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E. H. HARRIMAN 
 
 A Biography 
 
 IN TWO VOLUMES 
 
 VOLUME I 
 
E. H. HARRIMAN 
 
 A Biography 
 
 BY 
 GEORGE KENNAN 
 
 WITH ILLUSTRATIONS 
 
 VOLUME I 
 
 BOSTON AND NEW YORK 
 
 HOUGHTON MIFFLIN COMPANY 
 
 Cfje Sibersfoe Press Cambridge 
 1922 
 
<V\wi? 
 
 COPYRIGHT, 1922, BV GEORGE KENNAN 
 ALL SIGHTS RESERVED 
 
 HCftt Bfoetsfoe #tcss 
 
 CAMBRIDGE • MASSACHUSETTS 
 PRINTED IN THE U.S. A. 
 
To the Memory of 
 
 E. H. HARRIMAN 
 
 "whose services to the science of railroading will 
 hardly be reckoned, by those who know what his 
 work was, as less than those rendered by George 
 Stephenson himself " 
 
PREFACE 
 
 IN writing this biography of E. H. Harriman I 
 found it practically impossible to describe his 
 many and varied activities in chronological se- 
 quence, year by year, as one might do in the case of a 
 man who worked only in a single field and took up 
 only one thing at a time. In every year after 1899 
 he was carrying on at least two or three, and some- 
 times half a dozen, important enterprises simul- 
 taneously; and to narrate events by years would 
 render it necessary to put into every year a scrap, or 
 fragment, of everything that he was doing that year, 
 and thus make the biography a series of superim- 
 posed literary sandwiches, each made up of a slice of 
 the Boys' Club, a slice of the Union Pacific, a slice of 
 the Southern Pacific, etc. This would break up 
 three or four continuing enterprises into eight or ten 
 intermixed installments, and tend not only to con- 
 fuse the reader, but to deprive each achievement of 
 the interest that it might have if treated separately 
 as a whole. 
 
 I have also found it necessary to devote what may 
 seem to be a disproportionate amount of space to the 
 
viii PREFACE 
 
 details of certain transactions which, during Mr. 
 Harriman's life, were widely misrepresented or mis- 
 understood. In some cases these transactions were 
 relatively unimportant; but inaccurate accounts of 
 them were made the basis for unwarranted asper- 
 sions and attacks which, at the time, were allowed to 
 go unanswered and which have never since been 
 adequately dealt with.; Mr. Harriman was tempera- 
 mentally disinclined to engage in personal disputes 
 and controversies. He did not like the newspaper 
 notoriety that accompanies quarrels carried on pub- 
 licly, and he often refrained from making replies to 
 injurious charges, even when he had a perfect and 
 convincing defense. Then, too, he regarded public 
 controversy as a waste of time. The work in which 
 he happened at the moment to be engaged seemed to 
 him more important than anything else, and he 
 would not allow himself to be diverted from it by 
 harsh criticism of his methods, or even by unjusti- 
 fied attacks upon his character and personal integ- 
 rity. He always thought, as Abraham Lincoln once 
 said, that "a man has not time enough to spend half 
 his life in quarrels." This unwillingness to engage in 
 controversies, however, was often misinterpreted. 
 Some people, who did not know him personally, 
 thought that it indicated callous indifference to pub- 
 lic opinion, while others regarded it as evidence that 
 
PREFACE ix 
 
 no convincing reply to damaging accusations could 
 be made. Neither of these suppositions, however, 
 had any foundation in fact. Mr. Harriman was not 
 indifferent to public opinion, nor did he ignore at- 
 tacks because he was unable to meet them. He sim- 
 ply did not care to spend in controversy time that he 
 could employ more profitably in work. When an in- 
 timate friend once said to him that he certainly 
 would be misjudged if he did not defend himself 
 with the weapons that lay at his hand, he replied: 
 "The people always find out what's what, in the 
 end, and I can wait. I need all my time and energy 
 to do things." In order that the people who mis- 
 judged Mr. Harriman, in his lifetime, may "find 
 out what's what, in the end," it seems to me neces- 
 sary that they should be in possession of all the facts, 
 and I have therefore given with considerable fullness 
 the details of such transactions as the Chicago & 
 Alton reorganization, the contest for control of the 
 Burlington, the Equitable Life Assurance Society 
 case, the Interstate Commerce investigation, and 
 the break with President Roosevelt. 
 
 I desire gratefully to acknowledge the help given 
 me in the writing of this biography by a large num- 
 ber of railroad men, bankers, and civil engineers, 
 who have not only read my manuscript for errors, 
 
x PREFACE 
 
 but have furnished me with valuable information 
 concerning affairs in which they participated, or of 
 which they had accurate, first-hand knowledge. 
 
 The quoted matter in the Dedication is from an 
 article by W. M. Acworth in the London Economic 
 Journal for March, 1916. 
 
 George Kennan 
 
CONTENTS 
 
 I. Ancestry, Boyhood, and Early Life 
 Attends Trinity School, New York — Becomes 
 successively messenger boy, "pad-shover," clerk, 
 and chief clerk in office of D. C. Hays, stock- 
 broker, New York — Opens broker's office of his 
 own — First venture in stock speculation — In- 
 terest in horses, boxing, and rifle shooting — Va- 
 cations in the Adirondacks — Makes acquaint- 
 ance of Dr. E. L. Trudeau 
 
 II. The Boys' Club 25 
 First Boys' Club in the world founded by Harri- 
 man with three boys on the East Side, New York 
 
 — Average attendance during first five years 
 only about one hundred — Incorporated in 1887 
 with membership of about five hundred — Har- 
 riman puts up new building for it in 1901 at cost 
 of $185,000 — Membership grows to seven thou- 
 sand — Since its foundation club has influenced 
 lives and characters of 250,000 street boys 
 
 III. Entrance into the Railroad Field 59 
 Becomes director of Ogdensburg & Lake Cham- 
 plain Railroad Company — Marries Mary W. 
 Averell of Ogdensburg, New York — Buys Sodus 
 Bay and Southern Railroad, rebuilds it, and sells 
 
 it to the Pennsylvania — Elected director of Il- 
 linois Central — Retires from brokerage business 
 and buys Arden Estate in Orange County, New 
 York — Contest with J. P. Morgan for control of 
 Dubuque & Sioux City Railroad Company — 
 
xii CONTENTS 
 
 Elected Vice-President of Illinois Central — Con- 
 gress enacts interstate Commerce Law — Its in- 
 fluence on Harriman's later career — Contest 
 with general manager of Illinois Central over 
 question of rates 
 
 IV. Illinois Central and Erie 88 
 Acquires great influence in Illinois Central — 
 Extension and improvement of that road — 
 Makes thorough study of practical railroading — 
 Acquires interest in the Erie — Contest with J. 
 
 P. Morgan over reorganization of Erie Company 
 — Supports financially Erie Canal Work of Fur- 
 nace ville Iron Company 
 
 V. The Reorganization of the Union Pacific 109 
 Causes which brought about the insolvency of 
 that company — Attempts at reorganization — 
 Harriman determines to get control of the road 
 and opposes plan of reorganization committee — 
 Finally agrees to cooperate if given position on 
 Executive Committee — Elected Director of re- 
 organized company in December and chairman 
 
 of the Executive Committee in May 
 
 VI. Reconstruction and Reequipment of the 
 Union Pacific 139 
 Harriman makes trip of inspection over Union 
 Pacific System — Bad condition of road and of 
 country tributary to it — Asks appropriation of 
 $25,000,000 for betterments — His plans for re- 
 construction and reequipment of road — Colos- 
 sal engineering difficulties — Work of reducing 
 grades, eliminating curves, and reballasting — 
 The Aspen Tunnel — Abandonment of one hun- 
 dred and fifty miles of old line and reconstruction 
 
CONTENTS xiii 
 
 on new route — Reacquirement of Oregon Short 
 Line and Oregon Railroad & Navigation Com- 
 pany lost at time of bankruptcy — Financial re- 
 sults of Harriman's work — Great increase in 
 traffic and earnings — Enhancement in values of 
 farm lands and products — Enormous increase 
 in service rendered to public — Reduction of 
 rates 
 
 VII. The Expedition to Alaska 185 
 Charter of steamer George W. Elder — Harri- 
 man invites twenty-five distinguished scientists 
 
 to accompany him and pays all their expenses 
 from New York to Siberia and back — Depar- 
 ture from Seattle — Scenery, fauna, and flora of 
 Alaskan waters — Visit to Muir Glacier — Side 
 trip over ice to "Howling Valley" — Visit to 
 Malaspina Glacier — Discovery of Harriman 
 Fiord — Stop at Island of Kadiak — Harriman 
 shoots great Kadiak bear — Steamer strikes reef 
 in Bering Sea in dense fog — Visit to coast of Si- 
 beria — Return to Seattle — Scientific results of 
 expedition 
 
 VIII. The Kansas City Southern Episode 214 
 History of Kansas City Railroad Company — 
 Harriman acquires control of road and partially 
 rebuilds it — New Board of Directors elected 
 and Harriman retires — Criticisms of his man- 
 agement 
 
 IX. Acquirement and Reconstruction of the 
 Southern Pacific 232 
 Harriman buys control of Southern Pacific — 
 Objects of purchase — Reduction of grades and 
 eliminations of curves — Building of Lucin cut- 
 
xiv CONTENTS 
 
 off across Great Salt Lake at cost of $9,000,000 — 
 Abandonment of three hundred and seventy-four 
 miles of old line and reconstruction of three hun- 
 dred and twenty-two miles on new route — Re- 
 builds thirty miles of wooden trestles and bridges, 
 replacing them with structures of concrete or 
 steel — Spends $20,000,000 in improving road in 
 only three places — Introduces system of block 
 signals — Builds extension of Southern Pacific to 
 Mazatlan in Mexico — Spends in reconstruction, 
 reequipment, and extension of Southern Pacific 
 about $242,000,000 — Cost of betterments and 
 extensions on the two Pacific Roads $400,000,000 
 
 X. Railroad Combinations 261 
 Results of railroad combinations and consolida- 
 tions — They reduce rates instead of increasing 
 them — Alleged danger of monopoly — It is dis- 
 proved by history of Pennsylvania — Results of 
 Harriman's management of Southern Pacific — 
 Great increase in traffic and service to public — 
 Economy in operation through pooling of cars 
 and standardization of equipment — Evils of 
 over-regulation — Harriman's view of central- 
 ized control in railroad field 
 
 XI. Control of the Burlington 286 
 Reasons for desire of both Hill and Harriman to 
 acquire the road — Harriman makes two unsuc- 
 cessful attempts to get it — Hill succeeds in mak- 
 ing the purchase but refuses to let Harriman 
 share in it — Harriman then tries to secure con- 
 trol of Northern Pacific by purchasing $79,000,- 
 000 of its stock 
 
CONTENTS xv 
 
 XII. Northern Pacific Panic 311 
 Heavy purchases and short sales of Northern Pa- 
 cific stock bring on panic in Wall Street — Hill 
 and Morgan compromise with Harriman and 
 form Northern Securities Company — Objects 
 
 of this organization — Government attacks it in 
 the courts on the ground that under the Sher- 
 man Anti-Trust Law it is a combination in re- 
 straint of trade — U.S. Supreme Court orders its 
 dissolution 
 
 XIII. Contests with Senator Clark and Keene 340 
 Contest with Senator Clark over building of San 
 Pedro, Los Angeles & Salt Lake Railway — James 
 
 R. Keene attempts to get control of Southern 
 Pacific — Harriman and Schiff form defensive 
 pools for protection of Union Pacific 
 
 XIV. Harriman and the Erie 360 
 Elected a director of the Erie Company and a 
 member of its Executive Committee — Cooper- 
 ates with President Underwood in financing 
 betterments — Saves Erie from great loss on its 
 purchase of Cincinnati, Hamilton & Dayton 
 Railroad — Prevents bankruptcy of the Erie 
 Company by taking up $5,500,000 of its short- 
 term notes 
 
 XV. The Contest with the Santa Fe 378 
 Harriman buys $30,000,000 of Santa Fe stock 
 and elects two directors 
 
 XVI. Northern Securities Company Dissolved 387 
 Contest with Hill over distribution of its assets 
 
 — U.S. Supreme Court decides in favor of Hill 
 
xvi CONTENTS 
 
 — Harriman sells Northern Pacific and Great 
 Northern shares at profit of $58,000,000 — In- 
 vests $130,000,000 of Union Pacific money in 
 stock of other roads — Expediency of such in- 
 vestment questioned 
 
 XVII. Equitable Life Investigation 405 
 
 Harriman becomes director of company — Presi- 
 dent Alexander and Vice-President Hyde begin 
 factional quarrel — Harriman suggests com- 
 mittee of investigation — Frick committee ap- 
 pointed with Harriman as member — Commit- 
 tee recommends dismissal of both Alexander and 
 Hyde — Both factions then attack Harriman — 
 State Legislature appoints investigation commit- 
 tee with Charles E. Hughes as counsel — Harri- 
 man makes statement of his relations with com- 
 pany 
 
ILLUSTRATIONS 
 
 E. H. Harriman Photogravure Frontispiece 
 
 William Harriman, E. H. Harriman' s Great- 
 grandfather 2 
 
 View of Government House, facing the 
 Bowling Green, showing William Harri- 
 man' s House 6 
 
 From an old lithograph (1847) 
 
 Colonel John Neilson, a Maternal Ancestor io 
 
 The House at Hempstead, L.I., where E. H. 
 Harriman was born 14 
 
 The Boys' Club, New York City 40 
 
 E. H. Harriman at Thirty 60 
 
 On the Continental Divide 190 
 
 Head of Harriman Fiord, Prince William 
 Sound, Alaska. 202 
 
 The Last Spike of the Lucin Cut-Off across 
 Salt Lake 248 
 
 The New Colossus of Roads: A Newspaper 
 Cartoon 396 
 
 Map showing Harriman Lines, Hill Lines, 
 and the Burlington System 422 
 
w 
 
 E. H. HARRIMAN 
 
 CHAPTER I 
 ANCESTRY, BOYHOOD, AND EARLY LIFE 
 HEN a man greatly distinguishes himself, in 
 
 any field of human endeavor, the world nat- 
 urally asks: "Who were his ancestors? Where did 
 his family line originate and what was its history? 
 Did he inherit his ability from progenitors who had 
 themselves won distinction in the same or a similar 
 field?" 
 
 The history of E. H. Harriman's family in the 
 United States begins with the arrival in New York 
 of an Englishman named William Harriman in the 
 early summer of 1795. 1 This ancestor of the Ameri- 
 can branch of the family had been, for some years, a 
 dealer in stationery in the city of London. His busi- 
 ness must have been fairly large, as well as prosper- 
 ous, because the merchant to whom he sold it, when 
 he himself started for America, afterward became 
 Lord Mayor of the city. William Harriman came to 
 the United States, therefore, not because he had been 
 
 1 There are said to have been Harrimans in Massachusetts as early 
 as 1720, in New Jersey in 1747, and in New York in 1750; but their re- 
 lationship to E. H. Harriman's ancestor has not been determined. 
 
2 E. H. HARRIMAN 
 
 unsuccessful at home, but partly because he had 
 been a warm sympathizer with the American colo- 
 nists in their struggle for independence, and partly 
 because he thought he might find, in the newly es- 
 tablished Republic across the sea, better opportuni- 
 ties for ability and enterprise than any that he could 
 reasonably look for in the England of that time. 
 This William Harriman, who was E. H. Harriman's 
 great-grandfather, sailed from Bristol in the ship 
 Portland on the 4th of April, 1795, and after a tedi- 
 ous voyage of sixty days arrived in New York on the 
 3d of the following June. He went, almost at once, 
 to New Haven, Connecticut, which was then a grow- 
 ing and thriving city, almost as old as New York. 
 
 Most of the Europeans who came to America in 
 the last decade of the eighteenth century were com- 
 paratively poor; but from the fact that William 
 Harriman soon became known to his New Haven 
 neighbors as "the rich Englishman," it may fairly 
 be inferred that he was possessed of some capital. 
 At any rate, he had money enough to go into business 
 on a rather large scale, because soon after his arrival 
 in this country he bought or chartered a number of 
 sailing vessels and engaged in the West India trade 
 — a field of maritime enterprise in which, if the haz- 
 ards were sometimes great, the profits were generally 
 large. 
 
WILLIAM HARRIHAN 
 E. H. Harriman's great-grandfather 
 
ANCESTRY, BOYHOOD, AND EARLY LIFE 3 
 
 In the year 1800, after living five years in New 
 Haven, William Harriman moved to the city of New 
 York, where he continued to carry on the trade with 
 the West Indies, but added to it a general commis- 
 sion business. Throughout the early part of the 
 nineteenth century he resided with his family on 
 Broome Street, just off Broadway, in a part of the 
 city where many old New Yorkers then had their 
 homes. Although he never acquired great wealth, he 
 always lived in comfort and was generally prosper- 
 ous up to the time of his death. His family consisted 
 of eight sons and four daughters; but several of the 
 sons were lost at sea, and only Orlando, the grand- 
 father of E. H. Harriman, lived to transmit the fam- 
 ily name. This surviving son succeeded to his fa- 
 ther's business, carried it on successfully for many 
 years, and became a prominent figure in the com- 
 mercial life of New York; but in 1837 he lost a large 
 part of his property in the great fire which then 
 swept over the city. From this mishap he never fully 
 recovered; but in later years he partly retrieved his 
 fortunes, and passed the remainder of his life in com- 
 fort, if not in luxury. 
 
 His oldest son, also named Orlando, was E. H. 
 Harriman's father. He entered Columbia University, 
 distinguished himself as a student, and was gradu- 
 ated with honor, after having won the gold, silver, 
 
4 E. H. HARRIMAN 
 
 and bronze medals in his classes. Although most of 
 his brothers followed the example of their ancestors 
 by engaging in commercial pursuits, Orlando decided 
 to enter the ministry, and in 1841, just four years 
 after the fire which destroyed the greater part of his 
 father's property, he was ordained as a deacon in the 
 Episcopal Church. Whether he was qualified, in all 
 respects, for the profession that he adopted, seems to 
 be a matter of some doubt. He had been diligent and 
 successful as a student, and he was unquestionably a 
 man of character and culture; but he is remembered 
 as somewhat cold and austere in manner, and it is 
 possible that he lacked the magnetic personal charm 
 which might have given popularity and success to a 
 clergyman of much less ability. Certain it is that he 
 did not secure the advancement, or achieve the ma- 
 terial success, that might reasonably have been ex- 
 pected. He seems, however, to have had confidence 
 in his own future, because in 1841, soon after his 
 ordination as deacon, he assumed new responsibili- 
 ties by marrying Miss Cornelia Neilson, a lady to 
 whom he had been for some time betrothed. Miss 
 Neilson belonged to an old and distinguished New 
 Jersey family. Her father, who was related to the 
 Stuyvesants and the Bleeckers, was one of the ablest 
 and most successful physicians in New York, and her 
 paternal ancestor, Colonel John Neilson, served on 
 
ANCESTRY, BOYHOOD, AND EARLY LIFE 5 
 
 the staff of General George Washington during the 
 Revolutionary War, and was a delegate from New 
 Jersey to the Constitutional Convention of 1777. 
 She was a woman of strong and well-balanced char- 
 acter, and from her, rather than from the Reverend 
 Orlando Harriman, Mr. E. H. Harriman seems to 
 have inherited his business ability. 
 
 Mr. and Mrs. Orlando Harriman were devotedly 
 attached to each other, and the marriage was a 
 happy and successful one; but the husband did not 
 immediately succeed in securing adequate financial 
 support, or in establishing a permanent home. He 
 was still a deacon when he married, and it was not 
 until 1843 that he became assistant rector of Christ 
 Church in Tarrytown, New York. A year or two 
 later he moved to Hempstead, Long Island, and took 
 charge of the parish there, but in neither place did 
 he receive a salary that was commensurate with his 
 abilities. Country churches at that time were com- 
 paratively small and weak, and the few hundred 
 dollars that they could afford to pay their ministers 
 hardly sufficed for the support of a man with a grow- 
 ing family. When Edward Henry Harriman was 
 born in the Episcopal rectory at Hempstead, on the 
 20th of February, 1848, his father began to feel that 
 the increasing burden of his family obligations and 
 responsibilities was greater than he could bear under 
 
6 E. H. HARRIMAN 
 
 the conditions then existing. He had four young 
 children to care for and educate; the parish could not 
 pay more than it was already paying; and there 
 seemed to be little prospect of a change for the better 
 without a change of location. In 1849, the "gold 
 rush " to the Pacific Coast began, and when, through 
 the influence of friends, the Reverend Orlando Har- 
 riman received in 1850 a call from a mountain parish 
 in California, he decided to accept. He had labored 
 six years in Tarry town and Hempstead without much 
 advancement or pecuniary success, and he doubt- 
 less thought that in such a field as that presented 
 by the Pacific Coast there would be an opportunity 
 to do much good, and at the same time secure ade- 
 quate compensation for his work. In view of the 
 uncertainties involved in this change of location, it 
 seemed inexpedient to take his family with him, so 
 leaving his wife and children in Hempstead, with the 
 intention of sending or returning for them if all 
 should go well, he sailed in May, 1850, for California 
 by way of Panama. 
 
 ' Owing largely to circumstances that could not 
 have been foreseen, this bold venture of E. H. Har- 
 riman's father proved to be unfortunate. The sani- 
 tary conditions on the Isthmus at that time were 
 bad; there was no railway across it; and passengers 
 had to make their way from the Atlantic to the 
 
ANCESTRY, BOYHOOD, AND EARLY LIFE 7 
 
 Pacific as best they could, in carts, on mule-back, or 
 on foot. When Mr. Harriman, after such a journey, 
 arrived "wet, tired, and hungry" in Panama, he was 
 taken seriously ill. After lying there, helpless and 
 without much attendance, for a month or more, he 
 was able to resume his journey; but on the voyage to 
 San Francisco he read the burial service over the 
 bodies of seven of his fellow passengers who, less 
 fortunate than he, died of Chagres fever. 
 
 Upon reaching his proximate destination, Mr. 
 Harriman was disappointed to find that the vestry- 
 men of the church to which he had been called, hav- 
 ing heard nothing from him during his illness, had 
 given him up, and had filled the vacancy offered to 
 him by appointing another rector. Left thus without 
 a parish, he wandered about the State for nearly a 
 year, preaching here and there in pioneer towns or 
 mining camps ; founding Episcopal churches in Stock- 
 ton and Sacramento; going through an epidemic of 
 cholera in the latter place; and rendering everywhere 
 such service as he could to the living and the dead. 
 Early the next year, broken in health and disap- 
 pointed in the hope of establishing himself in a place 
 to which he might bring his family, he decided to 
 return to the East. Sailing from San Francisco in 
 March, he again crossed the Isthmus of Panama — 
 this time without mishap — and reached New Yprk 
 
8 E. H. HARRIMAN 
 
 on the 18th of April, 1851. It would perhaps have 
 afforded him some consolation, as he thus returned 
 unsuccessful from his first great venture, if he could 
 have foreseen that in that same month of April, just 
 fifty-five years later, his baby son, Edward Henry, 
 would start from New York for the Far Western 
 State where he himself had failed, and would there 
 put his wealth, his power, and the resources of his 
 two great railway systems, at the service of the peo- 
 ple of San Francisco, when they had been ruined and 
 made homeless by earthquake and fire. 
 
 Upon his return to New York, the Reverend Or- 
 lando Harriman took up his residence in Jersey City . 
 and established his family in a modest but com- 
 fortable home on Hamilton Square. For several 
 years his position there was that of a semi-attached 
 curate, whose duty it was to assist in the work of one 
 of the large city churches. Afterward he was called 
 to Clairmont, and then to West Hoboken, and in the 
 latter place he officiated, in the early sixties, as rector 
 of a small wooden church known as St. John's, to 
 which he walked every Sunday from Jersey City. 
 When he voluntarily relinquished this charge, in 
 October, 1866, the congregation was owing him more 
 than a year's salary, although, as stated in resolu- 
 tions of the vestry, he "had been the means of pre- 
 serving the church edifice," and had enabled the 
 
ANCESTRY, BOYHOOD, AND EARLY LIFE 9 
 
 parish to, "make great progress" irf the face of "nu- 
 merous obstacles." The faithful rector would have 
 been better satisfied, perhaps, if the official recogni- 
 tion of his services had been tendered in a monetary 
 rather than a verbal form. But he was apparently 
 fated, throughout his professional career, to earn 
 comparatively little and to have great difficulty in 
 collecting even the small sums that were his due. 
 With a family of six children to feed, clothe, and 
 educate, it was often difficult, in framing the domes- 
 tic budget, to make ends meet; and it was not until 
 he had passed middle life that a small inheritance 
 from the Neilson side of the family lightened a little 
 the burden of financial embarrassment. 
 
 When the Reverend Mr. Harriman returned from 
 California and settled with his family in Jersey City, 
 Edward Henry, the third son, was a little more than 
 three years of age. During most of his boyhood he 
 lived with his parents in the Hamilton Square house 
 and attended the public schools of Jersey City; but 
 as he grew older his father thought best to give him a 
 better, or at least a different, educational training, 
 and therefore sent him to the Trinity School in New 
 York. 1 He still continued, however, to live at home, 
 and walked to the school and back every day from 
 
 1 This school was founded in 1709. In April, 1914, Mrs. Harriman, 
 in memory of her husband, gave to the school about five and a half 
 acres of ground in the Bronx, valued at $150,000, for an athletic field. 
 
io E. H. HARRIMAN 
 
 the old Jersey City ferry, starting early in the morn- 
 ing and returning at a late hour in the afternoon. 
 So far as his early associates remember, there was 
 little or nothing in his life as a boy to indicate ex- 
 traordinary ability. He was quick, alert, and observ- 
 ing mentally, and very active physically; but, like 
 many other normal boys, he was more interested in 
 sports and athletic games than in books. He ac- 
 quired knowledge, however, rapidly and with great 
 facility, and when, at the beginning of his last term 
 in Trinity, he made up his mind to win the first prize 
 for scholarship, he accomplished his self-imposed 
 task with ease. This, perhaps, was a foreshadowing 
 of his future. Many years later, when the elderly 
 pedestrian, Weston, started for a walk across the 
 continent, a newspaper editor in New York con- 
 ceived the idea of interviewing the successful busi- 
 ness men of the city who had passed the prime of life, 
 and asking them whether they thought they could 
 accomplish a similar feat. When a reporter pro- 
 pounded the question to Mr. Harriman, the great 
 financier looked at the young man for a moment and 
 then said: "Yes, if I put my mind on it." As a boy, 
 however, Edward Henry did not always put his 
 mind on his school books. He was naturally restless 
 and high-spirited, and his deportment card at Trin- 
 ity showed that he was even more inclined to fun and 
 
COLONEL JOHN NEILSON 
 A maternal ancestor of E. H. Harriman 
 
ANCESTRY, BOYHOOD, AND EARLY LIFE n 
 
 mischief than to serious study. Although not a big 
 boy, physically, he was strong and agile, and when, 
 in his walks to and from Trinity School, he encoun- 
 tered the rough street boys of western Manhattan, 
 he quickly showed that he had spirit, pugnacity, 
 and "scrapping" ability enough to take care of him- 
 self. In this respect, too, the boy was perhaps the 
 father of the man. That he early displayed qualifica- 
 tions for leadership seems to be indicated by the fact 
 that when, at the beginning of the Civil War, his 
 playmates in Jersey City organized a sort of Boy 
 Scout company to march through the streets with 
 regiments of soldiers on their way to the front, Ed- 
 ward Henry, although the youngest of them all, was 
 chosen as captain. 
 
 The boy's education, so far as school training was 
 concerned, came to an end when he reached the age 
 of fourteen. After two years in Trinity, he seems to 
 have made up his mind that it would be better for 
 him, and perhaps better for his family, if he should 
 begin at once the active work of life. Coming home 
 from school one day, he marched into his father's 
 study, threw his books down on the table, and said 
 to his surprised parent: "Father, I have become 
 convinced that there is something else in life for me 
 besides school and books; I am going to work." 
 The father, who himself had studious tastes, who 
 
12 E. H. HARRIMAN 
 
 knew that the boy had aptitude for the acquirement 
 of knowledge, and who perhaps had plans of his own 
 for the future of his son, objected to this precipitate 
 abandonment of school, and tried to convince the 
 boy that to go into business at so early an age would 
 be very unwise. Edward Henry, however, was ob- 
 durate, and after listening impatiently to his father's 
 arguments, merely repeated his first declaration: 
 "I am going to work." The father at last yielded. 
 By the exercise of parental authority he might per- 
 haps force the young student to return to school; 
 but it did not seem expedient to use coercion when 
 the boy's heart was so evidently set on a business 
 career. 
 
 Edward Henry was not long in finding the "work" 
 that he coveted. He seems to have gravitated natu- 
 rally to Wall Street, and there he -soon secured a 
 position as office boy, at a salary of five dollars a 
 week, in the Stock Exchange house of D. C. Hays. 
 His work, at first, was largely that of a messenger, 
 whose duty it was to carry securities in a handbag 
 from his own office to the offices of other bankers 
 and brokers with whom his employers had business 
 dealings. He did not long remain, however, in this 
 position. In the Wall Street of that day there were 
 no electric "tickers" to print quotations of stocks 
 and bonds in the offices of the brokers, and business 
 
ANCESTRY, BOYHOOD, AND EARLY LIFE 13 
 
 was largely carried on through the medium of mes- 
 senger clerks, who carried from place to place pads 
 of paper on which current prices of securities and 
 offers to buy or sell were written with a pencil. These 
 clerks were known in the slang of the Street as " pad- 
 shovers." As soon as young Harriman had become 
 familiar with his environment and had made the 
 acquaintance of the men with whom his firm had 
 dealings, he was promoted to the position of "pad- 
 shover," and in that capacity he entered upon his 
 Wall Street career. It was a modest beginning, and 
 the financier of later years was justified in saying: 
 " My capital when I began was a pencil and this" — 
 tapping his head. 
 
 The vocation of messenger clerk or "pad-shover" 
 in the early sixties was, in a certain sense, a kinder- 
 garten of finance, in which many men who afterward 
 gained distinction acquired their first knowledge of 
 monetary affairs. Among the associates of young 
 Harriman in this primary financial school were 
 Thomas Fortune Ryan, H. K. Burras, Eugene Bo- 
 gart, and many other boys who subsequently became 
 wealthy and prominent in financial or industrial 
 fields. Edward Henry, as a "pad-shover," was alert, 
 enterprising, and trustworthy, and had, even at the 
 age of fourteen, great quickness of perception and an 
 accurate and retentive memory. He could carry in 
 
14 E. H. HARRIMAN 
 
 his head and give offhand to inquiring brokers the 
 current prices of stocks and bonds, while most of the 
 other boys had to produce or consult their pads. 
 
 As he grew older and as more office work was given 
 him, he began to take an interest in the reasons for 
 the incessant changes in the prices of stocks and 
 bonds, and to connect them with transactions and 
 events in other and often far-distant parts of the 
 world. A deep impression is said to have been made 
 upon him by the panic in Wall Street which followed 
 the advance of discount rates to ten per cent by the 
 Bank of England after the failure of Overend, Gur- 
 ney & Co. in 1866. This phenomenon showed him 
 that the Wall Street market is not the outcome of 
 local, or even of American conditions, and that the 
 New York Stock Exchange is a part of the commer- 
 cial machinery of the world. He then began to take a 
 wider view of the financial field and to study changes 
 in interest rates and fluctuations of stocks in connec- 
 tion with the causes that produced them. Before he 
 was twenty he had become thoroughly familiar with 
 the brokerage business, and in 1868 or 1869 he was 
 made managing clerk in the Hays office. By that 
 time he had made up his mind that Wall Street af- 
 forded the best field for the exercise of his powers and 
 had begun to cherish the ambition of going into busi- 
 ness for himself. 
 
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ANCESTRY, BOYHOOD, AND EARLY LIFE 15 
 
 In the summer of 1870, when Harriman was a little 
 more than twenty-two years of age, he borrowed 
 three thousand dollars from his uncle, Oliver Harri- 
 man, — a wealthy merchant of the firm of Low, 
 Harriman & Co., — bought a seat on the New York 
 Stock Exchange, and opened an office of his own on 
 the corner of Broad Street and Exchange Place. It 
 was a very modest office, situated on the third floor 
 of the building, and customers had to climb two 
 flights of stairs in order to reach it; but the young 
 broker, during his term of service as "pad-shover" 
 and managing clerk, had made many acquaintances 
 among investors and financiers, and business began 
 to find its way to him, even up two flights of stairs. 
 But he soon moved to a more accessible location. 
 "Dick" Schell, who was a noted speculator of that 
 time and an occasional customer of Harriman, hated 
 to climb stairs, and on one of his visits to the office of 
 the young broker he offered to give him business 
 enough to pay his rent if he would move to the 
 ground floor. Harriman did this and at once received 
 the trade of the Schell brothers, two of whom were 
 bank presidents, and one an official of the New York 
 Central Railroad Company and a personal friend of 
 Commodore Vanderbilt. But Harriman soon gained 
 other and equally important customers. C. J. Os- 
 borne, one of the prominent speculators of that time, 
 
16 E. H. HARRIMAN 
 
 frequently gave him orders and declared that he was 
 "the best broker in Wall Street." August Belmont 
 (senior) also made use of his knowledge and skill and 
 said, a few years later, that he was "good to draw on 
 his [Belmont's] credit up to a million dollars." Every- 
 body recognized his loyalty and trustworthiness. 
 He never made selfish speculative use of the knowl- 
 edge that he gained of his customers' intentions or 
 plans, and never failed to execute orders with intel- 
 ligence and discretion. The Equitable Life Assur- 
 ance Society employed him in the making of invest- 
 ments, and he acted as broker, now and then, for 
 both Commodore Vanderbilt and Jay Gould. 
 
 Bank credit at that time — before the establish- 
 ment of the Clearing House — was even more 
 important in Wall Street than it is now. The nature 
 of the business done there often made it necessary 
 for a broker largely to overdraw his bank account, 
 and if his credit was good, his checks were certified 
 without much regard to his actual balance. Such 
 transactions amounted, in effect, to temporary loans, 
 and no active broker could get along without them. 
 Harriman's ability and integrity soon became so 
 generally recognized that he never lacked ample 
 credit, and three or four banks, including the old 
 Union, stood ready to certify his checks to almost 
 any reasonable amount. His business was profitable 
 
ANCESTRY, BOYHOOD, AND EARLY LIFE 17 
 
 almost from the beginning, and his commissions, 
 even in the first year, were so large that he had no 
 difficulty in paying back the three thousand dollars 
 borrowed from his uncle. 
 
 For three or four years after he became a broker, 
 Harriman confined himself strictly to a commission 
 business; but as he gradually accumulated capital, 
 he began to watch for opportunities to use it for his 
 own benefit on a larger scale. The first of such op- 
 portunities came in 1874, when "Deacon" White, a 
 leading speculator of that day, attempted to corner 
 the so-called "anthracite stocks" — that is, the 
 stocks of railroads whose chief freight business was 
 the transportation of coal. Harriman noticed the 
 rise in these stocks and felt sure that some one was 
 trying to monopolize them for speculative purposes. 
 He did not believe that the shares were intrinsically 
 worth the prices that were being offered for them, 
 and when the rise seemed to have reached its culmi- 
 nation, he sold them short. The result vindicated his 
 judgment. " Deacon " White failed to get enough of 
 the stocks to establish the corner, and in the "slump" 
 of values that followed Harriman was able to cover 
 his short sales at a profit of about $150,000. En- 
 couraged by this success, he undertook a little later 
 a bear campaign in Delaware & Hudson, which was 
 then quoted at about 36. The invisible forces, how- 
 
i8 E. H. HARRIMAN 
 
 ever, which influence the Wall Street market cannot 
 always be foreseen by the closest observation, nor 
 estimated by the shrewdest judgment. At the time 
 when Harriman began selling Delaware & Hudson 
 stock short, John Jacob Astor, a much wealthier and 
 more powerful man, happened to want as much of it 
 as he could get, and the shares, instead of falling in 
 price, as Harriman expected, rose steadily under the 
 active demand for them by Astor's brokers, until 
 the short seller was finally obliged to cover at a heavy 
 loss. In this series of transactions a large part of the 
 profit that Harriman had made out of the "slump" 
 in the anthracite stocks was swept away. His com- 
 mission business, however, continued to be profitable 
 and in the long run his losses were more than coun- 
 terbalanced by his gains. About this time he gave 
 his friend, James B. Livingston, an interest in the 
 business and the name of the firm became "E. H. 
 Harriman & Co." 
 
 During the first five years of his experience as a 
 broker, Harriman not only gained the confidence 
 and support of many men who were then prominent 
 in Wall Street, but made warm personal friends in 
 the higher social circles of the city. Among such 
 friends were Stuyvesant Fish, James B. Livingston, 
 August Belmont, Jr., William Bayard Cutting, R. 
 Fulton Cutting, Dr. E. L. Trudeau (of Saranac Lake 
 
ANCESTRY, BOYHOOD, AND EARLY LIFE 19 
 
 fame), the two Van Burens, and George C. Clark. 
 They were all young men of approximately his own 
 age; many of them shared his tastes, and some of 
 them were destined to play important parts in his 
 future career. 
 
 In his leisure hours Harriman was not a solitary 
 student or a recluse. He was a director in the old 
 Travelers' Club, on Fifth Avenue, and seldom failed 
 to attend its Saturday night dinners. He was also a 
 member of the Union and Racquet Clubs and a pri- 
 vate in the famous Seventh Regiment of the Na- 
 tional Guard, which was then, and for many years 
 afterward, the crack militia organization of the State. 
 In Company K of this regiment he drilled with Au- 
 gust Belmont, Jr., and other Wall Street associates 
 and became so skillful in the use of the rifle that he 
 won many medals and trophies for expert marks- 
 manship. Convivial pleasures of the commoner sort 
 never appealed to him; but he had a passion for ath- 
 letics and out-of-door sports. Although not a big 
 man physically, he was strong and well developed; 
 his movements were quick and well coordinated, and 
 he soon gained distinction as a gymnast, a boxer, 
 and a field sportsman. He had always been a lover 
 of horses, and almost the first purchase that he made, 
 after he was able to afford luxuries, was a trotting 
 horse. He bought the animal, for comparatively 
 
20 E. H. HARRIMAN 
 
 little money, at a country fair; but his judgment of 
 horseflesh was good, and the beast that looked like a 
 country scrub proved, after a little training, to be so 
 fast that it was not always beaten on the speedway, 
 even by the blooded horses of Vanderbilt and Robert 
 Bonner. 
 
 Harriman, in his boyhood, had had many "scraps" 
 with the street urchins of Manhattan on his way to 
 and from the Trinity School, and it was perhaps the 
 remembrance of these contests that turned his atten- 
 tion, in his early manhood, to boxing. He took les- 
 sons of "Larry" Edwards, brother of the "Billy" 
 Edwards who then held the light-weight champion- 
 ship, and soon became one of the quickest and clever- 
 est boxers in New York. He finally helped his teacher 
 to establish, over Jones's candy shop on the corner of 
 Broadway and Twenty-First Street, a sort of boxing 
 academy, which ultimately became a fashionable 
 resort for the aristocratic young men of the city who 
 were interested in athletic sports. Harriman himself 
 was its chief patron, but on its rolls appeared also the 
 names of Francis Appleton, Louis Gross, the Living- 
 ston brothers, the Clark brothers, August Belmont, 
 Jr., and many other well-known young men of that 
 time. There Harriman boxed with his teacher and 
 his associates, and occasionally put on the gloves 
 with even the redoubtable "Billy" Edwards himself. 
 
ANCESTRY, BOYHOOD, AND EARLY LIFE 21 
 
 As a fisherman, a hunter, and a lover of outdoor 
 sports in general, Harriman was naturally attracted 
 to the Adirondacks, and he spent there, both in his 
 early manhood and in later life, some of the most 
 enjoyable of his summer vacations. Dr. E. L. Tru- 
 deau, then a practicing physician in New York, was 
 also a lover of the Adirondacks, and in his autobi- 
 ography, many years later, he described in the fol- 
 lowing words one of the earliest meetings that he had 
 with Harriman at Paul Smith's: 
 
 . . . Another friend of mine and of the Livingstons, 
 E. H. Harriman, offered to come up and look after me, 1 
 and spent most of the month of August with me. A tele- 
 gram which read, "Here I come! Head me!" preceded 
 his arrival by a few hours. Paul Smith had purchased 
 somewhere a gilt ball, which with great pride he had 
 placed on the flag-pole in front of the hotel. I told Paul 
 that I knew if Ed Harriman caught sight of that ball 
 when he arrived, the first thing he would do would be to 
 shoot at it. As the stage stopped, Ed Harriman jumped 
 out, rifle in hand, caught sight of the bright ball at the 
 top of the flag-pole, and put a bullet through it before 
 shaking hands with us all. This was before Mr. Harri- 
 man began his wonderful career as a railroad organizer 
 and a great financier — for I believe he was still a clerk 
 in the office of D. C. Hays & Co. at that time — and a 
 more light-hearted and better companion and friend I 
 could not have had. Many were the beautiful summer 
 days we spent floating over the lakes in our boats, hunt- 
 ing, fishing, and camping together wherever we fancied 
 
 1 Dr. Trudeau had been ill and had gone to the mountains to recu- 
 perate. 
 
22 E. H. HARRIMAN 
 
 to stop for the night. Mr. Harriman was an excellent 
 shot with a rifle, and we soon became rivals — especially 
 in the sport of loon-hunting. We were both light-hearted 
 young men in those joyous days, and little did either of 
 us know what responsibilities and struggles the future 
 held in store for us, and how absolutely divergent would 
 be the paths Fate had marked out for us to walk in. 
 Many years afterward, when the financial and railway 
 world was ringing with Mr. Harriman 's name, he came 
 to Paul Smith's in his private car to see me, and at Dr. 
 Seward Webb's invitation he went down to inspect some 
 of the lakes on Dr. Webb's wonderful forest preserve, 
 taking me along with him. A special engine was sent up 
 by the New York Central at his order to take the car 
 wherever he wanted to go ; and Dr. Webb's guides and 
 saddle horses were there to meet us when we arrived. 
 As I remarked upon the beauty and comfort of his car, 
 some recollections of the old days must have crossed his 
 mind, for he looked up at me with his keen smile and 
 said: "This is not half as much fun, Ed, as the way we 
 travelled about in the old days that summer at Paul 
 Smith's." And he was right, for it certainly was not. 
 
 During the "joyous days" in the Adirondacks to 
 which Dr. Trudeau refers, Mr. Harriman's buoyancy 
 of spirit and love of fun found expression in many 
 pranks and practical jokes which are still recalled by 
 the guides and mountaineers when they gather about 
 evening camp-fires in the great North Woods. One 
 summer, for example, there happened to be at Paul 
 Smith's an English traveler and sportsman who 
 made himself tiresome and unpopular by boasting 
 extravagantly of his exploits in the hunting of big 
 
ANCESTRY, BOYHOOD, AND EARLY LIFE 23 
 
 game in various parts of the world. Mr. Harriman 
 sent to New York for a bear's foot, and spent a large 
 part of a moonlight night in making tracks with it in 
 all the soft muddy places he could find along the 
 streams and around the lake. The boastful English- 
 man soon discovered them, and his persistent but 
 fruitless efforts to find and shoot the non-existent 
 animal furnished Mr. Harriman and his friends with 
 much secret amusement. 
 
 On another occasion, finding that some of the 
 guides and natives at Paul Smith's were inclined to 
 pride themselves on their proficiency in " the manly 
 art of self-defense," Mr. Harriman brought up from 
 New York, incognito, the light-weight champion 
 boxer, "Billy" Edwards, whom he introduced, under 
 an assumed name, as one of his Wall Street friends. 
 The guides, most of whom were large and physically 
 powerful men, regarded the smooth-faced, slightly- 
 built New Yorker with more or less disdain, and 
 hardly thought it worth while, at first, to put on the 
 gloves with him. When, however, they were finally 
 persuaded to do so, they found themselves, to their 
 amazement, almost defenseless and helpless in the 
 face of "Billy's" professional knowledge, experience, 
 and skill. Mr. Harriman, who was himself in the 
 light-weight class, derived a sort of mischievous 
 boyish enjoyment from the discomfort and chagrin 
 
24 E. H. HARRIMAN 
 
 of the bigger men, but when they had all been com- 
 pelled to admit that the youthful-looking New Yorker 
 was "too much" for them, Harriman allayed their 
 mortification and restored their good-humor by in- 
 forming them that they had been "up against" the 
 , champion light-weight professional boxer of America. 
 In later years, when Harriman became a national 
 figure, he was generally regarded by the public as a 
 cold, reticent, austere man, who was so completely 
 absorbed in business that he had little taste for, or 
 sympathy with, the practical jokes, boyish play, 
 and pure fun of life. But this was a misjudgment. 
 Sobered, afterward, as he undoubtedly was, by the 
 cares and responsibilities of a great business career, 
 he always retained — although perhaps he did not 
 so often show in public — the same characteristics 
 which made him the "light-hearted companion" of 
 Dr. Trudeau in the years of his young manhood. 
 His was a personality that had many sides. No one 
 would have supposed that the young Wall Street 
 broker who attended Travelers' Club dinners, kept a 
 trotting horse, excelled in rifle-shooting and athletics, 
 practiced boxing in "Larry" Edwards's "academy," 
 and played tricks on guides and hunters in the great 
 North Woods, would be likely to take an interest in 
 social-betterment work in a crowded tenement-house 
 district of the East Side, and yet it was to the East 
 Side that the young broker next turned his attention. 
 
CHAPTER II 
 THE BOYS* CLUB 
 
 AMONG the intimate personal friends of Mr. 
 Harriman in his early manhood was George C. 
 Clark, of the Wall Street firm of Clark, Dodge & Co. 
 They were both members of the Union Club, and be- 
 tween 1870 and 1875 they met frequently, not only 
 there, but at Mr. Clark's house where Mr. Harri- 
 man was always a welcome visitor. It was through 
 the influence of the Clark family that Mr. Harriman 
 was led to take an interest in social-betterment work 
 on the East Side. Mrs. Luther Clark, George Clark's 
 mother, had been interested for some years in the 
 Wilson Mission School, a charitable institution es- 
 tablished for the purpose of giving an industrial 
 training to poor young girls from the tenement- 
 house population in the neighborhood of Tompkins 
 Square. This school occupied part of a building 
 (since torn down) at the corner of Eighth Street 
 (St. Mark's Place) and Avenue A. 
 
 Mrs. Clark, on one of her visits to this school, 
 invited Mr. Harriman to accompany her. He was 
 much interested in all that he saw, and when the 
 matron, Miss Huntington, complained that they 
 
26 E. H. HARRIMAN 
 
 were greatly annoyed by the mischievous activity of 
 the lawless street boys, who teased the scholars and 
 threw stones at the windows of the school, he asked 
 suggestively: "Why would n't it be a good plan to 
 have a school, or a club, for the boys, so as to get 
 them off the streets and teach them better man- 
 ners? " Miss Huntington replied that she thought it 
 would be an excellent plan and that, judging from 
 her own experience, it would probably be successful. 
 Many of the girls of the neighborhood had been very 
 wild and lawless when first taken into the school, but 
 in the course of a few months they had become or- 
 derly and well-behaved and she saw no reason why 
 boys of the same class might not be disciplined in a 
 similar way. 
 
 Mr. Harriman at once decided to try the experi- 
 ment, and a few days later he went to the police 
 officer of the Tompkins Square precinct and asked 
 his assistance in getting the boys of the neighborhood 
 together for a preliminary conference. The police 
 officer endeavored to do this, but the boys, remem- 
 bering their recent misbehavior, were suspicious and 
 apprehensive. The invitation, they thought, was 
 part of a scheme to have them "pinched" and pun- 
 ished, and all of them, at first, declined to accept it. 
 After much persuasion, three youngsters, out of the 
 scores who were interviewed, consented to meet Mr. 
 
THE BOYS' CLUB 27 
 
 Harriman and listen to what he had to say. Mr. 
 Harriman first surprised them by giving them a 
 lunch of sandwiches and hot coffee, and then laid 
 before them his scheme of establishing a boys' club, 
 where they could meet in the evening for social inter- 
 course and amusement. He did not intend, he said, 
 to open a night school, or a lecture hall. What he 
 aimed to do was to provide them with a place of their 
 own where they could meet one another, play games, 
 and have a good time. The three youngsters, favor- 
 ably impressed by the coffee and sandwiches, as well 
 as by Mr. Harriman's breezy, colloquial talk, ex- 
 pressed approval of the scheme and said they be- 
 lieved the other boys of the East Side would like it. 
 Mr. Harriman asked them to talk with their com- 
 panions about it and to bring as many of them as pos* 
 sible to another meeting, to be held a few days later. 
 ; After several conferences, Mr. Harriman became 
 satisfied that with patience and perseverance the 
 scheme might be carried through, and in the early 
 part of 1876 he interested a number of his friends in 
 it, rented the basement of the building in which the 
 Wilson School was situated, and opened the Tomp- 
 kins Square Boys' Club, the first organization of the 
 kind in the United States, if not in the world. 1 There 
 
 1 There was no boys' club at that time in London, nor in any other 
 European city so far as known. 
 
28 E. H. HARRIMAN 
 
 was a newsboys' lodging-house at that time in the 
 Bowery, but its aims and purposes differed in many 
 respects from those of the Tompkins Square Club. 
 The latter was strictly a place of recreation, where 
 the boys of the East Side could meet one another 
 in the evening, talk, sing, and play indoor games. 
 There were no fees or dues, and no discriminations 
 on racial, religious, or other grounds. Any boy of 
 suitable age was eligible for membership, and the 
 children of Russians, Italians, Germans, Hebrews, 
 Hungarians, and Greeks, mingled on terms of perfect 
 equality. 1 The Club, at first, was open only in the 
 evening and was closed altogether from May to 
 October. It had no superintendent or manager, but 
 Mr. Harriman and his friends took turns in spending 
 one evening a week in the Club basement for the 
 purpose of keeping the boys in order, talking to them 
 and helping them to amuse themselves in rational 
 ways. 
 
 For several years the number of boys who visited 
 the Club was so small that any other man than 
 Mr. Harriman might have been discouraged; but he 
 
 1 At the time when the Boys' Club was founded, the Germans had 
 a numerical preponderance in the Tompkins Square neighborhood; but 
 in later years the Italians were in the majority, and still later both of 
 these nationalities were outnumbered by Hebrews from various parts 
 of Europe and especially from Russia and Poland. There were practi- 
 cally no boys of pure American stock in the Club at any time. AH the 
 members were of foreign parentage, although most of them had been 
 born in the United States. 
 
THE BOYS' CLUB 29 
 
 never lost faith in the practicability of the enterprise 
 and inspired his volunteer associates with his own 
 belief in its ultimate success. Between 1880 and 
 1885, the number of boys who visited the Club with 
 more or less regularity increased from forty or fifty 
 to a hundred or more, and it became necessary to 
 rent the next floor above the basement, in order not 
 only to accommodate them all, but to segregate them 
 in classes according to their ages and tastes. Boys of 
 fifteen or sixteen were not interested in amusements 
 that satisfied boys of seven or eight, and it was diffi- 
 cult to plan entertainment for them all without clas- 
 sifying them in separate rooms. As far as possible, 
 the initiative in all matters was left to the Club 
 members. They were encouraged to do whatever 
 they most wanted to do, and were not made to feel 
 that they were being educated or trained. The only 
 rules or regulations enforced were those which the 
 boys themselves recognized as necessary for the 
 maintenance of order and fairness. There was some 
 reason to fear that lawless boys from the East Side 
 street gangs would be hard to manage, and that 
 in their games and contests they might resort to 
 violent or "rough-house" practices. This did hap- 
 pen occasionally at first, and there is a Club tradition 
 that Mr. Harriman, who was himself an accom- 
 plished athlete and boxer, forcibly ejected from the 
 
30 E. H. HARRIMAN 
 
 building, on one occasion, a gang leader, seventeen 
 or eighteen years of age, who attempted to introduce 
 in the Club the bullying and intimidating methods 
 of the streets. Such occurrences, however, were 
 infrequent and finally ceased altogether. In 1907, 
 when the nightly admissions to the Club averaged 
 one thousand, or more, the trustees said in their 
 annual report: "One may legitimately wonder 
 whether any other institution in the world, with so 
 large and unselected a clientele, can boast a whole 
 year's immunity from a single case of serious mis- 
 demeanor." 
 
 Five or six years after the establishment of the 
 Club, its supporters formed a definite organization 
 by electing a board of directors and an executive 
 committee — with Mr. Harriman as chairman of 
 both — and hired a clerk, at a small salary, to keep 
 the accounts and assist the successive evening man- 
 agers in the work of supervision. The expenses of the 
 Club, at this time, including rent, fuel, lights, and 
 the salary of the clerk, were about eleven hundred 
 dollars a year, a sum which was made up by con- 
 tributions from Mr. Harriman and his friends. 
 
