Rearden throws Dr. Potter out, and the State Science Institute publicly smears Rearden Metal. Its denunciation contains no shred of factual evidence based on laboratory research, focusing instead on innuendoes and unsupported assertions. Dagny visits Dr. Robert Stadler, head of the Institute. Stadler recognizes the contemptible nature of the Institute's statement, but he refuses to publicly state the truth regarding Rearden Metal. His reasons are clear: The public demands practical results in return for its funding, but the Institute's metallurgical department has created nothing of value. If a private individual produces a new metal that is tremendously successful, the public will question the need for a State Science Institute. Stadler will not put the Institute's funding at risk.
The stock of Taggart Transcontinental plummets because of the State Science Institute's attack on Rearden Metal. Dagny tells Jim that she will start her own company to complete the construction of the Rio Norte Line. She says that after the merit of the Rearden Metal track has been proven, the line's ownership will go to Taggart Transcontinental. Jim approves, and Dagny decides to call her railroad the John Galt Line. Rearden and the producers from Colorado invest in her company.
The legislature passes the Equalization of Opportunity Bill, which will strip Rearden of his ore mines and place their ownership in the hands of someone else. Wesley Mouch, Rearden's Washington man, didn't inform Rearden that the bill was being brought to the floor.
