Note 28 — THE RAILWAY IN ITS BUSINESS RELATIONS.

In 1886 the capital stock and the indebtedness of the railroads of the United States amounted to about four thousand million dollars each. Most of the debt represents money actually paid in; but a very large fraction of the stock is a merely nominal liability on which no payments have been made. Some was issued as here described merely as a means of keeping control of the property; some, as the easiest method of balancing unequal values in reorganization; some, to represent increased value of the property, so as to be able to divide all the current earnings without calling public attention too prominently to the very profitable character of the business. On the other hand, some stock on which money was actually paid has been wiped out of existence; and something has been paid out of earnings for capital account without corresponding issue of securities. The net amount of "water," or excess of nominal liabilities over actual investments, in the capital account of the railroads of the country can only be made the subject of guesswork. Estimates of responsible authorities vary all the way from nothing to $4,000,000,000.