;: /HE AILROAD BUILDERS LVX ET '"^nm lOHN MOODY CORNELL UNIVERSITY LIBRARY THE MONAGHAN COLLECTION The Gift of Frank Monaghan Cornell 1927 DATE DUE y^ '^PP""^!! <% ArfrcH ^^r**a^ a^»- <^tm fl**"" ff- CAYLOflO PRINTEDINU S A. The original of tliis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924070687961 THE RAILROAD BUILDERS EXTRA-ILLUSTRATED EDITION VOLUME 38 THE CHRONICLES OF AMERICA SERIES ALLEN JOHNSON EDITOR GERHARD R. LOMER CHARLES W. JEFFERYS ASSISTANT EDITORS JAMES J. HILL Photograph by Pach Bros., New York. THE RAILROAD BUILDERS A CHRONICLE OF THE WELDING OF THE STATES BY JOHN MOODY LVXET NEW HAVEN: YALE UNIVERSITY PRESS TORONTO: GLASGOW, BROOK & CO. LONDON: HUMPHREY MILPORD OXFORD UNIVERSITY PRESS 1921 Copyright, 1919, by Yale University Press y3 ?fff^/^ a- CONTENTS I. A CENTURY OF RAILROAD BUILDING Page 1 II. THE COMMODORE AND THE NEW YORK CENTRAL " 20 III. THE GREAT PENNSYLVANIA SYSTEM " 47 IV. THE ERIE RAILROAD " 64 V. CROSSING THE APPALACHIAN RANGE " 95 VI. LINKING THE OCEANS " An VII. PENETRATING THE PACIFIC NORTHWEST " 138 VIII. BUILDING ALONG THE SANTA FE TRAIL " 154 IX. THE GROWTH OF THE HILL LINES " 165 X. THE RAILROAD SYSTEM OF THE SOUTH " 179 XI. THE LIFE WORK OF EDWARD H. HARRIMAN " 193 XII. THE AMERICAN RAILROAD PROBLEM " 211 BIBLIOGRAPHY " 243 INDEX " 247 ILLUSTRATIONS JAMES J. HILL Photograph by Pach Bros., New York. Frontispiece DEVELOPMENT OF RAILROADS IN THE UNITED STATES Map by W. L. G. Joerg, American Geographical Society. Facing page H THE DE WITT CLINTON The first locomotive and train in the State of New York. Photograph from the original. " " SO THE NEW YORK CENTRAL, SANTA FE, AND GREAT NORTHERN RAILWAY SYSTEMS Map by W. L. G. Joerg, American Geographical Society. '• " 30 THE PENNSYLVANIA, SOUTHERN. AND UNION PACIFIC-SOUTHERN PACIFIC RAILWAY SYSTEMS Map by W. L. G. Joerg, American Geographical Society. " " iS THE BALTIMORE AND OHIO, ERIE, AND NORTHERN PACIFIC RAILWAY SYS- TEMS Map by W. L. G. Joerg, American Geographical Society. " " 68 X ILLUSTRATIONS LOCOMOTIVE JOBN BULL, 1831 Photograph from the original engine in the National Museum, Washington. This loco- motive was built in Newcastle, England, and brought to America for the Camden and Amboy Railway in August, 1831. It was exhibited at the World's Fair in Chicago in 1893. Facing page 100 COMPLETION OF THE TRANSCONTINENTAL RAILROAD The locomotives Jupiter, of the Central Pa- cific, and 119, of the Union Pacific, meeting on May 10, 18C9, at Promontory Point, Utah, when the last spike was driven. Drawing from a wood engraving published in 1870, reproduced in The History oj Travel in America, by Seymour Dunbar. " " 133 THE RAILROAD BUILDERS CHAPTER I A CENTURY OF RAILROAD BUILDING The United States as we know it today is largely the result of mechanical inventions, and in par- ticular of agricultural machinery and the railroad. One transformed millions of acres of uncultivated land into fertile farms, while the other furnished the transportation which carried the crops to dis- tant markets. Before these inventions appeared, it is true, Americans had crossed the Alleghanies, reached the Mississippi Valley, and had even pene- trated to the Pacific coast; thus in a thousand years or so the United States might conceivably have become a far-reaching, straggling, loosely jointed Roman Empire, depending entirely upon its oceans, internal watercourses, and imperial highways for such economic and political integrity as it might 2 THE RAILROAD BUILDERS achieve. But the great miracle of the nineteenth century — the building of a new nation, reaching more than three thousand miles from sea to sea, giving sustenance to more than one hundred mil- lion free people, and diffusing among them the necessities and comforts of civilization to a greater extent than the world had ever known before — is explained by the development of harvesting machinery and of the railroad. The railroad is sprung from the application of two fundamental ideas — ■ one the use of a me- chanical means of developing speed, the other the use of a smooth running surface to diminish friction. Though these two principles are today combined, they were originally absolutely distinct. In fact there were railroads long before there were steam engines or locomotives. If we seek the real prede- cessor of the modern railroad track, we must go back three hundred years to the wooden rails on which were drawn the little cars used in English collieries to carry the coal from the mines to tide- water. The natural history of this invention is clear enough. The driving of large coal wagons along the public highway made deep ruts in the road, and some ingenious person began repairing the damage by laying wooden planks in the furrows. A CENTURY OF RAILROAD BUILDING 3 The coal wagons drove over this crude roadbed so successfully that certain proprietors started con- structing special planked roadways from the mines to the river mouth. Logs, forming what we now call "ties," were placed crosswise at intervals of three or four feet, and upon these supports thin "rails," likewise of wood, were laid lengthwise. So effectually did this arrangement reduce friction that a single horse could now draw a great wagon filled with coal — an operation which two or three teams, lunging over muddy roads, formerly had great difficulty in performing. In order to lengthen the life of the road, a thin sheeting of iron was presently laid upon the wooden rail. The next im- provement was an attempt to increase the dura- bility of the wagons by making the wheels of iron. It was not, however, until 1767, when the first rails were cast entirely of iron with a flange at one side to keep the wheel steadily in place, that the modern roadbed in all its fundamental principles made its appearance. This, be it observed, was only two years after Watt had patented his first steam en- gine, and it was nearly fifty years before Stephen- son built his first locomotive. The railroad origi- nally was as completely dissociated from steam propulsion as was the ship. Just as vessels had 4 THE RAILROAD BUILDERS existed for ages before the introduction of mechi cal power, so the railroad had been a familiar si in the mining districts of England for at least centuries before the invention of Watt really g it wings and turned it to wider uses. In this spect the progress of the railroad resembles 1 of the automobile, which had existed in crude f( long before the invention of the gasoline enj made it practically useful. In the United States three new methods of tn portation made their appearance at almost same time — the steamboat, the canal boat, the rail car. Of all three, the last was the sloT in attaining popularity. As early as 1812 J Stevens, of Hoboken, aroused much interest , more amused hostility by advocating the builc of a railroad, instead of a canal, across New Y State from the Hudson River to Lake Erie, ; for several years this indefatigable spirit journe from town to town and from State to State, i fruitless effort to push his favorite scheme. ' great success of the Erie Canal was finally haile( a conclusive argument against all the ridicul claims made in favor of the railroad and ] cipitated a canal mania which spread all c the country. A CENTURY OF RAILROAD BUILDING 5 Yet the enthusiasts for raib*oads could not be discouraged, and presently the whole population divided into two camps, the friends of the canal, and the friends of the iron highway. Newspapers acrimoniously championed either side; the ques- tion was a favorite topic with debating societies; public meetings and conventions were held to up- hold one method of transportation and to decry the other. The canal, it was urged, was not an experi- ment; it had been tested and not found wanting; already the great achievement of De Witt Clinton in completing the Erie Canal had made New York City the metropolis of the western world. The rail- road, it was asserted, was just as emphatically an experiment; no one could tell whether it could ever succeed; why, therefore, pour money and effort into this new form of transportation when the other was a demonstrated success? It was a simple matter to find fault with the railroad; it has always been its fate to arouse the opposition of the farmers. This hostility appeared early and was based largely upon grounds that have a familiar sound even today. The railroad, they said, was a natural monopoly; no private citi- zen could hope ever to own one; it was thus a kind of monster which, if encouraged, would override 6 THE RAILROAD BUILDERS all popular rights. From this economic criticism the enemies of the railroad passed to details of con- struction: the rails would be washed out by rains; they could be destroyed by mischievous people; they would snap under the cold of winter or be buried under the snow for a considerable period, thus stopping all communication. The champions of artificial waterways would point in contrast to the beautiful packet boats on the Erie Canal, with their fine sleeping rooms, their restaurants, their spacious decks on which the fine ladies and gentle- men congregated every warm summer day, and would insist that such kind of travel was far more comfortable than it could ever be on railroads. To all these pleas the advocates of the railroad had one unassailable argument — its infinitely greater speed. After all, it took a towboat three or four days to go from Albany to Buffalo, and the time was not far distant, they argued, when a railroad would make the same trip in less than a day. Indeed, our forefathers made one curious mis- take: they predicted a speed for the railroad — a hundred miles an hour — which it has never attained consistently with safety. If the American of today could transport himself to one of the first raihoad lines built in the United A CENTURY OF RAILROAD BUILDING 7 States it is not unlikely that he would side with the canal enthusiast in his argument. The rough pictures which accompany most accounts of early railroad days, showing a train of omnibus-like car- riages pulled by a locomotive with upright boiler, really represent a somewhat advanced stage of de- velopment. Though Stephenson had demonstrated the practicability of the locomotive in 1814 and although the American, John Stevens, had con- structed one in 1826 which had demonstrated its ability to take a curve, local prejudice against this innovation continued strong. The farmers asserted that the sparks set fire to their hayricks and bams and that the noise frightened their hens so that they would not lay and their cows so that they could not give milk. On the eariiest railroads, there- fore, almost any other method of propulsion was pre- ferred. Horses and dogs were used, winches turned by men were occasionally installed, and in some cases cars were even fitted with sails. Of all these] methods, the horse was the most popular : he sent! out no sparks, he carried his own fuel, he made little noise, and he would not explode. His only failing was that he would leave the track; and to remedy this defect the early railroad builders hit upon a happy device. Sometimes they would fix a 8 THE RAILROAD BUILDERS treadmill inside the car; two horses would patiently propel the caravan, the seats for passengers being arranged on either side. So unformed was the prev- alent conception of the ultimate fimction of the railroad, and so pronounced was the fear of monop- oly that, on certain lines, the roadbed was laid as a state enterprise and the users furnished their own cars, just as the individual owners of towboats did on the canals. The drivers, however, were an exceedingly rough lot; no schedules were observed and as the first lines had only single tracks and in- frequent turnouts, when the opposing sides would meet each other coming and going, precedence was usually awarded to the side which had the strong- er arm. The roadbed showed little improvement over the mine tramways of the eighteenth century, and the rails were only long wooden stringers with strap iron nailed on top. So undeveloped were the resources of the country that the builders of the Baltimore and Ohio Railroad in 1828 petitioned Congress to remit the duty on the iron which it was compelled to import from England. The trains consisted of a string of little cars, with the baggage piled on the roof, and when they reached a hill th^y sometimes had to be pulled up the inclined plane by a rope. Yet the traveling in these earliest days A CENTURY OF RAILROAD BUILDING 9 was probably more comfortable than in those which immediately followed the general adoption of loco- motives. When, five or ten years later, the advan- tages of mechanical as opposed to animal trac- tion caused engines to be introduced extensively, the passengers behind them rode through constant smoke and hot cinders that made railway travel an incessant torture. Yet the railroad speedily demonstrated its prac- tical value; many of the first lines were extremely profitable, and the hostility with which they had been first received soon changed to an enthusiasm which was just as unreasoning. The speculative craze which invariably follows a new discovery swept over the country in the thirties and the forties and manifested itself most unfortunately in the new Western States — Ohio, Indiana, Illinois, and Michigan. Here bonfires and public meetings whipped up the zeal; people believed that railroads would not only immediately open the wilderness and pay the interest on the bonds issued to con- struct them, but that they would become a source of revenue to sadly depleted state treasuries. Much has been heard of government ownership in recent years; yet it is nothing particularly new, for many of the early railroads in these new Western States 10 THE RAILROAD BUILDERS were built as government enterprises, with resull which were frequently disastrous. This manij with the land speculation accompanying it, wa largely responsible for the panic of 1837 and led t that repudiation of debts in certain States whic for so many years gave American investments a evil reputation abroad. In the more settled parts of the country, ho\^ ever, railroad building had comparatively a mor solid foundation. Yet the railroad map of the foi ties indicates that railroad building in this earl; period was incoherent and haphazard. Practical!; everywhere the railroad was an individual enter prise; the builders had no further conception of i than as a line connecting two given points usual! a short distance apart. The roads of those day began anywhere and ended almost anywhere, i few miles of iron rail connected Albany and Sche nectady. There was a road from Hartford to Ne> Haven, but there was none from New Haven t New York. A line connected Philadelphia wit Columbia; Baltimore had a road to Washington Charleston, South Carolina, had a similar contac with Hamburg in the same State. By 1842, Ne^ York State, from Albany to Buffalo, possess© several disconnected stretches of railroad. It wa A CENTURY OF RAILROAD BUILDING 11 not until 1836, when work was begun on the Erie Raih-oad, that a plan was adopted for a single line reaching several hundred miles from an obvious point, such as New York, to an obvious destina- tion, such as Lake Erie. Even then a few far- sighted men could foresee the day when the rail- road train would cross the plains and the Rockies and liok the Atlantic and the Pacific. Yet, in 1850 nearly all the railroads in the United States lay east of the Mississippi River, and all of them, even when they were physically mere extensions of one another, were separately owned and separately managed. Successful as many of the railroads were, they had hardly yet established themselves as the one preeminent means of transportation. The canal had lost in the struggle for supremacy, but certain of these constructed waterways, particularly the Erie, were flourishing with Uttle diminished vigor. The river steamboat had enjoyed a development in the first few decades of the nineteenth century almost as great as that of the railroad itself. The Mississippi River was the great natural highway for the products and the passenger traflBc of the South Central States; it had made New Orleans one of the largest and most flourishing cities in the 12 THE RAILROAD BUILDERS country; and certainly the rich cotton planter the fifties would have smiled at any suggesti that the "floating palaces " which plied this migh stream would ever surrender their preeminence the rusty and struggling railroads which woui along its banks. This period, which may be taken as the fir in American railroad development, ended abo' the middle of the century. It was an age of gre progress but not of absolutely assured success, few lines earned handsome profits, but in the ma the railroad business was not favorably regard( and railroad investments everywhere were held suspicion. The condition that prevailed in mar railroads is illustrated by the fact that the dire tors of the Michigan and Southern, when they hei their annual meeting in 1853, had to borrow chai from an adjoining oflBce as the sheriff had walkf away with their own for debt. Even a railroa with such a territory as the Hudson River Valle; and extending from New York to Albany existe in a state of chronic dilapidation; and the Ne York and Harlem, which had an entrance into Ne York City as an asset of incalculable value, w! looked upon merely as a vehicle for Wall Stro speculation. A CENTURY OF RAILROAD BUILDING 13 Meanwhile the increasing traffic in farm prod- ucts, mules, and cattle from the Northwest to the plantations of the South created a demand for more ample transportation faciUties. In the dec- ade before the Civil War various north and south lines of railway were projected and some of these were assisted by grants of land from the Federal Government. The first of these, the Illinois Cen- tral, received a huge land-grant in 1850 and ulti- mately reached the Gulf at Mobile by connecting with the Mobile and Ohio Railroad which had also been assisted by Federal grants. But the panic of 1857, followed by the Civil War, halted all rail- road enterprises. In the year 1856 some 3600 miles of railroad had been constructed; in 1865 only 700 were laid down. The Southern railroads were prostrated by the war and north and south lines lost all but local traffic. After the war a brisk recovery began and brought to the fore the first of the great railroad magnates and the shrewdest business genius of the day, Cor- nelius Vanderbilt. Though he had spent his early life and had laid the basis of his fortune in steam- boats, he was the first man to appreciate the fact that these two methods of transportation were about to change places — that water transportation 14 THE RAILROAD BUILDERS was to decline and that rail transportation was to gain the ascendancy. It was about 1865 that Vanderbilt acted on this farsighted conviction, promptly sold out his steamboats for what they would bring, and began buying railroads despite the fact that his friends warned him that, in his old age, he was wrecking the fruits of a hard and thrifty life. But Vanderbilt perceived what most American business men of the time failed to see, that a change had come over the railroad situation as a result of the Civil War. The time extending from 1860 to about 1875 marks the second stage in the railroad activity of the United States. The characteristic of this period is the development of the great trunk liaes and the construction of a transcontinental route to the Pacific. The Civil War ended the supremacy of the Mississippi River as the great transporta- tion route of the West. The fact that this river ran through hostile territory — Vicksburg did not fall until July 4, 1863 — forced the farmers of the West to find another outlet for their products. By this time the country from Chicago and St. Louis eastward to the Atlantic ports was fairly completely connected by raihoads. The necessities of war led to great improvements in construction and equip- 25 DEVELOPMENT OF RAILROADS IN THE UNITED STATES SCALE 1:13,600,000 2g_j0 75a0 200 ■ 300MHBS -,- Railroada iu the United States in 1840 ( after CarhegU IjMa. Publ.215C) Railroad! in lie United States in 18*0 built sinee 1840 (afinr Camtgie Imut. PiM. 215C) -—, — ™^-~ Railroads in the United States in 1880 built since I860 (after SirOmer'M Statutkal Atlas of the V.S.,1S8S ) , Bailroads in the United Stales in 1917 built since 1880. JULIUS B!EN L[TH N.N A CENTURY OP RAILROAD BUILDING 15 ment. Business which had hitherto gone South now began to go East; New Orleans ceased to be the great industrial entrep6t of this region and gave place to St. Louis and Chicago. Yet, though this great change in traflBc routes took place in the course of the war, the actual con- solidations of the various small railroads into great trunk lines did not begin until after peace had been assured. The establishment of five great railroads extending continuously from the Atlantic seaboard to Chicago and the West was perhaps the most remarkable economic development of the ten or fifteen years succeeding the war. By 1875 these five great trunk lines, the New York Central, the Pennsylvania, the Erie, the Baltimore and Ohio, and the Grand Trunk, had connected their scattered units and estabUshed complete through systems. All the vexations that had necessarily accom- panied railroad traffic in the days when each one of these systems had been a series of disconnected roads had disappeared. The grain and meat prod- ucts of the West, accumulating for the most part at Chicago and St. Louis, now came rapidly and uninterruptedly to the Atlantic seaboard, and railroad passengers, no longer submitted to the in- conveniences of the Civil War period, now began 16 THE RAILROAD BUILDERS to experience for the first time the pleasures of rail- road travel. Together with the articulation of the routes, important mechanical changes and recon- struction programmes completely transformed the American railroad system. The former haphazard character of each road is evidenced by the fact that in Civil War days there were eight different gages, with the result that it was almost impossible for the rolling stock of one line to use another. A few years after the Civil War, however, the present standard gage of four feet eight and one-half inches had become uniform all over the United States. The malodorous "eating cribs" of the fifties and the sixties — little station restaurants located at selected spots along the line — now began to dis- appear, and the modem dining car made its ap- pearance. The old rough and ready sleeping cars began to give place to the modern Pullman. One of the greatest drawbacks to ante-bellum travel had been the absence of bridges across great rivers, such as the Hudson and the Susquehanna. At Albany, for example, the passengers in the summer time were ferried across, and in winter they were driven in sleighs or were sometimes obliged to walk across the ice. It was not until after the Civil War that a great iron bridge, two thousand feet long, was A CENTURY OF RAILROAD BUILDING 17 constructed across the Hudson at this point. On the trains the little flickering oil lamps now gave place to gas, and the wood burning stoves — fre- quently in those primitive days smeared with to- bacco juice — in a few years were displaced by the new method of heating by steam. The accidents which had been almost the pre- vailing rule in the fifties and sixties were greatly reduced by the Westinghouse air-brake, invented in 1868, and the block signaling system, introduced somewhat later. In the ten years succeeding the Civil War, the physical appearance of the railroads entirely changed; new and larger locomotives were made, the freight cars, which during the period of the Civil War had a capacity of about eight tons, were now built to carry fifteen or twenty. The former little flimsy iron rails were taken up and were relaid with steel. In the early seventies when Cornelius Vanderbilt substituted steel for iron on the New York Central, he had to import the new material from England. In the Civil War period, practically all American railroads were single track lines — and this alone prevented any extensive traffic. Vanderbilt laid two tracks along the Hudson River from New York to Albany, and four from Albany to Buffalo, two exclusively for freight 18 THE EAILROAD BUILDERS and two for passengers. By 1880 the American railroad, in all its essential details, had definitely arrived. But in this same period even more sensational developments had taken place. Soon after 1865 the imagination of the American railroad builder began to reach far beyond the old horizon. Up to that time the Mississippi River had marked the Western railroad terminus. Now and then a road straggled beyond this barrier for a few miles into eastern Iowa and Missouri; but in the main the enormous territory reaching from the Mississippi to the Pacific Ocean was crossed only by the old trails. The one thing which perhaps did most to place the transcontinental road on a practical basis was the annexation of California in 1848; and the wild rush that took place on the discovery of the gold fields one year later had led Americans to realize that on the Pacific coast they had an empire which was great and incalculably rich but almost inac- cessible. The loyalty of California to the Northern cause in the war naturally stimulated a desire for closer contact. In the ten years preceding 1860 the importance of a transcontinental line had con- stantly been brought to the attention of Congress and the project had caused much jealousy between A CENTURY OF RAILROAD BUILDING 19 the North and the South, for each region desired to control its Eastern terminus. This impediment no longer stood in the way; early in his term, there- fore. President Lincoln signed the bill authorizing the construction of the Union Pacific — a name doubly significant, as marking the union of the East and the West and also recognizing the sen- timent of loyalty or union that this great enter- prise was intended to promote. The building of this railroad, as well as that of the others which ultimately made the Pacific and the Atlantic coast near neighbors — the Santa Fe, the Southern Pa- cific, the Northern Pacific, and the Great Northern — is described in the pages that follow. Here it is suflBcient to emphasize the fact that they achieved the concluding triumph in what is certainly the most extensive system of railroads in the world. These transcontinental roads really completed the work of Columbus. He sailed to discover the west- ern route to Cathay and found that his path was blocked by a mighty continent. But the first train that crossed the plains and ascended the Rockies and reached the Golden Gate assured thenceforth a rapid and uninterrupted transit westward from Europe to Asia. CHAPTER II THE COMMODORE AND THE NEW YORK CENTRAL A STORY was told many years ago of Commodore Vanderbilt which, while perhaps not strictly true, was pointed enough to warrant its constant repe- tition for more than two generations. Back in the sixties, when this grizzled railroad chieftain was the chief factor in the rapidly growing New York Central Railroad system, whose backbone then consisted of a continuous one-track hne con- necting Albany with the Great Lakes, the president of a small cross-country road approached him one day and requested an exchange of annual passes. " Why, my dear sir, " exclaimed the Commodore, "my railroad is more than three hundred miles long, while yours is only seventeen miles." "That may all be so," replied the other, "but my railroad is just as wide as yours." This statement was true. Practically no rail- road, even as late as the sixties, was wider than 20 THE "DE WITT CLINTON" The first locomotive and train in the State of New York. Photograph from the original. U^ I 'i^J THE NEW YORK CENTRAL 21 another. They were all single-tracked lines. Even the New York Central system in 1866 was prac- tically a single-track road; and the Commodore could not claim to any particular superiority over his neighbors and rivals in this particular. Instead of sneering at his "seventeen-mile" colleague, Vanderbilt might have remembered that his own fine system had grown up in less than two genera- tions from a modest narrow-gage track running from "nothing to nowhere." The Vanderbilt lines, which today with their controlled and aflSliated systems comprise more than 13,000 miles of rail- road — a large portion of which is double-tracked, no mean amount being laid with third and fourth tracks — is the outgrowth of a little seventeen- mile line, first chartered in 1826, and finished for traflBc in 1831. This little railroad was known as the Mohawk and Hudson, and it extended from Albany to Schenectady. It was the second con- tinuous section of railroad line operated by steam in the United States, and on it the third locomo- tive built in America, the De Witt Clinton, made a satisfactory trial trip in August, 1831. The success of this experiment created a sensa- tion far and wide and led to rapid railroad build- ing in other parts of the country in the years 22 THE RAILROAD BUILDERS immediately following. The experiences of a par- ticipant in this trial trip are described about forty years later in a letter written by Judge J. L. Gillis of Philadelphia : In the early part of the month of August of that year [1831], I left Philadelphia for Canandaigua, New York, traveling by stages and steamboats to Albany and stopping at the latter place. I learned that a locomo- tive had arrived there and that it would make its first trip over the road to Schenectady the next day. I con- cluded to lie over and gratify my curiosity with a first ride after a locomotive. That locomotive, the train of cars, together with the incidents of the day, made a very vivid impression on my mind. I can now look back from one of Pullman's Palace cars, over a period of forty years, and see that train together with all the improvements that have been made in railroad travel since that time. ... I am not machinist enough to give a description of the locomotive that drew us over the road that day, but I recollect distinctly the general make-up of the train. The train was composed of coach bodies, mostly from Thorpe and Sprague's stage coaches, placed upon trucks. The trucks were coupled together with chains, leaving from two to three feet slack, and when the locomotive started it took up the slack by jerks, with suflBcient force to jerk the passengers who sat on seats across the tops of the coaches, out from under their hats, and in stopping, came together with such force as to send them flying from the seats. THE NEW YORK CENTRAL 23 They used dry pitch for fuel, and there being no smoke or spark catcher to the chimney or smoke-stack, a volume of black smoke, strongly impregnated with sparks, coals, and cinders, came pouring back the whole length of the train. Each of the tossed passengers who had an umbrella raised it as a protection against the smoke and fire. They were found to be but a momen- tary protection, for I think in the first mile the last umbrella went overboard, all having their covers burnt off from the frames, when a general melee took place among the deck passengers, each whipping his neighbor to put out the fire. They presented a very motley appearance on arriving at the first station. Then rails were secured and lashed between the trucks, taking the slack out of the coupling chains, thereby affording us a more steady run to the top of the inclined plane at Schenectady. The incidents off the train were quite as striking as those on the train. A general notice of the contem- plated trip had excited not only the curiosity of those living along the line of the road, but those living remote from it, causing a large collection of people at all the intersecting roads along the route. Everybody, to- gether with his wife and all his children, came from a distance with all kinds of conveyances, being as igno- rant of what was coming as their horses, and drove up to the road as near as they could get, only looking for the best position to get a view of the train. As it approached the horses took fright and wheeled, upsetting buggies, carriages, and wagons, and leaving for parts unknown to the passengers if not to their owners, and it is not now positively known if some of them have stopped yet. 24 THE KAILROAD BUILDERS Such is a hasty sketch of my recollection of my first ride after a locomotive. The Mohawk and Hudson Railroad was origi- nally constructed with inclined planes worked by stationary engines near each terminus, the in- clinations being one foot in eighteen. The rail used was a flat bar laid upon longitudinal sills. This type of rail came into general use at this period and continued in use in parts of the country even as late as the Civil War. The roads that now make up the New York Central were built piecemeal from 1831 to 1853; and the organization of this company in the latter year, to consolidate eleven independent roads ex- tending from Albany to BuflFalo, finally put an end to the long debate between canals and railroads. The founding of this company definitely meant that transportation in the United States hence- forth would follow the steel route and not the water ditch and the towpath. Canals might indeed lin- ger for a time as feeders, even, as in the case of the Erie and a few others, as more or less important transportation routes, but every one now realized that the railroad was to be the great agency which would give plausibility to the industrial organization of the United States and develop its great territory. THE NEW YORK CENTRAL 25 Besides the pioneer Mohawk and Hudson, this consolidation inchided the Utica and Schenectady, which had been opened in 1836 and which had operated profitably for many years, always paying large dividends. The Tonawanda Railroad, opened in 1837, and the Buffalo and Niagara Falls, also finished in the same year, were operated with profit until they were absorbed by the new system. In 1838 the Auburn and Syracuse and the Hudson and Berkshire Railroads were opened. The former after being merged in 1850 with the Rochester and Syracuse Railway, became a part of the consolida- tion. The Syracuse and Attica Railroad, opened in 1839, the Attica and Buffalo, opened in 1842, the Schenectady and Troy, opened in the same year, and several other small lines, some of which had undergone various changes in name and owner- ship, were all merged into the New York Central Railroad. This great property now comprised five hundred and sixty miles of railroad, the main stem extending from Albany to Buffalo. Though it had as yet no connection with the Hudson River Rail- road, the New York Central Railroad at this period was the most substantial and important of Ameri- can railroad systems. It developed a large and healthy through traflBc to the Great Lakes and 26 THE RAILROAD BUILDERS was practically free from railroad competition. The Erie Railway, which for many years had been strug- gling under great difficulties to reach the Great Lakes and had gone through nearly a generation of financial vicissitudes, was just getting its through line actively under way. The Pennsylvania Rail- road was just pushing through to the waters of the Ohio and was not likely for many years to compete with the New York Central for the lake traffic. The Baltimore and Ohio, while remotely a competitor, was, like the Pennsylvania, looking more for the traffic of the Ohio Valley than for that of the Lakes. The period of six years following the consolida- tion of 1853 was one of great prosperity for the New York Central system, and, notwithstanding the setbacks to business caused by the panic of 1857, large dividends were continuously paid on the capital stock. In the year 1859 — before the Vanderbilt regime opened — the management em- braced what to modern men of affairs are famous names. Erastus Corning was president. Dean Rich- mond was vice-president, and John V. L. Pruyn, Nathaniel Thayer, Isaac Townsend, and Chauncey Vibbard were directors. The headquarters of the company were at Albany, and the stock was owned mainly by residents of that city. THE NEW YORK CENTRAL 27 Meanwhile the building of railroads in other parts of the State and under other leadership was going forward rapidly. As far back as 1832 the first mile of the New York and Harlem Railroad was opened for traffic. This single mile remained for some time the only property of the company. It extended through what is now a thriving part of down-town New York. Its original terminus was at Prince Street, but the line was afterwards extended southward to the City Hall and later to the Astor House. It was not until 1837 that the road reached northward to Harlem and not until 1842 that Williamsbridge became the northern terminus. The line was looked upon as a worthless piece of property until 1852, when it was extended north to Chatham, to connect with the Albany and Stockbridge Railroad, and thus give a through Une from New York City to Albany. Another property built in these days and des- tined to become eventually an important part of the Vanderbilt lines was the Hudson River Railroad. This company was chartered in 1846, but for many years was frowned on as an un- sound business venture, because of the behef that it would be in direct competition with the river traffic and therefore could never be made to pay. 28 THE RAILROAD BUILDERS Nevertheless the promoters went ahead and by 1850 the road had been opened to Poughkeepsie. The entire Hne of one hundred and forty-four miles was completed to East Albany in 1851. At the same time the Troy and Greenbush Railroad, ex- tending six miles to Troy, was leased, thus giving the new Hudson River Railroad an entry into the city of Troy. The Hudson River Railroad was entirely independent of the New York Central enterprise and was controlled in those early days by a group of New Yorkers, prominent among whom was Samuel Sloan. As we enter the Civil War period, we find the three important properties which were afterwards to make up the Vanderbilt system all developing rapidly and logically into the strategical relation- ship which would make ultimate consolidation in- evitable. The completion of the Erie Railway and its gradual development as the only through line across the State from New York to the Great Lakes; the opening, expansion, and general solidi- fication of the Pennsylvania lines and their aggres- sive policy of reaching out to the lake region on the west and across New Jersey on the east; the exten- sion of the Erie interests into the New England field, and the possibility that the latter might gain THE NEW YORK CENTRAL 29 control of the Harlem or the Hudson River Rail- road — all these considerations naturally aroused in the New York Central interests a desire to in- sure the future by obtaining for themselves control of the lines that would connect their own system with New York City and the Eastern seaboard. During the Civil War, however, no progress was made in this direction. It was not until 1869, four years after the closing of the war, that any radical change took place. But in the years that had intervened, a new and commanding figure in the railroad world had come upon the scene. This man had grown to be the dominating genius, not only in the field of railway expansion, but in the world of finance as well. His name was Cornelius Vanderbilt. Born in 1794 in very humble circum- stances, he had received little or no education, and as a youth had eked out a living by ferrying pas- sengers and garden produce from Staten Island to New York. He had painfully saved a few hundred dollars within a year or two after his marriage, and with this capital he began his career in the trans- portation business. From his first ferrying proj- ect he engaged in other undertakings and laid the foundation of his subsequent fortune in steamboat navigation. About 1860, at an age when most 30 THE RAILROAD BUILDERS men are beginning to retire from active affairs, the "Commodore" — as he was called on account of his numerous fleet — entered actively into the field of railway development, management, and consoli- dation. The extraordinary character and genius of the man are well depicted by the events of the years that followed. Before the opening of the Civil War and until immediately after its end, the New York Central and the Erie systems were controlled by bitterly antagonistic interests. These interests were be- ginning to foresee the day when extremely aggres- sive competition would call into play their greatest energies. Vanderbilt, wiser than his generation, foresaw more than this. His vision took in the vast future values of the properties as developed trunk lines, and the