 In the early eighties, the Club managers enlisted 
 the sympathy and cooperation of a number of young 
 college and university graduates, including Sherman 
 Evarts, Walter Jennings, N. C. Fisher, William R. 
 
THE BOYS' CLUB 31 
 
 Barbour, and Henry Stanford Brooks, all of Yale, 
 and the late William Carey, of the "Century Mag- 
 azine." These young men entered enthusiastically 
 into the work of the Club, not only by acting in ro- 
 tation as evening managers, but by supervising and 
 directing groups of boys who were interested in 
 particular kinds of amusement. Among the older 
 members of the Club a liking for gymnastic exercises 
 soon became apparent, and this taste was encouraged 
 by the young university graduates, who had had 
 recent experience in the gymnasium or the ball field, 
 and who were well qualified, therefore, to act as 
 instructors. The Club, at that time, had no gym- 
 nasium, and no room for one, but a few simple ap- 
 pliances were provided, and classes were formed for 
 calisthenics, dumb-bell and club swinging, wrestling, 
 and other similar exercises that did not require much 
 space. 
 
 A leading part in the promotion of athletics was 
 taken by Mr. H. S. Brooks (now of the American 
 Telegraph & Telephone Company) who was first 
 brought to the Club by Mr. Carey in 1886. Soon 
 after he became interested in the work, Mr. Brooks 
 proposed to Mr. Harriman that he (Brooks) give a 
 series of talks to the boys on the care of the body. 
 He had noticed, he said, that many of them paid 
 little attention to cleanliness of either body or cloth- 
 
32 E. H. HARRIMAN 
 
 ing, and he thought it would be a good idea to im- 
 press upon their minds the fact that the body cannot 
 do its best in athletic sports unless it is properly 
 cared for. Mr. Harriman approved the plan, and a 
 few days later a notice was posted on the door of the 
 Club that on Friday evening Mr. H. S. Brooks would 
 begin a series of talks, illustrated with magic-lantern 
 pictures, on "The Care of the Body — What to Eat, 
 What to Wear, and How to Train the Body for Ath- 
 letic Contests." 
 
 On the night when the first of these talks was to 
 be given, Mr. Harriman and Mr. Brooks, on their 
 way to the Club by the Eighth Street car, were 
 stopped near Tompkins Square by a great crowd 
 which completely filled the street. "What's the 
 excitement?" said Mr. Harriman to a police officer 
 as he stepped out of the halted car. "It's the boys, 
 sir," replied the policeman. "They're trying to get 
 into the Club to hear a lecture." 
 
 Nobody supposed that a talk on the care of the 
 body would be particularly attractive to the street 
 boys of the East Side; but magic-lantern pictures 
 were then a novelty in that part of the city, and those 
 who were not interested in athletics came to see the 
 pictures. When Mr. Brooks rose to speak, he faced 
 an audience of five hundred boys, of all ages, packed 
 closely together in a room that could not comfortably 
 
THE BOYS' CLUB 33 
 
 accommodate more than two hundred. It was not a 
 case of "standing room only," but of breathing room 
 only. 
 
 The talks on the care of the body were so success- 
 ful that the executive committee decided to make 
 Friday night of every week a special Club night, and 
 to provide for that evening some unusual entertain- 
 ment, such as an athletic exhibition, a sleight-of- 
 hand performance, a concert, or a display of magic- 
 lantern pictures. These entertainments, accom- 
 panied by general singing, for which the boys had a 
 great liking as well as some aptitude, proved to be 
 very popular and were attended by hundreds of 
 youngsters who did not visit the Club regularly, but 
 who were gradually drawn by this means into the 
 circle of its daily activities. 
 
 In 1887, eleven years after Mr. Harriman had his 
 first conference with the three boys in the Mission 
 School, it was thought expedient to give the Club a 
 permanent organization, and in the fall or winter of 
 that year it was legally incorporated under the name 
 of "The Boys' Club of Tompkins Square." Control 
 was vested in a board of directors, with Mr. Harri- 
 man as president, but the immediate direction of 
 Club affairs was left in the hands of the executive 
 committee. Among the incorporators were many 
 well-known business or professional men, includ- 
 
34 E. H. HARRIMAN 
 
 ing Henry S. Brooks, William R. Barbour, Jabish 
 Holmes, Jr., Sherman Evarts, Thomas G. Sloane, 
 Walter Jennings, Nathaniel C. Fisher, and William 
 G. Bates. 
 
 Between 1888 and 1898 there was no radical change 
 in the Club's methods or activities, but the seeds 
 were sown of a number of new enterprises which 
 eventually proved to be useful and important. In 
 1888, for example, Mr. Carey organized a series of 
 steamer excursions for the Club boys which finally 
 developed into a permanent summer camp, and a 
 few years later he collected or contributed books 
 and periodicals which formed the nucleus of a li- 
 brary. Some additions were made to the appliances 
 for gymnastic exercise, and the class managers con- 
 tinued to give the boys such instruction and training 
 in athletics as it was possible to give in the limited 
 room space then available. An attempt was also 
 made in this decade to find a competent superin- 
 tendent for the Club, but although a number of men 
 were tried, one after another, none proved to be 
 wholly satisfactory. At the end of 1897, ten years 
 after its incorporation, the Club seemed to have 
 reached the limit of its development in the quarters 
 that it then occupied. The average evening attend- 
 ance was two hundred or more, and in the basement 
 and on the first floor of the Wilson Mission School 
 
THE BOYS' CLUB 35 
 
 building a greater number could not be properly 
 classified or comfortably accommodated 
 
 Although Mr. Harriman, in the early part of 1898, 
 was absorbed in the reorganization of the Union 
 Pacific and in plans for the reconstruction of that 
 road, he was not so preoccupied as to lose sight of 
 the interests of the Boys' Club. A month or two 
 before his election as chairman of the executive com- 
 mittee of the Union Pacific, he chanced to hear, 
 through H. S. Brooks and Warren N. Goddard, of a 
 young English gentleman then living in New York 
 named Francis H. Tabor, who had had some ex- 
 perience in social-betterment work in London before 
 coming to America, and who, it was thought, would 
 make a good superintendent. Mr. Harriman made 
 inquiries and learned that Mr. Tabor was a former 
 Oxford House worker, as well as a Cambridge honor 
 man, and that he had already had some experience 
 on the East Side in connection with an institution for 
 boys known as "The Educational Alliance of the 
 Patriotic League." He therefore requested Mr. 
 Goddard to have Mr. Tabor make a study of the 
 Boys' Club and submit a report on its condition and 
 future possibilities. At a dinner given by Mr. Harri- 
 man to the executive committee in the University 
 Club a few weeks later, Mr. Tabor made the desired 
 report and outlined a scheme of Club management 
 
36 E. H. HARRIMAN 
 
 based largely on Walter Besant's original plan for 
 the People's Palace in London. Mr. Harriman was 
 very favorably impressed, by Mr. Tabor personally, 
 as well as by the practical wisdom of his suggestions, 
 and at the end of the dinner he intimated to him that 
 if he would undertake to manage the Club and carry 
 his ideas into effect, he (Mr. Harriman) would fur- 
 nish ample financial support and would provide, in 
 the near future, another and a more suitable building 
 for the boys' use. Mr. Tabor thereupon agreed to 
 become superintendent and assumed the manage- 
 ment of the Club in the autumn of that year. As 
 director of such an institution he proved to be almost 
 an ideal man. He was an athlete, an accomplished 
 cricket-player, and an amateur musician; he could 
 plan and direct concerts and dramatic entertain- 
 ments and train the boys for them; he was interested 
 in natural history and gardening, and he knew more 
 or less about half a dozen manual industries and 
 trades. In addition to these acquirements he had an 
 intuitive knowledge of boy nature, which enabled 
 him to see things from the boys' point of view, and to 
 exert strong influence over them through perfect 
 comprehension of their wishes, impulses, and needs. 
 Under the competent management of Mr. Tabor 
 the Club soon widened its scope and greatly intensi- 
 fied its activities. It had long suffered from the lack 
 
THE BOYS' CLUB 37 
 
 of indoor and outdoor room for athletic sports, and 
 one of the first measures taken by the executive 
 committee under the new administration was to rent 
 suitable apartments around Tompkins Square where 
 the boys could be better classified by ages and segre- 
 gated in small groups for special pursuits. At the 
 same time the Club was kept open in the afternoon, 
 as well as during a part of the summer, and arrange- 
 ments were made for the use of the St. George ath- 
 letic field in Hoboken, where ball clubs could be 
 trained, and where the boys could have practice in 
 walking, running, and jumping. Subsequently the 
 Club had the partial use for a time, of grounds in 
 Maspeth, Long Island, and finally, in 1907, it ac- 
 quired, at an annual rental of fifteen hundred dol- 
 lars, an athletic field of its own near 165th Street in 
 the Bronx. 
 
 In the summer of 1899, permission was obtained 
 from the owner, Abram S. Hewitt, to use a part of 
 Plum Island, at the entrance to Long Island Sound, 
 for a summer camp, and under the supervision of the 
 executive committee, this camp was soon prepared 
 for occupancy, the expenses being paid out of a spe- 
 cial fund raised for the purpose by Mr. Carey and 
 Mr. Brooks. Trips to the camp were then substi- 
 tuted for the steamer excursions which Mr. Carey had 
 initiated ten years before. As the boys who visited 
 
38 E. H. HARRIMAN 
 
 Plum Island in successive relays during the summer 
 had more time on their hands than they needed for 
 play, they improved the camp in various ways, took 
 up gardening, and finally, at somebody's suggestion, 
 began to raise potatoes. As a proof of Mr. Harri- 
 man's interest in the Club, as well as of his ability 
 to conduct great enterprises without losing sight of 
 trivial affairs, it may be worth while to note the fact 
 that in 1901, when he was chairman of the executive 
 committee of the Union Pacific and was spending 
 tens of millions of dollars in the reconstruction of 
 that road, he kept watch of the potato-growing on 
 Plum Island, and bought the whole crop of ten or 
 fifteen bushels as soon as the boys had it ready for 
 market. Absorbed as he was in the problems of the 
 Union Pacific, he remembered those Boys' Club 
 potatoes, and he probably would not have forgotten 
 them if they had ripened and been dug during the 
 panic that followed the famous "Northern Pacific 
 corner " in Wall Street. He had that kind of a mind. 
 While a part of the Tompkins Square boys were 
 cultivating flowers and raising potatoes in the Plum 
 Island summer camp, Superintendent Tabor, in the 
 Wilson School basement, was arranging week-end 
 walks in the country, training baseball and football 
 teams, forming singing classes, organizing a dramatic 
 company, and interesting the boys in many plays 
 
THE BOYS' CLUB 39 
 
 and pursuits of which they had previously known 
 little or nothing. 
 
 As the Club grew more and more attractive, mem- 
 bership and attendance steadily increased, and be- 
 fore the end of 1900 it became evident to Mr. Harri- 
 man that the organization had wholly outgrown the 
 accommodations available in the Wilson School build- 
 ing and its annexes, and that a new home for it must 
 be found or created. He therefore purchased several 
 lots of land on the neighboring corner of Avenue A 
 and Tenth Street, and early in 190 1 laid the corner- 
 stone of a five-story-and-basement building, fifty 
 feet by eighty, which, he thought, would be large 
 enough to meet all the needs of the Club for many 
 years to come. This building was completed in De- 
 cember, 1901, and cost, with land and furniture, 
 about $185,000, nearly all of which sum was con- 
 tributed by Mr. Harriman personally. It contained 
 a carpenter shop; a gymnasium with a running track 
 in the gallery; shower baths; a reading-room and 
 library; a spacious general room which could be used 
 as an auditorium; a music-room, a natural history 
 room, and a large number of^convenient apartments 
 for classes and groups interested in special pursuits. 
 
 The erection of this building marked the beginning 
 of a new era in the history of the organization. When 
 the Club moved into it, on the 21st of December, 
 
40 E. H. HARRIMAN 
 
 1901, Superintendent Tabor had, for the first time, 
 an opportunity to carry out fully his plan for the 
 segregation of the boys in classes and groups accord- 
 ing to their ages and interests. He began by dividing 
 them broadly into three great classes — juniors, 
 intermediates, and seniors. He then subdivided 
 these classes into smaller groups, each having its 
 own organization and each devoting itself to the 
 amusement or occupation in which its members were 
 most interested. Every such group had a leader — 
 generally a young college graduate who volunteered 
 his services — and by these leaders the activities of 
 the groups were guided, and to some extent regu- 
 lated. There was, however, no arbitrary compulsion. 
 If fifteen or twenty boys wished to take up basket- 
 ball, or natural history, or photography, they formed 
 a group, society, or minor club, elected officers and 
 were furnished by the superintendent with a leader 
 who could show them how to do the particular thing 
 that they most wanted to do. In the formation 
 of these occupational units the superintendent of 
 course, took the initiative; but there were always 
 groups of boys who had a common interest, or who 
 were eager to try any new game or amusement that 
 the superintendent suggested. Six or eight of these 
 groups were already In existence when the Club 
 moved into the new building, and between that time 
 
THE BOYS CLUB 
 New York City 
 
THE BOYS' CLUB 41 
 
 and 1906 the number increased to thirty-two, in- 
 cluding two natural history societies, two out-of-door 
 clubs, an art class, a journalists' and printers' club, 
 a camera club, a debating society, a cricket club, 
 three association football teams, four basket-ball 
 teams, four baseball teams, a track team, and half a 
 dozen clubs devoted to various forms of athletic 
 exercise. Eugene Sandow, the famous " strong man," 
 gave a talk and an exhibition one evening to the 
 Club members; experts from the Natural History 
 Museum lectured to the natural history societies and 
 the out-of-door clubs, and more than thirty young 
 college and university men gave instruction to as 
 many different groups interested in all sorts of pur- 
 suits from wrestling and cricket-playing to water- 
 color painting, journalism, and photography. 
 
 Among the group leaders during this period were 
 W. Bayard Cutting; Henry Stanford Brooks (sec- 
 retary of the Club for more than twenty-five years) ; 
 G. Grosvenor Dawe, of the "Cosmopolitan Maga- 
 zine" and the Butterick Publishing Company; 
 Trowbridge Hall, of Rogers, Peet & Co.; General 
 W. W. Skiddy; D. T. Pierce, editor of "Public Opin- 
 ion"; William Osborn Taylor, author of "Ancient 
 Ideals"; G. Gordon Brown, a nephew of J. Pierpont 
 Morgan; and Eliphalet N. Potter, a nephew of 
 Bishop Potter of New York^ 
 
42 E. H. HARRIMAN 
 
 As" might naturally have been expected, the new 
 building, with its ample facilities for entertainment 
 of all sorts, greatly increased the Club's attractive- 
 ness, and in less than three years it had a registered 
 membership of five or six thousand and a daily at- 
 tendance of a thousand or more. A restaurant was 
 provided where simple food could be bought at prices 
 ranging from three cents upward; a savings bank was 
 established in which an account could be opened with 
 a one-cent deposit; dancing classes were formed; a 
 billiard and pool room was opened for the seniors, 
 and a newspaper — "The Boys' Club Record" — 
 was published regularly by the young amateurs of 
 the journalists' and printers' club. Every part of the 
 building was occupied, and the art-room, music- 
 room, camera-room; gymnasium, and roof all were 
 used to their fullest capacity. Strange to say, the 
 art-room proved to be unexpectedly popular. The 
 drawing teacher had more pupils than he could 
 properly look after, and at the annual exhibition in 
 1904, the number of fairly good pictures was so great 
 that they could not all be displayed for lack of wall 
 space. In later years the well-known artist, J. W. 
 Alexander, acted as judge in the awarding of prizes, 
 and one of the boys of the art club won a scholarship 
 in the National Academy of Design. 
 
 Another recreation that proved to be popular, 
 
THE BOYS' CLUB 43 
 
 when room for it became available in the new build- 
 ing, was dancing. The boys soon learned the steps 
 and figures, and every Saturday night a dance was 
 given in the large intermediate room to which the 
 older boys were allowed to invite their girl friends. 
 The music was furnished by the members of the 
 Club; the management was wholly in their hands, 
 and everything was conducted with the utmost pro- 
 priety. Indeed, in later years, when the tango, the 
 bunny hug, and other similar dances became popular 
 in certain higher social circles, the East Side — or at 
 least the part of it represented in the Boys' Club — 
 disapproved and discountenanced them. 
 
 After Mr. Tabor became superintendent of the 
 Club particular attention was paid to music. There 
 had always been general mass singing, but under the 
 new regime, and especially after the Club moved 
 into its new building, vocal classes were trained, 
 either by the superintendent or by competent in- 
 structors, and musical entertainments were given 
 annually for the members of the Club and their 
 friends. In 1902, forty boys, from seven to fourteen 
 years of age, gave a very creditable public perform- 
 ance of "Pinafore," and this was followed in later 
 years by "The Pirates of Penzance," "Iolanthe," 
 "The Gondoliers," "The Mikado," "The Sorcerer," 
 and other well-known Gilbert and Sullivan operas. 
 
44 E. H. HARRIMAN 
 
 At first, these entertainments were given in the 
 Club auditorium only; but later, as the boys gained 
 proficiency and confidence, they were repeated up- 
 town, either at Sherry's or in the Berkeley Lyceum, 
 where they attracted large and fashionable audi- 
 ences. This innovation not only drew public atten- 
 tion to the Club, but brought large sums of money 
 into its treasury. In 1906, for example, when "The 
 Mikado" was given at the Berkeley Lyceum, the 
 receipts from admissions and programme advertising 
 were $4213. In addition to its opera company, the 
 Club had at this time three singing classes, two fife- 
 and-drum corps, a mandolin-guitar-and-banjo club, 
 a minstrel troupe, and a brass band. In later years 
 an orchestra was organized and trained, and there- 
 after the Club gave operas with its own orchestra, 
 directed by a boy conductor. 
 
 In the field of athletics, the successes of the boys 
 were quite as noteworthy as in the field of music. 
 In 1904, their wrestlers won championships in the 
 105- and 135-pound classes in the metropolitan and 
 national tournaments of the American Athletic 
 Union, and in 1907, they were sent to the World's 
 Fair in St. Louis, by Mr. Harriman personally, and 
 brought back two championships from there. In 
 1906, the Club's association football players de- 
 feated the Merion Club of Philadelphia and got into 
 
THE BOYS' CLUB 45 
 
 the semi-finals for the amateur cup; its four basket- 
 ball teams played forty-eight matches, winning 
 twenty- three; its four baseball teams played thirty- 
 eight games, of which they won twenty-two (in- 
 cluding the series for the inter-settlement baseball 
 cup) ; and its three football teams won thirty-eight 
 games out of fifty-four played in New York City and 
 its vicinity. In contests with universities the crack 
 football team of the Club defeated Princeton 3 to I 
 and Columbia 3 to o, and] drew with the University 
 of Pennsylvania. Many times in 1906, as the Club 
 ball teams returned from hard-fought contests, they 
 had reason to sing, and some of them did sing; 
 
 "As we go home a-marching 
 And the band begins to play, 
 You can hear the people shouting, 
 'The Boys' Club won to-day!'" 
 
 All together, the Club's athletes secured that year, 
 in various matches and contests, twenty-two tro- 
 phies and medals. 
 
 Among the larger enterprises of the Boys' Club in 
 the first decade of the twentieth century none was 
 more successful, or more beneficent in its results, 
 than the summer camp. It was located originally, 
 through the courtesy of Abram S. Hewitt, on Plum 
 Island, near Fort Fisher, but in 1902 the Govern- 
 ment needed more land for military purposes and 
 
46 E. H. HARRIMAN 
 
 bought from Mr. Hewitt the ground which the Club 
 had been using. Then, in 1903, after the death of 
 Mr. Carey, his friends raised a fund and purchased 
 twenty-five acres of unimproved land on Long Island, 
 fronting the Sound, about eighty miles from New 
 York and three miles north of the village of James- 
 town. There a new camp was established, as a me- 
 morial to Mr. Carey, and was named "The William 
 Carey Summer Camp." Part of the cost of main- 
 tenance was borne by the Club, and part was covered 
 by special contributions made annually for the pur- 
 pose by the friends of the Club and of Mr. Carey. 
 The real creators of the camp, however, so far as 
 work was concerned, were the boys who made use of 
 it. Beginning in 1903, they gradually cleared and 
 leveled the ground; laid out roads, walks, flower- 
 beds, and a garden; cut terraces and built steps 
 down the sixty-foot bluff to the beach, and erected 
 several wooden buildings, including a dining-hall, a 
 kitchen, and a commodious dormitory large enough 
 to accommodate sixty or eighty sleepers at a time. 
 Every year, during the summer months, successive 
 relays of boys spent from one week to two weeks at 
 this vacation resort, and the total number of campers 
 gradually increased from four hundred to more than 
 six hundred. Season after season the camp was en- 
 larged and improved, until, in 1907, four years after 
 
THE BOYS' CLUB 47 
 
 its establishment, it had dormitories, a dining-hall 
 and kitchen, a recreation hall furnished with chairs, 
 tables, and a piano, a stable for the camp horse, a 
 tool-and-implement house, a carpenter shop, a vege- 
 table garden, two tennis courts, a baseball ground, a 
 motor boat, and facilities for keeping chickens, rab- 
 bits, and bees. All of the work was done by the boys 
 themselves, and perhaps they derived as much pleas- 
 ure from it as from the bathing, fishing, boating, and 
 ball-playing for which they had plenty of time in the 
 intervals between their voluntary tasks. And when 
 they came from the hot, dirty, malodorous streets of 
 the East Side in July or August, they enjoyed all the 
 more the garden, the flower-beds, and the green, 
 neatly-trimmed lawns, because these improvements 
 were the results of their own labor. In the first nine 
 years of the camp's existence more than three thou- 
 sand boys visited it and returned safely to their 
 homes without a single death, accident, or serious 
 case of illness. 
 
 As the Boys' Club gradually increased its mem- 
 bership and diversified its activities, the problem of 
 financing it became one of importance, if not of dif- 
 ficulty. In the late nineties, its annual expenses were 
 about $3200, but in 1901, when it moved into the 
 new building and when more paid labor was needed, 
 they mounted up to $12,000. With the establish- 
 
48 E. H. HARRIMAN 
 
 ment of the summer camp, the renting of the athletic 
 field in the Bronx, and the engagement of technical 
 instructors and salaried assistants to teach and take 
 care of the largely increased number of boys, the 
 annual budget of the Club grew to about $23,000. 
 Fortunately, the rapidly developing organization 
 had competent financial management. To say noth- 
 ing of Mr. Harriman, it had in its board of trustees 
 between 1901 and 1906 such men as Philip J. Dodge, 
 president of the Mergenthaler Linotype Company; 
 Alvin W. Krech, of the Mercantile Trust Company; 
 Otto H. Kahn, of Kuhn, Loeb & Co. ; William H. 
 Baldwin, Jr., president of the Long Island Railroad 
 Company ; Loyall Farragut, son of Admiral Farragut; 
 and Percy A. Rockefeller. These men not only man- 
 aged the finances of the Club with prudence and skill, 
 but interested in the work a large number of their 
 associates and friends. In 1906, the contributors to 
 the Club's treasury numbered three hundred and 
 forty-three, including such prominent citizens and 
 well-known business firms as James Stillman, Morris 
 K. Jesup, Lord & Taylor, Spencer, Trask & Co., 
 Jacob H. Schiff, J. Pierpont Morgan, Elbridge T. 
 Gerry, George J. Gould, Gifford Pinchot, Brander 
 Matthews, Francis Lynde Stetson, Victor Mora- 
 wetz, Paul Warburg, and Winslow S. Pierce. At the 
 same time these and other friends of the Club made 
 
THE BOYS' CLUB 49 
 
 liberal donations for special objects, such as the 
 establishment of an employment bureau, the pur- 
 chase of uniforms, the traveling expenses of football 
 teams, and the training of the Club's orchestra. 
 
 It is a fact deserving of notice that the boys of the 
 Club contributed to its support as far as their limited 
 means enabled them to do so. When the Club moved 
 into the new building, Mr. Harriman, Superintend- 
 ent Tabor, and the executive committee decided 
 that it was not wise to offer the boys everything for 
 nothing, and that it would increase the latter's self- 
 respect and give them a feeling of ownership if they 
 gave what they could toward the Club's expenses. 
 The youngest of the boys, therefore, were asked to 
 pay one cent each for their membership tickets. Boys 
 of ten to fourteen, who were presumably able to earn a 
 little by working at odd jobs now and then, paid ten 
 cents a month, while the seniors, most of whom had 
 steady employment, were required to contribute 
 annually two dollars and a half. Receipts from these 
 sources, between 1904 and 1908, amounted annually 
 to from $800 to $1200. 
 
 During the financial panic of 1907, when the Club 
 fell more than $11,000 short of meeting its expenses, 
 Mr. Harriman promptly stepped into the breach, 
 made good the deficit, and notified the trustees that 
 he would thereafter contribute annually to the sup- 
 
50 E. H. HARRIMAN 
 
 port of the Club fifty per cent of the total sum that 
 might be obtained from all other sources taken to- 
 gether. This amounted, in subsequent years, to an 
 annual donation of from $5000 to $8000. 
 
 The decade from 1899 to 1909, which was the 
 period during which the Boys' Club grew and de- 
 veloped most rapidly, was also the period in which 
 Mr. Harriman's business life was most strenuous and 
 exacting. Absorbed as he was, however, in great 
 railroad enterprises in the West, he always found 
 time to consider the interests and the welfare of the 
 East Side boys. His personal visits to the Club were 
 less frequent than they had been in the first thirty 
 years of its existence, but his interest in it never 
 waned. Writing in 1910, after Mr. Harriman's death 
 Superintendent Tabor said: 
 
 Even when engaged in the most exacting and absorb- 
 ing enterprises, Mr. Harriman never for one moment 
 forgot to follow with pride and interest the continued 
 growth of the Club. Every report was read to him and 
 every newspaper account was laid before him. He gave 
 liberally and was always willing to subscribe for any 
 special undertaking. During the panic, for several 
 months, he paid all the expenses of the Club out of his 
 own pocket. He sent our champion wrestlers to the 
 World's Fair at St. Louis, whence they returned with 
 two championships. He subscribed liberally to the 
 "William Carey Camp," the most important of all the 
 Club's new undertakings. He always attended the an- 
 nual opera given by the Junior Singing Club, missing 
 
THE BOYS' CLUB 51 
 
 only one performance in eight years, and it was his cus- 
 tom to walk behind the scenes and compliment the 
 youngsters, not so much on any ability they had shown 
 as on the hard work they must have done. He never 
 missed a chance of giving pleasure to the boys, or help- 
 ing them to succeed. Every year he provided one or 
 more entertainments for the youngsters, and, person- 
 ally, I never knew him to refuse to give work to any one 
 of them whom I could confidently recommend. He was 
 president of the Club during the first eleven years after 
 I became superintendent, and during all those years he 
 never refused anything which I considered of benefit to 
 the boys. If I called at his office, the affairs of the Boys' 
 Club were never once kept waiting, and thousands of 
 the youth of the East Side would to-day bear witness to 
 the help which his wise generosity has given them. 
 
 Such was Superintendent Tabor's experience with 
 Mr. Harriman. What did the East Side boys think 
 of him? In 1907, after one of the entertainments in 
 the Club auditorium, a reporter of the "New York 
 Herald" had the happy thought of interviewing 
 some of the boys in the junior and intermediate 
 classes and recording, in their own words, the im- 
 pression that Mr. Harriman made upon them. All 
 had seen him, some had talked with him, and it is 
 interesting to note that in spite of their immaturity 
 and the limitations of their knowledge and experience, 
 they discerned, clearly and accurately, some of the 
 salient features of his character. One of the youngest 
 of them could only say that he was " the richest man 
 
52 E. H. HARRIMAN 
 
 in the world next to the King of Russia"; but others, 
 who were a few years older, had more definite knowl- 
 edge and clearer impressions. Julius Kreig, of 146 
 East Seventh Street, a boy twelve years of age, said: 
 
 Mr. Harriman's a great man. He's president of a 
 railroad and he's worth a couple of thousand anyhow. 
 He's a quiet man and never tells anybody down here 
 anything about his business. He is n't what I would 
 call a good-looking man, but I '11 bet he could put up 
 a good fight. He lives 'way up town somewhere in a 
 house all to himself. 
 
 Being "worth a couple of thousand anyhow" and 
 living in "a house all to himself" seemed to the tene- 
 ment-house boy of the East Side the acme of wealth 
 and luxury. 
 
 Another twelve-year-old boy said: 
 
 He 's the nicest man I ever saw, and he gives us boys 
 uniforms and pays for our plays. He looks just like 
 a man that lives down here on our block, and you 
 would n't think he is such a wonderful man. His clothes 
 are just like my father's and he talks just like the rest of 
 us. He works all day and all night, but he has to, be- 
 cause his railroads run all the time and he has to tend to 
 them. 
 
 James Fioldo, fifteen years of age, who had evi- 
 dently heard echoes of the investigation of Mr. Har- 
 riman's railroad management by the Interstate 
 Commerce Commission, said : 
 
 I 'd rather be President of the country than president of 
 all the railroads, because if you 're president of railroads 
 
THE BOYS' CLUB 53 
 
 people say you're a bad man. They say things like that 
 about Mr. Harriman, but we know they ain't true. If 
 they were he would n't treat us boys the way he does. 
 Nobody makes him — he just does it himself. 
 
 The Boys' Club is now more than forty-five years 
 old. It had its origin in a conference of Mr. Harri- 
 man with three "vagrom" street youngsters in a 
 room of the old Wilson Mission School on Tompkins 
 Square. For a decade or more it was numerically 
 weak, and for nearly a quarter of a century its home 
 was a basement on the corner of St. Mark's Place 
 and Avenue A. When, however, it practically at- 
 tained its full development, about eleven years ago, 
 it had six thousand members and owned property 
 valued at $300,000. 
 
 Although Mr. Harriman's relation to the Club 
 ended with his death in the autumn of 1909, it 
 seems desirable to complete its history partly be- 
 cause it is, in a certain sense, a memorial of him, 
 and partly because it engaged his thoughts dur- 
 ing a longer period than any other organization 
 with which he was ever connected. His great public 
 career as a railroad rebuilder and administrator was 
 all comprised within a single decade; but he was a 
 predominating figure in the Boys' Club for thirty- 
 three years — more than half his entire lifetime. 
 His successor, as president of the Club, was Temple 
 
54 E. H. HARRIMAN 
 
 Bowdoin, one of the partners in the firm of J. Pier- 
 pont Morgan & Co. There was no other change in 
 the management until 191 1, when Superintendent 
 Tabor resigned and was succeeded by Louis de For- 
 est Downer, formerly manager of the St. George's 
 Trade School. 
 
 Mr. Harriman, up to the time of his death, re- 
 tained a mortgage of $1 13,000 on the Club building 
 — probably in order to keep control of it in his own 
 hands, but in 1910, in pursuance of his ante-mortem 
 wishes, Mrs. Harriman canceled this mortgage and 
 presented it to the Club as her husband's last gift. 
 At the same time she notified the trustees that she 
 would continue to contribute annually fifty per cent 
 of the total sum obtained by the Club from all other 
 sources, in fulfillment of the promise made by Mr. 
 Harriman in 1907. 
 
 About five years after Mr. Harriman's death, the 
 Club was a second time deprived of its president. 
 In 1915, Mr. Temple Bowdoin died, leaving to the 
 Club a bequest of $50,000 which he wished to have 
 added to the permanent endowment fund of $50,000 
 created by Lorenzo G. Woodhouse. Charles H. 
 Sabin, president of the Guaranty Trust Company, 
 was elected to fill the vacancy caused by the death of 
 Mr. Bowdoin, and at the same time W. Averell Har- 
 riman, Mr. Harriman's eldest son, who had before 
 
THE BOYS' CLUB 55 
 
 been a trustee and a member of the executive com- 
 mittee, was chosen as vice-president. 
 ' Between 1909 and 1916, there was no great change 
 in the Club's various fields of activity. In minor 
 ways, however, it continued to extend, in various 
 directions, its beneficent influence. In 1910, or 191 1, 
 for example, the executive committee gathered in 
 fifteen or twenty deaf and dumb boys from the neigh- 
 borhood of Tompkins Square and organized them in 
 a special group known as "The Alphabet Club." 
 It also established an office boys' training school, 
 where, at a cost of fifty cents, a boy could get a 
 course of instruction that would prepare him for the 
 first step in a business career. In the year of its or- 
 ganization this school graduated 158 boys, most of 
 whom obtained places through the Club's employ- 
 ment bureau. 
 
 The pressure upon the accommodations and facil- 
 ities of the Club in 1916 became so great that the 
 trustees decided to erect an additional building, with 
 another gymnasium, a larger auditorium, a new li- 
 brary and reading-room, a bowling-alley, and a swim-r 
 ming-pool in the sixth story. This building, which 
 was so connected with the first one that they prac- 
 tically formed a single structure, was completed in 
 November, 1917. The Club now has two gymnasi- 
 ums, a much more spacious reading-room with a 
 
56 E. H. HARRIMAN 
 
 well-selected library of four or five thousand volumes, 
 an auditorium which has twice the seating capacity 
 of the old one, and a larger number of additional 
 rooms for the separate groups, or minor clubs, of 
 which there are now more than one hundred. A 
 large number of young college men give their services 
 as club leaders, and there are paid instructors for 
 groups of boys interested in music, dramatics, basket- 
 ball, running, wrestling, drawing, printing, and civil 
 service training. 
 
 Since the Club was founded, in 1876, more than a 
 quarter of a million boys have passed through it, or 
 been graduated from it, and among its alumni, says 
 President Sabin, 
 
 are three judges, one congressman, four aldermen, two 
 assemblymen, a member of the present Board of Esti- 
 mate and Apportionment of the city, and thousands of 
 successful professional and business men. These men 
 have "kept the faith"; and the creed of clean living and 
 fair dealing taught them at the Club seems to have 
 stood them in good stead in their struggle with the 
 world. It must be remembered that these alumni were 
 Gas House District boys, and were poor, many of them 
 being the sons of parents who could not read or write 
 when they first came to this country. . . . 
 
 The war record of the Boys' Club is something to be 
 proud of. As more than ninety per cent of the boys 
 were below enlistment age, only about two hundred of 
 them were able to get into uniform. Of these several 
 score were wounded and six were killed in action. The 
 
THE BOYS' CLUB 57 
 
 stranger visiting the Club will find that the members 
 do not forget their heroic dead. Every night, at nine 
 o'clock sharp, the lights in the main rooms are extin- 
 guished for one minute, during which all stand, in si- 
 lence, in memory of those who gave their lives for the 
 ideals taught at the Club. This moment of silent dark- 
 ness is most impressive. A second before, the great 
 seven-story building rings with the cries and footsteps 
 of about a thousand boys, and all this is hushed to the 
 stillness of death! When the lights flash on again, it is 
 wonderful to see the reverent faces of the boys, to whom 
 this ceremony is a sacrament to patriotism. 1 
 
 At the present time the Club has more than seven 
 thousand members; the average attendance is one 
 thousand or more, and in the warm months twenty- 
 five hundred boys go to the William Carey Summer 
 Camp, which now comprises fifty acres and contains 
 twenty-eight buildings, erected by the boys them- 
 selves. And all this is the outcome of the small and 
 feeble organization which began its existence, with a 
 mere handful of boys, forty-six years ago. 
 
 Mr. Harriman, in his lifetime, accomplished work 
 that increased the prosperity and added to the hap- 
 piness of a myriad of people scattered here and there 
 in the Great West; but his enterprise and labor were 
 fruitful also in the most crowded center of population 
 in the East. No man ever set his hand to a more 
 important task in the field of social betterment than 
 
 1 Statement of Charles H. Sabin, President of the Boys' Club; New 
 York Times, March 6, 1921. 
 
58 E. H. HARRIMAN 
 
 he did when he went to the East Side of New York 
 City, founded the Boys' Club in the basement of the 
 Wilson Mission School, and began to make useful 
 American citizens out of the undisciplined children 
 of foreign immigrants, who had no places of amuse- 
 ment except the streets, and few social interests 
 other than those of the ward and precinct "gangs" 
 to which so many of them belonged. In the forty-six 
 years of the Club's existence, it has, more or less, 
 formed the tastes and moulded the characters of 
 about 250,000 street boys, and through them it has 
 exerted an enlightening and ameliorating influence 
 over the whole foreign-born population of the great 
 East Side. 
 
CHAPTER III 
 ENTRANCE INTO THE RAILROAD FIELD 
 
 REGARDED from the point of view of public 
 interest, Mr. Harriman's life between 1876, 
 when he founded the Boys' Club, and 1881, when he 
 entered the railroad field, was comparatively un- 
 eventful. He carried on his business successfully, 
 strengthened his credit, and gradually accumulated 
 capital; but he did not publicly distinguish himself in 
 any way, and was generally regarded by superficial 
 observers as nothing more than a skillful and prosper- 
 ous Wall Street broker. During these uneventful 
 years, however, his character was steadily developing 
 and he was gaining '.the knowledge, experience, and 
 judgment which, in later life, made him a command- 
 ing figure in the financial world. A change was taking 
 place, moreover, in his aims and purposes. He had 
 been satisfied for a time with the mere buying and 
 selling of securities as a means of making money for 
 others and for himself; but the stocks and bonds in 
 which he dealt were only symbols of real value, and 
 as he grew older and became more conscious of his 
 mental powers he felt an ambition to manage and 
 control the material properties which the paper se- 
 
60 E. H. HARRIMAN 
 
 curities represented. In order to do this he needed 
 large capital, and as he approached his thirtieth year 
 he began to make and save money, not for its own 
 sake, nor for the luxuries and pleasures that it could 
 give him, but rather for the use that he could make 
 of it as an instrument in the control and direction 
 of the world's larger affairs. He wanted to act — to 
 achieve — and the possession or control of capital 
 was an indispensable prerequisite. , 
 
 The first outward indication of this new ambition 
 was the purchase, in 1877 or 1878, of the steamer 
 Twilight, a small Hudson River boat plying between 
 New York City and Newburgh. This was the first 
 vehicle of transportation that he ever owned or 
 managed, and although it played no important part 
 in his subsequent career, its acquisition was an evi- 
 dence of his early interest in the carrying trade. He 
 retained possession of it only a short time, but he 
 operated it successfully while he owned it and was 
 able to sell it at a profit. 
 
 In the late seventies, Mr. Harriman met at the 
 house of his friend George C. Clark, Miss Mary 
 Williamson Averell, of Ogdensburg, New York, a 
 cousin of Mrs. Clark. The young people were mutu- 
 ally attracted and the acquaintance ultimately re- 
 sulted in a marriage engagement. The Averells were 
 a wealthy and prominent family, whose ancestors 
 
E. H. HARRIMAN 
 At thirty 
 
ENTRANCE INTO THE RAILROAD FIELD 61 
 
 settled in the valley of the St. Lawrence in the latter 
 part of the eighteenth century, about the time when 
 Mr. Harriman's great-grandfather arrived in New 
 York from England. William J. Averell, Miss Aver- 
 ell's father, was the leading banker of Ogdensburg, 
 and was also president of the Ogdensburg & Lake 
 Champlain Railroad Company. 
 
 The marriage took place in 1879, at Miss Averell's 
 home in Ogdensburg, and it was on this occasion that 
 Mr. Harriman's name first appeared in connection 
 with a railroad. A special train had been provided 
 for the young couple by the bride's father, and when 
 they reached the station in Ogdensburg they found 
 that the name "E. H. Harriman" had been painted 
 on the locomotive by the workman in the railroad 
 shops. When Mr. and Mrs. Harriman returned from 
 their wedding journey, they went to New York, 
 where they established themselves in a home of their 
 own on East Forty-Fourth Street. 
 
 Mr. Harriman's connection with the Averell fam- 
 ily naturally turned his attention to affairs in the 
 northern part of the State, and in 1881, two years 
 after his marriage, he became interested in a small, 
 badly managed, and unprofitable railroad, thirty- 
 four miles in length, running from the little town of 
 Stanley, near Canandaigua, to a harbor on Lake 
 Ontario known as Great Sodus Bay, about forty 
 
62 E. H. HARRIMAN 
 
 miles west of Oswego. Although this piece of road 
 had been in existence for seven or eight years, and 
 although it connected with the Pennsylvania Rail- 
 road at Stanley and with the New York Central at 
 Newark, it had never happened to be absorbed by 
 either of these great transportation systems. It car- 
 ried a few local passengers and small quantities of 
 freight destined for, or coming from, the lake ports 
 of Canada; but its physical condition was bad, its 
 equipment, in the shape of cars and locomotives, was 
 scanty, and it was regarded by most railroad men 
 and investors as an unprofitable and undesirable 
 piece of property. It was called, originally, the 
 "Ontario & Southern"; but it became bankrupt, 
 went into the hands of a receiver, and was reorgan- 
 ized in ,the middle seventies as the "Lake Ontario 
 Southern." In 1881, it was owned or controlled by 
 its president, William Alexander Smith, a stock- 
 broker of New York; but it was again in financial 
 difficulties and was about to go into the hands of a 
 receiver for the second time when it attracted the 
 attention of Mr. Harriman. To that shrewd ob- 
 server and capable financier it seemed to have stra- 
 tegic possibilities, on account of its location and its 
 connections with the New York Central and the 
 Pennsylvania. If it were rebuilt and properly 
 equipped, it would make a desirable branch for either 
 
ENTRANCE INTO THE RAILROAD FIELD 63 
 
 of those great railroad systems, and to one or the 
 other of them he believed that it might profitably be 
 sold. In the fall of 1 881, therefore, he, with S. J. 
 Macy, of New York, and others, bought the interest 
 of William Alexander Smith in the property, and 
 about a year later reorganized the company as the 
 "Sodus Bay & Southern," with Macy as president 
 and Harriman as vice-president. This was the turn- 
 ing-point in the fortunes of the road. Betterments 
 were soon undertaken, new equipment was bought, 
 and in April, 1882, Mr. Harriman, in order to en- 
 courage the grain traffic and thus increase the road's 
 business, incorporated the "Sodus Bay Elevator 
 Company" and proceeded to erect a grain elevator 
 on Sodus Point. 
 
 Before the fall of 1883, the physical condition of 
 the road had been much improved, but its business 
 was still unprofitable, and Mr. Harriman became 
 satisfied that in order to do what he wished to do 
 with the property, he would have to get complete 
 control of it. At a meeting, therefore, of the board of 
 directors in October, 1883, he named a price at which 
 he would either sell his own stock, or buy the stock 
 of the other owners. The price was a fair one, and 
 nearly all of the principal shareholders, discouraged 
 by President Macy's last report on traffic and earn- 
 ings, decided to sell. Mr. Harriman thus became 
 
64 E. H. HARRIMAN 
 
 practically the sole owner of the property. He im- 
 mediately reorganized the directorate, had himself 
 elected president in place of Mr. Macy, and substi- 
 tuted George H. Strauss for Silas Stuart as superin- 
 tendent or general manager. 
 
 Before the ist of June in the following year, the 
 road (already much improved) had been put in first- 
 class condition, and Mr. Harriman, in pursuance of 
 his original intention, offered it for sale to both the 
 Pennsylvania and the New York Central. In making 
 his proposition to the former, Harriman pointed out 
 the desirability of extending the Northern Central to 
 Sodus Bay and thus getting an outlet on Lake On- 
 tario for the coal of the Pennsylvania fields which, 
 he thought, might be sold largely and profitably in 
 Canada. With the Vanderbilt interests, on the other 
 hand, he used the argument that if the New York 
 Central did not buy the road the Pennsylvania un- 
 doubtedly would, and that it was sound railroad 
 policy to keep a rival from acquiring it, even if the 
 Central itself did not particularly need it. Great 
 Sodus Bay, he urged, was the best harbor on the 
 southern shore of Lake Ontario, and the railroad that 
 controlled it would have a great advantage over any 
 other line in competition for the rapidly increasing 
 trade of Canada. 
 
 The officials of both roads were impressed by Mr. 
 
ENTRANCE INTO THE RAILROAD FIELD 65 
 
 Harriman's arguments, and the president of the New 
 York Central asked for an option which would give 
 him time for investigation. The option was granted 
 — for a substantial consideration — and when, a few 
 days later, President Thompson, of the Pennsylvania, 
 expressed a willingness to take over the rebuilt and 
 reequipped road, Harriman told him that he would 
 have to wait for the decision of the New York Cen- 
 tral. The option to the latter expired at noon on the 
 1st of July; but the Vanderbilt people were slow in 
 taking action, and when, at the last moment, they 
 sent an official to renew the option, Harriman hap- 
 pened to be absent from his office. Before he re- 
 turned, the specified time had elapsed and the owner 
 of the road was at liberty to conclude the bargain 
 with the Pennsylvania, which he immediately did. 
 Exactly how much money Harriman made out of 
 this transaction — his first venture into the railroad 
 field — is unknown; but his profits were large. The 
 purchase was advantageous also to the Pennsylvania, 
 and with the negotiations that preceded it began a 
 friendship between Harriman and President Thomp- 
 son which lasted until the latter' s death. In speaking 
 some years later of the sale of this road Mr. Harri- 
 man said: 
 
 "This property had great strategic value which 
 nobody seemed to recognize. I knew that if I put it 
 
66 E. H. HARRIMAN 
 
 into good physical condition, so it could handle and 
 develop traffic, the Pennsylvania Railroad would 
 jump at a chance to buy it, in order to get an outlet 
 to the lake; and that the New York Central would 
 be equally anxious to buy it, in order to keep its rival 
 out. My experience with this railroad taught me a 
 lesson with respect to the importance of proper phys- 
 ical condition in a transportation property which I 
 have never forgotten." 
 
 Long before Mr. Harriman finished rebuilding the 
 Sodus Point & Southern Railroad and sold it to the 
 Pennsylvania, his interests, outside of Wall Street, 
 were centering more and more in the railroad field. 
 In 1880, he became a director on the board of the 
 Ogdensburg & Lake Champlain Railroad Company, 
 of which his father-in-law, William J. Averell, was 
 president, and a few years later, he, with Senator 
 Yulee, bought railroad property in Florida, which he 
 afterward sold at a profit to Morton Plant, of the 
 Plant Steamship Line. These interests, however, 
 were not important enough to satisfy his ambition, 
 or furnish an adequate field for the exercise of his 
 powers. The United States at that time was just 
 entering upon a remarkable era of railroad construc- 
 tion. Immigrants were pouring into the country 
 more rapidly than ever before, and railroad builders 
 were striving to make places of settlement for them 
 
ENTRANCE INTO THE RAILROAD FIELD 67 
 
 by opening up and rendering accessible the vast 
 areas of arable land which still remained unculti- 
 vated and unoccupied in the West and South. In 
 1880, the year before Mr. Harriman began seriously 
 to consider the transportation business as a promis- 
 ing field for enterprise, the railroad mileage of the 
 country was only 93,000 and the annual immigration 
 177,000. Ten years later, the railroads in operation 
 had a mileage of 163,000, while immigration had 
 increased to 789,000, or more than fourfold. Twenty- 
 nine thousand miles of new road were built between 
 1879 and 1882, and more than 1 1,000 in the first year 
 after Harriman entered the railroad field. He prob- 
 ably had no idea, at that time, of engaging, himself, 
 in railroad construction; but he already felt conscious 
 of ability as a financier, and he believed that he 
 could manage a railroad, or shape its policies, if an 
 opportunity to do so were afforded him. 
 
 Singularly enough, the first road that attracted 
 his attention was not a new one, nor one whose finan- 
 cial policy it would be easy to control. On the con- 
 trary, it was one of the oldest and most successful 
 transportation lines in the United States, namely, 
 the Illinois Central. This road was built in the early 
 fifties by a group of wealthy New York merchants. 1 
 
 * It was chartered in 1850 and completed in 1855. Abraham Lin- 
 coln was attorney for it in 1857 and had an annual pass over it. 
 
68 E. H. HARRIMAN 
 
 They sold to capitalists in Holland and England five 
 sixths or more of its stock, but it was a favorite in- 
 vestment also for the old families of New York, and 
 large blocks of it were held by the Astors, the Cut- 
 tings, and the Goelets. The policies of the company, 
 for the first twenty-five years of its existence, were 
 mainly directed by William Henry Osborne, an old 
 Manila merchant who came back from the Philip- 
 pines with a fortune in the early forties, took a large 
 amount of the company's stock, and in 1877 became 
 virtually the manager of the road. For ten years or 
 more the Central did a profitable business and no 
 attempt was made to extend it beyond the limits of 
 the State; but soon after the Civil War, the competi- 
 tion of various east-and-west lines forced Osborne to 
 adopt a new and different policy. "Up to that time 
 it had been strictly an Illinois road, with its southern 
 terminus at Cairo, at the junction of the Mississippi 
 and Ohio rivers. Its chief traffic had been in carrying 
 grain to Chicago for shipment east on lake steamers. 
 Then the extensions of the eastern roads came 
 through Illinois at right angles to the Central. Any 
 point along its line was about as near the seacoast as 
 Chicago; consequently the new railroads could give 
 almost as good rates from where they crossed as 
 from Chicago, and the grain was moving directly 
 eastward. William Henry Osborne decided to strike 
 
ENTRANCE INTO THE RAILROAD FIELD 69 
 
 out south for the Gulf of Mexico. Before the panic 
 of 1873, Osborne had advanced the Illinois Central's 
 money to roads building south down the Mississippi 
 Valley below Cairo. These roads failed after the 
 panic and the Illinois Central took them over. In 
 the late seventies Osborne formed the Chicago, 
 St. Louis & New Orleans out of these roads, re- 
 built them, and turned them over to the Illinois 
 Central." x 
 
 About this time a new force appeared in the di- 
 rectorate of the road in the person of Stuyvesant 
 Fish, a member of a wealthy New York family and 
 a son of Grant's ex-Secretary of State. Young Fish, 
 at his summer home in the little town of Garrison, 
 New York, had been a neighbor of William Henry 
 Osborne, and the latter, as a result of the acquaint- 
 ance there formed, caused him to be elected a di- 
 rector of the company. Then, a few months later 
 (November 8, 1877), Osborne made him secretary of 
 the Chicago, St. Louis & New Orleans, which was 
 the Central's through line to the Gulf. 
 
 It was probably the long-standing friendship be- 
 tween Fish and Harriman which first led the latter 
 to take an interest in the Illinois road. He studied it 
 attentively, became satisfied that it had great pos- 
 
 1 "Masters of Capital in America," by John Moody, McClure's 
 Magazine, January, 19 11. 
 
70 E. H. HARRIMAN 
 
 sibilities of development and extension, and in 1881, 
 when Fish was placing an issue of Chicago, St. Louis 
 & New Orleans bonds, Harriman took a large block 
 of them. In that year Garfield was assassinated; 
 there was a "slump" in the stock market, and Harri- 
 man, it is said, "had hard work in pulling through"; 
 but he obtained assistance from wealthy friends, 
 held on to the bonds, and eventually sold them at a 
 substantial profit. The aid given by Harriman to 
 Fish in the placing of these bonds probably added 
 another to the ties that united the two men. At any 
 rate, Harriman took more and more interest in the 
 road that Fish was beginning to manage, and at 
 every favorable opportunity invested in its securi- 
 ties. "Conservative New Yorkers," says Moody, 
 "looked askance at the Illinois' new policy of exten- 
 sion. Its stock was selling very low and many wise 
 men were selling it short. Harriman had made a 
 thorough study of it. ' It 's the best road in the coun- 
 try,' he told his customers. He himself bought it in 
 such quantities that his partners were frightened. 
 1 It won't cost us a cent to carry,' he said; ' the shorts 
 will carry it for us.' He was right. He bought stead- 
 ily, but just as steadily the 'shorts' appeared to bor- 
 row and carry it. The stock went up and he made a 
 large profit on it." * 
 
 1 "Masters of Capital in America," by John Moody. 
 
