These rules may be considered in turn. The point to which the best practice should reduce fixed charges is readily understood. Nothing less than solvency under the least favorable conditions is the goal toward which a reorganization plan should strive. It appears, accordingly, that the minimum earnings of the Atchison property from 1891–4 had been $5,204,880; while the fixed charges proposed for it were $4,528,547. The lowest net earnings which the Union Pacific had ever recorded had been $4,315,077. The interest on its new bonded indebtedness was placed at $4,000,000. The net earnings for the Northern Pacific in 1895 were $6,052,660, which was the least that the road had earned for eight years. The new fixed charges were estimated at $6,015,846. The minimum net earnings of the Baltimore & Ohio from 1887 to 1898 had been $6,610,774. The fixed charges of the plan of 1898 were set at $6,252,351. In order to simplify the charges, as well as for other reasons, it is desirable to have the item of interest bear a large proportion to the whole. The fixed charges of six of our seven reorganizations from 1893–8 amounted together to $54,562,165. Of this sum, interest on bonds comprised $35,239,146 or some 64 per cent. The charges of the same railroads after reorganization amounted to $36,533,040, of which sum interest on bonds comprised $30,926,638 or 84 per cent. The distribution of losses should bear most heavily on the junior securities. The simplest readjustment would seem at first sight to demand a proportionate concession from all creditors. But this would be both unjust and impossible. In no sense do all bond- and stockholders stand upon an equal footing. In the first place, the cost at which senior bondholders have acquired their claims has much exceeded the cost at which junior bondholders and stockholders have acquired securities of equal nominal amount. Apparently equal claims represent very unequal investment. In the second place this increased cost has been due to certain legal provisions touching security which become prominent during reorganization. All mortgage bonds possess by law a lien upon the property pledged to secure them. Upon default in repayment of principal, and usually also upon default in payment of regular interest, their owners have the right to sell the pledged property at auction and to recoup themselves from the proceeds. After the underlying bonds have been satisfied the selling price is applied as far as it will go to the settlement in full of mortgages in the order of their issue; while the stock, representing the owners of the property, takes what is left. As a rule a railroad will not sell for anything like the sum required to pay off all its mortgages, and the junior issues are threatened with extinction. Usually, however, it is possible for the junior to guarantee interest on the senior bonds, or to buy the railroad at foreclosure sale under some senior mortgage,