greater possibihties of their control and operation as a consolidated whole. He was in a very real sense the forerunner or pio- neer of the great consolidation period of a half century later. He was the Harriman and the Hill of his day. The Erie had its own approach to New York City, but the New York Central was connected with the metropolis only by the river and the two independent roads — the Harlem Railroad ■^:^Oaver , "IStT / • s / - V / ^'0 jv JTinnipeg A A' A i i NORTH DJAKOTA O ^ T V THE NEWYOM CENTRAL, SANTAFE, AND GREAT NORTHEBNV RAILWAY SYSTEMS New York Central Railroad Atchison, Topeka, and Santa Fe Raiitoad Great Northern Railway Scale I: 16,300,000 ARKANSAS ?",«.. . / \ a. ! '^ \\ 6AtV»>"» N 1 W ! «! \ Sav A U L F or P«EP*.RI-D Fca THE CHfJONICLES OF AMERICA UNDER THE DJRECrJON OF W.L.0.JOSRG, AMERICAN GEOGRAPHICAL SGCIETV ; B(EN LITM. N.Y. THE NEW YORK CENTRAL 31 and the Hudson River Railroad. To get the latter two roads under his complete control was Vander- bilt's first object. He would then have unimpeded access to New York and so become independent of the river. He began his ambitious plans by making himself the master of the Harlem property, and in so doing got his first experience in raihoad stock manipula- tion and at the same time picked up a moderate fortune. It was comparatively easy to buy the control of the Harlem Railroad. The Company had never paid a dividend, and, in 1863, when the Commodore quietly began his work, the stock was selling below thirty dollars a share. Before the close of this year he had manipulated the stock un- til it had reached ninety-two, and by a comer, in August of that year, he raised it to 179. On this deal Vanderbilt reaped a nice little f ortime — but evidently not enough to enable him to carry through the ambitious plans which were in the back of his head, for in 1864 we find him manipu- lating another corner and this time running the price of the stock up to 285. In this wise the Com- modore not only added millions to his already growing fortune but also made himself a power in the financial world. Financiers began to fear him. 32 THE BAILROAD BUILDEBS and he found it comparatively easy later to buy up the control of the Hudson River Railroad, which he did by paying about 100 for the stock. Then he began speculating again, sent Hudson River up to 180, and incidentally reaped another fortune for himself. By this time Vanderbilt had achieved a great reputation as a man who created values, earned dividends, and invented wealth as if by magic; other railroad managers now began to lay their properties at his feet and ask him to do with them what he had done with the Harlem and the Hudson River. For under the Commodore's magic touch the Harlem Railroad for the first time in its long history began to pay dividends at a high rate, and in four years the earnings of the Hudson River property had nearly doubled. One of the first properties to be placed at Vanderbilt's feet was the New York Central, and the control passed into his hands in the winter of 1866-67. He was now in a powerful position and immediately began to lay his plans for obtaining control of the Erie Railroad in the following year. In the latter effort he did not succeed, however, and after a protracted and dramatic contest he was defeated by his great adversary, "Uncle" THE NEW YORK CENTRAL 33 Daniel Drew. The story of this contest need not be detailed here, as it is given in full in the chapter on the Erie Railroad. In the fall of 1869 the Commodore, having secured everything in the railroad field he had sought except the Erie, put through his scheme for consolidation. The New York Central and Hud- son River Railroad was incorporated. It included the old New York Central and also the Hudson River Railroad but not the Harlem. The capital of the consolidated company was placed at ninety million dollars, a figure of such magnitude in those days that the world was startled. The system em- braced in all nearly 850 miles of railroad lines. A few years later the Harlem Railroad was leased to the property at a high valuation and a large divi- dend was guaranteed on the stock, the ownership of which was retained by the Vanderbilt family. The Vanderbilt system as it is now understood really began with these transactions. From this time on, its history has been similar in many re- spects to that of other large systems which were the outgrowth of merger or manipulation in these early days. During the remarkable period of com- mercial and industrial development in this coun- try from 1870 onward, when thousands of miles of 34 THE RAILROAD BUILDERS new lines were built every year, when the growth of population was beginning to make the States of Ohio, Indiana, and Illinois centers of wealth and production, and when the wonderful Northwestern country embracing the States of Michigan, Wis- consin, and Minnesota, was so rapidly opened up and brought nearer to the Eastern markets, the Vanderbilt railroad interests were not idle. The original genius, Cornehus Vanderbilt, was soon gathered to his fathers, but his son, William H. Vanderbilt, was in many ways a worthy successor. By 1885 the Vanderbilt lines had grown in ex- tent and importance far beyond any point of which the elder Vanderbilt had ever dreamed. Long be- fore this year the system included many smaller lines within the State of New York, and it had also acquired close control of the great Lake Shore and Michigan Southern system, with its splendid line from Buffalo to Chicago, consisting of more than 500 miles of railroad; the Michigan Central, owning lines from Detroit to Chicago, with many branches in Michigan and Illinois; the Canada Southern Railway, extending from Detroit to Toronto; and in addition to all these about 800 miles of other Unes in the States of Ohio, Indiana, Michigan, and Pennsylvania. THE NEW YORK CENTRAL 35 In this same year 1885, another event of im- portance took place. The New York, West Shore and Buffalo Railroad, which after strenuous efforts extending over many years had constructed a new trunk line from Weehawken along the west shore of the Hudson to Albany and thence to Buffalo, came under the control of the New York Central. The great system in the Middle West, now known as the "Big Four," or Cleveland, Cincinnati, Chi- cago and St. Louis — embracing 750 miles of lines westward from Cleveland and Columbus, Ohio, to IndianapoUs, Springfield, and Cincinnati, and hav- ing traffic connections with St. Louis — was also a Vanderbilt property at this time, although not imder the formal control of these interests. An- other important competing line secured in this period was the New York, Chicago and St. Louis, built to parallel the Lake Shore and known as the "Nickel Plate" route. This road extended from Buffalo to Chicago, and, Uke the West Shore, had been constructed with the hope of ultimately selling out to its competitor. The development of railroad properties under the Vanderbilt influence was not confined to the territory east of Chicago and the Mississippi Val- ley. As early as 1859 a large system of roads had 36 THE RAILROAD BUILDERS been merged in the section extending westward from Chicago to Omaha and radiating throughout Iowa, Minnesota, Kansas, Wisconsin, Missouri, and other States. This company was known as the Chicago and North Western Railroad, and its prop- erty, which was one of large and growing value, by 1886 embraced a system of over 3500 miles of road. Although neither controlled by the New York Central nor directly affiliated therewith, it was classed as a Vanderbilt property. While for many years after the death of the Commodore the Vanderbilt family remained in di- rect financial and operating control of the New York Central and its myriad of subsidiary lines and their genius as railroad builders and operators was distinctly evident, yet the brains and resources of the Vanderbilts were not alone responsible for the brilliant career of the system down to recent times. William H. Vanderbilt, though a man of unusual ability, did not possess the breadth of view or the sagacity of his father, and in the course of a few years he found himself exposed to a cyclone of public criticism. He had let it be widely known that he was personally the owner of over eighty- seven per cent of the hundred million capital of the company. In 1879 the New York Legislature, THE NEW YORK CENTRAL 37 backed by the force of the popular anger and sur- prise at the accumulation of a hundred million dollar fortune by one man in ten years, was in- vestigating the management of the New York Central with a view to curtailing its power; the rate wars were on between the seaboard and Chi- cago; and Jay Gould was threatening to divert all the traffic of his Wabash, St. Louis, and Pa- cific hues from the New York Central and turn it over to other Eastern connections unless Van- derbilt would give him a vital interest in the Vanderbilt hues. Vanderbilt was harassed beyond endurance and, being of softer material than his father, was fearful of the outcome of public opinion, notwithstanding the fact that in a moment of anger — according to the statement of a newspaper reporter whose veracity Vanderbilt denied to his dying day — he had used the familiar expression, "The public be damned ! " There were intimations that the Legis- lature was planning to impose heavy taxes on the property, solely because Vanderbilt held this gi- gantic personal ownership in the property. This prospect frightened him and he consulted friends whose judgment he respected. They urged him to sell a considerable part of his holdings in order to 38 THE RAILROAD BUILDERS distribute the ownership of the property among a large number of people. This plan could not be carried out, however, in the ordinary way, because large sales of stock by the Vanderbilt interests, if the speculating and in- vesting public learned that he was making them, would greatly depreciate the price and might create general demoralization and a panic, while they would certainly injure the credit of the New York Central property. But a way out of the dilemma had to be foimd. It was at this juncture that a new personality, later to be closely identified with the Vanderbilt lines for a long series of years, appeared upon the scene. Vanderbilt was advised to consult J. Pierpont Morgan, of the banking house of Drexel, Morgan and Co. At that time the name of J. P. Morgan was just beginning to come prominently to the front in banking circles in New York. The Drexels had been conspicuous in business in Philadelphia for many years and in a sense were the fiscal agents of the great Pennsyl- vania Railroad Company. But the spectacular success of the House of Morgan a few years before in marketing the French government loan in Eng- land had added largely to its prestige. And so Vanderbilt concluded that, if any man could show THE NEW YORK CENTRAL 39 him a way out in his difficult problem, Pierpont Morgan was that man. The upshot of the matter was that Morgan devised a plan for the sale of a large amount of Vanderbilt's stock holdings through private sale in England, and in such a way that the knowledge of such sale would not become public in America. A confidential syndicate was formed which under- took to take the stock in a block and pass it on to English investors at approximately its current market price of about $130 per share. The sale was promptly accomplished; the stock went in- to the hands of unknown interests abroad; Van- derbilt received more than $25,000,000 in cash, which he largely reinvested in United States gov- ernment bonds, and the Morgan syndicate reaped a profit of about $3,000,000. Five months after the closing of the syndicate public announcement was made of the sale and of the syndicate profit. The striking success of this transaction naturally added greatly to the prestige of J. P. Morgan as a financier of very large caliber, and it had the satis- factory effect of cvu-tailing the legislative attacks on Vanderbilt. From that date forward, the history of the Van- derbilt railroads has been closely identified with 40 THE RAILROAD BUILDERS the House of Morgan. J. P. Morgan and his busi- ness associates became the company's financial agents, and thereafter all plans of expansion or con- solidation were handled directly by them. In the board of directors Morgan banking interests had full representation, which they have held until this day. The subsequent history of the Vanderbilt lines is chiefly a story of business expansion and growth. From 1885 to 1893, the great panic year, the New York Central each year added to its mileage, either by merger of smaller lines or by construction. All this time it was consolidating the system, elimi- nating the weaker links, and strengthening the stronger. Its lines penetrated all the best Eastern railroad territory outside of New England, New Jersey, and Pennsylvania, and no other railroad system in the country, with the single exception of the Pennsylvania, covered anything like the same amount of rich and settled territory, or reached so many cities and towns of importance. New York, Buffalo, Cleveland, Detroit, Chicago, St. Louis, Cincinnati, IndianapoUs — these are a few of the great traJEc centers which were included in the Vanderbilt preserves. The population of all these cities, as well as that of the hundreds of smaller THE NEW YORK CENTRAL 41 places and the countryside in general, was growing by leaps and bounds. Furthermore the North- west, beyond the Great Lakes and through to the Pacific coast, saw the beginnings of its great de- velopment at this time; and the wheat fields of the far western country became a factor of profound importance in the national development. Conse- quently when the period of depression arrived with the panic of 1893, the Vanderbilt properties were, as a whole, in a strong position to meet the changed situation and, like the great Pennsylvania prop- erty, they all passed through to the advent of the new industrial era without the defaulting of a bond or the passing of a dividend. The remarkable char- acter of this achievement is evident in view of the fact that in the period from 1893 to 1898 more than sixty -five per cent of all the railroad mileage in the United States went into the hands of receivers. After the close of this era of panic, the Vander- bilt lines began expanding again, though on a much smaller scale than in their more active time. In 1898 William K. Vanderbilt, then president, made the announcement that the New York Cen- tral had leased the Boston and Albany Railroad, at that time a lucrative line running from Albany across Massachusetts into Boston. This gave the 42 THE RAILROAD BUILDERS system an entry into the New England field, which it has continuously held since. A few years later this New England interest was increased by the ac- quisition of the Rutland Railroad in Vermont, thus making connection with the Ogdensburg and Lake Champlain, a line running across the northern part of New York State, which had also come under Vanderbilt control. When business revived in the closing years of the nineteenth century, the history of American rail- roads began a new chapter. Federal railroad regu- lation, which started in a moderate way with the passage of the Interstate Commerce Act in 1887, had steadily increased through the years; the Sher- man Anti-trust Act, passed in 1890, had been in- terpreted broadly as affecting the railroads of the country as well as the industrial and other com- binations. These influences had thus greatly cur- tailed the consolidation of competing lines which had gone on so rapidly during the decades follow- ing the Civil War. Railroad managers and finan- ciers therefore began to face a very serious problem. Competition of a more or less serious nature was still rampant, rates were cut, and traffic was pretty freely diverted by dubious means. Consequently many large railroad systems of heavy capitalization THE NEW YORK CENTRAL 43 bid fair to run into diflBculties on the first serious falling off in general business. Great men are usually the products of their times and one of the men developed by these times takes rank with the greatest railroad leaders in history. Edward H. Harriman had risen in ten years from comparative obscurity and was now the president of the Union Pacific Railroad, which he had, in conjunction with the banking house of Kuhn, Loeb and Company, reorganized and taken out of bankruptcy. Harriman was one of the originators of the "community of interest" idea, a device for the partial control of one railroad system by an- other. For instance, although the law forbade any raUroad system from acquiring a complete control of a competing line by purchasing a majority of its capital stock or by leasing it, nothing was said about one railroad having a minority investment interest in another. A minority investment, even though it be as low as ten or twenty per cent, usually constitutes a dominating influence if held by a single interest, for in most cases the majority of the shares will be owned in small blocks by thousands of investors who never combine for a def- inite, practical purpose. Thus the interest which has the one large block of stock usually controls 44 THE RAILROAD BUILDERS the voting power, and runs little risk of losing it unless a contest develops with other powerful in- terests — and this is a contingency which it almost never has to meet. Carrying out this policy of promoting harmony among competing lines, the New York Central and Pennsylvania Railroad early in 1900 acquired a working control of the Reading Company, which in turn controlled the New Jersey Central and dominated the anthracite coal traffic. Later the Baltimore and Ohio shared this Reading interest with the Lake Shore of the New York Central system. The New York Central and the Pennsyl- vania acquired a working control of the same kind in the Chesapeake and Ohio Railway, which was an important element in the soft coal fields and was reaching out to grasp soft coal properties in Ohio and Indiana. These and other purchases, and the consequent voice acquired in the management, established com- parative harmony among Eastern railroads for a long time; they stabilized rates and enabled for- merly competing roads to parcel out territory equitably among the different interests. Later, Harriman, and to some extent Morgan, carried the community of interest idea some steps further. THE NEW YORK CENTRAL 45 Morgan caused the New York Central to acquire stock interests in certain "feeder" lines such as the New York, New Haven and Hartford and the Chicago, Milwaukee and St. Paul, as well as in competing lines; and Harriman caused the Union Pacific not only to dominate the Southern Pacific Company by minority control but also to acquire interests in the Illinois Central, the Baltimore and Ohio, the New York Central, and other eastern properties. The fact was that Harriman had plans in view for acquiring actual control of the New York Central for the Union Pacific and thus, with the Illinois Central, of creating a continuous transcontinental line from ocean to ocean. In the past decade few unusual or startling events have marked the history of the Vanderbilt lines. The Vanderbilt family no longer possesses a majority interest in the stock, or anything which approaches it, and the New York Central system and its subsidiaries have come to be known more and more as Morgan properties. The system has grown up with the country. Many of its former controlled roads have now been merged into the main corporation and many new lines have been added to it. Hundreds of millions of dollars of new capital have been spent on the main lines and 46 THE RAILROAD BUILDERS terminals since 1900. In 1919 the entire property, including controlled lines, embraced more than 13,000 miles of main track, besides about 5000 miles of extra tracks ; over 200,000 freight cars are in use on the system, and every year upwards of 200,000,000 tons of freight are transported. The gross annual revenues of the entire system now aggregate more than $400,000,000, while the total capitalization in stocks and bonds exceeds a billion dollars. It is indeed a far cry from that day in August, 1831, when the De Witt Clinton locomotive made its trial trip over the primitive rails of the seventeen-mile Mohawk and Hudson road — a far cry even from that other day, thirty-eight years later, when the sagacious Commodore startled the financial world by his New York Central and Hudson River Railroad, with a capital of ninety million dollars. CHAPTER III THE GREAT PENNSYLVANIA SYSTEM In the early forties the commercial importance of Philadelphia was menaced from two directions. A steadily increasing volume of trade was passing through the Erie Canal from the Central West to the northern seaboard, while traffic over the new Baltimore and Ohio Railroad promised a great commercial future to the rival city of Baltimore. With commendable enterprise the Baltimore and Ohio Company was even then reaching out for con- nections with Pittsburgh in the hope of diverting western trade from eastern Pennsylvania. More- over the financial prestige of Philadelphia had suf- fered from recent events. The panic of 1837, the contest of the United States Bank with President Jackson, its defeat, and its subsequent failure as a state bank, the consequent distress in local finan- cial circles — all conspired to shift the monetary center of the coimtry to New York. 47 48 THE RAILROAD BUILDERS It was at this time that Philadelphia capitalists began to bestir themselves in an attempt to recover their lost opportunities. Philadelphia must share in this trade with the Central West. The designs of the Baltimore and Ohio Company must be de- feated by bringing Pittsburgh into contact with its natural Eastern market. To this end, the Penn- sylvania Railroad was incorporated on April 13, 1846, with a franchise permitting the construction of a railroad across the State from Harrisburg to Pittsburgh. An added incentive to constructive expansion was given by an act of the Legislatiu-e authorizing the Baltimore and Ohio to extend its line to Pittsburgh if the Pennsylvania Company failed to avail itself of its franchise. In order to avoid the heavy cost of constructing a road between Philadelphia and Harrisburg, the Pennsylvania Railroad entered into arrangements with the Philadelphia and Columbia — a railroad opened in 1834 and owned by the State — which ran through Chester and Lancaster to Columbia. This road was primitive in the extreme and used both steam and horse power. As late as 1842 a train was started only when sufficient traffic was waiting along the road to warrant the use of the engine. Belated trains were hunted up by K ""oil. . '; ofl'i-mi IV A NORTH DJAKOTA i -V SOUTH riAKOTA j -^ Q IXiIuth, SuPaul "v w I S « p f s * ^''^ / 5 IV G) I .._J ) X \ i-oj!U ^01-0 RiA B A S M..^ — r-J- MExllcO \ rf Kansas City ,^ MISSOU Rl T \^^ _l^-^H-4^ J — !-- il OKLAHOMA j 4 ^ THE PEMS'YlVA.m SOUTHERN. MI). UNION PAflFK SOUTHEM PACIFIC RAILWAY SYSTEMS : Pennsylvania Railroad Southern Railway Union Pacific and Southern Pacific Systems "ARKANSAS r / 6 % ", \ T v.. ^ V \ V ^^• Scale 1: jl6,500,00d ■ -.-* & U L F or 1 M E X I c\ o 'V PRZPARCD FOR THE CHftONlCLES QF AMERICA UNDER THE DiR£CTIONOFW.L.S.JO£RG, AMERICAN GEOeRAPHrCAt SOCIErV LIUS BiEN LiTK. I THE GREAT PENNSYLVANIA SYSTEM 49 horsemen. Yet the road was in those days famous for the "rapidity and exceptional comforts of the train service." Between Columbia and Harris- burg passengers westward bound had to use the Pennsylvania Canal. Construction of the main line westward to Pitts- burgh began at once and progressed rapidly. By making use of the Alleghany Portage Railroad from HoUidaysburg, the Pennsylvania Railroad eventually secured a continuous line from Harris- burg to Pittsburgh. But between Philadelphia and Harrisburg passengers were for a long time subjected to many inconveniences. Finally in 1857 the Pennsylvania Railroad bought the Phila- delphia and Columbia from the State, rebuilt it, and extended it to Harrisburg. At the same time the Pennsylvania bought the main line of the Pub- lic Works, which included the Alleghany Portage Railroad. On July 18, 1858, the first through train passed over the entire line from Philadelphia via Mount Joy to Pittsburgh without transfer of passengers. At the same time the first smoking car ever attached to a passenger train was used, and sleeping cars also soon began to appear. The railroad genius identified with the history of the Pennsylvania Railroad during the following 50 THE RAILROAD BUILDERS decade is J. Edgar Thomson. A man of vision and of great shrewdness and ability, he was more like the modern railroad head of the Ripley or Un- derwood type than of the Vanderbilt, Garrett, or Drew type. His interest was never in the stock market nor in the speculative side of railroading but was concentrated entirely on the development and operation of the Pennsylvania Railroad sys- tem. His dreams were not of millions quickly made nor of railroad dominance simply for the power that it gave; his mind was concentrated on the growth and prosperity of a vast railroad sys- tem which would increase with the years, become lucrative in its operations, and not only radiate throughout the State of Pennsylvania but extend far beyond into the growing West. Under the Thomson management, which lasted until 1874, the record of the Pennsylvania Rail- road was one of progress in every sense of the word. While Daniel Drew was lining his pockets with loot from the Erie Railroad and Commodore Van- derbilt was piling up his colossal fortune through consolidation and manipulation, J. Edgar Thom- son was steadily building up the greatest business organization on the continent. In 1860, the entire Pennsylvania Railroad system was represented THE GREAT PENNSYLVANIA SYSTEM 51 merely by the main line from Philadelphia to Pitts- burgh, with a few short branches. By 1869 the road had expanded within Pennsylvania alone to nearly one thousand miles and also controlled Unes northward to the shores of Lake Erie, through the State of New York. But the master accomplishment of the Thomson administration was the acquisition of the Pitts- burgh, Fort Wayne and Chicago line in 1869. This new addition gave the Company its own connection with Chicago and made a continuous system from the banks of the Delaware at Phila- delphia to the shores of Lake Michigan, thus rivaling the far-flung Vanderbilt line, a thousand miles long, which the industrious Commodore was now organizing. Shortly thereafter the Pennsyl- vania began to expand on the east also and ob- tained an entry into New York City by acquiring the United Railroad and Canal Company, which owned Unes across the State of New Jersey, passing through Trenton. In the latter years of the Thomson management it became more and more evident that it was im- portant for the Pennsylvania Railroad to have further Western connections which would reach the growing cities of the Middle West. While the 52 THE RAILROAD BUILDERS Fort Wayne route made a very direct connection with Chicago and included branches of value, yet the keen competition which was developing in the expansive years following the Civil War made actual control of the Middle Western territory a matter of sound business policy. The Vanderbilt hnes were reaching out through Ohio, Indiana, and Illinois; the Baltimore and Ohio was steadily developing its Western connections, and now Jay Gould had come actively on the scene with large projects for the Erie. To offset these projects, early in 1870 a "holding company" — probably the first of its kind on record — known as the Penn- sylvania Company was formed for the express pur- pose of controlling and managing, in the inter- est of the Pennsylvania Railroad, all lines leased or controlled or in the future to be acquired by the Pennsylvania Railroad interests west of Pittsburgh and Erie. This Company took over the lease of the Fort Wayne route and also ac- quired control by lease of the Erie and Pitts- burgh, a road extending northward through Ohio to Lake Erie. After this date the expansion of the system west of Pittsburgh went on rapidly. In 1871 the Cleve- land and Pittsburgh Railroad, which had been THE GREAT PENNSYLVANIA SYSTEM 53 opened as early as 1852, came under the Pennsyl- vania control. Soon after this, many smaller lines in Ohio were merged in the system. The most im- portant acquisition during this period, however, was the result of the purchase of the great Hues extending westward from Pittsburgh to St. Louis, with branches reaching southward to Cincinnati and northward to Chicago. This system — then known as the "Pan Handle" route and later as the Pittsburgh, Cincinnati, Chicago and St. Louis — was a consoUdation of several independent prop- erties of importance which had been gradually ex- tending themselves over this territory during the previous decade. This new system, which embraced over fourteen hundred miles of road, gave the Penn- sylvania a second line to Chicago, a direct line to St. Louis, a second line to Cincinnati, and access to territory not previously tapped. While the achievements of the Pennsylvania Railroad Company during these years of consoU- dation and expansion are not to be compared with those of more modern times, it is well to reaUze that even as early as the seventh decade of the last century this railroad was always in the forefront in matters of high standards and progressive practice. It was the pioneer in most of the improvements 54 THE RAILROAD BUILDERS which were later adopted by other roads. The Pennsylvania was the first American railroad to lay steel rails and the first to lay Bessemer rails; it was the first to put the steel fire-box under the locomotive boiler; it was the first to use the air brake and the block signal system; it was the first to use in its shops the overhead crane. In these earlier years also the Pennsylvania had established its enviable record for conservative and non-speculative management. No railroad wrecker or stock speculator had ever had anything to do with the financial control of the company, and this tradition has been passed on from decade to decade. The stockholders themselves, even in those days of loose methods and careless finance, had the dominating voice in the affairs of the com- pany and were also factors in the approval or disap- proval of any proposed policies. In the matter of its finances the Pennsylvania developed and estab- lished an equally clean record. The company began almost at the beginning to pay a satisfac- tory dividend on its shares and continued to do so right through the Civil War period. Since the through line from Philadelphia to Pittsburgh was opened, not a single year has passed without the payment of a dividend — a sixty-year record THE GREAT PENNSYLVANIA SYSTEM 55 which can be dupHcated by no other American railroad system. The Pennsylvania still continued to forge ahead even during the exciting period from 1877 to about 1889, when the trunk lines were aggressively car- rying on that policy of cutthroat competition be- tween Chicago and the Atlantic seaboard which resulted in so severely weakening the credit and position of properties like the Baltimore and Ohio and the Erie. The Pennsylvania, too, indulged in rate cutting, but the management was equal to the situation and made up in other directions what it lost in lower rates. It gave superior service, developed a high efficiency of operation, and stead- ily maintained its properties at a high standard. During these years the president was George B. Roberts, who had succeeded Thomas A. Scott m 1880. Roberts's management spanned the period from 1880 to 1897 and embraced a decade of compara- tive prosperity for the country as a whole and nearly a decade of panic and industrial and fi- nancial depression. During the earlier decade the business of the Pennsylvania was continually bene- fited by the industrial development and growth which marked the period. It was at this time that 56 THE RAILROAD BUILDERS the Pittsburgh district took its permanent place as the great center of steel and iron manufacture. The discovery of petroleum in western Pennsyl- vania, creating an enormous new industry in itself, proved to be an event of far-reaching significance for the Pennsylvania Railroad. The extensive open- ing up of the soft coal sections of western Pennsyl- vania, Ohio, and Indiana, also meant much for this great system of railroads. Still further developments in other directions ac- crued to the benefit of the Pennsylvania Railroad. In this period, by obtaining the control of a line to Washington, the system acquired a Southern artery running through Wilmington, Delaware, and Baltimore to Washington. Afterwards, with other roads, the Pennsylvania acquired control of the Richmond, Fredericksburg and Potomac Railroad and thus obtained a line to Richmond, Virginia. On the north and to the east the expand- ing movement also went on. In addition to the development of its main line from Philadelphia to Jersey City, the Pennsylvania acquired many other New Jersey lines, including the West Jersey and Seashore, a road running from Camden to Atlantic City and Cape May. During the whole of the aggressive administrations THE GREAT PENNSYLVANIA SYSTEM 57 of both Thomas A. Scott and George B. Roberts the great system continued to spread out steadily until it had penetrated as far as Mackinaw City on the north and Chesapeake Bay on the south. Its network of lines stretched across the Eastern section of the continent from New York to Iowa and Missouri, while the intensive development of shorter lines in the State of Pennsylvania and to the north was unceasing. The Northern Central running south from Sodus Bay on Lake Ontario through central Pennsylvania to Baltimore, the Buffalo and Allegheny Valley extending from Oil City northward and joining the main system to the east, the Western New York and Pennsylvania oper- ating north from Oil City to BuflFalo and Rochester — these lines the Pennsylvania Railroad acquired and definitely consolidated in the Roberts regime. After the retirement of Roberts, Frank Thom- son, who had formerly been general manager, was placed at the head of the system for three years. But in 1899 Alexander J. Cassatt, who had for many years been identified with the Pennsyl- vania as officer, director, and stockholder, took the helm, and a new chapter and probably the greatest in the history of this remarkable railroad began. The name of Alexander J. Cassatt will always 58 THE RAILROAD BUILDERS be linked with the comprehensive terminal de- velopments in the region of New York City which were begun almost immediately on his accession to the presidency and which were carried forward oa bold and far-reaching lines. Perhaps more than any other one person, Cassatt foresaw the ap- proach of the day when New York City as a com- mercial center would outstrip both in density of population and in amount of wealth all the other cities of the world. He and his predecessors had for many years witnessed the great industrial de- velopment of the Pittsburgh district, where prop- erty values had grown by leaps and bounds and where the steadily advancing development of in- dustry and material resources had been so unmis- takably reflected in the increasing earning power and value of the Pennsylvania Railroad properties. But while at Pittsburgh the road had every- thing to favor it as far as terminals and rights of way through the heart of the great industrial dis- trict were concerned, in the great Eastern metropo- lis the Pennsylvania Railroad was at an obvious disadvantage, particularly as compared with the New York Central, which had its splendid ter- minal rights penetrating to the heart of the city, Cassatt saw that his company must without delay THE GREAT PENNSYLVANIA SYSTEM 59 take a number of bold and, for the time, enor- mously expensive steps toward the development of terminal facilities in Greater New York or else forever abandon the idea of getting nearer the heart of the city than the New Jersey shore and thus run the risk, in the keen contest for commer- cial supremacy, of ultimately falling behind other more advantageously situated lines. There were still further incentives to immediate action on the part of the Pennsylvania Railroad. While the New York Central was in an ideal posi- tion for handling all traffic destined for the New England States, the Pennsylvania could control practically none of this business, as its terminals were on the wrong side of the Hudson and necessi- tated not merely the inconvenient transfer of pas- sengers but also the much more expensive han- dling of freight. Other disadvantages from which the Pennsylvania suffered were involved in its inability to make the most economical terms for foreign shipping, as a large proportion of such freight had to be constantly transferred on lighters to the New York and Brooklyn sides of the harbor. Thus any comprehensive plan for terminal de- velopment on the part of the Pennsylvania must necessarily include not only a tunnel system into 60 THE RAILROAD BUILDERS New York City but also an outlet through the city to Long Island and a connection with the New England railroads. The first move in the development of this ter- minal system was the acquisition in 1900 of the control of the Long Island Railroad, embracing all the steam railway mileage on Long Island, with lines extending along both the north and south shores to Montauk Point. This acquisition added extensive freight yards and terminals on the Brooklyn side of the East River. The Com- pany then obtained franchises and began the con- struction of its great tunnels under the North and East Rivers and entirely across New York City, with a mammoth passenger station at Seventh Avenue and Thirty-second Street. A great rail- road bridge was planned to cross from Long Island to the mainland, connecting with the New York, New Haven and Hartford system, in the stock of which the Pennsylvania at this time purchased an interest. The terminal construction occupied a period of many years and cost over one hundred million dollars, besides the added costs involved in build- ing up and developing the old, worn-out Long Is- land Railroad. Only recently has the project THE GREAT PENNSYLVANIA SYSTEM 61 been rounded out and completed through the final construction of the important connection with the New England railroad systems. But the reali- zation of this plan is undoubtedly the greatest achievement in all the long career of the Pennsyl- vania Railroad. Had the project been delayed for another decade, it probably could not have been accomplished because of the growing expense of operation and the difficulties of getting fran- chise rights and rights of way through and under the metropolis. While the tunnel development is the notable achievement of the Cassatt regime, this remark- able man's name is also closely identified with the "community of interest" idea already explained. This "community of interest" scheme was pushed aggressively by Cassatt in cooperation with Harri- man. Hill, and Morgan. Large stock purchases were made in the Norfolk and Western, the Chesa- peake and Ohio, and the Baltimore and Ohio. As the latter road had in its turn acquired, jointly with New York Central interests, a working control of the Reading Company, and the Reading Company had secured majority ownership of the New Jersey Central system, it is apparent that the domination which the Pennsylvania had obtained over the 62 THE RAILROAD BUILDERS entire Eastern seaboard south of New York City and north of Baltimore was made nearly complete. The "community of interest" plan held sway with the large railroads of the country and was very effective for perhaps half a dozen years, until the interstate commerce laws were amended in such a way as to give the Government complete control over railroad freight and passenger rates. In 1906 the Pennsylvania began to dispose of the bulk of its holdings in competing properties, the most no- table transactions being the sale of its entire inter- est in the Chesapeake and Ohio to independent interests and a substantial part of its Baltimore and Ohio holdings to the Union Pacific Railroad. A few years later, when the Union Pacific was forced by the Federal courts to dispose of its con- trol of the Southern Pacific Company, a trade was made between the Pennsylvania and the Union Pacific whereby the latter took from the Penn- sylvania the remainder of its Baltimore and Ohio investment and gave in exchange a portion of its own large holding of Southern Pacific stock. To get a fair idea of the meaning and magnitude of the great Pennsylvania Railroad