ENTRANCE INTO THE RAILROAD FIELD 71 
 
 In 1882, or the early part of 1883, Harriman seems 
 to have made up his mind to get a foothold in the 
 Illinois Central by becoming one of its directors. 
 "There was at that time," says Moody, "a large 
 Dutch stockholding in the railroad, whose votes, 
 according to the Dutch custom — were cast by the 
 firm that had placed the stock in Holland, viz. the 
 Boissevain Brothers. One of the firm came on a visit 
 to America. Harriman met him, and in a short time 
 gained his confidence and arranged to hold his prox- 
 ies in the Illinois Central meetings." Through the 
 influence of the Boissevain Brothers, aided perhaps 
 by that of Stuyvesant Fish, who had meanwhile be- 
 come vice-president, Harriman was elected a director 
 on the 30th of May, 1883, and became closely asso- 
 ciated with Fish in the management of the road. 
 His influence, from the first, was exerted in support 
 of a bold policy of improvement and expansion. The 
 management, under William Henry Osborne, had 
 been judicious and prudent, but it had been conserv- 
 ative, rather than progressive, and Harriman be- 
 lieved that the time had come for more energy and 
 enterprise. He therefore advocated and supported 
 every measure that seemed likely to increase the 
 road's business by extending its mileage. He ap- 
 proved the purchase of a part of the old Wabash, St. 
 Louis & Pacific Railroad after the failure of that 
 
72 E. H. HARRIMAN 
 
 company in 1884; he personally managed the ac- 
 quirement of the Mississippi & Tennessee Railroad, 
 which ran from Memphis to Grenada and which was 
 valuable to the Illinois Central as a feeder, and he 
 favored the construction, in 1886, of the Chicago, 
 Madison & Northern Railroad, which saved the 
 company $200,000 a year by giving it a connection 
 of its own between Chicago and its leased lines in 
 Iowa. He also advocated the purchase of a number 
 of other small properties in Illinois or the Mississippi 
 Valley which could be made useful and profitable as 
 feeders of the main stem. All together, in the first 
 five years after Harriman became a director, the 
 Illinois Central increased its mileage by about one 
 thousand miles. 
 
 This new policy of expansion was not carried 
 through without unfavorable comment. Many con- 
 servative financiers in New York regarded it with 
 apprehension, and in 1884, a little less than a year 
 after Harriman's accession to the directorate, one of 
 the leading railroad commentators of that time, after 
 criticizing the road's new policy, said: 
 
 In all these facts is there not evidence of some lack of 
 the conservative spirit so long dominant in the com- 
 pany's affairs? It will be seen that we do not base our 
 remark on any one incident in the recent career of the 
 property, but upon a whole series of events, all appar- 
 ently having the same tendency. We might be less 
 
ENTRANCE INTO THE RAILROAD FIELD 73 
 
 inclined to lay stress upon this apparent departure if it 
 were not for rumors connected with the late changes in 
 management. 1 
 
 This was a comparatively guarded and cautious 
 criticism, but others were more outspoken. 
 
 "I don't like that man Harriman," said Sam Sloan, 
 the old railroad man, who was a summer neighbor of Os- 
 borne and Fish at Garrison. "He and 'Stuyv' Fish are 
 going to get Osborne in trouble with the Illinois Central 
 if he don't look out." . . . But they did not break the 
 Illinois Central — far from it. They expanded accord- 
 ing to a definite system, made possible by the peculiar 
 strength of their corporation. This railroad's credit 
 was the best in the country. Railroad bonds in the 
 United States carried seven and eight per cent in the 
 '6o's and '70's; they sold at prices that often made 
 them cost the railroads ten per cent a year. The Illinois 
 Central was the exception. It had sold the first six, 
 five, four-and-one-half and four per cent bonds sold in 
 America, and in the early '8o's Stuyvesant Fish en- 
 gineered the extraordinary feat of selling for it a three- 
 and-one-half per cent bond at par. 
 
 If you buy a small railroad capable of earning six per 
 cent with the proceeds of a sale of three-and-one-half 
 per cent bonds, you make a profit of two and one half 
 per cent a year; and when transactions run into the tens 
 of millions of dollars, profits of this kind mount up. 
 ... In a short time Harriman had charge of this proc- 
 ess of extension, and in the middle 'go's he was buying 
 railroads with three per cent bonds; that is, he was pay- 
 ing about one third the price for his capital that many 
 a large railroad had been paying only twenty years 
 before. 2 
 
 1 Commercial fir Financial Chronicle, March 1, 1884. 
 * "Masters of Capital in America," by John Moody. 
 
74 E. H. HARRIMAN 
 
 It was to this acquirement of capital by the sale of 
 low-interest-bearing bonds that Harriman referred 
 when, in later years, he sometimes said: "I think 
 this is a good time to buy some money." 
 
 In the summer of 1885, a little more than two 
 years after Harriman became a director of the Illi- 
 nois Central, he retired from the firm of E. H. Harri- 
 man & Co. 1 and bought a large tract of farm land 
 near Tuxedo for a permanent residence. The pur- 
 chase of this property was, in a certain sense, fortui- 
 tous. The land belonged originally to James Parrott, 
 who became well known during the Civil War as the 
 inventor of the "Parrott gun." The Parrott family 
 had become wealthy through the exploitation of the 
 iron deposits in southern New York; but with the 
 discovery of large quantities of iron ore in Pennsyl- 
 vania the New York mines became less and less im- 
 portant until their owners were no longer able to 
 carry on profitably the manufactures based upon 
 them. By the middle eighties the fortune of James 
 Parrott had been so reduced that he was compelled 
 to sell at auction his eight-thousand-acre homestead 
 farm. This farm, most of which was covered with 
 dense forest, was situated in the Ramapo Highlands, 
 about forty-five miles north of Jersey City and ten 
 
 1 E. H. Harriman's younger brother, William M. Harriman, then 
 became a partner, and the firm was afterward known as "Harriman & 
 Co." 
 
ENTRANCE INTO THE RAILROAD FIELD 75 
 
 miles west of the Hudson River. Harriman, in his 
 boyhood, had known it well. During the years that 
 his father lived in Jersey City he had been ac- 
 quainted with the Parrotts and had often enjoyed 
 their hospitality. When, therefore, his former play- 
 mate, young Parrott, came to him one day in 1885 
 and asked him to attend an auction sale of the old 
 farm at Tuxedo, he did not hesitate to go. 
 
 The bidding at the sale was spirited, but nearly all 
 of it came from timber speculators whose evident 
 purpose was to cut away the forests and leave the 
 northern Ramapo hills stripped and bare. Harriman, 
 perhaps, did not go to the sale with the fixed inten- 
 tion of buying; but when he saw that if he did not 
 buy, one of the most picturesque and beautiful spots 
 in Orange County would be devastated and ruined, 
 he determined to save it. Toward the end of the 
 bidding he entered the contest and with character- 
 istic persistence raised the bids of his rivals, one after 
 another, until competition ceased. The eight thou- 
 sand acres of hill and forest cost him a large sum, 
 but it soon became worth more than he paid for it, 
 and was eventually enlarged by subsequent pur- 
 chases until it comprised an area of thirty square 
 miles and was perhaps the most extensive country 
 estate in the vicinity of New York. 
 
 After Mr. Harriman retired from the firm of E. H. 
 
76 E. H. HARRIMAN 
 
 Harriman & Co., he continued to live in New York; 
 but his chief interest was then in Illinois and he went 
 there from time to time, either to attend board meet- 
 ings or to consult with the officers of the Illinois Cen- 
 tral whose affairs were beginning to absorb more and 
 more of his time and his thoughts. In 1887, about 
 four years after he became a director and two years 
 after he bought the Parrott farm, he had his first 
 skirmish with J. Pierpont Morgan, the great banker 
 and financier, with whom he was destined to cross 
 swords more than once in his subsequent career. 
 The Illinois Central, at that time, was operating, 
 under a lease, a railroad in central Iowa known as 
 the Dubuque & Sioux City, for the use of which it 
 was paying the owners thirty-eight per cent of the 
 gross earnings. For some years the control of the 
 road was profitable to the Central ; but as the rail- 
 road mileage of Iowa grew from less than twelve 
 hundred to about seventy-five hundred, competition 
 became increasingly active, net earnings declined, 
 and in 1884 the Central began to lose money, both 
 on the Dubuque & Sioux City and on its subsidiary 
 the Iowa Falls & Sioux City. If the Central could 
 have obtained a larger share of the Iowa traffic by 
 extending its leased lines, it might have changed the 
 annual deficit into a substantial surplus; but it could 
 not do this without spending its own money — 
 
ENTRANCE INTO THE RAILROAD FIELD 77 
 
 largely for the benefit of the lessors who would get 
 thirty-eight per cent of the increased earnings with- 
 out any outlay of their own. This state of affairs led 
 Mr. Harriman to bring the matter before the Illinois 
 Central board with a recommendation that complete 
 ownership of the Dubuque & Sioux City be secured 
 by means of purchase. The lease was to expire Oc- 
 tober 1, 1887, and in 1886, Harriman was authorized 
 to get possession of the road if possible, either by 
 private negotiation or by purchase of its stock in the 
 open market. 
 
 Hearing of this, some of the large stockholders of 
 the Iowa corporation made up their minds that they 
 would force the Illinois Central either to buy their 
 shares at par, which was much above their market 
 value, or to accept a new lease which should guaran- 
 tee them dividends at four per cent per annum. In 
 order to bring this about, they put their stock into 
 the hands of Drexel, Morgan & Co. as trustees, and 
 invited all other Dubuque & Sioux City stockholders 
 to do the same. Before the 1st of January, 1887, the 
 Morgan firm had received from the owners more 
 than a majority of the stock and was apparently in 
 command of the situation. Harriman, acting for the 
 Illinois Central, had bought in the open market 
 about fifteen thousand shares; but as this was not 
 enough to give control, and as no more could be had, 
 
78 E. H. HARRIMAN 
 
 the prospect seemed to be that at the next annual 
 meeting the Morgan interests would elect their own 
 directors, and the Illinois Central would have to 
 negotiate, for a purchase or a renewal of the lease, 
 with a hostile board. Inasmuch as Drexel, Morgan 
 & Co. held more than a majority of the stock (32,680 
 shares) a contest with them seemed to be almost 
 hopeless; but Harriman and Fish had made a careful 
 study of all the factors in the problem and were pre- 
 pared to take advantage of any error or oversight 
 that their adversaries might make. 
 
 When the annual meeting of the Dubuque & Sioux 
 City stockholders took place at Dubuque on the 14th 
 of February, 1887, the Illinois Central interests con- 
 trolled a majority of those present. They therefore 
 organized the meeting and nominated five directors 
 (a majority of the board) friendly to themselves. 
 The Morgan interests nominated Abram S. Hewitt, 
 J. Pierpont Morgan, Lorenzo Blackstone, James A. 
 Roosevelt, and William G. Hunt. The further pro- 
 ceedings, as described in the "Commercial & Finan- 
 cial Chronicle," were as follows: 
 
 During the call of the roll of stockholders, a large 
 number of proxies, representing about 5000 shares of 
 stock, were presented and rejected by the parties in 
 control of the meeting, on the ground that proxy vot- 
 ing in Iowa is not legal. The whole block of stock held 
 by Drexel, Morgan & Co., as trustees was rejected also, 
 
ENTRANCE INTO THE RAILROAD FIELD 79 
 
 on account of the vote having been signed by Drexel, 
 Morgan & Co. personally, and not as trustees. The 
 only shares which could be voted were those held by 
 Harriman & Co., who voted them personally. At the 
 close of the meeting, the following were declared elected : 
 Edward Harriman, Albert Wilcox, and William D. 
 Guthrie, of New York; and Edward C. Woodruff, of 
 New Jersey. To fill the unexpired term of George H. 
 Warner, resigned, W. J. Knight, of Dubuque, was de- 
 clared elected. During the noon recess, the persons in- 
 terested with Drexel, Morgan & Co. held a meeting and 
 elected the former directors: James A. Roosevelt, 
 Abram S. Hewitt, J. Pierpont Morgan, and Lorenzo 
 Blackstone for the full term, and William G. Hunt for 
 the unexpired term. There is no doubt but the final ad- 
 judication of the matter will be made by the courts. 1 
 
 The contest, as predicted, was carried into the 
 courts, where litigation continued for some months. 
 The Morgan party refused, at first, to make any 
 compromise, but insisted on their original terms, 
 namely, purchase of their shares at par, or a renewal 
 of the lease upon a guarantee of four per cent divi- 
 dends. The Illinois Central Company declined to be 
 held up. Finally Harriman, by authority of the 
 board, sent a brief note to Drexel, Morgan & Co., 
 offering them eighty dollars a share for the stock 
 held by them, and intimating that if this offer were 
 rejected, it would not be renewed. Drexel, Morgan 
 & Co. and their associates, finding themselves out- 
 
 1 Press dispatches from Dubuque, quoted in the Commercial fir Fi- 
 nancial Chronicle, February 19, 1887. 
 
8o E. H. HARRIMAN 
 
 generaled, accepted the offer, and the Dubuque & 
 Sioux City became, shortly afterward, the property 
 of the Illinois Central. 
 
 To Wall Street the result was a surprise. No one 
 had supposed that Fish and Harriman could defeat 
 Drexel, Morgan & Co. when the latter held a clear 
 majority of the Dubuque & Sioux City stock. Inter- 
 ests hostile to the Illinois Central criticized Harri- 
 man's methods, of course, and Morgan, who had 
 never before paid much attention to Harriman, con- 
 ceived a violent dislike for him; but observant opera- 
 tors in the field of railroad strategy began to regard 
 him with increasing respect. 
 
 Before the end of 1886, the intimate knowledge 
 that Mr. Harriman had acquired of the Illinois Cen- 
 tral and its operations, the boldness and aggressive- 
 ness of his plans, and the skill that he displayed in 
 dealing with questions of finance, made him one of 
 the most prominent and influential members of the 
 board of directors; and on the 28th of September, 
 1887, less than a year after his successful struggle 
 with J. Pierpont Morgan for possession of the Du- 
 buque & Sioux City Railroad, he was elected vice- 
 president in place of Stuyvesant Fish, who, a short 
 time before, had succeeded James C. Clarke as presi- 
 dent. That fall Mr. and Mrs. Harriman went to 
 Chicago to live and remained there until the follow- 
 
ENTRANCE INTO THE RAILROAD FIELD 81 
 
 ing summer. They then returned to New York; took 
 possession of the Parrott farm to which they gave 
 the name of " Arden," and began the transformation 
 of it into the splendid country estate that it after- 
 ward became. 
 
 In the early part of 1887, just as Mr. Harriman 
 was preparing to go to Dubuque to attend the meet- 
 ing of the stockholders of the Dubuque & Sioux City 
 Railroad Company, an event occurred which was 
 destined to have an important bearing upon his 
 subsequent career, namely, the enactment of the 
 Interstate Commerce Law. This legislation was the 
 outcome of instability of railroad rates due mainly 
 to unrestricted competition among carriers. Its ob- 
 jects were to forbid rebates, "drawbacks," and other 
 forms of discrimination; to prevent "pooling" and 
 rate-fixing by agreement; and to compel railroads to 
 compete with one another fairly and in the open. If 
 the law had done nothing more than this, it might 
 not perhaps have affected Mr. Harriman personally; 
 but it not only forbade "pooling" and rate discrim- 
 ination, but created a railroad commission to which 
 it gave power " to inquire into the management of 
 the business of all common carriers; to keep itself 
 informed as to the manner in which the same is con- 
 ducted; to compel the attendance of witnesses and 
 the production of all books, papers, tariffs, contracts, 
 
82 E. H. HARRIMAN 
 
 agreements, and documents relating to any matter 
 under investigation; to invoke the aid of any court 
 of the United States in requiring the attendance and 
 testimony of witnesses and the production of books, 
 papers, and documents"; and to restrain or punish 
 anything that "has been done, or omitted to be done 
 in violation of the provisions of this act, or of any 
 law cognizable by the Commission." * 
 
 Mr. Harriman probably did not anticipate, when 
 he read these provisions of the new law, that it would 
 affect particularly his future career, but on this legis- 
 lation was based, twenty years later, one of the bit- 
 terest and most unjust attacks ever made upon his 
 personal character and integrity. The attack did not 
 succeed, but through the publicity given in the news- 
 papers to its unfounded assertions and accusations, 
 it caused a multitude of uninformed readers to mis- 
 judge his motives, his purposes, and his actions. 
 
 It is a curious fact that the first conflict which 
 Harriman had with a high official of the Illinois Cen- 
 tral Company, after he became vice-president, arose 
 out of the very question of rates with which the 
 Interstate Commerce Law dealt. It was customary 
 at that time for general managers, or traffic mana- 
 gers, to change rates at their own discretion, putting 
 them up or down as circumstances and the fluctua- 
 1 Sections 12, 13, and 15 of the Act of February 4, 1887. 
 
ENTRANCE INTO THE RAILROAD FIELD 83 
 
 tions of competition seemed to require. In deference 
 to public opinion, and with a view to keeping a 
 watchful eye on its own rate-making machinery, the 
 Illinois Central Company, in April, 1889, amended 
 one of its by-laws so as to provide that thereafter no 
 reduction of rates should be made without the ap- 
 proval of the president, who should report his deci- 
 sion to the board of directors. The making of rates, 
 at that time, was in the hands of the general manager, 
 E. T. Jeffery, a railroad man of long experience, who 
 was regarded as one of the ablest operating officials 
 in the Middle West. Mr. Jeffery had never approved 
 of the change in the by-laws, and President Fish had 
 promised him that if he would stay in the service of 
 the Illinois Central until the end of the year, he 
 should not be deprived of the rate-making power. 
 In the summer of 1889, President Fish went to Eu- 
 rope, and Harriman, moving again to Chicago, took 
 Fish's place as acting president. In a memorandum 
 written by Harriman at that time his conflict with 
 the general manager is described as follows: 
 
 September 2, 1889 
 E. T. Jeffery was in my office about 9.40 a.m. After 
 some talk about the purchase of twenty new locomo- 
 tives, I remarked to the General Manager that while I 
 remained in Chicago I should expect the matter of rates, 
 in accordance with By-Law II, to be referred to me. He 
 sat and looked at me for about half a minute and then 
 
84 E. H. HARRIMAN 
 
 jumped up and said: "If that's your decision, I quit, 
 and will turn the road over to you at 12 o'clock to-day." 
 I said that I was very sorry and hoped he would not act 
 hastily. He said : " Well, I quit at 5 o'clock and turn the 
 road over to you." He then went on to tell about the 
 arrangement with President Fish. I stated that I could 
 not see any other way than to carry the by-law into 
 effect. He said: "All right, then I quit," and went 
 out. 
 
 This precipitate resignation placed the acting 
 president in a somewhat embarrassing position. He 
 was not regarded at that time as a practical, or at 
 least an experienced, railroad man; he had only re- 
 cently become an officer of the company, and there 
 might be a question as to his right to disregard a 
 promise made to Jeffery by President Fish. Harri- 
 man, however, did not shrink from responsibility, 
 nor did he hesitate to act promptly on the merits of 
 the case as it was presented to him. A few hours 
 later he wrote to Mr. Jeffery the following note: 
 
 Chicago, September 2, 1889 
 E. T. Jeffery 
 
 General Manager 
 Dear Sir: 
 
 Your letter of even date containing your resignation 
 has just been handed to me. Believing, as I do, that the 
 wishes of the Directors, as expressed in the by-laws of 
 the company, should be respected and an earnest at- 
 tempt made to work under them, and that if then found 
 impracticable the by-laws should be referred to the 
 
ENTRANCE INTO THE RAILROAD FIELD 85 
 
 Board for a modification, I see no other course than to 
 accept your resignation, which I do with deep regret. 
 Truly yours 
 
 E. H. Harriman 
 
 Acting President 
 
 On the same day Harriman appointed C. A. Beck as 
 general manager, A. W. Sullivan as general superin- 
 tendent, and E. G. Russell as superintendent of lines 
 in Illinois; all of these officers being moved up one 
 grade in order to fill Mr. Jeffery's place. 
 
 The resignation of the general manager of the 
 Illinois Central was widely commented upon, both 
 in financial circles and in the press. Jeffery, at that 
 time, was more generally known, perhaps, as a rail- 
 road man, than Harriman, and his resignation was 
 attributed in some quarters to an "old quarrel." 
 But it was not the result of a quarrel; it turned on a 
 question of principle. In a long editorial comment- 
 ing on the episode, the "Commercial & Financial 
 Chronicle" justly said: 
 
 This [the action of Acting President Harriman] is in- 
 teresting as showing the position of the Illinois Central 
 on the question of maintaining rates, than which there 
 is at present no more important problem affecting rail- 
 road interests. The Illinois Central is evidently in accord 
 with the prevailing determination to limit and control 
 the rate-making power in every conceivable way, so that 
 alterations in tariff schedules shall occur only after the 
 most mature deliberation and with a full knowledge of 
 
86 E. H. HARRIMAN 
 
 the probable consequences. We all know the evils that 
 arose under the opposite policy, by which almost every 
 subordinate official had it within his power to upset the 
 most carefully prepared plans for observing created com- 
 pacts. We do not refer in this to the Illinois Central, 
 which, thanks to its good management, has not been 
 troubled in that way; but to the generally prevailing 
 principle, up to the beginning of the present year, on 
 most Western roads. 
 
 The evil was a crying one and had to be redressed, and 
 there was no point on which the bankers and presidents 
 were more strenuous than that there must be reform in 
 this respect, and that subordinates must be shorn of the 
 power of disturbing rates. Of course, in the Illinois Cen- 
 tral case the circumstances were peculiar. Mr. Jeffery 
 is not to be classed in the category of subordinate offi- 
 cials. His character and position, his great ability and 
 practical services, and the fact that he had so signally 
 justified the confidence placed in him in the past, were 
 elements entitling him to special consideration. The 
 rate-making power might safely have been continued in 
 his control. But, on the other hand, the point at issue in- 
 volved a principle, and the position of the Illinois Cen- 
 tral was in some respects exceptional. It had refused 
 to become a party to the Interstate Railway Associa- 
 tion, and yet, public opinion would not tolerate any 
 wide distribution of the power to make rates. It was 
 doubtless to show that they were in full sympathy with 
 the spirit and purposes of the Interstate Railway Asso- 
 ciation, in regard to rate matters, that the amendment 
 to the by-laws was originally made by the Directors, 
 and it requires no stretch of the imagination to suppose 
 that Acting President Harriman was actuated by the 
 same motives when he insisted that the expressed wishes 
 of the Directors in this respect should not be disre- 
 garded. In any event, we have in the action taken an 
 
ENTRANCE INTO THE RAILROAD FIELD 87 
 
 assurance that the Illinois Central management, like 
 the Interstate Railway Association, means to make 
 changes in rates a difficult matter, thus tending to en- 
 sure greater stability and uniformity; and if there is 
 anything that would tend to reconcile the owners of the 
 property, and the general public as well, to the loss of 
 such an excellent and capable official as General Mana- 
 ger Jeffery, it is that very circumstance. 
 
 Harriman's action was apparently approved by 
 the board of directors, and no exception to it seems 
 to have been taken by President Fish when he re- 
 turned from Europe. 
 
CHAPTER IV 
 ILLINOIS CENTRAL AND ERIE 
 
 IN the early part of 1890, when the country was 
 prosperous and when railroads generally were 
 increasing their equipment and extending their mile- 
 age in eager competition for traffic, an incident oc- 
 curred in the history of the Illinois Central that 
 showed not only the strength of the influence that 
 Mr. Harriman exerted in the directorate of that road, 
 but also the soundness of his judgment in forecasting 
 the future. 
 
 In the summer of 1889, the Central's board of 
 directors appointed a special Committee on Rates, 
 Revenues, and Expenditures, and instructed its 
 members to make a careful study of the company's 
 needs and resources, and to submit a full report on 
 the financial policy that it would be best to pursue 
 in the near future, together with a programme of 
 expenditures for the next two or three years. 
 
 The committee considered the subject for several 
 months and, in January, 1890, made a voluminous 
 report in which it strongly recommended the ex- 
 penditure of a large sum of money for the extension 
 and improvement of the system. "Such expendi- 
 
ILLINOIS CENTRAL AND ERIE 89 
 
 tures," the committee said, "should be spread over 
 a period of not less than three and one half years, 
 so that the results will, show through at least four 
 annual reports." 
 
 Inasmuch as this recommendation was in accord- 
 ance with the policy that Mr. Harriman had steadily 
 favored throughout the period of his association with 
 the road, no doubt seems to have been felt that he 
 would approve it. He had never hesitated to spend 
 money freely when prospective results seemed to 
 justify the outlay, and for a number of years he had 
 been more persistent than any other director in urg- 
 ing an aggressive policy of expansion and improve- 
 ment. There was no reason, therefore, to suppose 
 that, in a time of great prosperity, when the credit 
 of the company was high, and when other roads 
 were spending large sums in extending their mileage 
 and improving their facilities, he would suddenly 
 become conservative and advocate a policy of econ- 
 omy and saving. 
 
 The report of the committee was sent to Mr. Har- 
 riman in New York where he happened to be at that 
 time lying ill. 
 
 Two days later, he wrote from his bed with his 
 own hand the following letter to A. G. Hackstaff, the 
 secretary for the company in Chicago: 
 
90 E. H. HARRIMAN 
 
 4 West 34$ Street 
 New York, January 24, 1890 
 
 A. G. Hackstaff, Esq. 
 
 Secretary of the Illinois Central Railroad Co. 
 Dear Sir: 
 
 Your favor of the 22nd inst. enclosing printed copies 
 of the President's report and action of Committee on 
 Rates Revenues and Expenditures taken thereon is re- 
 ceived. I have been too ill to go over the President's 
 report as carefully as I would like, but I am familiar 
 enough with the subject to be able to form a decided 
 opinion. I do not concur with the recommendation of 
 the Committee on Rates, Revenues, and Expenditures, 
 and think it would be unwise at this time to pass any 
 resolution adopting a policy for a large expenditure of 
 money. Our organization is not prepared for it, we 
 have n't sufficient information, and it might lead to ex- 
 travagance. Our whole force should be devoted to mak- 
 ing and saving money. We can make necessary improve- 
 ments this year, during the dull season, with the equip- 
 ment we already have. No large expenditure should be 
 made at Chicago until the depot question has been de- 
 cided. If I were present to-day, I would vote against 
 the adoption of [such] a policy as [that] recommended 
 by the Committee on Rates, Revenues, and Expendi- 
 tures. Please present this to the Board of Directors. 
 Yours truly 
 
 E. H. Harriman 
 
 When Secretary Hackstaff read this letter to the 
 directors, they were more than surprised. Harriman 
 had previously been the most eagerly progressive 
 man on the board, and had often urged going for- 
 ward when some of the other members were inclined 
 
ILLINOIS CENTRAL AND ERIE 91 
 
 to hold back. Now, when all were in favor of expen- 
 diture and expansion, he alone urged economy and 
 restraint. It was a change of policy on his part for 
 which no one was prepared. So greatly, however, 
 had the directors come to rely upon the soundness of 
 his judgment that there was little opposition to his 
 views, and after a brief discussion the report of the 
 Committee on Rates, Revenues, and Expenditures 
 was laid on the table and the programme of lavish 
 expenditure was virtually abandoned. 
 
 The subsequent course of events proved that Mr. 
 Harriman's judgment was right, but it is hard to say 
 upon what considerations he based it. To the or- 
 dinary observer there was nothing in the situation 
 that warranted apprehension, or that suggested the 
 necessity for "making and saving money." "Com- 
 ing events," it is said, "cast their shadows before"; 
 but few men, at that time, saw the approaching 
 financial panic of 1893, and still fewer had the wis- 
 dom to prepare for it by adopting a policy of econ- 
 omy and retrenchment. If the recommendations of 
 the Committee on Rates, Revenues, and Expendi- 
 tures had been adopted, the financial resources of 
 the company would have been seriously depleted at 
 the very time when they should have been most 
 abundant. Only a few years later, the great financial 
 storm of 1893 broke over the country, sweeping into 
 
92 E. H. HARRIMAN 
 
 bankruptcy the Erie, the Baltimore & Ohio, the 
 Southern, the Reading, the Union Pacific, the North- 
 ern Pacific, the Atchison, Topeka & Santa Fe, and 
 one hundred and forty-nine other railroads, which 
 had in the aggregate a capitalization of $2,500,000,- 
 000. And this great disaster came precisely at the 
 end of the three-and-one-half-year period over which 
 the special committee of the Illinois Central pro- 
 posed to spread its lavish expenditures for better- 
 ments and extensions. What the results would have 
 been if the committee's programme had been fol- 
 lowed it is impossible to say; but scores of other 
 roads in the West and Middle West which had 
 adopted a similar programme found themselves, 
 when the panic came, over-extended, destitute of 
 reserve funds, and unable even to meet their fixed 
 charges. Largely to Mr. Harriman's sagacity and 
 foresight is attributable the fact that the Illinois 
 Central went through the panic and the years of 
 depression that followed it not only without embar- 
 rassment, but with a great enhancement of its credit. 
 It paid its dividends regularly, and the only bond 
 issue that it made ($2,500,000 in August, 1895) was 
 floated without difficulty at three per cent. 
 
 It was about this time that close observers of the 
 Illinois Central began to give due credit to the chair- 
 man of its finance committee. "It was then a well- 
 
ILLINOIS CENTRAL AND ERIE 93 
 
 known circumstance among bankers," says Mr. 
 Kahn, "that the Illinois Central's finances were 
 managed with remarkable skill and foresight. Some- 
 how or other, it never had bonds for sale except when 
 bonds were in great demand; it never borrowed 
 money except when money was cheap and abundant; 
 periods of storm and stress found it amply prepared 
 and fortified; its credit was of the highest. The few 
 acquainted with the facts conceded that Mr. Harri- 
 man was a shrewd financial manager." J The general 
 public gave most of the credit for this financial policy 
 to the company's president, Stuyvesant Fish, but he 
 himself was generous enough to admit that the pros- 
 perity of the road was largely due to Mr. Harriman's 
 skill and foresight. In a speech that he made at the 
 fiftieth anniversary of the company in Chicago in 
 1 90 1, Mr. Fish said: "The measure of success which 
 has been achieved by the company in the last twenty 
 years, with regard to its finances, is due to no man 
 more than to the chairman of our finance committee, 
 Mr. Harriman." (Applause.) 2 
 
 But it was not only for the skillful management of 
 its finances that the Illinois Central was indebted to 
 Mr. Harriman. His influence was potent also in the 
 
 1 Edward Henry Harriman. An address delivered before the Fi- 
 nance Forum of New York by Otto H. Kahn, January 25, 191 1. 
 
 * Memorial Volume commemorating the fiftieth anniversary of the 
 Illinois Central Railroad, 1851-1901. Privately printed. 
 
94 E. H. HARRIMAN 
 
 policies that extended its mileage, amplified its equip- 
 ment, and greatly increased the scope and diversity 
 of its traffic. He was mainly instrumental in the 
 purchase of the leased lines in Iowa and the construc- 
 tion of the link that joined them to the main stem; 
 and to him, largely, was due the acquirement of the 
 Louisville, New Orleans & Texas with its extensive 
 mileage, easy grades, and important terminals in 
 Memphis and New Orleans. 1 Between 1882 and 
 1892 — the first decade of Mr. Harriman's service 
 as director — the Illinois Central added more than 
 1500 miles to its track; built or bought 234 new 
 passenger cars, 274 new locomotives, and 8401 new 
 freight cars, and increased its gross annual earnings 
 from $8,905,312 to $20,095,190. During the same 
 period, moreover, the carrying power of its rolling 
 stock was more than doubled. In 1883, its freight 
 cars, in the aggregate, had a capacity of only 1 13,000 
 tons; while in 189 1, they could accommodate more 
 than 290,000 tons. This great enlargement of trans- 
 portation facilities benefited the public even more 
 than it benefited the stockholders. The dividends of 
 the latter were not increased, but in the service ren- 
 dered to the farmers, manufacturers, and shippers 
 along the line there was an immense improvement. 
 
 1 This road was absorbed by the Yazoo & Mississippi Valley, a 
 subsidiary of the Illinois Central, and the united roads were after- 
 ward known as the Yazoo & Mississippi Valley. 
 
ILLINOIS CENTRAL AND ERIE 95 
 
 This may be said also of every railroad whose man- 
 agement Mr. Harriman influenced or controlled. 
 He made money for the shareholders if he could, but 
 he never failed to develop and improve the property, 
 so as to make it more serviceable to its patrons. As 
 Mr. Kahn has justly said: "Whenever there was a 
 question between increased results to the shareholder 
 and increased efficiency to the railroad, Mr. Harri- 
 man invariably took the latter course." * 
 
 If, however, Mr. Harriman was useful to the Illi- 
 nois Central, that road, in turn, was useful to him, 
 because it afforded him an opportunity to learn the 
 practical, physical side of the transportation busi- 
 ness. Many years later, when his friends began to 
 talk of his extraordinary ability as a railway mana- 
 ger, people who had known him only in the earlier 
 part of his career exclaimed : "Ned Harriman ! Why, 
 I knew him, years ago, as a little ' two-dollar ' broker! 
 What should he know about practical railroading?" 
 That he did understand practical railroading, how- 
 ever, was a speedily demonstrated fact, although 
 those who did not closely observe his methods were 
 unable to explain the apparent rapidity with which 
 he acquired expert knowledge. He was not trained 
 in physical science, and he made little use of tech- 
 nical books; but he had what may be called "the 
 
 1 Edward Henry Harriman, by Otto H. Kahn (New York, 191 1), 
 p. 12. 
 
96 E. H. HARRIMAN 
 
 seeing eye" and few things escaped his attention. 
 One of his friends has since explained his habit of 
 close and attentive observation by saying that it was 
 due to "insatiable curiosity"; but it was not "curi- 
 osity" in the sense of aimless inquisitiveness. It was 
 a keen, intelligent interest in everything pertaining 
 to his work. In his trips over the Illinois Central he 
 noticed every detail of railroad equipment and opera- 
 tion, from cars and locomotives to rails, ties, grades, 
 curves, switches, and even water-supply pipes and 
 track-bolts. If he saw anything whose working or 
 raison d'etre he did not fully understand, he made 
 inquiries about it among those who knew; and no 
 statement or explanation satisfied him unless it went 
 to the root of the whole matter. Then, having ac- 
 quired the information and stored it away in his 
 extraordinarily retentive memory, he thought about 
 it often, assimilated it completely, and brought it 
 into coordinated relation with everything else that 
 he knew. Many of the most notable economies that 
 he afterward made in railway operation were due to 
 this habit of observing and considering even such 
 apparently trivial things as the surplus length of a 
 track-bolt projecting beyond the nut, or the unneces- 
 sary width of the so-called "shoulder of ballast" 
 outside the rails. Taken separately, or for a single 
 mile, these were things of comparatively little im- 
 
ILLINOIS CENTRAL AND ERIE 97 
 
 portance; but multiplied by the eight or ten thou- 
 sand miles of a great railroad system they made up 
 a tremendous aggregate. All these details of physical 
 construction and operation, as well as hundreds of 
 others, Mr. Harriman observed, remembered, and 
 thought about, and the practical education that he 
 thus acquired was perhaps more useful and fruitful 
 than that of many other railroad executives who had 
 been trained to the business, but who had never 
 formed the habit of noticing details and making them 
 a subject of reflection. 
 
 After Mr. Harriman took up his residence in Ar- 
 den, he became a "commuter" on the Erie Railroad, 
 and the affairs of that corporation soon began to 
 attract his attention. When the Erie became bank- 
 rupt and went into the hands of a receiver in the 
 panic of 1893, he happened to be the owner of a com- 
 paratively small amount of its second mortgage six 
 per cent bonds. In 1894, when Drexel, Morgan & 
 Co. undertook to reorganize the company, Harriman 
 objected to the reorganization plan, first, because it 
 was financially unsound, and second, because it in- 
 fringed the rights of the company's creditors — espe- 
 cially the holders of its j unior securities. By the terms 
 of the plan as summarized by Professor Daggett, 
 
 no mortgage senior to the second consolidated mort- 
 gage was to be disturbed save the first mortgage, which 
 
98 E. H. HARRIMAN 
 
 matured in 1897. The bonds to be dealt with were thus 
 reduced to $41,481,048, besides which provision had to 
 be made for the floating debt and for future capital re- 
 quirements. The plan proposed to authorize a blanket 
 mortgage of $70,000,000 at five per cent, of which $33,- 
 597,000 were to be exchanged at par for the six per cent 
 second consolidated bonds and funded coupons thereof; 
 $4,031,400 to be exchanged for the funded coupon 
 bonds of 1885, and $508,008 for the income bonds. Of 
 the balance, $6,512,800 were to be reserved to settle 
 with the old first lien and collateral trust bonds; $15,- 
 915,208 to supply capital requirements in the future, 
 and $9,915,208 to be offered for subscription in order to 
 pay the floating debt. The new management did not be- 
 lieve that these last bonds could be sold to advantage 
 in the general market, and therefore imposed as a con- 
 dition of the specified exchanges that holders of second 
 mortgage, funded coupon, and income bonds should 
 subscribe at ninety to the extent of twenty-five per cent 
 of their holdings. It was hoped that the grant of the 
 right of immediate foreclosure upon default would in- 
 duce the holders of the second mortgage bonds to come 
 in. Both these second mortgage bonds and the funded 
 coupons of 1885, it may be remarked, were to be kept 
 alive and deposited with the trustee for the protection 
 of the new bonds. Stated in tabular form the distribu- 
 tion was to be as follows: 
 
 To acquire the existing second mortgage bonds $33.597400 
 
 To acquire the funded coupons of 1885 4,031,400 
 
 To acquire the income bonds 508,008 
 
 For subscription as above 9,915,208 
 
 To acquire the old reorganization first lien and collateral 
 
 trust bonds 6,512,800 
 
 To be expended for construction equipment, &c 15,435,184 
 
 $70,000,000 l 
 1 Railroad Reorganization, by Stuart Daggett (University Press, 
 Cambridge, 1908), p. 62. 
 
ILLINOIS CENTRAL AND ERIE 99 
 
 The effect of this plan would be greatly to impair 
 the security of the second mortgage bondholders; to 
 lower their interest rate from six to five per cent; to 
 increase the annual fixed charges instead of lessening 
 them; and, in general, to make an assessment on the 
 road's creditors for the benefit of its owners. 
 
 Such a plan could not be expected to go through 
 without opposition. Some of the leading bankers of 
 New York, who were holders of the second mortgage 
 bonds, including Mr. Harriman, Kuhn, Loeb & Co., 
 August Belmont, Vermilye & Co., Hallgarten & Co., 
 and Charles A. Peabody (representing the Astor es- 
 tate), drew up and sent to the Erie managers a re- 
 monstrance in which they said: 
 
 Your plan seems unjust, inasmuch as it demands a 
 permanent reduction of interest on the bonded indebt- 
 edness for which no adequate equivalent is offered, and 
 it levies a forced contribution upon the bondholders 
 through the demand for a subscription to new bonds at 
 a price considerably above their probable market value. 
 It also proposes fixed charges which appear to be larger 
 than, in the light of past earnings and experience, the 
 company can carry with safety. 1 
 
 To this remonstrance the directors of the com- 
 pany and its bankers paid scant attention, and a lit- 
 tle later, the bondholders' protective committee, of 
 which Mr. Harriman soon became the fighting head, 
 
 1 Commercial & Financial Chronicle (1894), vol. 58, p. 264. 
 
ioo E. H. HARRIMAN 
 
 sent to the directors a protest which may be sum- 
 marized thus: 
 
 Our objections to your plan are : 
 
 First, that by enlargement of the issue from which 
 the bonds to be exchanged for ours are to be taken, it 
 reduces our security by more than one half. 
 
 Second, that no proper equivalent is offered for the 
 reduction of interest on our bonds. 
 
 Third, that the requirement to purchase new bonds 
 at more than their value (being, in effect, an assess- 
 ment on the bondholders) is an unjust and hitherto 
 unheard-of imposition by a debtor upon a secured 
 creditor. 
 
 Fourth, that if an assessment may be forcibly de- 
 manded by a debtor from a secured creditor for the pur- 
 pose of preserving the debtor's property and keeping it 
 in his control, this plan does not go far enough. The 
 contribution demanded is not sufficient to put the com- 
 pany on a sound and interest-paying basis. 
 
 Fifth, the plan calls for no effort or sacrifice on the 
 part of the debtor company to preserve its property and 
 redeem it from insolvency. 
 
 Sixth, the scheme, if successful, would establish a dan- 
 gerous precedent, which would be a discredit to Ameri- 
 can railroad finance, because it would violate the plain 
 obligations of a contract and tend to increase distrust of 
 all American railroad securities. We also regard as ob- 
 jectionable, considering the relations of the parties, the 
 language of the circular of the company and its bankers, 
 inasmuch as it contains an implied threat of punish- 
 ment to those who decline their proposition, and gives 
 scant consideration to the suggestions made by the 
 bondholders for a modification of the scheme. 
 
 At a meeting of the Erie stockholders on the 6th of 
 
ILLINOIS CENTRAL AND ERIE 101 
 
 March, 1894, the plan of reorganization was ap- 
 proved, and a little later in that same week, Drexel, 
 Morgan & Co. gave notice that inasmuch as a major- 
 ity of the second mortgage bondholders had turned 
 over their bonds to them, they would proceed with 
 the reorganization in accordance with the plan an- 
 nounced. Most of the holders of junior securities 
 then yielded and deposited their bonds; but Mr. 
 Harriman, who never submitted to injustice without 
 a fight, began suit in the Supreme Court for an in- 
 junction to prevent the recording of the new mort- 
 gage. Justice Ingraham, before whom the case came, 
 did not go fully into the merits of the questions in- 
 volved, but denied the application for an injunction 
 on the ground that the plaintiffs represented only a 
 small minority of the security-holders. "While it is 
 clear," he said, "that there are certain obligations 
 resting upon the majority to refrain from infringing 
 the legal right of the minority, and that a court of 
 equity will enforce and protect the rights of the 
 minority, still, when the holder of a very small num- 
 ber of bonds, or shares of stock, seeks to enjoin a very 
 large majority from carrying out a plan such major- 
 ity deem for their benefit, I think the court should 
 not interfere unless it plainly appears that some legal 
 right of the minority is endangered." * 
 
 1 Railroad Gazette (1894), vol. 26, p. 472. 
 
102 E. H. HARRIMAN , 
 
 Although Mr. Harriman was thus virtually de- 
 feated, he soon had the satisfaction of seeing his 
 contentions vindicated and his predictions fulfilled 
 by the course of events. He had warned the reor- 
 ganizers that their plan would not put the Erie "on 
 a sound and interest-paying basis," and his warning 
 was almost immediately justified. In June, 1894, the 
 company defaulted on the very first coupons of the 
 new bonds; in December, it defaulted again, and in a 
 circular issued before the end of the year Drexel, 
 Morgan & Co. were forced to admit that the plan of 
 reorganization had thus far proved to be a failure. 
 In 1895, it was abandoned altogether and a new and 
 very different plan was substituted for it. In the 
 second reorganization most of the objections raised 
 by Mr. Harriman and his associates were recognized 
 and in part met. The new and final plan put the 
 burden of readjustment on bonds and stock jointly, 
 instead of on bonds alone; it lowered fixed charges 
 instead of increasing them, and it procured cash from 
 stockholders instead of from second mortgage bond- 
 holders. 1 
 
 The result of this second conflict with Morgan was 
 to bring Harriman into greater prominence in the 
 field of railroad finance and to give a number of lead- 
 ing bankers a higher opinion of his judgment and 
 1 Railroad Reorganization, by Stuart Daggett, p. 69. 
 
ILLINOIS CENTRAL AND ERIE 103 
 
 courage. On the other hand, it deepened the dislike 
 that Morgan had for him, and excited in the minds 
 of the Erie managers a feeling of hostility which 
 manifested itself, on occasion, in various undignified 
 and petty ways. 
 
 In the fall of 1895, for example, Harriman wished 
 to see one of the races of the trotting association at 
 Goshen. He accidentally missed the Erie train that 
 he intended to take, and there was no other that 
 would bring him to his destination in time except the 
 Chicago express. Finding that this through train 
 made no local stops, he telephoned to the executive 
 offices of the Erie and asked if the express might not 
 be allowed to stop in Goshen as a personal accommo- 
 dation. Inasmuch as he was vice-president of the Il- 
 linois Central and it was customary for high railroad 
 officials to extend such courtesies to one another, 
 this was a perfectly natural and proper request; but 
 when it was referred to the highest authority it met 
 with a curt refusal. Mr. Harriman, however, was a 
 hard man to beat. Learning upon inquiry that the 
 Chicago express could be flagged at Goshen if there 
 happened to be any passengers there who wished to 
 go to points west of Buffalo, he telegraphed a friend 
 in Goshen to buy a ticket for Chicago. Then, at the 
 appointed hour, he took his seat in the express at 
 Jersey City. When the train reached Goshen, it was 
 
104 E. H. HARRIMAN 
 
 stopped by a flag-signal for the accommodation of 
 the non-existent passenger for Chicago, and the Jer- 
 sey-City-to-Goshen passenger got off and went to 
 the race. The high officials of the Erie would perhaps 
 have treated Mr. Harriman with more deference and 
 courtesy if they could have foreseen that in the not 
 distant future he would save the Erie from another 
 bankruptcy by putting up five and a half million 
 dollars of his own money. In that case he "heaped 
 coals of fire" upon Mr. Morgan's head, because the 
 Erie, at the time, was a Morgan road. 
 
 Nothing in Mr. Harriman's career is more sur- 
 prising than the readiness with which he turned 
 from one big piece of constructive work to another, 
 and the mingled boldness and sagacity that he dis- 
 played in undertaking new and unfamiliar enter- 
 prises. While he was engaged in rebuilding the Sodus 
 Point & Southern Railroad in northern New York in 
 1883-84, he made the acquaintance of W. W. Webb, 
 a prominent lawyer of Rochester, 1 and employed 
 him to look up and clear the titles to certain parts of 
 the road's right of way which were unsettled or in 
 dispute. Ten or twelve years later, Mr. Webb, 
 who had gained Harriman's confidence by skillful 
 accomplishment of the task assigned to him, hap- 
 pened to be largely interested in an iron mining cor- 
 1 Now Justice of the Court of Claims. 
 
ILLINOIS CENTRAL AND ERIE 105 
 
 poration known as the Furnaceville Iron Company, 
 which was situated fifteen or twenty miles east of 
 Rochester near the shore of Lake Ontario. In 1896, 
 the business of this corporation became unprofitable, 
 and it turned its attention to the work which the 
 State had then undertaken for the improvement of 
 the Erie Canal. The way in which Mr. Harriman 
 was brought into this work has since been described 
 by Mr. Justice Webb in the following words: 1 
 
 The particular business that brought me into closer 
 relations with Mr. Harriman grew out of the contracts 
 made by the Furnaceville Iron Co. with the State of 
 New York for the improvement of the Erie Canal under 
 the so-called "Nine Million Dollar Act." Prior to 1896, 
 our company's mining operations had been for some 
 time at a standstill. We had a large and expensive 
 plant, consisting of cars, tracks, engines, steam shovels, 
 conveyors, etc., and a force of men who thoroughly un- 
 derstood the work of excavation. When proposals were 
 invited by the State for canal contracts, the question at 
 once arose, should our company bid for the work? I 
 spent a day or two with Mr. Harriman at Arden. After 
 a long conference, in which I did not participate, Mr. 
 Harriman asked me what I thought of the proposition. 
 He had before him the proposals for excavating and re- 
 building the Erie Canal between Lockport and Roches- 
 ter, which was divided up into different contracts, each 
 averaging about seven miles of work. I believed that, 
 with our experience in that line of work, we could suc- 
 
 1 "Some Recollections of Edward H. Harriman," by Hon. William 
 W. Webb, Justice of the Court of Claims. (An unpublished manu- 
 script.) 
 
106 E.H. HARRIMAN 
 
 cessfully handle one or two contracts, if our bids should 
 be accepted. But this was not to Mr. Harriman's liking. 
 He would not bother with one contract — if we could 
 make money on one we could make money on all — and 
 if we went into it, it should be on a broad scale, with the 
 idea of doing the entire work between Lockport and 
 Rochester. To him the large sums required by the State 
 as a deposit for the performance of the work, the assem- 
 blage of the machinery and tools with which to do the 
 work, and the engagement of the army of brain- and 
 brawn-workers, presented no obstacles. We put in our 
 bids, made our cash deposits, and secured five contracts 
 covering some thirty-four miles of work. 
 
 Under the regulations prescribed by the State author- 
 ities, large amounts of money had to be provided before 
 there was any return. There was never any question or 
 any delay when money was called for, and from the time 
 the bids were submitted until the final settlements of 
 the contracts, Mr. Harriman gave his fullest confidence 
 to the men in charge of the work. Our actual operations 
 extended from December, 1897, until May, 1898, when, 
 without a moment's warning, the State officials ordered 
 us to cease work, and no more work was done after the 
 last mentioned date. 
 
 It is unnecessary to detail the legislation and subse- 
 quent litigation growing out of the State's failure to 
 complete the canal. There was an investigation directed 
 by the legislature, and various bills were passed, uni- 
 formly in the interest of the State, to adjust the differ- 
 ences between the contractors and the State officials. 
 Two successive Canal Boards passed upon the validity 
 of our claims, and endeavored to defeat our recovery by 
 attacking the measurements and classification of mate- 
 rials, and payments made to us years before by the State 
 on the certificate of its engineers, inspectors, and agents. 
 Meantime the manager of our company had died and 
 
ILLINOIS CENTRAL AND ERIE 107 
 
 the engineering force had been widely scattered. We 
 had to look up our witnesses — one from the coal mines 
 of Kentucky, one from northern Canada, and one from 
 the far West — and bring them on at our own expense 
 and at large cost, no part of which was ever repaid by 
 the State. 
 
 Had it not been for Mr. Harrimari's entire loyalty to 
 the interests of the Furnaceville Iron Co. and his per- 
 fect confidence in the ultimate outcome, either before 
 the State officials themselves, or otherwise in the courts, 
 our company, like many others, would have been bank- 
 rupt ; but he never wavered a moment, or limited in any 
 way the plans submitted to him for a complete investi- 
 gation of our entire work and all of our transactions. 
 After years of litigation the State paid us upward of 
 $100,000. 
 
 While Mr. Harriman had but little personal acquaint- 
 ance with the actual work under our contracts, I was 
 necessarily brought into close relations with him in the 
 proceedings to collect our dues from the State, mostly 
 because of the death of the manager of our company 
 and the dissolution of our working corps. His grasp of 
 the situation was such that apparently he could take up 
 a conversation at a point where it had ceased months 
 before, and his knowledge of the details of the legisla- 
 tion, litigation, and conferences was as fresh in his recol- 
 lection as if they had only that moment been brought to 
 his attention. 
 
 In every interview I had with him on the subject I 
 was amazed at the clearness of his intellectual vision, 
 his wonderful memory, even on unimportant details, 
 and at the rapidity and correctness of his conclusions. 
 
 Some time after the payment of the award which we 
 obtained from the State, an attack was made during a 
 political campaign upon the State officials and pretty 
 much everybody connected with the Canal Board and 
 
io8 E. H. HARRIMAN 
 
 the canal work, including our company. While, as it 
 turned out, the attack did not amount to anything more 
 than swearing at the court, nevertheless Mr. Harriman 
 was a good deal disturbed at the time, being fearful of 
 the effect upon the fortunes of the political party with 
 which he was affiliated. At his request I prepared a syn- 
 opsis of the experiences and trials which our company 
 had had with the State of New York, which was greatly 
 to his liking, and which, he felt, satisfactorily disposed 
 of the charges made by unscrupulous newspapers and 
 politicians. 
 
 In the autobiography of a distinguished naval officer 
 reference is made to the necessary isolation of a ship's 
 commander when on sea duty, except on matters imme- 
 diately connected with the business in hand. I fre- 
 quently drew a parallel between such a one and Mr. 
 Harriman. From the nature of his business conditions 
 he was, aside from his domestic life, a self-contained 
 man, and one necessarily limited in his friendships, but 
 his confidence, once given, was implicit; when lost, it 
 was gone forever; and he had no patience with any one, 
 high or low, who had evaded an obligation, or betrayed 
 a confidence. By common consent of those who knew 
 him best and longest he was a very extraordinary man 
 — to me the brightest mind I ever encountered. 
 
 In this little-known episode of Mr. Harriman's 
 earlier career may be seen some of the characteristics 
 that were to make him famous in a wider field in 
 later years, namely, courage, persistence, clearness 
 of intellectual vision, retentiveness of memory, and 
 natural taste as well as natural capacity for con- 
 structive work on a large scale. 
 
CHAPTER V 
 THE REORGANIZATION OF THE UNION PACIFIC 
 
 UP to the year 1897, Mr. Harriman's great abil- 
 ity as a financier, and his constructive genius 
 as a railroad executive, had not been generally recog- 
 nized. His skillful management of the finances of 
 the Illinois Central, and his victory over J. P. Mor- 
 gan in the struggle for the possession of the Dubuque 
 & Sioux City Railroad in 1887 had attracted the 
 attention of New York bankers, but to the public 
 generally he was known only as a shrewd and suc- 
 cessful Wall Street broker. Even in the affairs of the 
 Illinois Central his reputation had been overshad- 
 owed to some extent by that of the president, Stuy- 
 vesant Fish, and comparatively few people were 
 aware that by long and intensive study of transpor- 
 tation problems he had already gained a thorough 
 and accurate knowledge of the technical, as well as 
 the financial, side of railway administration. The 
 fact that he was well equipped for almost any great 
 enterprise in the transportation field was known to 
 his associates in the management of the Illinois Cen- 
 tral, but it had not yet become known to the pub- 
 lic at large, and no opportunity to demonstrate his 
 
no E. H. HARRIMAN 
 
 great ability was afforded him until after the Union 
 Pacific Railroad went into bankruptcy in the panic 
 of 1893. 
 
