BY STUART DAGGETT, Ph.D. INSTRUCTOR IN ECONOMICS IN HARVARD UNIVERSITY BOSTON AND NEW YORK HOUGHTON, MIFFLIN AND COMPANY The Riverside Press, Cambridge 1908 COPYRIGHT 1908 BY THE PRESIDENT AND FELLOWS OF HARVARD COLLEGE ALL RIGHTS RESERVED Published May 1908...

It sometimes happens that experiences long since past seem to be repeated, and that knowledge apparently forgotten proves again of service. This is illustrated by the subject of railroad reorganization. In the years between 1893 and 1899 an imposing group of American railroads passed into receivers’ hands. In 1893 alone more than 27,000 miles, with an aggregate capitalization of almost $2,000,000,000, were taken over by the courts, and in the following years the amount was largely increased. For

Early history—Extension to Chicago—Trunk-line rate wars—Effect on the company—Extension to New York—Sale of bonds to pay off floating debt—Unsatisfactory traffic conditions—Receivership—Mr. Little’s report—Reorganization—Subsequent history. The Baltimore & Ohio Railroad was the first important railway company to be incorporated in the United States. It was designed to aid the city of Baltimore in securing the Western trade, and not only private citizens but the city of Baltimore and the

Early history—Reorganization—Wall Street struggles—Financial difficulties—Second reorganization—Development of coal business—Extension to Chicago—Grant & Ward—Financial readjustment—New York, Pennsylvania & Ohio—Third reorganization—Later history. The New York & Erie Railroad was organized in 1833 in the hope of bringing to the southern tier of counties in New York State a prosperity equal to that which the Erie Canal had secured for the northern tier. It was to run from

Early history—Purchase of coal lands—Funding of floating debt—Failure—Struggles between Gowen and his opponents—Reorganization—Second failure and reorganization. The Philadelphia & Reading Railroad has been peculiarly unfortunate. Although serving a region of abundant traffic, it failed three times between 1880 and 1895, and was in the hands of receivers ten years. It was reorganized after each failure, and each reorganization was marked by bitter struggles between contending parties, du

Difficulties of the Coal & Iron Company—McLeod’s policy of extension—Collapse of this policy—Failure of company—Summary of subsequent history. With the year 1888 a new period in the history of the Reading began. The long struggle to bring the company back to solvency was fairly over, and for the first time in seven years the road saw before it a chance for genuine prosperity. Unlike the reorganization of 1880–3, that of 1884–7 succeeded in accomplishing the greater part of the saving exp

Richmond & Danville—East Tennessee, Virginia & Georgia—Formation of the Southern Railway Security Company—Growth and Combinations—Failure and reorganization of the East Tennessee—Reversal of position between the Richmond & Danville and the Richmond & West Point Terminal—Acquisition of the Central of Georgia—Failure and reorganization of the whole system—Subsequent development. At the present time there are in the South five great railway systems: the Atlantic Coas

Charter—Strategic extensions—Competitive extensions—Effect on finances—Raise in rate of dividend—Reorganization of 1889—Acquisition of the St. Louis & San Francisco and of the Colorado Midland—Income bond conversion—Receivership—English reorganization plan—Mr. Little’s report—Final reorganization plan—Sale—Subsequent history. The Atchison, Topeka & Santa Fe Railroad has been reorganized twice, in 1889 and in 1893–5; the first time without, but the second time after a foreclosure

Acts of 1862 and 1864—High cost of construction—Forced combination with the Kansas Pacific and the Denver Pacific—Unprofitable branches—Adams’s administration—Financial difficulties—Debt to the Government—Receivership and reorganization—Later history. The construction of the Union Pacific was made possible by direct grants of lands and government bonds by Congress. The motive for the project was military and political as well as economic; on the one hand California was to be cemented to the Unio

Act of 1864—Failure and reorganization—Extension into the Northwest—Villard and the Oregon & Transcontinental Company—Lack of prosperity—Refunding mortgage—Lease of Wisconsin Central—Financial difficulties—Receivership—Legal complications—Reorganization—Subsequent history. The Northern Pacific Railroad Company was chartered in 1864, and failed in 1875 and in 1893. Besides these bankruptcies it has been in frequent financial difficulty, and on the whole furnishes an instructive chapter in

Charter—Early prosperity—Reorganization of 1880—Conservative policy—Extension—Pays dividends throughout the nineties—Moores obtain control—Reorganization of 1902—Further extensions—Impaired credit of the company. The original Rock Island Railroad, chartered in 1847, 646 was completed between Chicago and Rock Island in 1854. Construction was continued from Rock Island to Council Bluffs across the state of Iowa, under the charter of the Mississippi & Missouri, until 1866, when this company

Definition of railroad reorganization—Causes of the financial difficulties of railroads—Unrestricted capitalization and unrestricted competition—Problem of cash requirements—Problem of fixed charges—Distribution of losses—Capitalization before and after—Value of securities before and after—Provision for future capital requirements—Voting trusts—Summary. A general survey of railroad reorganizations may now be attempted. Eighteen different ones and no less than forty-two reorganization plans have

Information about railroad reorganization must be gathered from a wide variety of sources. The most important are five in number. First, there are the annual reports of the railroads themselves. Second, there are the files of financial and railroad papers. Third, there are contemporaneous pamphlets. Fourth, there are memoirs and biographies containing first-hand material. And fifth, there are government documents, which comprise (1) regular reports by and testimony before bodies like the state a