system today one must do more than scan maps and study statistics. One should travel by daylight over its THE GREAT PENNSYLVANIA SYSTEM 6S main line from New York to Pittsburgh. Al- though the route is over the same ground which the road followed a generation or two ago, a four-track line runs practically all the way, with long stretches of hundreds of miles of five, six, and eight tracks. Where mountains were climbed thirty years ago, one will now find them bored by tunnels; where sharp curves were necessary before straight track- age only will be encountered today. Grades have been eliminated everywhere and the whole route has been modernized and strengthened by the laying of one hundred to one hundred and fifty pound rails. Undoubtedly the fortunate location of the Penn- sylvania hues in the half dozen States which represent the financial and industrial heart of the continent has had much to do with its vast growth and the expansion of its business; but its high repu- tation can be explained only by the long record of its superior methods and management. One of the primary objects of Pennsylvania Railroad policy has been to keep pace with the growth of the country. Instead of following in the wake of in- dustrial progress and making its improvements and extensions after its competitors had made theirs, its management has usually had the foresight to prepare well in advance for future needs. CHAPTER IV THE ERIE RAILROAD Before introducing a friend to a distinguished stranger, it is advisable to give him some account of the person whose acquaintance he is about to make; and so, fellow- traveler, whom I introduce to the New York and Erie Railroad, it may be well to prefix here a brief sketch of the history and present condition of this, the Lion of Railways. True, he is yet in an unfinished state, but you will find that what there is of him is complete, and of wondrous organization and activity. His magnificent head and front repose in grandeur on the shores of the Hudson; his iron lungs puff vigorously among the High- land fastnesses of Rockland; his capacious maw fares sumptuously on the dairies of Orange and the game and cattle of Broome; his lumbar region is built upon the timber of Chemung, and the tuft of his royal extremity floats triimiphantly on the waters of Lake Erie. This exultant, characteristically American, de- scription appeared in Harper's Guide-Book of the New York and Erie Railroad, published in 1851, soon after the opening of the main line of more than 64 THE ERIE RAILROAD 65 four hundred and sixty miles from Piermont on the Hudson to Dunkirk on Lake Erie. That this rail- road, which after nearly twenty years of struggle and of financial vicissitudes had finally finked the Great Lakes with the Atlantic coast, was looked upon as a property of wonderful character and limitless future is indicated in all the railroad litera- ture of that time. Appleton's Illustrated Hand- book of American Travel, pubfished in 1857, devotes several pages to a description of this remarkable achievement in railroad extension and among other things says: This great route claims a special admiration for the grandeur of the enterprise which conceived and executed it, for the vast contribution it has made to the facilities of travel, and for the multiplied and various landscape beauties which it has made so readily and pleasantly accessible. It traverses the southern portion of the Empire State in its entire length from east to west, passing through countless towns and villages, over many rivers, through rugged mountain passes now, and anon amidst broad and fertile valleys and plains. In addition it has many branches, connecting its stations with other routes in all directions, and opening new stores of pictorial pleasures. . . . An interesting fea- ture of this road is its own telegraph, which runs by the side of the road and has its operator in nearly every sta- tion house. This telegraph has a double wire, enabling the company to transact the public, as well as their 5 66 THE RAILROAD BUILDERS own private business. Daily trains leave for the west on this route, with connections by boat from the foot of Duane Street, morning, noon, and night. The Erie Railroad system was foreshadowed in the time of Queen Anne, when the Colony of New York appropriated the sum of five hundred dollars to John Smith and other persons for the purpose of constructing a public road connecting the port of New York with the West in the vicinity of the Great Lakes. The appropriation was coupled with the condition that within two years the beneficiaries should have constructed a road wide enough for two carriages to pass, from Nyack on the Hudson River to Steriing Iron Works, a dis- tance of about thirty miles; and that they should cut away the limbs of trees over the track in order to allow the carriages to pass. In this way began the internal improvement system of the State of New York, which after the lapse of more than a century resulted in opening the Erie Canal and in projecting a railroad system connecting New York and the valley of the Hudson with Lake Erie. After the opening of the Erie Canal in 1825, the Legislature of New York directed a survey of a state road which was to be constructed at public expense through the southern tier of counties from THE ERIE RAILROAD 67 the Hudson River to Lake Erie. The unfavorable profile exhibited in the survey apparently caused the project to be abandoned. But the idea still held sway over the minds of many people; and the great benefits brought to the Mohawk Valley and surrounding country by the Erie Canal led the southern counties to demand a transportation route which would work similar wonders in that region. This growing sentiment finally persuaded the Legislature to charter in April, 1832, the New York and Erie Railroad Company, and to give it authority to construct a line and to regulate its own charges for transportation. During the following summer a survey of the route was made by Colonel De Witt Chnton, Jr., and in 1834 a second survey was made of the whole of the proposed route. When the probable cost was estimated, many opponents arose who de- claimed the undertaking was "chimerical, imprac- tical, and useless." The road, they declared, could never be built and, if built, would never be used; the southern counties were mountainous, sterile, and worthless, and afforded no products requiring a market; and, in any case, these counties should find their natural outlet in the valley of the Mo- hawk. This antagonism was successfully opposed, 68 THE RAILROAD BUILDERS however, and the construction of the road was begun in 1836. The panic of 1837 interfered with the work, but in 1838 the state Legislature came forward with a construction loan of three million dollars, and the first section of line, extending from Piermont on the Hudson to Goshen, was put into operation in September, 1841. In the following year the company became financially embarrassed and was placed in the hands of receivers. This catastrophe delayed further progress for years, and it was not until 1846 that suflScient new capital was raised to go on with the work. The original estimate of the cost for building the entire line of 485 miles had been three milUon dollars, but already the road had cost over six milUons and only a small portion had been finished. The final estimate now rose to fifteen millions, and, although some money was raised from time to time and new sections were bujlt, there was no certainty that the entire road would ever be completed. Ultimately the State of New York canceled its claim against the prop- erty, new subscriptions of some milUons were se- cured, and more money was raised by mortgaging the finished sections. Finally, in 1851, after eighteen years of efiFort, ?e" p'^-'f* -4^^^ / / .^^"^ A JY NORTH dIakOTA Winnipeg ts / o ''^^a,C-PEPaOf^ ■-V ^^^o. -^■i^.__ / ♦ / ; Sao p.. t o -,i>o SOUTH DAKOTA NEBRASKA ^ ' vMiimeapoli^ — - . ' itlwl, W I S C t> 0!la«i = \ / k — I \ \ i' / 'x / Omaha *| i Oonver ^ *^ L KjA DO KANSAS OKLAHOMA IOWA * MEXifCO 'v- ^ «■''-l^5yv-v^r'^''-"■\J 'H [IS sou iu " / ) >\ \ 44 ^ E N s E s s 4 E ./xfCvafe -^^^-' -.-' r - i < \ \ _-Mlanl» ■'■> ■ \ i \ < \ I ^ it. _ j.»«» > \ 1^ j j>, {(itmingi \i BOB SavaW V, ? \ w X V » \ A iii!5) THEBALTftlORE AND OHIO. ERIE, AND NORTHEM R4CIFICV.^/ PlILWAY SYSTEMS ; \ Spn Antonio — . Baltimore and Ohio Railroad -—Erie Railroad Northern Pacific Railway Scale 1: 1<3,S0C),000 Galveston Y \ \ a U L F o \ PREPARED FOR TME CKR0MC!-E5 OF AMERICA UNDER THE DtRECTIOM OF W.L.G.JOERO, AMERICAN GEOGRAPHICAL SOCieTV THE ERIE RAILROAD 69 the line was opened to Lake Erie. In addition there had been added various feeders or branches, giving the road an entry into Scranton, Pennsyl- vania, and into Geneva and BuJBFalo, New York. It had its terminus on Lake Erie at Dunkirk and its eastern terminus at Piermont, near Nyack on the Hudson, about twenty-five miles by boat from New York City. The financial condition of the Erie at this time manifested the beginning of that general policj- of improvidence and recklessness which afterward, for nearly a generation and a half, made the com- pany a speculative football in some of the most dis- reputable games of Wall Street stock-jobbers. For though the original estimate had been three mil- Uons and the highest estimate of the cost during construction had been fifteen million dollars, the company, in 1851, started its career with capital obligations of no less than twenty-six millions — a very large sum for those days. The fact that these initial obligations constituted a heavy burden became apparent when the Erie be- gan operations. They made necessary such high freight rates that shippers held indignation meet- ings and again and again made appeals for legis- lative reUef. Although much money had been 70 THE RAILROAD BUILDERS raised after 1849 for improvements, the condition of the Erie steadily grew worse. It soon became notorious for many accidents due to carelessness in running trains and to the breaking of the brittle iron rails. But in spite of these drawbacks the business of the Erie grew. In 1852 it acquired the Ramapo and Paterson and the Paterson and Hudson River railroads and in this way it obtained a more di- rect connection with New York City. It changed the tracks of its new railroads to the six-foot gage, which the Erie had adopted from the start and which it persisted in maintaining for many years despite the world-wide practice of estab- lishing a standard width of four feet eight and one-half inches. The most conspicuous figure in the history of the Erie Railroad system in these early days was Daniel Drew. From 1851, when the main line was opened, until 1868, this man was a director and, for the larger part of the time, treasurer. Bom in 1797, he had driven cattle when a boy from his native town of Carmel in Putnam County to the New York City market and, for some years later, he had been proprietor of the Bull's Head Tavern. Shrewd, unscrupulous, illiterate, good-natured, and THE ERIE RAILROAD 71 sometimes generous, he was in many ways unlike his great adversary in the railroad world, Commo- dore Vanderbilt. Drew affected a pious and sanc- timonious attitude in all his dealings, while Vander- bilt had a more frank and open nature and usually made no pretensions to righteousness. For many years following 1851, Drew, who owned or controlled nearly one-half the stock of the Erie, appeared to think that his office of treasurer carried with it the right to manipulate the stock of the road at any time it might help his pocket- book to do so. He frequently advanced money which the road could not obtain elsewhere, always taking full security and excessive commissions. This practice gave him the name of "specula- tive director," and by the time his great contests with Commodore Vanderbilt broke out, he was re- puted to be worth many millions, most of which he had acquired by juggling in Wall Street with Erie securities. The entire period in the affairs of the Erie sys- tem from the ascendency of Daniel Drew in 1851 to the end of the Civil War witnessed an endless succession of stock-market exploits both large and small. In the spring of 1866, however. Drew found an opportunity to achieve a real masterpiece in 72 THE RAILROAD BUILDERS manipulation. The stock of the Erie road was then selling at about 95 and the company was in pressing need of funds. The treasurer came to the rescue as usual and made the necessary advances on adequate security. The company had in its treasury a considerable amount of unissued stock and had also the legal right to issue bonds to the extent of $3,000,000 which could be converted into stock. Drew took these bonds and the un- issued stock as security for a loan of $3,500,000. It so happened, naturally, that Drew was soon heavily short of Erie stock in Wall Street. The market was buoyant; speculation was rampant; and the outside public, the delight and prey of Wall Street gamblers, were as usual drawn in by the fascination of acquiring wealth without labor. All this time our friend, Daniel Drew, was quietly selling Erie stock and closing contracts for the future delivery of the certificates; and he was do- ing this at rising prices. As the days went by, his grave, desponding manner grew more and more apparent. Erie stock continued to rise. In the loan market its scarcity became greater hour by hour. The rumor began to spread that "Uncle Daniel" was cornered. His large obligations for future delivery must be met. Where was the Erie THE ERIE RAILROAD 73 stock to come from? The stock continued to soar, and Treasurer Drew seemed to become more and more depressed. Then the blow fell. Drew laid his hands on the collateral which he held for his loan to the Erie. In the twinkling of an eye his $3,000,000 in Erie bonds was converted into Erie stock, which he proceeded to dump in Wall Street. Erie quotations fell from 90 to 50. Every one at last reahzed the trap — but not before Daniel Drew had pocketed a few millions in profits. By this time Drew had come to be looked upon as a stock operator to be both admired and feared, and this incident took its place in Wall Street his- tory as a brilliant coup side by side with Vander- bilt's Harlem Railroad and other celebrated ex- ploits. It was soon followed, however, by much more sensational events. We have seen that the portentous figure of Vanderbilt was just at this time looming up in the railroad world, and Vander- bilt had his own theory of the management and financing of railroads. It was inevitable that he should clash with Drew. He was a few years older than Drew, and the two men, as we have seen, had much in common. Both were well on in life before they had transferred their activities to 74 THE RAILROAD BUILDERS steam railroads. When finally, in 1868, they crossed swords in connection with the two railroad systems extending through New York State, both were more than seventy years old and had been successful in the acquisition of millions by methods of their own invention. They were no doubt equally unscrupulous, but, while Drew was by na- ture a pessimist and "bearish," Vanderbilt, in the Wall Street vernacular, was always a "bull." : Having obtained control of the New York Cen- tral, the Hudson River, and the Harlem railroads, Commodore Vanderbilt now decided in the summer of 1867 to go after the Erie, of which Drew was nominally in possession, although no one knew when he owned a majority of the stock or when he was temporarily short of it. Usually he loaded up as the annual election of officers approached and liquidated shortly thereafter. Besides Van- derbilt there was another interest at this time trying for the control of the Erie. This interest consisted of certain Wall Street speculators and certain Boston capitalists who proclaimed them- selves railroad reformers. These so-called reform- ers were as unscrupulous and crafty as either of the other men, and they really represented nothing but an attempt to raid the Erie treasury in the interest THE ERIE RAILROAD 75 of a bankrupt New England corporation known as the Boston, Hartford and Erie Railroad. As "was well said, the name of this latter road was "synonymous with bankruptcy, litigation, fraud, and failure."- The Erie Railroad control was always nominally for sale, and, as the annual election approached, a majority of stockholders stood ready to sell their votes to the highest bidder. Commodore Vander- bilt cleverly secured the cooperation of the "re- former" element, corralling their proxies, and thus he appeared to be in a position to oust the Drew interests without difficulty. On the Sunday pre- ceding the election the Commodore saw Drew and amicably explained to him the trap he had laid, and showed him clearly that there was no way out of the situation. Upon this disclosure, Treasurer Drew at once faced about and agreed to join hands with Vanderbilt in giving the market for the stock the strong upward twist it had lacked before that hour. Jointly they would make so much money that neither side would lose anything. "Uncle Daniel" went away apparently satisfied and con- tented with the compromise. But the Commodore had not finished. A few hours later he took the Boston adventm-ers into his confidence and explained that he proposed to 76 THE RAILROAD BUILDERS continue Drew in the directorate. The Boston men were puzzled and confused by this sudden change of front. Later, all parties met at Drew's house, and Vanderbilt brought the Boston men to terms by proposing a plan to Drew whereby they would be entirely left out. This ruse succeeded and a written agreement to the advantage of all, but at the expense of the outside stockholders and of the general public, was then drawn up. This, however, was only the beginning of the fight. Vanderbilt was now in the Erie as a joint owner, but he had stretched out his hands to control the road and he meant to succeed. In Feb- ruary of 1868, Frank Work, the single repre- sentative of Vanderbilt on the Erie board, applied for an injunction against Treasurer Drew and his brother directors to restrain them from the repay- ment of the $3,500,000 borrowed by the railroad from Drew in 1866, and to restrain Drew from taking any legal steps toward compelling a settle- ment. Judge Barnard granted a temporary in- junction, and two days later Vanderbilt's attorney petitioned for the removal froni office of Treasurer Drew. The papers presented in the case exposed a new fountain of Erie stock which had up to that time been entirely overlooked. THE ERIE RAILROAD 77 A recently enacted law of the State of New York ■ — probably fathered by Drew — authorized any railroad company to create and issue its own stock in exchange for the stock of any other railroad under lease to it. Upon the basis of this law Drew and his close satellites had secretly secured owner- ship of a worthless piece of road connecting with the Erie and known as the Buffalo, Bradford and Pittsburgh. Then, as their personal needs in the stock-market or at elections demanded, they had supplied themselves with new Erie stock by leasing the worthless road to the Erie and then exchanging Erie stock for the worthless stock of the leased line. The cost of the line to Drew and his friends, as financiers, was about $250,000. They then issued, as proprietors, $2,000,000 in bonds of the road, payable to one of themselves as trustee. This person then shifted his character, became counsel for both sides, and drew up a contract leasing the line to the Erie for 499 years, the Erie agreeing to guarantee the bonds in consideration. These men then reappeared as directors of the Erie and ratified the lease. After that it was a simple matter to divide the loot. The Erie was thus saddled with a $2,000,000 mortgage at seven per cent in addition to a further issue of capital stock. 78 THE RAILROAD BUILDERS Following the first injunction another was now issued restraining Drew and the Erie board from making any further issues of stock, by conversion of bonds or otherwise, and also forbidding the Erie to guarantee any further issues of bonds. An additional injunction forbade Drew from having any transactions in Erie stock or fulfilling any contracts until he had returned to the treasury the shares involved in his loan transaction of 1866 and in the purchase of the worthless Buffalo, Bradford and Pittsburgh road. Matters now looked forbidding for Treasurer Drew. Instead of being allowed to manufacture fresh Erie stock certificates at his own will, as had been his habit for fifteen years, he was to be cor- nered by a legal writ and forced to work his own ruin. But notwithstanding the apparently des- perate situation it was quite evident that Drew's nerves were not seriously affected. Although he seemed rushing on destruction, he continued day after day to put out more short stock, all in the face of a steadily rising market. His plans, ap- parently, were carefully matured, and he said that if the Commodore wanted the stock of his road he would let him have all he desired — at the proper price. THE ERIE RAILROAD 79 As usual the Erie treasury was short of funds, and as usual "Uncle Daniel" stood ready to ad- vance all the money required — that is, on proper security. There was but one kind of security to offer and that was convertible bonds. No stock could be issued by the company for less than par, but convertible bonds could be disposed of by the directors at any price. A secret meeting of the executive committee was held, at which it was voted to issue immediately and to offer for sale $10,000,000 in convertible bonds at 723/^. Drew's broker at once became the purchaser of $5,000,000 worth. In ten minutes after the meeting had adjourned, the bonds had been issued, their con- version into stock demanded and made, and cer- tificates for 50,000 shares of stock deposited in a broker's safe, subject to Drew's order. A few days later came the injunction, and Erie stock began to soar in the markets, in response to which " Uncle Daniel," who had been industrious- ■i ly selling his many thousands of new shares, now determined to bring up the reserves and let the eager buyers have the other five milhons; but be- fore the bonds could be converted the injunction had been served. The date for the return of the writ was Tuesday the 10th of March; but the Erie 80 THE RAILROAD BUILDERS ring needed less time than this and decided on Monday the 9th as the day to defeat the corner. Saturday and Sunday were busy days for Drew and his friends. All his brokers had been enjoined, so a dummy was made the nominal purchaser of the bonds. This dummy then made his formal demand for the conversion of the bonds and was refused. All this was done upon affidavit, as it was the plan of Drew to get from some judge a writ of mandamus to compel the Erie Railroad to convert the bonds. The stock certificates for which they were to be exchanged were signed in blank and made ready for delivery. Drew had agreed to sell 50,000 shares of stock at 80 to the firms of which Jay Gould and James Fisk, Jr., were members; they were also Erie direc- tors. On Monday morning, the 9th of March, the certificates, filled out in the names of these firms, were handed by the secretary to an employee who was directed to carry them from the office of the company in West Street to the transfer clerk in Pine Street. The messenger left, but in a moment or two returned to report to the apparently amazed secretary that Fisk had met him outside the door, had taken the certificates away from him, and "had run away with them." It was true. The stock THE ERIE RAILROAD 81 certificates had been "stolen" and were beyond the control of an injunction. The stock certificates next appeared in every part of Wall Street. On the same day the Erie representatives applied to Judge Gilbert of Brooklyn for an injunction on the ground that certain persons, including Judge Barnard, had entered into a conspiracy to specu- late in Erie stock and to use the process of the courts to aid the speculation. To the amazement of everybody, Judge Gilbert issued an injunction restraining all parties to all the other suits from f mother proceedings; in one paragraph ordering the Erie directors to continue in the discharge of their duties — in direct defiance of the injunction of one judge — and in the next paragraph for- bidding the directors to desist in the conversion of bonds — in direct defiance of another judge. The Drew interests were now enjoined in every direc- tion. One judge had forbidden them to move, and another judge had ordered them not to stand still. It was a strategic position which Drew and his agents could not have improved upon, and while matters stood this way the 50,000 shares of Erie stock had been flung on the market. Vander- bilt, who was ignorant of this situation, bought the new stock as eagerly as the old. Then, when the 82 THE RAILROAD BUILDERS facts came out, the quotations dropped with a thud. Uncle Daniel was victorious ; the attempted corner had been a failure; and the Commodore was holding the bag. Further dramatic events followed. The Erie directors learned that process for contempt had been issued and that their only chance of escape from jaU lay in immediate flight. So, stuffing all that was worth while of the Erie Railroad into their pockets, they made oflF under cover of darkness to Jersey City. One man carried with him in a hack- ney coach over $6,000,000 in greenbacks. Two of the directors lingered and were arrested; but a majority collected at the Erie station in Jersey City and there, free from interference, went on with the transaction of business. Without dis- turbance they were able to count their expenses and divide the profits. Vanderbilt was now loaded up with reams of Erie stock at high costs, and the load was a severe strain on him. He dared not sell for fear of causing a financial collapse. Drew had taken away about seven million dollars of his money and an artificial stringency had been created in Wall Street by this exodus of most of its available cash. But Van- derbilt weathered the storm and, as his generally THE ERIE RAILROAD 83 optimistic attitude inspired confidence, the sky began to clear. But this stock-market battle did not end the war. New injunctions flew in all directions. Osgood, son-in-law of Vanderbilt, was appointed receiver of the 100,000 shares of illegally issued stock and was immediately enjoined from acting by another judge. Then Peter B. Sweeney, of the Tammany ring, was appointed in his stead without notice to the other side. There was nothing for a receiver to do, as every dollar he was to "receive" was known to be in New Jersey and beyond his reach. Nevertheless he was subsequently allowed a fee of $150,000 by Judge Barnard for his services ! While the legal battle was going on neither Drew nor Vanderbilt was idle. A plot was arranged for bringing the Erie directors over by force, but this failed. In the meanwhile the Erie directors per- suaded the New Jersey Legislatiu-e to rush through a bill making the Erie Railway a New Jersey cor- poration. This move, however, was intended mere- ly to meet an emergency. It was the intention of the Erie interests to do their real work with the Legis- lature at Albany. This was also the intention of the Vanderbilt interests. Consequently, during the subsequent session, the grafters in that body were 84 THE RMLROAD BUILDERS wooed by both sides. When the Legislature con- vened, a bill was promptly introduced making legal the recent issue of Erie stock, regulating the power to issue convertible bonds, providing for the guaranty of the bonds of the Boston, Hartford and Erie, and forbidding the consolidation of the Cen- tral and the Erie under the control of Cornelius Vanderbilt. But evidently the Commodore's purse was open wider than "Uncle Daniel's, " for this bill was defeated by a decisive vote. Now Jay Gould appeared upon the scene. He left Jersey City with half a million of the Erie's money in his pocket and arrived in Albany im- mediately after the defeat of this bill. On his arrival he was arrested on a writ issued against him for contempt of court and was held in bail of half a million dollars for his appearance in New York a few days later. He appeared before Judge Barnard in New York and was put in the charge of a sheriff. But the sheriff was served with a writ of habeas corpus, and Gould was again brought be- fore the court. Then in some mysterious way the hearing was deferred and Gould returned to Al- bany, taking the officer as a traveling companion. After reaching his destination Gould became so ill that he could not return to New York, though THE ERIE RAILROAD 85 he managed to go to the Capitol in a driving snow- storm. Here he became rapidly convalescent, as did also many members of the Legislature. Mem- bers, indeed, who had been too sick or too feeble to attend the legislative sessions during this cold winter suddenly found their health returning and flocked to Albany on the fastest trains. Gould stayed in Albany until April, and by this time a remarkable change had come over the mentality of a majority of the legislators. On the 13th of April a bill was presented in the Senate which met the approval of the Erie interests and which Judge Barnard afterwards designated as a bill for legaliz- ing counterfeit money. This bill, which was passed after due debate, legalized the issues of Erie bonds and stocks which had been put out by Drew; it provided for the guaranty of the bonds of connect- ing roads as desired by Drew; and it forbade all possible contracts for consolidation or division of receipts between the Erie and the Vanderbilt roads, a provision also desired by Drew. In fact it was the same bill in different form that had been voted down so decisively a short time before. But the real tug of war was to get the bill through the lower House. Fabulous stories were told of money which would be expended and the 86 THE RAILROAD BUILDERS market quotations for votes never soared so high. Then, at the critical moment, Vanderbilt sur- rendered, made a secret deal with his foe, and with- drew his opposition to the bill. The anger of the disappointed grafters and vote-sellers knew no bounds, and they immediately set to work passing other bills which they felt would annoy or injure Vanderbilt, with the hope that he would still be induced to give them what they regarded as their rightful spoils. The details of this settlement between Drew and Vanderbilt were not announced until some months afterward. By the terms agreed on Vanderbilt was relieved of 50,000 shares of Erie stock at 70, pay- able partly in cash and partly in bonds guaranteed by the Erie, and received $1,000,000 in cash for an option given the Erie Railroad to purchase his re- maining 50,000 shares at 70 within four months, besides about $430,000 to compensate his friends who had worked so heroically for him. This total sum of nearly $5,000,000 no doubt represented part of the "slush fund" which Drew expected that the company would have to give up to the venal legislators, and it was therefore no hardship to hand it over to Vanderbilt instead. As a part of the general settlement the Boston THE ERIE RAILROAD 87 interests were relieved of their $5,000,000 of largely worthless bonds of the Boston, Hartford and Erie Railroad, for which they received $4,000,000 of Erie securities. Thus in all about $9,000,000 in cash or securities was drawn out of the Erie treas- ury in final settlement of this great stock-market manipulation. And this does not include the pick- ings of Gould and Fisk and the smaller fry, of which there is no oflficial record. But that these gentlemen did not go empty-handed there is not the shadow of a doubt ! The sensational stock-market deal between the Drew and Vanderbilt interests was but a truce, however, and did not settle the troubles of the Erie. Jay Gould was now becoming a dominating factor and in October of 1868 was chosen president. The various stock-market struggles that ensued from the ascendency of Jay Gould to the receivership of the Erie in 1875 is a long and intricate tale. Suflice it to say that the events were generally similar to those already recounted • — stock-market corners, over-issues of bonds and stocks, injunc- tions, court orders, arrests, legislative bribes. Less than a week after his election Jay Gould frankly announced that the company had just issued 88 THE RAILROAD BUILDERS $10,000,000 of convertible bonds and that a third of these had already been converted into stock. He further announced that the company now had $60,000,000 of common stock outstanding, where- as the public had understood that it was only $45,000,000. During the few years that followed, the poor Erie was systematically looted. Millions were wasted in New York real-estate speculation, and the company's money was used in the erection of the Grand Opera House on Twenty-third Street, to which the executive offices of the Erie Railroad were moved. Finally the new ring, comprising as leading spirits Jay Gould and James Fisk, Jr., eliminated Daniel Drew and left him high and dry without a cent, through a new stock corner. About this time the road was financially on its last legs, and Jay Gould was appointed receiver. This started further litigation which dragged on for several years until, in 1874, Gould was turned out by General Daniel E. Sickles in combination with the English shareholders. The new interests, when they finally got control, elected an entirely new management and made H. J. Jewett, a practical railroad man, president. But the Erie was already bankrupt, and not much could be done toward THE ERIE RAH^ROAD 89 saving the situation. In May, 1875, the road confessed inability to meet its obHgations, and Jewett was appointed receiver. It was three years from the date of the receiver- ship before the Erie property was taken out of the hands of the courts. In April, 1878, a new com- pany, the New York, Lake Erie and Western Rail- road, took over the property; Jewett was elected its president, and a new chapter in the history of the property began. Had the reorganization of the Erie been drastic enough, the road might not so soon have fallen into financial difficulties again, for it owned valu- able coal lands in Eastern Pennsylvania and rap- idly increased its earnings in this region. More- over the extension of the system westward should have increased its earning capacity. Up to this time the Erie had no Chicago connection and was at an obvious disadvantage compared with its com- petitors. It improved this situation in 1881 by ac- quiring the New York, Pennsylvania and Ohio, and the franchise of the Chicago and Atlantic Railway. Two years later it obtained control of the Cincinnati, Hamilton and Dayton and found itself in a position in which it could compete for through traffic with the Pennsylvania and the New York Central. 