 The causes that brought about the insolvency of 
 this great corporation are so well known that a de- 
 tailed review of them is hardly necessary. The most 
 important of them were excessive initial cost due to 
 rapid construction and high prices for materials; 
 wasteful if not dishonest building contracts with the 
 notorious Credit Mobilier, and, at a later time, in- 
 judicious acquirement of competing but unprofitable 
 lines, which added largely to the company's capital- 
 ization without increasing its net revenue. 
 
 The Union Pacific and the Central Pacific Rail- 
 road Companies were created by an Act of Congress 
 in 1862 for the purpose of connecting California with 
 the Eastern States by means of a transcontinental 
 line. The Union Pacific was authorized to build 
 westward from Omaha, and the Central Pacific east- 
 ward from Sacramento, until they should form a 
 junction at or near the boundary line of Nevada. In 
 order to encourage the enterprise, the Government 
 not only granted to the companies twenty-five thou- 
 sand square miles or more of public land, in alternate 
 sections along the route, but issued and turned over 
 to them a series of thirty-year six per cent bonds, 
 which they were allowed to sell as a means of getting 
 
REORGANIZATION OF UNION PACIFIC in 
 
 construction capital. As security for the money thus 
 loaned, the United States (by the Act of 1864) took 
 a second mortgage on the roads, allowing the com- 
 panies to sell their own bonds and to secure them by 
 a first mortgage equal in amount to the Govern- 
 ment's second mortgage. The United States ex- 
 pected the companies to pay the interest and princi- 
 pal of the loan by setting aside for that purpose five 
 per cent of their net earnings, and by carrying the 
 Government mails, troops and military supplies. 
 Under this arrangement the Union Pacific Company 
 received $27,236,512 in Government bonds and 
 11,309,884 acres of public land. 
 
 Construction work began on the Central Pacific at 
 Sacramento in 1864, and on the Union Pacific at 
 Omaha in 1865, and was pushed with great energy 
 by an army of laborers, which, at the time of greatest 
 activity, numbered about twenty-five thousand men. 
 On the 1st of January, 1867, the termini of the two 
 roads were 1376 miles apart, but in less than two 
 years the gap was reduced to seven hundred miles, 
 and on the 10th of May, 1869, the construction par- 
 ties of the two companies met at Promontory Point, 
 in Utah, and the last spike in the great transcon- 
 tinental line was driven. The Central Pacific had 
 built 689 miles across the Sierra Nevada Mountains 
 from Sacramento, and the Union Pacific 1086 miles 
 
ii2 E. H. HARRIMAN 
 
 across the plains, the Black Hills, and the Rocky 
 Mountains from Omaha. A junction was formed at 
 Ogden, and the whole line was put in operation on 
 the 1 5th of July, 1 869. The cost of the Union Pacific, 
 as stated in the construction account contained in 
 the balance sheet of 1870, was $97,273,549, but the 
 actual cost to the contractors was probably not more 
 than half that sum, as the latter were paid in stock 
 and bonds which went into the capital account at 
 par value while they were taken by the contractors 
 at a much lower market value. The capitalization 
 of the company, therefore, at the very outset, greatly 
 exceeded the actual construction cost of the road, 
 the difference representing the profit of the contrac- 
 tors and the discount on the securities that they took 
 in payment. 1 
 
 The earnings of the Union Pacific, in the earlier 
 years of its existence, were comparatively small, for 
 the reason that it ran through an almost uninhabited 
 country. At the time when its construction was 
 authorized, there were practically no settlements 
 between Omaha and the Rocky Mountains except a 
 few mining camps in Colorado; and although the tide 
 
 1 For various estimates of the construction cost and the profits of 
 the contractors see Report of the U.S. Pacific Railway Commission, 
 Senate Exec. Doc. No. 51, 50th Congress, 1st Session, pp. 51-52 et seq.; 
 also The Union Pacific Railway, by John P. Davis, p. 174; and The 
 Building and Cost of the Union Pacific, by Henry Kirke White (in Rail- 
 way Problems, by W. Z. Ripley, pp. 95-97). 
 
REORGANIZATION OF UNION PACIFIC 113 
 
 of emigration began to flow westward as soon as the 
 road was opened, the earnings from traffic were not 
 large enough to justify the payment of a dividend 
 until 1875. From that time until 1880 the company 
 was fairly prosperous and paid its shareholders from 
 five and one half to eight per cent per annum. Mean- 
 while, however, it was beginning to suffer from the 
 competition of the Kansas Pacific — a nearly paral- 
 lel line of 638 miles running westward from Kansas 
 City to Denver. This road, poorly built and badly 
 managed, had never been profitable, and in 1874 it 
 had become insolvent and had gone into the hands 
 of a receiver. In 1878, Jay Gould and a group of his 
 associates obtained control of it (and of its subsidiary 
 branch, the Denver Pacific), by purchasing a major- 
 ity of its stock. The Union Pacific was then forced 
 to meet the competition of a bankrupt road, which 
 had no interest charges to pay and which was able to 
 cut rates almost to the bare cost of operation. In 
 1879, Gould proposed to the Union Pacific a con- 
 solidation of the Union, Kansas, and Denver Pacific 
 roads, in which the shares of the respective com- 
 panies should be treated as if they had equal value. 
 The terms of this proposition, as a well-known writer 
 on the subject has said, 
 
 were absurd. . . . The Union Pacific had reported an an- 
 nual surplus, the other roads an annual deficit; the 
 
H4 E. H. HARRIMAN 
 
 Union Pacific had not defaulted, the Kansas and Den- 
 ver Pacific had done little else; the highest mark which 
 the stock of the Kansas Pacific had touched, in Janu- 
 ary, 1879, had been 13, that of the Union Pacific 68^. 
 But the question, as Gould well knew, was not one of 
 productive, but of destructive capacity; and the means 
 of coercion which he employed was a demonstration of 
 the ease with which the Kansas Pacific could be made 
 formidable as a competing line. 
 
 In November, 1879, Mr. Gould purchased the Mis- 
 souri Pacific, from Kansas City to St. Louis, and an- 
 nounced his intention of extending the Kansas Pacific to 
 Salt Lake City, there to connect with the Central Pa- 
 cific and to form a third transcontinental route. . . . The 
 result was the consent of the Union Pacific directors to 
 the terms imposed, and the execution of an agreement 
 dated January 14, 1880, whereby the Union and the 
 Kansas Pacific, with all their respective assets and lia- 
 bilities, were put together at par of their respective cap- 
 itals ... to which was added the capital of the Denver 
 Pacific. 1 
 
 By virtue of this consolidation the mileage of the 
 Union Pacific was nearly doubled; but its financial 
 strength was very much weakened, for the reason 
 that the absorption of two unprofitable lines resulted 
 in a large increase of capitalization without any 
 commensurate increase in earning capacity. The 
 Union Pacific had freed itself from competition, but 
 at too high a cost, and its subsequent embarrassment 
 and final insolvency were largely due to this taking 
 
 1 Railroad Reorganization: The Union Pacific, by Stuart Daggett 
 (Cambridge, 1898), pp. 228-29. 
 
REORGANIZATION OF UNION PACIFIC 115 
 
 in of the Gould roads at far more than their actual 
 value. 1 
 
 Between 1880 and 1890, the mileage of the Union 
 Pacific was further increased by the construction of 
 the Oregon Short Line and the purchase of the Ore- 
 gon Railroad & Navigation Company. These exten- 
 sions, however, were profitable, for the reason that 
 they opened up revenue-producing territory and 
 gave the Union Pacific an outlet on the Pacific Coast 
 at Portland. 
 
 Between 1884 and 1890, under the presidency of 
 Charles Francis Adams, the Union Pacific acquired 
 more than three thousand miles of branch lines, all 
 
 1 According to the report of the U.S. Pacific Railway Commission 
 of 1888, the average annual earnings of the three roads for a period of 
 ten years prior to the consolidation were as follows: 
 
 Annual net earn- Annual interest 
 
 ings per mile charges per mile 
 
 Union Pacific $5617 $3185 
 
 Kansas Pacific 1602 2295 
 
 Denver Pacific 1333 1750 
 
 This table shows an annual surplus of $432 per mile for the Union 
 Pacific, and an annual deficit of $693 per mile for the Kansas Pacific, 
 and $417 per mile for the Denver Pacific. The same report also states 
 that as a result of the consolidation, the total indebtedness ofthe Union 
 Pacific was increased by the sum of $57,950,925, including $14,000, 
 000 in stock and $38,346,761 in bonds. Obviously the consolidation 
 was detrimental to the interests of the solvent and surplus-earning 
 road and profitable to the shareholders of the two bankrupt corpora- 
 tions. The merger seems to have been forced by the threat of trans- 
 continental competition, which, if made effective, would be likely, as 
 Mr. Gould himself admitted on the witness stand, to "destroy the 
 Union Pacific." {Report of the U.S. Pacific Railway Commission, Sen- 
 ate Doc. No. 51, 50th Congress, 1st Session.) 
 
»6 E. H. HARRIMAN 
 
 under separate organizations, but with their ac- 
 counts and management subject to the supervision 
 and control of the parent company. These branch 
 lines cost the Union Pacific nearly $42,000,000. 
 Most of them reported annual deficits, which were 
 covered out of earnings of the main line, or carried 
 as floating debt; but President Adams justified the 
 acquisition of them on the ground that, by acting as 
 feeders, they added to the revenue of the main line 
 at least $5,000,000 a year. Without their help, he 
 said, the company would not have been able to meet 
 even its fixed charges. 1 
 
 Between 1880 and 1890, the financial condition of 
 the road, notwithstanding the able management of 
 President Adams, grew worse rather than better, 
 owing partly to the inability of the company to fund 
 the floating debt created in large part by extensions 
 and purchases of branch lines; partly to diminished 
 freight receipts from the transportation of an in- 
 creased quantity of low-grade commodities, and 
 partly to intensified competition for transconti- 
 nental business. 2 As a result of these unfavorable 
 
 1 This statement was confirmed by the testimony of witnesses ex- 
 amined by the U.S. Pacific Railway Commission of 1888. The report 
 of the Commission characterized the administration of President 
 Adams as honest, intelligent, and skillful. 
 
 2 In explaining this competition, the president said, in his annual 
 report for 1884: "Not only has the Rio Grande been completed to Og- 
 den, making, in connection with the Atchison, Topeka & Santa F6 
 
REORGANIZATION OF UNION PACIFIC 117 
 
 conditions, the average receipts per ton-mile de- 
 creased about forty-five per cent, and the net earn- 
 ings in 1889 were $3,000,000 less than they had been 
 eight years before. In 1892, after the resignation of 
 President Adams, the position of the road became a 
 very difficult one. "Its capitalization was high; its 
 net earnings had shown hardly any increase in five 
 years; it had to prepare to raise a large sum of money 
 in two years for the payment of its short-time 
 notes"; and, in addition, there was ahead of it the 
 repayment of the Government loan, which would 
 begin to mature in 1895, and would amount, with 
 interest, to about $53,000,000. 
 
 Such was the condition of the Union Pacific when 
 there came upon the country the great financial 
 panic of 1893, in which six mortgage companies, 
 thirteen loan and trust companies, and five hundred 
 and fifty-four banks failed, and one hundred and 
 fifty-six railroads, with a capitalization of $2,500,000, 
 000, went into the hands of receivers. If this great 
 national calamity had not occurred, the Union Pa- 
 cific Company might perhaps have struggled along, 
 in spite of its increasing difficulties; but it was in no 
 
 and the B. & M. extension of the Chicago, Burlington & Quincy, a 
 direct competing line with the Union Pacific from Chicago and all 
 eastern points to a common western terminus, but the Northern Pa- 
 cific has been connected through, making a third transcontinental 
 route." 
 
n8 E. H. HARRIMAN 
 
 condition to stand such a financial cyclone as this. 
 In the first eight months of the panic year its net 
 revenue fell off $2,500,000, and in the next four 
 months it would have to meet a maturing indebted- 
 ness of about $5, 100,000. x This, in the existing state 
 of the money market, it could not possibly do, and 
 in October, 1893, it went into the hands of receivers. 
 A month or six weeks later, at a conference held in 
 New York, the company's security-holders, of va- 
 rious classes, appointed a reorganization committee 
 consisting of Senator Brice, chairman ; A. H. Boisse- 
 vain, General Dodge, Major H. L. Higginson, and 
 a representative of the estate of F. L. Ames. This 
 committee, to which J. Pierpont Morgan was sub- 
 sequently added, struggled for two years to reconcile 
 conflicting interests and agree upon a plan of reor- 
 ganization; but Congress would not consent to any 
 suggested refunding of the Government debt, and in 
 March, 1895, the committee abandoned its task and 
 returned to the owners the securities that had been 
 placed in its hands. The Union Pacific system, mean- 
 while, had been slowly disintegrating, partly through 
 the efforts of the receivers to get rid of unprofitable 
 branches, and partly through the action of bond- 
 holders of subsidiary roads who were impatient of 
 
 1 Mr. John F. Dillon, counsel for the company, stated that there 
 would be a deficit for the year 1893 of at least $3,000,000, and that the 
 company was "without money or means" to meet its obligations. 
 
REORGANIZATION OF UNION PACIFIC 119 
 
 delay and insisted on immediate foreclosure of their 
 liens. One branch or extension after another was 
 lopped off in this way until, in May, 1895, the mile- 
 age of the parent company had been reduced from 
 8167 to 4469, and was about to be still further 
 curtailed by proceedings in bankruptcy against the 
 Oregon Short Line and other important parts of the 
 system. 1 
 
 Such was the state of affairs when, in 1895, the 
 Union Pacific — or what was left of it — fell into 
 the hands of new and strong financial interests. In 
 the late fall of that year, Winslow S. Pierce, personal 
 counsel of George J. Gould, approached Mr. Jacob 
 H. Schiff with a proposition that the reorganization 
 of the company be undertaken by Kuhn, Loeb & 
 Co. "But," objected Mr. Schiff, "that is J. P. Mor- 
 gan's affair; I don't want to interfere with anything 
 that he is trying to do." Mr. Pierce replied that the 
 Brice committee, of which Mr. Morgan was a mem- 
 ber, had abandoned the task as hopeless, and that it 
 would greatly please large interests in the Union 
 Pacific if Mr. Schiff would undertake the work, with 
 his banking house as financial manager. Kuhn, Loeb 
 
 1 Among the branch roads or extensions lost prior to May, 1895, 
 were the Fort Worth & Denver City, the Denver, Leadville & Gunni- 
 son, the St. Joseph & Grand Island, and the Leavenworth, Topeka & 
 Southwestern. The Oregon Short Line and the Union Pacific, Denver 
 & Gulf were separately reorganized at a somewhat later time. 
 
iao E. H. HARR1MAN 
 
 & Co. had never been particularly interested in the 
 Union Pacific, but Mr. Schiff was much impressed 
 by the data concerning it that Mr. Pierce laid before 
 him and promised that he would consult his partners 
 and take the matter into consideration. A few days 
 later he called upon J. P. Morgan, apprised him of 
 the Pierce proposition, and asked whether accept- 
 ance of it would interfere with any of his plans. Mr. 
 Morgan declared emphatically that he was through 
 with the Union Pacific and wanted nothing more to 
 do with it. So far as he was concerned, he said, Mr. 
 Schiff was at liberty to go ahead and do whatever he 
 liked. He (Morgan) would give Kuhn, Loeb & Co. 
 what help he could, but he was so disgusted with the 
 political intriguing and wire-pulling which had de- 
 feated the Brice committee's plans in Congress, and 
 so unfavorably impressed by the outlook for reor- 
 ganization in general, that he was not willing even to 
 take a financial participation for his firm. 1 
 
 1 Mr. Morgan's failure to take advantage of his opportunity to re- 
 organize the Union Pacific is regarded as one of the chief tactical mis- 
 takes of his life. He thought that the road had no future, and that it 
 was less valuable than the Erie. Mr. Harriman, on the contrary, with 
 characteristic imagination and judgment, had a clear prevision of its 
 possibilities, and when its common stock was selling below 25 he said 
 to Mr. Otto H. Kahn: "Union Pacific is intrinsically worth as much as 
 St. Paul, and with good management it will get there." This seemed 
 to Mr. Kahn "the wildest kind of wild talk," and he did not at first 
 take the prediction seriously; but in less than ten years Union Pacific 
 was paying ten per cent dividends; the stock was selling at nearly 200, 
 and it had left St Paul far behind. These results, however, were 
 
REORGANIZATION OF UNION PACIFIC 121 
 
 Knowing that the Union Pacific was regarded with 
 disfavor by capitalists and investors, Mr. Schiff de- 
 cided to interest in the reorganization an entirely 
 new set of men, whose positions and abilities would 
 be likely to inspire the public with confidence. He 
 therefore went to Marvin Hughitt, president of the 
 Chicago & Northwestern Railroad, and asked him 
 to take an interest in the enterprise. Mr. Hughitt 
 was reluctant to do this at first, but after a good deal 
 of persuasion he finally consented to serve on the 
 reorganization committee. Through his friend, Gen- 
 eral Louis Fitzgerald, Mr. Schiff then secured the 
 cooperation of Chauncey M. Depew, president of 
 the New York Central. As Hughitt and Depew were 
 both known as " Vanderbilt men," bankers and bro- 
 kers in Wall Street jumped to the conclusion that it 
 was to be a Vanderbilt reorganization. "The New 
 York Central," they said, "will acquire both the 
 Northwestern and the Union Pacific and thus get a 
 through line to the Pacific Coast." Such rumors and 
 conjectures did not trouble Mr. Schiff, because they 
 served a useful purpose in attracting attention and 
 exciting public interest. Late in 1895, General Fitz- 
 
 largely if not wholly due to the "good management" of a born rail- 
 road builder and executive. Mr. Morgan, with all his great financial 
 ability, might not have been able to make the Union Pacific what John 
 W. Gates said it was in 1901 — "the most magnificent railroad prop- 
 erty in the world." 
 
122 E. H. HARRIMAN 
 
 gerald, Oliver Ames, a director of the Union Pacific, 
 and T. Jefferson Coolidge, Jr., of the Old Colony 
 Trust Company of Boston, joined Messrs. Schiff, 
 Hughitt, and Depew, and the committee, with Gen- 
 eral Fitzgerald as chairman, took up the heavy bur- 
 den of the bankrupt road's debts and liabilities. 
 
 For a time the work of reorganization proceeded 
 satisfactorily; but in the latter part of 1896, Mr. 
 Schiff and his associates became conscious that some 
 secret but powerful influence was working against 
 them. Their plans were opposed in the Pacific Roads 
 Commission and in Congress; a large part of the 
 press was hostile to them; objections were raised and 
 difficulties created by many holders of the old stock, 
 and evidences of antagonism were apparent in the 
 financial circles of both America and Europe. The 
 public soon noticed that the reorganization commit- 
 tee was encountering obstacles, and a rumor became 
 current that they were thrown in its way by J. P. 
 Morgan. He was jealous, it was said, of the success- 
 ful progress thus far made by the committee, and 
 wished now to get control of the reorganization him- 
 self. Thinking that there might be some basis for 
 this rumor, Mr. Schiff called on Morgan and asked 
 him frankly if he had changed his mind about Union 
 Pacific and if he now wished to take an interest in 
 the reorganization. Mr. Morgan replied in the nega- 
 
REORGANIZATION OF UNION PACIFIC 123 
 
 tive. He had not changed his views, he said, and he 
 did not care to have anything more to do with the 
 road. Mr. Schiff then explained to him that the com- 
 mittee was meeting with serious opposition, and 
 asked if he knew what influences were behind it. 
 Mr. Morgan replied that he did not know, but that 
 he would investigate quietly and try to find out. He 
 did not care, he said, to be further associated with 
 Union Pacific affairs himself, but he would gladly 
 help Kuhn, Loeb & Co. in any way that he could. 
 
 A few weeks later, Mr. Morgan sent for Mr. Schiff 
 and said that he believed he had ascertained the 
 source of the opposition to the committee's plans. 
 "It's that little fellow Harriman," said Morgan, 
 "and you want to look out for him." 
 
 Mr. Schiff's personal acquaintance with Mr. Har- 
 riman was comparatively slight. He knew that the 
 latter was the financial manager of the Illinois Cen- 
 tral; and that he was generally regarded as a shrewd 
 and resolute man ; but beyond this his knowledge did 
 not go. He could think of no good reason for opposi- 
 tion to the committee's plans on the part of the Illi- 
 nois Central, and he determined to put the matter 
 squarely before Harriman and find out what he, 
 individually, was trying to do. He therefore ar- 
 ranged an interview with him and said to him frankly : 
 "Mr. Harriman, my associates and I, as you doubt- 
 
124 E. H. HARRIMAN 
 
 less know, are trying to reorganize the Union Pacific. 
 For a long time we have been making good progress; 
 but now we are meeting everywhere with opposition, 
 and I understand that this opposition is being di- 
 rected by you. What have you to say about it?" 
 
 "I am the man," replied Mr. Harriman. 
 
 "But why are you doing it?" asked Mr. Schiff. 
 
 "Because I intend to reorganize the Union Pacific 
 myself." 
 
 This was somewhat surprising, but Mr. Schiff 
 merely smiled and said: "How do you propose to do 
 it, Mr. Harriman? Most of the securities of the com- 
 pany are in our possession. What means have you of 
 reorganizing the Union Pacific?" 
 
 "The Illinois Central ought to have that road," 
 replied Mr. Harriman, "and we are going to take 
 charge of the reorganization. We have the best 
 credit in the country. I am going to issue $100,000, 
 000 in three per cent bonds of the Illinois Central 
 Railroad Company and am going to get close to par 
 for them. You, at the best, can't get money for less 
 than four-and-a-half per cent. In that respect I am 
 stronger than you are." 1 
 
 1 There is some reason to believe that Mr. Harriman's original in- 
 tention (approved perhaps by President Fish) was to unite the Illinois 
 Central and the Union Pacific, and that his opposition to the Fitz- 
 gerald-Schiff plan of reorganization was based on a fear that it would 
 shut the Illinois Central out and give controlling influence to the New 
 York Central and the Chicago & Northwestern, whose presidents 
 
REORGANIZATION OF UNION PACIFIC 125 
 
 Mr. Schiff was amazed at the confident boldness 
 of these assertions, but he merely replied: "You'll 
 have a good time doing it, Mr. Harriman; but, 
 meanwhile, what is your price?" 
 
 "There is no price," replied Harriman. "I am 
 determined to get possession of the road." 
 
 Mr. Schiff then asked if there were no terms on 
 which all parties could come together and work in 
 harmony. 
 
 "If you'll make~me chairman of the executive 
 committee of the reorganized road," said Harriman, 
 " I '11 consider the expediency of joining forces with 
 you." 
 
 "That is out of the question," replied the banker. 
 " It has been decided that Mr. Pierce shall be chair- 
 man and I think he deserves the place." 
 
 "Very well, Mr. Schiff," said Harriman. "Go 
 ahead and see what you can do. Good-day." 
 
 After this interview the opposition to the reor- 
 ganization plan of the Fitzgerald-Schiff committee 
 grew stronger rather than weaker. Stuyvesant Fish, 
 president of the Illinois Central, attacked it vigor- 
 were prominent members of the reorganization committee. After he 
 became a director of the Union Pacific, Mr. Harriman seems to have 
 abandoned the idea of consolidating it with the Illinois Central — 
 possibly because the stockholders of the latter had little faith in the 
 future of the Union Pacific and were not willing to run the risk of com- 
 bining with it and taking its chances of success. (See E. H. Harriman 
 and the Union Pacific Railroad, by Alexander Millar, New York, 1910, 
 P- 5-) 
 
126 E. H. HARRIMAN 
 
 ously in a speech before the Pacific Roads Commis- 
 sion in Washington, and all the influences that he 
 and his railroad company could control were ar- 
 rayed against it. Realizing, at last, that Mr. Harri- 
 man was not a man to be ignored or pushed aside, 
 Mr. Schiff decided to propose a compromise. It 
 would be better, he thought, in the interest of a 
 prompt and successful reorganization, to secure Mr. 
 Harriman's cooperation than to work at cross-pur- 
 poses with him. He therefore brought about another 
 interview, in the course of which he explained more 
 fully the circumstances that seemed to make neces- 
 sary the election of Winslow S. Pierce as first chair- 
 man of the executive committee. The latter, Mr. 
 Schiff said, had been instrumental in bringing the 
 business to Kuhn, Loeb & Co. in the first place, and 
 he was supported, moreover, by powerful Union 
 Pacific interests which were more or less hostile to 
 Mr. Harriman. "However," said Mr. Schiff, "if you 
 will cooperate with us, I '11 see that you are made a 
 director of the reorganized company and a member 
 of the executive committee. Then, if you prove to be 
 the strongest man in that committee, you'll prob- 
 ably get the chairmanship in the end." 
 
 "All right," said Harriman, "I'm with you." 
 He then joined the syndicate and took a "partici- 
 pation" to the amount of $900,000. 
 
REORGANIZATION OF UNION PACIFIC 127 
 
 Owing chiefly to embarrassments and difficulties 
 growing out of the indebtedness of the Union Pacific 
 to the Government, the progress of the reorganiza- 
 tion committee was slow; but before the end of 1896 
 a plan was agreed upon which met the approval of 
 nearly all the security-holders, and early in 1897 ar- 
 ticles of incorporation for a new company were filed. 1 
 
 Foreclosure proceedings had long been under way, 
 and in January, 1897, the Government agreed to 
 join in them provided the committee would guaran- 
 tee a bid, at the forced sale, of a sum equal at least 
 to the amount of the original Government bonds 
 with interest at three and one-half per cent. This the 
 committee consented to do, but when the decrees of 
 the courts in the foreclosure proceedings were made 
 public, the Government was dissatisfied with them 
 and put in additional claims amounting in the ag- 
 gregate to about $8,000,000. Further negotiations 
 delayed the final sale until November 2, 1897, when 
 the financing syndicate, headed by Kuhn, Loeb & 
 
 1 "The plan of reorganization was a strong one. It reduced fixed 
 charges from over $7,000,000 to under $4,000,000, with an eventual 
 lower limit of $3,000,000, and this amount such good authorities as 
 Messrs. Mink and Clark pronounced the road safely able to earn, in 
 spite of the reduction of its mileage. ... It gave to each class of secur- 
 ities a claim to interest strictly proportional to the earning capacity of 
 the road, and added to this a preferred stock on which no payment 
 was to be paid unless earned ; while it provided for a liberal assessment 
 upon stockholders and attempted no funding of the current liabilities 
 incurred during the past troubled years." (Railroad Reorganization: 
 The Union Pacific, by Stuart Daggett, pp. 252-54.) 
 
128 E. H. HARRIMAN 
 
 Co., bought the road, paying the Government debt 
 in full with interest to date of purchase, and agree- 
 ing, furthermore, to buy up all the bonds secured by 
 the first mortgage which amounted to $27,637,436 
 more. Thus the syndicate, when it acquired the 
 property, assumed liabilities amounting in the ag- 
 gregate to more than $81, 000,000. l For this sum 
 the purchasers received only the main stem of the 
 Union Pacific extending from Omaha to Ogden. All 
 the rest of the old system, including the Kansas 
 Pacific, Denver Pacific, Oregon Short Line, and 
 Union Pacific, Denver & Gulf, had already been lost 
 or were about to be lost, through the foreclosure of 
 other mortgages. 
 
 1 U.S. 2d mortgage bonds with interest $40,253,605 
 
 Union Pacific 1st mortgage bonds 27.637,435 
 
 Securities in sinking fund brought by committee. . . . 13,645,250 
 Total $81,536,290 
 
 The sum received by the Government, in full satisfaction of. its 
 claims, was $58,448,223, as follows: 
 
 U.S. 2d mortgage bonds with interest $40,253,605 
 
 Securities in sinking fund sold to committee 131645,250 
 
 Cash in sinking fund, taken over 4,549,368 
 
 Total $58,448,223 
 
 (Commercial & Financial Chronicle, January 15, 1898.) 
 
 This settlement was very advantageous to the United States. The 
 Government had loaned to the company in bonds only $27,236,512, 
 and it had not only got this sum back, with interest in full, but had 
 saved in the thirty years almost or quite as much more through the 
 economies secured in the transportation of mails, troops, supplies, etc, 
 by rail instead of by wagon. 
 
REORGANIZATION OF UNION PACIFIC 129 
 
 The risking of more than $81,000,000 in the pur- 
 chase of the main line of the Union Pacific was one 
 of the most daring financial undertakings of that 
 time. The road was not in good physical condition, 
 nor was it properly equipped. It had lost its through 
 connection to the Pacific, as well as all of its branches 
 in Kansas and Nebraska, and the whole of the ter- 
 ritory through which it ran was still suffering from 
 the business depression that followed the disastrous 
 panic of 1893. So seriously did Mr. Schiff regard the 
 enterprise upon which he and his associates had em- 
 barked that, on his first visit to Omaha after the 
 purchase of the road, he spent the greater part of 
 one night pacing the floor in his hotel room, debating 
 anxiously with himself the question whether Kuhn, 
 Loeb & Co., as financial managers for the reorganiza- 
 tion committee, had not undertaken more than they 
 could successfully carry through. Mr. Harriman, on 
 the contrary, felt no anxiety and had no misgivings. 
 His faith in the future growth and prosperity of the 
 Great West was unbounded, and he intended to 
 reconstruct and reequip the Union Pacific so com- 
 pletely that when better times should come, it would 
 be prepared to handle cheaply and profitably the 
 immense volume of traffic that he could already 
 foresee. 
 
 On the 6th of December, 1897, when the new 
 
130 E. H. HARRIMAN 
 
 Union Pacific Company perfected its organization, 
 Mr. Harriman was chosen a director and shortly 
 afterward a member of the executive committee, in 
 accordance with the promise that Mr. Schiff had 
 made to him. 1 But he did not at first play any im- 
 portant part, for the reason that he was little known 
 to his new associates and was regarded by some of 
 them with distrust. 
 
 Almost all the members of the board had been pre- 
 viously connected with the Union Pacific, either through 
 old affiliations, or through membership in the reorgani- 
 zation committee. Mr. Harriman was a newcomer, and 
 by several members of the board his advent was not re- 
 garded with friendly eyes. He was looked at askance, 
 somewhat in the light of an intruder. His ways and 
 manners jarred upon several of his new colleagues, and 
 he was considered by some as not quite belonging in 
 their class, from the point of view of position, financial 
 standing, and achievements. 8 
 
 Mr. Harriman, however, paid little attention to 
 this, if, in fact, he noticed it. He was intent on learn- 
 
 1 The other members of the executive committee were Winslow S. 
 Pierce (ex-officio chairman), Marvin Hughitt (president of the Chicago 
 & Northwestern), James Stillman (president of the National City 
 Bank), and Otto H. Kahn (of Kuhn, Loeb & Co.). 
 
 2 Edward Henry Harriman, by Otto H. Kahn. Mr. Kahn was a 
 young man of brilliant talents who, after studying banking in Ger- 
 many, had six or seven years of training and experience in the London 
 branch of the Deutsche Bank and in the firm of Speyer & Co. of New 
 York. He became a partner in the banking house of Kuhn, Loeb & Co. 
 in 1897, and was a member of the first board of directors of the reor- 
 ganized Union Pacific Company. He soon became one of Mr. Harri- 
 man's warmest friends and staunchest supporters. 
 
REORGANIZATION OF UNION PACIFIC 131 
 
 ing the exact condition of the property for which he 
 had become in part responsible, and he devoted most 
 of the winter of 1897-98 to an intensive study of it. 
 This necessitated frequent requests for information 
 from the men on the ground, and in commenting 
 upon such requests, Mr. J. B. Berry, who was then 
 chief engineer of the road, says: 
 
 It was apparent to a number of us connected with the 
 Union Pacific that, even prior to Mr. Harriman's elec- 
 tion as chairman of the executive committee, in the 
 spring of 1898, there was a new man at the head of af- 
 fairs. He was constantly making inquiries about the 
 staff and the condition of the road, and was evidently 
 making up his mind as to what it would be best to do. 1 
 
 In the early part of 1898, a number of Union Pa- 
 cific directors and officials made a trip over the main 
 line, for the purpose of ascertaining the condition 
 and needs of the road. Mr. Harriman, who was a 
 member of the party, had already begun to attract 
 attention in the West, and was fast acquiring reputa- 
 tion in his new environment as a man of exceptional 
 knowledge and ability. The impression that he made 
 upon some of the employees of the road is described 
 by Mr. W. L. Park, then division superintendent at 
 North Platte, Nebraska, in the following words: 
 
 The advent of the Harriman regime on the Union 
 
 1 "Notes on Association with E. H. Harriman," by J. B. Berry, 
 chief engineer of the Union Pacific. (An unpublished manuscript.) 
 
132 E. H. HARRIMAN 
 
 Pacific, February 1st, 1898, was a matter of no small 
 concern to the employees and officials. It was not known 
 generally what interest had purchased the road, or who 
 would dictate its policies. Then along came a party of 
 financial people, who were escorted over the road by the 
 general officers and shown the physical characteristics 
 of the property. I heard the General Manager remark 
 to the Superintendent of Machinery, Mr. J. H. McCon- 
 nell, "Joe, did you notice that dark-complected man 
 with glasses who seemed to know so much about scrap, 
 and a great deal about things in general? Well, that's 
 the man who is going to have a good deal to say about 
 this railroad." 
 
 "Do you think so?" inquired the Superintendent of 
 Machinery in rather a doubtful manner. "What's his 
 name?" 
 
 "That's Ned Harriman — used to be on the Illinois 
 Central at Chicago. He's a comer! They all defer to 
 him, and he knows nearly as much about the property 
 as I do, already; except the financial end, and of that 
 he knows all and I know very little." 1 
 
 If Mr. Harriman already knew almost as much 
 about the Union Pacific as its general manager did, 
 it was only because he had already spent months in 
 the study of it, with a view to its complete recon- 
 struction and reequipment under his own direction. 
 
 It was about this time, or a little later, that Mr. 
 Harriman laid the foundation of his great fortune by 
 investing largely in Union Pacific stock. His ability 
 
 1 "Personal Recollections of E. H. Harriman," by W. L. Park, di- 
 vision superintendent of the Union Pacific at North Platte, Nebraska, 
 from 1890 to 1900. (An unpublished manuscript.) 
 
REORGANIZATION OF UNION PACIFIC 133 
 
 to take a "participation" to the amount of $900,000 
 in the financing syndicate shows that he was already 
 a man of means; but judged by the standards of the 
 time, he was not yet a man of great wealth. It was 
 the Union Pacific that ultimately enriched him, and 
 when, in 1898, he began to buy its stock, he was 
 counting on his own ability to make immensely 
 valuable a property which was then worth compara- 
 tively little. Speaking of these early investments, 
 Mr. Otto H. Kahn says: 
 
 He caused his associates to wonder and doubt, by 
 buying all of the Union Pacific common that he could 
 accumulate up to the price of 25 or thereabouts. He 
 must have acquired many thousands of shares, for the 
 stock had long been selling freely between 15 and 20. It 
 was considered to have but very little intrinsic value, 
 and there were no dividends in sight for the preferred, 
 much less for the common stock. I recollect an influen- 
 tial financial personage saying to me about these pur- 
 chases, which at the time attracted a good deal of com- 
 ment, " You see the man is essentially a speculator. He 
 is putting everything he has, and more, into Union Pa- 
 cific common and preferred at these prices. He will 
 come to grief yet." 1 
 
 Mr. Harriman, however, was not speculating, in 
 the proper, or even the popular, sense of that word. 
 When a capitalist buys a run-down farm, on the 
 chance that it may appreciate in value with the in- 
 
 1 Edward Henry Harriman, by Otto H. Kahn (New York, 19 1 1) , pp. 
 14-15. 
 
134 E. H. HARRIMAN 
 
 crease of population, he is truly a speculator. He 
 does not work the farm, and if it happens to double 
 in value as the result of some fortuitous circumstance 
 — the building of a railroad or a scarcity of farm 
 products — he has not earned the profit that he 
 takes. Such is not the case when an agricultural 
 expert buys a worn-out farm, works it himself, puts 
 into it his knowledge and skill, as well as his labor, 
 and eventually doubles its value by fertilization and 
 intensive cultivation. He does not then take a profit 
 without earning it, as does the hypothetical capital- 
 ist; he rightfully takes possession of value that he has 
 himself created. When Mr. Harriman invested his 
 money in a worn-out railroad, he expected to earn, 
 by personal labor and skill, the profit that he an- 
 ticipated — and he did earn it. No one now ques- 
 tions the fact that he was virtually the creator of the 
 reorganized Union Pacific; and if he made millions 
 out of it, he added, at the same time, hundreds of 
 millions to the value of the property of other men, 
 and widened immensely the area of human happiness 
 and prosperity. 
 
 It has sometimes been said, in disparagement of 
 Mr. Harriman's achievement, that the ultimate 
 success of the Union Pacific was wholly due to the 
 growth and development of the territory that it 
 served. " Harriman did n't create the Great West," 
 
REORGANIZATION OF UNION PACIFIC 135 
 
 said W. B. Thompson in an argument before the 
 United States Industrial Commission. "God Al- 
 mighty did that." This is the argument of the Rus- 
 sian peasant who begrudged the ten kopeks that he 
 had to pay for a teakettleful of hot water. "God 
 made the water," he declared, "and he gives it 
 freely to everybody." 
 
 "Yes, my little brother," replied the dispenser of 
 the aqueous fluid, "God made the water, but he 
 did n't make it hot; if you want God's water, go to 
 the river and fill your old teakettle." 
 
 The same reply may be made to Mr. Thompson. 
 God created the Great West, but he did n't make it 
 accessible. Railroad-builders did that and for that 
 railroad-builders should have all the credit. It is 
 undoubtedly true, as Mr. Kahn has said, that "the 
 growth and prosperity of the Union Pacific was de- 
 pendent upon the growth and prosperity of the ter- 
 ritory that it served, but such growth and prosperity 
 were universal throughout the country west of the 
 Missouri River and their benefits were available to 
 all other Western railroads to the same extent as to 
 the Union Pacific. Yet there is not a single line that 
 comes near to equaling the record made by the 
 Union Pacific, and it is the uniqueness of the Union 
 Pacific's attainments, considering not only the finan- 
 cial results to the stockholders, but also the standard 
 
136 E. H. HARRIMAN 
 
 of efficiency, service to the public, physical condition, 
 and financial strength of resources, which measures 
 the uniqueness of Mr. Harriman's genius." 1 
 
 What his own profits were from the investments 
 that he made in 1898 can only be conjectured; but 
 the well-known financial expert, John Moody, has 
 figured that the man who bought one hundred shares 
 of Union Pacific common in 1898 for $1600 received 
 on it, in dividends and increased value, in eight and 
 a half years, $21,900, and was then receiving sixty- 
 three per cent on his original investment. 2 
 
 Most of Mr. Harriman's great fortune was made 
 out of the increase in value of the properties that he 
 managed, and in part owned; but the value was put 
 into those properties by unremitting labor and by 
 the exercise of the rare mental powers and capacities 
 which in the business world always gain the high 
 rewards. Mr. Harriman's attitude toward money 
 will be considered elsewhere; but as it was at this 
 time in his life that he began to accumulate wealth 
 rapidly, it seems proper to say that in investing in 
 Union Pacific stock he was not speculating on an 
 uncertainty, but was anticipating the natural and 
 legitimate results of work for which he knew he had 
 a peculiar fitness. 
 
 1 Edward Henry Harriman, by Otto H. Kahn (New York, 191 1) , p. 12. 
 8 "The Growth of the Harriman Lines," by John Moody, McClure's 
 Magazine, October, 1906, p. 546. 
 
REORGANIZATION OF UNION PACIFIC 137 
 
 On the 1st of January, 1898, the Union Pacific was 
 turned over by the receivers to the reorganized com- 
 pany, and the latter began at once to operate it, with 
 Horace G. Burt as president; Oliver W. Mink, vice- 
 president; Alexander Millar, secretary; Edward 
 Dickinson, general manager; and Winslow S. Pierce, 
 chairman of the board of directors and of the execu- 
 tive committee. 1 
 
 In the course of the next three months, the new 
 Union Pacific Company reacquired the Kansas Pa- 
 cific, Denver Pacific, and the Julesburg branch of the 
 Union Pacific, Denver & Gulf, and made plans for 
 getting control again of the Oregon Short Line, the 
 Oregon Railroad & Navigation Company, and other 
 important parts of the old system. Mr. Harriman, as 
 a director, favored all these measures and plans, and 
 in the discussion of them showed so much accurate 
 knowledge and shrewd judgment as greatly to impress 
 even those of his associates who had at first doubted 
 
 1 Mr. Burt was an engineer by profession, and prior to his election 
 as president of the Union Pacific he had been third vice-president and 
 traffic manager of the Chicago & Northwestern Railroad at Chicago. 
 Messrs. Millar, Dickinson, and Mink had all been connected with the 
 old company — Millar as secretary, Dickinson as general manager, 
 and Mink as controller and afterward one of the receivers. Mr. 
 Pierce was a corporation lawyer and had acted in the capacity of gen- 
 eral counsel, or general attorney, for several Western railroads, includ- 
 ing the Missouri Pacific, Texas & Pacific, and St. Louis Southwestern. 
 He was the personal representative of George J. Gould, who, at that 
 time, was interested in the Union Pacific as well as the Missouri 
 Pacific. 
 
138 E. H. HARRIMAN 
 
 his ability. Mr. Schiff, in particular, became con- 
 vinced that in bringing about the election of Mr. 
 Harriman as a director he had "builded better than 
 he knew," and had given to the board a man of ex- 
 ceptional knowledge, boldness, and power. The by- 
 laws of the reorganized company provided that the 
 chairman of the board of directors should be, ex 
 officio, chairman also of the executive committee; 
 but when, in the spring of 1898, it became apparent 
 that Mr. Harriman was preeminently qualified for 
 leadership, it was decided to amend the by-laws so 
 as to make a place for him by empowering the com- 
 mittee to choose a presiding officer for itself. Early 
 in May, 1898, when this had been accomplished, 
 Mr. Harriman was elected chairman and took his 
 seat as chief executive officer of the board. Thus was 
 fulfilled the half promise, half prediction made by 
 Mr. Schiff in 1897 that if Mr. Harriman should 
 "prove to be the strongest man in the committee," 
 he would "probably get the chairmanship in the 
 end." 
 
CHAPTER VI 
 
 RECONSTRUCTION AND REEQUIPMENT OF 
 THE UNION PACIFIC 
 
 MR. HARRIMAN'S first step, after he became 
 chairman of the executive committee of the 
 Union Pacific, was thoroughly characteristic of the 
 man and his methods. He had already made a care- 
 ful study of the road, and was better acquainted, 
 perhaps, with its condition and needs than were any 
 of his associates on the board of directors; but in 
 order to verify his information and perfect his knowl- 
 edge he determined to go personally, by daylight, 
 over the whole line from the Missouri River to the 
 Pacific Coast, and make a thorough examination of 
 it from an observation car. Early in the summer of 
 1898, with his two older daughters, Mary and Cor- 
 nelia, he went to Omaha, and there ordered a special 
 train made up with an observation car in front and a 
 locomotive in the rear. Then, accompanied by Pres- 
 ident Burt, Chief Engineer Berry, and a few other 
 high officials of the road, he started for the Pacific 
 Coast, sitting in the front of the observation car and 
 taking note of grades, curves, rails, ballast, etc., as 
 the locomotive in the rear pushed the train west- 
 ward across the plains. 
 
140 E. H. HARRIMAN 
 
 Traveling only in the daytime, and stopping at all 
 important stations to question officials, investigate 
 conditions, and gather information, the new chair- 
 man of the executive committee made a slower trip 
 from Omaha to Portland, perhaps, than had ever 
 been made before by a high railroad official ; but in 
 the weeks that the journey occupied he became 
 thoroughly acquainted with the physical condition 
 of the road, estimated the value of its equipment, 
 interviewed the shippers who made use of it, judged 
 the characters of the officials locally in charge of it, 
 and not only devised plans for its immediate im- 
 provement, but, in many cases, put such plans into 
 operation without waiting for the approval of the 
 executive committee. He determined, for example, 
 to retire as soon as possible most of the light rolling 
 stock; and in order to prevent useless expenditure of 
 money in repairing it, he directed that not more 
 than ten dollars be spent in putting any single car 
 in order. He also directed the removal of the sides 
 and roofs of old box cars, in order that they might be 
 used as flatcars in ballasting the track. They were 
 too small and light for freight traffic and he in- 
 tended to substitute for them cars of much greater 
 capacity. 1 These measures he took on his own per- 
 
 1 "Recollections of E. H. Harriman in Connection with the Union 
 Pacific," by W. L. Park, division superintendent at North Platte, 
 Nebraska. (An unpublished manuscript.) 
 
RECONSTRUCTION OF UNION PACIFIC 141 
 
 sonal responsibility, merely for the purpose of saving 
 time and money. In his examination of the road and 
 its equipment, nothing escaped his attention. One 
 of the division superintendents afterward declared, 
 with pardonable exaggeration, "He saw every poor 
 tie, blistered rail, and loose bolt on my division." 
 He even noticed and made inquiries about such 
 comparatively unimportant matters as the diameter 
 of water-tank service pipes, the quality of water 
 furnished to engines, and the effect of unsuitable 
 water on the casing of locomotive fire-boxes. His 
 wide knowledge, keenness of observation, and quick- 
 ness of decision made a deep impression upon the 
 minds of railway officials who had never before seen 
 him. Mr. W. H. Bancroft, general manager of the 
 Oregon Short Line says: 
 
 As I now recall it, I first met Mr. Harriman in 1898, 
 when he made his first trip of inspection over the Union 
 Pacific, the Oregon Short Line, and the other roads 
 with which his name has been so familiarly associated. 
 Before he became chairman of the executive committee 
 of the Union Pacific, I had known little about him, even 
 by reputation; but his election to that position natur- 
 ally aroused interest in his personality. I had imagined 
 a man larger in stature than I found him to be, but, al- 
 though somewhat below the average size, he impressed 
 me as a man of unusual ability, with a wonderful grasp 
 of affairs, full of energy, and apparently of physical 
 strength. At that time he was about fifty years of age, 
 but he did not look it. I should have said that he was 
 
142 E. H. HARRIMAN 
 
 between forty and forty-five. The things that impressed 
 me as most remarkable in his character were his general 
 knowledge of the properties with which he had become 
 so recently associated, and his rapid observation of all 
 matters of detail. His view of larger and broader ques- 
 tions also was that which a man ought to have if he is 
 to exercise supervisory powers and to direct the devel- 
 opment and management of great railroad properties. 
 He approached every question with a directness and 
 thoroughness which enabled him to master all the 
 phases of it in the least possible time. It was often dif- 
 ficult, even for an experienced employee, to answer di- 
 rectly and promptly his pertinent and far-reaching in- 
 quiries. A man might be acquainted in a general way 
 with the data and information that he was called upon 
 to furnish, but he might not have arranged the facts 
 systematically enough in his mind to make a compen- 
 dious presentation of them. Mr. Harriman's grasp of 
 affairs, and his desire for full information in condensed 
 form, constituted a lesson to me and to those associated 
 with me. We learned to systematize and condense our 
 information and to present it to him, at subsequent 
 meetings, approximately in the brief and comprehensive 
 form that his methods seemed to require. It was this 
 that enabled him to deal successfully with the multi- 
 tude of great questions presented to him. 
 
 His manner, at first, seemed to me brusque; but this 
 was an erroneous impression, for I soon found that it 
 was only his thorough way of transacting business. If 
 the information given him with regard to any matter 
 seemed satisfactory to his mind, he disposed of the larg- 
 est questions with great rapidity and, as the results 
 showed, with the greatest wisdom. If, on the other 
 hand, the facts laid before him were insufficient, a per- 
 tinent suggestion from him would show his assistants 
 what was lacking and enable them to go after the de- 
 
RECONSTRUCTION OF UNION PACIFIC 143 
 
 sired information understandingly. To be associated 
 with him in business afforded an opportunity for a lib- 
 eral education in business problems. 1 
 
 Many, if not most, of the things that Mr. Harri- 
 man saw in his daylight ride over the Union Pacific 
 would have disheartened a less far-sighted or less 
 resolute man. In the first place, the condition of the 
 road itself was deplorably bad. The rails were light, 
 the track had never been properly ballasted, and the 
 rolling stock was either old or of limited capacity. 
 Every railroad deteriorates rapidly if adequate ap- 
 propriations are not made for maintenance and re- 
 pair, and in the five and a half years just prior to the 
 reconstruction of the Union Pacific, the money spent 
 for these purposes was less than $180,000 a year. 2 
 
 1 "Impressions of E. H. Harriman," by W. H. Bancroft, vice- 
 president and general manager of the Oregon Short Line. (An unpub- 
 lished manuscript.) 
 
 * Between January 1, 1893, and June 3, 1898, the expenditures of 
 the Union Pacific for maintenance and repair were $983,678, as fol- 
 lows: 
 
 Bridges and trestles $100,651 
 
 Fences 18,281 
 
 Real estate 1,350 
 
 Side tracks 12,193 
 
 Widening embankments 68,929 
 
 Miscellaneous betterments 147,567 
 
 Reconstruction and grade revision 129,338 
 
 New rolling stock 505,368 
 
 Total $983-677 
 
 This sum, on a main line of a thousand miles, would make only about 
 $179 per mile annually for maintenance, betterments, and renewal of 
 equipment. 
 
144 E. H. HARRIMAN 
 
 On the main line of the road, when Mr. Harriman 
 went over it, there were only seven miles of ninety- 
 pound rails, seventy miles of eighty-pound rails, and 
 three hundred and forty-four miles of seventy-five- 
 pound rails. Eighty per cent of the track had sixty- 
 and seventy-pound rails, and even these were in a 
 more or less worn and untrustworthy condition. 
 Only two hundred miles of the main line were gravel- 
 ballasted, and in many parts of these stretches the 
 ballast was thin and scattered. Almost eighty per 
 cent of the main line had no ballast at all. Not a 
 yard of rail was tie-plated; not a mile of track had 
 signals of any kind ; and nearly half the line needed 
 replacement of wooden sleepers. The western part 
 of the road, moreover, abounded in heavy grades 
 and short curves. Between Cheyenne and Sherman 
 there was a rise of 2214 feet in a distance of only 
 thirty miles, and maximum grades of from fifty to 
 ninety-eight feet to the mile were not uncommon. 
 
 The rolling stock of the road was in better condi- 
 tion perhaps than the track, for the reason that more 
 money had recently been spent on it, but it, too, left 
 much to be desired. The company was carrying 
 10,634 freight cars on its books, but most of them 
 were of small capacity and more than half of them 
 were old or unserviceable. 1 
 
 1 A report made to Mr. Harriman in May, 1898, showed that 3597 
 of these cars had been built before 1880 and that 1180 were worn out 
 
RECONSTRUCTION OF UNION PACIFIC 145 
 
 The state of the country tributary to the road was 
 quite as bad as that of the road itself. Nowhere, 
 perhaps, in the United States, were the disastrous 
 effects of the panic of 1893 and of the long period of 
 business depression that followed it more clearly 
 manifest than in the region west of the Missouri 
 River. This territory, in the years previous to 1893, 
 had enjoyed what is colloquially known as a" boom." 
 The tide of immigration from the Eastern States had 
 flowed into it rapidly, and thousands of newcomers, 
 many of them with very little agricultural knowledge 
 or experience, had bought land at inflated prices, 
 borrowing on it all the money they could get. Loan 
 companies in the East made easy the financing of such 
 purchases, and even savings banks, tempted by high 
 rates of interest, were eager to invest in Western 
 farm mortgages. Little attention was paid, in many 
 cases, to the intrinsic value of the land, or its pro- 
 ductive capacity. If it was called a "farm," and if 
 somebody stood ready to cultivate it, Eastern money- 
 lenders were willing to finance the development of it. 
 Speculative syndicates bought immense tracts of 
 land, mortgaged them for more than they were 
 worth, cut them up into farms, and sold them, or 
 tried to sell them, to immigrants from the East. 
 Even established farmers borrowed millions of dol- 
 lars on their holdings for the purpose of building 
 
146 E. H. HARRIMAN 
 
 houses and barns, acquiring additional land, or pur- 
 chasing live stock and machinery. Cities and towns 
 in the agricultural area outgrew their former bound- 
 aries and expanded widely in suburban development. 
 Money was easily made, easily borrowed, and freely 
 spent, and there seemed to be no limit to the oppor- 
 tunities for speculation and profit. This apparent 
 prosperity, however, was largely fictitious, for the 
 reason that it was mainly based on borrowed capital; 
 and when the panic of 1893 came, with a sudden 
 contraction in credits and a general loss of confidence 
 in everything and everybody, the financial structure, 
 built up on hope and trust, collapsed and went to 
 pieces. Interest payments on speculative loans 
 ceased; mortgages were everywhere foreclosed; farm- 
 ers were unable to meet their engagements, and a 
 period of general embarrassment and distress fol- 
 lowed the period of deceptive prosperity. The great 
 tracts of land bought by speculative syndicates were 
 no longer salable and remained uncultivated; town 
 sites were abandoned, and municipalities which had 
 floated loans in the East ceased to exist, leaving the 
 holders of their bonds to foreclose on deserted town 
 lots and empty buildings. Settlers could no longer 
 obtain bank accommodations; solvent business men 
 suffered great losses from the sudden shrinkage in 
 values; and even the population decreased as ruined 
 
RECONSTRUCTION OF UNION PACIFIC 147 
 
 farmers and unemployed farm laborers drifted back 
 into the Eastern States. Some agricultural counties 
 lost almost their whole population, while in others 
 there was a numerical reduction of from twenty-five 
 to fifty per cent. 
 
