It would not even be necessary that the money to pay the interest coupons should pass through the government's hands. The operating company would pay it directly to the bond-holder and at the same time the ¼ of 1 per cent. would be paid into the government treasury.
The object in making the bonds run for no longer time than twenty-five years, when it is intended that the whole value of the road shall be perpetually held in the form of bonds, is that at proper intervals a revaluation may be made of the improvements to the road and the interest charges may be readjusted to correspond with the general change in the income from capital. When the bonds fall due, a new block would be issued and sold to the highest bidder. The interest rate should be set at such a point that the bonds could be sold at a premium. These premiums, with the ¼ of 1 per cent. on the bonds, paid by the operating company to the government, (which we may regard as a legitimate fee to the government for its guaranty) should form a government railway fund. This 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