90 THE RAILROAD BUILDERS But in carrying through these extensive plans, the Erie again became involved in financial diflficul- ties; the sensational Grant and Ward failure in Wall Street in 1884 was a severe blow to the com- pany's credit, as this firm was at that time doing important financing for the Erie. The English security holders stepped to the front again, de- manded President Jewett's resignation, and elected John King in his stead. In 1885 and 1886 a financial readjustment took place, but the company continued to carry the bulk of the heavy load of obligations which had been created during the years of the Drew and Gould managements. It was surely an evidence of the inherent worth of the property that during the half dozen or more years following, the Erie succeeded in struggling along in the face of all its financial and other handicaps and at the same time showed substantial growth in the volume of its business. The company was kept above water until 1893 without again appealing to the courts; but by that time the indebtedness had once more mounted, and in July of that year Erie receivers were appointed for the fourth time in its history. The name of Pierpont Morgan is closely identified with the story of the railroad during this latest THE ERIE RAILROAD 91 reorganization period. Morgan's firm came to the front in 1894, with the powerful backing of the large EngUsh interests, and proposed a plan which involved heavy sacrifices by many of the security holders but which was designed to insure the per- manent future of the property. The plan was vigorously opposed, however, by Edward H. Har- riman, August Belmont, and other powerful in- terests, and it was not until August, 1896, that a final compromise was effected and a reorganization was carried through. But at last the Erie was taken out of receivership, and an entirely new company, intelligently designed and having am- ple working capital for future development, was formed with E. B. Thomas at its head. This new president, like Daniel Willard of the Baltimore and Ohio and many of the modern railroad leaders, was a practical railroad man who had worked up from the ranks and who had no large financial interest or banking connections to divert his atten- tion from the real business of management. Under Thomas, who remained at the head of affairs from 1896 to 1900, the Erie made substantial progress. The system was solidified and its territory was more uniformly and systematically developed. In 1898, the Erie secured control of the New York, 92 THE RAILROAD BUILDERS Susquehanna and Western system, gaining thereby an important branch to Wilkesbarre; and in 1901 it purchased jointly with the Lehigh Valley Rail- road the stock of the Pennsylvania Coal Company of which the Erie later became sole owner. The real achievement of the Thomas administration was the development of the property as a heavy car- rier of anthracite coal. On the financial side dur- ing this period the credit of the House of Morgan, intelligent administration, and modern methods did much to improve the reputation of the Erie and enable it to live down its bad inheritance. In 1901 Frederick D. Underwood succeeded Thomas. Like his predecessor. Underwood repre- sented the modern type of railroad president — a hard-working, eminently practical big business manager of great executive talent. Underwood's idea was to make the Erie a great freight-carrying system by developing its tonnage and its freight capacity in every way possible. Consequently he favored opening up the property more extensive- ly in the soft coal fields of Ohio and Indiana, re- constructing roadbeds, laying extra tracks, and eliminating grades and curves. The history of the Erie Railroad ever since 1901 has been a record of progress. During these years THE ERIE RAILROAD 93 the system has been practically rebuilt. It now has a double track from New York to Chicago; it has extensive mileage in the soft coal regions of Ohio and Indiana, and its soft coal tonnage today far overtops its tonnage of anthracite coal; its train load averages far higher than that of the New York Central or of any other Eastern trunk hnes except the Pennsylvania; its steep grades throughout New York State have been for the most part eliminated, and many short cuts for freight traffic have been built. In carrying through these extensive develop- ments in fifteen years the Erie has spent hundreds of millions of dollars. More money indeed has been used legitimately for improvement and de- velopment since the reorganizaton of 1896 than during the previous sixty years of its existence. Of course this outlay has meant that the Erie has had to create new mortgages and borrow many millions; but a large part of the expenditure for im- provement has come directly from earnings. The Underwood administration has been conservative in paying dividends and the stockholders grumble. But the Erie is at last coming into its own. Instead of being a speculative football and a hopelessly bankrupt road, as it was for nearly forty years, it 94 THE RAILROAD BUILDERS is now in the forefront of the great trunk lines of the eastern section of the United States. It is no longer, what it was called for many years, the "scarlet woman of Wall Street," but is a respect- able member of the American railroad family. CHAPTER V CBOSSING THE APPALACHIAN RANGE The story of the Baltimore and Ohio Railroad takes us back more than ninety years. When the scheme for the construction of a railroad from Bal- timore to the waters of the Ohio River first began to take form, the United States had barely emerged from the Revolutionary period. Many of the fa- mous men of that great day were still living. John Adams and Thomas JeflFerson had been dead only a year; Madison and Monroe had recently retired from public life; John Quincy Adams held the office of President, and the "reign" of Andrew Jackson had not yet begun. At this time steam navigation on the rivers was only in its beginnings, but no one could doubt that it would come into general use. Two decades had passed since the Clermont had been launched on the Hudson by Robert Fulton, and steamboats were now carrying cargoes successfully against the swift 95 96 THE RAILROAD BUILDERS currents up the Mississippi from New Orleans and were threatening the extinction of the aggressive flatboat traffic. Great strides had also been made in the construction of turnpike roads. The famous National Pike from Cumberland to Vandalia, Illi- nois, had been in large part completed and had done much for the opening up of the Western territory. Canal building was hkewise an extensive de- velopment of this period. The idea of connecting the waters of the Chesapeake with those of the Ohio had been broached by George Washington before the Revolution, and he had also prophesied the union of the Hudson and Lake Erie by canal. He believed that a country of such great geo- graphical extent as the United States could not be held together except by close commercial bonds. The opening of the Erie Canal to New York in 1825 stimulated other cities on the Atlantic sea- board to put themselves into closer commercial touch with the West. This was especially true of the city of Baltimore. A canal connecting Chesa- peake Bay and the Ohio River was advocated to protect the trade of Baltimore and the South from the competition of New York and the East which would inevitably result from the construc- tion of the Erie Canal and the Public Works of CROSSING THE APPALACHIAN RANGE 97 Pennsylvania. But discouragements in plenty frus- trated the plan. The cost was believed to be exces- sive and the engineering difficulties were said to be almost insuperable. George Bernard, a French engineer, was of the opinion that the high eleva- tions and scarcity of water along the route would prevent such a canal from having much practical value. For these reasons Baltimore believed that its position as a center for the rapidly developing Western trade was slowly but surely slipping away. This was the situation that led to the building of the Baltimore and Ohio Railroad. Two men — Philip E. Thomas and George Brown — were the pioneers in this great undertaking. They spent the year 1826 investigating railway enterprises in England, which were at that time being tested in a comprehensive fashion as commercial ventures. Their investigation completed, they held a meet- ing on February 12, 1827, including about twenty- five citizens, most of whom were Baltimore mer- chants or bankers, "to take into consideration the best means of restoring to the city of Baltimore that portion of the western trade which has lately been diverted from it by the introduction of steam navigation and by other causes." The outcome was an application to the Maryland Legislature 98 THE RAILROAD BUILDERS for a charter for a company to be known as "The Baltimore and Ohio Railroad Company" having the right to build and operate a railroad from the city of Baltimore to the Ohio River. The formal organization took place on April 24, 1827, with Philip E. Thomas as president and George Brown as treasurer. The capital of the proposed company was fixed at five million dollars. The construction of the railroad began on July 4, 1828. The venerable Charles Carroll of Carroll- ton, then more than ninety years old and the only surviving signer of the Declaration of Independ- ence of fifty -two years before, said on this occasion, as he laid the first stone: "I consider this among the most important acts of my life, second only to my signing the Declaration of Independence," His vision was indeed prophetic. It was determined that the first section of road constructed should extend to EUicott's Mills, twelve miles distant, but, owing to delays in ob- taining capital, the actual laying of the rails was not begun until the fall of 1829, and this first sec- tion was not opened for traffic until May 22, 1830. At first, experiments were made with sails for pro- pelling the cars, but it was soon found that a more eflFective source of power was supplied by mules CROSSING THE APPALACHIAN RANGE 99 and horses. The Flying Dutchman, one of the cars devised to furnish motive power, provided for the horse or mule a treadmill which would revolve the wheels and make the distance of twelve miles in about an hour and a quarter. Steam locomo- tives at this time were in their infancy and, un- til the opening of the Liverpool and Manchester Railroad in this same year, they had attained a speed of only six miles an hour. Horses and mules, and even sail cars, made more rapid progress than did the earliest locomotive. In spite of these crude and primitive facilities for transportation, however, the traflBc on the new railroad was of large volume from the beginning, and the com- pany could not handle the amount of merchandise offered for transport in the first months. Construction was now rapidly pushed ahead, and by 1832 the whole line had been opened to Point of Rocks, with a branch to Frederick, Mary- land, making seventy-two miles in all. In 1831, steam locomotives were tested, and one of them, the York, was found capable of conveying fifteen tons at the rate of fifteen miles an hour on level portions of the road. This achievement was re- garded as a great triumph, and in 1832 the direc- tors of the road called attention to "the great 100 THE RAILROAD BUILDERS increase in velocity" that had been obtained in this way. From this time forward the expansion of the railroad proceeded with a certainty born of success. A branch was built to Washington and the main line was extended to Harper's Ferry. Beyond this point construction was slow because financial dif- ficulties stood in the way, and it was not until after the panic of 1837 that further aggressive building began. But by 1842 the line was com- pleted to Cumberland, Maryland, and by 1853, to Wheeling. Meanwhile, the branch from Cum- berland to Parkersburg, Virginia, was built. The road now comprised a total system of more than five hundred miles and reached two points of im- portance on the Ohio River, one northward near the Pennsylvania-Ohio state line and one south- ward in the direction of Cincinnati. The Par- kersburg extension was of great importance because it opened a through route to St. Louis, by means of the Cincinnati and Marietta Railroad — which was at this time completed from Cincinnati to Belpre, Ohio, opposite Parkersburg — and the Ohio and Mississippi, which extended more than three hundred miles from St. Louis to Cincinnati. Times were not the best, however, and, although LOCOMOTIVE "JOHN BULL,"- 18S1 Photograph from the original engine in the National Museum, Washington. This locomotive was built in Newcastle, England, and brought to America for the Camden and Amboy Railway in August, 1831. It was exhibited at the World's Fair in Chicago in 1893. CROSSING THE APPALACHIAN RANGE 101 much traffic was developed, the immense cost of the extensions heavily burdened the Baltimore and Ohio Company, while the panic of 1857 seriously embarrassed its credit. Soon after this panic and before the company had begun to re- cover from its effects, John W. Garrett, one of the large stockholders in the road and son of a Balti- more banker, was elected to its presidency, and a new chapter in the history of the Baltimore and Ohio began. Almost immediately following Gar- rett's election, a remarkable change became appar- ent. Losses were turned into gains; deficits were converted into surpluses; and soon Garrett had gained the reputation of being the most remark- able and eflScient railroad manager in the world. He seemed to be almost an Aladdin of railroad management for, even when he could not show in- creases in amount of business done, he reported greater profits by showing lower expenses. In those days the railroads did not furnish detailed reports of business to the stockholders or to the public. At the annual meetings it was customary for a president or the directors simply to an- nounce, either orally or in a brief printed state- ment, the amount of gross business and profits for the year. No such thing as a balance sheet or 102 THE RAILROAD BUILDERS detailed financial statement saw the light of day — practically everything was taken by the stock- holders on faith. And great was their faith. When, therefore, Garrett announced large increases in profits in years when most railroads were standing still or were incurring losses, he was implicitly believed. Under Garrett's management a new era of ex- pansion almost immediately began; work was started on the long delayed branch to Pittsburgh and plans were laid for establishing a line of steam- ships from Baltimore to the leading European ports. But the Civil War, which bore heavily on the Baltimore and Ohio, interfered with these ambitious schemes. Early in 1861 the Confeder- ates took possession of a large part of the line east of Cumberland; in the next four years important sections of the road were repeatedly destroyed and rebuilt, as they passed into the hands of the Fed- eral or Confederate troops. The company, how- ever, managed to get through without default in its securities, and, when peace was restored in 1865, the Baltimore and Ohio resumed its policy of aggressive expansion. Before very long the road, with its connections constructed or purchased, reached the cities of CROSSING THE APPALACHIAN RANGE 103 Pittsburgh, Sandusky, and Chicago, and further strengthened its connections with Cincinnati and St. Louis. It acquired steamboats, grain eleva- tors, and docks; it constructed hotels as mountain summer resorts; it built dry docks in Baltimore; and finally it proceeded to organize and operate an express company, a telegraph company, and a sleeping-car company. To carry out these am- bitious plans the capital stock and debt were of course increased again and again, and in the course of these operations a large part of the new securi- ties issued was sold to English investors. Not- withstanding these great increases in liabilities, the company continued to report large surpluses and to pay large dividends, — generally ten per cent annually. In fact, this liberal rate was, with brief exceptions, paid right through the Civil War period, in spite of the fact that large parts of the line were frequently destroyed and traffic was often at a standstill. With such prosperity under such conditions Garrett's reputation as a railroad manager naturally suffered no eclipse. In the course of the Civil War, as already noted, through traffic routes from New York to Chicago had been established, and in the succeeding years the consolidations of the great competing systems 104 THE RAILROAD BUILDERS into trunk lines had taken place. The struggle of the Baltimore and Ohio for its share of Western business led to fierce rivalry with the Pennsylvania. This competition became so severe and intense that, in 1874, the Pennsylvania road refused to carry the Baltimore and Ohio cars over its line to New York on any terms whatever. Since this was the only way in which the Baltimore and Ohio could reach New York, the situation was a serious one. Gartett retahated by making destructive re- ductions in passenger rates from Washington and Baltimore to Western points. The cuts were soon made on other roads and affected both freight and passengers. All the hues became involved. Pas- senger fares from Chicago to Baltimore and Wash- ington were reduced from nineteen dollars to nine dollars, and those to New York and Boston from twenty-two to fifteen dollars. Still the fight con- tinued, and before the end of 1875 it was possible to travel from Chicago to New York first class for twelve dollars and to ship grain to New York for as low a rate as twelve cents. Despite the fact that competition had cut earn- ings almost to the point of extinction, the Balti- more and Ohio continued to report surprisingly good profits. The company borrowed additional CROSSING THE APPALACHIAN RANGE 106 funds from time to time but continued to pay the liberal ten per cent dividend until 1877, when it somewhat reduced the rate. These dividend pay- ments indicated, however, a prosperity that was only apparent, and they did not greatly deceive the bankers, for the credit of the Baltimore and Ohio weakened from day to day. The fact is that the reports of operations inspired little public confi- dence; to the farseeing, there were danger signals ahead. Nevertheless the ten per cent dividends were resumed in 1879 and continued at this rate without interruption until 1886. On the death of John W. Garrett in 1884, his son Robert, who succeeded him as president, continued the same policy of competition and aggression. With the object of gaining an entrance into Phila- delphia and through that gateway of reaching New York, he started work on a branch from Baltimore to Philadelphia to meet, at the northern boundary of Maryland, the Baltimore and Philadelphia Rail- road — a line which independent interests were then building through Delaware with the intention of obtaining an entrance into Philadelphia. The Pennsylvania interests strongly opposed Garrett's new project and many years before had gone so far, in their determination to block the Baltimore 106 THE RAILROAD BUILDERS and Ohio from acquiring control of the Philadel- phia, Wilmington and Baltimore Railroad, as to purchase that road themselves. Despite this op- position the Baltimore and Ohio went forward with their plans and secured an entry into Philadelphia by acquiring control of the Schuylkill East Side Railway, which was a short terminal road of great strategic value. North of Philadelphia the com- pany arranged a traflSc contract with the Philadel- phia and Reading, whose lines extended to Bound Brook, New Jersey, and also with the Central Railroad of New Jersey beyond Bound Brook to Jersey City. Afterward, by purchasing the Staten Island Rapid Transit Company the Baltimore and Ohio acquired extensive terminals at tidewater on Staten Island and constructed a connection in New Jersey with the New Jersey Central. Thus, after many years of struggle and at heavy cost, the Baltimore and Ohio finally secured an entry into the New York district independently of the Pennsylvania Railroad. Both freight and passenger charges, however, were still maintained at an unprofitable rate, and, after the death of John W. Garrett, the credit of the Baltimore and Ohio continued to decline. Divi- dends were gradually reduced and by 1888 were CROSSING THE APPALACHIAN RANGE 107 omitted entirely. As is usually the case, the cessation of dividends awakened the sleeping stockholders. They began an investigation to ascertain the where- abouts of that remarkable surplus which had been reported from year to year and which, according to official report, had shown a constant growth. This investigation disclosed a startling state of aflFairs. Instead of a surplus, the company had been piling up deficits year after year, had been borrowing money right and left on onerous terms, had been charging up millions of dollars of expenses to capital accounts — and as a matter of fact, instead of making money, it had for the most part been losing it. Now the company urgently needed cash, and the only way it could obtain that essen- tial commodity was by selling its express, telegraph, and sleeping-car business. During the entire administration of John W. Garrett, extending over more than two decades, current expenditures of enormous amounts which should have been deducted from the income had been credited to the surplus; many millions which would never be returned had been advanced to subsidiary lines, or had been spent, and therefore should have been put down in the books as losses. When these facts became public, the capital stock 108 THE RAILROAD BUILDERS of the Baltimore and Ohio, which for generations had been looked upon as one of the most secure of railroad investments, dropped to almost noth- ing, and the most strenuous financial efforts were required to keep the company out of bankruptcy. These disclosures, towards the end of 1887, ended the first period of active Garrett manage- ment in the Baltimore and Ohio. The directors then turned to New York bankers for the cash that was needed to put the affairs of the company on a sound basis. Samuel Spencer, who afterward became a partner in the banking house of J. P. Morgan and Company, was elected president and active manager. He introduced radical reforms, en- tirely revolutionized the organization, and adopt- ed modern methods. He wrote off the books a large amount of the much vaunted "surplus" and he took important steps toward the general improvement of the property. Had the new interests been allowed to continue their efforts unmolested, the history of the Balti- more and Ohio in the next decade might have been very different. But the original controlling interests, the Garrett family, still held the balance of power. As the bad bookkeeping and other ir- regularities of the past naturally reflected On the CROSSING THE APPALACHIAN RANGE 109 Garretts, it was their interest to suppress further investigation as far as possible; and their antagonis- tic attitude toward the policy adopted by the new Spencer management was seen in the annual elec- tion of directors in November, 1888. Only five of the members of the board were reelected, President Spencer was ousted, and Charles J. Mayer was elected in his place. This second change in management sidetracked the plans for radical reform, and little improvement resulted either in earning power or in financial con- dition. The company had fallen upon evil days. The net profits did not increase, and eight years after 1888 they were smaller than in that year, while the debt and interest charges constantly grew. De- spite these ominous facts, dividends were paid regu- larly on the preferred stock and in 1891 they were resumed on the common stock. In the latter year a twenty per cent dividend was declared "to compensate shareholders for expenditures in bet- terments and improvements in the physical con- dition of the property," while at the same time the directors decided to raise five million dollars of new capital for expenditures which would be neces- sary to handle the increased traffic created by the World's Fair at Chicago. no THE RAILROAD BUILDERS The traffic problem continued to be a thorn in the flesh and until 1893 freight rates were con- stantly being cut. The opening of the Baltimore and Ohio connection to New York had brought keener competition from the Pennsylvania Rail- road and had made deep inroads into the Balti- more and Ohio revenues. Such conditions made even the Garrett interests feel that something should be done, and in 1890 a "community of interest" scheme was proposed. To control the stock of the Baltimore and Ohio Railroad, Edward R. Bacon in New York, acting harmoniously with the Garrett family, formed a syndicate of capitalists representing the Richmond Terminal system, the Philadelphia and Reading Railroad, the Northern Pacific Raihoad, and other proper- ties. The ultimate plan, which proved too vision- ary, was to consolidate under one control a vast network of lines extending all over the continent. The syndicate had made little progress toward rehabilitation when the panic of 1893 occurred. In this year and the next the earnings of the Balti- more 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 CROSSING THE APPALACHIAN RANGE 111 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 difficul- ties 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 re- ceivership 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 reorgani- zation committee was formed, with whom were de- posited 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 112 THE RAILROAD BUILDERS receivership contained the same kind of irregulari- ties 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. Fur- thermore 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 terri- tory. It had been progressive in matters of ex- pansion and had built up its system to meet the needs of modern times. Its trackage and equip- ment compared favorably with similar systems, and most of its extensions and branches had been wisely planned and had proved profitable. The operating management of the railroad was gener- ally good and it usually secured its proportion of CROSSING THE APPALACHIAN RANGE US what business was to be obtained. But the steady increase in its debts over a number of years, its extravagance in dividend payments, and its painful efforts to keep down its operating expenses had so weakened the property that, when the hard times of 1893 to 1896 arrived, it was in no position to weather the storm. The only wonder is that the management succeeded in keeping the system intact and apparently solvent so long as it did. The receivership at once adopted a vigorous policy of improvement. The rolling stock had run down until it could not handle even ordinary busi- ness. While the company had been depleting its credit and paying out all its cash in dividends, the equipment had been going into the scrap heap. For two years the receivers made large expenditures on equipment and roadbed, borrowing money for this purpose; the result was that when, in 1898, the courts surrendered the property, it was in splendid condition to take advantage of the tide of commer- cial and industrial prosperity which was just then beginning to flow throughout the United States. While the reorganization of the Baltimore and Ohio was not so drastic as that of many other systems which went through the courts during this period, it was thorough enough to" meet the 114 THE RAILROAD BUILDERS situation. The fixed charges were cut down radi- cally and the stockholders were assessed in large amounts. In all, more than thirty-six million dol- lars was raised by assessments and the sale of new securities; the liabilities of the Company were greatly reduced; and its credit was promptly re- stored. Formerly the Baltimore and Ohio had been struggling under a burden of floating indebtedness, with so little money in its treasury that it could not even put a new coat of paint on the pas- senger cars and had to continue to use oil lamps to light some of its best trains. But now the float- ing debt was replaced by a large available cash capital, and as a result of the liberal policy fol- lowed by the receivers, the equipment and roadbed were brought fully up to the standards required for handling the traffic of the road both economically and effectively. With the reorganization of 1898 finished, the Baltimore and Ohio Railroad entered a new period in its history. The strong, progressive interests which now took control concentrated their ener- gies on developing traffic, increasing earnings, and rounding out the general system. They adopted careful measures for unifying the system by adding other lines and connections of value; they paid CROSSING THE APPALACHIAN RANGE 115 much attention to the improvement and develop- ment of terminals; and they spent many millions in acquiring and expanding the terminal properties of the company at Chicago, St. Louis, Philadelphia, and Baltimore. The financial history of the Baltimore and Ohio since the close of the nineteenth century is inter- esting chiefly in connection with changes in the control of the property. After the reorganization a group of prominent financiers, including Marshall Field, Philip D. Armour, Norman B. Ream, and James J. Hill jointly purchased a large interest in the stock. But this purchase, while perhaps rep- resenting a dominating interest, did not involve actual control. Soon afterward, interests identi- fied with the Pennsylvania Railroad began to ap- pear in the Baltimore and Ohio, and before long the Pennsylvania had a strong representation on the board. As a consequence, the Baltimore and Ohio almost lost its individuality and for a time was popularly regarded practically as a subsidiary of its old rival line. The purpose of the Pennsylvania ia obtaining this ascendency over the Baltimore and Ohio was to regulate the soft coal traffic. Already it had ac- quired dominating interests in the Chesapeake and 116 THE RAILROAD BUILDERS Ohio, the Norfolk and Western, and other soft coal properties. These purchases were merely manifestations of that "community of interest" policy which at this time led several large systems to acquire interests in competing lines. Several of the railroad leaders of that time, notably James J. Hill and Edward H. Harriman, believed that if these great systems actually owned large blocks of stock in each other's properties, this common associa- tion would ipso facto end the competition that, if continued, would ultimately ruin them all. The Supreme Court had decided that the "pooling" arrangements which had so long prevailed among great competing roads violated the Sherman Anti- Trust Act; and the American public, which now was cultivating a new interest in railroad prob- lems, believed that the "community of interest" plan was merely a scheme to defeat the Inter- state Commerce Act and the Sherman Act and to maintain secretly all the old railroad abuses. These inter-railroad purchases therefore became so unpopular that the Pennsylvania sold its Baltimore and Ohio stock. At this time Edward H. Harri- man of the Union Pacific, who had at his disposal vast funds of the latter property which he had ob- tained by the settlement of the Great Northern CROSSING THE APPALACHIAN RANGE 117 and Northern Pacific deal, decided to acquire con- trol of a system of roads in the East in order to establish a complete transcontinental line in the interest of the Union Pacific. It was the theory that such a purchase by the Union Pacific would not defy the law or outrage the popular conscience because the Union Pacific, unlike the Pennsylvania, did not compete with the Baltimore and Ohio, but was only a western extension of that system. Harriman in August, 1906, therefore purchased nearly all the Pennsylvania holdings in the old Garrett property and thus obtained virtual control. At this same time the Baltimore and Ohio had been developing a "community of interest" plan on its own account. In the year 1903, it acquired a substantial stock interest in the newly reor- ganized Reading Company, which controlled the Philadelphia and Reading Railroad and the Phila- delphia and Reading Coal and Iron Company. It did not obtain a majority interest but, with the Lake Shore and Michigan Southern Railroad of the New York Central system, it now controlled the Reading system. The Reading Company mean- while had secured control of the Central Railroad of New Jersey, over the lines of which the Balti- more and Ohio reached New York City. 118 THE RAILROAD BUILDERS In the following years the Baltimore and Ohio property was still further rounded out by pur- chasing the Cincinnati, Hamilton and Dayton, a small system of doubtful value radiating through the State of Ohio and, by additional extensions, into the soft coal fields of West Virginia. New energy was put into the expansion and improve- ment of the southwestern lines to St. Louis, while the eastern terminal properties were still further improved. The practical control of the Baltimore and Ohio remained in the hands of the Union Pacific inter- ests until 1913. In that year, however, the Union Pacific liquidated its holdings by distributing them to its own individual stockholders in the shape of a special dividend. The Baltimore and Ohio thus became once more an independent property. The story of the Baltimore and Ohio for the past decade has been mainly a record of a grow- ing, well-managed, and efficient business. It is closely identified with the personality of its nota- ble and efficient president, Daniel Willard, a con- spicuous example of the modern type of railroad manager. In the earlier days of railroading, and especially in the long period which came to an end with the death of Harriman, the typical railroad CROSSING THE APPALACHIAN RANGE 119 president was usually a man of great wealth who had secured his position by owning a large financial interest in the property. The country was full of "Wall Street Railroad Generals." But in recent years the efficient railroad head has come more and more to be the practical railroad man who has risen from the ranks, who has no important per- sonal financial interest in the property but who is paid an adequate salary to operate a system in a purely businesslike way. Notable examples of this modern type of railroad president are, be- sides Daniel Willard, Edward P. Ripley of the Atchison, Topeka and Santa Fe, Benjamin F. Bush of the Missouri Pacific, and Fairfax Harrison of the Southern. The efficient management of today is abundantly shown in the recent record of the Baltimore and Ohio. President Willard has been unmolested by financial interests and has been continuously backed up in his policies by the owners of the road. As a result the Baltimore and Ohio of the present decade has reached an enviable position as one of the great Eastern trunk lines, comparing well with other progressive properties like the Pennsylvania, the New York Central, the Southern, the Illinois Central, and the Louisville and Nashville, Mil- 120 THE RAILROAD BUILDERS lions have been poured into the property in the past fifteen years; its main lines have been large- ly rebuilt; its rolling stock is chiefly of the most modern types; and its terminals and structm-es are such as modern conditions demand. CHAPTER VI LINKING THE OCEANS In 1862, when the charter was granted by the United States Government for the construction of a raih-oad from Omaha to the Pacific coast, the only States west of the Mississippi Valley in which any railroad construction of importance existed were Iowa and Missouri. During the three dec- ades which had passed since the first railroad con- struction, the earlier methods of transportation by boat, canal, and stage coach gave place in the Eastern half of the United States to more modern methods of transportation. As a result of these new conditions, the States, cities, and towns were welded together, and population and prosperity increased rapidly in those inland sections which had formerly languished because they had no means of easy and rapid communication. The construction of extensive railways, how- ever, and particularly the consolidation of small, 121 122 THE RAILROAD BUILDERS experimental lines into large systems, dates from the days of the discovery of gold in California. The nation did not begin to realize the extraordi- nary possibilities of the vast Western territory un- til its attention was thus suddenly and definitely concentrated on the Pacific by the annual addition of over fifty million dollars to the circulating me- dium. The wealth drawn so copiously from this Western part of our continent had a stimulating effect on the commerce, manufactures, and trade of the entire Eastern section. People began to understand that with the acquisition of California the nation had obtained practically half a conti- nent, of which the future possibilities were almost unlimited, so far as the development of ndtiu-al resources and the general production of wealth were concerned. The public conviction that a railroad linking the West and the East was an absolute necessity became so pronounced after the gold discoveries of '49 that Congress passed an act in 1853 pro- viding for a survey of several lines from the Mis- sissippi to the Pacific. Though the published re- ports of these surveys threw a flood of light on the interior of the continent, they led to no definite result at the time because the rivalry of sections LINKING THE OCEANS 123 and groups of interests for the selection of this or that route held up all progress. The Act of 1862, which created the Union Pacific Railroad Company, together with the amending Act of 1864, authorized the construction of a main line from an initial point "on the one hundredth meridian of longitude," in the Territory of Ne- braska to the eastern boundary of California, with branch lines to be constructed by other companies and to radiate from this initial point to Sioux City, to Omaha, to St. Joseph, to Leavenworth, and to Kansas City.' Provision was made for a subsidy of $16,000 a mile for the level country east of the Rocky Mountains; $48,000 a mile for the Unes through mountain ranges; and $32,000 a mile for the section between the ranges. The original plan to secure the government subsidies by a first mortgage on the lines was amended so as to allow private capital to take the first mortgage, the Government taking a second hen for its ad- vances. In addition to these subsidies the several companies were to receive land grants of 12,800 acres to the mile in alternate sections contiguous to their lines. Upon the same terms the Central ' These ambitious designs were never fully realized. The main line ran eventually Tvest from Omaha, meeting the Sioux City branch at 124 THE RAILROAD BUILDERS Pacific, a company incorporated under the laws of California, was authorized to construct a line from the Pacific coast, at or near San Francisco, to meet the Union Pacific Railroad. The public was quick to realize the significance of this huge enterprise, for the papers of the day were full of such comments as the following : It is useless to enlarge upon the value and importance of this great work. It concerns, not the United States alone, but all mankind. Its line is coincident with the natural and convenient route of commerce for the world. . . . Over it the trip will be made from London to Hong Kong in forty days, over a route possessing every comfort and attraction, which takes a continent in its course, and which, from the variety and magnitude of its sources, from the race which now dominates it, and from the extent of their numbers, wealth and produc- tions, must soon give law to the commercial world. Notwithstanding these and similarly optimistic sentiments, the meager financial support given to the enterprise by the public at large had been very discouraging. Although the construction had been liberally subsidized by the Government, gross ex- travagance had promptly crept in; juggling of accounts for the purpose of securing profits on the Fremont. The only other branch which was constructed to connect with the Union Pacific was that from Kansas City and it ran first to Denver. LINKING THE OCEANS 125 government advances was freely indulged in, and after only a small section of the line had been com- pleted it was announced that more capital must be forthcoming or the work would cease. Out of this situation grew the plan for subletting the work to a construction company known as the Penn- sylvania Fiscal Agency — a name which was after- wards changed to that of the Credit Mobilier of America. The story of the Credit Mobilier, with its irregularities involving conspicuous politicians, is one of the most disgraceful in American history. The detailed history of these operations need not be considered here; it is sufficient to say that finally, in spite of political scandals, the Union Pa- cific lines were brought to completion. Within two years after the letting of the contracts to this new company, in 1866, over five hundred miles of road were completed and in operation. An advertise- ment published late in 1868 announced that "five hundred and forty miles of the Union Pacific Rail- road, running west from Omaha across the con- tinent, are now completed, the track being laid and trains running within ten miles of the Rocky Mountains. . . . The prospect that the whole grand line to the Pacific will be completed by 1870 was never better." 126 THE RAILROAD BUILDERS As a matter of fact, the line through to the coast was finished earlier than had been predicted. One fact which increased the rapidity of construction was the growing financial difficulty of the com- pany. It was absolutely imperative that the through line be completed in order that the result- ing business might make the operation of trains pay. But aside from this, another influence was at work to encourage rapid construction. The Act of 1862 provided that the Central Pacific might also build across Nevada to meet the Union Pacific, on condition that it completed its own allotted sec- tion first. As the Central Pacific also was receiving a heavy government subsidy per mile, and as there was great profit in construction undertaken with this government subsidy, there was naturally a strong incentive for both companies to build all the mileage possible and as rapidly as possible. The Central Pacific enterprise was backed by a group of men who were awake to the possibili- ties of the situation and who had made large for- tunes in the gold-mining boom of previous years, such as Leland Stanford, CoUis P. Huntington, Mark Hopkins, and the Crockers. The rivalry between them and the Union Pacific interests woke the whole continent and formed a chapter in LINKING THE OCEANS 127 American railroad history as startling and romantic as anything in the stories of the Vanderbilts and Goulds with their financial gymnastics. As the contest proceeded, public interest in- creased and the entire country watched to see which company would win the big government sub- sidies through the mountains. Through the win- ter of 1868 the work continued on the Union Pacific with unabated energy, and freezing weather caught the builders at the base of the Wasatch Mountains; but blizzards could not stop them. The workmen laid tracks across the Wasatch on a bed of snow and ice, and one of the track-laying trains slid bodily, track and all, off the ice into a stream. The two companies had over twenty thousand men at work that winter. Suddenly the Central Pacific sur- prised the Eastern builders by filing a map and plans for building as far as Echo, some distance east of Ogden. The Union Pacific forces, however, were equal to the occasion. At first, one mile a day had been considered rapid construction, but now, even with the limited daylight of the winter months, they were laying over two miles a day, and they finally crowned their efforts by laying in one day between sunrise and sunset nearly eight miles of track. 