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The Federal Government Created Conrail in 1976 by Seizing 6 Bankrupt Pennsylvania Railroads Six major Northeast railroads including Penn Central, Reading, and Lehigh Valley went bankrupt by the early 1970s, threatening to collapse freight shipping across the industrial Northeast. Congress created Conrail in 1976 as a government-owned corporation that seized 13,000 miles of track and 70,000 employees with $3.5 billion in federal funding, operated at a loss until becoming profitable in the mid-198