when the
panic of 1893 occurred. In this year and the next the earnings of
the Baltimore and Ohio fell off rapidly and the dividend was reduced.
Nevertheless, as late as January, 1895, the directors insisted that
financially the company was in better condition than for several years
and that on the whole it was in a stronger position than at any time
since 1880. But in this same year it became necessary to stop all
dividend payments; the company began to have difficulties in securing
ready money; and before the close of the year the situation seemed
hopeless. Early in 1896 Mayer tendered his resignation, and John K.
Cowan succeeded him. The new president did his utmost to obtain money
to meet the current needs, but he was unsuccessful. A receivership and
reorganization seemed absolutely necessary, and in February, 1896, the
receivership was announced.

With the property now in the hands of the courts, the opportunity at
last came to make real the reforms which had been proposed and
begun nearly a decade earlier under the wise but quickly terminated
administration of Samuel Spencer. A thorough housecleaning was now
carried through without interference or interruption. A reorganization
committee was formed, with whom were deposited the Garrett shares as
well as those of the Morgan and New York and Philadelphia interests. A
full investigation of past management disclosed that the records for
the interim extending from the brief Morgan control under Spencer to
the receivership contained the same kind of irregularities and errors
of policy that had prevailed under the earlier Garrett management.
Statements of profits had been swelled by arbitrary entries in the books
and nearly six million dollars which had not been earned had been paid
out in dividends. Furthermore the company had endorsed the notes of
certain subsidiary roads to the extent of over five million dollars, and
had made no record whatever of this action for the stockholders.

As in the case of numerous other railroads, the financial breakdown of
the Baltimore and Ohio Railroad was primarily due to a bad or reckless
financial policy, for there was nothing inherently insecure in the
railroad property itself. During all the years of the Garrett regime,
the company had shared in the general growth and expansion of industry,
wealth, and population within its territory. It had been progressive in
matters of expansion and had built up its system to meet the needs of