his should be used, first, to defray the expenses of the government
department of railways, and second, to pay the deficit when on any line
the net receipts after operating expenses are paid are insufficient to
pay the rental. The remainder should be expended in making improvements
and additions to the railway system, such as building new bridges and
stations, and improving the line, the cost of which, however, should be
represented by additional bonds at the end of the twenty-five-year term.
The amount of income should be so regulated, by varying the rate of
interest on new bonds, that the sum remaining for the last purpose may
be about sufficient for usual needs. The whole administration of the
receipt and expenditure of this fund should be vested in the government
department of railways. In this way the danger that the whole work of
this government department might be blocked through the neglect of
Congress to make necessary appropriations, would be avoided.

The readjustment of existing stocks and bonds presents difficulties
which will be considered in very different ways by different classes of
persons. The "granger" element, for instance, would cut off the holder
of "watered stock" with a shilling. Fortunately, if we take time enough,
we can arrange this matter with no shadow of injustice. To illustrate:
The government can purchase the A. B. & C. road outright at its market
value, which, owing to inflated prices and watered securities, is
perhaps $3,000,000. It is desired to wipe out $1,000,000 of this to
place the road upon its proper basis. The government issues 3 per cent.
guaranteed ten-year bonds upon the road and leases it at an annual
rental of 6 per cent. on what it has paid. At the time the bonds are
due, the accumulation of rentals over interest is more than sufficient
to pay off $1,000,000 of the bonds, while the remainder are renewed on
the permanent basis.

The author is well aware that a very strong prejudice exists against the
lending by the government of its credit to private corporations. This
prejudice--which has perhaps already been sufficient to condemn the
plan, as thus far presented, in the mind of the reader--he believes to
be a very wise and well founded one. The assumption by the government of
any risk in connection with corporate enterprise is highly undesirable.
It is now to be noted that this objection is wholly overcome; for,
notwithstanding the fact that the government guarantees the