Two major U.S. Midwestern railroads, the Rock Island Lines and the Milwauke Road, filed for bankruptcy after 1975 and the Court ordered them dismembered. This study explains the economic factors causing financial failure such as total rail line excess capacity in the region leading to low density of freight traffic; in addition, labor union rules required unnecessary large train crews. The regulations of the Interstate Commerce Commission aggravated the economic problems by limiting rail line abandonments and mergers designed to improve efficiency. Congress passed the Staggers Act in 1980 to...