128 THE RAILROAD BUILDERS In the meantime the Central Pacific also had stopped at nothing. The company had a dozen tunnels to build but did not wait to finish them. Supplies were hauled over the Sierras, and the work was pushed ahead regardless of expense. On May 10, 1869, the junction was formed, the op- posing track layers meeting at Promontory Point, five miles west of Ogden, Utah. Spikes of gold and silver were driven into the joining tracks, and the through line from the Missouri River to the Pa- cific Ocean had been completed; the first engine from the Pacific coast faced the first engine from the Atlantic. The whole country, from President Grant in the White House to the newsboy who sold extras, celebrated this achievement. Chicago held a parade several miles long; in New York City the chimes of Trinity were rung; and in Phila- delphia the old Liberty Bell in Independence Hall was tolled again. The cost of the Union Pacific Railroad from Omaha to its junction with the Central Pacific formed a subject of controversy for a generation. The saving of six months of the allotted time for completing the road no doubt increased its cost to the builders, for at times they borrowed money in the East at rates as high as 18 and 19 per cent. LINKING THE OCEANS 129 Besides, in pushing the line far beyond the bounds of civilization without waiting for the slower pace of the settler and the security which his protec- tion afforded, it often became necessary for half the total number of workmen to stand guard and thus reduce the working capacity of the construc- tion force. Even so, hundreds were killed by the Indians. Governmental restrictions of various kinds also increased the cost of the road. For example, the stipulation that only American iron should be used increased the cost by at least ten dollars for every ton of rail laid. The requirement that a cut should be made through each rise in the Laramie plains, thus giving the track a dead level instead of conforming to the natural roll of the country, ultimately resulted in a waste of from five to ten million dollars. Extraordinary costs such as these, combined with the extravagant meth- ods of construction and financing, brought the total cost of the property up to what was in those days a fabulous sum of money. The records in- dicate that the profits which accrued through the Credit Mobilier and in other ways in the construc- tion up to the time of the opening in 1869 exceeded fifty millions of dollars. While the Union Pacific was being built, from 130 THE RAILROAD BUILDERS 1862 to 1869, other railroads were not idle, and many were rapidly reaching out into the Central West. Not only had the Chicago and North West- ern reached Omaha and made connection with the Union Pacific, but the Kansas Pacific had pene- trated as far west as Denver and had joined the Union Pacific at Cheyenne. The close relationship between railroad expan- sion and the general development and prosperity of the country is nowhere brought more distinctly into relief than in connection with the construc- tion of the Pacific railroads. With the opening of a transcontinental line the vast El Dorado of the West was laid practically at the doorstep of Eastern capital. Not only did American pio- neers turn definitely toward the West, but foreign emigrants bent their steps in vast numbers in that direction, and capital in steadily increasing amounts made its way there. Towns sprang up everywhere and soon developed into busy centers of trade and commerce. Caravan trains, which a few years before had followed a single west- ward line, now started from points along the rail- road artery and penetrated far to the north and south. The settlers knew that the time was not far distant when all the vast territory west of the LINKING THE OCEANS 131 Missouri, from the Canadian border to the Rio Grande, would be reached by the rapid spread of the railroad. In the sixties and seventies there sprang up and rapidly developed in size and im- portance such centers as Kansas City, Sioux City, Denver, Salt Lake City, Cheyenne, Atchison, Topeka, Helena, Portland, Seattle, Duluth, St. Paul, Minneapolis, and scores of smaller places. The entire Pacific slope was soon dotted with towns and cities, and even the great arid plains of the West — as well as the "Great American Desert" covering Utah, Arizona, New Mexico, and parts of Nevada — began to take on signs of life which had not been dreamed of a decade before. But the development of this great section of the country during the next few years was even more notable. By 1880 four dijBPerent lines of rail- road were running through to the Pacific States, and a fifth, the Denver and Rio Grande, had penetrated through the mountains of Colorado and across Utah to the Great Salt Lake. These were the years when the modern industrial era was really beginning. Man's viewpoint was changing, and instead of remaining content with the mate- rial achievements of the Atlantic and Central sec- tions of the continent, he began to realize that the 1S2 THE RAILROAD BUILDERS vast Western regions and the thousand miles of Pa- cific coast line were destined to be America's inexhaustible patrimony for the years to come. In 1880 the Union Pacific began its expansion to the eastward and acquired control of the Kan- sas Pacific, which had come upon evil days, and of the Denver Pacific, a most important connecting link. In January, 1880, these two companies were absorbed by the Union Pacific, which thus obtained a continuous line from St. Louis westward. In the meantime the Central Pacific, operating from Ogden west to the coast, had added many branches, while a new company — known as the Southern Pacific Railroad of California — had for some years been constructing a system of lines through- out that State south of the Central Pacific and by 1877 had penetrated to Yuma, Arizona, 727 miles southeast of San Francisco. It had also built lines into Arizona and New Mexico and soon joined the Santa Fe route, which had for some time been working westward. During 1881 the Southern Pacific continued its eastern extensions along the Rio Grande to El Paso, Texas, where it formed a connection with a new road under construction from New Orleans. A junction was also made at EI Paso with the COMPLETION OF THE TRANSCONTINENTAL RAILROAD The locomotives Jupiter, of the Central Pacific, and 119, of the Union Pacific, meeting on May 10, 1869, at Promontory Point, Utah, wiien the last spike was driven. Drawing from a wood engraving published in 1870, reproduced in The History of Travel in America, by Seymour Dunbar. LINKING THE OCEANS 133 Mexican Central, which was under construction to the City of Mexico. The Southern Pacific Railroad was closely allied with the Central Pacific interests headed by CoUis P. Huntington, and in 1884 the great Southern Pacific Company was formed, which acquired stock control of the entire aggregation of railroads in the South and South- west. At the same time the Central Pacific came under direct control of the Southern Pacific through a long lease. During these eventful years, while the South- ern Pacific properties were penetrating eastward through the broad stretches of country to the south of the Union Pacific lines, equally interesting events were occurring in the north. In 1879 a consolidation was formed of the Oregon Steam- ship and Navigation Company with several short railway lines in Oregon and Washington, under the name of the Oregon Railway and Navigation Company. These railroad lines extended east from Portland to the Oregon state line, and north to Spokane, and they finally made connection with the new Northern Pacific. At the same time, another road, known as the Oregon Short Line Railroad, was built from Granger, Wyoming, on the line of the Union Pacific to a junction with 134 THE RAILROAD BUILDERS the Oregon Railway and Navigation Company at Huntington, Oregon, on the Snake River. The Oregon Short Line came under the control of the Union Pacific and was opened for traffic in 1881. Later a close alliance was made with Henry Vil- lard, the controlUng spirit in the Oregon Railway and Navigation Company. Ultimately the entire system of Oregon lines passed under Union Pacific control, to be lost in the receivership of 1893, but later recovered under the Harriman regime. When, after ten more years of expansion, the great Union Pacific property went into the hands of receivers in 1893, it had grown to a system of more than 8000 miles. It completely controlled the Oregon railway and steamship lines, the lines to St. Louis, and also an important extension known as the Union Pacific, Denver and Gulf Railroad, running from a point in Wyoming across Colorado to Fort Worth, Texas. The financial failure of the system was due to a variety of causes. Its management had been extravagant and in- efficient, and construction and expansion had been too rapid. The policy of building expensive branch lines where they were not needed and of obligat- ing the parent company to finance them had been a grievous mistake and had contributed largely to LINKING THE OCEANS 135 the downfall of the company. Further than this, the credit of the Union Pacific was steadily growing weaker because the time was drawing near when its heavy debt to the United States Government would fall due. In all its history of more than twenty years the company had never paid any interest on the government debt nor had it main- tained a sinking fund to meet the principal when due. Consequently, the accruing interest had mounted year by year and, should the Govern- ment enforce payment at maturity in 1897-99, the company would be doomed to bankruptcy. This government debt, including accrued interest, amounted to the sum of $54,000,000. Attention should not, however, be diverted from the fact that during all these years a vast expan- sion of competitive lines had been going on far southward of the Union Pacific. Under the guid- ing genius of CoUis P. Huntington, the Southern Pacific Company in 1884 had consohdated and solidified a gigantic system of railways extending from New Orleans to the Pacific and throughout the entire State of CaUfornia to Portland, Oregon, with branch lines radiating through Texas and making close connection with roads entering St. Louis. In addition to these railroads, Huntington 136 THE RAILROAD BUILDERS acquired control of a steamship line operating from New York to New Orleans and Galveston, and subsequently of the Pacific Mail Steamship Com- pany, operating along the coast from Oregon south to the Isthmus of Panama and across the Pacific Ocean. The ever-growing eflFects of this power- ful and well-managed competitor — combined with the large development of the Santa Fe system during these years, the competition of the com- pleted Northern Pacific, and the possibihties of the new Great Northern Railway or Hill line, now completing its main artery to the Pacific — were far-reaching enough in themselves to bring the Union Pacific upon evil days. Consequently few were surprised when, under the great pressure of the panic of 1893, the property was forced to confess insolvency. The Union Pacific had simply repeated the story of most American railroads; it had been constructed in advance of population and had to pay the penalty. Yet it had more than justified the hopes of the daring spirits who pro- jected it. It may have made individuals bank- rupt, but it magnificently fulfilled the part which it was expected to play. It had opened up mil- lions of acres to cultivation, given homesteads to millions of people, many of whom were immigrants LINKING THE OCEANS 137 from Europe, developed mineral lands of incalcu- lable value, created several new great States, and made the American nation a unified whole. Its subsequent history belongs to another chapter of this story — a history that is richer than the first in the matter of financial success but that can never surpass the early pioneering years in real and permanent achievement. CHAPTER VII PENETRATING THE PACIFIC NORTHWEST It is only when one reads such a book as Francis Parkman's Oregon Trail that one fully realizes the vast transformation which has taken place within little more than half a century in the great North- western territory beyond the Mississippi and the Missouri. In that fascinating history we read of the romantic and thrilling experiences of Parkman and his companions in their summer journey across the plains of Nebraska and through the mountain ranges of Wyoming, Montana, and Oregon. We read of their hairbreadth escapes from the Indians; their chase of the buflfalo and other wild animals of the far Western country; of the wearisome weeks that they spent in crossing the deserts where ab- solute loneliness reigned; and finally of their arri- val, after months of hardship, in the vast Oregon country, which with its great natural resources, splendid climate, and large extent has come to be 138 THE PACIFIC NORTHWEST 139 known in these modern days as the Empire of the Northwest. It was to penetrate and bring this great virgin region within reach of the East that the Northern Pacific Railroad Company was chartered by Con- gress in 1864, just prior to the closing of the Civil War. During this same period the Union Pacific route was being surveyed, and the first ground was broken in December, 1863, for the line which was later to coimect Omaha with San Francisco. Like the Union Pacific charter, that of the Northern Pacific also contained an extensive land grant. From the modern viewpoint, such land grants look colossal, but in those days the general opening up and development of the Western coun- try had progressed to so slight an extent that the significance of giving away millions of acres of the public lands to encourage a precarious railroad en- terprise was then no more than the passing over to capitalists today of exclusive rights in extensive tracts of territory in Brazil and the other South American Republics. Even these great opportu- nities to acquire almost an empire of fertile lands or rich forests were not as a rule looked upon as attractive enough to tempt capital into the wil- derness. The old saying that capital is the most 140 THE RAn.ROAD BUILDERS timid thing in the world and does not like pio- neering is strongly emphasized by such instances as this, and no doubt in 1864 the enormous grants of free land made by Congress did not appear especially attractive to the man who had money to invest. Whatever the public attitude may have been, the Act of Congress of July 2, 1864, creating the Northern Pacific Railroad, gave that Company the right to construct a line from some point on Lake Superior, either in Minnesota or in Wiscon- sin, westward and north of latitude 45°, to or near Portland, Oregon. The land grant consisted of forty alternate sections of public land for each mile within the Territories penetrated and twenty al- ternate sections within the States through which the railroad might pass. The hazardous character of this undertaking will be realized when it is remembered that at this time no railroad had yet penetrated the Rocky Mountains; that the entire railroad system of the United States was less than 40,000 miles; and that west of the Mississippi there was no mileage worth mentioning. It was still less than a genera- tion since Parkman and his companions had made their four months' journey from St. Louis to the THE PACIFIC NORTHWEST 141 mouth of the Columbia River, and between the fringe of civilization along the Pacific slope and the region about Chicago and St. Louis lay almost a third of the continent uninhabited, undeveloped, and unknown. The scheme languished for several years until finally, in 1869, the firm of Jay Cooke and Company of Philadelphia undertook to raise the necessary capital. The story of the Northern Pacific for the next few years was closely bound up with that of Jay Cooke, who was one of the most conspicuous char- acters of his time in the financial world. He was a man of commanding personality, great energy, unusual resourcefulness, and with a large personal following. He had built his reputation through his great success in financing United States govern- ment loans during the Civil War. He now un- dertook to raise more than one hundred million dollars to carry through the Northern Pacific en- terprise. He achieved remarkable success for a time and within three years had built over five hundred miles of the main line to the Pacific coast. But the outbreak of the Franco-Prussian War and the consequent financial stringency abroad, the diflBculty of marketing bonds on an uncompleted enterprise, combined with the poor showing made 142 THE RAILROAD BUILDERS by those sections of the line completed and in oper- ation, brought matters to a crisis, and in Septem- ber, 1873, Jay Cooke and Company were obliged to close their doors. The affairs of the railroad were so closely involved with those of the bank- ing firm that, although strenuous efforts were adopted to save the railroad, its revenues were inadequate. As a result, in April, 1874, General Lewis Cass was appointed receiver. The uncompleted property was operated for some years thereafter under the protection of the courts and no plan of reorganization was devised until 1879. During the receivership only a moder- ate amount of additional mileage was constructed, and it was not until many years had passed that the system penetrated the mountains and reached the Pacific coast. But when the new company took possession in 1879, aggressive building was resumed, and for a time it looked as though the project would be promptly finished. However, in 1882, the company still had about one thou- sand miles to construct in order to complete its main artery. At this time financial dijQBculties appeared, and the days of stress were tided over only by the help of a syndicate and the Oregon and Transcontinental Company. THE PACIFIC NORTHWEST 143 With the formation of the Oregon and Trans- continental Company begins the regime of Henry Villard, the dominating factor in Northern Pacific aflFairs for many years afterward. Some years before, Villard, who had long been interested in Western railroad enterprises and who had become prominent through his activities in connection with the Kansas and Pacific Railway, had suc- ceeded in forming the Oregon Railway and Navi- gation Company as a combination of steamboat lines operating on the Willamette and Columbia rivers in Oregon, with an ocean line connecting Portland and San Francisco. A connecting rail- road line, which had been built to Walla Walla in southeastern Washington, penetrated a portion of the territory through which the Northern Pacific was projected. In 1880 a contract was arranged between the two companies whereby the Oregon Railway and Navigation Company, in order to share in the traffic, undertook to construct a line eastward to meet the Northern Pacific line at the mouth of the Snake River. This arrangement would allow the Northern Pacific to run its trains into Portland and would obviate the necessity of constructing its own road into that city. In spite of this arrangement, Villard feared that 144 THE RAILROAD BUILDERS the Northern Pacific Company might decide, after all, to build its own line to Portland as soon as it was able to finance the project. It was for the purpose of preventing this move that he formed the Oregon and Transcontinental Company, a hold- ing corporation which promptly acquired, in the open market and by private purchases, a domi- nating interest in the Northern Pacific Railroad. At the same time Villard placed the control of the Oregon Railroad and Navigation Company in the hands of the new Transcontinental. Villard thus came to control the entire North- ern Pacific system and, backed by the Deutsche Bank of Berlin and other German and Dutch in- terests, at once began an aggressive policy of ex- pansion and development. The business of the sys- tem developed rapidly. The main line through to the Pacific coast was now in operation, and the en- tire system amounted to about 2300 miles of road. But Villard followed a financial policy which was not sound and paid dividends without justification. In a short time the company consequently found itself financially embarrassed. As a result of financial losses in 1884, Villard was obliged to retire from active control of the prop- erties. But in 1887 he once more got possession THE PACIFIC NORTHWEST 145 of the Northern Pacific with German capital and succeeded in arranging a lease of the Oregon Short Line, which had been developed by the Union Pacific interests, embracing a cross-country road from its main lines in Wyoming northward into Oregon and Washington. At the same time the in- terest of the Transcontinental Company in the Oregon Railway and Navigation Company was linked with the Oregon Short Line Company. These transactions, however, stiU left the Trans- continental Company in control of the situation, as it retained its majority ownership of Northern Pacific Railroad stock. For the next few years the Northern Pacific did not follow a policy of rapid expansion. Other trunk lines, such as the Union Pacific, Rock Island, Santa Fe, Burlington, and North Western, were all growing and keeping pace with the rapid settle- ment of the West; but the Northern Pacific in these years simply rested content with its position as a single track transcontinental route having but few branches. Its only important extension was made by acquiring the Wisconsin Central Railroad, which gave the company a line between St. Paul and Chicago and a valuable and important en- trance into the latter city. It was expected that. 146 THE RAILROAD BUILDERS with this accession, the affairs of the company would be permanently established on a sound basis, but the overliberal policy of paying out practically all the surplus in dividends was continued in the face of large increases in fixed charges. Early in 1892 it began to be rumored that the Northern Pacific was not in so easy a financial position as had been assumed. The stockholders took alarm; and the committee which was ap- pointed to investigate the situation discovered a deplorable state of affairs. As a result of the severe criticism of Villard'spolicy, steps were at once taken to oust him from control, but without success un- til June, 1893. Two months later, receivers were appointed who discovered that the company was insolvent and had no funds to pay quickly matur- ing obligations. Receivers were appointed also for most of the branch lines, including the Wiscon- sin Central system. The Oregon Short Line, which was tied through guarantees with the Union Pacific although leased to the Northern Pacific, was involved in the general crash but was later separately reorganized. To rehabilitate the Northern Pacific Railroad effectively was a difiScult problem. Its debt was enormous; its roadbed and rolling stock had been THE PACIFIC NORTHWEST 147 neglected; and, as a result of the recent crash, its valuable feeders on both east and west, the Wis- consin Central and the Oregon properties, were removed from its control. Besides these adverse conditions, competition of a serious nature was looming up. James J. Hill had for many years been quietly developing the Great Northern Rail- way. This great system he had financed in an ex- tremely conservative manner; he had extended it through territory where construction costs were low; and he had secured control of branches and feeders which might have come under the sway of the Northern Pacific had that company been more far sighted. Hill had operated his road from the beginning at very low cost; he had kept its credit high; and even in the period of financial depression he had reported large profits and had paid substan- tial dividends on his stock. With such a competitor in the field, it really looked for a while as though the Northern Pacific could have no future whatever. Finally, in May, 1895, a plan sponsored by Ed- ward D. Adams, representing New York inter- ests and those of the Deutsche Bank of Berlin, proposed a practical merger with the Great North- ern Railroad Company: the old stock and bond- holders were to make all the sacrifices and to supply 148 THE RAILROAD BUILDERS all the new capital, and the Great Northern was then to be presented with half the stock of the new company, in consideration for which it was to guarantee the new Northern Pacific bonds. The situation was somewhat similar to that which ex- isted in New York State as early as 1868 when Com- modore Vanderbilt had achieved his great reputa- tion as a wizard at railroading by acquiring the Harlem and Hudson River railroads and by forc- ing the New York Central lines to terms. James J. Hill had become a modern wizard, and the only hope for the Northern Pacific seemed to be to lay the road at his feet and ask him to do with it what he had done with the Great Northern — make it a "gold mine." This plan, however, met with too much opposi- tion and was abandoned. During the following year a new plan, backed by both the American and the German interests, secured the strong co- operation and endorsement of J. P. Morgan and Company. This was the first instance of Morgan's entry into railroad reorganization in the West. During the previous few years he had been increas- ing his reputation as a reorganizer of Eastern rail- road properties, and by this time he had success- fully organized or was rehabilitating the Erie, the THE PACIFIC NORTHWEST 149 Reading, the Baltimore and Ohio, the Southern, and the Hocking Valley systems. But he had kept clear of the far Western field and had definitely refused to reorganize the Union Pacific on the ground that its territory was too sparsely settled and that there was little hope for its future, es- pecially as its partial control by the United States Government made any reorganization extremely diflScult. The new plan for the Northern Pacific was carried out with no regard to the Hill interests : the old stockholders were heavily assessed; all bondholders were forced to make sacrifices; the Wisconsin Central lines were entirely eliminated and separately reorganized; and the Oregon lines were dissociated from the Northern Pacific and afterwards returned to the control of the new Union Pacific. While the new Northern Pacific as reorganized in 1898 came directly under Morgan's control and was immediately classed as a Morgan property, it did not remain exclusively such for very long. In the promotion and development of the Great Northern system. Hill had hitherto maintained an independent position so far as banking alliances were concerned, but he now began to develop closer relations with the Morgans and became 150 THE RAILROAD BUILDERS heavily interested in the First National Bank of New York, an institution which for many years had been more or less directly identified with the Morgan interests. On more than one occasion thereafter the banking firm of J. P. Morgan and Company acted as financial agent for the Great Northern. Soon after the reorganization of the Northern Pacific, it became known that Hill had acquired an important interest in the property, and as time went on this interest was substantially increased. Within a year or two the Northern Pacific began to be classed as one of the Hill Unes. With a sub- stantial Hill representation on the board of directors and a managerial policy which was clearly inspired by Hill, the company now entered upon a new stage in its career. The outstanding dramatic event in the story of the modern Northern Pacific was the famous cor- ner which occurred in the spring of 1901 as a result of a contest between the Hill and the Harriman interests for the control of the property. The de- tails of this operation, which sent the price of Northern Pacific stock up to $1000 a share and precipitated a stock-market panic, form part of the story of the Harriman fines. The contest resulted THE PACIFIC NORTHWEST 151 in the formation of the Northern Securities Com- pany, a corporation of $400,000,000 capital, devised as a holding company under the joint control of the Hill and Harriman interests, for the purpose of retaining a majority of the stocks of the Northern Pacific and the Great Northern. The Hill interests, jointly with the Morgan con- trol of the Northern Pacific, had been quietly accumulating stock in the Chicago, Burlington and Quincy Railroad, and Harriman felt that there was grave danger to the Union Pacific in this move, as the Burlington had already pene- trated into the Union Pacific territory and might at any time start to build through to the coast its own line parallel to the Union Pacific. Harri- man consequently began to buy up Northern Pacific stock in the open market and thus, together with the efforts of the Hill and Morgan people to retain and strengthen their control, brought about the corner. The Northern Securities Company was designed to harmonize all interests and to keep the control of the Burlington property jointly in the hands of Harriman and Hill. But as the result of a suit under the Sherman Anti-Trust Act, this combination was declared illegal, and in 1904 the company was 152 THE RAILROAD BUILDERS dissolved. The final outcome of the situation was that the Northern Pacific, sharing with the Great Northern the joint control of the Burlington lines, was left indisputably in the hands of the Hill- Morgan group, where it has ever since remained. These three great railroad systems, the Northern Pacific, the Great Northern, and the Chicago, Bur- Ungton and Quincy, constituting nearly twenty thousand miles of railroad, have been known ever since as Hill lines. Since the dramatic days of the Harriman-Hill contest the history of the Northern Pacific system has been simply a striking reflection of the growth in population and wealth of the great Northwest. The States through which it operates have grown with astounding rapidity during the past two dec- ades; small cities have spread into great centers of manufacture and trade; hundreds of smaller towns have sprung up; natural resources of untold value have been developed. In the meanwhile the North- ern Pacific has forged ahead in its earnings and profits, and the stock of the road has come to be known as one of the highest class of investment issues. Although new competition appeared, in both the local and the through business of the company — notably by the extension of the St. Paul system THE PACIFIC NORTHWEST 153 largely through Northern Pacific territory to the Puget Sound region — the superior modern busi- ness management of James J. Hill, backed by the strong resources of the Morgan banking interests, made the Northern Pacific one of the standard railroad systems of America. CHAPTER VIII BUILDING ALONG THE SANTA FE TRAIL The Santa Fe Route, or the Atchison, Topeka and Santa Fe Raikoad, which has in modern times developed into one of the largest and most profit- able railroad systems in this country, was pro- jected long before the idea of a transcontinental line to the Pacific coast had taken full possession of men's minds. As early as 1858 a plan was worked out for the construction of a line of about forty miles within the State of Kansas to connect what were then the obscure and unimportant townships of Atchison and Topeka. At that time not a mile of railroad had been built in Kansas or in any Territory west of that State, except on the Pacific coast, to which there had been an enor- mous immigration occasioned by the wonderful discovery of gold. The outbreak of the Civil War delayed the undertaking of the Atchison-Topeka line, and 154 BUILDING ALONG THE SANTA FE TRAIL 156 nothing more was done until 1863. In that year new interests took control of the enterprise and acquired rights for its extension through south- western Kansas in the direction of Santa Fe, the capital of the Territory of New Mexico. The com- pany, which had originally been the Atchison and Topeka, now changed its name to the Atchison, Topeka and Santa Fe and obtained from the Gov- ernment a very valuable land grant of 6400 acres for every mile constructed, the only condition being that within ten years the line should be completed from Atchison to the western border of Kansas. The plan involved the building of only 470 miles of road, which when finished would assure the company nearly three million acres of land within the State of Kansas. A decade would seem to be ample time for the construction of this comparatively short railroad, particularly with the inducement of so extraordi- nary a land grant. Not only the Union Pacific but the Central Pacific and Kansas Pacific — all built within this decade — had to accomplish far more construction in order to secure their respec- tive grants, and yet they had their complete lines in operation years before the Santa Fe had fifty miles of track in actual commission. The reason 156 THE RAILROAD BUILDERS for this delay was of course a financial one. The other roads had all received government aid in cash or securities in addition to land grants. But the Atchison line was, from the start, thrown on its own resources in raising capital, and it was not until late in 1869 — nearly a year after the opening of the Union Pacific to the coast — that any con- struction work whatever was done. In that year the section from Topeka to Burlingame, consisting of about twenty-eight miles, was opened for traflBc, and a year later the extension to Emporia was finished, thus making a total of sixty-one miles under operation. The terms of the land grant provided that the entire line across Kansas should be completed by June, 1873. When by 1872 only sixty-one miles of track had been built, the company still had over four hundred miles to go within ten months if it expected to obtain the land grant. But so ener- getically did the owners of the property work from that time on that within seven months they had reached the eastern boundary of Colorado and had thus saved the grant. But like most of the Western railroads built in those early days the Santa Fe property was, in a sense, ahead of its time. The rapidity with which BUILDING ALONG THE SANTA Ffi TRAIL 157 it shot across the State of Kansas in 1872 was equaled only by the promptness with which it fell into financial straits. No sooner had its com- plete line been opened for traffic than the panic of 1873 occurred; the company became embar- rassed by a large floating debt; and a compromise had to be made with the bondholders whereby a postponement of a year's interest was arranged. No attempts were made to extend the Santa Fe during the long period of depression following the panic of 1873. The road ended in 1872 at the Colorado state line, and during the next few years the only building of importance was a western spur to connect with the Denver and Rio Grande at Pueblo, thereby giving an outlet to the growing city of Denver and the rapidly developing min- ing regions of Colorado. About 1880, construction was resumed in a leisurely way, down the valley of the Rio Grande into New Mexico and in the direc- tion of Albuquerque. In this extension, as in later building, the line of the old Arizona trail was usu- ally followed. One writer has declared that "the original builders of the Atchison followed the line of the Arizona trail so religiously that if the trail skirted a ten-foot stream for a quarter of a mile to strike a shallow spot for fording, the railroad 158 THE RAILROAD BUILDERS builders did likewise, instead of bridging the stream where they struck it, and where the trail ran up a tree or hid in a hollow rock to avoid the wolves or savages, the railroad did the same!" The traveler of a generation ago over this par- ticular section of the Santa Fe lines might have felt that there was some truth in this criticism; but the Atchison has long since cut out these idio- syncrasies of early construction, and the main line in this section of New Mexico is now noted for alinement and absence of curves and grades. The builders of the Santa Fe lines in the early days no doubt planned ultimately to penetrate to the Pacific coast, knowing that the real op- portunity for the road lay in that direction. The Southwest was yet but sparsely settled; and no railroad which had as its objective the plains or alkali deserts of Arizona or New Mexico could thrive — at least it could not for decades to come. And yet in the early eighties the real objective of the Atchison system had not been determined. Having passed its original objective point, Santa Fe, the road had reached Albuquerque, but it could not afford to stop there. Through traffic it must have or die. New Mexico, with its thin population and its total lack of development, could BUILDING ALONG THE SANTA FE TRAIL 159 not supply traffic in sufficient amount even to "feed the engines." To extend somewhere, then, was an impera- tive necessity. But whither? Several routes were under consideration. The Southern Pacific lines had worked eastward to El Paso on the Mexican border, several hundred miles due south from Albuquerque, and it looked feasible to extend the Atchison to that point and arrange a traffic agree- ment with the Southern Pacific, or to build an ex- tension through New Mexico to Deming and then westward along the river valleys and down into Mexico to Guaymas on the Gulf of California. It was possible, in the third place, to build di- rectly west from Albuquerque through Arizona and Southern California to the coast. Ultimately all of these plans were carried out. The first extension of the Santa Fe was to Dem- ing, New Mexico, where in March, 1881, its tracks met those of the Southern Pacific, and by agree- ment the company secured the use of the South- ern Pacific to Benson, Arizona. From the first this new through route to the Pacific began to pay handsomely. Later on the line into Guaymas, Mexico, was added by the purchase of the Sonora Railway. Soon afterward the Santa Fe secured 160 THE RAILROAD BUILDERS from the St. Louis and San Francisco Railway a half interest in the charter of the Atlantic and Pa- cific, a company which planned to build through to the coast. Meanwhile the St. Louis and San Fran- cisco had been acquired by the Gould and Plunt- ington interests, which, as the owners of the Texas and Pacific and the Southern Pacific systems, naturally opposed the plans of the Santa Fe. The matter was compromised by the agreement of the Santa Fe to build no farther west than the Colo- rado River, where the Santa Fe was to be met by an extension of the Southern Pacific line from Mojave, California. This arrangement proved unprofitable to the Santa Fe, for the Southern Pacific naturally diverted traffic to El Paso and Ogden. A new ar- rangement was accordingly made in 1884, involv- ing the purchase, by the Atlantic and Pacific, of the Southern Pacific division between Needles and Mojave, the obtaining of trackage rights between Mojave and San Francisco, and the use of the Southern Pacific terminals at San Francisco. To assure a connection with the coast in Southern California, the Santa Fe built a line to Colton, acquired the California Southern Railway from Colton to San Diego, and effected an entrance to BUILDING ALONG THE SANTA FE TRAIL 161 Los Angeles by leasing the Southern Pacific tracks from Colton. The Santa Fe had now reached the Pacific coast over its own lines, but it was handicapped by poor connections with the East. Its next move there- fore was eastward to Chicago, where it acquired the Chicago and St. Louis Railroad between Chi- cago and Streator, Illinois, and then constructed lines between the latter point and the Missouri River. During the same year the company opened branches southward to the Gulf of Mexico, un- til by May, 1888, the entire system comprised 7100 miles. This rapid expansion of the property, combined with extravagance in management and a reckless policy in the payment of dividends, brought the company into financial difficulties within a year after the completion of the system. Unprofitable branches had been built, and these had become an immediate burden to the main system. It is the same story that has been told of most of the large railroads of those days. Strenuous eflForts were made to save the property from a receivership, and a committee was appointed in September, 1889, to devise ways and means of reform and reorganization. 