14 
Transactions Texas Academy of Science. 
The Railroad Commission of Georgia, in its report for 1892, says: 
“Railroad companies ought to have the opportunity of earning reasona- 
ble reward upon the fair and just valuation of the property. On a just 
basis they ought to be able to earn a dividend. Interest and dividends 
ought not to be computed on overissue of stocks and bonds, nor on float- 
ing debts that result from extravagance and mismanagement, nor for 
purposes of speculation. * * * Railroads are loaded with ‘watered’ 
stock and bonded far in excess of their value, from which collossal for- 
tunes are made by reprehensible methods — methods not reached by laws, 
either to punish the guilty or protect the innocent. The ‘railroad 
wrecker/ with a bare majority of the stock and a board of directors, 
‘waters’ the stock and makes overissues of bonds, which are bought by 
innocent purchasers until the overburdened road is broken down in 
credit under enormous debt and disproportional capitalization and goes 
into the hands of a receiver. * * * The evil does not stop here. 
The innocent holders of these excessive issues of stocks and bonds 
demand rates for transportation sufficient to pay dividends and the inter- 
est on such bonds. If the rates are allowed, commerce is injured and 
the people oppressed ; if denied, the road is again forced into the hands 
of a receiver and again sold to the loss of the innocent holders. Such 
a failure is the result not of small tonnage and low rates, but of false 
capitalization.” 
EFFECT OF THE TEXAS STOCK AND BOND LAW. 
The Railroad Commission, in its second annual report for 1893, with 
reference to the passage of the Stock and Bond law, says : “It is believed 
that the Act of the Legislature regulating the issuance of stocks and 
bonds, if fully and fairly enforced, will prove to be a very great benefit 
to both the people and the companies operating the railroads of this 
State. This law will prevent the unlawful and fraudulent issue of stocks 
and bonds of railroad companies in the future in this State and protect 
the people from the exactions necessary to satisfy them. It will protect 
the purchasers of such securities from being imposed on by them and it 
will secure to the companies who may hereafter build railroads a real 
value to their property and securities instead of a merely speculative and 
fluctuating value. And it will, as to such roads, defeat one of the most 
powerful agencies for the accumulations of vast fortunes by unscrupu- 
lous and dishonest men at the expense of the public.” 
The most noticeable effect of the Texas Stock and Bond law secured 
since its inauguration in 1893 is the gradual reduction per mile of the 
indebtedness of the railroads on the average from year to year, result- 
ing in a gradual reduction of the fixed charges. Although all capitaliza- 