 Inasmuch as Mr. Harriman had known all these 
 conditions before he started westward from New 
 York, he was not discouraged by them when he saw 
 them from his observation car. He believed that the 
 worst period of the depression had passed, and that a 
 revival of business would come very soon. The agri- 
 cultural crops for 1898 promised to be good, and he 
 felt sure that the Great West would not only regain 
 its prosperity, but develop more rapidly than evre 
 before. As for the railroad, its condition was no 
 worse than he had supposed it to be, and he had al- 
 ways anticipated the complete reconstruction and 
 reequipment of it. With capital, skill, and energy he 
 knew that it could be made one of the best railroads 
 in the world, as well as one of the most profitable. 
 By reducing grades, eliminating curves, and increas- 
 ing the size of cars and the tractive power of locomo- 
 tives, he expected not only to lessen the road's op- 
 erating expenses, but to double its carrying capacity. 
 That the territory between the Missouri River and 
 the Pacific would furnish, in the near future, an 
 immense volume of traffic, he never for a moment 
 
148 E. H. HARRIMAN 
 
 doubted; and he did not hesitate, therefore, to take 
 immediate and decisive action. 
 
 His first step, as described by Mr. Otto H. Kahn, 
 was to 
 
 telegraph the board in New York, asking for authority 
 to purchase immediately a large quantity of cars, loco- 
 motives, rails, etc., and to start various works of im- 
 provement, the total aggregating, as I remember it, 
 something like $25,000,000, which telegram was fol- 
 lowed by a written communication setting forth the 
 reasons for his request and the main details of the pro- 
 posed expenditure. The reasons, in short, were that he 
 clearly discovered signs of returning prosperity after 
 the period of long depression ; that he believed this pros- 
 perity would assume proportions corresponding to the 
 depth and extent of the long-drawn-out and drastic re- 
 action that preceded it; that labor and materials were 
 then extremely cheap, but would begin to advance be- 
 fore very long, and that the Union Pacific should put it- 
 self in shape to take care of the largely increased traffic 
 which he foresaw, to attract business to its lines by be- 
 ing better prepared for it, and thus afford shippers bet- 
 ter facilities than its neighbors. Remember that at that 
 time . . . $25,000,000 was a vastly greater sum than 
 nowadays, when the stupendous development of the 
 country has made railroad expenditures of proportion- 
 ate size familiar, and that it was a pretty hazardous 
 thing to venture upon this huge outlay simply upon a 
 guess of coming unprecedented prosperity. There was 
 much doubt in the board as to whether Mr. Harriman's 
 recommendation should be followed. I remember the 
 statement was made that, if it were followed, the Union 
 Pacific would find itself in receivers' hands again before 
 two years had passed. The subject was laid over until 
 
RECONSTRUCTION OF UNION PACIFIC 149 
 
 Mr. Harriman's return to New York. . . . Incidentally I 
 may mention, as characteristic of the man, that he felt 
 so sure of his judgment and of his ability to carry the 
 board with him (though he had no illusions as to the 
 sentiment of some of its members regarding him and of 
 the fatal consequences to his career in case his forecast 
 should turn out to be mistaken or even premature) that, 
 while he was still in the West, and so as to be sure not to 
 lose time or opportunity, he took upon himself the re- 
 sponsibility, at his personal risk, of concluding various 
 contracts for purchases and work included in the pro- 
 gramme advocated by him. 1 
 
 Soon after his arrival in Portland, Mr. Harriman 
 went southward over the lines of the Southern Pa- 
 cific to San Francisco; thence eastward over the 
 Central Pacific to Ogden; northward to Butte, Mon- 
 tana, and back on a branch of the Oregon Short 
 Line, and finally eastward on the main line of the 
 Union Pacific to his starting-point in Omaha, thus 
 completing a journey of more than five thousand 
 miles, most of which he made by daylight in the 
 observation car of a pushed train. Everywhere on 
 the main line of the old Union Pacific between the 
 Missouri River and Portland he saw evidences of 
 business depression, and everywhere the road over 
 which he passed was in an unsatisfactory if not a 
 neglected condition; but so confident was he of com- 
 ing prosperity, and so sure did he feel of his ability to 
 
 1 Edward Henry Harriman, by Otto H. Kahn (New York, 191 1), 
 pp. 13-14. 
 
ISO E. H. HARRIMAN 
 
 reconstruct the railroad and put it into a state of 
 high efficiency, that, as his train pulled into Omaha, 
 he said to the officials who accompanied him: "Gen- 
 tlemen, I have to-day wired New York for five thou- 
 sand shares of Union Pacific preferred at sixty-six, 
 and any one of you is welcome to take as few or as 
 many shares as he likes at that price plus the interest 
 until paid." 1 
 
 Few railroad officials, or business men of any 
 class, after going over a dilapidated and run-down 
 railroad and through a country still suffering from 
 an unprecedented financial debacle, would have 
 had courage and self-confidence enough to invest 
 $330,000 on his personal judgment of that rail- 
 road's potential capacity and that country's future 
 prosperity. 
 
 Upon his return to New York in the late summer 
 of 1898, Mr. Harriman submitted to the Union Pa- 
 cific directors the facts and reasonings on which his 
 telegraphic request for $25,000,000 had been based. 
 "After long and strenuous argument he carried the 
 day. The appropriation for the expenditures advo- 
 cated by him was made, though with considerable 
 head-shaking and misgiving, and it was this courage- 
 ous outlay, at a time when the unexampled pros- 
 
 1 "Notes on Association with E. H. Harriman," by J. B. Berry, 
 chief engineer of the Union Pacific (An unpublished manuscript) 
 
RECONSTRUCTION OF UNION PACIFIC 151 
 
 perity to come was barely discernible, and the intel- 
 ligent and efficient application of the funds, that 
 started the Union Pacific on its amazingly success- 
 ful career." * 
 
 This acceptance of Mr. Harriman's plan for the 
 complete reconstruction of the Union Pacific, at an 
 initial cost of $25,000,000, shows how deep an im- 
 pression his knowledge, ability, and character had 
 made upon the minds of the directors. When he 
 became a member of the board, in December, 1897, 
 he was comparatively little known, even to his asso- 
 ciates, but in less than six months his influence had 
 become paramount, and in less than a year (Decem- 
 ber 1, 1898) he was made chairman of the whole 
 board, as well as chairman of the executive commit- 
 tee, and was practically given supreme control of 
 Union Pacific affairs. The directors, of course, con- 
 tinued to manage the property, but, as a rule, they 
 deferred to the expert knowledge and far-sighted 
 judgment of their chairman in all questions of im- 
 portance, whether technical or financial. 
 
 Few railroad officials, at that time, fully appre- 
 ciated the importance of reducing the cost of trans- 
 portation by using larger cars and more powerful 
 locomotives. The average freight car then in use 
 
 1 Edward Henry Harriman, by Otto H. Kahn (New York, 191 1), 
 p. 14. 
 
152 E. H. HARRIMAN 
 
 weighed 20,000 to 40,000 pounds and had a carrying 
 capacity about equal to its own weight. The average 
 freight locomotive weighed about fifty tons and its 
 tractive power was less than ten tons. Mr. Harriman 
 believed that by increasing the size of the cars and 
 the power of the locomotives he could double the 
 carrying capacity of every train, without increasing 
 in anything like the same ratio the operating expense. 
 Given a suitable track, it would cost little more to 
 run a train that would carry a thousand tons of pay- 
 ing freight than to run one that would carry only 
 half that quantity, and the difference in earnings 
 would be very great. Heavy equipment and heavy 
 trains, however, would require an approximately 
 straight and level track, and the western part of the 
 Union Pacific was full of sharp curves and heavy 
 grades. Between Rawlins and Wamsutta there was 
 a grade of sixty-seven feet to the mile each way; 
 between Wamsutta and Green River a grade of 
 sixty-seven feet going west and seventy feet going 
 east; and between Cheyenne and Laramie a grade 
 of eighty-seven feet one way and ninety-eight the 
 other. Long and heavy trains could not be run eco- 
 nomically, if at all, over this part of the main line 
 without extensive grade reductions, and Mr. Harri- 
 man's first task was to get an approximately straight 
 and level track, on which the heavy equipment that 
 
RECONSTRUCTION OF UNION PACIFIC 153 
 
 he contemplated could be economically used. From 
 his own observations and from the reports of his 
 engineers, he believed that everywhere, except be- 
 tween Evanston and Ogden and between Cheyenne 
 and Laramie, grades could be reduced to a maximum 
 of forty-three feet to the mile, and this was adopted 
 as the standard for the road. Bringing the track to 
 this standard, however, was a work of colossal dif- 
 ficulty, inasmuch as it involved engineering opera- 
 tions of the most formidable nature and practical 
 abandonment of the old line in a large part of the 
 mountainous region. Fortunately Mr. Harriman had 
 as his assistants technical experts of the first rank. 
 Chief Engineer Berry was a man of conspicuous 
 ability; President Burt was himself an engineer 
 by profession; and W. L. Park, who superintended 
 the ballasting, laying of rails, and building of bridges, 
 was an extremely capable and energetic officer. With 
 Kilpatrick Brothers and Collins and the MacArthurs 
 of Chicago as contractors they made a strong direct- 
 ing and working force. 
 
 As soon as the appropriation of $25,000,000 had 
 been secured, the work of reconstruction began along 
 the whole extent of the main line. Under the active 
 direction of President Burt, contractors enlisted an 
 army of laborers and assembled a complete equip- 
 ment of modern machinery, much of which was then 
 
154 E. H. HARRIMAN 
 
 used for the first time in railroad-building. In trying 
 to get a maximum grade of forty-three feet to the 
 mile, Harriman's engineers encountered the greatest 
 difficulties in the mountainous region west of Chey- 
 enne. 
 
 It is not perhaps generally understood [says a well- 
 informed writer on the subject] that the highest barrier 
 presented to the Union Pacific in its transcontinental 
 run lies immediately west of the plains about Cheyenne, 
 where the line strikes that secondary range of the Rock- 
 ies known as the Black Hills. What makes the ascent of 
 these hills of especial difficulty is a great elevation cou- 
 pled with unusually short slopes. Just here, at the out- 
 set almost, the Union Pacific rises to its greatest height 
 above the sea, and here, in the rebuilding, lay the prob- 
 lem before Berry, chief engineer, as to how the grade of 
 this granite summit might possibly be reduced. New 
 limits had been set to the gradients of the proposed im- 
 provements ; but it is one thing in a directors' meeting to 
 adopt a grade over the Rockies of forty-three feet to the 
 mile, and quite another to go into the Rockies and run it. 
 The chief engineer had to match his wits against those 
 of engineers who, a generation before, had laid out the 
 pioneer line and done it well. Thirty-five years of reflec- 
 tion, observation, and criticism from the best construc- 
 tionists in the world had failed to develop flaws in this 
 earliest effort of Americans to bridge the Rockies. . . , 
 
 To find the line that Berry determined he must have, 
 he sent good men into the hills, only to be told that 
 where he wanted a line there was none. But when they 
 tried to maintain this, the personal equation, that 
 subtle and incalculable factor in men which, in the 
 overcoming of difficulties, makes the slight difference 
 between success and failure, intervened. The chief en- 
 
RECONSTRUCTION OF UNION PACIFIC 155 
 
 gineer, undaunted, refused to abide by the findings. He 
 sent the engineers again; the second time they brought 
 the line he knew must be there. It involved staggering 
 estimates. The Dale Creek crossing, just beyond Chey- 
 enne, called for a single fill nine hundred feet long and 
 one hundred and thirty feet deep. In these granite 
 wastes the engineering figures assumed at once un- 
 heard-of proportions. Cubic yards went into the calcu- 
 lations in millions instead of thousands. Two creek 
 crossings called for eight hundred thousand yards of em- 
 bankment. Two miles of new line required the moving 
 of seventeen hundred thousand cubic yards of material, 
 and of this three hundred thousand were solid rock. 
 Two fills, within these two miles, swallowed a million 
 cubic yards. To eliminate three heavy reverse curves 
 and two bridges, a summit cut was required eighty feet 
 deep and a thousand feet long. The springing charge 
 for a single cone of rock was a thousand pounds of giant 
 powder, and the mountain was hurled into the canon 
 with twenty thousand pounds of black. For these unpre- 
 cedented levelings of the continental summit new de- 
 vices were constantly brought into play. Time was an 
 essence of the undertaking, and the American contrac- 
 tor, following loyally the American engineer, as he has 
 always followed him, stooped like an Atlas and took 
 upon his shoulders the burden of the plans. 
 
 Grading machines and dump-wagons were sent into 
 the hills in train-loads. Steam shovels, the leviathans of 
 the railroad camp, crossed the mountains in processions. 
 They scooped the borrow-pits, cut the shale from the 
 tunnels, dug the Sherman ballast, and loaded even 
 blasted granite upon cars out of the rock cuts. Track- 
 laying machines flung out rails on one side and ties on 
 the other like sandwiches. At one of the vital points 
 Chicago men took the heavy work, and in order to make 
 a three-hundred-thousand-yard fill with an embank- 
 
156 E. H. HARRIMAN 
 
 ment of one hundred and thirty-eight feet, MacArthur, 
 to complete his contract on time, threw his own tem- 
 porary suspension bridge across the thousand-foot 
 canon, and ran his dump-cars out upon his own rails 
 and cables. Track-laying — ballasting even — was 
 pushed across the Rockies in midwinter. At the summit 
 the last hill was drilled and a tunnel eighteen hundred 
 feet long was put through primitive granite. Here the 
 Harriman engineers scaled two hundred and forty-seven 
 feet off the highest elevation at which the road had 
 formerly crossed the continent; then came the task of 
 getting gracefully down the western slope of the hills to 
 the Laramie plains. 
 
 There is nothing less showy in the rebuilding of the 
 Harriman lines, and nothing that is more of a triumph, 
 than this feat of Berry's in getting into Laramie. He 
 has used every trick in his bag, and after moving five 
 millions of cubic yards of earth and rock to accomplish 
 his purpose, he comes down into Laramie with a forty- 
 three-foot maximum grade eighteen miles long. 1 So 
 close is the cloth cut for this entire distance that not one 
 rail length of level track could be conceded for stations; 
 they take their chances on the grade as best they can. 
 Providence may, indeed, sometimes shift the axis of 
 the granite anticlinal now so skillfully crossed at Sher- 
 man, Wyoming, and new dispositions may be called for; 
 but until such an upheaval takes place, Berry's Laramie 
 grade is likely to stand. 
 
 The whole road, from this eastern approach to the 
 Black Hills far out to Medicine Bow on the Laramie 
 plains, shows everywhere the chisel and the straight- 
 edge of the Harriman engineers. There are but two 
 pieces of track — both of them very short — on the 
 entire main line where the forty-three-foot grade is ex- 
 
 1 The grade of the old line here was ninety-eight feet 
 
RECONSTRUCTION OF UNION PACIFIC 157 
 
 ceeded. Curvature had to go with the heavy grades, and 
 between the Black Hills and the Wasatch Range seven 
 thousand degrees gradually disappeared. At one point, 
 the new line, within a distance of four miles, crosses the 
 old one seven times. 
 
 The Hanna cut uncovered an eight-foot seam of coal; 
 a Green River cut revealed wide deposits of petrified 
 fish. First and last the contractors uncovered a little of 
 everything in the Rockies, from oil pockets to under- 
 ground rivers; but in the Wasatch Range, in boring a 
 six-thousand-foot tunnel, they struck a mountain that 
 for startling developments broke the records in the an- 
 nals of American engineering. It was here that the un- 
 derground stream was encountered ; but this was a mere 
 incident among the possibilities in the mountain. The 
 formation is carboniferous, thrown up in the Aspen 
 Ridge at an angle of twenty-five degrees, and it includes 
 shales, sandstone, oil, and coal. To bore a hole through 
 the mountain at a depth of four hundred and fifty feet 
 from the highest point was not difficult ; but the curious 
 thing was that after being bored the hole would not stay 
 straight. The mountain, reversing every metaphor and 
 simile of stability, refused to remain in the same posi- 
 tion for two days together. It moved forcibly into the 
 bore from the right side, and then stole quietly in from 
 the left; it descended on the tunnel with crushing force 
 from above, and rose irresistibly up into it from below. 
 The mountain moved from every point of the compass, 
 and from quarters hardly covered by the compass. 
 Workmen grew superstitious and engineers stood non- 
 plussed. Starting in huge cleavage planes, the shale be- 
 came at times absolutely uncontrollable. Wall plates, 
 well fastened into regular alignment at night, looked in 
 the morning as if giants had twisted them. Twelve-by- 
 twelve hard-pine timbers, laid skin to skin in the tunnel, 
 were snapped like matches by this mysterious pressure. 
 
158 E. H. HARRIMAN 
 
 Engineers are on reeord as stating that in the Aspen 
 tunnel such construction timbers were broken in differ- 
 ent directions within a distance of four feet. An engi- 
 neer stood one day in the tunnel on a solid floor of these 
 timbers, when under him and for a distance of two hun- 
 dred feet ahead of him the floor rose, straining and 
 cracking, three feet into the air. Before the tunnel could 
 be finished it became necessary to line over seven hun- 
 dred feet of it with a heavy steel and concrete construc- 
 tion. 1 
 
 Speaking of the same tunnel, Superintendent Park 
 
 says: 
 
 The Aspen tunnel was a Pandora box of unexpected 
 events. The approaches were gentle and the earth 
 parted easily before the great machines of Kilpatrick 
 Brothers & Collins ; but then it came together again and 
 slides developed that required Herculean efforts and 
 new devices to hold back. Farther in, at the^ eastern 
 portal, docile limestone was encountered which remained 
 where it was placed and made easy work ; but beyond it 
 shale rock appeared, and, at the western end, oily shale 
 at a frightful angle. This slipped, squeezed, and crushed ; 
 great timbers a foot square bent and broke like tooth- 
 picks; gas appeared and ignited, ejecting men, mules, 
 and timbers from the mouth of the tunnel like a can- 
 non's shot. It took brave men to go back into the head- 
 ings after the funerals; but they did return and con- 
 quered; and one morning Mr. Harriman appeared on 
 the scene and went through the sink-hole of so many 
 unexpected obstacles. 2 
 
 1 The Strategy of Great Railroads, by Frank H. Spearman (New 
 York, 1914), pp. 59-66. Mr Spearman's account of these engineering 
 operations has been submitted to Chief Engineer Berry and has been 
 approved by him as substantially correct. 
 
 * " Recollections of E. H. Harriman in Connection with the Union 
 
RECONSTRUCTION OF UNION PACIFIC 159 
 
 v On the eastern part of the line, between Omaha 
 and Cheyenne, the country was more nearly level 
 and the engineering difficulties involved in the work 
 of reconstruction were not so formidable; but even 
 here great changes were made. Between Omaha and 
 Lane, Nebraska, a new route was adopted which 
 reduced the distance from twenty-four miles to fif- 
 teen miles and lowered the grade from forty-two feet 
 to twenty-six feet. Between Lane and Grand Island, 
 on a distance of one hundred and thirty miles, grades 
 were reduced from thirty-nine and forty-two feet to 
 twenty-six and thirty-one feet, and large parts of 
 the track were abandoned and relocated in order to 
 eliminate curves. All together, between Omaha and 
 Ogden, the Harriman engineers abandoned more 
 than one hundred and fifty miles of the old line (an 
 amount equivalent to all of the New York Central 
 Railroad between New York City and Troy), and by 
 rebuilding it in new locations eliminated twenty-two 
 complete circles of curvature and saved nearly forty 
 miles of distance. At the same time the working 
 force widened one hundred and ninety-six miles of 
 road-bed and ballasted it with disintegrated granite; 
 put in almost a million new cross- ties; laid forty-two 
 thousand tons of new and heavier rails on a distance 
 
 Pacific," by W. L. Park, division superintendent at North Platte, 
 Nebraska. (An unpublished manuscript.) 
 
160 E. H. HARRIMAN 
 
 of three hundred and ninety-seven miles, and re- 
 placed nearly four thousand feet of old timber 
 bridges with permanent earthen embankments or 
 solid structures of steel. All this was done in the first 
 year and a half of Mr. Harriman's administration. 
 During the same period immense additions were 
 made to the road's equipment. Two hundred light 
 locomotives, which were not powerful enough to 
 haul such trains as Mr. Harriman contemplated, 
 were sold at about their scrap value, and were re- 
 placed with heavier engines which made it possible 
 to more than double the tonnage of the average 
 train. The rolling stock of the old road consisted of 
 10,634 freight cars, with a capacity of 400,000,000 
 pounds. Mr. Harriman added 4760 new cars with a 
 capacity of 325,000,000 pounds, thus nearly doub- 
 ling the road's carrying power. No such addition to 
 equipment had ever before been made by an Ameri- 
 can railroad in the short period of sixteen months. 
 During the first three years of Mr. Harriman's ad- 
 ministration, he spent on the Union Pacific, for im- 
 provements, betterments and new equipment, the 
 sum of $25,655,000, while the Atchison, Topeka & 
 Santa Fe, with seventy per cent more mileage, spent 
 only $11,318,000, and the Northern Pacific, with 
 ten per cent more mileage, expended only $6,866,000. 
 But Mr. Harriman wanted — as he said to his en- 
 
; RECONSTRUCTION OF UNION PACIFIC 161 
 
 gineers and contractors — the best-built and best- 
 equipped railroad that skill could devise and money 
 pay for. 
 
 In discussing this period in the history of the 
 Union Pacific, Superintendent Park says: 
 
 The lines east of Cheyenne did not require realign- 
 ment, but they needed to be ballasted; the shoulders 
 were thin and scant. Teams were employed along nearly 
 every mile, widening the banks for ballast. The sidings 
 were extended, cross-ties and heavier rails were thrown 
 off alongside the track with such astonishing liberality 
 that the rank and file marveled as to what it all meant. 
 The famous Sherman disintegrated-granite gravel was 
 dug up in train-loads and transported hundreds of 
 miles, first in flatcars and then on a car of new design 
 which we were told was a Rodger ballast car. Mr. Hart, 
 the inventor, came out to show us how to operate them 
 and I, personally, opened and unloaded near North 
 Platte the first of thousands of such cars. 
 
 As superintendent, I was consecutively in charge of 
 all that part of the ballasting, laying of rail, construc- 
 tion of bridges, etc., that fell to the operating depart- 
 ment from Grand Island to Ogden, a distance of nearly 
 a thousand miles. I was in this way brought intimately 
 in contact with the construction department. Opera- 
 tion under heavy construction is always difficult, and 
 construction under heavy traffic is apt to be slow and 
 expensive. By close cooperation with the engineering 
 department traffic was moved satisfactorily and the 
 work of the reconstruction of the line proceeded very 
 rapidly. There was close team work, and the most har- 
 monious relations existed between the forces. A friendly 
 rivalry to outdo each other stimulated to extraordinary 
 
162 E. H. HARRIMAN 
 
 effort and it was seldom that one department was com- 
 pelled to wait on the other. 
 
 When the work was finished in Nebraska, I was 
 moved to Cheyenne and placed in charge of the Wyom- 
 ing division, where heavy reconstruction was under 
 way. Those were strenuous days! The power was in- 
 sufficient, the cars were old and decrepit. The demands 
 upon the operating department were terrific. Only a 
 few months could be utilized in pushing the work, as at 
 the average height of six thousand feet winter might be 
 expected to begin in September and to continue until 
 March. The tunnels, at first, gave much concern. The 
 one at the crest of the Rocky Mountains, however, de- 
 veloped into a matter only of persistent digging through 
 flinty granite at so many inches an hour, the boring of 
 which could be computed mathematically. In fact, its 
 completion caught the engineers in other parts of the 
 Sherman Hill line with work unfinished that should 
 have been out of the way, and the mere filling of Dale 
 Creek valley with eight hundred thousand cubic yards 
 of gravel — enough to ballast three hundred miles of 
 ordinary railroad — was not a satisfactory excuse for 
 the chief engineer. 
 
 The work, as a whole, progressed with remarkable 
 regularity and was free from the friction and conflict of 
 authority quite frequently incident to such large un- 
 dertakings. The pace, of course, was terrific, and men 
 sometimes fell by the wayside — those without brains 
 or brawn got out of the way — but the elimination was 
 through the survival of the fittest. There was no favorit- 
 ism; those who made good were remembered while 
 those who did not were forgotten. 
 
 President Burt was on the work almost continually; 
 his chief engineer, Mr. Berry, was everywhere, while 
 the general manager, Mr. Dickinson, in his cool, delib- 
 erate way, steadied the organization and requisitioned 
 
RECONSTRUCTION OF UNION PACIFIC 163 
 
 for the material and equipment needed in the operating 
 department. New locomotives and cars began to arrive. 
 We heard that a couple of compound locomotives had 
 been ordered; when they arrived there were sixty of 
 them. Some freight cars were needed; five thousand 
 were ordered. Steam shovels, wrecking derricks, and 
 snow plows had only to be mentioned to be purchased. 
 The road grew from a mere skeleton, a wandering con- 
 tour line, into a magnificent highway, straight for miles 
 as an arrow. Gentle curves took the place of abrupt and 
 uncomfortable turns first one way and then the other 
 without any apparent reason. Smooth, regular grades 
 were substituted for sudden and alarming ascents and 
 drops. The old depots and freight houses, with hiero- 
 glyphics of horses and wild animals cut by the Sioux 
 Indians on doors and rough weather-boarding, were re- 
 placed by neat buildings with comfortable living-rooms. 
 The shacks of section houses disappeared as if by magic, 
 and in their places arose two-story buildings, grouped, 
 properly, away from the line, so as to leave the view un- 
 obstructed for safety in operating the trains. Water- 
 tubs, housed in with huge stoves to keep them from 
 freezing and in close proximity to the track, were torn 
 down, and graceful tanks with water- treating plants and 
 frost-proof compartments were erected at proper dis- 
 tances. Water-pipes and cranes led to the locomotive 
 tender, and by Mr. Harriman's personal order the dis- 
 charge pipes were made twelve inches in diameter, in- 
 stead of four, or six, in order to economize in the time ot 
 trains. One depot was moved three times to satisfy all 
 concerned that it was in the right location ; the last time 
 by Mr. Harriman's personal direction, and it will re- 
 main there, because he was right. 1 
 
 1 " Recollections of E. H. Harriman in Connection with the Union 
 Pacific," by W. L. Park, division superintendent at North Platte, Ne- 
 braska. (An unpublished manuscript.) 
 
164 E. H. HARRIMAN 
 
 / Although Mr. Harriman's work of reconstruction 
 began on the main stem of the old system, it soon 
 extended far beyond that. In 1899, less than a year 
 after he became chairman of the executive commit- 
 tee, the Union Pacific reacquired the Oregon Short 
 Line, one of the most important parts of the old sys- 
 tem, and at the same time secured control of the 
 Oregon Railroad & Navigation Company; thus in- 
 creasing its mileage from 2848 to 5391 and recover- 
 ing its lost outlet on the Pacific Coast at Portland. 1 
 Mr. Harriman had long before determined to secure 
 possession of these" roads, and when he went over 
 them in the summer of 1898 he became deeply inter- 
 ested in the future development of the vast and 
 potentially rich territory through which they ran. 
 In riding from Butte to Salt Lake City at that time 
 
 1 This merger, or consolidation, was effected by issuing $27,460,- 
 000 of new Union Pacific common stock and exchanging it for Short 
 Line stock on the basis of share for share. As the Short Line owned 
 a majority of the stock of the Railroad & Navigation Company the 
 Union Pacific thus obtained control of both roads. Then, later in 
 1899, the Union Pacific increased its own preferred stock from $75,- 
 000,000 to $100,000,000 and its own common stock from $88,460,100 
 to $96,178,700 for the purpose of securing complete ownership of the 
 two Oregon lines. The new shares of preferred were used in retiring 
 the Oregon companies' bonds, and the new common shares were ex- 
 changed for all the stock of the Railroad & Navigation Company 
 that the Short Line did not already possess. By virtue of these opera- 
 tions the Union Pacific became the owner of ninety-eight per cent of 
 the Oregon Short Line and ninety-one per cent of the Oregon Rail- 
 road & Navigation Company. {Commercial fir Financial Chronicle, 
 July 22, September 2, and October 13, 1899.) 
 
RECONSTRUCTION OF UNION PACIFIC 165 
 
 with the general manager of the Oregon Short Line, 
 he asked the latter how much he thought the road 
 would earn that year. 
 
 I told him [says Mr. Bancroft] that I believed it would 
 earn $6,000,000. He thought that, in my enthusiasm, I 
 had put the sum too high; but I replied that I thought 
 not; that the road would not only earn $6,000,000 that 
 year, but in ten years it would earn $12,000,000. He 
 then wanted to know on what grounds I made that 
 statement. Of course he was not familiar with the 
 country at that time, while I was ; but he was quick to 
 grasp the possibilities of development in the territory 
 that the road served. I explained to him that I thought 
 Idaho, in a few years, would be the best State west of 
 the Missouri River, if not west of the Mississippi. It had 
 more water than any other Western State and more 
 land to be put under cultivation. . . . There were ranges 
 in abundance for sheep and cattle; undeveloped mines 
 whose value had not yet been determined ; undeveloped 
 coal lands in the territory that the railroad served, and 
 timber resources second to only one other Western 
 State. As he became acquainted with the country, go- 
 ing over it from time to time, ... he realized the possi- 
 bilites of it as I fancy he had foreseen them in his first 
 wonderful vision of the future ; and he never cast aside 
 any recommendaton made to him by me for the build- 
 ing of branch lines, purchase of new equipment, laying 
 of new and heavier steel, purchase of terminals, ballast- 
 ing, signaling, and making other improvements to the 
 property. 1 
 
 At the time when the Union Pacific acquired the 
 
 1 " Impressions of E. H. Harriman," by W. H. Bancroft, general 
 manager of the Oregon Short Line. (An unpublished manuscript.) 
 
166 E. H. HARRIMAN 
 
 Oregon Short Line, the physical condition of the lat- 
 ter was no better than that of other parts of the old 
 system. The rails were light; the track was unbal- 
 lasted; the grades over the mountain ranges were 
 heavy; and the equipment, of all classes, was limited 
 in capacity. This state of affairs, however, did not 
 last long. The first appropriationi or reconstruction 
 work on the Oregon Short Line under the Harriman 
 regime was $6,000,000, and thereafter, for a long 
 term of years, large sums of money were spent, both 
 on it and on the Oregon Railroad & Navigation Com- 
 pany's lines, in the relocation of tracks, reduction of 
 grades, straightening of curves, and purchase of new 
 and heavier equipment. Inasmuch as the reconstruc- 
 tion work on the main line from Omaha to Ogden 
 has already been described, it is unnecessary, per- 
 haps, to go fully into the details of leveling, straight- 
 ening, and reequipment on the two Oregon roads. 
 Suffice it to say that as soon as they became a part 
 of the new Union Pacific system, they were brought 
 up, in every respect, to the new Union Pacific stand- 
 ard ; and when Mr. John W. Gates, of Chicago, went 
 over the whole road, a few years later, he said in a 
 private letter: "I have traveled over nearly every 
 railroad in the United States, and have just been 
 over the Union Pacific by daylight. Its condition is 
 the best I have ever found, East or West, and in my 
 
RECONSTRUCTION OF UNION PACIFIC 167 
 
 judgment it is the most magnificent railroad prop- 
 erty in the world." 
 
 That the condition of its track was almost perfect 
 is shown by the fact that when, on one occasion, Mr, 
 Harriman found it necessary to go from San Fran- 
 cisco to New York quickly, he made the journey of 
 3255 miles, in his own special train, in less than three 
 days (71 hours and 27 minutes). His average speed 
 for the whole distance was 45.6 miles an hour, which 
 included all stops for water, coal, and changing of 
 engines, as well as unavoidable delays of every kind. 
 Over the Union Pacific he made forty-eight miles an 
 hour west of Cheyenne and fifty-five east of that 
 point, with an occasional maximum of eighty-two 
 miles an hour where the track was straight. This 
 trip lowered the best previous record of speed across 
 the continent by nearly eleven hours, ten of which 
 were saved on the track of the Union Pacific. 1 
 
 The financial results of this great work of recon- 
 struction became apparent more quickly, perhaps, 
 than even Mr. Harriman himself anticipated. The ag- 
 ricultural crops in the Western States in 1898, 1899, 
 and 1900 were exceptionally good; there was a gen- 
 eral revival of business, and the flow of population 
 into the trans-Missouri region not only began again, 
 
 1 The fastest time previously made from ocean to ocean was that 
 of the famous Jarrett-Palmer theatrical train in 1878. This train also 
 went over the Union Pacific, and its time was 82 hours, 24 minutes. 
 
168 E. H. HARRIMAN 
 
 but increased so rapidly that between January i, 
 1899, and June 30, 1900, the Union Pacific Company 
 sold to new settlers an area of land almost equal to 
 that of the States of Delaware and Rhode Island taken 
 together. Increased Oriental trade and the acquisi- 
 tion of the Philippines also augmented the volume 
 of transcontinental traffic and added largely to the 
 profits of all the Pacific roads. The Union Pacific 
 system, with its reduced grades, straightened curves, 
 and heavy equipment, was able to handle, cheaply 
 and expeditiously, all the business that offered, and 
 its receipts from the transportation of both freight 
 and passengers increased with great rapidity. In the 
 fiscal year ending June 30, 1899, its earnings were 
 more than $34,000,000 gross and $14,000,000 net; 
 and six months later, the company not only had on 
 hand an accumulated cash surplus of $11,385,793, 
 but owned more than a thousand miles of improved 
 track upon which there was no lien of any kind. In 
 the fiscal year ending June 30, 1900, the road earned 
 $39,000,000 gross and $20,000,000 net, and paid a 
 first dividend of one and a half per cent on its com- 
 mon stock, as well as a semi-annual dividend of two 
 per cent on its preferred. In October, 1900, it raised 
 the rate on the common to four per cent per annum, 
 and at the end of the year, after paying all divi- 
 dends and putting vast sums of money back into 
 
RECONSTRUCTION OF UNION PACIFIC 169 
 
 the property, the company had a cash surplus of 
 $4,843,96i. 1 
 
 These extraordinary financial results were due 
 primarily to Mr. Harriman's faith in the future de- 
 velopment and prosperity of the Great West, and to 
 his boldness in spending tens of millions of dollars on 
 a run-down and inefficient road, for the purpose of 
 putting it in a condition to handle, economically and 
 profitably, the immense volume of future traffic that 
 he foresaw. 2 The brilliant success of this bold policy 
 and the skill and energy shown in carrying it out 
 have since been universally recognized. In a review 
 of the work of reconstruction, "The Outlook," of 
 New York, said: 
 
 1 Commercial & Financial Chronicle, September 2 and December 
 30, 1899, February io, August 4, and November io, 1900. 
 
 * The sum spent on the Union Pacific system for betterments, 
 new equipment, etc., in the five years from 1898 to 1902 was nearly 
 $45,000,000, as follows: 
 
 1898 fco5-368 
 
 1899 8,325,432 
 
 1900 11 ,560,7 1 1 
 
 1901 13,639,884 
 
 1902 10,925,686 
 
 Total $44,957,081 
 
 In the same period — and mainly as a result of these expenditures — 
 the density of traffic almost doubled, as shown in the following table: 
 Passengers Tons of freight 
 
 carried one mile carried one mile 
 
 Years Per mile of road per mile of road 
 
 1898 42. 8 54 476,000 
 
 1899 49.364 528.000 
 
 1900 59,000 626,000 
 
 1901 59.906 664,000 
 
 1902 70,126 751,000 
 
170 E. H. HARRIMAN 
 
 Among all the stories in American railroading, and it 
 has teemed with the marvelous, few chapters are so ex- 
 traordinary as the building of the Union Pacific system 
 by Edward H. Harriman. The boldness of the concep- 
 tion, the magnitude of the undertaking, and the con- 
 structive genius shown in the working-out of plans, are 
 all unusual features, even in an era of undertakings that 
 make for us, every day, new records in industrial his- 
 tory. . . . Mr. Harriman had faith in the mysterious, 
 hopeless-looking, wonder-working Western empire that 
 is wrapped in its unendng dream of sunshine beyond 
 the Missouri River. He had the keenness of vision to 
 map out within it a traffic confederation of unequaled 
 strength; the determination to supply it with railways 
 — the best of their class in the world — and the tremen- 
 dous personality to persuade careful men to risk un- 
 heard-of sums of money to make good his plans. 
 
 Even Professor Ripley, who has not always been 
 
 fair in his judgments of Mr. Harriman, says of the 
 
 latter's work on the Union Pacific: 
 
 These early years [1898 to 1901] were devoted to an 
 entire rebuilding of the road from end to end. Fortune 
 favored the enterprise from the start. The unusual rain- 
 fall in the arid belt brought heavy crops and prosperity 
 at a crucial time. For this all occurred, it should be 
 noted, before the days of dry farming and extensive ir- 
 rigation in the Far West. The annexation of the Philip- 
 pine Islands also largely stimulated transcontinental 
 and Oriental business. Gross earnings increased rap- 
 idly. Dividends began and substantial surpluses, over 
 and above these, were turned back into the property for 
 every form of improvement which would reduce costs 
 of operation. . . . Double tracks were laid ; solid embank- 
 ments took the place of trestles, and curves were elim- 
 
RECONSTRUCTION OF UNION PACIFIC 171 
 
 inated, wherever possible, all along the line. The result 
 was a heavy decline in the operating ratio. This was 
 sixty- two per cent in 1896. Within six years operating 
 expenses were below fifty-three per cent of revenue from 
 operation. Train-loads rapidly increased, so that the 
 greatly expanding business was yielding more than pro- 
 portionate net returns. Within three years, both gross 
 and net revenues had more than doubled. By 1901, 
 therefore, the company was in prime financial condi- 
 tion, with strong credit and unsurpassed banking con- 
 nections. 1 
 
 All this, it should be remembered, was the work of 
 less than four years, and it is only a small part of 
 what was accomplished in ten years. Throughout 
 Mr. Harriman's connection with the Union Pacific, 
 which lasted until his death, he never ceased to im- 
 prove its physical condition. He strove to make it 
 the best as well as the most useful railroad in the 
 West, and when, after he became president in 1904, 
 he had brought it almost to the point of perfection as 
 a means of transportation, he turned his attention to 
 beautifying it. 
 
 On one of his trips over the line says Superintendent 
 Park he noticed the lack of vegetation in and around 
 Rock Springs, Wyoming, which, its population consid- 
 ered, was the best revenue-producing station on the road. 
 
 " Why don't you put in a park here? " he asked. "The 
 station is of attractive design, and some grass and a 
 little shrubbery would freshen things up wonderfully." 
 
 1 Railroads: Finance and Organization, by W. Z. Ripley, Ropes Pro- 
 fessor of Economics in Harvard University. (New York, 191 5), p. 502. 
 
i?2 E. H. HARRIMAN 
 
 A resident of Rock Springs interrupted my reply by 
 saying: "Mr. Harriman, there is not a sprig of grass in 
 Rock Springs; not because we don't want it, but because 
 the percentage of alkali in the soil is an absolute bar to 
 its growth." 
 
 Mr. Harriman looked at me and said: "Nothing is 
 impossible." 
 
 Taking that for my cue, I hauled from Utah hun- 
 dreds of cars of the best soil of that fertile State, distrib- 
 uted it around the depot, planted shrubbery and trees, 
 and to-day one of the most attractive spots on the 
 Union Pacific Railroad is the garden surrounding Rock 
 Springs station. This was also a cue for further work of 
 this character all along the line. At my own personal ex- 
 pense I had planted trees in many localities, and had 
 made every effort to obtain parks without the expendi- 
 ture of money, because previous managements had not 
 been willing to "waste" money, as they termed it, in 
 this way. Mr. Harriman was willing to spend money to 
 make the road look attractive. The result was the beau- 
 tiful park at Cheyenne, and the improvement of the 
 landscape at all terminals, which, in a few years, trans- 
 formed the Union Pacific from a road through a desert 
 to one along which the bright green grass, trees, and 
 flowers were in evidence at every station of importance. 
 This movement soon spread — the section foremen be- 
 gan to plant trees and flowers — and now there is no 
 other railroad so well kept, unless it be the Southern 
 Pacific, along which Mr. Kruttschnitt had started a 
 similar movement years before. 1 
 
 One of Mr. Harriman's noteworthy personal char- 
 
 1 " Recollections of E. H. Harriman in Connection with the Union 
 Pacific," by W. H. Park, division superintendent at North Platte, 
 Nebraska, and afterward general superintendent (An unpublished 
 manuscript.) 
 
RECONSTRUCTION OF UNION PACIFIC 173 
 
 acteristics was his love of horses, and, curiously 
 enough, it was his knowledge of the capacity of the 
 horse for speed and endurance that enabled him to 
 suggest a remedy for one of the evils with which, in 
 the first decade of the twentieth century, all Western 
 railroads had to contend, namely, train robberies. 
 
 The Wyoming division of the Union Pacific [says Su- 
 perintendent Park] had long been a Mecca for outlaws. 
 The mountainous region on each side of the road, within 
 an average distance of a hundred miles, afforded oppor- 
 tunities for the "get-away" which is essential in the 
 highwayman's profession. The trains were held up 
 early in the evening, and before a posse could be organ- 
 ized the bandits were in the Hole-in-the- Wall-country 
 to the north, or in Brown's Park, or the North Park 
 country south, where the trail was invariably lost. Mr. 
 Harriman, with his knowledge of the horse, suggested 
 that we find horses that could go one hundred miles 
 in a day and keep them in the service of our special 
 agents, to be moved about from place to place on 
 trains and in the country. This was done and cured 
 the trouble. Thereafter the Union Pacific suffered no 
 holdups, although the Northern Pacific, Great North- 
 ern, and Denver & Rio Grande were frequently vic- 
 tims. Our posse of train guards, which became quite 
 celebrated, was composed of the best hunters and 
 guides. One of them — Joe La Force — was made 
 famous in Spearman's novel, " Whispering Smith." 
 Sam Lawson, formerly guide and hunter for Lord and 
 Lady Brassey, was always to be depended upon. Mr. 
 Timothy Keliher had immediate charge of the guards 
 and their equipment, and so maneuvered them that 
 complete exemption was obtained from attacks. The 
 
174 E. H. HARRIMAN 
 
 expense was infinitesimal, compared with fruitless ex- 
 penditures to capture the outlaws after robberies had 
 occurred, to say nothing of the bad advertising such 
 incidents gave to a railroad. 
 
 In discussing one of the holdups, which in the past 
 had been all too numerous, Mr. Harriman asked me for 
 a detailed description of the Wilcox train robbery. At 
 considerable length I went over the occurrence, explain- 
 ing the method adopted by the bandits; their pursuit; 
 the killing of Sheriff Hazen of Converse County, who 
 was in charge of one of the posses ; the capture of Bob 
 Lee at Colorado City, his trial, conviction, and sentence 
 to the penitentiary; the killing of George Curry ("Flat- 
 nose George") near Green River, Utah, and of Lon Lo- 
 gan near Kansas City; and finally the capture, near 
 Knoxville, Tennessee, of Harvey Logan, the leader of 
 the outlaws (as merciless and bloodthirsty a villain as 
 this country ever produced), and his escape, after con- 
 viction, from the Knoxville jail. In concluding the nar- 
 rative, I stated incidentally that Harvey Logan was at 
 that time reported to be in Wyoming, either preparing 
 to commit another robbery, or wreak vengeance upon 
 those who had so relentlessly pursued him and the mem- 
 bers of his gang. 
 
 Mr. Harriman appeared to be intensely interested in 
 the story, and after a few moments he turned to me, 
 with one of his rare smiles, and said: "Mr. Park, there 
 are just two men in these United States upon whom de- 
 volves the responsibility for the capture and reincarcer- 
 ation of Harvey Logan." 
 
 "Who are those two men, Mr. Harriman?" I asked. 
 
 Pointing his finger at me he said: "The General Su- 
 perintendent of the Union Pacific Railroad, and" (in- 
 dicating himself with the same finger) "the President of 
 the Union Pacific Railroad." 
 
 Knowing full well the skill of Logan with a revolver, 
 
RECONSTRUCTION OF UNION PACIFIC 175 
 
 and his delight in its use with a human being as its 
 target, I replied: "The General Superintendent of the 
 Union Pacific Railroad renigs." 
 
 Mr. Harriman laughed and said: "So does the Presi- 
 dent." * 
 
 Mr. Harriman, however, probably would not have 
 "reniged" if he had been put to the test, because he 
 was constitutionally fearless. 
 
 On one occasion [says Mr. Park] he described to me 
 very graphically his killing of a large Yakutat bear in 
 Alaska — an incident which, on account of his personal 
 modesty, is not generally known. The story, if pub- 
 lished, would illustrate a side of his character which, 
 when occasion offered, was quite prominent — that of 
 great personal courage. From my own observation and 
 that of others I am convinced that he was wholly with- 
 out fear. In time of war he would undoubtedly have 
 been a splendid general. Like Napoleon and Grant, un- 
 der the most trying circumstances he was at his best — 
 cool, deliberate, and calculating — with an intensely 
 patriotic inspiration which would have impelled him to 
 make any sacrifice for his country.' 
 
 The history of the Union Pacific, in the first decade 
 of the twentieth century, shows a progressive realiza- 
 tion of Mr. Harriman's anticipations and a steady 
 working-out of his far-reaching plans. No other man 
 — with the possible exception of James J. Hill — 
 had so clear a prevision of the development and 
 prosperity that were coming to the Great West, and 
 
 1 "Recollections of E. H. Harriman in Connection with the Union 
 Pacific," by W. H. Park. (An unpublished manuscript.) * Ibid. 
 
176 E. H. HARRIMAN 
 
 certainly no other railroad man made such prepara- 
 tions to foster that development, augment that pros- 
 perity, and provide for the increased traffic that 
 would result therefrom. Between 1900 and 1910, the 
 population of the trans-Missouri States increased 
 about forty per cent, while the increase in the value 
 of farm lands along the lines of the Union Pacific 
 ranged from 100 to 353 per cent. In Idaho, which 
 Mr. Bancroft predicted would be "the best State 
 west of the Missouri River," the increase was more 
 than threefold. This enhanced value of farm lands 
 was partly due to better and more extensive cultiva- 
 tion, and partly to a greatly improved railroad serv- 
 ice^ which enabled the farmers to send their crops, 
 cheaply and promptly, to markets where there was 
 an active demand for them. The annual value of 
 these crops, in the States directly tributary to the 
 Union Pacific, increased in the decade 1 899-1 909, 
 by percentages that ranged from 89 to 235. x 
 
 > Value of crops 
 
 1899 
 
 Kansas $113,522,693 
 
 Nebraska 92,469,326 
 
 Oregon 21,806,687 
 
 Utah 8,242,985 
 
 Montana 10,692,515 
 
 Colorado 16,970,588 
 
 Washington 23,532,150 
 
 Idaho 9,267,261 
 
 Totals $296,504,205 
 
 Total amount of increase $3751980,789 
 
 (Thirteenth Census.) 
 
 
 Per cent 
 
 1909 
 
 of increase 
 
 $214,859,597 
 
 89-3 
 
 196,125,632 
 
 112. 
 
 49,040,725 
 
 I24.9 
 
 18,484,615 
 
 124.2 
 
 29,714,563 
 
 I77.9 
 
 50,974-958 
 
 200.4 
 
 78,927,053 
 
 2354 
 
 34.357>85i 
 
 27O.7 
 
 $672,484,994 
 
 
RECONSTRUCTION OF UNION PACIFIC 177 
 
 Agricultural crops, however, were not the only 
 Western products that needed transportation. In 
 the revival of business that followed the reconstruc- 
 tion of the Union Pacific, industrial activity in- 
 creased rapidly in all the far Western States, and 
 between 1900 and 1910 the annual value of manu- 
 factured products in Union Pacific territory rose 
 from $257,000,000 to $530,000,000 in California; 
 in Colorado from $89,000,000 to $130,000,000; in 
 Idaho from $3,000,000 to $22,000,000; in Kansas 
 from $154,000,000 to $325,000,000; in Nebraska 
 from $13,000,000 to $199,000,000; in Utah from 
 $18,000,000 to $62,000,000; and in Washington from 
 $71,000,000 to $221,000,000. This group of States 
 alone, in 1909, produced manufactured goods valued 
 at $1 ,500,000,000, as well as farm crops to the value of 
 $672,000,000 more. 
 
 It was the growth and development indicated by 
 the above figures that Mr. Harriman anticipated 
 when he began the reconstruction of the Union Pa- 
 cific in the period of business depression that fol- 
 lowed the panic of 1893. The expenditures made by 
 him for railroad betterments from year to year show 
 that he was never taken by surprise, and that the 
 wonderful transportation system which he created 
 was always equal to the demands made upon it by an 
 ever-increasing volume of traffic. During the period 
 
178 E. H. HARRIMAN 
 
 of his administration the Union Pacific Company 
 spent for additions, extensions, betterments, and 
 new equipment more than $174,000,000, a large part 
 of which came out of earnings. 1 The result of this 
 liberal — not to say unprecedented — expenditure 
 was a complete and radical transformation of the 
 road. Not only were grades reduced and sharp 
 curves eliminated, but 4029 miles of heavier rails 
 were laid on 22,139,000 new cross-ties; 2319 miles 
 of track were ballasted, and 137,000 lineal feet 
 (twenty-six miles) of wooden bridges were taken 
 away and replaced with solid earthen embank- 
 ments or bridges of concrete and steel. Nearly $3,- 
 000,000 was spent, moreover, for automatic block 
 signals, and in 1909, forty per cent of all the rail- 
 
 1 Expenditures of the Union Pacific system (not including the 
 Southern Pacific) for additions, betterments, and new equipment, 
 during Mr. Harriman's administration: 
 
 Years Amounts 
 
 1898 $ 505,368 
 
 1899 ■ 8,325,432 
 
 1900 11,560,711 
 
 1901 13,639,884 
 
 1902 10,894,291 
 
 1903 12,928,881 
 
 1904 1 1,488,467 
 
 1905 5481,709 
 
 1906 29,175,761 
 
 1907 28,051,496 
 
 1908 23,261,746 
 
 1909 19,279,832 
 
 Total $174,593,578 
 
RECONSTRUCTION OF UNION PACIFIC 179 
 
 road mileage thus protected in the United States 
 was included in the Harriman lines. 
 
 Upon a track thus improved it was safe and prac- 
 ticable to use much heavier equipment, and the sum 
 spent for such equipment between 1899 and 1909 
 was $38,636,715. In 1898, the average weight of 
 Union Pacific locomotives, on the drivers, was thirty- 
 seven tons; in 1909 it was sixty-eight tons. In 1898, 
 the total capacity of all the freight cars that the com- 
 pany owned was 414,858 tons. In 1909, it had grown 
 to 984,923 tons, while the average train-load had 
 increased from 277 tons to 548 tons. The volume of 
 business done by means of this enlarged equipment 
 and heavier train-loading may be measured by the 
 traffic density — that is, by the number of tons 
 hauled one mile per mile of road. In 1898, this ton- 
 nage was 476,009; in 1909, it was 1,054,427 (includ- 
 ing all freight). The number of tons of all freight 
 hauled one mile increased from 2,535,069,468 to 
 6,393,072,432. Only a small part of this increased 
 volume of business was due to new branch lines and 
 greater mileage; most of it was the direct result of 
 greater efficiency — that is, greater carrying capac- 
 ity over approximately the same length of track. 
 Between 1898 and 19 10, the average number of 
 miles operated increased only eighteen per cent, 
 while the volume of business done increased one 
 
180 E. H. HARRIMAN 
 
 hundred and seventy-six per cent. In 1898, the gross 
 transportation revenues were only $32,631,000; in 
 1910, they had grown to $78,750,000. 1 
 
 In 1905, the dividend on the common stock was 
 raised to five per cent; a little later to six per cent, 
 and in 1906 to ten per cent; while the market value 
 of the stock increased in value from about $25 a 
 share in 1898 to $195 a share in 1906. 
 
