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Transactions Texas Academy of Science. 
the passage of the law for amounts greater than would be the Commis- 
sion’s valuations. Upon sale and reorganization they would come under 
the provisions of the law and the issuance of their securities would be 
limited to their physical value. So the present holders are content to 
absorb the earnings of the roads> whatever they may be, and trust to 
better times in the future, when the full interest may be paid, together 
with such interest as has been defaulted on the bonds, and also some 
dividends on the stock. 
As has been heretofore stated, the chief reason for the enactment of 
the Stock and Bond law was that the issuance of railroad securities 
might be limited to approximately the physical value of the properties, 
which would serve, indirectly at least, as the basis for making freight 
rates. However, it is doubtful if up to this time the Commission has 
taken direct cognizance of its valuations of the railroads in the promul- 
gation of its tariffs. That the law has had some effect, there can be no 
doubt, for it is readily seen that the railroad companies have been 
deprived of their most potent means of combatting rate reductions, as 
their earnings have increased, that is, by increasing their capitalization, 
for there can be no increase in the capitalization without fair compen- 
sation to the properties in the shape of permanent improvements and 
betterments. Ultimately there is no question but that the purpose of the 
law will be effected and the Commission will be controlled definitely in 
its rate-making by its valuations, as it will be only required to protect 
those securities outstanding by which the valuations will be represented. 
The Stock and Bond law has had the effect of placing Texas railroad 
securities, in a large measure, beyond the influence t of the gamblers and 
speculators of Wall Street and upon the high plane of legitimate invest- 
ment. Their purchasers are protected to the extent that they have the 
assurance that additional indebtedness can not be created against the 
properties without a fair return to the same. The clever practice of 
“watering,” which has been the favorite pastime of the manipulators and 
which has had the effect of defrauding innocent purchasers out of mil- 
lions of dollars, is practically a memory of the past. The fixed charges, 
interest on bonds, etc., will be kept at the minimum, and the surplus 
earnings will be expended in improvements of all kinds to the mutual 
advantage and benefit of the railroads and the people. 
The passage of the Stock and Bond law was at first looked upon as 
a blow aimed at foreign capital, and it was thought that it would be 
prejudicial to future railroad construction in the State. A great many 
people opposed its enactment on these grounds, but it has been proved 
that their fears were more or less unwarranted. While it is true that its 
effect has been to discourage railroad building from purely speculative 
motives, and perhaps a great many miles of railroad would otherwise 
