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Transactions Texas Academy of Science. 
value, having been sold at a mere nominal price or been donated as a 
premium or a bonus to those who purchased the bonds. * * * By 
the creation 'of fictitious values the managers of the companies have 
attempted to levy an exorbitant tax upon the commerce and travel of the 
country for all time to come. The Government guarantees to an inventor 
a monopoly only for a limited space of time, at the expiration of which 
his invention becomes the common property of the people; but railroad 
managers endeavor to collect under the protection of the laws an exorbi- 
tant royalty from our people for all time to come.” 
The science of stock and bond “watering” reaches its highest develop- 
ment when the consolidation of several lines into one system takes place. 
All indebtedness of the former companies is absorbed and new securities 
issued to cover it, usually far in excess of the original amount. Various 
reasons are assigned for this, among others, for the purpose of improving 
the properties and building new extensions, but, as a rule, the “watered” 
securities are divided out as profit to the promoters of the consolidation. 
Another favorite method of absorbing the fictitious issues is for the pro- 
moters, who are, as a rule, the directors of the consolidated company, to 
organize among themselves construction companies for the purpose of 
building new extensions, and to contract with themselves to deliver to 
themselves these constructed extensions for specified amounts of these 
“watered” stocks and bonds, largely in excess, as large as they choose, of 
their actual cost and value of the extensions. These bonds, whose inter- 
est is guaranteed by the railroad company, have previously been con- 
tracted for and are sold. In this way the profits of the transaction can 
be made as large as the cupidity of the speculators permits. Large 
amounts of the securities of the new company are divided out among the 
promoters in the guise of fees, bonuses, dividends, etc. “Watered” 
stocks and bonds are “watered” again and again at the will of the manip- 
ulators, and immense private fortunes have been built up, the expense 
of which the public is today maintaining in the form of freight tolls. 
It can be shown that, almost without exception, the railroads of the 
country have inflated their securities with fictitious issues. The com- 
merce of the land is being taxed to pay dividends and interest on them, 
and further, the people, except indirectly, derive no return from the vast 
and liberal donations made by the State governments, nor from the gifts 
of property and money made by counties, towns and individuals. Neither 
do the present companies themselves derive benefits from these dona- 
tions, as the same have long since been absorbed by the railroad pro- 
moters or were distributed among them as a part of the profits of con- 
struction and a reward for magnanimity and beneficence. 
The annual report of the Interstate Commerce Commission for the 
year ending June 30, 1901, gives the total amount of railway capital 