 It is evident from these figures that the recon- 
 struction and subsequent management of the Union 
 Pacific brought great wealth to Mr. Harriman, 
 through his ownership of many thousand shares of 
 its stock; but his reward was not out of proportion to 
 the benefits that he conferred upon the Nation. 
 Between 1898 and 1909, the service rendered by the 
 Union Pacific to the public far more than doubled in 
 
 1 The progressive increase in earnings due mainly to greater trans- 
 portation efficiency is shown in the following table: 
 
 Miles of Gross trans- Net surplus 
 railway porlalion before dim- 
 Years operated revenue dends 
 
 1898 5325 $32,631,769 $9,212,575 
 
 1899- •• 5357 34.394.729 9,792,426 
 
 1900 5427 39.147,697 12,272,017 
 
 1901 5686 43,538,181 12,535,057 
 
 1902 57io 47,500,279 14,503,249 
 
 1903 5762 51,075,189 15,276,642 
 
 1904 5352 55,279,230 16,597,092 
 
 1905 5357 59,324,948 22,785.507 
 
 1906 5403 67,281,543 31,764,674 
 
 1907 5644 76,040,726 36,176,021 
 
 1908...., 5781 76,039,225 35,719,400 
 
 1909....,., 6062 78,750,461 41,598,401 
 
RECONSTRUCTION OF UNION PACIFIC 181 
 
 extent and importance. Freight transportation facil- 
 ities increased in that period by one hundred and 
 forty per cent and passenger travel facilities by 
 nearly two hundred and fifty per cent. What this 
 meant to the people of the trans-Missouri territory 
 is shown by the increase in farm values in the States 
 that the Union Pacific served. In the year 1900, the 
 value of farm lands in Kansas, Nebraska, Oregon, 
 Utah, Montana, Colorado, Washington, and Idaho 
 was $2,342,000,000. In 1910, it was $6,580,000,000. 
 Of course there could not have been anything like 
 this increase of four billion dollars in agricultural 
 wealth without the improved transportation service 
 furnished by the transcontinental railroads, and 
 largely by the Union Pacific. Such service, moreover, 
 was rendered more and more cheaply from year to 
 year. During the period of Mr. Harriman's adminis- 
 tration freight rates on the Union Pacific decreased 
 by from fifteen to seventeen per cent, 1 while the 
 service rendered increased by one hundred and forty 
 per cent. Freight rates in the Western territory 
 finally became so low that for the cost of a two-cent 
 postage stamp a farmer could have a ton of freight 
 carried more than two miles; for the price of an or- 
 dinary lantern globe he could have it moved sixteen 
 
 1 Testimony of Mr. Harriman before the Interstate Commerce 
 Commission, p. 172. 
 
1 82 E. H. HARRIMAN 
 
 miles; and for the cost of ten pounds of tenpenny 
 nails he could send it forty-four miles. The trans- 
 portation of a ton of freight for a distance of one 
 hundred and thirty-eight miles cost him less than he 
 had to pay for a good milk pail, and for the price of a 
 No. 2 Ames shovel he could have a ton of freight 
 carried one hundred and sixty-six miles. 1 
 
 It is not surprising that with such rates, and al- 
 most unlimited railroad facilities, the States through 
 which the Union Pacific ran doubled their crop out- 
 put and trebled the value of their agricultural lands 
 in a single decade. If, therefore, Mr. Harriman's 
 achievement be regarded solely from the point of 
 view of public benefit, there can be no question that 
 by increasing cheapness and efficiency of transporta- 
 tion it built up American industry; enlarged the 
 earnings of both labor and capital; and brought 
 opportunities for greater comfort and happiness to 
 millions of human beings. 
 
 Mr. Harriman found the Union Pacific insolvent, dis- 
 membered, decrepit, its sources of revenue curtailed, 
 without important alliances, friendless. He left it finan- 
 cially powerful, its severed members restored, its road- 
 bed and equipment renewed and of the highest type, 
 dominating traffic conditions in a wide territory and 
 with alliances and influence extending from the Atlan- 
 tic to the farther shore of the Pacific, from the Gulf of 
 
 1 The Truth about the Railroads, by Howard Elliott (New York, 
 1913). P- 158. 
 
RECONSTRUCTION OF UNION PACIFIC 183 
 
 Mexico to the Great Lakes and even across the Cana- 
 dian frontier. The property which had seemed to his 
 predecessors to be fit for nothing more than to be a con- 
 tinuous object and means of political and financial in- 
 trigue, he transformed into a wealth-creating and dis- 
 seminating machine of the highest efficiency. The 
 transportation-buying public, those who travel and 
 those who ship, has seen efficiency of the highest degree 
 substituted for inefficiency of the lowest order; the Fed- 
 eral Government has collected millions which seemed 
 hopelessly lost; and shareholders have received gratify- 
 ing returns upon their investments. Rates have been 
 lowered and wages raised, traffic has multiplied, and the 
 region served has acquired prosperity without prece- 
 dent. To Mr. Harriman, more than to any other sin- 
 gle agency, is due the fact that, to an extent unknown 
 before, 
 
 " Through the veins 
 Of that vast empire flows, in 
 Strengthening tides, 
 Trade, the calm health of nations! " * 
 
 Professor W. G. Sumner, one of the wisest and 
 most far-sighted of American economists, said a few 
 years ago: "The cheapening of transportation be- 
 tween the great centers of population and the great 
 outlying masses of unoccupied land is the greatest 
 fact of our time, and it is the greatest economic and 
 
 1 "Harriman the Efficient," by H. T. Newcomb. Railway World, 
 September 17, 1909. Mr. Newcomb was formerly statistician and 
 expert of the Interstate Commerce Commission, and, with Professor 
 Adams, acted in the same capacity for the Senate Committee on Inter- 
 state Commerce prior to the enactment of the Hepburn Law. 
 
184 E. H. HARRIMAN 
 
 social revolution that has ever taken place." In this 
 greatest of all social and economic revolutions, no sin- 
 gle person played a more important and command- 
 ing part than £. H. Harriman. 
 
CHAPTER VII 
 THE EXPEDITION TO ALASKA 
 
 IN the early spring of 1899, when the reconstruc- 
 tion of the Union Pacific was well under way, 
 Mr. Harriman determined to get a little rest and 
 recreation by making a summer cruise in a chartered 
 steamer up the coast of Alaska to the island of Ka- 
 diak. His attention was directed to this particular part 
 of the territory by D. G. Elliot, of the Field Colum- 
 bian Museum in Chicago, who had interested him 
 in the opportunities there offered for hunting the 
 Kadiak bear, said to be the largest in the world. 
 To a man who loved nature and out-of-door life as 
 much as Mr. Harriman did, the prospect of cruising 
 for a month or two through the wild, glacier-fringed 
 straits and fiords of the mountainous Alaskan coast 
 was in itself attractive, but it was made doubly so by 
 the lure of adventurous sport in a picturesque, little 
 known region, and the chance of getting a specimen 
 of the great Kadiak bear. His original intention was 
 to take with him only his own family and a few 
 friends; but as comfort and safety required a large 
 vessel, there was room for many more, and he there- 
 fore decided to include as his guests twenty-five or 
 thirty scientists, artists, and photographers, who, 
 
1 86 E. H. HARRIMAN 
 
 "while adding to the interest and pleasure of the 
 expedition, would gather useful information and 
 distribute it for the benefit of others." In pursuance 
 of this plan he went to Washington, in March, 1899, 
 to confer with Dr. C. Hart Merriam, then Chief of 
 the United States Biological Survey, with regard to 
 the personnel of the scientific staff. 
 
 He came unannounced [says Dr. Merriam] and told 
 me in an unassuming, matter-of-fact way that he was 
 planning a trip along the Alaskan coast in a privately 
 chartered steamer and desired to take along a party of 
 scientific men. He asked my cooperation in arranging 
 plans for the expedition and in selecting the scientific 
 men and outfits necessary for the work. Never having 
 heard of Mr. Harriman before, and knowing nothing of 
 his resources, I made inquiries of a railroad official (for 
 Mr. Harriman had incidentally remarked that he was a 
 railroad man) and was informed that he was a man of 
 means and a rising power in the railroad world. When 
 therefore he called at. my house later in the day, accom- 
 panied by Dr. Lewis Rutherford Morris, of New York, 
 and told me more of his plans, I was less astonished to 
 learn that he had already engaged the steamship George 
 W. Elder and was having her refitted for the voyage. He 
 remarked that he had secured a number of books and 
 maps relating to Alaska and wished advice as to what 
 others were needed, and added that while his plans were 
 as yet in the formative stage, he thought there should be 
 two men of recognized ability in each department of 
 natural science — two zoologists, two botanists, two 
 geologists, and so on — and that each should have an 
 assistant. When I raised the question of cost, remark- 
 ing that few scientific men were financially able to meet 
 
THE EXPEDITION TO ALASKA 187 
 
 the expenses incident to such a trip, he promptly put my 
 mind at rest by replying that all the members of the ex- 
 pedition would be his guests. 
 
 After ascertaining his general views as to the kind of 
 men desired for the scientific party, I suggested one of 
 our most distinguished naturalists, Dr. William H. Dall, 
 who had spent many years in Alaska, and the eminent 
 geologist and physiographer, Dr. G. K. Gilbert. Mr. 
 Harriman asked me to bring them to call at his rooms at 
 the hotel. This I did, and the subject of the expedition 
 was talked over at some length. In the course of the con- 
 versation we were impressed by Mr. Harriman's frank- 
 ness and simplicity of manner, and by the directness and 
 relevance of his questions. He was very much in ear- 
 nest, and we realized that the expedition was bound to go, 
 that it would afford opportunity for scientific research, 
 and that to be a member of it would be the event of a 
 lifetime. Before leaving Washington, Mr. Harriman in- 
 vited both Dall and Gilbert to go and both accepted. 
 Thus early was the nucleus of the scientific party estab- 
 lished and the high character of the expedition assured. 1 
 
 The technical staff, as finally made up, consisted 
 of two photographers, three artists, and twenty-five 
 men of science representing three museums of natu- 
 ral history, four departments or bureaus of the Na- 
 tional Government in Washington, and six of our 
 largest and most important universities. No more 
 distinguished body of American scientists was ever 
 gathered together for an expedition of this kind. 
 
 1 "Recollections and Impressions of E. H. Harriman," by Dr. C. 
 Hart Merriam, then Chief of the U.S. Biological Survey. (An unpub- 
 lished manuscript.) 
 
188 E. H. HARRIMAN 
 
 Most of its members had a national reputation, and 
 among them were men as well known, even to the 
 general public, as R. Swain Gifford, the New York 
 artist; John Burroughs, author and ornithologist; 
 John Muir, mountain-climber and expert student of 
 glaciers; and George Bird Grinnell, author of many 
 books on American Indians and big-game hunting, 
 and also editor, at that time, of "Forest and Stream." 
 Among the most eminent of the naturalists were 
 Professor Brewer, of Yale; Dr. Dall, G. K. Gilbert, 
 and Henry Gannett, of the U.S. Geological Survey; 
 Dr. Merriam and Dr. Fisher, of the U.S. Biological 
 Survey; Daniel G. Elliot, zoologist, of the Field 
 Columbian Museum, Chicago; Robert Ridgway, 
 ornithologist, of the National Museum in Washing- 
 ton; and Professor Fernow, Dean of the School of 
 Forestry in Cornell University. Mr. Harriman's 
 own party numbered thirteen and consisted of Mrs. 
 Harriman and five children; Mr. and Mrs. W. H. 
 Averell, of Rochester, New York, and their daughter, 
 Miss Elizabeth Averell; Miss Dorothea Draper; Dr. 
 Lewis Rutherford Morris, of New York City; and 
 Dr. E. L. Trudeau, Jr., of Saranac Lake. The mem- 
 bers of the expedition from the East left New York 
 for the Pacific Coast by special train on the 23d of 
 May, 1899, and those from the West joined the 
 main party at Portland or Seattle. 
 
THE EXPEDITION TO ALASKA 189 
 
 Mr. Harriman lost no time in organizing his sci- 
 entific staff and making plans for its work. 
 
 On board the special train which carried us from New 
 York to Seattle [says Dr. Merriam], we were given an 
 insight into Mr. Harriman's methodical ways, and an 
 opportunity of learning something of his power of organ- 
 ization and skill in dividing labor and fixing responsibil- 
 ity. The day after leaving New York, he called a meet- 
 ing of the scientific men, said a few words about the pur- 
 poses of the expedition, and announced his desire to 
 place the specialists in control of their work, and to 
 leave the details of the route and itinerary to those most 
 familiar with the region and the opportunties it was 
 likely to afford. This was followed by the suggestion 
 that work would be facilitated and time saved by the 
 creation of an executive committee. Before we reached 
 Chicago such a committee was appointed, and the next 
 day special committees on zoology, botany, geology, 
 mining, and big game were added. The wisdom of this 
 course was demonstrated over and over again by the effi- 
 ciency of the organization — an organization which per- 
 fected its plans in advance and took advantage of every 
 opportunity for work, thus accomplishing results out of 
 all proportion to the time spent in the field. 
 
 Even the railroad journey was full of interest and 
 profit. To take a party across the continent by special 
 train, and thence to Alaska and Siberia by privately 
 chartered steamer, would seem to be enough; but Mr. 
 Harriman was not content with this ; he wanted us to 
 enjoy everything on the way. So at Omaha a special 
 trolley took us to the Omaha Exposition ; at Shoshone, 
 Idaho, a small caravan of teams and saddle-horses (sent 
 from Utah on telegraphic orders) carried us twenty-five 
 miles to the lava canon of Snake River to see the great 
 Shoshone Falls; at Nampa the train was run up a 
 
190 E. H. HARRIMAN 
 
 branch to Boise, where we were shown the mint and 
 given a plunge in the great natatorium; at Pendleton, 
 Oregon, we were taken on a much longer detour, cross- 
 ing Snake River at Riparia, traversing the famous 
 Palouse wheat country to Colfax, and thence, by a 
 Northern Pacific special, winding down a side canon 
 to Lewiston. At Lewiston we were met by a steamer 
 which took us down the long canon of Snake River and 
 landed us at the bridge near the junction of the Snake 
 with the Columbia, at which point our train was wait- 
 ing to carry us through the picturesque gorge of the 
 Columbia to Portland, where, before setting out for 
 Seattle, a special trolley took us to the Heights. 1 
 
 When the party arrived in Seattle, the steamship 
 George W. Elder, which had been refitted under the 
 supervision of President A. L. Mohler, of the Oregon 
 Railroad & Navigation Company, was in waiting. 
 She had a crew of sixty-five officers and men, with 
 Peter Doran as captain, and Mr. Harriman had 
 engaged an additional force of eleven hunters, pack- 
 ers, and campers to assist the landing parties. The 
 steamer's equipment for the Northern voyage in- 
 cluded a steam launch, two naphtha launches, extra 
 boats, a number of folding canvas canoes, tents, 
 sleeping-bags, camp outfits, and everything that 
 could possibly be needed by the hunters and scien- 
 tific explorers of the party. 
 
 The expedition sailed from Seattle on the 31st of 
 
 1 Dr. Merriam's manuscript, previously cited. 
 
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THE EXPEDITION TO ALASKA 191 
 
 May, and after stopping a few hours in Victoria, 
 proceeded northward through the channel that sep- 
 arates Vancouver Island from the mainland, and 
 entered the vast labyrinth of islands, straits, pas- 
 sages, and mountain-enclosed fiords which extends 
 northward along the Alaskan coast. 
 
 Before us [says John Burroughs in his narrative of the 
 voyage] was a cruise of several thousand miles, one 
 thousand of which was through probably the finest 
 scenery of the kind in the world that can be seen from 
 the deck of a ship — the scenery of fiords and mountain- 
 locked bays and arms of the sea. Day after day a pano- 
 rama unrolled before us with features that might have 
 been gathered from the Highlands of the Hudson, from 
 the Thousand Islands, the Saguenay, or the Rangeley 
 Lakes in Maine, with the addition of towering snow- 
 capped peaks thrown in for a background. The edge of 
 this part of the continent, for a thousand miles, has been 
 broken into fragments, great and small, as by the stroke 
 of some earth-cracking hammer, and into the openings 
 and channels thus formed the sea flows freely, often at a 
 depth of from one to two thousand feet. It was along 
 these inland ocean highways, through tortuous narrows, 
 up smooth, placid inlets, across broad island-studded 
 gulfs and bays, with now and then the mighty throb of 
 the Pacific felt for an hour or two through some open 
 door in the wall of islands, that our course lay. 1 
 
 As the steamer proceeded northward, short stops 
 were made at such points of interest as Lowe Inlet, 
 the mission station of New Metlakatla, Wrangell 
 
 1 The Harriman Alaska Expedition, edited by Dr. C. Hart Mer- 
 riara (Doubleday, Page & Co., New York, 1901), vol. I, pp. 19-20. 
 
192 E. H. HARRIMAN 
 
 and Juneau, and at Skagway the officials of the 
 newly constructed White Pass & Yukon Railroad 
 took the party by special train to the summit of 
 White Pass, nearly three thousand feet above the 
 sea, where the flags of the United States and Great 
 Britain floated side by side over the provisional 
 boundary between British Columbia and Alaska. '* 
 ' When the expedition entered Northern waters 
 spring was already far advanced, and at all the places 
 along the coast where the ornithologists landed they 
 found birds in abundance. Even at the summit of 
 the White Pass, amid snow and ice, the rosy finch, 
 titlark, and golden-crown sparrow were singing mer- 
 rily, while at lower altitudes the dwarf hermit thrush, 
 russet-backed thrush, summer warbler, Lincoln's 
 finch, and Townsend's sparrow were not only sing- 
 ing, but building their nests. Few members of the 
 party expected to see in Northern latitudes, and in 
 the wild environment of mountains, glaciers, and 
 gloomy spruce forests, the diminutive humming- 
 bird of the temperate zone; and yet, as soon as the 
 salmon-berry begins to blossom, this mite of a bird 
 — hardly bigger than a large moth — flies thousands 
 of miles up the coast from southern California or 
 Mexico, and may be found as far north as Wrangell 
 and Juneau. 
 On both sides of the North American continent, 
 
THE EXPEDITION TO ALASKA 193 
 
 from Vancouver to Mount St. Elias and from Nova 
 Scotia to northern Labrador, birds appear earlier in 
 the season than flowers, but the flowers soon over- 
 take them. In the first ten days of June, the botan- 
 ists of the expedition found only violets, strawberry 
 and salmon-berry blossoms, and the delicate white 
 or pink bells of mountain heather; but ten days later 
 acres of meadow-land were covered with the blue 
 spikes of lupine, and before the first of July the whole 
 Alaskan coast was abloom with wild geranium, col- 
 umbine, Jacob's-ladder, iris, cypripedium, shooting 
 star, rhododendron, bluebells, primroses, and forget- 
 me-nots 
 
 Up to the time when the members of the Alaskan 
 expedition assembled in New York to take the train 
 for the Pacific Coast, few of the scientific men had 
 ever seen Mr. Harriman and many of them had never 
 even heard his name. It is interesting, therefore, to 
 note the impression that he made upon them when, 
 in the close intimacy of steamer life, they had an 
 opportunity to make his acquaintance. 
 
 I soon saw [says John Muir] that he was uncommon. 
 He was taking a trip for rest, and at the same time man- 
 aging his exploring guests as if we were a grateful, sooth- 
 ing, essential part of his rest cure, though scientific ex- 
 plorers are not easily managed, and in large mixed lots 
 are rather inflammable and explosive, especially when 
 compressed on a ship. Nevertheless he kept us all in 
 
194 E. H. HARR1MAN 
 
 smooth working order; put us ashore wherever we liked, 
 in all sorts of places — bays, coves, the mouths of 
 streams, etc. — to suit the convenience of the different 
 parties into which we naturally separated, dropping 
 each with suitable provisions, taking us aboard again at 
 given times, looking after everything to the minutest de- 
 tails ; work enough to bring nervous prostration to ordi- 
 nary mortals instead of rest. All the Harriman family 
 were aboard, together with Mr. and Mrs. Averell and 
 their daughter Betty. Mrs. Harriman ably seconded 
 her husband in making everything move harmoniously. 
 The boys were very young, Roland only about two or 
 three years of age. One of the telling sights that comes 
 to mind as I write is Mr. Harriman keeping trot-step 
 with little Roland while helping him to drag a toy canoe 
 along the deck with a cotton string. The girls were 
 so bright and eager to study the wonderful regions 
 passed through that we were all proud to become their 
 teachers. 
 
 We soon learned that Mr. Harriman was not only a 
 wonderful manager of men, but that he was fearless. 
 Nothing in his way could daunt him or abate one jot the 
 vigor of his progress toward his aims, no matter what 
 — going ashore through heavy breakers, sailing un- 
 charted fiords, pursuing bears, etc. . . . Before I came 
 to know him I thought, like many others, that money- 
 making might be one of the springs of his action. One 
 evening when the expedition was at Kadiak the scien- 
 tists, assembled on the forecastle awaiting the dinner- 
 bell, began to talk of the blessed ministry of wealth, es- 
 pecially in Mr. Harriman 's case, now that some of it was 
 being devoted to science. When these wealth laudations 
 were sounding loudest, I teasingly interrupted them, 
 saying: "I don't think Mr. Harriman is very rich. He 
 has not as much money as I have. I have all I want and 
 Mr. Harriman has not." This saying somehow reached 
 
THE EXPEDITION TO ALASKA 195 
 
 Mr. Harriman's ear, and after dinner, seating himself 
 beside me, he said: "I never cared for money except as 
 power for work. I was always lucky and my friends and 
 neighbors, observing my luck, brought their money to 
 me to invest, and in this way I have come to handle 
 large sums. What I most enjoy is the power of creation, 
 getting into partnership with Nature in doing good, 
 helping to feed man and beast, and making everybody 
 and everything a little better and happier." And this 
 has proved true. He earned the means and inherited 
 the courage to do and dare as his great head and heart 
 directed. 1 
 
 The first important objective of the Harriman 
 expedition was the famous Muir Glacier, which is 
 situated at the head of Glacier Bay, about one hun- 
 dred and twenty-five miles north of Sitka. This 
 great river of ice, which has a surface area of three 
 hundred and fifty square miles or more, descends 
 from the vast snow-fields on the high mountains 
 west of Skagway, and abuts on the sea in a long icy 
 palisade which rises in places to heights of from two 
 hundred to two hundred and fifty feet. The Elder 
 steamed into the bay on the 8th of June and an- 
 chored at 5 p.m. about two miles off the glacier front 
 in the midst of floating bergs of all sizes and shapes. 
 Hardly was the anchor down when the members of 
 the party were startled by a loud explosive roar 
 which sounded like muffled thunder. " It was," says 
 
 1 Edward Henry Harriman, by John Muir (Doubleday, Page & Co., 
 New York, 191 1), pp. 35-36. (Privately printed.) 
 
196 E. H. HARRIMAN 
 
 Burroughs, "the downpour of an enormous mass of 
 ice from the glacier's front, making it, for the mo- 
 ment, as active as Niagara. Other and still other 
 downpours followed, at intervals of a few minutes, 
 with deep explosive sounds and the rising of great 
 clouds of spray. We quickly realized that here was 
 a new kind of Niagara, a cataract the like of which 
 we had not before seen — a mighty congealed river 
 that discharged into the bay intermittently in ice 
 avalanches. The mass of ice below the water-line is 
 vastly greater than that above, and when the upper 
 portions fall away, enormous bergs are liberated and 
 rise up from the bottom. They rise slowly and ma- 
 jestically, like huge monsters of the deep, lifting 
 themselves to a height of fifty or a hundred feet 
 with the water pouring off them in sheets, and then 
 subsiding and floating away with a huge wave in 
 front. Nothing that we had read or heard had pre- 
 pared us for the color of the ice, especially of the 
 newly exposed parts and of the bergs that rose up 
 from beneath the water — its deep, almost indigo 
 blue. Huge bergs were floating about that suggested 
 masses of blue vitriol. The roar that followed the 
 discharge of ice from the glacier constantly suggested 
 the blasting in mines or in railroad cuts. The spray 
 often rose nearly to the top of the glacier. Night and 
 >day, summer and winter, this intermittent and ex- 
 
THE EXPEDITION TO ALASKA 197 
 
 plosive discharge of ice into the inlet goes on, and 
 has gone on for centuries. When we awoke in the 
 night we heard its muffled thunder, sometimes so 
 loud as to jar the windows in our staterooms, and 
 the swells caused by the falling and rising masses 
 rocked the ship" at a distance of two miles. 1 The 
 quantity of ice pushed into the sea every day exceeds 
 200,000,000 cubic feet, and the Muir is only one of 
 nine glaciers which discharge bergs into Glacier Bay. 
 In this scenically attractive and scientifically 
 interesting environment the members of the expedi- 
 tion spent five or six days studying the glaciers, 
 climbing the mountains, sketching, painting, photo- 
 graphing, dredging, and making large collections of 
 animals and birds. John Muir, who had visited this 
 part of the coast several times before, had many 
 suggestions to offer with regard to interesting excur- 
 sions and trips, and "when," says Dr. Merriam 
 
 he excited the enthusiasm of the hunters by a fairy tale 
 about the abundance of wolves in a little snowy valley 
 ("Howling Valley," he called it), eighteen miles back 
 from the front of Muir Glacier, Mr. Harriman promptly 
 decided to go there, notwithstanding the long and fa- 
 tiguing tramp over the ice and snow and the necessity of 
 spending a night on the glacier. Nor was he deterred 
 when Muir himself declined to go, making the clever ex- 
 cuse that he was no hunter. The party consisted of Mr. 
 
 1 John Burroughs, in The Harriman Alaska Expedition, vol. 1, pp. 
 36-37- 
 
198 E. H. HARRIMAN 
 
 Harriman and Doctor Morris, Grinnell, Trudeau, and 
 myself. The grip proved much more severe than was ex- 
 pected. After tramping sixteen miles over the glacier, 
 the more distant parts of which were covered with snow 
 into which we sank at first to our ankles and later to our 
 knees, we finally reached a point from which we could 
 look into the valley and were disappointed to find it 
 completely buried in snow. For some miles the increas- 
 ing depth of the snow had led us to fear that this would 
 be the case, but Mr. Harriman was unwilling to turn 
 back until we had actually seen the goal. Both going 
 and coming he, like the rest of us, carried a pack 
 weighing about twenty pounds, and he was always 
 either in the lead or near the front. 1 
 
 This trip over glacier ice to Muir's "Howling 
 Valley" furnished ample proof not only of Mr. Har- 
 riman's enterprise as a hunter, but of his indomitable 
 spirit and great physical endurance. Few men, fifty- 
 one years of age, would have undertaken a tramp of 
 thirty-six miles over a snow-covered glacier, and 
 still fewer would have been able, in competition with 
 younger men, to keep "always in the lead, or near 
 the front." Mr. Harriman was just from an office 
 desk and was not in training for severe and long- 
 continued physical effort; and yet, with a twenty- 
 pound pack on his back, he waded knee-deep in snow 
 at or near the head of his party, and refused to turn 
 back until he had at least looked into the snow- 
 
 1 "Recollections and Impressions of E. H. Harriman," by Dr. C. 
 Hart Merriam. (An unpublished manuscript.) 
 
THE EXPEDITION TO ALASKA 199 
 
 buried "Howling Valley" and satisfied himself that 
 it was not the habitat of howling wolves. John Bur- 
 roughs afterward suggested that perhaps all the 
 "howling" was done by Muir's imagination! In the 
 course of the march the members of the party were 
 sometimes roped together, to guard against the dan- 
 ger of falling into crevasses, and in the forty-eight 
 hours of almost continuous tramping they had only 
 a few hours' rest when, about midnight, they lay 
 down in their sleeping-bags on the ice. 
 
 On the 13th of June, the expedition turned south- 
 ward to Sitka, spent there "four humid days" and 
 then proceeded northward again to Yakutat Bay 
 and Prince William Sound. In this part of the voy- 
 age the members of the party saw and enjoyed the 
 most beautiful scenery on the whole Alaskan coast. 
 
 In our northward journey [says Muir] dark clouds hid 
 the mountains until we reached Yakutat. Then the hea- 
 vens opened and St. Elias, gloriously arrayed, bade us 
 welcome, while the heaving, plunging bergs roared and 
 thundered. Here we spent immortal days, studying, 
 gazing, sailing the blue waters, climbing the hills, gla- 
 ciers, and warm flowery islands, and considering the 
 abounding life. Everybody was naturally enthusiastic, 
 busy, and happy to the heart. The scenery at the head 
 of Disenchantment Bay [an extension of Yakutat] is 
 gloriously wild and sublime — majestic mountains and 
 glaciers, barren moraines, bloom-covered islands amid 
 icy, swirling waters, enlivened by screaming gulls, hair 
 seals, and roaring bergs. On the other hand, the beauty 
 
200 E. H. HARRIMAN 
 
 of the southern extension of the bay is tranquil and rest- 
 ful and perfectly enchanting. Its shores, especially on 
 the eastern side, are flowery and finely sculptured, and 
 the mountains, of moderate height, are charmingly com- 
 bined and reflected in the quiet waters. . . . For an hour 
 or two after we left Yakutat, we enjoyed glorious views 
 of Malaspina's crystal prairie 1 and of St. Elias and his 
 noble compeers; then down came clouds and fog, leav- 
 ing only a dim little circle about us. But just as we 
 entered the famous Prince William Sound, which I had 
 so long hoped to see, the sky cleared, disclosing to the 
 westward one of the richest, most glorious mountain 
 landscapes I ever beheld — peak after peak dipping 
 deep in the sky, a thousand of them, icy and shining, 
 rising higher and higher, beyond and yet beyond one 
 another, burning bright in the afternoon light, purple 
 cloud bars above them, purple shadows in the hollows, 
 and great breadths of sun-spangled, ice-dotted waters 
 in front. 
 
 The nightless days circled away while we gazed and 
 studied, sailing among the islands, exploring the long 
 fiords, climbing moraines and glaciers, and hills clad in 
 blooming heather — grandeur and beauty in a thousand 
 forms awaiting us at every turn in this bright and spa- 
 cious wonderland. But that first broad, far-reaching 
 view in celestial light was the best of all. 2 
 
 One of the most important geographical achieve- 
 
 1 The Malaspina Glacier, which falls into the sea just north of 
 Yakutat Bay, is the most extensive body of ice on the Alaskan coast. 
 It is twenty miles long and sixty or seventy miles wide and is fed by 
 the snow-fields of the Mount St. Elias Range. Its surface area is 
 fifteen hundred square miles or more — almost equal to that of the 
 State of Delaware — and the quantity of roily, sediment-charged 
 water which runs out from under it is so great that the ocean, for a 
 distance of thirty miles from the coast, is tinged a milky white. 
 
 a John Muir, in The Harriman Alaska Expedition, vol. i, pp. 130-32. 
 
THE EXPEDITION TO ALASKA 201 
 
 ments of the expedition in this "wonderland" of 
 Prince William Sound was the finding and explora- 
 tion of the Harriman Fiord, a deep but hidden arm 
 or bay which opens off the channel known as Port 
 Wells and which terminates, thirteen miles farther 
 west, in the splendid Harriman Glacier. The dis- 
 covery of this deep concealed fiord, which was not 
 shown on the United States Coast Survey chart and 
 which had never before been navigated by any ves- 
 sel, was almost accidental. 
 
 On the evening of June 26th [says Dr. Merriam], as 
 we were steaming out of Port Wells, we saw at the head 
 of a short arm on the starboard side a very large glacier 
 which appeared to extend entirely across the head of the 
 fiord. It was a truly splendid glacier, presenting a high 
 sea wall at least two miles in length, and pushed out 
 into the water much farther than any we had previously 
 seen. Mr. Harriman at once changed the course of the 
 vessel and turned into the fiord. Approaching nearer, 
 the most distant point of land on the left, which up to 
 this time had appeared to abut against the ice, was seen 
 to be separated from it, revealing open water beyond. 
 Going still closer to examine the ice caves and pinnacles 
 of the glacier front, we were amazed to discover that the 
 open water continued, stretching away for miles and 
 showing two fine glaciers in the distance. Every one 
 was filled with eager excitement and anxious to con- 
 tinue the exploration. Mr. Harriman asked the captain 
 to turn the ship into the new fiord, but neither he nor 
 the pilot was willing to assume the responsibility of nav- 
 igating the unknown water in the night. So Mr. Harri- 
 man himself took the wheel and pushed the ship on to 
 
202 E. H. HARRIMAN 
 
 the very head of the fiord, a distance of about thirteen 
 miles. A number of new glaciers were discovered, four 
 of which had massive fronts shedding icebergs into the 
 sea. Others came down nearly to the water, while others 
 hung on the towering faces of the bordering cliffs. We 
 were completely surrounded by rugged snowy moun- 
 tains, presenting an impressive and desolate spectacle 
 of rock, ice, and snow. Then a snowstorm set in, shut- 
 ting out the mountains while we were still in the new 
 fiord, which later was named in honor of its discoverer. 
 On our way back, as we turned the point in front of the 
 huge glacier, the incoming tide caught the ship and 
 swung her with great force toward the ice-wall. The 
 rudder was put hard-a-port, but it was some time before 
 the ship responded and for a few moments it looked as 
 if we were going to be crushed against the ice. 1 
 
 The fearlessness and decision of character shown 
 by Mr. Harriman in thus taking full charge of the 
 ship and steering her through thirteen miles of un- 
 charted and unknown water, when the captain and 
 the pilot declined to take the responsibility for such 
 risky navigation, were thoroughly characteristic of 
 the man. There seemed to be nothing that he was 
 afraid to do, and nothing that he did not know how 
 to do. 
 
 We were constantly surprised [says Dr. Merriam] by 
 his physical strength and his fondness and aptitude for 
 out-of-door pursuits. He was an expert swimmer and 
 diver and an enduring walker and mountaineer. When 
 on the sea he joined heartily in the daily sports on deck, 
 
 1 "Recollections and Impressions of E. H. Harriman," by Dr. C. 
 Hart Merriam. (An unpublished manuscript.) 
 
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THE EXPEDITION TO ALASKA 203 
 
 and when on shore took part in the most difficult and 
 fatiguing expeditions. Throughout the voyage he was 
 alert, enthusiastic, and venturesome, and often took 
 risks which many of us thought a man in his position 
 should avoid. If a thing were worth seeing, he wanted 
 to see it. If a difficult or dangerous trip were to be ta- 
 ken, by launch or on foot, he was almost certain to be in 
 the lead. His versatility was a source of wonderment to 
 us all. During the trip across the continent we had 
 found out that he was not only a great railroad director 
 and financier, but was also personally familiar with the 
 multitude of details of railroad construction and opera- 
 tion. And when we came to the ocean voyage, we were 
 still more surprised to learn that he was a trained sailor 
 and a skillful and daring navigator of steam craft. Run- 
 ning the launch was one of his favorite diversions, and 
 when so engaged he nearly always took the wheel. The 
 greater the danger the surer he was to take this post, 
 and we were not long in learning that we were safest 
 when in his hands. 
 
 When exploring Yakutat Bay, two parties were 
 landed on the north shore to hunt and collect animals 
 and plants, and while there were blockaded by drift ice. 
 I was a member of one of these parties. After three days 
 the ship attempted to reach us, but was prevented by 
 the ice. Our hopes rose as we saw the dark smoke in the 
 distance, but as it moved about and then disappeared 
 we knew the open water was a long way off. On the 
 fourth day we rejoiced to again see the steamer's smoke. 
 It was in another place, farther down the bay. It came 
 nearer, to the edge of the drift, and stopped as before. 
 For a long time we watched and waited, but could see 
 nothing. Finally some one called out, and looking west- 
 erly close to the land we were thrilled by the sight of two 
 small boats. Slowly and laboriously they came, picking 
 their way among the loose ice in the narrow space be- 
 
204 E. H. HARRIMAN 
 
 tween shore and the line of grounded bergs which kept 
 the heavy drift from pressing in. It was a dangerous un- 
 dertaking, and when they were near enough to enable 
 us to distinguish persons, we were not surprised to see 
 Mr. Harriman standing in the bow of the first boat, di- 
 recting her course. We and our camp outfits were taken 
 aboard, and on the return trip to the ship took the more 
 direct but still more hazardous route through the pack- 
 ice, which in the ocean swell constantly threatened to 
 smash our frail craft. 
 
 This was neither the first nor the last time that Mr. 
 Harriman took a perilous boat journey to gather in ab- 
 sent members of the expedition. Earlier in the season, 
 when a party consisting of Gilbert, Muir, and Palache, 
 who had gone in a small boat to explore the remoter gla- 
 ciers in the main arm of Glacier Bay, failed to appear at 
 the appointed place, he became anxious for their safety, 
 took the ship up the bay as far as the drift ice permitted 
 and sent out two launches in search. One of these he 
 placed in my charge ; the other he himself operated. We 
 went in different directions through the floating ice, and 
 when at six in the evening I heard four whistles from the 
 steamer I knew that he had found them. 
 
 Some weeks later, several members of the expedition, 
 including George Bird Grinnell, Charles Keeler, and 
 myself, went ashore on the spit at the entrance of Port 
 Clarence to visit the Eskimo who had come there to 
 trade with the whaling vessels then at anchor near by. 
 At the same time Mr. Harriman, with Dr. Morris and 
 one or two others, took one of the launches and went on 
 a visiting tour among the whalers, while our ship crossed 
 the bay to take water at the mouth of a small stream on 
 the south shore. At about half-past six in the afternoon, 
 Mr. Harriman came for us with the launch and started 
 to take us back to the steamer. The distance proved 
 greater than we had supposed — fourteen miles — and 
 
THE EXPEDITION TO ALASKA 205 
 
 the wind blew so hard that a strong sea was running. 
 Fortunately we were going with the wind. When we had 
 reached a point about midway between the spit and the 
 south shore, we could see only the rigging of the whalers 
 and only the masts and smokestack of the Elder. A lit- 
 tle, later the fireman of the launch announced that the 
 supply of gasoline was so low that it was doubtful if we 
 could reach the ship. Meanwhile the wind had increased 
 to a gale, driving the water in such big waves that to lose 
 headway meant the capsizing of the launch and, doubt- 
 less, the loss of all on board. But luck was in our favor. 
 The gasoline held out and Mr. Harriman was at the 
 wheel. On coming alongside, the sea was so high that we 
 would have been dashed to pieces against the vessel had 
 we attempted to run in close. By means of pike-poles 
 we were kept from striking, and with the aid of a rope- 
 ladder and the outstretched hands of the sailors most of 
 us scrambled aboard. Mr. Harriman, however, learning 
 that a party was ashore on the neighboring tundra, took 
 on a new supply of gasoline, and, instead of trusting the 
 task to another, made two trips from the ship to the 
 shore and brought all the members back in safety. 
 These trips were attended with no little danger, the tak- 
 ing on of the party and the turning of the launch in the 
 gale requiring great skill in navigation to avoid disaster. 
 It was nine in the evening when he returned with the 
 last boat-load and we had supper. 1 
 
 On the 28th of June, the Elder sailed from Prince 
 William Sound and after a short stop in Cook Inlet 
 proceeded to the island of Kadiak, where the party 
 proposed to spend four or five days and where Mr. 
 
 1 "Recollections and Impressions of E. H. Harriman," by Dr. C 
 Hart Merriam. (An unpublished manuscript.) 
 
206 E. H. HARRIMAN 
 
 Harriman hoped to get a specimen of the largest of 
 all known bears. 
 
 Between Prince William Sound and Kadiak there 
 was a sudden and remarkable change in climate and 
 scenery. The weather, under the influence of the 
 Japan current — the Gulf Stream of the Pacific — 
 grew noticeably warmer; the wild fiords, glaciers, 
 spruce forests, and high, snowy mountains of the 
 mainland disappeared, and in place of them were 
 rounded hills tinged faintly blue with acres of wild 
 geraniums; verdant glades threaded by cascading 
 trout brooks, and scenery that was sometimes so 
 beautiful and parklike as to suggest the work of an 
 expert landscape gardener. 
 
 We had come [says John Burroughs] from an arboreal 
 wilderness to a grassy wilderness ; from a world of spruce 
 forests to a world of emerald heights and verdant slopes. 
 Never had I seen such beauty of greenness, because 
 never before had I seen it from such a vantage-ground 
 of blue sea. To eyes sated with the wild, austere grand- 
 eur of Prince William Sound, the change was most de- 
 lightful. 
 
 On the 2d of July, the Elder made fast to the 
 wharf at the village of Kadiak, and in bright sun- 
 shine and a temperature of nearly 70 , with birds 
 singing and flowers blooming everywhere, the mem- 
 bers of the expedition "swarmed out of the ship like 
 boys out of school " and began climbing the "mighty 
 
THE EXPEDITION TO ALASKA 207 
 
 emerald billow" that rose from the rear of the vil- 
 lage. 
 
 From the ship [says Burroughs] it looked as smooth as 
 a meadow; but the climber soon found himself knee- 
 deep in ferns, grasses, and a score of flowering plants, 
 and now and then pushing through a patch of alders as 
 high as his head. He could not go far before his hands 
 would be full of flowers, blue predominating. The wild 
 geranium here is light blue and it tinges the slopes as 
 daisies and buttercups do at home. Near the summit 
 were patches of a most exquisite forget-me-not of a pure, 
 delicate blue with a yellow center. It grew to a height of 
 a foot, and a handful of it looked like something just 
 caught out of the sky above. Here, too, was a small 
 delicate lady's-slipper, pale yellow striped with maroon, 
 and a dwarf rhododendron, its large purple flowers sit- 
 ting upon the moss and lichen. The climber also waded 
 through patches of lupine and put his feet upon blue- 
 bells, Jacob's-ladder, iris, saxifrage, cassiope, and many 
 other flowers. 
 
 From the village of Kadiak, Mr. Harriman, with 
 a native Russian guide, set out on a bear-hunting 
 expedition in the interior of the island, and after 
 tramping two days among high, treeless mountains 
 ten or fifteen miles back from the coast, finally shot, 
 on a grassy hillside above a small lake, one of the 
 great Kadiak bears and a half-grown cub. It was 
 the only bear secured by the expedition on the Alas- 
 kan coast and was the first animal of this particular 
 species that had ever been measured and photo- 
 graphed. When, therefore, Mr. Harriman, with the 
 
208 E. H. HARRIMAN 
 
 members of his party, celebrated on shipboard a day 
 or two later the national holiday of July 4th, he re- 
 ceived the hearty congratulations of his scientific 
 associates upon having attained as a hunter one of 
 the objects of his ambition, and upon having made 
 at the same time an important addition to the col- 
 lections of the expeditions. 
 
 But it was not only Mr. Harriman who had reason 
 to be pleased and satisfied with this remote grassy 
 island in the waters of the North Pacific. 
 
 Kadiak [says John Burroughs] won a place in the 
 hearts of all of us. Our spirits probably touched the 
 highest point here. If we had other days that were epic, 
 these days were lyric. To me they were certainly more 
 exquisite and thrilling than any before or after. I feel 
 as if I wanted to go back to Kadiak — almost as if I 
 could return there to live — so secluded, so remote, so 
 peaceful ; such a mingling of the domestic, the pastoral, 
 the sylvan, with the wild and the rugged ; such emerald 
 heights, such flowery vales, such blue arms and recesses 
 of the sea, and such a vast green solitude stretching 
 away to the west, to the north, and to the south. . . . 
 Our stay of five days in this charming spot was a dream 
 of rural beauty and repose; warm summer skies above 
 us, green flower-strewn hills and slopes around us, our 
 paths were indeed in green pastures and beside still 
 waters. 1 
 
 The Elder sailed from Kadiak on the 5th of July, 
 and two days later, at daybreak, when the scientists 
 
 i John Burroughs, in The Harriman Alaska Expedition, vol. 1, pp. 
 82, 86. 
 
THE EXPEDITION TO ALASKA 209 
 
 awoke, the first sounds' they heard through their 
 open windows were the musical bird voices of 
 thrushes, song sparrows, finches, and warblers from 
 a green slope on one of the Shumagin Islands, off 
 which the ship was anchored. " It is a novel experi- 
 ence," says Burroughs, "to wake up in the morning 
 on an ocean steamer and hear bird songs through 
 your open window. But this was often our experi- 
 ence on the trip." 
 
 After landing a scientific party on Popof Island, to 
 be picked up later, the Elder steamed westward 
 along the Alaska peninsula; entered the Akutan 
 Passage; touched at Dutch Harbor on the island of 
 Unalaska; and finally, on the 8th of July, plunged 
 into the foggy solitudes of Bering Sea. On the fol- 
 lowing afternoon the ship anchored off the island of 
 St. Paul, one of the Pribilof group, where the scien- 
 tists of the party went ashore to observe the fur seals 
 which assemble there in thousands every summer. 
 
 "According to our original programme," says 
 John Burroughs, "our outward journey should have 
 ended at the Seal Islands; but Mrs. Harriman ex- 
 pressed a wish to see Siberia and, if all went well, the 
 midnight sun. 'Very well,' replied Mr. Harriman, 
 ' we will go to Siberia' ; and toward that barren shore 
 our prow was turned." 
 
 But the voyage came near ending in a fatal dis- 
 
210 E. H. HARRIMAN 
 
 aster long before Siberia was reached. At eight 
 
 o'clock that same evening, in a dense fog off the 
 
 island of St. Paul, the Elder struck heavily on a 
 
 sunken ledge. 
 
 We were at supper [says Dr. Merriam], and the ship 
 was going at full speed when her bottom suddenly struck 
 the reef. A few seconds later she struck again and, ris- 
 ing a little, struck the third time with a fearful bumping, 
 rasping crash. We all fully believed that the bottom was 
 smashed and that the vessel would sink. Mr. Harriman 
 was perfectly cool. He immediately rose, told the party 
 to remain inside, and went at once on deck where he as- 
 sisted Captain Doran in the management of the ship. 
 Some one suggested that he be taken off in one of the 
 boats. After an indignant reply, he turned to me with 
 the remark: "Can you conceive of such a suggestion! 
 What would a man want to live for if his family were 
 drowned?" 
 
 The accident, however, was not so serious as it 
 threatened to be. The engines were quickly reversed, 
 a sail was hoisted, and in a few moments the steam- 
 er's prow swung to the right, and the danger was 
 passed. The stern of the ship, which was two feet 
 lower in the water than the bow, had raked across 
 the rocks, but no serious damage was done. 
 
 "Some of us," says Burroughs, "hoped this inci- 
 dent would cause Mr. Harriman to turn back. Ber- 
 ing Sea is a treacherous sea; it is very shallow; it has 
 many islands, and in summer it is nearly always 
 draped in fog. But our host was a man not easy to 
 
THE EXPEDITION TO ALASKA 211 
 
 turn back; in five minutes he was romping with his 
 children again as if nothing had happened." 
 
 The Elder reached the Siberian coast safely on the 
 nth of July and anchored in Plover Bay, a harbor 
 about a hundred miles southwest of Bering Strait, 
 where there was a small encampment of Eskimos. 
 All the members of the party went ashore and spent 
 two or three hours in walking about on the conti- 
 nent of Asia, buying curios from the natives, taking 
 photographs of the scenery, and picking handfuls 
 of primroses, Iceland poppies, and forget-me-nots. 
 Then, as there was not much else to see or do, they 
 returned in the early evening to the ship and sailed 
 across Bering Strait to Port Clarence, on the Alaskan 
 coast, where a dozen American whaling vessels were 
 waiting for a chance to get through the pack-ice that 
 blocked the Strait. 
 
 Port Clarence, sixty miles from the Arctic Circle, 
 was the northernmost point that the expedition 
 reached, and after taking water there, the Elder 
 sailed for home. The return voyage down the coast 
 was uneventful ; but as many stops were made — at 
 St. Matthew's Island, Dutch Harbor, the Shumagin 
 Islands, Kadiak, Yakutat Bay, Juneau, and other 
 places — it was not until the 30th of July that the 
 steamer finally arrived in Seattle. She had been gone 
 from there just two months, and in that time had 
 
212 E. H. HARRIMAN 
 
 made a voyage, out and back, of about nine thou- 
 sand miles. 
 
 The scientific results of the expedition were in 
 every way satisfactory. A number of glaciers not 
 previously known, as well as many others that had 
 been vaguely or imperfectly known, were mapped 
 and described, and much evidence was gathered of 
 changes that had occurred in their length and size. 
 The photographs taken by members of the party 
 numbered about five thousand and constituted in- 
 comparably the best series of pictures ever taken of 
 the Alaskan coast. The natural history collections 
 made were very large and included thirteen genera 
 and six hundred species that were wholly new to 
 science. More than fifty specialists were engaged to 
 work up this mass of new material, and twenty-two 
 special papers, based on collections made by the ex- 
 pedition, were published in the "Proceedings " of the 
 Washington Academy of Sciences. Under the aus- 
 pices of the same Academy were also published, in 
 thirteen large illustrated volumes, the narrative of 
 the expedition by John Burroughs, and eleven spe- 
 cial monographs by various members of the scien- 
 tific party, including Muir, Grinnell, Dall, Keeler, 
 Fernow, Gannett, Brewer, Merriam, and Washburn. 1 
 
 1 The Harriman Alaska Expedition, edited by Dr. C. Hart Merriam; 
 2 volumes with 369 illustrations and maps. (Doubleday, Page & Co., 
 New York 1902.) 
 
THE EXPEDITION TO ALASKA 213 
 
 No single expedition to the Alaskan coast has ever 
 made more important and valuable contributions 
 to the world's knowledge of that region. 
 
 In the same year in which Mr. Harriman made 
 the trip to Alaska, he formed a syndicate for the 
 reorganization of the Chicago & Alton Railroad 
 Company; but inasmuch as this transaction after- 
 ward became the subject of an exhaustive investiga- 
 tion by the Interstate Commerce Commission, and 
 was widely misrepresented and generally condemned, 
 both by the Commission and by the public, it seems 
 best to defer consideration of it until the work and 
 the criticisms can be presented together in a later 
 chapter. 1 
 
 1 See vol. 11, chapters xxvu. xxvm. 
 
CHAPTER VIII 
 THE KANSAS CITY SOUTHERN EPISODE 
 
 IN the early part of 1899, when Harriman's ener- 
 getic work in the reconstruction of the Union 
 Pacific had begun to attract attention, and when he 
 was generally recognized as a rising man in the rail- 
 way world, his help and cooperation were solicited 
 by a group of men in the West who were interested in 
 a railroad known as the Kansas City, Pittsburgh & 
 Gulf, which had fallen into financial difficulties as 
 the result of hasty original construction and sub- 
 sequent bad management, and which was greatly in 
 need both of assistance and of competent advice. 
 The history of this road, prior to Mr. Harriman's 
 connection with it, was this: 
 
 In the year 1889, a group of Western capitalists 
 and promoters obtained a charter for a railroad to 
 run from Kansas City to Fort Smith, Arkansas, by 
 way of the small Missouri town known as Nevada. 
 It was incorporated under the name of the Kansas 
 City, Nevada & Fort Scott Railway; but, for reasons 
 that it is not necessary here to specify, little work 
 was ever done on it, and two or three years later its 
 charter was acquired by another group of Western 
 
THE KANSAS CITY SOUTHERN EPISODE 215 
 
 promoters and speculators headed by Arthur E. Still- 
 well, of Kansas City. Mr. Stillwell, who had been 
 engaged for some years in the life insurance business 
 in Chicago, moved to Kansas City in the early eight- 
 ies, became a prominent and successful real estate 
 operator there, organized the Missouri, Kansas & 
 Texas Trust Company, and eventually acquired 
 both influence and capital. He was not a railroad 
 builder, either by training or by experience; but he 
 seems to have been a man of pleasing and persuasive 
 personality, and he was generally successful in rais- 
 ing money for the various enterprises in which he 
 became interested. He first entered the railroad 
 field in 1886, when he projected and built around 
 Kansas City a circular railway known as the "Belt 
 Line," which was intended to link together the scat- 
 tered stations of a number of different roads which 
 had there their terminals. 1 
 
 Encouraged by the success of this enterprise, he 
 conceived the idea of building a through trunk-line 
 from Kansas City to the Gulf of Mexico by way of 
 Pittsburgh (a growing town in the Kansas coal re- 
 gion), Joplin, Texarkana, and Shreveport. Kansas 
 City, at that time, had become one of the most im- 
 portant grain and provision markets in the United 
 
 1 This railway was subsequently reincorporated and is now called 
 the Kansas City Terminal. 
 
216 E. H. HARRIMAN 
 
 States, and there seemed every reason to believe 
 that if a north-and-south line were built from there 
 to tide-water, it might secure a large part of the 
 export traffic of the Missouri River region, which 
 was then going either eastward to Atlantic ports, or 
 southward to the Gulf of Mexico by way of the Illi- 
 nois Central. 
 
 In the early nineties, Mr. Stillwell and a small 
 group of Western speculators and promoters bought 
 the charter of the old Kansas City, Nevada & Fort 
 Smith Railway, changed its name to the Kansas 
 City, Pittsburgh & Gulf, and organized a number of 
 construction companies to begin work on the pro- 
 posed line. Owing, however, to the panic of 1893 
 and the long period of business depression that fol- 
 lowed it, the promoters had difficulty in getting 
 capital enough to push the enterprise rapidly, and it 
 was not until the fall of 1898 that the road was nom- 
 inally completed and put in operation as a whole. 
 It then extended from Kansas City on the Missouri 
 River to Port Arthur on the Gulf of Mexico and had 
 a total length of about 778 miles. 
 
