be utilized with commercial advan- 

 tage. As the development of the country is 

 now mainly in this direction, and as the for- 

 eign demand for agricultural products enables 

 every newly opened district of rich land to be 

 tilled with profit, railroads yield surer and 

 larger returns than almost any other species of 

 property into which accumulated savings can 

 be placed. At the beginning of the year there 

 were upward of $5,000,000,000 of railroad se- 

 curities of all sorts outstanding. The favor- 

 able reports of railroad business furnished good 

 grounds for the growing confidence in this 

 species of property and the strong demand 



