rows that in times past we have shared together in this unhappy Venice."

Here the signora ended perforce the speech, which had been long for her, and the Paronsina burst into a passion of weeping,-not more at her mamma's words than out of self-pity, and from the national sensibility.

Tonelli took the chain, and reverently kissed it and the hands that gave it. He had a helpless sense of the injustice the signora's words and the Paronsina's tears did him; he knew that they put him with feminine excess further in the wrong than even his own weakness had; but he tried to express nothing of this, it was but part of the miserable maze in which his life was involved. With what courage he might he owned his error, but protested his faithful friendship, and poured out all his troubles, his love for Carlotta, his regret for them, his shame and remorse for himself. They forgave him, and

--

there was everything in their words and will to restore their old friendship, and keep it; and when the gate with a loud clang closed upon Tonelli, going from them, they all felt that it had irrevocably perished.

I do not say that there was not always a decent and affectionate bearing on the part of the Paronsina and her mother towards Tonelli and his wife: I acknowledge that it was but too careful and faultless a tenderness, ever conscious of its own fragility. Far more natural was the satisfaction they took in the delayed fruitfulness of Tonelli's marriage, and then in the fact that his child was a girl, and not a boy. It was but human that they should doubt his happiness, and that the signora should always say, when hard pressed with questions upon the matter: "Yes, Tonelli is married; but if it were to do again, I think he would do it to-morrow rather than to-day."

THE HE ultimate solution of the Erie contest awaits the next election of the board of directors.

Until the second Tuesday of October we shall have plenty of surmises; there will possibly be very strange and conflicting tactics, the purposes of the capitalists who have ventured many millions in the fight will become more and more enigmatical and inscrutable; but of the real import of the war the rightfully curious public will have no certain knowledge before the autumnal meeting of the Erie shareholders.

In our present review of the recent developments regarding the Erie Railroad, therefore, no attempt will be made to forecast the future. Neither shall we essay to explain the aspect which affairs have seemed to assume since the passage of the anti-consolidation bill through the New York Legislature. It suffices that what has already transpired of the immediate or habitual policy of the principal actors in this unfinished drama is of a nature so notably representative of railway management and stock operations in America as to justify careful examination, whatever may be the incongruities in sequel.

The primary fact, the overshadowing fact, the fact which should be kept steadfastly in the foreground in all speculations upon the conflict, is that Cornelius Vanderbilt had resolved to secure control of the Erie Railroad, in order to

largely enhance the cost of travel and freightage throughout every rood of soil in the State whereof with one exception he is the wealthiest citizen. The programme was broad, and with many ramifications. If completed, it would affect disastrously, not only the producing class and the national commerce, but the very share-gamblers who have been most clamorous in its favor. Nevertheless, the scheme was defended so sagaciously, so secretly, and with such incomparable sophistry, that for many months its full measure was most imperfectly comprehended, while it encountered only halting and spasmodic opposition.

The general public first became cognizant of the monopoly programme during the initial session of the recent Constitutional Convention of New York. At that time a strenuous effort was made to estop finally and comprehensively all combinations looking toward exorbitant charges in railroad transportation; and the subsequent result of the struggle was the insertion among the proposed amendments of a clause forbidding the Legislature from authorizing "the consolidation of railroad corporations owning parallel or competing lines of road." The measure naturally provoked a very considerable discussion, and in the course of its advocacy there gradually transpired certain facts and hypotheses of which the following are the most trustworthy.

By a series of rapid and enormous purchases of stock, the Vanderbilt fam

N. Y. Central

Capital of consolidation .

The fourteen millions credited to Hudson in the above summary represents only ten and a half millions of actual money, and owes its creation to one of those peculiar financial expedients by which shrewd American capitalists acquire the enviable title of railroad kings. When the head of the dynasty which now dominates over the three affined companies made his first move toward empire by securing possession of the river route, he inaugurated a system of economical management, special traffic arrangements, and vast construction outlays which afforded a specious pretext for augmenting the capital stock. It was therefore voted that the then capital of seven millions should be increased to fourteen by an issue of bonus shares at fifty per cent. Each stockholder paid in fifty dollars, and received scrip, the par value of which was one hundred, but which sold in Wall Street at forty-five premium. This splendid manoeuvre, by which the company obtained three and a half millions for the construction and repair fund, while the stockholders doubled their money, presented features too large and captivating to lapse into desuetude. It was now proposed to repeat the same operation along all the lines, which at the same time were to be consolidated. The scrip dividend in this second scheme was to be 33 per cent.

