“That’s customary in friendly proceedings,” he said. “Anyhow, it will be so in this case. The court takes charge of the property as trustee with arbitrary powers. It can’t run the railroad. It must get somebody to do that. So it looks around a bit and decides that the president is the very man. He is hired for the job. The next day he comes back to his old desk with the title of receiver. All essential employes are retained and you go on as before, only without any directors’ meetings.”
“How as before? I don’t understand.”
“That’s the point, Coxey. You can’t shut up a busted railroad like a delicatessen shop. Bankrupt or not it has to go on hauling freight and passengers because it’s what we call a public utility. A railroad may go bust but it can’t stop.”
“Then what is a receivership for?”
“That’s another point. You are getting now some practical economics, not like the stuff old polly-woggle has been filling you up with. The difference is this: When you are bankrupt you put yourself in the hands of the court for self-protection. Then your creditors can’t worry you any more. A railroad in receivership doesn’t have to pay what it owes, but everybody who owes it money has got to pay up because the court says so. It goes along that way for a few months or a year, paying nothing and getting paid, until it shows a little new fat around its bones and is fit to be reorganized.”
“What happens then?”
“Well, then it is purged of sin and gets born again with a new name. The old Great Midwestern Railroad Company becomes the new Great Midwestern Railway Company, issues some new securities on the difference between r-o-a-d and w-a-y, and sets out on its own once more. The receiver is discharged. The stockholders elect a president, maybe the same one as before or maybe not, and the directors begin to hold meetings again.”
iii
The Stock Exchange received the news calmly. It was not unexpected. The directors, as we knew, had been getting out. They read the signs correctly. Under their selling the price of Great Midwestern stock had fallen to a dollar-and-a-half a share. For a stock the par value of which is one hundred dollars that is a quotation of despair. Nothing much more could happen short of utter extinction. Many of the finest railroads in the country were in the same defunct case. You could buy them for less than the junk value of their rails and equipment. But if you owned them you could not sell them for junk. You had to work them, because, as Galt said, they were public utilities. And they worked at a loss.
It happened also on this day that everyone was thinking of something else. That was nothing less than the imminent bankruptcy of the United States Treasury. This delirious event now seemed inevitable.