162 THE RAILROAD BUILDERS The new management of the Santa Fe was a rational one and substantially reduced the obliga- tions of the road. Had its spirit been maintained, a second failure and reorganization a few years later would not have been necessary. New inter- ests, however, came into the property, and, though it was hoped that they would support a conser- vative policy, the former programme of expan- sion was resumed until in 1890 the St. Louis and San Francisco system was merged with the Santa Fe on a very extravagant basis. Within a year it was clear that the St. Louis and San Francisco would prove more of a liability than an asset. During the same time the less important purchase of the Colorado Midland Railway also turned out to be a poor investment. The next four years were marked by more bad financial management which culminated in the fail- ure of the reorganized company. In 1892 an ex- change of income bonds for fixed interest-bearing bonds so increased the fixed charges of the com- pany that, as a result of the panic of 1893 and its ensuing depression, the great Santa Fe system suddenly found itself in the hands of a receiver. The president, John W. Reinhart, had persistently asserted throughout 1893 that the company was BUILDING ALONG THE SANTA Ffi TRAIL 163 financially sound; but an examination of its books subsequently made in the interest of the secur- ity holders disclosed gross irregularities, dishonest management, and manipulation of the accounts. During the year 1894 the property was operated under the protection of the courts, and early in 1895 a new and comprehensive scheme of reor- ganization was carried out. This latest plan in- volved dropping the St. Louis and San Francisco system, the Colorado Midland, and all other un- profitable branches; it wiped out the floating debt; it supplied millions of new capital; and it enabled the succeeding management at once to build up and improve the property. At the head of the new company was placed Edward P. Ripley — a railroad manager of great executive ability and a practical, broad-minded business man of the modern type, who has ever since remained president of the road. The his- tory of the Santa Fe since 1895 has been closely identified with Ripley's business career, and its record during these two decades has been an en- viable one. Steady progress from year to year in volume of business, in general development of the system, in improvement of its rights of way, ter- minals, and equipment, has characterized its history 164 THE RAILROAD BUILDERS through periods of depression as well as times of prosperity. Its resources have grown to vast totals; its credit equals that of the best of Ameri- can railroads; its stocks and bonds are prime in- vestments; and each year it pours millions of dollars of profits into the hands of its stockholders. CHAPTER IX THE GROWTH OP THE HILL LINES The States which form the northern border of the United States westward from the Great Lakes to the Pacific coast include an area several times larger than France and could contain ten Englands and still have room to spare. The distance from the head of the Great Lakes at Duluth to the Pa- cific coast in the State of Washington is greater than the distance from London to Petrograd or the distance from Paris to Constantinople, and three times the distance from Washington, D. C, to Chicago. Fifty years ago these States, with the single ex- ception of Wisconsin, were practically a wilder- ness in which only the Indian and buffalo gave evidences of life and activity. No railroads pene- trated the forests or the mountain ranges. Far southward some progress in the march of civiliza- tion had been made; the Union Pacific had linked 185 166 THE RAILROAD BUILDERS the West with the East before the eighth decade of the century began, and the Northern Pacific proj- ect was being painfully pushed through the inter- mediate tier of States during the seventies. But the material resources of the Great Northwest had still to be discovered. When the Northern Pacific Railway failed in 1873, the crash involved a little railroad known as the St. Paul and Pacific, running out of St. Paul for a couple of hundred miles westward, with a branch to the north joining the Northern Pacific at Brainerd, Minnesota. The St. Paul and Pacific had been acquired in the interest of the Northern Pacific some years earlier but was now regarded as a property so worthless that its owners would be glad to get rid of it, if only they could find a purchaser rash enough to take it over. During the three years following the panic of 1873 the crops of Minnesota were practically eat- en up by the grasshoppers, and poverty reigned among the farmers. At that time a short, stocky man with long hair, one blind eye, and the reputa- tion of being the greatest talker in town, kept a coal and wood store in St. Paul. His name was James J. Hill. For years he had been a familiar figure, sitting in his old chair in front of his store THE GROWTH OF THE HHX LINES 167 and discoursing on current events. This man was not only an interesting talker; he was a visionary, a dreamer — and one of his dreams was to buy the St. Paid and Pacific Railroad and to transform it into a real railway line. Nearly twenty years had passed since he had drifted in, an eighteen- year-old Scotch-Irish boy from Ontario, and had begun work in a steamship office on the levee at St. Paul. Now, in 1876, he was thirty-eight years old and a town character. And the town felt that it had his measure. He had already triied a vari- ety of occupations, and at this time was agent for Unes of steamboats on the Mississippi and the Red River. Everybody knew him and liked him, but no one took him very seriously. The idea of his controlling the St. Paul and Pacific was even amusing. Now the most promising part of the St. Paul and Pacific when it failed in 1873 was the line from St. Paul to Breckenridge on the Red River. Hill was the Mississippi steamboat agent at one end; at the other, an old Hudson Bay trader, Norman W. Kittson, ran two little old stern-wheel steam- boats from Breckenridge to Winnipeg. A large part of the freight that Hill and Kittson handled was for the Hudson's Bay Company. It came up 168 THE RAILROAD BUILDERS the Mississippi, went across on the St. Paul and Pacific to Breckenridge, and then down the Red River on Kittson's steamboats until it was re- ceived at Fort Garry, Winnipeg, by Donald Alex- ander Smith, then commissioner for the Hudson's Bay Company. Smith, who became afterwards Lord Strathcona and High Commissioner for Canada in England, was a tall, lean, urbane Scotchman with a soft manner and a long red beard. In 1876 he was fifty-six years old, with a life of strange, wild ad- venture behind him. He had gone when little more than a boy to Labrador to take charge of a station of the Hudson's Bay Company. Among the north- ern Indians he stayed for thirteen years. In the sixties he was practically king over all the savage territory of the company along the waters enter- ing Hudson Bay. By the seventies he was a man of means and he had some influence in the new Dominion of Canada. It would be a great advantage to Smith to have a good railroad from St. Paul to Winnipeg as the Red River boats were frozen up in the winter and the service on the St. Paul and Pacific, under the receiver, was impossible. So Smith listened with favor to Hill's project of getting hold of the St. THE GROWTH OF THE HttL LINES 169 Paul and Pacific and making a real railroad out of it. And whenever Smith went to Montreal he talked the matter over with his cousin George Stephen — later Lord Mount Stephen — who was the head of the Bank of Montreal. In 1877 Stephen and Richard B. Angus, the general man- ager of the Bank, went to Chicago on business. While there, they had two weeks' time on their hands, and tossed a penny to decide whether to run down to St. Louis or up to St. Paul. The penny sent them to St. Paul. " I am glad of that," said Stephen; "it will give us a chance to see the prairies and look over that St. Paul and Pacific road that Donald Smith is always talking about." When they arrived in St. Paul, James J. Hill took them over the line to Breckenridge. The country had been scoured by the grasshoppers and looked like the top of an old rusty stove. But Stephen was a broad-minded man, wise enough to know that the pest of grasshoppers could not last forever. He was greatly impressed with the ulti- mate possibilities of the soil and, under the hyp- notic influence of Hill's eloquence, became quite enthusiastic over the scheme for getting hold of the railroad; but, as it would evidently involve millions, he didn't see how it could be done. 170 THE RAILROAD BUILDERS The road had originally been financed by bonds sold largely in Holland, and to do anything at all it was necessary to get in touch with these Dutch bondholders. In 1877 Stephen went over to Am- sterdam and secured an option on the bonds at thirty cents on the dollar — less than the accrued interest which was due and unpaid on them. He then came back to America, conferred with John S. Kennedy at New York, who represented both Dutch and American bondholders, and brought Kennedy into the combination. In the spring of 1878 the St. Paul and Pacific was taken over. People still smiled at Hill and wondered how he had induced a hard-headed bank president like Stephen to put up the money. No- body in St. Paul believed in the future of the road. Even the syndicate's attorneys, when offered a choice between taking $25,000 in cash or $500,000 of the new road's stock for their services, preferred the cash. Had they taken the stock and held it for thirty years, they would have had, in principal and interest, some $30,000,000. To the surprise of everybody, including Hill and his friends, the grasshoppers suddenly disappeared in the early summer of 1877 and never came back. That summer saw the biggest wheat crop that THE GROWTH OF THE HILL LINES 171 had ever been harvested in Minnesota. "Hill's Folly, " as it was afterwards called, with its thirty locomotives and few hundred cars, was feverish with success. Hill worked every possible source to get extra cars and went all the way to New York to buy a lot of discarded passenger coaches from the Harlem Railroad. By the end of the season it was evident to everybody that the St. Paul and Pacific was going to have a career and that "Jim" Hill's dream was coming true. Immediately the fortunate owners began to plan for the future. They had acquired the road at an initial cost of only $280,000 in cash. In the following year they advanced money for the com- pletion of the unfinished section, as necessary to obtain the benefit of a generous grant of land from the State. Then, in 1879, having acquired full possession of the property, and having several millions of dollars in profits, they issued bonds for further developments. This gave them sufficient basis to enlarge their scheme greatly, and in the formation of the St. Paul, Minneapolis and Mani- toba Railroad, they created $15,000,000 of stock, which was divided equitably among Hill, Stephen, Angus, Smith, Kennedy, and Kittson. This stock was all "water," but the railroad prospered so 172 THE RAILROAD BUILDERS extraordinarily in the succeeding few years that by 1882 the stock was worth $140 a share. And in 1883 they issued to themselves $10,000,000 of six per cent bonds for $1,000,000 — a further division of $9,000,000, coming out of nothing but good will, earning power, and future prospects. The decade from 1880 to 1890 witnessed a steady growth of the system formed in 1879 under the name of the St. Paul, Minneapolis and Manitoba. The 600 odd miles which it embraced when Hill and his coterie made their big stock division had grown in 1890 to 2775 miles. It then consisted of a main line reaching from St. Paul and Minneapolis across Minnesota and the northern part of North Dakota, far into Montana, with a second main line from Duluth across Minnesota to a junction with the St. Paul line in North Dakota, besides numerous branches reaching points of importance in both these States. But the development of the Hill properties had by no means reached its limit at this time. Hill's dream had been to construct a through line across the northern tier of States and Territories to the Pacific, and this plan had been constantly in his mind while he was building up the system in Mani- toba. The original line running up into Manitoba THE GROWTH OF THE HH^L LINES 173 and reaching Winnipeg was all very well as a start. It had paid so well that the original group of men had become millionaires almost overnight. But Hill meant to show the public that, after all, the early success was only an incident and merely a stepping-stone to the really great thing. Practical railroad men everywhere ridiculed the idea of a railroad running across the far north- ern country, climbing mountain ranges, travers- ing hundreds of streams and extending for great stretches through absolutely wild and uninhabited regions. Especially did they deem it absurd to attempt such an undertaking without government aid, subsidies, or grants of land, pointing to the experience of such roads as the Union Pacific, Northern Pacific, and Santa Fe. All these had re- ceived financial assistance and large land grants, and yet all had gone through long periods of finan- cial vicissitude before they had become profitable and stable enterprises. But Hill was more farseeing than his critics. In 1889 the name of the company was changed to the Great Northern Railway, and under this title the extension to the coast was rapidly carried for- ward and was opened in the panic year of 1893. When all the other transcontinental lines went into 174 THE RAILROAD BUILDERS bankruptcy, Hill's road not only kept out of the courts but actually earned and paid annual divi- dends of five per cent on its stock. The five years from 1896 to 1901 were years of uninterrupted prosperity for the Great Northern Railroad. Each year its credit rose; each year it grew to be more of a force in the Western railway situation. In these years the control of the property had somewhat changed and a few of the original promoters had died or had withdrawn. But Hill, Lord Strath- cona. Lord Mount Stephen, and John S. Kennedy of the original group, all held their large interests, and Hill in particular had added to his holdings as the years had gone by. The secret of Hill's striking success with his Western extension was the method by which the line was constructed. Hill had a theory that it was far better to go around mountains and avoid grades than to climb them or to bore through them; it was always better to find the route which would make long hauls easy and economical. He thus built his road with the idea of keeping down the operating costs and of showing a larger margin of profit than the others. From the very start the Great Northern was noted for its low ratio of oper- ating expenses and its comparatively long trains THE GROWTH OF THE HH^L LINES 175 and heavy trainloads. It was by this method that it really made its money. By the year 1901 the Great Northern Railway absolutely controlled its own territory. But it was still handicapped by lack of an independent entrance into Chicago, as its eastern lines ter- minated at Duluth and St. Paul. At the west- ern end also, the situation was unsatisfactory. It seemed important for the Great Northern to con- trol a line of its own into Portland, Oregon, be- cause the Northern Pacific Railroad, which, as we have seen, had been reorganized several years before by the Morgan interests, had been rapidly extending its lines in Oregon and Washington. Hill and his associates, therefore, had been quietly buying a substantial interest in the Northern Pa- cific property and thus, in the course of time, had come into closer relations with the Morgan group in New York. Soon afterward, under Hill's influence, the Northern Pacific began the con- struction of further extensions in Oregon and reached into territory that the Harriman inter- ests in the Union Pacific Railroad had regard- ed as their own. This move created much fric- tion between the Harriman and Hill groups, and in order to forestall danger Harriman in turn 176 THE RAILROAD BUILDERS began quietly accumulating an interest in the Northern Pacific property by purchases in the open market. The story of the battle royal between the Hill and Harriman interests will be told in a subsequent chapter. It is not necessary to repeat the history of the famous corner of 1901 nor of the compro- mise eflFected by the formation of the Northern Securities Company. The final result of this con- test was the complete harmonizing of the Western railroad situation, so far as the Hill and the Harri- man interests were concerned. In the succeeding years the Great Northern system penetrated to the heart of Manitoba and constructed lines through British Columbia to Nelson and Vancouver. It built other branches to Spokane, Washington, and Helena and Butte, Montana. Moreover by the discovery of extensive ore deposits on the lines of the company in northern Minnesota and by subse- quent purchases of other mines, the Great North- ern acquired control of about sixty-five thousand acres and hundreds of millions of tons of iron ore. All the properties so controlled were leased on a very profitable basis to the United States Steel Corporation. The Great Northern Railroad it- self did not retain control of the ore lands but. THE GROWTH OF THE HHJ. LINES 177 through a trusteeship, gave a beneficial interest in them to its stockholders in the shape of a special dividend. The profits under this lease promised to be very large in the course of time, but the Steel Corpora- tion had the option to cancel after a five-year period, and in 1912, as the result of a United States Government suit for the dissolution of the Steel Corporation, the lease was canceled. Since that time the trustees of the ore lands have executed other leases, and the Great Northern ore certi- ficates are bringing in a substantial return to their owners. The three Hill lines — the Great Northern, the Northern Pacific, and the Chicago, Burlington and Quincy — have been unusually profitable. The Great Northern and the Northern Pacific have steadily paid liberal dividends to their stockhold- ers on increasing amounts of capital stock; and the Burlington, whose whole stock is owned by these two roads, has also handed over liberal profits year by year, at the same time accumulating an earned surplus of more than one hundred million dollars and spending an almost equal amount of profits on the improvement and maintenance of the prop- erty. The Burlington today controls the Colorado 178 THE RAILROAD BUILDERS Southern, which extends southward from the Burlington lines in Wyoming, passing through Denver, Pueblo, Fort Worth, and other points southward to the Gulfo CHAPTER X THE RAILROAD SYSTEM OF THE SOUTH In the year 1856 a small single- track railroad was opened from Richmond to Danville, Virginia. This enterprise, like many others in ante-bellum days, was carried out largely with funds supplied by the State. As long afterwards as 1867, three- fifths of the stock was owned by the State of Vir- ginia, but soon after this time the State disposed of its investment to a railroad company operating a line in North Carolina from Goldsboro westward to Greensboro, and projected southward to Char- lotte. In modern times, this little road, like the Richmond and Danville, has become an integral part of the Southern Railway system, but in those days it was controlled, curiously enough, by the Pennsylvania Railroad Company. After 1867 the new owners of the Richmond and Danville began aggressively to extend their lines. By leasing the North Carolina Railroad, a small 179 180 THE RAILROAD BUILDERS property forming a link with the Greensboro line, they created a through route from Richmond to Charlotte. By 1874 they had built the road south- ward to Atlanta, Georgia, and had thus formed the first continuous route from Richmond to that city. Because of the extreme disorder and de- pression in the South during the years after the Civil War the line did not prosper and was sold under foreclosure about 1875. But the company was reorganized in 1878 and acquired the Char- lotte, Columbia and Augusta, thus extending its lines into the heart of South Carolina and tapping a rich territory. During these early years the Pennsylvania Railroad interests, which still held control, supplied the funds necessary for making improvements. At the same time that the Richmond and Dan- ville was linking up the commercial centers of the southern Atlantic seaboard, another system — known as the East Tennessee, Virginia and Geor- gia — was being built up in the Appalachian Mountains to the west. This property and its predecessors had to some extent been state-owned enterprises at first, but in 1870 the Pennsylvania Railroad interests acquired control. A holding company called the Southern Railway Securities THE RAILROAD SYSTEM OF THE SOUTH 181 Company was now formed for the purpose of con- trolling all the Pennsylvania Railroad interests south of Washington. Besides the properties mentioned, this Securities Company soon obtained several other Atlantic seaboard properties extend- ing from Richmond to Charleston, and also the Memphis and Charleston Railroad, running from Memphis to Chattanooga. Thus at this early day a considerable railroad system had been welded together in the South, reaching many points of importance and forming direct connection at Washington with the northern properties of the Pennsylvania system. Had this experiment been successful, we would perhaps to- day reckon the great Southern Railway system as part of the Pennsylvania group . But the outcome was disappointing; the roads did not prosper; and soon the poorer sections began to default. The Pennsylvania then disposed of its interests and left the roads to shift for themselves. The East Tennessee was the best of these minor lines, and in 1877 it began to acquire others ex- tending through the South. Soon it had pene- trated the heart of Alabama, reaching what is today known as the Birmingham district. Addi- tional extensions were made to Macon and Rome, 182 THE RAILROAD BUILDERS Georgia, and on the north an alliance was ar- ranged with the Norfolk and Western, while with a view to securing some of the business of the West, a connection was constructed at Kentucky-Ten- nessee state line. Such was the condition of the East Tennessee property by the end of 1881. In the meantime the Richmond and Danville had practically stood still. About this time a definite revival set in through- out the South as the long-drawn-out period of depression following the war came to an end. Railroad activity revived, and both the East Ten- nessee, Virginia and Georgia and the Richmond and Danville roads passed into the hands of new and more aggressive interests. The new owners constructed the Georgia Pacific, which ultimately stretched across Alabama and Mississippi. To finance this enterprise and to consolidate their in- terests, a new holding company ^ the Richmond and West Point Terminal Railway and Warehouse Company — was formed in 1881 with large powers and authority to acquire the stocks and bonds of railroad properties in many Southern States. In addition to the properties already named, the Virginia Midland Railway was now acquired, and by 1883 the entire system had been merged under THE RAILROAD SYSTEM OF THE SOUTH 183 this organization. The company also secured the control of a line of steamboats running from West Point, Virginia, to Baltimore, and made close traflfic arrangements with the Clyde line of steamers running between New York and Philadelphia and all important Southern points. The personality at the head of the Richmond and West Point Terminal Railway and Warehouse Company was Calvin S. Brice, a man who had become increasingly prominent in railway affairs in the Southern States. Brice was something of a genius at combination and by 1883 had linked to- gether and solidified the various properties in a very efficient manner. Nevertheless the competi- tive conditions of the time, combined with the necessarily more or less crude and hazardous methods adopted in financing and capitalizing the enterprise, prevented the credit of the orga'niza- tion from reaching a sound and secure level. The Tennessee properties especially proved an encum- brance, and they were almost immediately threat- ened with bankruptcy. Brice therefore decided to reorganize these subsidiary lines, and a new com- pany called the East Tennessee, Virginia and Geor- gia Railway took over this section of the system in 1886. 184 THE RAILROAD BUILDERS In the meanwhile the Richmond and Danville properties, which were themselves becoming bur- dened with an ever growing debt, gave the Brice interests constant trouble. A large amount of the stock of the Richmond and Danville, as well as most of its bond issues, remained still outstanding in the hands of the public. Consequently the only way in which Brice and his friends could save the Richmond and Danville property from completely breaking up was to merge it more closely with the holding company in some way. But the credit and standing of the holding company itself were anything but high, for in addition to paying no dividends it had piled up a heavy floating debt of its own and had a poor reputation in Wall Street. The situation thus becoming acute, the manage- ment carried through a remarkable stock-juggling plan. Instead of merging the Richmond and Dan- ville directly into the West Point Terminal Com- pany, the directors secretly decided to turn the Terminal Company assets over to the Richmond and Danville without apprising the stockholders of the Terminal Company. In conformity with this plan, early in 1886 the Richmond and Dan- ville leased the Virginia Midland, the Western North Carolina, and the Charlotte, Columbia and THE RAILROAD SYSTEM OF THE SOUTH 185 Augusta railroads, and later in the year the Colum- bia and Greenville and certain other small lines. At about the same time the Richmond and Dan- ville obtained in some unknown way large amounts of the Terminal Company stock, a portion of which it now issued in exchange for stocks and bonds of certain of these subsidiary companies which it had leased. Having carried through these transfers, the Richmond and Danville then threw the re- mainder of its Terminal Company stock on the market, where it was bought by investors who knew nothing about these secret transactions. The Terminal Company was now left high and dry so far as the Richmond and Danville was con- cerned. But at this juncture a surprising thing happened. The management of the Terminal Company, in its turn, began to buy shares of Rich- mond and Danville stock and in a short time re- gained its former control. This shifting of power exactly reversed the situation which had previ- ously existed, when the Terminal Company itself had been controlled by the Danville Company. These changes were followed by a further move on the part of the Brice and Thomas interests, which now formed a syndicate and turned over to the Terminal Company a majority of the stock 186 THE KAILROAD BUILDERS of the East Tennessee Company for $4,000,000 in cash and a large amount of new Terminal Company stock. When these transactions had been accompHshed, the Terminal Company found itself once more securely in control of the entire system, and the Brice and Thomas interests had incidentally very considerably increased their fortunes and also their hold on the general situation. From this time, the Terminal Company went aggressively for- ward in an ambitious plan for further expansion. By acquiring control of the Central Railroad and Banking Company of Georgia, the Terminal man- agement was involved with new financial interests which immediately sought to control the system and to eliminate the Brice and Thomas group. The consequent internal contest was adjusted, however, in May, 1888, by electing as president John H. Inman, a man who had been identified with the Central Railroad of Georgia system. The Richmond Terminal system now put in motion further plans for expansion. In 1890 it acquired a system of lines extending south from Cincinnati to Vicksburg and Shreveport, known as the Queen and Crescent route, and in the mean- time made a close alliance with the Atlantic Coast THE RAILROAD SYSTEM OF THE SOUTH 187 Line system. By the end of 1891 the Richmond Terminal system embraced over 8500 miles of railroad, while the Louisville and Nashville, the next largest system in the Southern States, had only about 2400 miles. But as 1891 opened, the vast Richmond Termi- nal system was perilously near financial collapse. Notwithstanding the great value of many of the lines, its physical condition was poor; the liabili- ties and capitalization were enormous; and much of the mileage was distinctly unprofitable. About this time many disquieting facts began to leak out: during the previous year the Richmond and Danville had been operated at a large loss, and this fact had been concealed by deceptive entries on the books; the dividends paid on the Central Railroad of Georgia stock had not been earned for some years; and the East Tennessee properties were hardly paying their way. Various investigating committees were now ap- pointed, and finally a committee headed by Fred- eric P. Olcott of New York took charge and worked out a complete plan of reorganization. The scheme, however, met with strenuous opposition, and thus matters dragged on into the panic pe- riod of 1893, when the entire system went into 188 THE RAILROAD BUILDERS bankruptcy and into the hands of receivers. The various sections were operated separately or jointly by receivers during this unsettled period, and it looked for some time as though an effective reor- ganization which would prevent the properties from entirely disintegrating could not be successfully accomplished. In the dark days of 1893, after Olcott and the Central Trust Company had failed to effect a re- organization of the Richmond Terminal system, a new interest came to the rescue, represented by the firm of J. P. Morgan and Company, whose growing reputation was due to the unusual per- sonality of J. P. Morgan himself. He was essen- tially an organizer. The railroad properties which had become more or less identified with the Mor- gan interests had for the most part prospered. It was felt that Morgan's banking-house was the only one in Wall Street which might be equal to the task. The proposal was made to him; he did not invite it. In fact, it is said that for some time he was much opposed to taking hold of this disintegrated and broken-down system of railroads operating largely in poor and unprogressive sec- tions, populated for the most part by negroes. Said Morgan, "Niggers are lazy, ignorant, and THE RAILROAD SYSTEM OF THE SOUTH 189 unprogressive; railroad traflSc is created only by industrious, intelligent, and ambitious people." After months of discussion, however, Morgan finally agreed to undertake the task, and out of the previous chaos there emerged the Southern Railway Company, which has been closely iden- tified with Morgan's name ever since. Probably of the many railroad systems which Morgan reorganized from 1894 down to the time of his death, no system has become more distinctly a Morgan property than the Southern Railway Company. The plan of reorganization whereby this great aggregation of loosely controlled and poorly man- aged Southern railroads was welded together in- to an efllcient whole was a very drastic one in its effect on the old security holders. Debts were slashed down everywhere, assessments were levied, and old worthless stock issues were wiped out. Valueless sections of mileage were lopped off, and an effort was immediately made to strengthen those of real or promising value. Millions of dol- lars of new capital were spent in rebuilding the main lines; terminals of adequate scope were con- structed in all centers of population ; and alliances were made with connecting links with a view to 190 THE RAILROAD BUILDERS building up through traffic from the North and the West. The first ten years of the Southern Railway sys- tem under the Morgan control were practically years of rebuilding and construction. While after ten years of work the main system still radiated through most of the territory already occupied in a crude way in 1894, yet it had acquired a large number of feeders and smaller railroads in other sections. The Mobile and Ohio, operating with its branches about one thousand miles from Mobile to St. Louis, Missouri; the Georgia Southern and Florida, furnishing an important connection from the main system to various points in the State of Florida; the Alabama Great Southern, operating in and near the Birmingham district of Alabama — all these properties were molded into the system during these years. The system was then rounded out toward the North and consolidated through joint control, with the Louisville and Nashville, of the Chicago, Indianapolis and Louisville Rail- road, which operated lines northward into Ohio and Illinois and on to Chicago. Thus, with the lines of the Queen and Crescent route running southward from Cincinnati to New Orleans, the system secured a direct through line from THE RAILROAD SYSTEM OF THE SOUTH 191 its various southern points to the shores of the Great Lakes. In addition to these developments, the manage- ment of the Southern Railway system arranged direct connection with Washington through the joint acquisition with other lines of the Richmond, Fredericksburg and Potomac; it made traflBc ar- rangements with the Pennsylvania and the Balti- more and Ohio systems to Baltimore, Philadel- phia, and New York; and it also developed close alliances with the coastwise steamships plying northward from various Southern points. In the reorganization of 1894 the Central of Georgia Railway system was cut oflF and separately reorganized, although it remained under the con- trol of Morgan for a number of years. Finally in 1907 Morgan sold his Georgia properties to Charles W. Morse. They subsequently passed to Edward H. Harriman, who afterwards merged them into the Illinois Central system, under which control they have since remained. As compared with the old Richmond Ter- minal aggregation with its broken-down rails and roadbed, poor equipment, and miserable service, the modern Southern Railway system shows star- tling changes. The Southern States have grown 192 THE RAILROAD BUILDERS enormously in population and wealth during the last generation; the industrial activities of the South at the present time are elements of large im- portance to the country as a whole. Cities have vastly increased in population; new towns and manufacturing districts have been built up; and at the present there is scarcely a mile of unprofit- able railroad in the entire 9000 miles under opera- tion. In recent years large soft coal deposits have been discovered and developed on many of the branch lines, and today the coal tonnage of the Southern Railway is exceeding the relatively un- stable lumber tonnage of two or three decades ago. CHAPTER XI THE LIFE WORK OF EDWARD H. HARRIMAN In a previous chapter there has been related the early history of the great line that first joined the Atlantic and the Pacific Oceans — the Union Pa- cific. But the history of this property in recent years is almost as startling and romantic as its story in the sixties and seventies. It was not until recent days that the golden dreams entertained by these early builders came true. The man who really reaped the harvest and who at the same time gave the Union Pacific that position among American railroads which its founders foresaw was the last, and some writers think, the greatest of all American railroad leaders. The Union Pacific, a bankrupt railroad in 1893, lay quiescent under the stress of the hard times that lasted until 1898. The long story of its trib- ulations hardly made it a tempting morsel for the men who were then most active in the railroad field. 13 193 194 THE RAILROAD BUILDERS In 1895 or 1896 the several protective committees which had been appointed to look after the inter- ests of stockholders and defaulted bondholders had tried to induce J. P. Morgan to undertake the reorganization, but he had refused. To reor- ganize the Union Pacific meant that not far from one hundred millions of new capital would sooner or later have to be supplied, and there was no other banking-house in America at that time which seemed strong enough for the task. Smaller con- cerns were all involved in the Morgan syndicates or in other undertakings, and a combination of these at the moment seemed out of the question. About this time the German-Jewish banking- house of Kuhn, Loeb and Company began looking into the situation. Kuhn, Loeb and Company were known as a very conservative but very rich con- cern with close connections in Frankfort and Ber- lin. Though it had been long established in New York it had not been identified with the railroad reorganization movement nor had it been promi- nent as an investing or underwriting institution. But now the active partner of the business, Jacob H. Schiff, set out seriously to persuade the vari- ous committees to adopt a plan of reorganization which he had devised. Though he made some LIFE WORK OF EDWARD H. HARRIMAN 195 progress, he soon found much secret opposition and thought that Morgan might be quietly attempting to secure the property . Morgan, however, was not interested. The mystery was still unsolved. The fact was that Edward H. Harriman, who for some years past had been a powerful influence in the affairs of the Illinois Central Railroad but who was unknown to the average Wall Street promoter and totally unheard of throughout the country, had made up his mind to reorganize the Union Pacific Railroad. He therefore began to work quietly with various interests in an attempt to tie up the property. But soon he, like Schiff, encountered serious opposition. He also imme- diately jumped to the conclusion that Morgan was secretly at work, and he called on Morgan for the facts. Morgan replied, as he had replied to Schiff, that he was not interested, but that he wished Harriman success. As Schiff continued to meet with diflBculty, he soon called on Morgan again. Again Morgan replied that he was not interested. "But," he said, "I think if you will go and see a chap named E. H. Harriman you may find out something." Who was Harriman? Schiff had hardly heard of him and had never met him. How could a small 196 THE RAILROAD BUILDERS man like Harriman, with no money, no powerful friends, no big financial backing, reorganize a great system like the Union Pacific Railroad? The idea seemed ridiculous. Nevertheless, as the opposi- tion continued, SchiflF soon got in touch with Harri- man. In the course of a conference, he warned this daring interloper to keep his hands off the Union Pacific. But Harriman was not moved by threats. On the contrary, he insisted that SchifiF should leave the Union Pacific alone ; that he himself had al- ready worked out his plans to reorganize it. Schiff laughed at this idea, termed it chimerical, and as- serted that Kuhn, Loeb and Company were easily able to obtain the needed one hundred millions or more through their foreign connections on a basis of from four to five per cent, and that in America no such sum of new capital could at that time be raised through banking activities at better than six or seven per cent. Harriman then sprang his surprise on SchifF. For some years he had been financially inter- ested in the affairs of the Illinois Central. This property had at that time higher credit than any other American railroad; it had raised large sums of capital in Europe on as low a basis as three per cent, and on most of its bonds paid only LIFE WORK OF EDWARD H. HARRIMAN 197 three and one-half per cent interest. For nearly fifty years the property had been paying dividends with hardly an interruption, and altogether it had an enviable reputation as one of the soundest investments. Harriman's influence in the affairs of the conapany had been increasing quietly for years; the management had been left almost com- pletely in his hands; and the directors were in effect largely his puppets, and a majority would do his bidding in almost anything he might propose. Harriman now announced to Schiff that he in- tended to have the Union Pacific reorganized as an appendage of the Illinois Central. The necessary one hundred millions would be raised by a first mortgage on the entire Union Pacific lines at three per cent, and the mortgage would be guaranteed by the Illinois Central, while the latter company would receive a majority of the new Union Pacific stock in consideration for giving its guarantee. Here was a poser for Schiff, who saw at once that if Harriman could use the Illinois Central credit in this way, he certainly could carry out his plan. Schiff soon found that Harriman would have no difficulty in using Illinois Central credit. The upshot of the matter was that the two men got together and jointly reorganized the Union 198 THE RAILROAD BUILDERS Pacific. Harriman was made chairman of the Board of Directors, and Kuhn, Loeb and Com- pany became the permanent bankers for the new railroad system. Thus with one bound Harriman had leaped to the forefront in American railroad finance and by a bold act which was characteristic of the man. For Edward H. Harriman was not only a hard- headed, practical business builder who like Morgan thought in big figures, but he was also a bold plunger, which Morgan was not. Possessing a viv- id imagination, he not only saw far into the future but he also planned far into that same future. Morgan was also a man of vision, but his vision did not carry him far beyond the present. The things Morgan saw best were those immediately before him, while the things that Harriman saw best were at a distance. Morgan's big plans of procedure were based on what he saw in a business way in the near future; he reorganized his railroads with the idea of making them pay their way as soon as possible and of showing a good return on the capital invested. He thought little of what might be the outcome a decade or two hence or of what combinations might later be worked on the chessboard as a result of his immediate moves. LIFE WORK OF EDWARD H. HARRIMAN 199 Morgan's mind was not philosophical; it was intensely practical. While Morgan declined the proffered control of the Union Pacific on the theory that it was only a "streak of rust" running through a sparsely settled country and across an arid desert, Harri- man dreamed of the great undeveloped West fill- ing up with people during the following genera- tion, of the empty plains being everywhere put under cultivation, and of the arid desert respond- ing to the effects of irrigation on a large and comprehensive scale. He foresaw the wonderful future of the Pacific States — the opening up of natural resources in the mountains, the steady stream of men and women who would ultimately emigrate to this vast section from the East and from foreign lands and who would build up towns and great cities. At the same time, with that practical mind of his, Harriman calculated that the Union Pacific Railroad — situated in the heart of this huge area, having the most direct and shortest line to the Pacific, and with all traffic from the East converging over half a dozen feed- er lines to Omaha and Kansas City — would haul enormous amounts of tonnage just as soon as the Western