The Major smiled grimly.  “Yes, I have heard of it,” he said.

“Is it common?” asked Montague.

“Not so common as you might suppose,” answered the other.  “A railroad president is commonly not an important enough man to be permitted to do it.  If it happens to be a big road, and the president is a power in it, why, then he may do it.”

“I see,” said Montague.

“That was Higgins’s trick,” said the Major.  “Higgins used to go around making speeches to Sunday schools; he was the kind of man that the newspapers like to refer to as a model citizen and a leader of enterprise.  His brothers, and his brothers-in-law, and his cousins, and all his family went into business in order to sell things to his railroads.  I heard of one story—­it has never come out, but it’s very amusing.  Every year the road would advertise its contract for stationery.  It used about a million dollars’ worth, and there’d be long and most elaborate specifications published—­columns and columns.  But sandwiched away somewhere in the middle of a paragraph was the provision that the paper must all bear a certain watermark; and that watermark was patented by one of Higgins’s companies!  It didn’t even own so much as a mill—­it sublet all the contracts.  When Higgins died, he left eighty million dollars; but they juggled the records, and you read in all the newspapers that he left ‘a few millions.’  That was in Philadelphia, where you can do such things.”

Montague sat thinking for a few moments.  “But I can’t see why they should do it in this case,” he said.  “The men who are doing it own nearly all of the stock of the road.”

“What difference does that make?” asked the Major.

“Why, they are simply plundering their own property,” said Montague.

“Tut!” was the reply.  “What do they care about the value of the property?  They’ll unload it before the public finds out; and in the meantime they are probably manipulating the stock.  That’s the scheme they’re working with the street railroads over in Brooklyn, for instance; the more irregular the dividends are, the more violently the stock fluctuates, and the better they like it.”

“But this is the case of a railroad that is being built,” said Montague; “and they are putting up the money to build it.”

“Yes,” said the Major, “of course; and then they are paying it back to themselves by this dodge; and they’ll still have the stock, and whatever they can get for it will be profit.  And if the State Legislature comes along and asks any impertinent questions, they can open their books and say:  ’See, we have spent this much for improvements.  This is the cost of the road; and if you reduce our freight-rates, you will cut off our dividends and confiscate our property.’”

And the Major gazed at Montague with a mischievous twinkle in his eye.  “Besides,” he said, “another thing.  You say they are putting up the money.  Are you sure it’s their own money?  Commonly the greater part of the cost of railroad building is paid by bonds, and they work those bonds off on banks and insurance companies and trust companies.  Have you thought of that?”