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Both of the Goulds and the Harriman family found it financially advantageous to bankrupt railroads by being large bond holders in the particular railroad and sit on the board of directors. As one of the major investors and as a bond holder he got paid first as the railroads assets were liquidated and the proceeds went first to bond holder and then to Class A stock holder and then to Class B stockholders, if there were any, then to Common Stock holder, and finally to pay wages to workers. Bondholders got all of the money and stock holders seldom even got 1 cent on the dollar, workers always got squat. Gould and Harriman used the same technique using the bankruptcy as an opportunity to reorganize the railroad that had gone into receivership by being one of the largest receivers. The newly reorganized railroad would then be opened to selling bonds and stock again with a new group of big investors joining the board of directors. The various parts of the D. & RG were bankrupted repeatedly and on purpose to create the opportunity to raise funds again and build a little more railroad and then profit from the bankruptcy. When you own a profitable bank and control seats on Wall St. it was easy to refinance a bankrupt railroad except during the Panics, but after the depressions ended or when the depressions were ending it was a great time for the receivers to refinance the company through the issue of stock. They issued themselves bonds for their role as receivers and thus they could clean up the next time the railroad went bankrupt. Harriman on one occasion made his fellow board members very angry because he convinced them to sell bonds on the market and his family bought up the new bonds and as President and Chief Officer of the Board of Directors he demonetized the old bonds and bankrupted them along with the railroad. It gave him sole control. The process of building and bankrupting of the D&RG is detailed in Robert Athearn's book "The Denver & Rio Grande Western: Rebel of the Rockies" A fun railroading history because it covers all of the dirty deeds, deals and shenanigans that took place in the building of the RR. __._,_.___ Posted by: professorcarroll308@yahoo.com __,_._,___ |