country revived from the depression 200 THE RAILROAD BUILDERS under which it had been struggling for half a dozen years. When Harriman took hold of the Union Pacific he had already determined to absorb the Oregon lines, with their tributaries running up into the Puget Sound country and to the Butte mining district; to get hold of the Southern Pacific prop- erties at the earliest possible moment; and to link the Illinois Central in some way to the Union Paci- fic so that the latter would have its own independ- ent outlets to Chicago and St. Louis. All these plans he ultimately accomplished, as well as many others, some of which his farseeing imagination may have conceived then. While Harriman was able very promptly to carry through his first scheme and recapture the Oregon lines, which had been separately reorgan- ized as a result of the receivership, he found it a far more difficult matter to secure a dominating interest in the great system of railroads controlled by Collis P. Huntington. Himtington was a hard man to deal with. Himself one of the practical railroad magnates of his time, he also had the gift of vision and undoubtedly foresaw that the ulti- mate result must be a consolidation of the prop- erties; but he fully expected that his company LIFE WORK OF EDWARD H. HARRIMAN 201 would absorb the Union Pacific. Had it not been that during the panic period the Southern Pacific had heavy loads of its own to carry and that its credit was none too high, Huntington might then have attempted to gain control of the Union Pacific. Events finally worked to the benefit of Harri- man. When Collis P. Huntington died in 1900, it was in most people's minds only a question of time as to when the powerful Harriman interests would take over the Southern Pacific properties. Consequently there was no surprise when in 1901 announcement was made that the Union Pacific had purchased the holdings of the Huntington estate in the Southern Pacific Company and was therefore in virtual control. By a master stroke the railroad situation in the West had been radically changed. The Hunting- ton system comprehended many properties of large and growing value, which were now feeling the full benefit of the agricultural prosperity at that time spreading throughout the great Southwest. Aside from this prize, the Union Pacific acquired the main line to the Pacific coast which it had always coveted and thus added to its system over nine thousand miles of railroad and over four thousand miles of water lines, besides obtaining a grip on the 202 THE RAILROAD BUILDERS railroad empire of this entire portion of the con- tinent not to be readily loosened by competitors. At the same time that Harriman was strengthen- ing his position on the west and south, the Great Northern and Northern Pacific properties, both now operated under the definite control of James J. Hill, were following a policy of expansion fully as gigantic as that of the Union Pacific. The Great Northern lines operating from Duluth to the Pacific coast had become powerful elements in the Western railroad situation, and Hill had de- vised many plans for diverting to the north the through traflSc coming from the central section of the continent. He had established on the Great Lakes a line of steamships running from Duluth to BuflFalo, and was also operating on the Pacific Ocean steamship lines which gave him a connection with Japan, China, and other oriental countries. After the reorganization of the Northern Pacific Railroad, which fell under the domination of Mor- gan, the affiliations of the Hill and Morgan inter- ests became very close, and in a short time Hill had as secure a grip on the Northern Pacific as he had always had on the Great Northern. This powerful combination looked like a menace to the Harri- man-Kuhn-Loeb interests which controlled the LIFE WOKK OF EDWARD H. HARRIMAN 203 territory to the south and radiated throughout the Stpte of Oregon. When, therefore, the Northern Pacific began a Httle later to build into territory in Oregon and Washington which the Union Pacific regarded as a part of its own preserves, much bad feeling was engendered between the two interests. Matters were brought to a climax in the spring of 1901 when the Harriman people suddenly made the discovery that the Hill-Morgan combination had been quietly buying control of the valuable Chicago, Burlington and Quincy Railroad, which operated a vast system west and northwest of Chicago, penetrated as far into the Union Pacific main-line territory as Denver, and connected at the north with the eastern terminals of both the Great Northern and Northern Pacific systems. This move meant but one thing to Harriman : the Hill-Morgan interests were trying to surround the Union Pacific and make it powerless, just as the Southern Pacific had attempted to do many years before. Harriman now played one of his bold strokes. He immediately began to purchase Northern Pa- cific stock in the open market in order to secure control of that property. It was well known that while the Hill-Morgan alliance dominated the 204 THE RAILROAD BUILDERS Northern Pacific, it did not actually own a major- ity of the stock, and to secure this majority was Harriman's purpose. This move would eflFectu- ally check the invasion of the Union Pacific terri- tory by giving the Hamman interests a voice in the control of the Chicago, Buriington and Quincy. The price of Northern Pacific common stock soared day after day until on May 9, 1901, it sold at $1000 a share, and a momentary panic ensued. At the time Morgan was on the ocean and could not be reached. His partners were ap- parently not equal to the emergency. But Ham- man was. When the panic reached its height, both interests had purchased far more than a majority of Northern Pacific stock — in contracts for future delivery. It was seen that to insist on the delivery of shares which did not exist would not only bank- rupt every " short " speculator, large and small, but would undoubtedly bring all Wall Street tum- bling down like a house of cards. So, in the midst of the excitement, the two interests reached a compromise. The outcome was the formation of the Northern Securities Company with a capital of $400,000,000, neariy all of which was issued to acquire the capi- tal stocks of the Northern Pacific and Great LIFE WORK OF EDWARD H. HARRIMAN 205 Northern railroads. All the properties, including the Burlington, thus came under the joint control of the Harriman and Hill groups. The division of territory on both the east and the west was worked out amicably: the Northern Pacific aban- doned some of its plans for extensions in Oregon, and the Burlington system remained as it was, with the understanding that no extensions should be built to the Pacific coast. Later the Burlington acquired control of a cross-country system, the Colorado Southern, extending south to the Gulf, but to this day has made no attempt to build beyond the lines it owned to Wyoming in 1901. As is well known, the Northern Securities Com- pany was subsequently declared to exist in viola- tion of the Sherman Anti-Trust Act, and on a decision of the United States Supreme Court in 1904 it was practically dissolved and all its securi- ties were returned to the original holders. This dissolution left the Hill-Morgan interests in undis- puted control of the Burlington properties, but harmonious relations had in the meantime been established among the contestants, assuring an equitable division of territory and traffic. The final outcome was that the Union Pacific Railroad Company, which had purchased with its large 206 THE RAILROAD BUILDERS surplus and by the use of its high credit many million dollars' worth of the capital stocks of the Great Northern and Northern Pacific railroads, received these stocks back after several years of great prosperity and after the appreciation in the market values of the stocks had exceeded $60,000,- 000. There was no further necessity for holding them and most of the stocks were sold at the high prices of 1905 and 1906, with actual net profit for the Union Pacific Railroad in excess of $50,000,000. No such gigantic financial transaction as this had ever before been carried through by an American railroad corporation. With an overflowing treasury in the Union Pacific, Harriman immediately turned his face toward the East. It had for years been one of his dreams to control a continuous line of railroad from the Atlantic to the Pacific. As early as 1902 he had all but completed negotiations for the acqui- sition of the New York Central lines in the inter- est of the Union Pacific; but this plan had met with opposition from the Vanderbilts and Morgan and had been dropped. Harriman now took ad- vantage of an opportunity which presented it- self to acquire for the Union Pacific what was prac- tically a dominating interest in the Baltimore LIFE WORK OF EDWARD H. HARRIMAN 207 and Ohio, a large block of whose stock was dis- posed of by the Pennsylvania Railroad. Ham- man had already largely added to the Union Pa- cific's holdings in the Illinois Central. Jointly with the Lake Shore of the Vanderbilt system, the Baltimore and Ohio had, as already described, acquired a dominating interest in the Reading Company, including all the latter company's in- terests and aflBliations as well as its entry into the New York district through control of the Central Railroad of New Jersey. Harriman, therefore, by a single stroke, now found himself in practical pos- session of a coast-to-coast system of railroads extending all the way from New York to San Francisco, Portland, and Los Angeles, and passing through all the important cities of the country. The Illinois Central system, operating nearly five thousand miles of road southward from Chicago to New Orleans, passing through St. Louis, with an arm reaching out to Sioux City on the west and a network of branches covering the Middle States, had thus become the great link welding to- gether the eastern and western Harriman systems. Later the Union Pacific acquired large interests in other properties and purchased substantial amounts of stock in the Atchison, Topeka and 208 THE RAILROAD BUILDERS Santa Fe, the New York Central, the St. Paul, and the Chicago and North Western railroads. It also acquired a dominating interest in the Chicago and Alton property, operating from Chicago to St. Louis, with Western branches. In the panic period of 1907, Harriman personally purchased from Charles W. Morse, who had acquired the property from Morgan a short time before, the entire capital stock of the Central of Georgia Rail- way, which he later turned over to the Illinois Central. The Central of Georgia lines connect at several points with the Illinois Central and have given the system various outlets on the South Atlantic seaboard. Harriman died in September of 1909, and with his death the wizard touch was clearly gone. What would have been the later history of the Union Pacific had he lived can be only conjectured. The new management, with Judge Robert S. Lovett at its head, continued the broad and eflScient opera- tion which had characterized Mr. Harriman's re- gime, but it soon abandoned the policy of further growth and expansion. This alteration in policy, however, was perhaps more the result of changing conditions than of relinquishment of Harriman's aims. Many new laws for the regulation of the LIFE WORK OF EDWARD H. HARRIMAN 209 railways had been passed, and in 1906 the pow- ers of the Interstate Commerce Commission were greatly augmented. A period of reform had now begun, and after 1909 a wave of "progressivism" overspread the country. New interpretations were given to the Sherman Act, and suits were soon under way against all the railroads and industrial combinations which appeared to be infringing that statute. The great Standard Oil and Tobacco trusts were dissolved in this period, and a suit which was brought to divorce the Union Pacific and the Southern Pacific Company was finally decided against the Union Pacific, with the result that the two big properties were separated. The Union Pacific turned a large amount of its Southern Pacific stock holdings over to the Pennsylvania Railroad, in exchange for which it received from the Pennsylvania the remainder of the Baltimore and Ohio stock which the Pennsylvania interests had retained after the sale to the Union Pacific in 1906. Immediately after this, the Union Pacific management, seeing no particular advantage in retaining an interest in the Baltimore and Ohio, gave the shares to its own stockholders in a special dividend. Thus, since Harriman's death, the Union Pacific 210 THE RAILROAD BUILDERS Railroad has once more returned to very much its original condition prior to its acquisition of the Southern Pacific. It still controls the Illinois Cen- tral and the Chicago and Alton and has invest- ment interests in a large number of other railroads. It is still the premier system of the West and promises to remain so indefinitely; but the bold Harriman touch is gone and will never return. CHAPTER XII THE AMERICAN RAILROAD PROBLEM During the last fifty years the railroad has per- haps been most familiar to the American people as a "problem." As a problem it has figured con- stantly in politics and has held an important posi- tion in many political campaigns. The details that comprise this problem have been indicated to some extent in the preceding pages — the speculative character of much railroad building, the rascality of some railroad promoters, the corrupting influ- ence which the railroad has too frequently exerted in legislatures and even in the courts. The at- tempts to subject this new "monster" to govern- ment regulation and control have furnished many of the liveliest legislative and judicial battles in American history. Farmers, merchants, manufac- turers, and the traveling public have all had their troubles with the transportation lines, and the diflSculties to which these struggles have given rise 211 212 THE RAILROAD BUILDERS have produced that problem which is even now apparently far from solution. Railroads had been operating for many years in this country before it dawned upon the farmers that this great improvement, which many had hailed as his greatest friend, might be his greatest enemy. It had been operating for several decades in the manufacturing sections before the enterpris- ing industrialist discovered that the railroad might not only build up his business but also destroy it. From these discoveries arose all those discordant cries of "extortion," "rebate," "competition," "long haul and short haul," "regulation," and "government ownership," which have given rail- road literature a vocabulary all its own and have written new chapters in the science of economics. The storm center of all this agitation concerned primarily one thing — the amount which the rail- road might fairly charge for transporting passen- gers and freight. The battle of the people with the railroads for fifty years has been the "battle of the rate." This has taken mainly two forms, the agra- rian agitation of the West against transportation charges, and the fight of the manufacturing centers, mainly in the East, against discriminations. Per- haps its most characteristic episodes have been THE AMERICAN RAILROAD PROBLEM 213 the fight of the "Grangers" and their successors against the trunk lines and that of the general public against the Standard Oil Company. Even in the fifties and the sixties, the American public had its railroad problem, but it was quite different in character from the one with which we have since grown so familiar. The problem in this earlier period was merely that of getting more rail- roads. The farmer pioneers in those days were not demanding lower rates, better service, and no dis- crimination and anti-pooling clauses; they asked for the building of more lines upon practically any terms. This insistence on railroad construction in the sixties explains to a great extent the difficulties subsequently encountered. In a large number of cases railroad building became a purely speculative enterprise; the capitalists who engaged in this business had no interest in transportation but were seeking merely to make their fortunes out of con- structing the lines. Not infrequently the farmers themselves furnished a considerable amount of money, expecting to obtain not only personal divi- dends on the investment but larger general divi- dends in the shape of cheap transportation rates and the development of the country. Even when the builders were more honest, their mistaken 214 THE RAILROAD BUILDERS enthusiasm had consequences which were similarly disastrous. The simple fact is that a considerable part of the Mississippi Valley, five or ten years after the Civil War, found itself in the possession of railroads far in excess of the public need. In the long run this state of affairs was probably not a great economic evil, for it stimulated development on a tremendous scale; but its temporary effect was disastrous not only to the railroads themselves but to the struggling population. The farmer had mortgaged his farm to buy stock in the road; and his town or county or State had subsidized the line by borrowing money which it frequently could not repay. When this property became bankrupt, not only wiping out these investments but leaving the agricultural population at the mercy of what it regarded as exorbitant rates and all kinds of unfair discriminations with high interest charges on its mortgages and high local taxes, the blind fury that resulted among the farmers was not unnatural. Many of the railroad evils were inherent in the situation; they were explained by the fact that both managers and public were dealing with a new agency whose laws they did not completely under- stand. But the mere play of personal forces in themselves aggravated the antagonism. The fact THE AMERICAN RAILROAD PROBLEM 215 that most of the railroad magnates Kved in the East added that element of absentee landlordism which is essential to most agrarian problems. Many of the Western capitalists were real leaders; yet it is only necessary to remember that the most active man in Western railroads in the seventies was Jay Gould, to understand the suspicion in which the railroad promoter of that day was generally held. It is significant that of all the existing railroad abuses, the one which seemed to arouse particular hostility was the free pass. There were many greater practical evUs than this, yet the fact that most editors and public officials and politicians and legislators and even many judges rode * ' deadhead " was a constant reminder of the influence which this "alien" power exercised over the government and the public opinion of the communities of which it was theoretically the servant. Many of these roads had a greater income than the States they served; their payrolls were much larger; their head officials received higher salaries than governors and presidents. The extent to which these roads controlled legislatures and, as it seemed at times, even the courts themselves, alarmed the people. The stock-jobbing that had formed so large a part of their history added nothing to their popularity. 216 THE RAILROAD BUILDERS Yet, when all these charges against the railroads are admitted, the fundamental difficulty was onfe which, at that stage of public enlightenment, was beyond the power of individuals to control. Nearly all the deep-seated evils arose from the fact that the railroads were attempting to do something which, in the nature of the case, they were entirely unfitted to do — that is, compete against one another. When the great trunk lines were con- structed, the idea that competition was the life of trade held sway in America, and the popular im- pression prevailed that this rule would apply to railroads as well as to other forms of business. To the few farseeing prophets who predicted the difficulties which subsequently materialized, the answer was always made that competition would protect the public from extortion and other abuses. But competition between railroads is well-nigh impossible. Only in case different companies operated their cars upon the same roadbed — something which, in the earliest days, they actually did on certain lines — could they compete, and any such system as a general practice is clearly impracticable. One railroad which paralleled an- other in all its details might compete with it, but there are almost no routes that can furnish THE AMERICAN RAILROAD PROBLEM 217 business enough for two such lines, and the carry- ing out of such an idea involves a waste of capital on an enormous scale. Probably the country re- ceived its most striking illustration of this when the West Shore Railroad in New York State was built almost completely duplicating the New York Central, with the result that both roads were nearly bankrupted. While no one railroad can completely duplicate another line, two or more may compete at particu- lar points. By 1870 this contingency had produced what was regarded as the greatest abuse of the time — the familiar problem of "long and short haul." Two or more railroads, starting at an identical point, would each pursue a separate course for several hundred miles and then suddenly come together again at another large city. The result was that they competed at terminals, but that each existed as an independent monopoly at intermediate points. The scramble for business would thus cause the roads to cut rates furiously at terminals; but since there was no competition at the intervening places the rates at these points were kept up, and sometimes, it was charged, were raised in order to compensate for losses at the terminals. Thus resulted that anomaly which 218 THE RAILROAD BUILDERS strikes so strangely the investigator of the raiboad problem — that rates apparently have no relation to the distance covered, and that the charge for hauling a load for seventy-five miles may be ac- tually higher than that for hauling the same load one hundred or one hundred and fifty miles. The expert, looking back upon nearly a hundred years of railroad history, may now satisfactorily explain this curious circumstance; but it is not surprising that the farmer of the early seventies, overbur- dened with debt and burning his own corn for fuel because he could not pay the freight exacted for hauling it to market, saw in the system only an attempt to plunder. Yet even the shippers at ter- minal points had their grievances, for the compe- tition at these points became so savage and so ru- inous that the roads soon entered into agreements fixing rates or formed "pools." In accordance with this latter arrangement, all business was put into a common pot, as the natural property of the roads constituting the pool; it was then allotted to different lines according to a percentage agreement, and the profits were divided accordingly. As the purpose of rate agreements and pools was to stop competition and to keep up prices, it is hard- ly surprising that they were not popular in the THE AMERICAN RAILROAD PROBLEM 219 communities which they affected. The circum- stance that, after solemnly entering into pools, the allied roads would frequently violate their agree- ments and cut rates surreptitiously merely added to the general confusion. The early seventies were not a time of great prosperity in the newly opened West, and the farm- ers, looking about for the source of their dis- comforts, not unnaturally fixed upon the railroads. Their period of discontent coincided with what will always be known in American history as "the Granger movement." In its origin this organiza- tion apparently had no relation to the dissatis- faction which its leaders afterward so successfully capitalized. Its founder, Oliver Hudson Kelley, at the time when he started the fraternity was not even a farmer but a clerk in the Agricultural Bureau at Washington. Afterward, when the Grangers had become an agrarian force to be feared, if not respected, it was a popular jest to refer to the origi- nators of this great farmers' organization as "one fruit grower and six government clerks." Kelley's first conception seems to have been to organize the farmers of the nation into a kind of Masonic order. The Patrons of Husbandry, which was the official title of his society, was a secret organization, with 220 THE RAILROAD BUILDERS signs, grips, passwords, oaths, degrees, and all the other impressive paraphernalia of its prototype. Its officers were called Master, Lecturer, and Treasurer and Secretary; its subordinate degrees for men were Laborer, Cultivator, Harvester, and Husbandman; for women — and women took an important part in the movement — were Maid, Shepherdess, Gleaner, and Matron, while there were higher orders for those especially ambitious and influential, such as Pomona (Hope), Demeter (Faith), and Flora (Charity). Certainly these titles suggest peace and quiet rather than discon- tent and political agitation; and, indeed, the or- ganization, as evolved in Kelley's brain, aimed at nothing more startling than the social, intellec- tual, and economic improvement of the agricultural classes. Its constitution especially excluded poli- tics and religion as not being appropriate fields of activity. It did propose certain forms of busi- ness cooperation, such as the common purchase of supplies, the marketing of products, perhaps the manufacture of agricultural implements; but its main idea was to contribute to the social well-being of the farmers and their families by frequent meet- ings and entertainments, and to improve farming methods by collecting agricultural statistics and THE AMERICAN RAILROAD PROBLEM 221 by spreading the earliest applications of science to agriculture. The idea that the "Grange," as the organization was generally known, would ulti- mately devote the larger part of its energies to fighting the railroads apparently never entered the minds of its founders. Had it not been for the increasing agricultural discontent against railroads and corporations in general, the Patrons of Husbandry would probably have died a painless death. But in the early seven- ties this hostility broke out in the form of minority political parties, the principal plank in whose plat- form was the regulation of the railroads. Farmers' tickets, anti-monopoly parties, and anti-railroad candidates began to appear in county and even state elections, sometimes achieving such success as to frighten the leaders of the established organi- zations. The chief aim of the discontented was "protection from the intolerable wjongs now in- flicted on 1 is by the railroads." "Railroad steals, " ''railroad pirates," "Wall Street stock-jobbers," and like phrases supplied the favorite slogans of the spirited rural campaigns. These parties, though much ridiculed by the metropolitan press, started a political agitation which spread with increasing force in the next forty years and in recent times 222 THE RAILROAD BUILDERS eventually gained the ascendency in both the old political parties. The panic of 1873 and the unusually hard times that followed added fuel to the flame. It was about this time that the Patrons of Husbandry gave evidences of a new vitality, chiefly manifested in a rapidly increasing membership. On May 19, 1873, there were 3360 Granges in the United States, while nineteen months later, on January 1, 1875, there were 21,697, with a total membership of over seven hundred thousand. In the Eastern States the movement had made little progress; in the South it had become somewhat more popular; in such States as Missouri, Iowa, Kansas, Nebraska, Mon- tana, Idaho, and Oregon, it had developed into almost a dominating influence. It is not diflficult to explain this sudden and astonishing growth : the farmers in the great grain States seized upon this organization as the most available agency for remedying their wrongs and rescuing them from poverty. In their minds the National Grange now became the one means through which they could obtain that which they most desired — cheaper transportation. Not only did its membership show great increase, but money from dues now filled the treasury to overflowing. At the same time the THE AMERICAN RAILROAD PROBLEM 223 organs of the capitalist press began to attack the Grange violently, while the politicians in the sec- tions where it was strongest sedulously cultivated it. But the leaders of the movement never made the fatal mistake of converting their organization into a political party. It held no political conven- tions, named no candidates for office, and even officially warned its members against discussing political questions at their meetings. Yet, accord- ing to a statement in the New York Tribune, "within a few weeks the Grange menaced the po- litical equilibrium of the most steadfast States. It had upset the calculations of veteran campaigners, and put the professional office-seekers to more embarrassment than even the Back Pay." The Grangers fixed their eyes, not upon men or upon parties, but upon measures. They developed the habit of questioning candidates for office concern- ing their attitude on pending legislation and of publishing their replies. Another favorite device was to hold Granger conventions in state capitals while the legislature was sitting and thus to bring personal pressure in the interest of their favorite bills. This method of suasion is an extremely potent political force and explains the fact that, in certain States where the Granges were most 224 THE RAILROAD BUILDERS powerful, they had practically everything their own way in railroad legislation. The measures which they thus forced upon the statute books and which represented the first com- prehensive attempt to regulate railroads have always been known as the "Granger Laws." These difiFered in severity in different States, but in the main their outlines were the same. Prac- tically all the Granger legislatures prohibited free passes to members of the legislatures and to public oflBeials. A law fixing the rate of passenger fares — the maximum ranging all the way from two and one- half to five cents a mile — was a regular feature of the Granger programme. Attempts were made to end the "long and short haul" abuse by passing acts which prohibited any road from charging more for the short distance than for the long one. More drastic still were the laws passed by Iowa in 1874 and the famous Potter bill passed by Wisconsin in the same year. Both these measures, besides fix- ing passenger fares, wrote in the law itseK detailed schedules of freight rates. The Iowa act included a provision establishing a fund of $10,000 which was to be used by private individuals to pay the ex- penses of suits for damages under the act, and this same act made all railroad officials and employees THE AMERICAN RAILROAD PROBLEM 225 who were convicted of violations subject to fine and imprisonment. The Potter act was even more severe. It not only fixed maximum freight rates, but it established classifications of its own. The railroads asserted that the framers of this law had simply taken the lowest rates in force everywhere and reduced them twenty -five per cent. But Iowa and Wisconsin and practically all the States that passed the Granger laws also established railroad commissions. For the most part these commis- sions followed the model of that established by Massachusetts in 1869, a body which had little mandatory authority to fix rates or determine service, but which depended upon persuasion, ar- bitration, and, above all, publicity, to accompUsh the desired ends. The Massachusetts commission, largely owing to the high character and abiUty of its membership — Charles Francis Adams serving as chairman for many years — had worked admir- ably. In the most part these new Western com- missions were limited in their activities to regulat- ing accounting, obtaining detailed reports, collect- ing statistics, and enforcing the new railroad laws. These measures, following one another in rapid succession, produced a national, even an inter- national sensation. The railroad managements 226 THE RAILROAD BUILDERS stood aghast at what they regarded as demagogic invasions of their rights, and the more conservative elements of the American public looked upon them as a violent attack upon property. Up to this time there had been little general understanding of the nature of railroad property. In the minds of most people a railroad was a business, precisely like any other business, and the modem notion that it was "affected with a public interest" and that the public was therefore necessarily a partner in the raihoad business had made practically no headway. " Can't I do what I want with my own? " Commo- dore Vanderbilt had exclaimed, asserting his ex- clusive right to control the operations of the New York Central system; and that question fairly well represented the popular attitude. That the rail- road exercised certain rights of sovereignty, such as that of eminent domain, that it actually used in its operations property belonging to the State, and that these facts in themselves gave the State the right to supervise its management, and even, if necessity arose, to control it — all this may have been recognized as an abstruse legal proposition, but it occupied no practical place in the business consciousness of that time. Naturally the first step of the railroads was therefore to contest the THE AMERICAN RAILROAD PROBLEM 227 constitutionality of the laws, and while these suits were pending they resorted to various expedients to evade these laws or to mitigate their severity. A touch of livehness and humor was added to the situation by the thousands of legal fare cases that filled the courts, for farmers used to indulge in one of their favorite agricultural sports — getting on trains and tendering the legal two and a half cents a mile fare, a situation that usually led to ejectment for nonpayment and then to a suit for damages. The railroads easily met the laws forbidding lighter charges for long than for short hauls by increasing the rates for the longer distances, and the laws fixing maximum rates within the State by increas- ing the rates outside the State. When the courts decided the cases against the railroads, as in most cases they did, these corporations set about to se- cure the repeal of the laws. They started cam- paigns of education, frequently through magazine or newspaper articles pointing out the injustice of the Granger laws and insisting that they were working great public damage. It is a fact that a decrease in railroad construction followed the Granger demonstration, and the friends of the rail- roads insisted that timid capital hesitated to em- bark in an enterprise that was constantly subject 228 THE RAILROAD BUILDERS to legislative attack. These campaigns succeeded much better than the more violent opposition to which the railroads had first resorted. The Western States in the majority of cases repealed their most drastic legislation. Nearly all the laws fixing maximum rates disappeared from the books, and even Iowa and Wisconsin substituted for these measures supervisory and advisory commissions after the Massachusetts model. While the Granger movement thus failed effec- tively to curb the railroads, it succeeded in arous- ing great popular interest in the railroad problem and in placing before the public several of the most important details of that problem. Not the least of its achievements were the decisions which it obtained from the Supreme Court of the United States. The Granger cases are among the most epoch-making in American history, and they fixed for all time the principles of American policy in dealing with the railroad question. They are particularly worthy of study by those who have regarded the Supreme Court as the bulwark of social injustice and as a body which can always be relied upon to protect the rights of property against the interests of the masses. In its railroad decisions this charge hardly holds ; for these Granger THE AMERICAN RAILROAD PROBLEM 229 cases sustain practically all the legal contentions made by the Granger legislatures. ' The cases fixed for all time the point that a State, acting imder the police power, may regulate the charges of a railroad even to the extent of fixing maximum rates. They even went so far as to hold that the right to fix rates is not subject to any restraint by the court on the ground of unreasonableness, a principle which the Supreme Court has reversed in more recent times. The courts also held that a State, at least imtil Congress acted, could regu- late interstate commerce, but this decision also has since then been reversed. These subsequent rever- sals of decisions which were exceedingly popular at the time, however, not only constituted sound law but promoted the public interest, for they estab- lished that body of law which has made possible the present more comprehensive system of Federal regulation of railroads. Meanwhile the demand for regulation was gain- ing strength in the Eastern States, but for somewhat different reasons. The farmers of New England, New York, and the Eastern region in general had ' The cases of particular interest were: Muim as. Illinois, 94 U. S. 114; Peik vs. Chicago and Northwestern Railway Company, 94 U. S. 164; and Chicago, Burlington and Quincy Railway Compcny ts. Cutts, 94 U. S. 155. 230 THE RAILROAD BUILDERS not particularly sympathized with the Granger legislation; they already had great diflSculty in competing with the large Western farms, and a re- duction in rates to the seaboard would have made their position even less endurable. This attitude was unquestionably selfish but entirely compre- hensible. The agitation for railroad reform in the East came chiefly from the manufacturing and commercial classes. Here the main burden of the complaint was the railroad rebate. This was a method of giving lower rates to large shippers than to small — charging the favored shipper the pub- lished rate and then, at stated periods, surrepti- tiously retiu-ning part of the payment. This was perhaps the most vicious abuse of which the rail- roads have ever been guilty. That the common law forbade the practice and that it likewise vio- lated the implied contract upon which the railroad obtained its franchise was hardly open to dispute; yet up to 1887 no specific law in this country pro- hibited the practice. For many years the rebate hung over the American business world, a thing whose existence was half admitted, half denied, a kind of ghostly economic terror that seemed per- sistently to drive the small corporation to bank- ruptcy and the large corporation to dominating THE AMERICAN RAILROAD PROBLEM 231 influence. The Standard Oil Company was the "monster" that was believed especially to thrive upon this kind of sustenance, though this was by no means the only industry that maintained such secret relations with the railroads; the Carnegie Steel Corporation, for example, accepted rebates almost as persistently. It was not until 1879, when the Hepbiu-n Committee in New York State had its hearings, that all the facts concerning the rebate were exposed officially to public view. The con- tracts of the Standard Oil Company with the rail- roads were placed upon the records and these showed that all the worst suspicions regarding this practice were justified. This disclosiu-e made the railroad rebate one of the most familiar facts in American industrial life; and in consequence a de- mand arose for Federal legislation that would defi- nitely make the practice a crime and also for some kind of Federal supervision to do effectively the work which the state commissions had failed to do. By this time it was clear enough that the only hope of adequate regulation lay with the Federal Government. Congressman Reagan, of Texas, had for years been pushing a bill to regulate in- terstate commerce and to prohibit imjust dis- criminations by common carriers; other measures 232 THE RAILROAD BUILDERS periodically made their appearance in the Senate; but the Houses had been unable to agree and nothing had been done. Two facts presently gave great impetus to the movement; in 1886 the United States Supreme Court, reversing its previous decision, decided that no State could fix rates for railroad lines outside its own borders, in other words, that interstate rates were exclusively within the jurisdiction of the Federal authority ' ; and a Senate committee, under the chairmanship of Shelby B. Cullom, conducted an investigation of railroad conditions which made clear the need of immediate reform. As a conse- quence. Congress passed the Interstate Commerce Act, which received President Cleveland's signa- ture on February 4, 1887. This measure specifi- cally made illegal rebates, pools, higher charges for short than for long hauls (when the hauls in ques- tion were upon the same road) ; it required raih-oads to file their tariffs, and it established a commission of five members, who had powers of investigation, including the right to make the companies produce their books. This commission received power to establish systems of accounting and the like, but it ' Wabash, St. Louis and Pacific Railway Company vs. Illinois, 118 U. S. 557. THE AMERICAN RAILROAD PROBLEM 233 had no prerogative to fix rates. Inadequate as this measure seemed to the radical element, it was generally hailed as marking the beginning of an era in the Federal control not only of railroads but of other corporations, and this impression was in- creased by the high character of the men whom President Cleveland appointed to the first board. The Interstate Commerce Commission lasted essentially in this form for nearly twenty years. On the whole it was a failure. Such was the judg- ment passed by Justice Harlan of the United States Supreme Court when he remarked in one of his decisions that the commission was "a useless body for all practical purposes"; and such, indeed, was the judgment of the commission itself, for in its report of 1898 it declared that the attempt at Federal regulation had failed. The chief reasons for this failure, the commission said, were the con- tinued existence of secret rates and the fact that published tariffs were not observed. ' The manag- ers of the great American railroad systems would not yet admit that the fixing of railroad rates was the concern of any one but themselves, and they ' But it should be added that the effectiveness of the commission as an administrative and regulating body was diminished by decisions of the courts, notably the decision of the Supreme Court in the maximum rate case. See 160 U. S. 479. 