Charter—Strategic extensions—Competitive extensions—Effect on finances—Raise in rate of dividend—Reorganization of 1889—Acquisition of the St. Louis & San Francisco and of the Colorado Midland—Income bond conversion—Receivership—English reorganization plan—Mr. Little’s report—Final reorganization plan— Sale—Subsequent history. CHAPTER VII UNION PACIFIC 220 Acts of 1862 and 1864—High cost of construction—Forced combination with the Kansas Pacific and the Denver Pacific—Unprofitable branches —Adams’s administration—Financial difficulties—Debt to the Government—Receivership and reorganization—Later history. CHAPTER VIII NORTHERN PACIFIC 263 Act of 1864—Failure and reorganization—Extension into the Northwest— Villard and the Oregon & Transcontinental Company—Lack of prosperity —Refunding mortgage—Lease of Wisconsin Central—Financial difficulties—Receivership—Legal complications—Reorganization— Subsequent history. CHAPTER IX ROCK ISLAND 311 Charter—Early prosperity—Reorganization of 1880—Conservative policy —Extension—Pays dividends throughout the nineties—Moores obtain control—Reorganization of 1902—Further extensions—Impaired credit of the company. CHAPTER X CONCLUSION 334 Definition of railroad reorganization—Causes of the financial difficulties of railroads—Unrestricted capitalization and unrestricted competition—Problem of cash requirements—Problem of fixed charges—Distribution of losses—Capitalization before and after—Value of securities before and after—Provision for future capital requirements—Voting trusts—Summary. RAILROAD REORGANIZATION CHAPTER I BALTIMORE & OHIO Early history—Extension to Chicago—Trunk-line rate wars—Effect on the company—Extension to New York—Sale of bonds to pay off floating debt—Unsatisfactory traffic conditions—Receivership— Mr. Little’s report—Reorganization—Subsequent history. The Baltimore & Ohio Railroad was the first important railway company to be incorporated in the United States. It was designed to aid the city of Baltimore in securing the Western trade, and not only private citizens but the city of Baltimore and the state of Maryland early subscribed to its stock. When in the course of construction it became expedient to extend into Virginia, the city of Wheeling and the state of Virginia likewise subscribed, though the action of the latter was subsequently withdrawn.[1] As a result the funds required for first construction were obtained from the sale of stocks instead of bonds. In 1844, seventeen years after the granting of the charter, the annual report showed $7,000,000 in stock as against $985,000 in 6 per cent bonds; while in 1849, though the loans had been increased, they yet stood in the proportion of one to two.[2]