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Rh the early railroad charters—those of New York State, for instance—whereby the profits divisible annually were limited to ten per cent; but this provision, intended to secure shippers against unduly high rates, has been evaded by the process known as stock-watering. To illustrate: The contract for the consolidation of the lines forming the New York Central Railroad was made in 1853, and the ten amounts of capital then fused formed a total of $23,000,000, on which premiums were granted aggregating $8,900,000. In 1868 and 1869 the New York Central and Hudson River Railroad Companies were consolidated as a single company, which named its capital at nearly $15,000,000 more than the capitals of the two lines before union. Of course, more than ten per cent would have to be earned on the inflated figures before the State law would apply, and by that time doubtless a new company would appear to buy the road at a handsome advance on its nominal capital. The critics of stock-watering or of the capitalizing of surplus earnings say that it is in substance exacting money from the people, creating an indebtedness representing the same, and making this the basis for forever asking the public to pay interest upon their money so exacted. These critics would limit the profits of the lucrative roads, but, unjustly it would seem, would leave the struggling lines to their fate.

The railroad companies are told, "You may earn as little as you can, but, if by good fortune and good management you earn more than ten per cent, the State will seize the surplus." Practically, however, the law can not be enforced, as the common rights of sale and purchase can be exercised to evade it.

In response to the complaints against the New York roads, the Assembly in February, 1879, appointed a special committee, with Mr. A. B. Hepburn as chairman, to investigate alleged abuses, propose remedies, and report. The testimony before this committee fully established the truth of the alleged abuses in discrimination. Mr. Goodman, Assistant General Freight Agent of the New York Central Railroad Company, testified that special rates were given to all points almost invariably when asked. About ninety per cent of the business between New York and Syracuse was done at reductions from tariff terms, and about one half the business between New York and other points was done at special rates. Other witnesses proved that flour had been carried from Milwaukee to New York while the tariff rate was thirty-six cents, at the specially reduced price of twenty cents, the maintained rate at the time from Rochester being thirty cents. Rochester is 350 miles from New York, and Milwaukee 1,030 miles. So marked and inconsistent a difference did there exist between local and through freight charges, that Mr. W. W. Mack, of Rochester, could ship edge-tools to New York and thence to Cincinnati via Rochester, and save fourteen cents per hundred; to St. Louis by the same route, eighteen cents per hundred—in each case the goods being