In cases like the one just described the bondholders are largely to blame for their own folly. But sometimes the loss falls on those who are in no way responsible for it. A railroad may be built as a blackmailing job. If a company is sound and prosperous, speculators may be tempted to build a parallel road, not with the idea of making it pay, but because they can so damage the business of the old road as to force it to buy them out. They build the road to sell. It is but fair to say that operations as bad as those just described are the exception rather than the rule. But the fact that they can exist at all is by no means creditable to our financial methods. The whole system by which directors can use their positions of trust to make contracts in which they are personally interested puts a premium on dishonesty. Such contracts are forbidden in England. It may be true, as is urged by many railroad officials of undoubted honesty, that it would be inconvenient to apply the same law here; but on the whole, the gain would far outweigh the loss. At the very best, a railroad president is subject to temptations to misuse his financial powers, all the more dangerous because it is impossible to draw the line between right and wrong. He knows the probable value of his railroad and of the property affected by its action a great deal better than any outsider possibly can. The published figures of earnings of the road are the result of estimates by himself and his subordinates. Out of the current earnings he pays current expenses, and probably charges permanent expenditures to capital account. But what expenditures are current and what are permanent? This division is itself the result of an estimate, and a very doubtful one at that. There are some well-established general principles, but none which will apply themselves automatically. With the best will in the world he cannot make his annual reports give a thoroughly clear idea of what has been done. Is he to be forbidden to buy stock when it seems too low, or sell it when it is high? Shall we refuse him the right to invest in other property which he sees will advance in value? Apparently not; and yet, if we allow this, we open the door for some of the worst abuses of power which have occurred in railroad history. The line between good faith and bad faith in these matters is a narrow one, and the average conscience cannot be trusted to locate it with accuracy.