This would give: —

But this magnificent project had one important drawback. The increasing business upon the coalescing roads, though certain, is essentially slow. It was inconceivable that the ordinary earnings could allow of current dividends on so vast an augmentation of capital. The statistics of railroads are subject to the tyranny of arithmetic. If the subtrahend remain the same, and the subtractor be multiplied, 33 or 50 per cent, the remainder will be definitely decreased. It was evident that the profitableness of the programme depended upon the possible elasticity of the rates of transportation. At this dilemma Mr. Vanderbilt showed himself in no wise disconcerted. Dividends must be provided for, and he would therefore advance the tariff.

Experts in railroads are generally agreed that the expense of freightage is seventy-five per cent on earnings. It costs a trifle less to carry passengers, somewhat more to transport merchandise; but the average is about three fourths of gross income, while out of the residual twenty-five per cent must proceed the money for repairs and replacement, the interest on bonds, the contingent fund,* and the dividends. Now it would put the company to no greater expense to carry a ton of wheat at eight cents than at four, while a merely marginal increase on rates of goods in bulk and of passenger travel would secure quite satisfactory profits on the new

shares.

Such an enhancement of current rates

Under the impress of modern ideas, this item has recently acquired startling proportions. The Union Pacific, for instance, paid not less than $500,000 for services rendered to the company by lobbyists at Washington. It recently cost the Missouri Pacific Railroad $192,178 to secure the posession of that road by State legislation. The New York Central credits $250,000 to the contingent fund for expenses at Albany in 1866-67. In view of these facts, it seems just to modify the popular prejudice against the Camden and Amboy Railroad, which has certainly attained its ends in Congress and at Trenton by a far more economical expenditure.

was therefore a necessary feature of the scheme. From one aspect this programme was not only plausible, but feasible. Against the irritation incident to an advance in charges stood the habitual lethargy of the citizens of the United States, who pay six cents as readily as five for a ride in a street car, ten cents as quickly as six in omnibuses, and forty cents for expressage where they once paid twenty-five; while even if popular excitement should so far develop itself as to prompt Albany legislation, there was "influence" at hand quite adequate to check agitation.

It was the ever-present danger of competition which constituted the important obstacle to the measure. As long as the Erie Railroad occupied the position of an active rival, it was impossible either to effect dividends on the fictitious stock, or even to insure large returns on the genuine capital. In previous years, and on a minor scale, an agreement had been entered into, not only with this line, but also with the Pennsylvania Central, by which the general rates had been kept up very much above a reasonable maximum. Goods shipped from St. Louis to New York at the average charge of $ 2.62 were carried from the same point to Baltimore for $1.10. From Chicago there was a like invidious distinction of sixty-two cents; from Cincinnati, of eighty cents. On large importations the difference amounted to immense sums, and was threatening disaster to the mercantile interests of the metropolis.

Nevertheless, this exorbitant tax was found utterly insufficient for the purposes of the prospective consolidation, and a more intimate alliance became of paramount importance. One of two courses was open to the president of the New York Central. He must either secure the unlimited co-operation of the Erie direction by treaty, or he must control the road by buying up a majority of the stock. Each of these alternatives presented peculiar difficulties, and subsequent events would seem to prove that his mind has been in a state of painful indecision as VOL. XXII. - NO. 129.

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to which he should finally adopt. It is a historical fact, that he made essays in both these particulars. We have now to consider the special embarrassments of the problem.

