Stubborn Problems In the South in the late 1800's there were many problems, with progress came these problems.
Most railroads were heavily in debt. Many railroads raised money by issuing bonds. These Bonds were certificates that earn interest and are redeemed on a certain date. They also sold stock certificates, which shares the ownership of a company. This system of financing would be used in many other industries. What many company's did to make their stock certificates more desirable (because often they had little value) companies would exaggerate their assets, which is their equipment, property and cash. These tickets became known as "watered stock"ÃÂ in reference to ranchers having their cattle drink water before being weighed for sale.
With all the ruthless competition the burden of large debt was complicated with heavy competition. Some railroads would have "ÃÂrate wars"ÃÂ which is when rival railroads drop their rates to be less than their competition and it would go back and forth even if they were running or operating at a loss.
1903 stock certificate of the Baltimore and Ohio R...
Aktie der Berlin-Dresdner Eisenbahngesellschaft
English: Frederick H. Billings (1823-1890) Image f...Running at a loss was better than not running at all.
As the competition grew more, some companies adopted illegal practices. To attract more business some companies secretly offered rebates to some of their best shippers. A rebate was a discount on the normal shipping charge. The reason rebates were illegal is because they were not offered to everyone, this hurt mainly farmers along the rail line.
Sometimes companies entered in a pooling arrangement that promised not to cut prices as well as assuring each other a certain portion of the freight so that they all could stay in business.
After all this bribery and pooling and many other scandal's, the nationwide rail system would come together through new communication and transportation which would bound our nation together. They say time heals all wounds.
English: Share of Brazil Railway Company Français...
H.Cegielski Company Stock certificate, 1928
English: The Kansas Southwestern Railroad Co. THE ...