Message of Gov. J. S. Hogg to the twenty-third Legislature of Texas. Page: 4 of 28
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MESSAGE OF THE GOVERNOR.
RAILROAD BONDS AND STOCKS.
The constitution provides that: "No corporation shall issue stock or bonds
except for money paid, labor done, or property actually received; and all
fictitious increase of stock and indebtedness shall be void."-Art.12, Sec. 6.
The legislature has attempted to give force to this provision of the constitution
by providing that, "no railroad corporation shall issue any stock or
bonds except for money, labor, or property actually received and applied to the
purposesfor which such corporation was organized; nor shall it issue any shares
of stock in said company except at its par value and to actual subscribers who
pay or become liable to pay the par value thereof."-R. S.. Art. 4154.
The only penalty, tlowever, for the violation of this provision now prescribed
by law is aimed at the corporate officers and directors. They are
simply made liable to the stockholders and creditors thereof for the full par
value of such illegal stock or indebtedness as the case may be.-Id. Art.
4156. Herein lies the trouble. The laws are sufficient in declaring the
effect of such evil practices, but the public is altogether ignored and unprotected
from abuses of that kind, and it is the material sufferer. Bonds in
excessive amounts, far beyond the value of the property, have been issued
by many of the railroad companies of the State, their payment secured
directly by mortgage upon the several lines, and indirectly by a lien upon
every article of commerce carried by them.
To present the enormity and the consequent injustice resulting to the
public from corporate abuse by the issuance of fictitious stocks and indebtedness,
it is well to take a view of the condition affecting commerce throughout
the United States, and then examine it with reference to local affairs.
Authentic statistics show that there are now 170,600 mi;es of railway within
the United States. Liabilities on them, inciuding stocks and bonds, the first
day of January last year, aggregated over $10,765,000,000. Duringthe year
1891 the companies collected from the traffic of the country $1,130,000,000.
They had left from those receipts after paying all the heavy expenses incident
to railway management, including the liberal salaries to their army of
officials, a total available cash revenue of over $457,000,000, or about
$2,681 for every mile of railway in the whole government. After paying
interest on bonds and otherwise due, together with rentals, tolls, and miscellaneous
items amounting to hundreds of millions of dollars, they also
paid over ninety million dollars as dividends on their stock. This enormous
assessment upon the public may be better illustrated by the statement that the
railways for the year 1891 collected over $15 per capita of the whole population
within the federal government. ''he surplus, after paying all expenses,
interests, and dividends, aggregated for that period over forty million
dollars. These facts are taken from the best and most reliable published
statistics. The frequent distressed condition of the whole republic,
growing out of the fast recurring financial depressions, confronts
the government itself and every citizen of it. It may not therefore be
amiss to say, that whlile there is about $1,500,000,000 of active circulating
medium in the United States, the annual revenue taxes received by the
government, added to the traffic taxes collected by these transportation companies
annually, exceed that amount. Doubtless the railway companies of
other States are as free of restraint in the execution of their obligations as
those of 'l'exas. If such is the case, they have but to continue to issue their
bonds and keep up the high traffic rates to pay the interest on them, in order
to go apace with the increase of the circulating medium, and to finally absorb
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Hogg, J.S. (James S.). Message of Gov. J. S. Hogg to the twenty-third Legislature of Texas., book, January 12, 1893; Austin, Texas. (texashistory.unt.edu/ark:/67531/metapth5861/m1/4/: accessed June 28, 2017), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; .