Pending the completion of the preceding arrangements rate conditions remained naturally unsatisfactory. The Pennsylvania objected to the paralleling of its Philadelphia-New York branch, and refused to allow temporary use of that line by the Baltimore & Ohio while the latter’s independent connections were being established.[33] Freight rates were slowly and painfully raised after the conflict of 1884–5, and did not regain a high level. In 1886 the Baltimore & Ohio was forced to reduce its dividends from 10 to 8 per cent. The following year it cut to 4 per cent, and in 1888 no dividend at all was declared. The surplus on the year’s operations, which had not since 1878 fallen below $1,000,000, dropped to $110,819 in 1885, and to $36,259 in 1886. As dividends decreased, the funded debt increased,[34] the percentage of fixed charges to net income rose from 63 to 89, and the floating debt attained the portentous amount of $11,148,007. The only item which did not grow was net earnings. There was nothing occult in the situation. Every one was well aware that the competition to which the Baltimore & Ohio had been subjected had been severe, and that the cost of its New York extension had been large. In 1887 the bonds outstanding were $56,868,201, the stock $19,792,566, and the accumulated surplus $48,083,720, or a total of $124,744,487. This stood for the sums invested in the property. Net income on the other hand was $4,994,721; so that on an investment of over $100,000,000 but 4 per cent was being obtained to cover interest, improvements, and whatever dividend might be declared. That no general apprehension was felt by investors before 1887 was due to the great prestige which the Baltimore & Ohio enjoyed. The long series of dividends counted heavily in favor of the road. The enormous accumulated surplus, said to have been invested in valuable improvements and extensions;[35] the enterprise of the company in making extensions; the large volume of business; and the confident statements of the president, all conspired to prevent a too keen analysis of the business returns.[36] Relief of two sorts was nevertheless required. In the first place the floating debt had grown so large that some means of paying it off was necessary; in the second place the road needed a sufficient reduction in fixed charges to restore some of the margin of non-mortgaged earnings which had been so great a safeguard in the early days. Only the first of these requirements was met. Cash the road had to have; the existing fixed charges, it was thought, it could endure if only some abatement of the intensity of trunk-line competition could be obtained.