annual report and its prospectuses. Though Gowen was able to easily slough off such accusation at that time, it was renewed more powerfully in 1876 by Charles E. Smith—Gowen's direct predecessor as president, who had recommended the young man for the position in his absence. Even following Gowen's election to the post in his own right, Smith had remained on the corporation's Board of Managers. After hearing from Gowen of a US$7 million floating debt that had never been discussed in any board meetings, Smith inspected the unpublished books of the subsidiary Coal & Iron Co., which issued no annual report of its own. He found that the parent corporation's floating debt was being transferred to the subsidiary before the parent's fiscal year end in November, to avoid appearing in year-end statements; only to be shifted back to the parent prior to the subsidiary's own fiscal year end in December, thus effectively masking the joint enterprise's precarious condition overall. Smith raised the issue to the Reading's principal source of funds, the McCalmont Brothers investment banking firm in London, seeking Gowen's ouster, but was rebuffed. Though Gowen remained as president, and Smith resigned from the board, the incident forced Gowen's 1876 annual report to approximate frankness. It indicated the corporation's funded debt as US$65 million, resulting in US$5.5 million annually in carrying charges, compared to just over US$3 million in earnings for the railroad and a US$600,000 loss for the Coal & Iron Co. From that time, through fresh sanguine predictions for improvements in the business climate and the Reading's overall performance, which allowed him to borrow more funds on a less grand scale and to get the McCalmonts to defer interest payments due; and maneuverings such as periodically paying workers in scrip—essentially promissory notes—instead of cash, Franklin Gowen continued to run the Reading. In early 1880, employees were paid in cash for the first time in sixteen months. Then, on Friday, May 22, 1880, two Coal & Iron Co. checks, intended to transfer cash to the railroad, bounced. Gowen offered railroad promissory notes to make the checks good, but the bank turned him down. McCalmont Brothers ignored Gowen's plea by cable for a fresh loan of a half million dollars. That same day the Reading announced suspension of payments on debt. Reading Railroad stock dropped from 23 to 12½ in one hour of trading. An anonymous statement from the corporate