sine die.

The ordinary incidents of receivership, foreclosure etc. follow. As time goes on the outlook affords little hope of any available income or profit to the shareholders. Still a great deal of money has been sunk, and to write this off without an effort would seem to be a somewhat tame solution of the difficulty. Many meetings are held, and generally the smallest stockholders are the most eloquent and positive. The result is reorganization in a form which gives control of the concern to the men who provide the new capital. Now, assuming that a railroad was in the first place fairly well conceived, and has been brought within measurable distance of completion on a basis of (say) $25,000 per mile, a new combination or syndicate cannot hurt themselves very seriously if they see their way to acquire the enterprise on a basis of (say) $10,000 per mile. The advantage accruing to the new syndicate is not confined to the mere pecuniary cheapness of the acquisition. They succeed gratis to a vast aggregate of valuable experience for which their predecessors paid highly. They know more about the general and local possibilities and the correlative drawbacks of the enterprise than their predecessors could possibly know at the outset, and they get this knowledge without paying value received for it. On the whole, resuscitation appears a more comfortable theory than creation, and results are often found to justify this forecast.

On general principles then our observer will not be deterred from investing in reorganized concerns by the mere fact that their past history has been disastrous. He will make a few superficial enquiries which may be necessary for his protection, the answers to which will readily For instance, he will note as a matter of course the amount of good money honestly expended on the

occur.

property, as distinguished from outlay incurred through intermediate construction companies, extravagant temporary loans, and other complex financial arrangements; its relation to the new capital proposed; the probabilities of reasonably prompt completion, and therefore productiveness within a measurable limit of time; and the nature and extent of the control proposed to be given to the persons providing the new capital. Next, it may be worth his while to enquire how often and to what extent an embarrassed railroad which it is intended to resuscitate has done duty as a factor in prior reorganizations. He will note that, in many great combined schemes, there have been several weak and comparatively worthless sections of line which were intrinsically and of their own nature destined to insolvency. With a really clever clique of capitalists possessing large means and influence at the helm, this circumstance has in many instances presented no insuperable obstacle to the ultimate manipulation of a great coup, involving the unloading of worthless securities on European investors. Again a wrecked line, well conceived at the outset and intercepted in its career of success by panic or accident, may have been employed as a serviceable stalking-horse, and its attraciveness already exhausted. For instance, after it has been bought up cheaply, the trumpet is freely blown and a lively tune is played on the theme of its intrinsic merits. It is now once more warranted to carry-almost exclusively the vast business of (let us say) the far West to the Eastern seaboard. Once more the unspeakably wealthy districts which it will "tap" are indicated on an appropriate map. The dense black line on this map, which indicates the route of the new figure-head portrays, with its new connection, a line so nearly straight, or (in the

current argot) is so nearly a "bee-line," that one marvels how it can be possible that a single ton of freight should go by any other route. It will be enough for our observer to compare this dense black line with the ordnance map of the United States. This will possibly give him some new impressions on the subject.

In connection with the "tapping" business, it may occur to him to enquire whether this process has not been repeatedly performed on the favoured district during the last few years. He may perhaps reflect that, while "tapping" is essentially a festive process, it makes all the difference to a thirsty man whether the barrel is full or empty. He will also do well to enquire what are the incidents of recent receivership. These sometimes make serious calls on the resources of a demoralized road. The annals of receivership record enormous claims for compensation of receivers,-among the largest being in a heavy case $750,000 for seven months' service. Our enquirer will be disposed to prefer systems which, if they cannot pay a dividend, are somewhat more economical in their view of the compensation likely to be claimed for official service.

It will sometimes occur that a relatively heavy assessment on the stock of a distressed railroad is proposed. Our enquirer, if he hold such stock, will do well to consider a proposal of this kind somewhat carefully. It may of course be worth while to protect his stake in the concern by paying the amount required. But he will bear in mind that, in a large majority of cases, the stock which he is asked to protect really represents, not actual outlay, but a contingency dependent on the net earnings of the railroad over and above working expenses and fixed interest on the bonds by means of which the road itself

was built. It may be that the value of the stock is purely speculative; useful for the purposes of the "Street," but of little merit so far as the chance of a dividend is concerned. Again, the destination of the money to be raised by assessment is worth attention. If it is to be strictly devoted to urgent repairs, improved equipment or the like, the investment may be worth making. If it is to be appropriated to the acquisition of speculative property, or to the protection or development of collateral assets, a single assessment will not permanently stop formidable gaps; and the process of taxing shareholders may be repeated at an unexpectedly short interval. The privilege of holding unproductive stock on the terms of assessment recurring at short periods may be somewhat too costly.

Per contra, the submission to assessment by stockholders may sometimes enable them to greatly strengthen their position by suitable arrangements with the holders of junior funded securities. The stockholder, who has ready money wherewith to meet a real emergency, may see his way to greatly fortify his position in a reorganization. The possession of cash, and the courage to invest it at a time of need, clothes him with special importance and power. No doubt the owners of prior securities hold the fortress and the big guns. But, in a period of emergency, the owner of ready money controls the ammunition. He is a very useful man in view of an immediate fight. If the resuscitated railroad has already done duty as a figure-head in one or two combinations which have resulted disastrously, the observer will be disposed to extend his enquiries somewhat more closely to the actual duty which it is at the moment called on to perform. Perhaps it may be incorporated in a new combination to facilitate the floating of a "blanket " mortgage. It is

very commonly an incident of a "blanket " mortgage that it covers under its ample folds one good section of line and several bad ones. If such a case should come under his notice, and he is the holder of sectional bonds of the sound portion of the proposed combination, he will do well to stick to them for the present. He need not be afraid of further investment, because it is probably very desirable to the holders of a great number of weak securities to float a "blanket" mortgage; and the holders of bonds of the sound section are virtually masters of the position. If they have ready money besides, they should control the reorganization and have things pretty much their own way. No very deep or close enquiry is necessary to guide our observer in determining and identifying those cases in which the lemon has been squeezed dry. Financiers have made several coups in them already. The most speculative think they will not pay for another squeeze; and the confidence of the foreign investor is already wellnigh exhausted.

Superficial enquiries of the kind indicated above tend to prevent some of the most familiar and disappointing forms of investment in resuscitated American railroads. They may equally tend to indicate that resuscitation, reorganization and combination with new elements are not, by any means, necessarily prohibitory factors in connection with projected investments.