234 THE RAILROAD BUILDERS still regarded railroad management as essentially a private business. If they could obtain large ship- ments by granting special rates, even though they had to do it by such underhanded ways as granting rebates, they believed that they were entirely justi- fied in doing so. Thus rebates flourished almost as much as ever, passes were still liberally bestowed, and pools were still formed, though they sometimes took the shape of "gentlemen's agreements." In 1906, when President Roosevelt became in- tensely active in the railroad problem, conditions were fairly demoralized. Attempts to enforce the anti-pooling clause had led railroads to pm-chase competing lines, and when the United States Su- preme Court pronounced this illegal, the situation became chaotic. The evils of over-capitalization also became an issue of the times. The Interstate Commerce Commission had become almost mori- bund, and there was a general sentiment that the trouble arose from the fact that the commission had no power to fix rates and that the solution of the railroad problem would come only when such power was vested in it. ' The Interstate Commerce ' The Elkins Act of 1903 had, it is true, increased the effectiveness of the commission in deaUng with discriminations, but it had not solved the problem of securing reasonable rates. THE AMERICAN RAILROAD PROBLEM 235 Act which became a law on June 29, 1906, was the outcome of one of the greatest battles of President Roosevelt's political life. The act increased the membership of the commission from five to seven members, placed imder its jurisdiction not only railroads but pipe lines, express companies, and sleeping-car companies, added to the other fa- miliar restrictions a "commodities clause," which prohibited any railroad from transporting a prod- uct which it had produced or mined, "except such articles or commodities as may be necessary and intended for its use in the conduct of its business as a common carrier" — this clause was intended to end the railroad monopoly of the coal mines — and made the failure to observe published tariffs a crime punishable with imprisonment . The amended law did not give the commission the right to fix rates in the first instance but did empower it, on complaint, to investigate charges and on the basis of this investigation to determine just maximum rates, regulations, and practices, though carriers were given the right of appeal to the courts. Thus, in essence, the public had obtained the reform which it had been demanding for years. The reorganized commission did not hesitate to exercise its new powers. It soon began actually 236 THE RAILROAD BUILDERS fixing rates, and from being a half-alive despised institution it rapidly developed into one of the most powerful agencies of administration. In the succeeding ten years its powers were still further enlarged by acts of Congress and the privilege of fixing charges practically passed out of the hands of the railroads into the control of the Interstate Commerce Commission. The railroads, that is, practically lost the power to regulate their own income. Meanwhile, the progressive movement in American politics had led to the creation of commissions in most of the States, with similar authority over rate making within the States, be- sides exercising numerous other powers over service and capitalization. Many railroads fell upon evil days and receiverships again became common. Natiu-ally the railroad managers attributed these calamities to the fact that they were so constantly being regulated; but they probably pushed this claim too far, for the causes of their troubles were more complex. In 1916, in the heat of a political campaign, the Federal Government took a step which introduced a new principle into railroad management and made the roads practically helpless. The four brotherhoods of railroad operatives were making THE AMERICAN RAILROAD PROBLEM 237 demands for a so-called eight-hour day, and threat- ened a general strike that would paralyze all busi- ness and industry and throw the whole life of the nation into chaos. Properly to appreciate the consequences of this event, it is necessary to keep in mind the fact that the plea for an "eight-hour day" was spurious. An eight-hour day cannot be rigidly enforced on railroads; the workmen well knew this, and indeed they did not really demand such working hours. What they asked for was a full day's pay for eight hours and "time and a half" pay for all in excess of that amount; that is, they demanded an increase in wages. President Wilson, having failed in his attempt to settle the difficulty by arbitration, compelled a Democra- tic Congress over which his sway was absolute to pass a law — sponsored by Chairman Adamson of the House Committee on Interstate Commerce — which granted practically what the unions de- manded. In passing this law, Congress asserted an entirely new power which no one had ever sus- pected that it possessed — that of fixing the wages which should be paid by common carriers and possibly by other corporations engaged in inter- state commerce. The railroads immediately took the case to the United States Supreme Court, which 238 THE RAILROAD BUILDERS promptly sustained the law. This decision, un- questionably the most radical in the history of that body, declared virtually that Congress could pass any law regulating railroads which the public interest demanded. And thus, after fifty years of almost incessant struggle with the public, was the mighty railroad monster humbled. It had lost power to regulate the two items which represent the existence of a business — its income and its outgo. The Inter- state Commerce Commission was now fixing rail- road rates, and Congress was fixing the amounts of railroad wages. It remained for the Great War to precipitate the only logical outcome of this situa- tion — government control. The steadily increas- ing responsibilities of war soon told heavily upon all lines until, in the latter part of 1917, the whole rail- road system of the United States had all but broken down. The unions were pressing demands for wage increases that would have added a billion dollars a year to their annual budgets. The fact that so large a part of the output of American locomotive works was being shipped to the Allies made it diffi- cult for the American lines to maintain their own supply. Nearly all coastwise ships and tugs were utilized for war work, a large part of them had been THE AMERICAN RAILROAD PROBLEM 239 sent to the other side, and this put an addition- al strain upon the railroads. The movement of troops, the heavy building operations in canton- ments and shipbuilding plants, the manufacture and transportation of munitions, all put an unprec- edented pressxu"e upon them. Everywhere there was great shortage of cars, equipment, and mate- rials. Possibly the railroads might have risen to the occasion except for the fact that the enormous increase in the cost of labor and supplies made de- mands upon their treasuries which they could not meet. They repeatedly asked the Interstate Com- merce Commission for an increase in rates, but this request was repeatedly refused. The roads were therefore helpless, and their operations became so congested as to create a positive military danger. Under these circumstances there was profound relief when President Wilson took over the roads and placed them under government control, with William Gibbs McAdoo, Secretary of the Treasury, in active charge. McAdoo immediately took the step which the Administration, while the railroads were under private control, had steadily refused to sanction, and now increased the rates. These increases were so great that they made the public fairly gasp, but. 240 THE RAILROAD BUILDERS under the impulse of patriotism, there was a good- natured acquiescence. McAdoo also increased wages by hundreds of millions of dollars. His ad- ministration on the whole was an able one. He ignored for the moment the prevailing organiza- tion and managed the roads as though they con- stituted a single system. He instituted economies by concentrating ticket offices, establishing uni- form freight classifications, making common the use of terminals and repair shops, abolishing cir- cuitous routes, standardizing equipment, increas- ing the loads of cars and by introducing a multi- tude of other changes. All these reforms greatly increased the usefulness of the roads, which now became an important element in winning the war. Properly regarded, the American raihoads became as important a link in the chain of -communications reaching France as the British fleet itself. It is not too much to say that the fate of the world in the critical year 1918 hung upon this tremendous raihoad system which the enterprise and genius of Americans had built up in three-quarters of a century. In February, 1918, Great Britain, France, and Italy made official representations to the American Government, declaring that unless food deliveries could be made as they had been prom- THE AMERICAN RAILROAD PROBLEM 241 ised by Hoover's food administration, Germany would win the war. McAdoo acted immediately upon this information. He gathered all available cars, taking them away from their ordinary routes, and rushed them from all parts of the country to the great grain producing States. All other kinds of shipments were discontinued; officials and em- ployees from the highest to the lowest worked day and night; and presently the huge supplies of the indispensable food started towards the Atlantic coast. So successful was this operation that, on the 12th of March, the supplies so exceeded the shipping capacity of the Allies that 6318 carloads of food stood at the great North Atlantic ports awaiting transportation. This dramatic movement of American food supplies was an important item in wuining the war and fairly illustrated the great part which the American railroads played in turning the tide of battle from defeat to victory. i6 BIBLIOGRAPHICAL NOTE General literature on the history of American rail- roads is surprisingly scarce. While numerous volumes have been written in recent years on special phases of the railroad question, few histories of any real value are available. Probably the best outline history of Ameri- can railroad development as a whole is still Arthur T. Hadley's Railroad Transportation, its History and its Laws (1885), but this necessarily covers only the earlier periods of railroad growth and its discussions are limited to the problems which confronted the carriers many years ago. An extremely valuable book (now out of print) giving a very complete picture of railroad build- ing and expansion in the pre-Civil War period is The Book of the Great Railway Celebration of 1867, by William Prescott Smith. This is primarily a description of the opening of the Ohio and Mississippi Railway, which connected the Mississippi Valley for the first time with the Eastern seaboard. A volume of real value, but somewhat technical, giving a complete and accurate view of the reorganization period of the great railroad systems, from 1885 to 1900, is Railroad Reorganiza- tion, by Stewart Daggett (1910). This book contains outline sketches of the histories of nearly all of the large systems, as weU as very accurate details of the financial reorganizations of all of the defaulted properties. 243 244 BIBLIOGRAPHICAL NOTE The most comprehensive history of any American railroad system is The Story of Erie, by H. S. Mott (1900), but even this is partially imreliable and much of it is compiled from unoflScial sources. On the finan- cial history of the Erie Railroad, the really valuable authority is Charles Francis Adams in his Chapters of Erie (1871). This book furnishes a full and accurate account of the regime of Daniel Drew, Jay Gould, James Fisk, Jr., and the famous "Erie ring, " including "Boss" Tweed, and also throws side lights on the character and career of Commodore Vanderbilt. Among other im- portant histories of particular railroad systems may be mentioned The Union Pacific Railway, by John P. Davis (1894) and History of the Northern Pacific Railroad, by Eugene V. Smalley (1883); but neither of these volumes covers the recent and more interesting periods in the development of these properties. To get a complete and satisfactory view of the later development of the Northern Pacific system, one must turn to modem biographical works, such as the Life of Jay Cooke, by E. P. Oberholtzer (1910), the Memoirs of Henry Villard (1909), and the Life of James J. Hill, by Joseph Gilpin Pyle (1916), which also recounts at length the rise and development of the Great Northern Railway system. But in these volumes, as in many biographies of great men, the authors often betray a bias and misrepresent facts vital to an understanding of the development of both of these railroad systems. A recent volume en- titled the Life Story of J. P. Morgan, by Carl Hovey, although extremely laudatory and therefore in many ways misleading, contains valuable information about the development of the Vanderbilt lines after 1880 and also about the financial vicissitudes and rehabUitation BIBLIOGRAPHICAL NOTE 245 of the many Morgan properties, such as the Southern Railway, the modern Erie system, the Northern Pacific, the Reading, and the Baltimore and Ohio. Some of the railroad companies many years ago them- selves published histories of their lines, but most of these attempts were of little value, as they were always too laudatory and one-sided and evidently were usually written for political purposes. The best of this class of railroad histories was a book issued by the Pennsylvania Railroad many years ago, giving a record (largely statis- tical) of the growth and development of its lines. But this book has been long out of print and covers the period prior to 1885 only. For original material on American railroad history, one must depend almost entirely on financial and rail- road periodicals and official and state documents. By far the most valuable sources for all aspects of railroad building and financing during the long period from 1830 to 1870 are the American Railroad Journal (1832-1871) and Hunt's Merchant Magazine (1831-1870). Both of these periodicals are replete with details of raUroad building and growth. And for the period from 1870 to the present time the best authority is the Commercial and Financial Chronicle, with its various supplements. The story of modern railroading is so intertwined with finance and banking that to get any broad and complete view of the subject one must consider it largely from the viewpoint of Wall Street. For facts regarding opera- tion and management of modem railroads, the Railroad Age-Gazette also is extremely useful. By far the most valuable soiu-ces for railroad statistics, railroad legisla- tion, and all related facts, are the annual reports and bulletins of the Interstate Commerce Commission. 246 BIBLIOGRAPHICAL NOTE which have been regularly issued since 1888. Many state commissions also have issued volumes of value. The best accoimt of the origin of the Granger laws is contained in S. J. Buck's The Granger Movement (1913). The beginnings of Federal regulation are traced in L. H. Haney's A Congressional History of Railways in the United States, 1850-1887 (1910). The history of recent railroad regulation by state and Federal legislation, and of court decisions affecting the railroads, is clearly and succinctly told in William Z. Ripley's Railroads: Rates and Regulation (1912), and in Johnson and Van Metre's Principles of Railroad Transportation (1916). INDEX Accidents, reduction of, 17; on Erie. 70 Adams, C. F., 225 Adams, E. D., plan of railroad merger, 147 Alabama Great Southern Rail- road, 190 Albany, railroad to Schenec- tady, 10, 21; crossing of Hudson at, 16-17; head- quarters of New York Cen- tral, 26; through line from New York City to, 27 Albany and Stockbridge Rail- road, 27 Alleghany Portage Railroad, 49 Angus, R. B., 169, 171 Appleton'a Illustrated Handbook of American Travel, descrip- tion of Erie Railroad, 65-66 Armour, P. D., 115 Atchison (Kan.), development of, 131 Atchison, Topeka and Santa F& Railroad, 19, 145, 154 et aeq.; Ripley as president of, 119, 163; plan of route, 154; building of road, 155, et seg.; financial diflSculties, 157; reorganization (1889), 161-62; failure (1893), 162; reorganization (1895), 163; progress since 1895, 163-64; Union Pacific and, 207-08 Atlantic and Pacific Railroad, 160 Atlantic Coast Line, 186-87 Attica and Buffalo Railroad, 25 Auburn and Syracuse Rail- road, 25 Bacon, E. R., 110 Baltimore, railroad in 1840, 10; and Baltimore and Ohio, 47, 97, 103, 115; Penn- sylvania Railroad acquires line through, 56; Southern Railway connection, 191 Baltimore and Ohio Railroad, petition to Congress (1828), 8; through system by 1876, 15; in 1853, 26; and Read- ing, 44, 61, 106, 110, 117; Union Pacific and, 45, 116- 117, 118, 206-07, 209; west- ern connections, 47, 48, 52; competition, 65, 104; "com- munity of interest" idea applied to, 61, 62, 110, 116- 116, 117; history of, 95 et aeq.; charter, 98; con- struction, 98-100; Garrett as president, 101-02, 103, 104-05, 107; dividends, 104, 105, 106-07, 109; expansion, 105-06, 118; financial dis- closures, 107-08; Spencer as president, 108; Mayer as president, 109; Cowan aa president. 111; receivership (1896), 111, 113; Morgan and, 111-12, 149; reorgani- zation (1898), 113-14; Penn- sylvania Railroad and, 104. 247 248 INDEX Baltimore and Ohio — Continued 115-16, 207, 209; Willard as president, 118-19; recent record, 119-20; Southern Railway and, 191 Baltimore and Philadelphia Railroad, 105 Barnard, Judge, and case against Drew, 76, 81, 83, 84 Belmont, August, 91 Bernard, George, French engi- neer, 97 "Big Four," see Cleveland, Cincinnati, Chicago and St. Louis Railroad Block signal system, in pre- vention of accidents, 17; Pennsylvania Railroad first uses, 54 Boston and Albany Railroad, 41 Boston, Hartford and Erie Railroad, 75, 84, 87 Brice, C. S., 183 Bridges, lack before Civil War, 16-17 British Columbia, Great North- ern in, 176 Brown, George, and Baltimore and Ohio Railroad, 97, 98 Buffalo, railroad in 1842, 10; New York Central to, 40; Erie Railroad in, 69 Buffalo and Allegheny Valley Railroad, 57 Buffalo and Niagara Falls Railroad, 25 Buffalo, Bradford and Pitts- burgh Railroad, 77, 78 Burlington Railroad, tee Chi- cago, Burlington and Quincy Bush, B. F., 119 California, effect of annexa- tion on railroads, 18, 121- 122 California Southern Railway, 160 Canada Southern Railway, 34 Canals, 96; »». railroads, 4-0, 11, 24; see alto Erie Canal Carnegie Steel Corporation and rebates, 231 Carroll, Charles, of Carroll- ton, quoted, 98 Cars, dining cars introduced, 16; sleeping cars, 16, 49; first smoking car, 49 Cass, General Lewis, receiver of Northern Pacific (1874), 142 Cassatt, A. J., 57-58, 61 Central of Georgia Railway, 187, 191, 208 Central Pacific Railroad, 123- 124, 126, 127, 128, 132, 155 Central Railroad and Banking Company of Georgia, 186 Central Railroad of New Jer- sey, 106, 117, 207; see also New Jersey Central Central Trust Company, 188 Charleston (S. C.)i railroad in 1840, 10 Charlotte, Columbia and Augusta Railroad, 180, 184- 185 Chesapeake and Ohio Railroad, 44, 61, 62, 115-16 Cheyenne (Wy.), develop- ment of, 131 Chicago, railroads to Atlantic coast from, 14; industrial center, 15; New York Cen- tral to, 40; Pennsylvania Railroad connection to, 51; Erie Railroad connection to, 89; through traffic routes to, 103; Baltimore and Ohio in, 115; Santa F^ reaches, 161 Chicago and Alton Railroad, 208, 210 Chicago and Atlantic Railway, 89 Chicago and North Western Railroad, 36, 130, 145, 208 INDEX 249 Chicago and St. Louis Rail- road, 161 Chicago, Burlington and Quincy Railroad, western expansion, 145, 205; Hill interest and, 161, 152, 20S; prosperity, 177-78 Chicago, Indianapolis and Louisville Railroad, 190 Chicago, Milwaukee and St. Paul Railroad, 45, 208 Cincinnati, New York Central reaches, 40; Baltimore and Ohio connection, 103 Cincinnati and Marietta Rail- road, 100 Cincinnati, Hamilton and Day- ton Railroad, 89, 118 Civil War, effect on railroads, 13, 14; Baltimore and Ohio during, 102; through traffic to Chicago established dur- ing, 103 Clermont, Fulton's steamboat, 95 Cleveland, New York Central reaches, 40 Cleveland and Pittsburgh Rail- road, 52-53 Cleveland, Cincinnati, Chicago and St. Louis Railroad, 35 Clinton, De Witt, 5 Clinton, Colonel De Witt, Jr., 67 Clyde line, traffic arrange- ments with Richmond Ter- minal Company, 183 Colorado Midland Railway, 162, 163 Colorado Southern Railroad, 177-78, 205 Columbia (S. C), railroad in 1840, 10 Columbia and Greenville Rail- road, 185 Commissions, state railroad, 225, 228 " Community of interest " idea, 43-45,61,62,110,116-16,117 Congress, Interstate Com- merce Act (1887), 42, 232; Act providing for survey from Mississippi to Pacific (1853), 122; Act of 1862 creating Union Pacific, 123; charters Northern Pacific (1864). 139; Elkins Act (1903), 234; Interstate Com- merce Act (1906), 234-36; Adamson Law, 237-38 Cooke, Jay, 141, 142 Corning, Erastus, 26 Cowan, J. K., Ill Credit Mobilier of America, 125, 129 Crockers, interest in Central Pacific, 126 Cullom, S. B., 232 Cumberland (Md.), Baltimore and Ohio completed to (1842), 100 Denver (Col.), development of, 131 Denver and Rio Grande Rail road, 131, 157 Denver Pacific Railroad, 132 Detroit, New York Central reaches, 40 De Witt Clinton, third loco- motive built in America, 21, 46 Drew, Daniel, and Vanderbilt, 32-33, 71, 73 et seq.; and Erie, 60, 70 et seq.; per- sonal characteristics, 70-71; eliminated from Erie by Gould and Pisk, 99 Drexel, Morgan and Company, 38 Duluth, development of, 131; distance from Pacific, 166; Great Northern terminus at (1901), 176 East Tennessee, Virginia and Georgia Railroad, 180, 181- 182, 183, 186, 187 250 INDEX England, steel imported from, 17 Erie Canal, 4, 5, 6, 24-, 47, 66, 96 Erie Railway, plan to reach Great Lakes, 11, 26, 28; in 1875, 15; rivalry with New York Central, 30; Vander- bilt and, 32-33, 71, 73 ei seq.; Drew and, 60, TO ct seq.; Gould and, 52; com- petition, 55; history and description, 04 et seq.; char- ter (1832), 67; construction, 67-68; opened to Lake Erie, 68-69; cost of building, 68; financial condition (1851), 69; since 1901, 92-94; Mor- gan and, 148; bibliography, 244 Erie and Pittsburgh Railroad, 52 Field, Marshall, 115 First National Bank of New York, Hill's relations with, 149-50 Fisk, James, Jr., 80, 87, 88 Flying Dutchman, car on Balti- more and Ohio, 99 Frederick (Md.), Baltimore and Ohio opens branch to (1882), 99 Fulton, Robert, and Clermont, 95 Gage, adoption of standard, 16; Erie's use of six-foot, 70 Garrett, J. W., 101-05, 106, 107 Garrett, Robert, 105 Geneva (N. Y.), Erie Railroad in, 69 Georgia Pacific Railroad, 182 Georgia Southern and Florida Railroad, 190 Gilbert, Judge, of Brooklyn, and Erie Railway case, 81 Gillis, Judge, J. L., of Phila- delphia, account of trial trip on Mohawk and Hudson, 22-24 Gould, Jay, 215; and Vander- bilt, 37; and Erie Railway, 52, 80, 84, 87-88; inter- ests oppose Santa F5, 160 Government ownership, 9-10; see also Railroad regula- tion Grand Trunk Railroad, 15 Granger movement, 219-24; and the railroads, 212-13, 221; "Granger Laws," 224- 225, 227 Grant and Ward, effect of failure on Erie Railway, 90 "Great American Desert," 131 Great Northern Railroad, 19; Harriman and, 116-17; com- petition with Union Pacific, 136; Hill's development of, 147, 173 et seq., 202; name of St. Paul, Minneapolis and Manitoba changed to, 173; and Northern Pacific, 175; Minnesota ore lands, 176-77; prosperity, 177 Great War precipitates govern- ment control, 238 Hamburg (S. C), railroad in 1840, 10 Harlan, Justice, on Inter- state Commerce Commis- sion, 233 Harlem Railroad, Vanderbilt and, 30-31, 32, 33, 148; Hill buys coaches from, 171; see also New York and Harlem Railroad Harper's Ferry, Baltimore and Ohio extends line to, 100 Harper's Guide-Book of the New York and Erie Railroad qu otod, 64 INDEX 251 Harriman, E. H., and Union Pacific, 43, 116, 193 et seq.; "community of interest" idea, 43, 44-45, 61, 116-17; and Erie reorganization, 91; Hill and, 150-52, 175-76, 202 et seq.; and Central of Georgia Railway, 191. 208; compared with Morgan, 198; death (1909), 208 Harrisburg (Penn.), Pennsyl- vania constructs line to, 48 Harrison, Fairfax, 119 Hartford (Conn.), railroad in 1840, 10 Helena (Mont.), development . of, 131 Hepburn Committee, 231 Hill, J. J., and "community of interest" idea, 61, 116; and Baltimore and Ohio, 115; and Great Northern, 147, 173 et seq.; Morgan and, 149-50, 153, 202 et seq.; and Northern Pacific, 150, 153; and Harriman, 150-52, 175-76, 202 et seq.; growth of Hill lines, 165 et seq.; personal character- istics, 166-67; "Hill's Folly," 171; St. Paul, Minneapolis and Manitoba Railroad, 171- 173 Hocking Valley Railroad, 149 Holland, St. Paul and Pacific financed in, 170 Hopkins, Mark, 126 Hours of labor, eight-hour day, 237 Hudson and Berkshire Rail- road, 25 Hudson River, bridge at Al- bany, 17 Hudson River Railroad, 12, 27-28, 31; and New York Central, 25; Vanderbilt and, 32, 148 Hudson's Bay Company, Hill's relations with, 167-68 Huntington, C. P., 126, 133, 135, 160, 200-01 Illinois, railroad speculation in, 9; development after 1870, 34; Vanderbilt lines in, 34, 52 Illinois Central Railroad, 119; Federal grant to, 13; Harri- man and, 45, 191, 196, 200; extent, 207; and Central of Georgia, 208; Union Pacific and, 210 Indiana, railroad speculation in, 9; development after 1870, 34; Vanderbilt lines in, 34, 52; Chesapeake and Ohio in, 44; Erie develop- ment in, 92, 93 Indianapolis, Vanderbilt lines to, 40 Inman, J. H., 186 Interstate Commerce Com- mission, 209, 232-33, 234- 235 Inventions, influence on United States, 1 Iowa, railroads in, 18, 36, 121; Pennsylvania Railroad ex- tends to, 57; "Granger Laws," 224-25; commission established, 228 Jersey City, Pennsylvania Rail- road develops line to, 56; Erie directors go to, 82 Jewett„ H. J., 88, 89, 90 Kansas, railroads in, 36 Kansas and Pacific Railway, 143 Kansas City, development of, 131 Kansas Pacific Railroad, 130, 132, 155 Kelley, O. H., 219 Kennedy, J. S., 170, 171. 174 King, John, 90 252 INDEX Kittson, N. W., 167, 171 Kuhn, Loeb and Company, 43, 194 Lake Shore and Michigan Rail- road, 34, 44, 117, 207 Land grants, 173; to Illinois Central, 13; to Northern Pacific, 139-40; to Atchison, Topeka and Santa F&, 155 Lehigh Valley Railroad, 92 Lincoln, Abraham, signs bill authorizing Union Pacific, 19 Long Island, Pennsylvania Railroad on, 60 Long Island Railroad, 60 Los Angeles, Santa Fe enters, 160-61 Louisville and Nashville Rail- road, 119, 187, 190 Lovett, Judge R. S., 208 McAdoo, W. G., 239-40 Massachusetts railroad com- mission, 225 Mayer, C. J., 109, 111 Memphis and Charleston Rail- road, 181 Mexican Central Railroad, 133 Michigan, railroad speculation in, 9; opening up of, 34; Vanderbilt lines in, 34 Michigan and Southern Rail- road, 12 Michigan Central Railroad, 34 Minneapolis, development of, 131 Minnesota, opening up of, 34; railroads in, 36; crop failure, 166; discovery of ore de- posits in, 176 Mississippi River, as highway, 11; end of supremacy as transportation route, 14; as Western railroad terminus, 18 Missouri, railroads in, 18, 36, 121; Pennsylvania Railroad extends to, 57 Missouri Pacific Railroad, 119 Mobile and Ohio Railroad, 13, 190 Mohawk and Hudson Railroad, first Vanderbilt road, 21, 25; account of trial trip, 22- 24, 46; original construction, 24 Morgan, J. P., Vanderbilt and, 38, 39, 40; "community of interest" idea, 44-45, 61; and New York Central, 45; reorganization of Erie, 90- 91, 148; as reorganizer of railroads, 148-49; and Hill, 149-50, 153, 202 et seq.; and Union Pacific, 149, 194, 195; and Southern Railway, 188- 189; and Central of Georgia Railway, 191 ; compared with Harriman, 198 Morse, C. W., 191, 208 Mount Stephen, Lord, 174; see also Stephen, George New Haven, railroad in 1840 to, 10 New Jersey Central, 44, 61; see also Central Railroad of New Jersey New Orleans, effect of river traffic on, 11-12; business shifts north from, 15 New York (State), railroads (1842), 10 New York and Erie Railroad, see Erie Railway New York and Harlem Rail- road, 12, 27; see also Harlem Railroad New York Central Railroad, 119, 217; through system by 1875, 15; steel used on, 17; Vanderbilt and, 20, 21, 32, 36, 148; single track in 1866, INDEX 253 New York Central — Continued 21; consolidation to form (1853), 24-26; connection with New York City, 30; further consolidation (1869), 33; state investigation, 37; Morgan and, 38-39, 45; growth (1885-93), 40; entry into New England, 41-42; "community of interest" idea applied to, 44, 61; Harriman and, 45, 206; in 1919, 46; Union Pacific and, 208 New York Central and Hud- son River Bailroad, 33, 46 New York, Chicago and St. Louis Railroad, 35 New York City, effect of Erie Canal on, 5; railroads in 1840, 10; New York and Harlem Railroad in, 27 New York Central and, 29 railroad approaches to, 30 Vanderbilt lines in, 40 monetary center, 47; Penn- sylvania Railroad enters, 51, 59; Cassatt and, 58; real-estate speculation by Erie Railway, 88; Baltimore and Ohio connection, 104, 106, 110; rates from Chicago to, 104; Southern Railway connection, 191 New York, Lake Erie and Western Railroad, 89 New York, New Haven and Hartford Railroad, 45, 60; see also New Haven New York, Pennsylvania and Ohio Railroad, 89 New York, Susquehanna and Western Railroad, 91-92 New York Tribune on Grange politics, 223 New York, West Shore and Buffalo Railroad, 35 "Nickel Plate" route, see New York, Chicago and St. Louis Railroad Norfolk and Western Railroad, 61, 116, 182 North Carolina Railroad, 179- 180 Northern Central Railroad, 57 Northern Pacific Railroad, 19; "community of interest" idea applied to, 110, 117; Oregon connections, 133; competition with Union Pacific, 136; chartered (1864), 139; land grant to, 139-40; Jay Cooke and, 141-42; failure (1873), 142, 166; Villard and, 143-44; receivers appointed, 146; plan of merger with Great Northern, 147-48; reorgan- ization by Morgan, 148-50; prosperity, 152-53; Hill and, 202, 203; Harriman and, 203-06 Northern Securities Company, 151-52, 176, 204, 205 Northwest, development of, 41 North Western Railroad, see Chicago and North Western Railroad Ogdensburg and Lake Cham- plain Railroad, 42 Ohio, railroad speculation in, 9; effect of railroads in, 34; Vanderbilt lines in, 34, 62; Chesapeake and Ohio in, 44; Erie development in, 92,93 Ohio and Mississippi Railroad, 100 Olcott, F. P., 187 Oregon and Transcontinental Company, 142, 143, 144, 145 Oregon Railway and Navi- gation Company, 133, 134, 143 254 INDEX Oregon Short Line Railroad, 133, 145, 146 Oregon Steamship and Navi- gation Company, 133 Osgood, Vanderbilt's son-in- law, 83 Pacific Mail Steamship Com- pany, 136 "Pan Handle" route, 53 Panics (1837), 10, 47, 68, 100; (1857), 13, 26, 101; (1873), 157, 222; (1884), 144; (1893), 110, 162, 187- 188 Parkersburg (Va.), Baltimore and Ohio branch to, 100 Parkman, Francis, Oregon Trail, cited, 138 Paterson and Hudson River Railroad, 70 Patrons of Husbandry, see Granger movement Pennsylvania, Vanderbilt lines in, 34 Pennsylvania Canal, 49 Pennsylvania Coal Company, 92 Pennsylvania Company formed (1870), 52 Pennsylvania Fiscal Agency, 125; see also Credit Mobi- lier Pennsylvania Railroad, 15, 26, 119; expansion, 28, 53-54, 65; Drexels as fiscal agents, 38; "community of interest" idea applied to, 44; history of, 47 et seq.; incorporated (1846), 48; Thomson as head of, 49-51; and Balti- more and Ohio, 104, 115-16, 207, 209; and Richmond and Danville, 179, 180; and East Tennessee, Virginia and Georgia, 180; Southern Rail- way Securities Company and, 180-81; Southern Railway and, 191 Philadelphia, railroad in 1840, 10; commercial importance menaced, 47; Pennsylvania Railroad as aid to, 48; Balti- more and Ohio to, 105, 115; Southern Railway connec- tion. 191 Philadelphia and Columbia Railroad, 48-49 Philadelphia and Reading Coal and Iron Company, 117 Philadelphia and Reading Railroad, 106, 110, 117; see also Reading Railroad Philadelphia, Wilmington and Baltimore Railroad, lOG Pittsburgh, Baltimore and Ohio to, 47, 48, 103; and Pennsylvania Railroad, 48, 68 Pittsburgh, Cincinnati, Chi- cago and St. Louis, Railroad, 63 Pittsburgh, Fort Wayne and Chicago Railroad, 61 Portland (Ore.), development of, 131 Pruyn, J. V. L., 26 Public Works, 49 Pullmans, introduction of, 16 Queen and Crescent route, 186, 190 Railroad regulation. Inter- state Commerce Act (1887), 42, 232; Sherman Anti- trust Act (1890), 42, 116, 151, 209; Union Pacific forced to dispose of holdings, 62; "Granger Laws," 224- 225, 227; commissions, 225, 228; demand in East for, 229-30; bills to regulate interstate commerce, 231- 232; Interstate Commerce Act (1906), 234-35; bibli- ography, 246; see also Gov- ernment ownership INDEX 255 Railroads.influenceon develop- ment in, of United States, 1-2; history of, 2 et seq.; vs. canals, 4-6, 11, 24; objection to steam, 7; early lines in United States, 7-12; first stage of development (to 1850), 12; during Civil War, 13-14; second stage of activity in United States (1860-75), 14; construction of great trunk lines, 14, 15; adoption of standard gage, 16; improvements, 16-17, 18; transcontinental lines, 18-19, 121 et seq.; compe- tition, 104, 216-19; prob- lems connected with, 211 et seq.; overbuilding, 214; during Great War, 238- 241 Rails, history of use of, 2-3; Pennsylvania first uses steel, 54 Ramapo and Paterson Rail- road, 70 Rates, reduction due to com- petition, 104, 110; on Balti- more and Ohio, 106; "battle of the rate," 212-13; "Gran- ger Laws," 224-25, 227; Interstate Commerce Com- mission and, 235-36, 239 Reading Railroad, "com- munity of interest" idea applied to, 44, 61; Balti- more and Ohio and, 61, 117, 207; Morgan and, 149; see also Philadelphia and Read- ing Railroad Reagan, of Texas, bill to regu- late interstate commerce, 231 Ream, N. B., 115 Rebates, 230-31, 234 Regulation, see Railroad regu- lation Reinhart, J. W., 162 Richmond, Dean, 26 Richmond and Danville Rail- road, 179, 180, 182, 184, 185, 187 Richmond and West Point Terminal Railway and Ware- house Company, 110,182,183 et seq. Richmond, Fredericksburg and Potomac Railroad, 56, 191 Ripley, E. P., 119, 163 Roads, National Pike, 96 Roberts, G. B., 55, 57 Rochester and Syracuse Rail- road, 25 Rock Island Railroad, 145 Roosevelt, Theodore, 234 Rutland Railroad, 42 St. Louis, railroads to Atlantic coast from, 14; becomes industrial center, 15; Van- derbilt lines reach, 40; Balti- more aind Ohio connection to, 100, 103, 115 St. Louis and San Francisco Railway, 160, 162, 163 St. Paul, development of, 131; Hill in, 166-67 St. Paul and Pacific, Northern Pacific and, 166; Hill and, 167-71; "Hill's Folly," 171 St. Paul, Minneapolis and Manitoba Railroad, 171-78 St. Paul Railroad, see Chi- cago, Milwaukee and St. Paul Railroad Salt Lake City, development of, 131 Sandusky, Baltimore and Ohio at, 103 Santa Fe Railroad, see Atchi- son, Topeka and Santa Fe Schenectady, railroad in 1840, 10; Mohawk and Hudson to, 21 Schenectady and Troy Rail- road, 25 Schiff, J. H., 194-96 256 INDEX Schuylkill East Side Railway, 106 Scott, T. A., 55, 57 Scranton (Penn.), Erie Rail- road in, 69 Seattle, development of, 131 Sherman Anti-trust Law (1890), 42, 116, 151, 209 Sickles, General D. E., 88 Sioux City (la.), development of, 131 Sloan, Samuel, 28 Smith, D. A., 168, 171; aee also Strathcona, Lord Smith, John, Colony of New York appropriates money for road to, 66 Sonera Railway, 159 South, railroad system of the, 179 et seq. Southern Pacific Railroad, 19; Union Pacific and, 45, 62, 201, 209; expansion, 132- 133; Southern Pacific Com- pany formed, 133, 135; Santa F4 secures rights from, 160-61; Harriman and, 200-01 Southern Pacific Railroad of California, 132 Southern Railway, 119, 181; Harrison president of, 119; Morgan and, 149, 189; im- provement, 191-92 Southern Railway Securities Company, 180-81 Spencer, Samuel, 108, 109, 111 Standard Oil Company and rebates, 213, 231 Stanford, Leland, 126 Staten Island Rapid Transit Company, 106 Stephen, George, 139, 170, 171; see also Mount Stephen, Lord Stephenson, George, invents locomotive, 3, 7, Stevens, John, of Hoboken, advocates railroad, 4; con- structs locomotive (1826), 7 Strathcona, Lord, 168, 174; see also Smith, D. A. Subsidies, for Union Pacific, 123; Central Pacific receives, 126 Supreme Court, decision against "pooling," 116, 234; Granger cases, 228-29; and rate fixing, 232; upholds Adamson Law, 238 Sweeney, P. B., 83 Syracuse and Attica Railroad, 25 Texas and Pacific Railroad, 160 Thayer, Nathaniel, 26 Thomas, E. B., 91 Thomas, P. E., 97, 98 Thomson, Frank, 57 Thomson, J. E., 49-50 Tonawanda Railroad, 25 Topeka, development of, 131 Townsend, Isaac, 26 Transcontinental lines, 18-19, 121 et seq.; see also names of railroads Transportation, canal boats, 4; steamboats, 4, 11-12; see also Canals, Railroads Troy and Greenbush Rail- road, 28 Underwood, F. D., 92 Union Pacific Railroad, 165- 166 ; construction authorized, 19, 123; Harriman and, 43, 45, 193 ct seq.; "com- munity of interest" idea applied to, 45, 62, 116; and Baltimore and Ohio, 118; construction, 123-26, 155; contest with Central Pacific, 127; cost, 128-29; expansion, 132, 145; finan- cial failure (1893), 134-35; competition, 135-36; Mor- gan and, 149, 199; since 1909, 208-10 INDEX 257 Union Pacific, Denver and Gulf Railroad, 134 United Railroad and Canal Company, 51 United States Steel Corpora- tion, 176, 177 Utica and Schenectady Rail- road, 25 Vanderbilt, Cornelius, 50, 148; enters railway field (1860), 13-14, 29-30; and New York Central, 17-18, 20 et seq., 226; early life, 29; and Harleni' Railroad, 31, 33; buys Hudson River Railroad, 32, 33; and Erie Railway, 32-33, 71, 73 et seq.; succeeded by son, 34; and Drew, 32-33, 71, 73 el seq. Vanderbilt, W. H., succeeds his father, 34; criticism of, 36: and Morgan, 37-40 Vanderbilt, W. K.. 41 Vanderbilt lines, 21, 33-34. 35- 36, 40-42, 45 Vibbard, Chauncey, 26 Villard, Henry, 134, 143-45, 146 Virginia railroad opened (1856), 179 Virginia Midland Railway, 182, 184 Washington (D. C). railroad in 1840, 10; Pennsylvania Railroad acquires line to, 56; Baltimore and Ohio branch to, 100; Southern Railway connection, 191 Watt, James, inventor of steam engine, 3 West Jersey and Seashore Railroad, 56 West Shore Railroad, 217 Western New York and Penn- sylvania Railroad, 57 Western North Carolina Rail- road, 184 Westinghouse air-brake, 17 Wheeling, Baltimore and Ohio line to (1853), 100 Willard, Daniel, 91, 118, 119 Wilmington (Del.), Penn- sylvania Railroad acquires line through, 56 Wilson, Woodrow, places rail- roads under government control, 239 Wisconsin, opening up of, 34; railroads in, 36; Potter bill, 224-25; commission estab- lished, 228 Wisconsin Central Railroad, 145, 146, 147. 149 Work, Frank, 76 York, steam locomotive, 99