 If this road had been built by practical railroad 
 men and solely with a view to traffic possibilities and 
 economy of operation, it might perhaps have been 
 successful ; but Mr. Stillwell and his associates seem 
 to have aimed primarily at making it a means of 
 
THE KANSAS CITY SOUTHERN EPISODE 217 
 
 land speculation rather than a carrier of merchan- 
 dise. They ran it, therefore, not directly into the 
 towns that it was intended to serve, but through 
 their outskirts, or at a considerable distance from 
 them, with the expectation, apparently, that the 
 towns would grow toward it, and that large profits 
 might be made through the organization of land 
 companies and the purchase and sale of real estate. 
 In a number of places, moreover, the road was badly 
 located with reference to the topography of the coun- 
 try; it contained a good many unnecessary curves 
 and grades, and it was built, generally, without due 
 regard to economy and efficiency of operation. Em- 
 bankments and cuttings were only just wide enough 
 to hold the track and permit the passage of cars; 
 gullies and ravines that should have been crossed on 
 substantial earthen fills were spanned by trestles or 
 light wooden bridges; freight and passenger stations 
 were little more than shacks thrown up hastily at 
 the least possible expense, and shop facilities, water 
 supply, crossings, and sidings were all more or less 
 inadequate for a railroad that purported to be a 
 trunk-line from one of the most important cities in 
 the West to tide- water. 
 
 It is not surprising, perhaps, that a road so planned 
 and built should fail to be remunerative. The sepa- 
 rate sections of it, as they were completed and put in 
 
218 E. H. HARRIMAN 
 
 operation, were never profitable, and even after it 
 had been ostensibly finished, it did not earn money 
 enough to pay its operating expenses and meet its 
 obligations. Early in 1899, when through trains had 
 been running only a few months, the company be- 
 came so involved in financial difficulties that it was 
 threatened with bankruptcy, and a committee of 
 shareholders was formed in New York for the pur- 
 pose of saving it if possible by means of a reorganiza- 
 tion. But the attempt was made too late. In April, 
 1899, the road went into the hands of receivers and 
 another reorganization committee was formed in 
 Philadelphia. 
 
 The managers of the property, as the crisis in their 
 affairs developed, were anxious, of course, to get the 
 support of some strong railway interest in the neigh- 
 borhood, and as their line connected at Kansas City 
 with the Union Pacific, they naturally turned for 
 help to Mr. Harriman. In April or May, 1899, after 
 receivers had been appointed, he was asked to be- 
 come a member of the New York reorganization 
 committee, and as he happened to own some of the 
 company's stock he consented to do so. 
 
 Throughout the summer and fall of 1899 the two 
 committees, one in New York and the other in Phila- 
 delphia, struggled with the problems of the company 
 and tried, often with great differences of opinion, to 
 
THE KANSAS CITY SOUTHERN EPISODE 219 
 
 straighten out its tangled affairs and put it on a 
 sound and stable financial basis. The Philadelphia 
 committee succeeded at last in securing the support 
 of a majority of the security-holders, and in Novem- 
 ber, 1899, it formulated a plan of reorganization 
 which was eventually adopted. In March, 1900, a 
 new company, called the Kansas City Southern, was 
 incorporated under the laws of the State of Missouri, 
 and to it, under foreclosure proceedings, was turned 
 over all the property of the old Kansas City, Pitts- 
 burgh & Gulf. 
 
 Meanwhile, in the summer or early fall of 1899, 
 Mr. Stillwell and his associates, without consulting 
 or notifying Mr. Harriman, sold all their interest in 
 the property to a group of Western steel manufac- 
 turers headed by John W. Gates, of Chicago. 1 Mr. 
 Harriman regarded this sale, in the circumstances 
 of the case, as a virtual breach of trust. Stillwell 
 and his friends had asked him to help them, and 
 then, without his knowledge or consent, had dis- 
 
 1 Mr. Gates and his associates had never before been actively en- 
 gaged in railroading, but they were all largely interested in the Ameri- 
 can Steel & Wire Company of Illinois, and that corporation had taken 
 a large amount of the bonds of the Kansas City, Pittsburgh & Gulf 
 in payment for steel rails. It is quite possible, therefore, that they 
 bought control of the road not as a speculative venture, but rather as a 
 means of protecting their own interests as creditors and bondholders. 
 Five of them — Gates, Lambert, Edenborn, Ellwood, and Pam — 
 were among the incorporators of the Kansas City Southern, and four 
 of them became directors and members of the executive committee. 
 
220 E. H. HARRIMAN 
 
 posed of their interest in the road and left him in 
 the lurch. 
 
 In an address on "Edward Henry Harriman," 
 delivered before the Finance Forum in New York in 
 191 5, Mr. Otto H. Kahn, referring evidently to this 
 episode, said: 
 
 The incident which I am about to relate occurred in 
 1898 or 1899, at a time when Mr. Harriman was but at 
 the threshold of his successes, and had not yet acquired 
 the commanding prestige which came to him in later 
 years, and which, when once attached to a man's name 
 and personality, naturally adds very greatly to his in- 
 fluence over other people. At the time I speak of, he had 
 been invited to take an interest in a certain property, 
 and though not greatly caring for the proposition, had 
 accepted. A few months afterwards, the people who had 
 sought Mr. Harriman's cooperation suddenly sold out 
 their holdings in the property to a group of men who 
 thereupon proceeded to assume the control now right- 
 fully theirs, and to substitute themselves and their ap- 
 pointees in place of Mr. Harriman and his colleagues. 
 Having myself a somewhat indirect interest in the situa- 
 tion, I had occasion to discuss it with him, and referred 
 to the cessation of his short-lived connection with the 
 property, which I took as a matter of course. To my 
 surprise he interrupted me, calling out: "Hold on. Not 
 so fast! I am not through this thing yet, by any means. 
 I can't be played fast and loose with like this. I did not 
 care particularly to go into it, as you know ; but, having 
 been urged to do so and having done so, I am in it to 
 stay." 
 
 I replied, "Of course you have a just grievance 
 against the men who have quit. Having asked you, of 
 
THE KANSAS CITY SOUTHERN EPISODE 221 
 
 their own initiative, to cooperate with them, it was a 
 mean and improper act on their part to sell out without 
 first conferring and consulting with you. But it's done, 
 the newcomers are in rightful control, it's no use mak- 
 ing a fuss, and it seems to me that the best, and indeed 
 the only thing for you to do is to look pleasant and get 
 out. As a matter of fact, why should you care? That 
 property is of very little interest to you." 
 
 He reiterated his view and his determination not to 
 give in. I said, "Well, what are you going to do about 
 it? They have the right to turn you out without cere- 
 mony if you do not give way gracefully." He answered, 
 "I don't know yet. I'll just stand pat and not budge, 
 and watch." 
 
 After a while the newcomers found out that while all 
 the others concerned accepted the situation, Mr. Harri- 
 man would not quit without a fight; and, though they 
 were clearly in a position to win, as far as their immedi- 
 ate object was concerned, they hesitated to attack so 
 determined an opponent. Things went on* in this way 
 for several months, Mr. Harriman retaining an attitude 
 of quiet but uncompromising defiance. . . . One morn- 
 ing he called me on the telephone to ask that I accom- 
 pany him to a conference at the enemy's headquarters. 
 I went, somewhat in the capacity of a second at a duel. 
 He gave me no indication what the proceedings were 
 to be. The conference lasted three hours. Most of the 
 talking was done by the other side. Mr. Harriman did 
 not threaten, or cajole, or make promises. He simply 
 brought to bear upon these men the stupendous force of 
 his will and personality. When the conference broke up, 
 not only was there no longer any question of his retiring, 
 but the newcomers had agreed to turn over to him their 
 votes and proxies and let him run the property. 
 
 Evidently, Mr. Gates and his associates, when 
 
222 E. H. HARRIMAN 
 
 they were brought into direct personal contact with 
 Mr. Harriman, concluded that the road would be 
 more likely to become prosperous under his manage- 
 ment than under theirs, and they therefore proposed 
 not only to elect him as a director, but to make him 
 chairman of the executive committee. In view of 
 the fact that he was a comparatively small and un- 
 influential stockholder, his success in thus winning 
 the confidence and support of his opponents must 
 be regarded as a triumph of personal character and 
 ability. 
 
 This particular incident [added Mr. Kahn] especially 
 impressed itself upon my mind in all its details because 
 it was the first time I had seen Mr. Harriman in action. 
 I witnessed many similar cases in the further course of 
 his career, during which it was my privilege to be closely 
 associated with him. Over and over again did I see him 
 bending men and events to his determination by the ex- 
 ercise of the truly wonderful powers of his brain and 
 will. 1 
 
 The property of the old Kansas City, Pittsburgh 
 & Gulf Company was turned over to its successor, 
 the Kansas City Southern, on the ist of April, 1900. 
 In cases of bankruptcy and reorganization, it was 
 customary at that time to vest the control of the 
 property, temporarily, in a specially appointed 
 board of managers known as a "voting trust." 
 
 1 Edward Henry Harriman, by Otto H. Kahn (New York, 191 1), 
 PP- 3-7. 
 
THE KANSAS CITY SOUTHERN EPISODE 223 
 
 "The essence of a voting trust," as described by a 
 well-known authority on railroad reorganization, 
 "is the deposit of stock in the hands of trustees 
 (most frequently five in number). These trustees 
 issue certificates in return. All dividends on the 
 stock are paid to the holders of certificates, but all 
 the voting power is exercised by the trustees as long 
 as the trust endures." The object of the trust is to 
 "avoid the dangers of fluctuating and speculative 
 control at critical periods in a railroad's history. . . . 
 It is of supreme importance that a reorganized com- 
 pany be well started on its way by men who have an 
 interest in making the reorganizing plan perma- 
 nently successful, and that conservative direction be 
 assured until danger of bankruptcy be past." 1 
 
 Aiming primarily at these objects, and following 
 the example of the reorganizers of the Erie, North- 
 ern Pacific, Reading, Baltimore & Ohio, and many 
 other railroad companies, the stockholders of the 
 Kansas City Southern assigned all their powers, for 
 a period of five years from April 1, 1900, to a very 
 strong voting trust, representing about equally the 
 friends of Mr. Harriman and the associates of Mr. 
 Gates in the American Steel & Wire Company. Its 
 members were E. H. Harriman, of the Union Pacific; 
 
 1 Railroad Reorganization, by Stuart Daggett (Cambridge, 1908), 
 p. 382- 
 
224 E. H. HARRIMAN 
 
 Otto H. Kahn, of Kuhn, Loeb & Co., New York; 
 James Stillman, of the National City Bank, New 
 York; Louis Fitzgerald, president of the Mercantile 
 Trust Company, New York; George J. Gould, presi- 
 dent of the Missouri Pacific; John W. Gates, of the 
 American Steel & Wire Company, and Herman 
 Sielcken, who represented a large body of security- 
 holders in Holland. 
 
 On the 5th of May, 1900, an executive committee 
 composed of Harriman, Kahn, and five representa- 
 tives of the Gates interests was chosen to manage 
 the property under direction of the trustees, and 
 about a week later it organized by electing Harriman 
 as chairman. In July, 1900, Samuel W. Fordyce, 
 formerly president and later one of the receivers of 
 the Kansas City, Pittsburgh & Gulf, tendered his 
 resignation, and upon recommendation of the ex- 
 ecutive committee Stuart R. Knott, of Savannah, 
 Georgia, vice-president of the Plant System, was 
 elected in his place. 1 
 
 The task set before the trustees, the executive 
 committee, and the new president of the Kansas 
 City Southern was one of great if not insuperable 
 difficulty. They had to deal not with a substantially 
 built and properly equipped road, but with one that 
 
 1 Mr. Knott was a trained and experienced railroad man, who, 
 prior to his connection with the Plant System, had been for ten years 
 or more first vice-president of the Louisville & Nashville. 
 
THE KANSAS CITY SOUTHERN EPISODE 225 
 
 had been flimsily put together in sections by half a 
 dozen different construction companies; that had 
 never been completely finished or adequately sup- 
 plied with rolling stock; and that stood in need of 
 capital betterments before it could even be operated 
 with safety. In a report made to Mr. Harriman after 
 the condition of the property had been ascertained, 
 President Knott described it as follows: 
 
 The railway properties acquired by the Kansas City 
 Southern Railway Company were constructed in sec- 
 tions during the years from 1888 to 1897. Contracts 
 were entered into with construction companies for build- 
 ing the road and furnishing equipment. The greater 
 part of the road was built by such construction com- 
 panies, while other portions, consisting of logging or 
 lumber roads built for local purposes, were purchased 
 by the construction companies to form a part of the 
 through line. These properties were generally hurriedly 
 built, due regard not being paid to permanent results 
 or efficiency of operation, and in that condition were 
 turned over to the railway company, although the con- 
 tracts with the construction companies called for a first- 
 class, single-track, standard-gauge railroad. As a re- 
 sult, at the time when the properties were taken over by 
 the present owners, the embankments were to a large ex- 
 tent found not to be of the proper width ; the cuts were 
 too narrow, and requisite ditching and draining were 
 lacking. In numerous cases, long wooden trestles had 
 been constructed where a small culvert and a permanent 
 earthen embankment should have been placed, and 
 many of these trestles were unsafe and required to be 
 either rebuilt or filled. The narrow banks were also dan- 
 gerous ; weak or temporary bridges, unsafe for operation, 
 
226 E. H. HARRIMAN 
 
 had to be replaced with structures of a character to per- 
 mit the movement of business; yards, sidings, and pass- 
 ing tracks were required ; freight and passenger stations 
 were inadequate or lacking at some of the most impor- 
 tant points, and new section houses, new water stations, 
 additional shop machinery and tools had to be pro- 
 vided. 1 V 
 
 If Mr. Harriman and President Knott had had 
 funds enough and time enough, they might perhaps 
 have put into satisfactory condition even a half- 
 finished, patched-up line composed largely of "log- 
 ging and lumber roads built hurriedly for temporary 
 purposes"; but, in the first place, they had very lit- 
 tle money outside of the earnings of the road itself, 
 and, in the second place, the period of their control 
 lasted only until April i, 1905. It was hardly possi- 
 ble, in five years, to save out of earnings a sum great 
 enough to pay for the virtual reconstruction of 778 
 miles of road. 
 
 Under the plan of reorganization the new com- 
 pany was supposed to begin operations with an avail- 
 able working capital of about $3,000,000; but, as a 
 matter of fact, the unsold treasury bonds which 
 were expected to yield that sum hardly sufficed to 
 meet the outstanding obligations of the old company. 
 The trustees, upon assuming control of the property, 
 had not only to provide for the liquidation of car- 
 
 1 Report of President Knott to E. H. Harriman, chairman of the 
 executive committee, February 23, 1905. 
 
THE KANSAS CITY SOUTHERN EPISODE 227 
 
 trust certificates, receivers' certificates, and other 
 prior liens of the Kansas City, Pittsburgh & Gulf to 
 the amount of $3,250,000, but also to complete and 
 pay for various betterments authorized or under- 
 taken by the receivers, including three modern steel 
 bridges,, over the Elk, Red, and Houston Rivers. 
 After meeting these liabilities, the trustees had no 
 available funds other than those derived from the 
 current earnings of the road. These, however, they 
 devoted wholly to reconstructive work. 
 
 In the last year's operation of the Kansas City, 
 Pittsburgh & Gulf there was a deficit of $317,000; but 
 between that time and December 31, 1904, the new 
 managers of the property increased its gross earnings 
 from $3,593,505 to $6,450,319 and its net earnings 
 from $915 ,005 to $ 1 ,90 1 , 1 40. This was equivalent to 
 a gain of $2746 per mile in gross and $1259 in net. 1 
 
 Between April 1, 1900, when Mr. Harriman and 
 his associates assumed the management of the road, 
 and April 1, 1905, when they retired, they expended 
 on capital account $9,692,967, of which amount 
 $5,459,269 went for betterments, additions, and new 
 equipment. 2 
 
 On the 1st of April, 1905, when the term of the 
 voting trust expired, the management of the road 
 
 1 Report of President Knott to E. H. Harriman, chairman of the 
 executive committee, February 23, 1905. 
 v * Report of the board of directors to the stockholders, May 11, 1905. 
 
228 E. H. HARRIMAN 
 
 reverted to the shareholders, and, as the result of 
 changes in the ownership of the stock, the control of 
 the property passed to other hands. In 1900, Mr. 
 Gates and his associates owned or controlled a ma- 
 jority of the shares; but five years later the security- 
 holders in Holland and certain capitalists in New 
 York were found to hold the balance of power, and 
 Gates and Harriman were displaced. They made no 
 contest for supremacy, and at the annual meeting of 
 stockholders on the 17th of May, 1905, the party 
 then predominant elected, without opposition, a new 
 board of directors, headed by Herman Sielcken, the 
 American representative of the Dutch interests. 
 The new administration made a sweeping change of 
 officers by electing J. A. Edson as president, H. R. 
 Duval as vice-president, and William Coughlin, for- 
 merly of the Denver & Rio Grande, as general mana- 
 ger. 1 Mr. Harriman then retired and soon afterward 
 disposed of his interest in the property. 
 
 The new managers, in the first report that they 
 made after coming into power, drew a dark picture 
 of the physical condition of the road when it was 
 turned over to them, and ascribed its imperfections 
 to neglect of maintenance; but in making this charge 
 
 1 Mr. Edson had been general manager of the Kansas City, Pitts- 
 burgh & Gulf and its successor the Kansas City Southern from Janu- 
 ary 25, 1899, to January I, 1903. Mr. Sielcken had been a director of 
 the Kansas City Southern and also a member of the voting trust. 
 
THE KANSAS CITY SOUTHERN EPISODE 229 
 
 they were hardly fair to their predecessors. If the 
 latter, in April, 1900, had come into possession of a 
 properly built and adequately equipped road, and 
 had then allowed it to fall into decay, they might 
 justly have been chargeable with neglect; but such 
 was by no means the case. The line, when they be- 
 came responsible for it, was — as President Knott 
 said — "in an unfinished and disorganized state"; 
 and although they had not been able to perfect it, 
 they at least turned it over to Sielcken and his asso- 
 ciates in far better condition than that in which they 
 received it from the original builders. A road cannot 
 increase its gross earnings by 56 per cent and its net 
 earnings by 154 per cent, as the Kansas City South- 
 ern did under Mr. Harriman's management, without 
 making some improvement in its physical condition. 
 Certainly, its managers cannot fairly be accused of 
 neglecting maintenance if they declare no dividends, 
 "plough in" all their earnings, and spend more than 
 a million dollars a year for physical betterments. 
 Doubtless, the Kansas City Southern, even in 1905, 
 stood in need of further improvement; but the need 
 arose not from neglect of maintenance, but from 
 faulty original construction, which Mr. Harriman 
 and his associates had not had means enough or time 
 enough fully to remedy. 1 
 1 As careful a writer as Edward S. Mead cites the Kansas City 
 
230 E. H. HARRIMAN 
 
 There is some reason to believe that Mr. Harriman 
 desired to have a line from Kansas City to the Gulf 
 of Mexico as an additional outlet for the traffic of the 
 Union Pacific, and that he would have retained con- 
 trol of the Kansas City Southern in 1905, if he could. 
 One of his associates, who afterward held an impor- 
 tant position on the road says: 
 
 "What he [Mr. Harriman] apparently wanted,"as 
 a matter of strategic development, was a connection 
 in the neighborhood of Kansas City, which was and 
 is the°second primary grain market in the United 
 States. The easy way of accomplishing this was by 
 securing and improving the Kansas City Southern. 
 I am confirmed in this impression by my knowledge 
 of the fact that when the control passed to other 
 
 Southern as an extreme illustration of the evils of neglected mainte- 
 nance; but he seems to have paid too much attention to the company's 
 fifth annual report and not enough to President Knott's description of 
 the condition of the road when he first became connected with it. 
 (Corporate Finance, by Edward S. Mead, New York, 1914, p. 219.) 
 
 Professor Ripley, too, takes a fling at Mr. Harriman by saying that 
 "when in 1905 the voting trust on the Kansas City Southern, set up 
 in 1900, expired by limitation, the stockholders, coming into posses- 
 sion of their property, discovered that it was almost completely 
 gutted." Inasmuch, however, as the same authority, in another place, 
 declares that " the Kansas City, Pittsburgh & Gulf in 1900 [after the 
 reorganization] was physically rebuilt and also structurally solidified 
 throughout," one assertion may be set off against the other. The 
 average reader, perhaps, will find it difficult to understand how a road 
 can be "almost completely gutted," and, at the same time, be "physi- 
 cally rebuilt and structurally solidified throughout." (Railroads: 
 Finance and Organization, by William Z. Ripley, New York, 191 5, pp. 
 214 and 405.) 
 
THE KANSAS CITY SOUTHERN EPISODE 231 
 
 hands, he caused a very exhaustive survey and loca- 
 tion to be made of a line between Kansas City and 
 Galveston. Subsequently, just before his last trip to 
 Europe, an opportunity was presented of securing 
 control of the Kansas City Southern and he was giv- 
 ing it serious consideration. If he had lived, he would 
 doubtless have taken over the property. No one had 
 a clearer idea of the strategic values of railroad prop- 
 erties than Mr. Harriman, or more courage in seizing 
 and developing advantageous positions." 
 
CHAPTER IX 
 
 ACQUIREMENT AND RECONSTRUCTION OF 
 THE SOUTHERN PACIFIC 
 
 AS the great work of rebuilding the Union Pa- 
 cific progressed, Harriman saw that, in order 
 to create a trunk-line from the Missouri River to the 
 Pacific that would be capable of handling efficiently 
 and economically the increasing volume of trans- 
 continental traffic, it would be necessary greatly to 
 improve, if not to rebuild entirely, the Central Pa- 
 cific, which was the link that united the Ogden ter- 
 minus with San Francisco. By straightening curves, 
 lowering grades, and using heavier rolling stock, he 
 might double the capacity of his own line between 
 Ogden and Omaha; but if he could not bring up to 
 the same high level of efficiency the line that gave 
 him his western connection, it would be difficult, if 
 not impossible, to increase much the carrying capac- 
 ity of the transcontinental system as a whole. A 
 chain is no stronger than its weakest link, and the 
 weakest link in the Omaha-San Francisco line was 
 that from Ogden to Sacramento. It was full of short 
 curves, especially in the Sierra Nevadas and in the 
 hilly region west of Ogden and east of Reno. Be- 
 
THE SOUTHERN PACIFIC 233 
 
 tween the latter points there were many stretches of 
 track where, without prohibitive expense, it was 
 possible not only to eliminate sharp curvature, but 
 to reduce short gradients — in some places running 
 up to ninety feet to the mile — which limited the 
 hauling capacity of locomotives over long distances. 
 The rolling stock of the company, too, as compared 
 with that which Mr. Harriman was introducing on 
 the Union Pacific, was light and of limited capacity. 
 Unless this part of the line could be improved, the 
 betterments that were being made east of the Great 
 Salt Lake would lose much of their value, because 
 the Central Pacific could not accommodate half the 
 transcontinental traffic that the Union Pacific was 
 prepared to handle with ease. Unfortunately, Mr. 
 Harriman had no control over the Central Pacific, 
 and the men who did control it were unable to carry 
 out the plans that they had made for the reconstruc- 
 tion of the line, because, at that time, they were fac- 
 ing the problem of financing the debt owed by the 
 Central Pacific to the Government, amounting with 
 interest to about $59,000,000. Mr. Harriman tried 
 more than once to buy this road, with a view to doing 
 with it what he was already doing with the Union 
 Pacific; but the Southern Pacific, which owned it, 
 would not sell. 
 On the 13th of August, 1900, Collis P. Huntington, 
 
234 E. H. HARRIMAN 
 
 who had been practically the creator of the Southern 
 Pacific, 1 and who held four hundred thousand shares 
 of its stock, died after a brief illness in the Adiron- 
 dacks. This sudden removal of the greatest railroad- 
 builder in the Southwest gave Harriman an oppor- 
 tunity to acquire the long-desired link connecting 
 his western terminus at Ogden with San Francisco. 
 In order, however, to get it, he would have to secure 
 control of the whole Southern Pacific system, by 
 which it was owned ; and this, at first sight, seemed 
 to be impracticable. The capital stock of the South- 
 ern Pacific Company at that time consisted of nearly 
 two million shares, which had a market value of al- 
 most $100,000,000. In order to secure complete con- 
 trol of it, the Union Pacific would have to make a 
 cash investment of more than $50,000,000, and this, 
 for a company that had only recently emerged from 
 bankruptcy and that had on hand a cash surplus of 
 less than $4,000,000, seemed an almost impossible 
 task. 
 
 Mr. Harriman, however, was never daunted by 
 prospective difficulties. The Union Pacific Company 
 under his management had increased its earnings 
 and greatly improved its credit, and while its cash 
 assets were small, its resources, in the shape of 
 
 1 In association with Leland Stanford, Charles Crocker, and Mark 
 Hopkins. 
 
THE SOUTHERN PACIFIC 235 
 
 unencumbered property, were very great. Relying 
 upon his ability to raise money by selling bonds on 
 the security of these unmortgaged assets, Mr. Harri- 
 man, almost immediately after the death of Hunt- 
 ington, began to lay plans for the acquirement of the 
 whole Southern Pacific system. 
 
 In commenting shortly afterward upon his pur- 
 pose in so doing, the United States Industrial Com- 
 mission of 1 90 1 said: 
 
 In order to attain a single important end it often 
 becomes necessary to acquire an entire system of rail- 
 roads, although only a small portion of that system can 
 add directly to the efficiency of the controlling road. 
 Thus, the entire Burlington system is absorbed by the 
 northern transcontinental lines for no other reason than 
 that they may obtain a direct entrance into Chicago. 
 The Union Pacific purchased control of the Southern 
 Pacific System, not because it needed the additional 
 mileage, but rather that it might indirectly acquire 
 the Central Pacific and a direct outlet to the Pacific 
 Coast. 1 
 
 This comment is interesting and important for the 
 reason that six years later the Interstate Commerce 
 Commission cited the acquirement of the whole 
 Southern Pacific System, not as evidence of a desire 
 to get an outlet on the Pacific Coast, but as a proof 
 of Mr. Harriman's alleged purpose to eliminate com- 
 
 1 Reports of the U.S. Industrial Commission, vol. 19, pp. 309-10 
 and 313; House Documents, vol. 82; see also Railroads: Finance and 
 Organization, by W. Z. Ripley, p. 217. 
 
236 E. H. HARRIMAN 
 
 petition and establish a monopoly. 1 The different 
 views of the same transaction taken by two different 
 federal commissions seem to show that the second 
 had a prejudice against Mr. Harriman, while the 
 first was unbiased. 
 
 Early in 1901, Harriman recommended to the 
 board of directors of the Union Pacific Company 
 that the stockholders authorize an issue of $100,000, 
 000 in convertible bonds, for the purpose of "making 
 provision for the contemplated acquisition of the 
 securities of other companies," and for the extension, 
 protection, and consolidated operation of the Union 
 Pacific lines. These bonds were to be secured by a 
 first mortgage on 1135 miles of improved road, and 
 by a collateral lien on certain securities of the Oregon 
 Short Line and the Oregon Railroad and Navigation 
 Company, which were held as free assets in the 
 Union Pacific treasury and which had a par value of 
 about $66,000,000. 2 The rate of interest on the pro- 
 posed bonds was "not to exceed four per cent," but 
 
 1 On "Consolidation and Combination of Carriers," Reports of 
 Interstate Commerce Commission, vol. 12, p. 284. 
 
 2 These securities consisted of: 
 
 Bonds of Oregon Short Line $21,881,000 
 
 Stock of Oregon Short Line 2 7.337.650 
 
 Stock of Oregon Railroad & Navigation Com- 
 pany 17.505.306 
 
 Total $66,723,956 
 
 The Union Pacific had acquired the stock of the two Oregon com- 
 panies by exchanging its own stock for them. 
 
THE SOUTHERN PACIFIC 237 
 
 in order to make them attractive to investors they 
 were made convertible, at any time within five years, 
 into the common stock of the Union Pacific Com- 
 pany at par. 
 
 On the 5th of February, 1901, the board of direc- 
 tors of the Union Pacific Company adopted a resolu- 
 tion authorizing the issue of these bonds and giving 
 to Mr. Harriman, as chairman of the executive com- 
 mittee, discretionary power to use the money to be 
 derived from them " as in his judgment may be prac- 
 ticable and desirable." This was only one of many 
 cases in which the board showed its perfect confi- 
 dence in Mr. Harriman by giving him almost un- 
 limited discretionary power. The Interstate Com- 
 merce Commission, therefore, was perhaps justified 
 in saying afterward that he was practically "the 
 dominating spirit of the corporation." In all its 
 great transactions "he acted upon his own initiative, 
 and the policies and purposes of the company were 
 his." 1 The advantages of this unified control under 
 the direction of a single master mind were shown in 
 the subsequent history and almost unexampled pros- 
 perity of the road. 
 
 When, early in May, the four per cent convertible 
 bonds were put upon the market, they were eagerly 
 
 1 Report of Interstate Commerce Commission on "Consolidation 
 and Combination of Carriers" (1907), p. 278. 
 
238 E. H. HARRIMAN 
 
 taken by the investing public. The security upon 
 which they were based was not, perhaps, wholly 
 adequate, but the conversion privilege gave them a 
 speculative value which more than made up for the 
 lack of absolute security. The increasing prosperity 
 of the Great West, the growing volume of trans- 
 continental traffic, and the almost complete recon- 
 struction of the Union Pacific under Mr. Harriman's 
 management, all indicated that, in the not-distant 
 future, the common stock of the company would go 
 above par. The purchasers of bonds, therefore, felt 
 reasonably sure that for every thousand dollars in- 
 vested they would eventually be able to get much 
 more than that value in the stock for which they 
 could exchange their holdings. Their anticipations 
 were fully realized. Before 1906, when the conver- 
 sion privilege expired, every holder of a thousand- 
 dollar bond might have converted it into ten shares 
 of Union Pacific stock, salable in the open market 
 at $1565. 
 
 The Union Pacific Company began buying South- 
 ern Pacific shares soon after Mr. Huntington's death; 
 but it was not until the following year that it went 
 into the market for all that could be had. To secure 
 control, however, without acquiring the four hun- 
 dred thousand shares held by the Huntington estate 
 was practically impossible, inasmuch as these shares 
 
THE SOUTHERN PACIFIC 239 
 
 comprised more than twenty per cent of all the stock 
 outstanding and constituted the largest single block 
 in existence. But it was not easy to buy the Hunting- 
 ton holdings, for the reason that they were desired 
 also by many other persons, corporations, or inter- 
 ests. The powerful bankers, Speyer & Co., who were 
 the fiscal agents of the Southern Pacific and who had 
 close relations with the Huntington estate, were op- 
 posed to the sale of this stock to the Union Pacific 
 Company, as were also many individuals in or out 
 of the Southern Pacific who had railroad plans and 
 ambitions of their own. Mr. Harriman, however, 
 was a skillful and persistent negotiator, and in the 
 end he outbid or won over all of his competitors. 
 Early in February, 1901, Mr. Edwin Hawley, who 
 had been closely associated with Mr. Huntington for 
 more than twenty years, signed an agreement to 
 transfer to the Union Pacific, on behalf of himself 
 and the Huntington estate, 475,000 shares of South- 
 ern Pacific stock having a par value of $47,500,000. 
 Meanwhile, Kuhn, Loeb & Co., the bankers of the 
 Union Pacific, had bought in the open market, or at 
 private sale, 275,000 shares more, so that on the 31st 
 of March, 1901, the Union Pacific was virtually in 
 possession of 750,000 shares, or thirty-eight per cent, 
 of the outstanding capital stock of the Southern 
 Pacific Company. This stock cost the Union Pacific 
 
240 E. H. HARRIMAN 
 
 a little more than $55.82 per share and therefore rep- 
 resented an investment of nearly $42,000,000. Al- 
 though it did not constitute a majority of the shares 
 outstanding, it was sufficient to prevent any other 
 interest from getting control, and possession of it 
 gave the Union Pacific Company time enough to 
 strengthen its hold by acquiring more. This it soon 
 afterward did by purchasing 150,000 shares of the 
 common and 180,000 shares of the preferred, which 
 brought its aggregate holdings up to 1,080,000 shares 
 or 45.49 per cent of all the stock outstanding. This, 
 for all practical purposes, united the two companies 
 and brought them under the same management, be- 
 cause no opposing combination of stockholders that 
 could probably be formed would be strong enough to 
 outvote a corporation that owned 1,080,000 out of 
 2,374,000 shares. 
 
 The Southern Pacific, when Mr. Harriman and 
 his associates thus acquired control of it, was the 
 greatest transportation system in the world. It op- 
 erated a continuous main line extending from Port- 
 land, Oregon, to New Orleans, Louisiana, by way of 
 San Francisco, Los Angeles, Yuma, and El Paso; its 
 equally important main line (the old Central Pacific) 
 ran eastward across the Sierra Nevadas to the junc- 
 tion with the Union Pacific at Ogden; while it con- 
 nected with an extension into Mexico some hundreds 
 
THE SOUTHERN PACIFIC 241 
 
 of miles from the Arizona border, owned by the same 
 interests that owned the Southern Pacific. The com- 
 pany had also bought, leased, or absorbed more than 
 a dozen other railroads of less importance, so that in 
 1901 it owned or controlled nearly nine thousand 
 miles of continuous track in eight different States 
 or Territories. In view of the fact that the region 
 directly tributary to this great system comprised 
 nearly one third of the total area of the United States, 
 Mr. Harriman was perhaps justified in saying, when 
 the wisdom of the purchase was afterward ques- 
 tioned, "We have bought not only a railroad, but an 
 empire." The company, moreover, which furnished 
 transportation to this "empire," had two or three 
 steamship lines of its own, which connected its land 
 lines on the east with Havana and New York, and on 
 the west with Yokohama, Shanghai, and the princi- 
 pal ports of the Orient. 
 
 The traffic of the Southern Pacific, at that time, 
 was large and diversified. . As a transcontinental 
 system it carried from ocean to ocean a great amount 
 of through freight, while, at the same time, it gath- 
 ered up along its own lines quantities of merchandise, 
 locally produced, which it turned over to other roads 
 for distribution. In 1901, for example, it moved 
 2,825,000 tons of forest products; 1,263,000 tons of 
 grain; 560,000 tons of cotton; nearly 1,000,000 tons 
 
242 E. H. HARRIMAN 
 
 of. fruit and vegetables; 3,000,000 tons of manufac- 
 tured articles; and 6,000,000 tons of miscellaneous 
 products, all of which originated in, or was carried to, 
 the region traversed by its lines. No other railroad 
 in the West had a better balanced traffic, or was bet- 
 ter able to make money out of local business alone. 
 Its principal connection, the Union Pacific, was es- 
 sentially a through trunk-line and had to get its 
 profits mainly from transcontinental traffic; but the 
 Southern Pacific, while getting its due share of 
 through freight, transacted also a large and profita- 
 ble local business, originating in the territory di- 
 rectly tributary to its many lines and branches. Its 
 gross earnings, in the year when the Union Pacific 
 acquired control of it, were $77,729,000; but its op- 
 erating expenses were large, it had a funded debt 
 of nearly $350,000,000, and it had never paid a 
 dividend. 
 
 Although the physical condition of the road com- 
 pared favorably with that of other Western lines, it 
 fell far short of the standard established by Mr. Har- 
 riman in the reconstruction of the Union Pacific. 
 Six thousand miles of the system had rails weighing 
 only sixty pounds to the yard ; less than eight hun- 
 dred miles had rails that exceeded seventy-five 
 pounds to the yard, and on the main lines alone there 
 were more than two hundred miles of timber trestles 
 
THE SOUTHERN PACIFIC 243 
 
 and bridges, many of which would have to be re- 
 placed with more substantial and durable structures. 
 The part of the system whose reconstruction pre- 
 sented most serious engineering difficulties was that 
 between Ogden and Reno, where grades of forty-five 
 to ninety feet to the mile were common, and where 
 the curves were so sharp and so frequent that in a 
 distance of three hundred and seventy-three miles 
 the road made more than thirty-six complete circles. 
 It was this part of the system, in particular, that Mr. 
 Harriman was most desirous of improving, because 
 upon it depended largely the prosperity cf his own 
 line. The Central Pacific must be made capable of 
 carrying from San Francisco to Ogden as much 
 freight as the reconstructed Union Pacific could 
 carry from Ogden to Omaha. To this part of the 
 line, therefore, Mr. Harriman gave particular and 
 immediate attention. He had been over it several 
 times, and had a good general idea of its defects and 
 needs; but in order to plan the reconstruction of it 
 with all the knowledge that could be obtained, he 
 summoned to New York for a conference Mr. Julius 
 Kruttschnitt, general manager of the system, who 
 was a railroad engineer by education and training, 
 who had been connected with the road, as man- 
 ager or assistant manager, for sixteen years, and 
 who presumably was better acquainted with its 
 
244 E. H. HARRIMAN 
 
 physical condition than was any other official- 
 Mr. Kruttschnitt, who then knew Mr. Harriman 
 only slightly, gave afterward the following account 
 of the conference: 
 
 We tried to discuss our business at the office, but Mr. 
 Harriman was too frequently interrupted by callers. He 
 asked me to his house that night to dine. After dinner 
 he called for blue-prints, maps, and statistics covering 
 the contemplated reconstruction work in Nevada and 
 Utah. He asked innumerable questions with great rapid- 
 ity, always touching the crucial points. Frequently he 
 would not wait for me to finish a sentence, but would 
 dash off on another question. He wanted to know the 
 advantages of one method over another; the economies 
 to be effected, the increase in capacity to be derived, 
 etc., etc., etc. The swiftness with which he covered the 
 plans was astonishing. We finished the discussion in less 
 than two hours, and thereupon he told me to be at the 
 board room next morning when there was to be a meet- 
 ing of the executive committee. 
 
 The plans called for an expenditure of $18,000,000 
 and I supposed that there would be no end of arguing 
 and talking, which would result in the approval of only 
 a part of the work. However, Mr. Harriman, in a few 
 words, clearly explained to the committee the general 
 scheme, what it would cost and the advantages that 
 would follow, and recommended the approval of the 
 entire work. It was approved without dissent. Evi- 
 dently he had absorbed enough in that two hours' talk 
 with me to satisfy himself what ought to be done and to 
 approve the whole thing. As I left for the West, I won- 
 dered what manner of man it was who in a few hours' 
 talk could digest the details of an $18,000,000 recon- 
 struction work along a thousand miles of railroad 
 
THE SOUTHERN PACIFIC 245 
 
 through a mountainous country, expound the general 
 principles of the plan to his executive associates in the 
 course of a few minutes, and obtain the seal of financial 
 approval. I asked him what speed we should make — 
 over what period of time we should spread the expendi- 
 ture. He replied, "Spend it all in a week if you can." 
 
 The virtual reconstruction of the Central Pacific, 
 under the direction of Mr. Kruttschnitt and the im- 
 mediate supervision of Chief Engineer Hood, began 
 at once and was finished in less than three years. 
 Some conception of the magnitude of the task may 
 be gained from the fact that it involved the complete 
 abandonment of three hundred and seventy-three 
 miles of the old line and the substitution for it of 
 three hundred and twenty-two miles of new track 
 built in new and better locations. This was about 
 equivalent to the construction of an entirely new 
 railroad from Boston, Massachusetts, to Washing- 
 ton, D.C. The engineering difficulties, however, in 
 the mountainous regions of Utah and Nevada, were 
 far more serious than they would be in the com- 
 paratively level country lying between eastern Mas- 
 sachusetts and the District of Columbia. 
 
 As the result of these changes of location, the new 
 line was about fifty miles shorter than the old ; it had 
 thirteen thousand degrees less of curvature, and its 
 maximum grades were reduced from an average of 
 forty-nine to ninety feet per mile to an average of 
 
246 E. H. HARRIMAN 
 
 twenty-one feet per mile. On the old line there were 
 many curves of eight and ten degrees, while on the 
 new the sharpest curve did not exceed four degrees. 
 The saving in grade rise, going either east or west, 
 was about three thousand vertical feet, and was 
 equivalent to more than sixty miles of continuous 
 grade of fifty feet to the mile. 
 
 The most remarkable and perhaps the most dif- 
 ficult achievement in this reconstruction of the Cen- 
 tral Pacific was the building of the so-called Lucin 
 cut-off across the Great Salt Lake. The old line of 
 the road ran around the northern end of the lake, 
 across two mountain ranges, and through a very 
 wild and rugged country where it was practically 
 impossible to get easy grades, or eliminate sharp and 
 frequent curves. This part of the road, as originally 
 built, varied in elevation from 4200 to 4900 feet 
 above the sea-level and contained maximum curva- 
 tures of ten degrees and grades as steep as ninety feet 
 to the mile. Very little of the track between Ogden 
 and Lucin was either straight or level, and the topog- 
 raphy of the whole region was such that, for a dis- 
 tance of one hundred and forty-seven miles, it was 
 difficult, if not impossible, to find a location that 
 would be much better. When Mr. Harriman ac- 
 quired control of the Central Pacific, he decided that 
 this part of the line would have to be abandoned 
 
THE SOUTHERN PACIFIC 247 
 
 altogether, and as there seemed to be no other satis- 
 factory route around the lake, he determined to go 
 directly across it. The idea, however, was not his 
 own. Mr. William Hood, the chief engineer of Collis 
 P. Huntington, had suggested it, some years before, 
 and had even drawn plans for an air line across the 
 lake on embankments and trestles; but the estimated 
 cost of the work was very great, and Mr. Huntington 
 had only begun it. Mr. Harriman, however, soon 
 satisfied himself that the saving which might be 
 made in the running of trains would cover liberal 
 interest on the cost of the improvement, and he there- 
 fore directed Mr. Kruttschnitt to complete the con- 
 struction of the cut-off at once. It proved to be a 
 task of tremendous difficulty. Although the greatest 
 depth of the Great Salt Lake was only thirty-two 
 feet, it had a very insubstantial and treacherous bot- 
 tom, and many times in the progress of the work the 
 fills and trestles seemed about to be wholly swallowed 
 up in abysses of quicksand and mud. But persistence 
 and unfaltering resolution won out at last, and on the 
 26th of November, 1903, Mr. Harriman and fifty 
 prominent officials of the Pacific roads assembled at 
 Ogden to celebrate the completion of the great under- 
 taking. By the building of this cut-off, the maximum 
 grades between Ogden and Lucin were reduced from 
 ninety feet per mile to twenty-one feet per mile; four 
 
248 E. H. HARRIMAN 
 
 thousand degrees of curvature were eliminated, and 
 the distance between the two points was shortened 
 from one hundred and forty-seven miles to about 
 one hundred and three miles. The cut-off, when 
 completed, was only three tenths of a mile longer 
 than an air line. The cost of the improvement was 
 nearly $9,000,000, a large part of which sum was 
 spent in building twenty-seven miles of fills and 
 trestles across the lake from Lakeside to Promon- 
 tory. 
 
 In discussing the savings made by this cut-off, an 
 official of the Southern Pacific Company said in 
 1917: 
 
 One hundred and ten million tons of freight have 
 passed over the Lucin cut-off since its completion, and 
 this, in terms of average car-loading, would take about 
 4,000,000 cars, making a continuous train 37,000 miles 
 long, or enough to reach one and a half times around the 
 earth. Had this freight been hauled over the old line, 
 it would have necessitated the running of 172,000,000 
 additional car miles and additional work equivalent to 
 lifting a million carloads a mile in the air. 1 
 
 The main line of the Southern Pacific, from New 
 Orleans to San Francisco, ran through a country 
 that was comparatively open and level, so that re- 
 construction of it involved fewer engineering dif- 
 ficulties than those presented by the Central Pacific 
 
 1 Railway Age Gazette, November 2, 1917. 
 
THE SOUTHERN PACIFIC 249 
 
 division between Ogden and Reno. It needed, how- 
 ever, almost everywhere, extensive betterments in 
 the shape of heavier rails, new cross-ties, better bal- 
 lasting, longer sidings, and more substantial culverts 
 and bridges. These improvements Mr. Harriman 
 began at once to make, and in the first two years 
 after he acquired control, he spent on the main line 
 of the Southern Pacific (apart from the Central Pa- 
 cific division) more than $20,000,000. All the avail- 
 able net earnings of the road were devoted to better- 
 ments, and no dividends were paid, even on the 
 preferred stock, until 1905. 
 
 Reconstruction work on the Southern Pacific did 
 not differ essentially from that on the Union Pacific, 
 and it is perhaps unnecessary, therefore, to describe 
 it in detail. Suffice it to say that during the period of 
 Mr. Harriman's administration 373 miles of the old 
 main line were abandoned altogether and 322 miles 
 were rebuilt in better locations; new and heavier 
 rails were laid on 4481 miles of track; 27,000,000 new 
 cross- ties were substituted for old; nearly 1000 miles 
 of track were ballasted, or reballasted with better 
 material, and about 30 miles of wooden culverts, 
 trestles, and bridges were replaced with earthen 
 embankments, or permanent structures of concrete 
 or steel. Seven million dollars were spent in building 
 new sidings, or extending those already in existence; 
 
250 E. H. HARRIMAN 
 
 $2,600,000 in providing a second main track where 
 the traffic was densest; $6,300,000 in rebuilding tres- 
 tles and bridges, and nearly $14,000,000 in purchas- 
 ing terminal or other real estate and the erection of 
 new terminal buildings. 
 
 The most important piece of engineering work 
 done on the main line, and the only one comparable, 
 in cost and magnitude, with the famous Lucin cut- 
 off, was the so-called Bay Shore cut-off, a short and 
 nearly straight line which greatly improved the ap- 
 proach to San Francisco. The old single-track road, 
 which was built in 1863, ran into the city on the 
 western side of the San Bruno Mountain by way of 
 Baden and Ocean View. From San Bruno to the 
 terminal it was only eleven miles long, but in that 
 distance it had 796 degrees of curvature, and rose to 
 a height of 292 feet with a maximum grade of 158 
 feet to the mile. As an approach to San Francisco it 
 had long been inadequate and unsatisfactory; but 
 the city, in the course of forty years, had grown up 
 around it to such an extent that it was practically 
 impossible to widen the right of way, eliminate 
 curves, or reduce the steep grades. Mr. Harriman 
 decided to abandon it altogether and construct an 
 entirely new double-track line on the eastern side of 
 the San Bruno Mountain along the shore of San 
 Francisco Bay. The building of this cut-off was a 
 
THE SOUTHERN PACIFIC 251 
 
 very difficult piece of work, inasmuch as it involved 
 extensive grading, the building of a number of new 
 bridges, and the digging of five tunnels whose ag- 
 gregate length was nearly ten thousand feet; but it 
 saved 2.65 miles in distance, eliminated 592 degrees 
 of curvature, lowered the extreme elevation from 
 292 feet to 20 feet, and reduced a maximum grade of 
 158 feet to less than 16 feet per mile. The cost of this 
 improvement, including bridges, tunnels, and right 
 of way for a four- track road, was $9,273,055, or more 
 than $800,000 per mile; but it gave the Southern 
 Pacific easy access to the heart of the city and fur- 
 nished it with better terminal facilities than it had 
 ever before enjoyed. 
 
 The most important and costly piece of new con- 
 struction in southern California was the sixty-mile 
 cut-off on the main line between Burbank and Mont- 
 alvo. Like all of Mr. Harriman's improvements it 
 was intended to eliminate curves and heavy grades. 
 The old road, by way of Saugus, was unnecessarily 
 long and roundabout and had a maximum grade of 
 116 feet to the mile. The new line, by way of the 
 Santa Susana tunnel, saved seven miles in distance 
 and 2276 degrees of curvature; lessened the extreme 
 elevation by 51 1 feet, and reduced the 1 16-foot grade 
 to a maximum grade of less than 53 feet. 
 
 The total amount spent on the Southern Pacific 
 
252 E. H. HARRIMAN 
 
 System for line changes, grade reductions, and other 
 similar improvements during the period of Mr. Har- 
 riman's administration was approximately thirty 
 million dollars, and two thirds of this sum was used 
 in building the three principal cut-offs, namely, 
 Lucin, Bay Shore, and Montalvo. Twenty million 
 dollars seems a great expenditure for track improve- 
 ment in only three places; but the saving in operating 
 expenses which these betterments made possible was 
 equivalent to from eight to ten per cent interest on 
 the money invested in them. 
 
 The most important requirement of the Southern 
 Pacific, next to track improvement, was better and 
 heavier rolling stock. Twenty-five per cent of its 
 locomotives and twenty-four per cent of its freight 
 cars were more than sixteen years old, and very few 
 were of the largest capacity. The average weight of 
 the locomotives on their drivers, for example, was 
 only 40.62 tons, and the average capacity of the 
 freight cars was less than 27 tons. By purchasing 
 540 new locomotives of greater power and 8869 new 
 freight cars of larger size, Mr. Harriman brought the 
 average engine weight up to 52 tons and the average 
 car capacity up to 37.58 tons. At the beginning of 
 the Harriman administration, the freight cars owned 
 by the road could carry, at a single trip, about 959, 
 000 tons, while at the end of it the company's cars 
 
THE SOUTHERN PACIFIC 253 
 
 had an aggregate capacity of 1,633,000 tons. In the 
 same period, 510 new coaches of larger size and better 
 design were added to the passenger equipment, and 
 the water service on the Atlantic and Pacific Oceans 
 was improved by the expenditure of nearly $9,000, 
 000 for new steamers. All together, the money in- 
 vested in new rolling stock and floating equipment, 
 after the Union Pacific Company acquired control of 
 the road, amounted to more than $41,000,000. 
 
 One of the most valuable improvements made to 
 the Southern Pacific, upon the personal initiative of 
 Mr. Harriman, was the installation of a very perfect 
 system of automatic block signals. Up to 190 1, very 
 little of this work had been done,", and on the nine 
 thousand miles of the Southern Pacific system there 
 were less than fifty miles of block-signaled track. 
 Mr. Harriman, at a cost of $2,835,000, provided 
 automatic signals for nearly three thousand miles of 
 track, and thus ensured the safety of moving trains 
 on practically the whole of the main line, including 
 the Central Pacific division from Ogden to Reno. 
 In describing these signals, Mr. Kruttschnitt said: , 
 
 They notify trains of danger ahead or danger behind. 
 They are maintained at safety by an electric current 
 sent through the rails, and anything that breaks the con- 
 tinuity of that current sets the signal at danger. If a 
 rail breaks, if a switch is left open, or if an iron bar or 
 rail is laid across the track for the purpose of wrecking 
 
254 E. H. HARRIMAN 
 
 a train, the automatic signal gives due warning. The 
 signal is set at danger also if there is a train ahead, or if 
 a car has escaped from a siding and run on to the main 
 track. Protection is afforded, therefore, not only against 
 collisions, but against broken rails, open switches, wash- 
 outs, landslides, and obstructions. 
 
 The result of the installation of this system of 
 block signaling on the Harriman lines was a great 
 decrease in the number of train accidents — a de- 
 crease that amounted in some cases to more than 
 one half. Employees, and especially engineers, were 
 trained to observe signals attentively, and "sur- 
 prise" experiments were frequently made to test 
 their vigilance. If, in spite of all precautions, acci- 
 dents occurred, no attempt was ever made to conceal 
 the facts. On the contrary, boards of inquiry were 
 appointed to fix the responsibility, and representa- 
 tives of the public, including even local newspaper 
 men, were invited to serve on these boards and to 
 assist the railroad officials in making the investiga- 
 tions. To such a pitch of perfection was this system 
 of safeguards carried that, in 1914, the Harriman 
 gold medal of the American Museum of Safety was 
 awarded to the Southern Pacific as the road that had 
 done most to prevent accidents and protect the lives 
 of passengers. In presenting the medal, President 
 Williams referred to the fact that the percentage of 
 accidents on the Southern Pacific had been reduced 
 
THE SOUTHERN PACIFIC 255 
 
 by two thirds, and that in the preceding five years 
 not a single passenger had been killed. In receiving 
 the medal, Mr. Kruttschnitt, chairman of the execu- 
 tive committee, said: 
 
 During the year ended June 13, 1913, the company's 
 locomotives ran 59,738,000 miles — a figure too large to 
 convey any meaning. At this rate, the miles run in a 
 single week would girdle the earth forty-six times, or 
 nearly seven times in a day, or once in three and one- 
 half hours. With so vast a movement the liability to ac- 
 cident is very great, and yet, 41,783,000 passengers were 
 carried the inconceivably great aggregate distance of 
 1,756,482,000 miles, equivalent to transporting the en- 
 tire population of Greater New York, some 5,000,- 
 000 people, from New York to Rochester. This was 
 done without a fatality in a train accident, and it had 
 been done in the four years preceding with the same 
 immunity. 
 
