2. The development of the territory served by individual railroads at a slower rate than is anticipated, and the influence of competition in reducing profits when the territory has developed. 3. The undertaking of railway construction when there is considerable activity in the money market, and when capital commands a high rate of interest. 4. The circumstance that railways, lacking reserve capital, can never avail themselves of a cheap market for labor or supplies, but must always buy when everything is inflated, because then only can they float their loans and borrow capital. 5. The necessity of complete reconstruction within a brief period of most railroads built through new territory, and the increase in funded and in floating debt involved. 7. The growth of railroads beyond the ability to handle them. 8. The steadily increasing expenditures required by law to accommodate the public. 9. The abuse of their position by directors and trustees. 10. The irresponsibility of railway accounts. And it may be added that the control of American railways by foreign investors who apportion charges between operating and capital accounts in a way unsuited to American conditions has been upon occasion a cause of disaster. Unlimited freedom in matters of capitalization and unrestricted competition have nevertheless been the fundamental causes of bankruptcy. It is interesting to observe that the majority of the principal railroads which failed in the nineties had taxed their resources nearly to the point of exhaustion before the panic of 1893 finally drove them to the wall. For every $100 received in 1892 the Richmond & Danville and East Tennessee systems were paying out $68.79 for operating expenses and $31.15 for interest on bonds, rentals, etc., leaving only 6 cents for dividends, necessary improvements, and the like. For every $100 received the Erie paid out the same year $66.46 for operating expenses and $31.85 for interest and other fixed charges, leaving only $1.68 as a surplus to ensure solvency in case of a decline in earnings. In 1893 the Atchison, the Northern Pacific, the Reading, and the Union Pacific had no surplus at all, but rather a deficit. The following table shows similar figures for all of our reorganized roads: _Percentage to Gross Income_ 1893 1892 _Operating _Fixed _Surplus_ _Operating _Fixed _Surplus_ Expenses_ Charges_ Expenses_ Charges_