operations in the course of its construction. To build 1231 miles had cost in 1879 but $35,664,200, of which $4,702,202 had been supplied from earnings; leaving a total of bonds and stocks of $30,962,000, or $25,151 per mile. Fixed charges were, therefore, low. In 1875, when net earnings were $3,853,676, interest on bonds, taxes, and all other necessary disbursements took but $1,065,395; and in 1879 the payments were markedly less. Is it strange that the troubles of the road came from too great earnings rather than from too small, and that instead of striving to maintain solvency the directors had to seek ways and means for concealing or getting rid of earnings without arousing the hostility of legislators to whom 10 per cent dividends seemed high, and anything over 10 per cent proof of extortion? Between 1866 and 1876 four cash distributions of 10 per cent were made to stockholders, five of 8 per cent, one of 8½ per cent, and one of 7½ per cent. The dividend for 1879 was again 10 per cent, that of 1878 8 per cent, and that for 1879 9½ per cent. Meanwhile large sums were carried to surplus. The balance, after all disbursements, never after 1873 fell below $665,000, and in 1879 was nearly equal to the dividend declared; that is, while distributing $1,993,086, or 9.5 per cent, the road earned, over and above charges, $3,947,065, or 18.8 per cent. It was inevitable that some attempt should be made to increase the distribution to stockholders; and the most obvious method was the one adopted, viz., a watering of the stock. The plan devised in 1880 was as follows: It was proposed to consolidate various branches of the railroad company, hitherto operated as separate corporations, with the main line; and to do this through the formation of a new company, which should exchange its stock for the stock of the previously existing corporations in the ratio of two to one. Practically all the stock retired was owned by the Chicago, Rock Island & Pacific Railroad Company, so that the only increase in stock outstanding came through the distribution to the stockholders of the parent company. In March the executive committee of the Rock Island passed the following resolution: “Resolved, that the proposition to consolidate the capital stock, property, rights, franchises, and privileges of the Chicago, Rock Island & Pacific Railroad Company with the capital stock, property, rights, franchises, and privileges of the Iowa Southern & Missouri Northern Railroad Company, the Newton & Monroe Railroad Company, the Avoca, Macedonia & Southwestern Railroad Company, and the Atlantic & Audubon Railroad Company into a consolidated Railroad Company, with an authorized capital of $50,000,000, and such powers as shall be assumed in the articles of consolidation, be submitted to a vote of the stockholders of this company at their annual meeting.”[647] Of the roads named only the Iowa Southern & Missouri Northern was of