protection of the investor. A financial coup in a speculative stock needs a reasonable time for incubation, and the intervention of publicity at short intervals is very unfavourable to the successful manipulation of such coups. Of course cases occur in which the party who control the speculative road and temporarily own the majority of its stock contend that they do not desire aggressive publicity, but prefer to run their own business in their own way. That might be a conclusive answer to any thing that the casual investor could say, if it were not for the fact that he and his class are precisely the people upon whom the securities of the speculative company will be presently unloaded.

The prevalent divergence in the method of keeping railroad accounts is a matter which will probably be sooner or later dealt with by Congress. It may, for the present, be dismissed with the remark that nothing short of inside knowledge will enable the enquirer to pursue this subject with appreciable advantage. If this question, coupled with that of Inter-State commerce, be subjected to a new and special type of regulation, the effect of publicity will be very largely increased. It is thought possible by some observers that the formal legalization of pools would produce satisfactory results, in the direction of publicity and a clear understanding of the subject by all classes. But on this point no forecast can at present be made with any approach to confidence. It may be prudent however to note in passing that, when railroad companies hold substantial interests in various kinds of property not immediately connected with the purpose of their corporate existence, a very sanguine view is apt to be taken in official reports of the market value of collateral assets. There may be, for instance, included in the list of assets

large blocks of securities connected with leased lines, or with property which it is thought may some day be valuable for terminal facilities, or perhaps coal or mineral land, or real estate in projected new towns. The business of a transporting company is, as a rule, most effectually conducted, when attention is exclusively given to the matter in hand and not to collateral undertakings. In these days it is a sufficiently difficult task for a railroad company to conduct its proper business on a paying basis. A transportation company cannot, in the long run, profitably become the owner of the produce which it is its business primarily not to produce but to transport. Exceptional cases will of course occur in which it may be possible to run under the same "umbrella" all kinds of incompatible elements. But, from the investor's point of view, business of this kind is a fertile source of mistake and confusion. The railroad, which spends a good deal of time and energy in hauling about material which it produces, may make a good show on paper; but inferences derivable from a superficial view of its nominal earnings are very likely to be illusory. Again, the valuation of collateral assets only indirectly connected with the business of a transporting company is very apt to be sanguine and excessive. Nothing is more common than to find that, if an effort were made to realize them in discharge of floating debt, their immediate market value would turn out to be merely nominal, and their prospective value altogether too remote to deserve the confidence of an intending investor. New acquisitions, new construction, new additions to mileage or accommodation form the proper subject-matter for an enlightened increase of funded debt at a reasonable rate of interest. When extraordinary weight is attached to them, as a set-off to an

excessive floating debt, an intending investor is put on his enquiry. It may well happen that these new acquisitions represent money which under a sound administration should have been appropriated to repairs. No more wasteful or dangerous method, from the investor's point of view, can be adopted than to allow the track and equipment of a going concern to run down, and to excuse or disguise such a result by a showy statement of new acquisitions or collateral assets. It is a method which points. to receivership and insolvency as truly as the needle points to the pole.

Our enquirer will probably come to the conclusion that the drift of the age is in favour of exclusive attention to the particular matter in hand, and he will be inclined to prefer those forms of administration which do not go, to any large extent, outside of their proper business.

CHAPTER XIV.

RAILROAD COMMISSIONS.

By far the most important change in the status of railroad property which has taken place in recent years turns on the adoption of the Railroad Commission. The bearing on railroad property of this institution must be sought, not so much in the principle of a Railroad Commission— which is probably right,—as in the remarkable variation in point of degree, which in different States characterizes the powers conferred on the Commissioners. For instance, between the advisory method successfully adopted by Massachusetts and the somewhat peremptory exercise of power which prevails in Georgia there is a great gulf fixed. Whichever form may be preferred by the intending investor, it is plainly worth his while to bear in mind that the jurisdiction of a Railroad Commission is a very elastic thing; and it will be prudent for him to give some attention to its principles, its incidents and its possibilities. The issues raised by it are important in principle and far-reaching in practical result; e. g., Is a railroad corporation which has built a road at its own expense simply a purveyor of transportation whose status is defined by formal legislation, or is it an agent of the State and a trustee for the people? To whom does the increment of value properly belong? Does the admitted power of the State to assume ownership of railroads on payment of compensation involve the right to assume

their virtual management without giving either compensation or indemnity against losses resulting from defective or unfortunate State intervention? If the State undertakes to reduce the earning power of a railroad and to annex a portion of the increment of value, can it fairly prescribe the expenditure by corporations of additional capital and the improvement of existing accommodations, outside the requirements of public safety? Is "regulation" substantially a corrective process, or is it broad enough in its application to railroads to supersede a charter?

The mode in which these questions are practically answered by State legislation is a matter of grave importance to foreign stockholders. If they are held to be traders or purveyors of transportation protected by valid contracts, they can take care of themselves by reasonable vigilance. But, if the earning power of their railroads and the amount of their dividends are liable to be indefinitely reduced or restricted by the State, while the entire responsibility for losses is left on their shoulders, then their position is not without serious difficulties.

The assertion by a State of a right to fix rates and limit dividends by ex post facto legislation, without regard to existing charters and without compensation or indemnity, is, in fact, the barely disguised assertion of a right to confiscate* to a greater or less extent the increment of value legitimately accruing to a going concern. In connection with a railroad the increment of value cannot with any semblance of propriety be described as an "unearned" increment. In a vast number of instances an American railroad may be said to create the settlement of population which is destined to furnish passen

* Binghampton Bridge Case, 3 Wal. 51.