The Erie is one of the most important links in the great chain of interior railway connection between the producing and the consuming States. It was built under the impulsion of popular excitement, amid keen opposition, and with the disadvantage, at the start, of being enormously expensive. Its broad and massive line sweeps through a country of singular picturesqueness, while, for every glory of river gorge and mountain slope its stockholders have had to pay enormously in deep cuts, solid causeways, and firm-built bridges. There is scarcely a road in the country which will compare with it for unavoidable and immense engineering expenses. Moreover, its splendid gauge, while undeniably the most luxurious to travellers, and admitting of excessive freighting, is notoriously costly, both in construction and repairs. Still further: the central idea of the New York and Erie, as it was originally called, was the modern one of comparatively straight lines, and through trade, rather than intermediate traffic. This principle underlay the construction of the Illinois Central, and is seen in most remarkable activity in the Pacific railroads. Experience has demonstrated the wisdom of the theory. It has been seen that population accepts the fresh channels, that cities rapidly spring up, that manufacture as well as agriculture centralizes itself around the new highways, and real estate triples and quadruples its value everywhere within sound of the locomotive whistle. But all these immeasurable changes come after the completion of the roads; and, in the interval, the rewards to invested capital are in inverse ratio to desert. It has happened, therefore, that what is averagely true of the first stockholders, even of such roads as pass through a comparatively well-populated country from the first, was exasperatingly true of the original share-owners of Erie. The

agriculturists and land-owners throughout all the inland lower tier of counties were enriched, New York City was enriched, but the stockholders were hopelessly ruined. Mr. Greeley recently stated that on five thousand dollars, which he invested out of pure public spirit, his loss was forty per cent, and it is believed that his case was comparatively a fortunate one.

But there is a worse fact beyond. Ordinarily the capitalist who steps in and buys the shares which have proved fatal to former investment succeeds in bringing up the property to a dividendpaying basis. In the case of the New York and Erie this was never accomplished. Had Dr. Kane discovered an orange-grove on the borders of the Central Polar Sea, he would not have been more astonished than would have been a holder of the old Erie stock by the announcement of a six-per-cent dividend. The road was not merely expensive in building, but it had the misfortune of requiring large sums for repair and improvement, while its direction never appears to have acted in the best interests of the company. Although it had received a State gift of three millions, it was always in debt, from which it extricated itself only by fresh emissions of stock or bonds, that depressed, while flooding, the market.

This exceptional phase finally resulted in the bankruptcy of the company. The mortgages were foreclosed, the property passed, into the hands of receivers, a reorganization of the corporation was effected, and under a new name, but with much the same management as before, the road made a fresh appeal to public confidence. The confidence, however, never came. That large portion of the well-to-do and opulent classes which buys stocks for the sake of dividends alone refused to invest in the new scrip. The contractors were

"suspect," the employees and directors were "suspect"; an atmosphere of distrust closed in around the company, as the spring fog closes around the Erie ferry-boats. This disastrous suspicion gave birth to one of the most

curious phenomena in railway annals. The really profitable roads in America are seldom quoted on the stock-list. The old Camden and Amboy never was. Neither is Panama stock; neither is Central Pacific. Other roads, like the Illinois Central, are only partially used for speculation; a very considerable portion of the shares being absorbed for trust funds, or held by local capitalists. But it has resulted to Erie, by reason of its unparalleled expenditures, its indubitably incompetent management* and the redistribution of its shares, that the sum total of its stock in all its vast volume has become "street" property. Discarded as a legitimate investment, it has been taken up by the lower or lesser operators on 'Change and employed for "corners," to control elections, for all possible uses but that for which it was originally created. With no deeper significance than a ball in the game of financial battledore and shuttlecock, or counters in rouge et noire, it has acquired a notoriety the most shameful and infamous. The hard practical argot of Wall Street has a certain odd admixture of metaphor in its texture. Like the grammarian of verse, it deals in "longs" and "shorts." A share-bidder who rises or falls with the market is described as "riding in the saddle." A broker who temporarily yields to the storm of adverse fortune is said to "squat." True to this rude tendency for figurative language, the stock board has shown its contempt for the creature of its shameless uses by affixing to Erie the terse Saxon epithet which King James's

* This vague phrase has a very definite meaning among railway men, especially as regards Erie. It includes quite a variety of improprieties, such as the borrowing of money to pay dividends, the concealment of debts from the published reports, the Wall Street operations of responsible directors, secret arrangements with contractors, &c., &c. It is asserted that, although no salary attaches to the position of director, yet no man of intellect, however poor on assuming office, has ever left the Erie board other than rich. A former secretary, who had never been more than a newspaper reporter until accepting place in the company, died worth half a million. Any one familiar with the history of the Napoleon Transportation Company, connected with the Camden and Amboy Railroad, will comprehend how this opulence is generally attained.