 Mr. Kruttschnitt attributed these results mainly 
 to the policies of Mr. Harriman and to the coopera- 
 tion and team-work which he so ardently advocated. 
 
 The most important extension of the Southern 
 Pacific made after the Union Pacific acquired control 
 was the branch line into Mexico. "Mr. Harriman," 
 says Alexander Millar, late secretary of the Union 
 Pacific, "visited the City of Mexico in March, 1902, 
 and there met President Diaz and the leading men of 
 the Mexican Republic. As a result of that visit a 
 concession was granted by the Government of the 
 Republic for the construction and operation of lines 
 
256 E. H. HARRIMAN 
 
 of railway from Guaymas, on the Gulf of California, 
 up the valley of the Yaqui River, in the State of 
 Sonora, to develop the coal and mineral resources of 
 that region, and also down the west coast of Mexico 
 through the cities of Navajoa, San Bias, Culiacan, 
 Mazatlan, and Tepic to the city of Guadalajara, 
 there connecting with the national lines for the City 
 of Mexico and the South and East, a total distance, 
 with branches, of about fifteen hundred miles. These 
 lines will not only afford the Government of Mexico 
 an easy and natural route for the movement of troops 
 and supplies to the Pacific States of the Republic, 
 but will open up a vast extent of territory rich in 
 mining, agricultural, and shipping interests tribu- 
 tary to our Southwestern States. On the 1st of July, 
 1909, about eight hundred miles of the Mexican 
 lines had been finished, and in the spring of that year 
 Mr. Harriman went over them to Mazatlan in the 
 first railroad train ever seen by the natives of that 
 place." * The cost of the Mexican lines, so far as they 
 had been completed during the period of Mr. Harri- 
 man's administration, was about $35,000,000, which, 
 added to the cost of new lines and branches built 
 or acquired by the Southern Pacific in the United 
 States in the same period, make a total expenditure 
 
 1 E. H. Harriman and the Union Pacific, by Alexander Millar, secre- 
 tary of the Union Pacific Railroad Company (New York, 1910), p. 11. 
 
THE SOUTHERN PACIFIC 257 
 
 of $114,513,000 for the extension of the system, aside 
 from $127,000,000 spent in the reconstruction and re- 
 equipment of it. 
 
 It has sometimes been said that Mr. Harriman 
 was not a railroad-builder, but only an improver of 
 railroads that had been built by others. This, how- 
 ever, is hardly true. He built, or caused to be built, 
 more than fifteen hundred miles of entirely new road, 
 much of it in a very wild, mountainous region, and the 
 money spent under his direction for the improvement 
 of the Union and Southern Pacific Systems would have 
 sufficed, at that time, to build and equip three or four 
 transcontinental lines of wholly new railway from 
 the Missouri River to the Pacific Ocean. Improve- 
 ment, on such a scale as this, does not differ essentially 
 from new construction. An idea may be gained of the 
 scope and extent of Southern Pacific improvements 
 from the following itemized statement of expenditures : 
 
 Extensions: 
 
 New lines and branches built or bought $114,513,383 
 
 , $H4.5i3-383 
 Track betterments: 
 
 Lucin cut-off $8,358,833 
 
 Bay Shore cut-off 91273,055 
 
 Montalvo cut-off 2425,911 
 
 Other line changes and reconstruction 10,761,484 
 
 Second main track 2,699,532 
 
 Side tracks ,~ 7,293,407 
 
 Bridges and trestles 6,298,059 
 
 Automatic block signals 2,835,278 
 
 Ballast 2,962,206 
 
 Total track betterments $52,907,765 
 
258 E. H. HARRIMAN 
 
 New equipment: 
 
 Rolling stock, 9919 locomotives and cars $32,061,304 
 
 Steamers, ferry-boats, etc 8,984,282 
 
 Total new equipment $4 I i°45>586 
 
 Buildings and real estate: 
 
 Terminals and land $13,896,985 
 
 Station grounds and right of way 3.235.988 
 
 Station buildings and fixtures 1,878,217 
 
 Pumping stations 1,058,294 
 
 Fuel stations 1,827,396 
 
 Shops, machines and tools 3.33 2 ,7H 
 
 Miscellaneous structures 1,611,337 
 
 Various betterments, docks, engine houses, fencing, etc. 6,636,756 
 Total buildings and real estate $33,477i684 
 
 Recapitulation: 
 
 Extensions $H4.5 I 3>383 
 
 Track betterments 52.907.765 
 
 New equipment 41,045,586 
 
 Buildings and real estate • 33.477.684 
 
 Grand total $241,944,418 
 
 The results of these betterments were summed up 
 by Mr. Kruttschnitt in the following words: 
 
 Through a progressive policy and the assistance of an 
 established credit [that of the Union Pacific] enormous 
 sums were expended for betterments and additions; the 
 physical condition of the roads was vastly improved; 
 grades were reduced and curves eliminated; the lines 
 were shortened wherever possible ; facilities of all kinds 
 were enlarged ; the heaviest and most powerful types of 
 locomotives were freely supplied, and the modern pas- 
 senger and freight cars furnished were of standards not 
 surpassed on any railroad in the United States. As a re- 
 sult, the general service to the public was much im- 
 proved; the danger from accidents was reduced; the 
 traffic was handled without increase of rates, even dur- 
 
THE SOUTHERN PACIFIC 259 
 
 ing periods of rising prices for material and labor, and 
 the capacity of the roads was so increased that they car- 
 ried for the public a volume of business that it would 
 have been impossible to move at all if the improvement 
 in facilities had not been made. 
 
 While these changes, made under the administration 
 of Mr. Harriman, improved the return to the stock- 
 holders through the development and transportation of 
 a much greater volume of business at lower cost, they 
 were equally beneficial to the public in providing a 
 safer, straighter, and more comfortable road and better 
 equipment for passenger travel, as well as increased ca- 
 pacity for freight with more certainty in movement and 
 promptness in delivery. 1 
 
 Although the Interstate Commerce Commission, 
 
 which investigated the merger of the Union and 
 
 Southern Pacific Systems, was strongly prejudiced 
 
 against Mr. Harriman, it did not venture to deny 
 
 that his management of the roads had resulted in 
 
 great material improvement. Commissioner Lane, in 
 
 his report on "Consolidation and Combination of 
 
 Carriers," in 1907, said: 
 
 It has been no part of the Harriman policy to permit 
 the properties which were brought under Union Pacific 
 control to degenerate and decline. As railroads, they 
 are better properties to-day - — with lower grades, 
 straighter tracks, and more ample equipment — than 
 they were when they came under that control. Large 
 sums have been generously spent in the carrying on of 
 engineering works and betterments which make for the 
 
 1 Unpublished letter of Julius Kruttschnitt, director of maintenance 
 and operation of the Harriman lines. 
 
260 E. H. HARRIMAN 
 
 improvement of the service and the permanent value of 
 the property. 1 
 
 In view of the fact that Mr. Harriman spent in 
 the reconstruction and reequipment of the two sys- 
 tems more than $400,000,000, or enough, at that 
 time, to build and equip three or four entirely new 
 lines to the Pacific Coast, the Commission could 
 hardly say less than this; but, for reasons of its own, 
 it persisted, nevertheless, in regarding this tremen- 
 dous scheme of betterment as a menace, in some 
 way, to the welfare of the people whose interests it 
 so effectively promoted. If Mr. Harriman had not 
 lived, there would have been a delay of certainly ten 
 years, and possibly twenty, in the development of 
 the resources of the Great West. 
 
 1 Report of the Interstate Commerce Commission on "Consolida- 
 tion and Combination of Carriers," by Franklin K. Lane (April 5, 
 1907), p. 281. 
 
CHAPTER X 
 RAILROAD COMBINATIONS . 
 
 THE merger of the Union Pacific and Southern 
 Pacific lines in 1 90 1 was the largest and most 
 important combination of railroad properties that 
 had ever been made, and in view of the hostile crit- 
 icism to which it was afterward subjected and the 
 attacks that were made upon Mr. Harriman as the 
 leading exponent of the consolidation policy, it may 
 be well to consider briefly the reasons for such com- 
 binations and the effect that they had upon the pub- 
 lic welfare. 
 
 The consolidation of railroads into large groups, 
 or systems, had its origin in the demonstrated evils 
 of unrestricted competition. More than forty years 
 ago, railway managers became convinced that un- 
 restricted competition was prejudicial to the inter- 
 ests of both shareholders and shippers. It injured 
 the former by reducing their profits, and the latter 
 by vitiating all commercial contracts that were de- 
 pendent upon equality and stability of rates. A ship- 
 per or manufacturer could not safely make plans for 
 the future unless he felt sure that transportation 
 rates would remain substantially unchanged, nor 
 
262 E. H. HARRIMAN 
 
 could he enter into contracts for future delivery un- 
 less he had some guarantee that, when the time 
 should come for the shipment of his goods, he could 
 get them carried to their destination as cheaply as 
 could any o*f his business rivals. Cut-throat competi- 
 tion between railroads, with the frequent changes 
 and wide discriminations that it involved, deprived 
 him of all security and introduced an element of 
 uncertainty into every business transaction. 1 
 
 With a view to avoiding these and other evils of 
 unrestricted competition, the railways, after the 
 disastrous rate wars of 1875 and 1878, entered into 
 what were known as "pooling" agreements, by vir- 
 tue of which freight was apportioned among the 
 several competing roads, or receipts from traffic were 
 divided among them, in such a way as to secure 
 equality and stability. These agreements were not 
 intended to raise rates, or to keep them at an unduly 
 high level; their object was to steady rates — to 
 avoid the competitive changes, differences, and dis- 
 criminations which were as upsetting to the calcula- 
 tions of producers and shippers as they were un- 
 profitable to the railroads themselves. 
 
 1 The Interstate Commerce Commission itself said, in 1887, that 
 without stability of rates all business contracts were "lottery ven- 
 tures." It also admitted that railroad combinations had a tendency 
 "to remove obstacles to the interchange of business and to increase 
 the facilities and conveniences for uninterrupted business inter- 
 course." (First Report of the Interstate Commerce Commission, De- 
 cember 1, 1887, pp. 8 and 34.) 
 
RAILROAD COMBINATIONS 263 
 
 For a period of ten or twelve years, the "pooling" 
 system worked fairly well; but the public became 
 obsessed with the idea that rates could be reduced 
 and kept low only by the unrestrained competition 
 of carriers; and every effort of railway managers to 
 secure uniformity and stability was regarded as a 
 conspiracy to extort money from the people. In 
 1887, Congress, paying more attention to popular 
 clamor and demagogic appeals than to facts or rea- 
 son, inserted in the Interstate Commerce Bill a sec- 
 tion which made it "unlawful for any common car- 
 rier to enter into any contract, agreement, or com- 
 bination with any other common carrier, or carriers, 
 for the 'pooling' of freights of different competing 
 railroads, or to divide between them the aggregate 
 or net proceeds of the earnings of such railroads, or 
 any portion thereof." Although this prohibition, as 
 a well-known economist has said, "was suggested 
 and carried through by one of those spasms of dema- 
 gogism which have done so much to retard progress," 
 it completely thwarted the attempt of the transpor- 
 tation companies to stabilize rates by means of re- 
 ciprocal agreements. Railway managers then tried 
 to get the same results by organizing joint-traffic 
 associations, which controlled rates through tariff 
 concessions and cooperative adjustments. This plan 
 also worked well for a time, but just as it was be- 
 
264 E. H. HARRIMAN 
 
 coming most effective it was prohibited by the Su- 
 preme Court, on the ground that it brought about 
 a restraint of trade and consequently violated the 
 provisions of the Sherman Anti-Trust Law. 
 
 Urged on by the extreme need of stabilizing rates, 
 as well as by considerations of efficiency and econ- 
 omy, the railroads then began to combine into large 
 systems, each of which dominated traffic conditions 
 over a large area. Some of these combinations were 
 made through purchases or leases, some through 
 stock holdings, and some through that form of uni- 
 fied control known as "a community of interest." 
 Congress, however, was opposed to such combina- 
 tions, as well as to the "pooling" and traffic agree- 
 ments that preceded them, for the alleged reason 
 that they had a tendency to raise transportation 
 rates, or to maintain such rates at an unduly high 
 level. But, as a matter of fact, did they have such 
 a tendency? During the period of "pooling" and 
 joint-traffic associations — that is, between 1870 
 and 1890 — there was a decrease in freight rates of 
 about fifty per cent. In 1870, the average rate per 
 ton-mile was 1.889 cents. In 1880, it was 1.232 cents, 
 and in 1890, 0.941 cent. The decrease on Eastern 
 roads was from 1.61 to 0.55; on Western roads from 
 2.61 to 0.94, and on transcontinental lines from 
 4.50 to 0.99. If railroad pools and agreements had a 
 
RAILROAD COMBINATIONS 265 
 
 tendency to increase rates, or even to maintain them, 
 why did not such tendency become apparent? 
 
 If we take the era of railroad mergers and com- 
 binations — the period during which the grouping of 
 railroads into large systems proceeded most rapidly 
 — the decline in rates is equally noticeable. In the 
 quarter of a century that ended with 1903, when 
 nearly all the great railroad combinations were 
 formed, including that of the Union Pacific with the 
 Southern Pacific, freight rates per ton-mile decreased 
 from an average of 1.22 cents to an average of 0.77 
 cent, or nearly forty per cent. The saving to ship- 
 pers by this reduction of rates was approximately 
 one billion dollars in eighteen years on only one of the 
 large Western systems — the Great Northern. 
 
 In the half -century that followed the Civil War, 
 there was never a time when railroad pools, agree- 
 ments, or combinations increased rates, or even 
 maintained them at a fixed level. On the contrary, 
 there was, throughout that period, a steady and 
 continuous decline, which brought down ton-mile 
 rates, on such a railroad combination as the Penn- 
 sylvania System for example, from two and a half 
 cents to six mills. The conclusion seems to be irresist- 
 ible that the high-rate evil, against which so much 
 prohibitory legislation was directed, did not exist — 
 it was wholly imaginary. 
 
266 E. H. HARRIMAN 
 
 The only other evil alleged as a reason for pro- 
 hibiting combinations was that the size of the sys- 
 tems that might be formed would tend to produce 
 monopolistic conditions over a wide area and thus 
 give the railroads undue power. But they could 
 exercise that power to the prejudice of the public 
 interest only in one way, namely, by making an ex- 
 cessive charge for the service that they rendered. 
 Theoretically, of course, railroad managers, if they 
 had a complete monopoly of transportation in a 
 given area, or between two given points, might fix 
 almost any rates; but practically they would still be 
 subjected to a very effective economic restraint. If 
 they made charges too high, they would lessen, crip- 
 ple, or destroy the traffic upon which their profits 
 depended. Mr. Harriman, long ago, pointed out the 
 fact that no railroad, or combination of railroads, 
 can charge exorbitant rates without throttling or 
 paralyzing the industries along its lines. "It is im- 
 possible," he said, "for a railroad to sever its inter- 
 ests from those of its patrons. Its life-blood is drawn 
 from their prosperity, and it must furnish them with 
 adequate and ever-increasing facilities at reasonable 
 rates. The widespread popular impression that a 
 railroad company can extort money from the public 
 at will, and in defiance of the laws of trade, is not 
 justified by the facts." 
 
RAILROAD COMBINATIONS 267 
 
 As a matter of history, the great railroad com- 
 binations formed between 1887 and 1905 — com- 
 binations that were said to be monopolistic in nature 
 or tendency — did not fix unnecessarily high rates. 
 Proof of this is furnished by the records of the Inter- 
 state Commerce Commission. In response to a Sen- 
 ate resolution of inquiry, adopted January 13, 1905, 
 the Commission reported that in the eighteen years 
 of its existence it had heard 9099 complaints, relat- 
 ing to all sorts of railroad methods and practices. 
 Thousands of them charged unjust discrimination 
 between persons or places, but not one alleged ex- 
 orbitant rates. More than eight thousand of the 
 cases of supposed discrimination were informally 
 and amicably settled, and of the forty-five com- 
 plaints that were carried into the courts only eight 
 were sustained. 1 If the great railroad combinations 
 accused of monopoly had charged exorbitant rates, 
 it is inconceivable that in the course of eighteen 
 years complaint of it should not have been made by 
 some one of the nine thousand shippers who came 
 before the Commission. 
 
 The records of the great railroad combinations 
 that were in existence during the period covered by 
 
 1 Railroad Regulation in Its Political Aspects, by Joseph Nimmo, 
 Jr. (Washington, May 4, 1909), p. 5; Highways of Progress, by James 
 J. Hill (New York, 1912), p. 271. 
 
268 E. H. HARRIMAN 
 
 the Commission's report furnish additional proof 
 that, although the grouping of railroads into large 
 systems enormously increased the service rendered, 
 it did not increase the rates charged. Between 1898 
 and 1909, for example, the Union Pacific Company 
 increased its capacity for handling freight by about 
 one hundred and forty per cent, while at the same 
 time it lowered rates by an average of sixteen per 
 cent. Abundant facilities are often as important to 
 shippers as low rates; the Union Pacific furnished 
 both. On the Great Northern system, during ap- 
 proximately the same period, there was also a great 
 increase of facilities, accompanied by a reduction of 
 rates which saved shippers one hundred million dol- 
 lars in a single year (1909). 1 
 
 The low rates on the Western combined lines were 
 undoubtedly due, in part, to the reduction of grades, 
 the straightening of curves, the use of heavier equip- 
 ment, and the many other improvements in the art 
 of railroading which Mr. Harriman, in particular 
 advocated or introduced ; but they were also due, in 
 very large part, to the increased efficiency and econ- 
 omy which the grouping of railroads into big sys- 
 tems made possible. This, as will presently be shown, 
 was particularly true of the Union Pacific-Southern 
 Pacific merger. 
 
 1 Highways of Progress, by James J. Hill (New York, 1912), pp. 
 260-61. 
 
RAILROAD COMBINATIONS 269 
 
 Not one of the Western combinations had any- 
 thing like a complete monopoly of the territory that 
 it served ; but the results of a nearly complete monop- 
 oly may be found in the history of one of the great 
 Eastern systems, namely, the Pennsylvania. 
 
 For many years [says Professor Mead] the Pennsyl- 
 vania has been dominant in the State of Pennsylvania, 
 and has enjoyed the largest advantage from the traffic 
 of the middle Atlantic seaboard. Its rivals have cut into 
 long-distance traffic, but in the most valuable portions of 
 this eastern territory the Pennsylvania Railroad Com- 
 pany has supplied the majority of shippers with their 
 transportation facilities. If there were any truth in the 
 assertion that railroad monopoly is injurious to the in- 
 terests of the shipper, it would appear in the territory 
 which the Pennsylvania controls. As a matter of fact, 
 the unprecedented growth of this section in wealth and 
 prosperity offers a striking refutation of the claim that 
 competition is the life of trade. It is not to the interest 
 of the Pennsylvania Company, although its power in 
 most of this eastern territory is unquestioned, to exact 
 unfair rates from the shipper. Not by such methods 
 can a large traffic be built up. A railroad which abuses 
 its power and follows a policy of extortion is working 
 directly against its own interests. The policy of the 
 Pennsylvania has been to leave a liberal margin of profit 
 to the shipper, in order to encourage him to expand his 
 business and furnish more freight to the railroad. The 
 success of this policy is written in the prosperity of the 
 corporation, and even more legibly in the prosperity of 
 the territory which it serves. 1 
 
 x "The Great American Railway Systems: The Pennsylvania," by 
 Edward Sherwood Mead, Professor of Finance and Economy in the 
 University of Pennsylvania. (Railway World, February 20, 1904.) 
 
270 E. H. HARRIMAN 
 
 There have undoubtedly been a few monopolies 
 which, under the direction of greedy and short- 
 sighted managers, have tried to make large and im- 
 mediate profits by charging unreasonable rates; but 
 such monopolies must always be self -destructive for 
 the reasons that Mr. Harriman and Professor Mead 
 have given. They cannot possibly last long, even 
 though there be no anti-trust law to suppress them. 
 
 If the evidence above set forth shows, as it seems 
 to show, that combinations do not raise rates, and 
 that transportation monopolies injurious to the ship- 
 per or the public are self -destructive and short-lived, 
 what remains of the case against railroad consolida- 
 tions? Nothing, apparently, except the vague and 
 unsupported charge that big combinations of car- 
 riers are "a menace to the public welfare." But this 
 assertion, for which no proof is offered, was discred- 
 ited nearly four centuries ago. In 1522, the Diet of 
 Nuremberg appointed a committee to investigate 
 the evils said to be caused by the combination of 
 merchants into great companies. In explaining its 
 reasons for doubting the expediency of a restrictive 
 policy, the committee said: 
 
 It is impossible to limit the size of the companies, for 
 that would limit business and hurt the common welfare. 
 The bigger and more numerous they are, the better for 
 everybody. If a merchant cannot do business above 
 a certain amount, what is he to do with his surplus 
 
RAILROAD COMBINATIONS 271 
 
 money? Some people talk of limiting the earning ca- 
 pacity of investments. This would be unbearable and 
 would work great injustice and harm by taking away 
 the livelihood of widows, orphans, and other sufferers 
 who derive their income from investments in these com- 
 panies. . . . Hence any one can see that the idea that 
 the companies undermine the public welfare ought not 
 to be seriously considered. 
 
 This ancient record of one of the earliest investiga- 
 tions of trusts might well be thoughtfully considered 
 by Congressmen who sought to restrain railroad 
 combinations because they were "a menace to the 
 public welfare," and by Interstate Commerce Com- 
 missioners who limited the earning capacity of trans- 
 portation companies and thus "took away the liveli- 
 hood of widows, orphans, and other sufferers" who 
 were dependent upon investments for support. We 
 are supposed to have learned something in the course 
 of four hundred years — but have we? The Diet of 
 Nuremberg, in 1522, seems to have had a clearer 
 comprehension of economic law than had the Con- 
 gress that passed the Anti-Trust Bill and the courts 
 that afterward interpreted it. 
 
 Let us see now to what extent the combination of 
 the Union Pacific with the Southern Pacific benefited 
 the latter, and what the effect of the merger was upon 
 the public welfare. When Mr. Harriman bought the 
 Southern Pacific and began the reconstruction of it, 
 his ultimate object was to transport over it more 
 
272 E. H. HARRIMAN 
 
 freight and more passengers at a relatively reduced 
 cost. He saw, as his famous rival James J. Hill saw, 
 that the greatest possible economy in railway opera- 
 tion was to be effected by carrying a greater volume of 
 traffic with fewer trains, or, to speak more accurately 
 with a decrease in the aggregate mileage of trains 
 run. If he could increase the tonnage carried by, say, 
 twenty per cent, while, at the same time, he reduced 
 the number of miles run by, say, ten per cent, he 
 would make an immense saving in fuel, wages, and 
 the cost of operation generally. The only way in 
 which this could be accomplished was by using larger 
 cars and more powerful locomotives. But in order to 
 run economically this heavier equipment, he would 
 have to have a better track — a track with stronger 
 rails and bridges, fewer curves, and more moderate 
 grades. It was for this reason that he rebuilt nearly 
 four hundred miles of the Southern Pacific line; 
 spent $20,000,000 for track improvement in only 
 three places, and substituted permanent structures 
 of earth, concrete, or metal for about thirty miles of 
 wooden bridges and trestles. He wanted a track on 
 which he could use safely and economically powerful 
 locomotives and cars of large capacity. He therefore 
 put nearly $53,000,000 into track betterments alone. 
 As soon as he had made the track fit for heavy equip- 
 ment, he spent more than $30,000,000 for new roll- 
 
RAILROAD COMBINATIONS 273 
 
 ing stock, including 540 locomotives and 8869 
 freight cars. The increase in traffic, from year to 
 year, which accompanied this increase of facilities is 
 shown in the following table: 
 
 
 
 
 
 Tons carried 
 
 Frt. train 
 
 Tons of 
 freight 
 per train 
 including 
 5£ mixed 
 
 Years 
 
 Average 
 
 Tons 
 
 Tons carried 
 
 1 mile per 
 
 mileage 
 
 miles 
 
 carried 
 
 1 mile 
 
 mile of road 
 
 including 
 
 
 operated 
 
 allfrt. 
 
 ellfrt. 
 
 ollfrt. 
 
 % mixed 
 
 1901 
 
 8,774-37 
 
 I7,725,63a 
 
 5,694,770,640 
 
 653,802 
 
 18,650,784 
 
 305.34 
 
 1902 
 
 8,809.21 
 
 20,260,573 
 
 6,059,873,410 
 
 691,965 
 
 18,997,981 
 
 318.97 
 
 1903 
 
 8,933-43 
 
 22,230,367 
 
 6,308,502,359 
 
 711,099 
 
 19,344,658 
 
 326.11 
 
 1904 
 
 9,135-49 
 
 23,684,348 
 
 6,562,648,418 
 
 727,196 
 
 19,823,619 
 
 331.05 
 
 1905 
 
 9,142.01 
 
 24,464,827 
 
 6,561,349,589 
 
 718,041 
 
 18,886,016 
 
 347.4a 
 
 1906 
 
 9,216.83 
 
 27,589,004 
 
 7,236,786,873 
 
 784,590 
 
 18,468,406 
 20,677,172 
 
 391-85 
 
 1907 
 
 9,451.27 
 
 30,810,518 
 
 8,011,974,964 
 
 849,420 
 
 387-48 
 
 1908 
 
 9,591.82 
 
 28,998,913 
 
 7,845.002,515 
 
 824,251 
 
 18,988,586 
 
 413.14 
 
 1909 
 
 9,734-03 
 
 28,122,443 
 
 7,213,993,420 
 
 749,394 
 
 15,261,631 
 
 472.69 
 
 From the above table it appears that the Southern 
 Pacific carried, in 1909, 10,000,000 more tons of 
 freight than it carried in 1901, but with a reduction 
 of 3,400,000 in the number of freight-train miles run. 
 This was made possible by increasing the capacity of 
 the average freight car from 26 tons to 37 tons, and 
 the average train-load from 305 tons to 472 tons. 
 
 In the passenger traffic there was a similar increase 
 without a proportionate increase in the passenger- 
 train mileage. Between 1901 and 1909 the number of 
 passengers carried one mile increased 65 per cent, 
 while the increase in passenger-train miles run was 
 only 43 per cent. The relative economy in the opera- 
 tion of passenger trains was not so great as in that of 
 freight trains, for the reason that in the former it was 
 
274 E. H. HARRIMAN 
 
 not possible to increase the car and train capacity so 
 much. Nevertheless, 606,000,000 more passengers 
 were carried one mile in 1909 than in 1901, with an 
 addition of only 5,800,000 to the passenger- train 
 mileage. 
 
 Great economy was also effected by pooling the 
 whole equipment of the Union and Southern Pacific 
 systems. The Southern Pacific, prior to its consoli- 
 dation with the Union Pacific, was composed of a 
 number of organizations and subsidiary companies, 
 many of which had their own managing officers, and 
 were operated, in some respects, independently of 
 one another. This prevented the effective and eco- 
 nomical distribution of rolling stock over a large area, 
 and resulted in the returning of many cars empty to 
 the places where they had been loaded. The traffic 
 demand for freight cars varies greatly in different 
 places and at different seasons of the year, and the 
 utmost possible economy in operation can be se- 
 cured only by redistributing rolling stock, from time 
 to time, in such a way as to place cars where, at the 
 moment, they happen to be most needed, thus keep- 
 ing them constantly employed. It costs almost as 
 much to haul an empty car as one that is loaded, and 
 the great advantage that a combination has over a 
 number of unrelated or loosely connected roads is 
 that it can distribute cars more widely, in accord- 
 
RAILROAD COMBINATIONS 275 
 
 ance with varying needs, and thus avoid the un- 
 necessary hauling of empties on return trips. 
 
 One of the first things that Mr. Harriman did, 
 after he acquired control of the Southern Pacific, 
 was to appoint J. C. Stubbs as director of traffic for 
 both Pacific Systems. 1 Then, when the work of 
 reconstruction in charge of Mr. Kruttschnitt had 
 been largely completed, he appointed him director of 
 maintenance and operation for all the Harriman 
 lines, and authorized him to work out as perfect a 
 system as possible of pooling equipment and unify- 
 ing traffic on both of the great Pacific Systems. The 
 results more than justified his anticipations. 
 
 On June 1, 1904 [says Mr. Kruttschnitt], we com- 
 menced pooling freight equipment on all the lines of the 
 Union Pacific System and the Southern Pacific Com- 
 pany. The object of this was to increase efficiency and 
 reduce unnecessary haul by permitting the cars of all 
 the roads to be used as though they were of one owner- 
 ship. It had previously been the practice, and is still 
 the practice for roads of different ownership, to return 
 cars to their owners empty when they cannot be 
 promptly reloaded, in order to escape rental payments 
 on them. In the next two years after we inaugurated the 
 system of pooling equipment, we so reduced our empty- 
 car haul that, in the two years, we saved the running of 
 
 • * Mr. Stubbs had been in the freight-department service of the 
 Southern Pacific Company for nearly thirty years, and was generally 
 regarded as one of the ablest traffic experts in the United States. At 
 the time of the consolidation he was third vice-president and traffic 
 manager. 
 
276 E. H. HARRIMAN 
 
 53i2i3,79i car-miles unnecessarily, which would be 
 equivalent to operating one average freight train a dis- 
 tance of 1,400,900 miles. 1 
 
 It can readily be seen that this saving in the num- 
 ber of car-miles run greatly reduced operating ex- 
 penses, while, at the same time, the pooling of equip- 
 ment accommodated shippers by devoting to then- 
 use on one road, or system, the cars which, at that 
 particular time, were not needed on another. It 
 was like giving to a military commander on a wide 
 front the resources and motor-trucks of two or three 
 army corps instead of one. 
 
 The consolidation of the Union and Southern 
 Pacific systems enabled Mr. Harriman to make 
 another improvement, which, from the point of view 
 of economy, was almost as important as the pooling 
 of rolling-stock, and that was the standardization of 
 equipment generally. Under his administration, all 
 material things used in the operation of a railroad, 
 from locomotives and cars to rails, frogs, switches, 
 wrenches, nuts, bolts, oil-boxes, and journal-bearings 
 were, as far as possible, standardized and made uni- 
 form. On the lines of the separate companies that 
 made up the two systems there were originally nearly 
 fifty patterns of frogs; they were reduced to four. 
 There were nearly a hundred different kinds of jour- 
 
 1 Unpublished letter of Julius Kruttschnitt, director of main- 
 tenance and operation of the Harriman lines. 
 
RAILROAD COMBINATIONS 277 
 
 nal-bearings; they also were reduced to four. This 
 policy of standardization, which would not have 
 been possible without unified control, not only re- 
 duced cost by enabling the allied companies to pur- 
 chase such supplies in immense quantities, but ef- 
 fected a great saving in time in the making of repairs. 
 If, before the merger, a Union Pacific car lost the 
 use of an oil-box at San Francisco, it might be neces- 
 sary to send to Ogden, or Omaha, for a new one. If a 
 Southern Pacific car broke down at Butte, Montana, 
 the part needed for repair might have to be brought 
 from Sacramento, or from some Southern Pacific 
 center a thousand miles away. Combination and 
 standardization made it possible to get almost any 
 needed part of equipment at almost any place from 
 Ogden to San Francisco and from New Orleans to 
 Portland. 
 
 Sometimes Mr. Harriman was disposed to carry 
 this policy of standardization too far, as in one case 
 where he proposed that classes of locomotives on the 
 two systems be made uniform. When, however, his 
 director of operation showed him that this was im- 
 practicable, and that it would result in a decrease of 
 efficiency on certain parts of the lines where engines 
 of an exceptional type were needed, he yielded to 
 Mr. Kruttschnitt's better judgment. 
 
 On the other hand, he often suggested improve- 
 
278 E. H. HARRIMAN 
 
 ments or economies that the most experienced of his 
 assistants had never thought of. 
 
 One day [says Mr. Kruttschnitt] I was walking with 
 Mr. Harriman on the road. He noticed a track bolt and 
 asked me why so much of the bolt should protrude be- 
 yond the nut. I replied, " It is the size which is generally 
 used." He said, "Why should we use a bolt of such a 
 length that a part of it is useless? " I replied, "Well, when 
 you come right down to it, there is no reason." We 
 walked along and he asked me how many track bolts 
 there were to a mile of track, and I told him. Thereupon 
 he remarked, "Well, in the Union Pacific and Southern 
 Pacific we have about eighteen thousand miles of track 
 and there must be some fifty million track bolts in our 
 system. If you can cut an ounce off from every bolt, you 
 will save fifty million ounces of iron, and that is some- 
 thing worth while. Change your bolt standard." 
 
 A similar change was made, at Mr. Harriman's 
 suggestion, in the width of what is technically known 
 as the "shoulder of ballast"; that is, the width of 
 ballast between the ends of the ties and the begin- 
 ning of the downward slope to the level of the ter- 
 rain. The elimination of a few inches of superfluous 
 "shoulder" would not lessen much the cost of bal- 
 lasting a mile or two of track; but even this small 
 saving, multiplied by thousands of miles, would 
 amount, as Mr. Harriman said in the case of the 
 track bolt, to "something worth while." 
 
 The increase in carrying capacity made possible 
 by Mr. Harriman's betterments, and the economies 
 
RAILROAD COMBINATIONS 279 
 
 that resulted directly from the consolidation of the 
 two systems, were reflected, of course, in the earn- 
 ings of the Southern Pacific Company. In 1901, 
 when the combination was made, the gross operating 
 revenue of the road was about $78,000,000. In the 
 next six years it increased to $126,000,000. During 
 the same period the net surplus, after paying all 
 operating expenses and putting vast sums into re- 
 construction and improvements, grew from $10,000,- 
 000 to $24,000,000. Up to 1901, the company had 
 never paid a dividend. In 1907, it paid $2,769,000 in 
 dividends on its preferred stock and had nearly 
 $25,000,000 left for the common, after having put 
 $30,000,000 of the year's earnings into maintenance 
 of way and equipment. 
 
 These results, the captious critic may say, were 
 due to the natural growth and development of the 
 territory that the Southern Pacific served. This, of 
 course, is partly true; but if the transportation facili- 
 ties afforded by the road had not been immensely 
 increased, the growth and development of the coun- 
 try would have been greatly retarded. It would be 
 almost as true to say that the reconstructed railroad 
 caused the growth of the country as to say that the 
 growth of the country caused the prosperity of the 
 road. They reacted on each other, but the trans- 
 portation facilities, under the far-sighted manage- 
 
280 E. H. HARRIMAN 
 
 ment of Harriman, Kruttschnitt, and Stubbs, were 
 always ahead of the territorial development. In his 
 testimony before the Interstate Commerce Com- 
 mission in 1907, Mr. Harriman himself said, " If we 
 had not had the power to buy the Southern Pacific 
 with the credit of the Union Pacific, the territory 
 tributary to the Southern Pacific would have been 
 ten years behind what it is now." x 
 
 One of the most important advantages of railroad 
 combination is, undoubtedly, the physical improve- 
 ment of weak or financially embarrassed roads as 
 the result of incorporation in richer or more powerful 
 systems. When a strong railroad, with large earning 
 power and high credit, combines with a weaker or 
 poorer competitor, it enables the latter to serve the 
 public far better than it ever could alone. A weak 
 road generally has difficulty in getting money for 
 improvements, and it always has to pay high rates 
 for its borrowed capital. At the minimum price fixed 
 by a State commission it may not be able to sell a 
 single share of its stock, in which case it must borrow 
 on bond and mortgage, or on short-term notes, and 
 thus increase fixed charges which may already be 
 dangerously great. All railroad managers are reluc- 
 tant to do this, because it lessens financial strength; 
 so they avoid it as long as possible by cutting down 
 
 1 Testimony in the investigation by the Interstate Commerce Com- 
 mission of "Consolidation and Combination of Carriers," p. 163. 
 
RAILROAD COMBINATIONS 281 
 
 expenditures for maintenance and betterments, thus 
 impairing the road's efficiency and usefulness. Scores 
 of railroads have deteriorated physically because 
 they have been forced to economize in this way, and 
 many more have been thrown into the hands of re- 
 ceivers as the result of trying to carry a large floating 
 debt, or of increasing their bonds out of all propor- 
 tion to their stock. Combination with a rich and 
 powerful road immediately changes this state of af- 
 fairs. The stronger company lends its money or its 
 credit to the weaker and thus enables the latter to 
 improve its track and increase its equipment without 
 running the risk of financial insolvency. 
 
 This was what Mr. Harriman did for the Southern 
 Pacific. That road never would have been able to 
 spend $242,000,000 for additions and betterments in 
 eight years, if, by its merger with the Union Pacific, 
 it had not secured the benefit of the latter's credit 
 and Mr. Harriman's incomparable management. 
 Its improved service and increased public usefulness, 
 therefore, were the direct result of what the United 
 States Supreme Court afterward called an illegal 
 "combination in restraint of trade." Such results 
 have almost always followed the combination of a 
 strong road with a weaker rival, and its beneficial ef- 
 fect, so far as the public welfare is concerned, hardly 
 needs to be pointed out. 
 
282 E. H. HARRIMAN 
 
 Mr. Harriman would have acquired and greatly 
 improved other railroad properties in the West and 
 Southwest if he had not been prevented from doing 
 so by prohibitory State or Federal legislation. In his 
 testimony before the Congressional Joint Committee 
 on Interstate Commerce in March, 19^7, R- S. Lov- 
 ett, formerly counsel for the Union and Southern Pa- 
 cific Companies, said: 
 
 During the life of Mr. Harriman, he planned to build 
 a low-grade line connecting with the Union Pacific at 
 Kansas City, thence to the boundary of Texas at Deni- 
 son, there connecting with the Houston & Texas Cen- 
 tral Line, controlled by the Southern Pacific, and prac- 
 tically to rebuild that line from Denison to Houston and 
 Galveston, in order to establish a low-grade line from 
 Kansas City to the Gulf. As counsel, I was obliged to 
 advise him that, under the Texas law and the ruling of 
 its railroad commission, not a dollar in bonds could be 
 issued for the money required in the reconstruction of 
 the Houston & Texas Central; and even if stock could 
 be issued at one hundred cents on the dollar for the 
 money thus expended, as a practical matter it could not 
 be sold, since stock ownership was the only way by 
 which the Houston & Texas Central could continue as 
 part of the Southern Pacific System, a lease or sale of 
 the railroad itself to the Southern Pacific Company, or 
 any foreign corporation, being forbidden by the laws of 
 Texas. The result was that a great project for improv- 
 ing the facilities for interstate and international com- 
 merce had to be abandoned, and the choppy grades of 
 the Houston & Texas Central continue as they always 
 have been, and probably always will be as long as the 
 Texas law remains unchanged. 1 
 
 1 Railway Age Gazette, March 23, 1917. 
 
RAILROAD COMBINATIONS 283 
 
 A new line from Kansas City to the Gulf would 
 not have been injurious to the public welfare; on the 
 contrary, it would have been highly beneficial to all 
 concerned ; and yet, construction of it was prevented 
 by the votes of short-sighted legislators who feared 
 that railroad combinations would promote the inter- 
 ests of stockholders rather than the interests of the 
 people. In the railroad field, as in other fields of in- 
 dustrial enterprise, combinations made for the pur- 
 pose of rendering better service, or furnishing more 
 commodities at lower cost, are as useful as they are 
 practically inevitable. Mr. Harriman, who perhaps 
 more than any other single man personified the idea 
 of combination and centralized control in the rail- 
 road field, said, in his address at the opening of the 
 Louisiana Purchase Exposition: 
 
 Within the present generation vast improvements 
 have been made in railway transportation. It was im- 
 possible to supply the needs of commerce by the rail- 
 ways originally constructed and operated. It became 
 necessary not only to reconstruct and reequip these 
 lines, but to bring them under uniform methods and 
 management, which was possible only by the combina- 
 tion and unification of the original short lines of railway 
 into systems, each under one management or control. 
 The combination of different railroads should be regu- 
 lated by law. So far as may be necessary, the public in- 
 terest should be protected by law; but in so far as the 
 law obstructs such combinations, without public bene- 
 fit, it is unwise and prejudicial to the public interest. 
 
284 E. H. HARRIMAN 
 
 Another great master in the art of railroading, Mr. 
 James J. Hill, has approved railroad combinations in 
 language equally clear and emphatic. In his "High- 
 ways of Progress" he said: 
 
 The tendency toward combination is simply a part of 
 that coSperation in the production, the distribution, 
 and the exchange of wealth with which everybody has 
 been familiar for centuries. When the pioneers in this 
 country united to help build one another's houses, when 
 they had a barn-raising, it was combination. When the 
 owners of land, or implements, or capital in any other 
 form, entered into partnership with labor to produce 
 more wealth, it was combination. When the corpora- 
 tion came into existence, through which many small 
 amounts of capital could be massed, it marked an era, 
 just as much as when two men first lifted by their united 
 strength some stone or tree-trunk too heavy for them 
 singly. Exactly as society and the work of the commun- 
 ity have become more complex, so have the means by 
 which material ends are achieved grown larger and more 
 powerful. The union of numerous weak and discon- 
 nected railroads in one orderly and efficient system is 
 part of the natural and inevitable evolution of united 
 action among men. Every legitimate railroad combina- 
 tion is intended to produce, and does produce, better 
 service and lower rates on the side of the public, and 
 either larger or more certain profits, or both, on the side 
 of the stockholder. 1 
 
 These economically sound statements of Harriman 
 
 and Hill were supported and confirmed by the whole 
 
 history of the Union Pacific-Southern Pacific lines. 
 
 1 Highways of Progress, by James J. Hill (New York, 1912), pp. 
 1 14-15. 
 
RAILROAD COMBINATIONS 285 
 
 The combination policy, it is true, was ultimately 
 condemned by the Interstate Commerce Commis- 
 sion of 1907; but long before Mr. Harriman adopted 
 it with such brilliant success, it had been distinctly 
 approved by the Interstate Commerce Commission 
 of 1887. Fourteen years prior to the amalgamation 
 of the Union Pacific and Southern Pacific systems, 
 Thomas M. Cooley, who was perhaps the ablest and 
 most far-sighted chairman that the Commission ever 
 had, said, in the Omaha Board of Trade case: 
 
 The more completely the whole railway system of the 
 country can be created as a unit, as if it were all under 
 one management, the greater will be the benefit of its 
 service to the public, and the less the liability to unfair 
 exactions. 
 
 Although Judge Cooley may have seen the ad- 
 vantages of combination as clearly as Mr. Harriman 
 or Mr. Hill did, he could hardly have foreseen that, 
 thirty years later, the Government itself would do 
 what it had forbidden Mr. Harriman to do, and for 
 precisely the reason that Mr. Harriman assigned, 
 namely, to secure greater efficiency. 
 
CHAPTER XI 
 CONTROL OF THE BURLINGTON 
 
 THE struggle for control of the Chicago, Bur- 
 lington & Quincy Railroad, which began soon 
 after the acquirement of the Southern Pacific by the 
 Union Pacific in 1901, was one of the most striking 
 and spectacular incidents in Mr. Harriman's career. 
 Possession, or control of the Burlington was desired 
 by two powerful and far-sighted managers, each of 
 whom was striving to strengthen his position, or 
 increase his business, in the great transportation 
 field lying west of the Missouri River. This field was 
 partly occupied at that time by four important rail- 
 road systems, namely, the Great Northern, the 
 Northern Pacific, the Union Pacific, and the Chicago, 
 Burlington & Quincy. The first two of these sys- 
 tems, which were dominated by James J. Hill and 
 J. P. Morgan, extended from Lake Superior and the 
 Mississippi River to the Pacific Coast; but neither of 
 them had an outlet of its own in Chicago. The Bur- 
 lington had its eastern terminus in Chicago, but it 
 did not extend westward beyond Denver. Between 
 that city and the Missouri River, however, it closely 
 paralleled the Union Pacific, and its great network 
 
CONTROL OF THE BURLINGTON 287 
 
 of branches and feeders in Kansas, Nebraska, and 
 Colorado gathered up or distributed large quantities 
 of freight originating in, or destined for, Union Pa- 
 cific territory. 
 
 Such being the situation, it was almost inevitable 
 that Hill and Harriman should both seek to get pos- 
 session of the Burlington system. Hill and Morgan 
 wanted it because it would give their roads an en- 
 trance into Chicago, while Harriman wanted it, 
 partly because it was a competitor for business in 
 Union Pacific territory, and partly because it might 
 at any time extend its main line from Denver to the 
 Pacific Coast and thus become a rival of the Union 
 Pacific in transcontinental as well as local traffic. 
 
 The Burlington, at that time, was 
 
 one of the best constructed, best managed, and most 
 profitably operated systems in the West. ... It had its 
 own line from Chicago to St. Paul, well built, well han- 
 dled, and with good terminal facilities and connections. 
 It had a network of lines in northern Illinois; reached 
 Peoria and Quincy, and ran thence to St. Louis. It 
 covered southern Iowa and northern Missouri from 
 Burlington to Omaha, and from Omaha to St. Joseph, 
 St. Louis, and Kansas City. Its lines stretched across 
 southern Nebraska, with termini at Denver and Chey- 
 enne. Northwest, it had a line straight up to and 
 through the Black Hills to Billings in Montana. . . . 
 The total length of lines operated by it in 1901, exclu- 
 sive of systems leased or otherwise controlled, was 79 n 
 miles. 
 
288 E. H. HARRIMAN 
 
 It had been organized under another name as early as 
 1849. It absorbed one line after another and built 
 steadily, growing rich and powerful because it ran 
 through one of the best traffic countries in the West. 
 Tributary to it were the fertile lands of Illinois, Iowa, 
 and Nebraska, the coal mines of Illinois and Iowa, the 
 river valleys of the Mississippi and its tributaries, and 
 the mining industries of Colorado and the Black Hills. 
 During its existence it had paid out, up to 1901, cash 
 dividends of more than $127,000,000, besides $6,700,000 
 in stock distributed 1 
 
 Its capital stock was approximately $110,500,- 
 000, and it had a funded debt of a little more than 
 $145,000,000. 
 
 To purchase such a road as this, or even to acquire 
 stock control of it, would obviously require a large 
 amount of capital — a greater amount than Mr. 
 Hill at that time could secure. He discussed the 
 matter with friendly financiers in London as early as 
 1897, but they thought it too big an enterprise for 
 the Great Northern alone to undertake. The North- 
 ern Pacific, of course, was equally interested, because 
 it too needed an outlet in Chicago; but the Northern 
 Pacific was not then financially strong enough to par- 
 ticipate. It had gone into the hands of a receiver in 
 the panic of 1893 and was not reorganized until 1896. 
 J. Pierpont Morgan and the Deutsche Bank then took 
 
 1 Life of James J. Hill, by J. G. Pyle (New York, 1917), vol. 11, pp. 
 1 14-15. 
 
CONTROL OF THE BURLINGTON 289 
 
 its affairs in hand, set the company on its feet, and 
 allowed Mr. Hill, in behalf of the Great Northern, 
 to buy about $16,000,000 of its reorganization stock. 
 Subsequently the Great Northern added largely to 
 its holdings, and before 1900 the two roads were 
 practically being operated as a single system, under 
 Mr. Hill's management, and were known as the 
 "Hill Lines." Both roads were then prospering, and 
 when, in 1901, Mr. Hill renewed his effort to get 
 control of the Burlington, he had the support of both 
 companies and the powerful backing of J. P. Morgan 
 and his associates. 
 
 Meanwhile, however, Mr. Harriman was not blind 
 to the consequences that might follow a consolida- 
 tion of the Great Northern, Northern Pacific, and 
 Burlington systems under the skillful and far-sighted 
 management of his rival in St. Paul. Such a com- 
 bination was sure to be injurious to the interests of 
 the Union Pacific, and might even affect them dis- 
 astrously. 
 
 Late in 1899, therefore, Mr. Harriman and Mr. 
 Schiff had conferences with the president and some 
 of the leading directors of the Burlington Company 
 for the purpose of ascertaining whether the pur- 
 chase of the road would be possible. The negoti- 
 ations, however, came to nothing, either because 
 the managers of the Burlington were disinclined to 
 
290 E. H. HARRIMAN 
 
 sell, or because Harriman and Schiff did not offer 
 enough. 1 
 
 In the spring of 1900, after the failure of these 
 negotiations, Mr. Harriman called a conference of 
 some of the most powerful friends of the Union Pa- 
 cific, for the purpose of considering the situation and 
 discussing the best means of preventing the Morgan 
 and Hill interests from buying or controlling the 
 Burlington system. There were present at that con- 
 ference E. H. Harriman, Jacob H. Schiff (senior 
 partner in the firm of Kuhn, Loeb & Co.), James 
 Stillman (president of the National City Bank), and 
 George J. Gould. Mr. Harriman pointed out the 
 danger involved in the possible acquirement of the 
 Burlington system by Morgan and Hill, and sug- 
 gested that it be averted, or at least minimized, by 
 the formation of a stock pool to purchase a large 
 enough block of Burlington shares to prevent any 
 hostile interest from acquiring control. As the stock 
 of the Burlington was very widely scattered, and 
 held in small lots of sixty or seventy shares each by 
 fifteen thousand permanent investors, it was not at 
 all certain that enough of it could be obtained in 
 
 1 Mr. Hill's biographer says that Mr. Harriman "made an offer, 
 but it was too low to be taken into serious consideration. Then, be- 
 lieving he could make terms satisfactory to himself later, he went back 
 to New York." (Pyle's Life of James J. Hill, vol. n, p. 121.) Mr. 
 Schiff, however, could not remember that any definite offer was made. 
 
CONTROL OF THE BURLINGTON 291 
 
 the open market to give the Union Pacific a substan- 
 tial hold on the company; but the experiment seemed 
 to be worth trying. It was decided, therefore, to 
 form the pool and secure as much Burlington stock 
 as could be had up to 200,000 shares. 
 
 Kuhn, Loeb & Co. began purchasing for the syn- 
 dicate in May, and by the 6th of June had accumu- 
 lated 69,800 shares. The market supply at current 
 prices then seemed to run short and in the next six 
 weeks the syndicate was able to add only 10,000 
 shares to its holdings. By that time it had become 
 apparent that to get enough of the stock to establish 
 even partial control of the company would be dif- 
 ficult, if not wholly impracticable; and on the 25th of 
 July the syndicate suspended operations, after hav-^j 
 ing acquired 80,300 Burlington shares at a cost of 1 
 approximately $10,000,000. In speaking of this epi- J 
 sode, a year or two later, Mr. Hill said that when 
 the Union Pacific interests tried to get control of the 
 Burlington by stock purchases, they "found them- 
 selves up against a stone wall consisting of the great 
 body of small shareholders" (fifteen thousand, or 
 more, who did not wish to sell their holdings). 1 
 
 Throughout August and September Burlington 
 stock remained inactive; but in October the demand 
 for it began to increase, as the result, apparently, of 
 
 1 Pyle's Life of James J. Hill, vol. n, p. 139. 
 
292 E. H. HARRIMAN 
 
 bids made by speculators, or friends of the Hill Lines, 
 who based their calculations on reports that the 
 Great Northern and Northern Pacific intended to 
 buy the Burlington road. From that time the price 
 of Burlington shares steadily increased until, in De- 
 cember, it reached 140. 1 
 
 The scanty market supply of the stock and the 
 increasing demand for it apparently convinced the 
 members of the Harriman syndicate that they could 
 not get enough of it to answer their purpose; so about 
 the 1st of November they decided to sell their shares, 
 take the profit they had made, and liquidate the 
 pool. Kuhn, Loeb & Co. began selling on the 7th of 
 November, and between that time and the 21st of 
 December sold 60,300 shares at prices ranging from 
 130 to 140I . The 20,000 shares that remained were 
 then divided among the members of the syndicate, 
 each taking 5000 shares. 
 
 The next steps in the contest for possession of the 
 Burlington were taken by Morgan and Hill. In tes- 
 tifying as a witness in the Northern Securities case, 
 two or three years later, Mr. Morgan said: 
 
 1 Mr Hill always contended that he never tried to buy stock con- 
 trol of the Burlington and that the purchases which raised the price of 
 the shares from 130 to 1405 in the fall and winter of 1900 were neither 
 made nor inspired by him. This is doubtless true, because if he con- 
 templated buying the road outright from its directors and stock- 
 holders he would not run up the value of its shares by bidding for 
 them in the open market. That would only encourage the owners of 
 the property to demand a higher price for it. 
 
CONTROL OF THE BURLINGTON 293 
 
 I made up my mind that it was essential that the 
 Northern Pacific Railway should have its terminus 
 practically in Chicago. I talked it over with a great 
 many people interested in the Northern Pacific, and I 
 found that all agreed with me, and the question came 
 up as to how it could best be done. I came to the con- 
 clusion that there were but three lines available, the St. 
 Paul, the Chicago, Burlington & Quincy, and the Wis- 
 consin Central. I made up my mind that I would rather 
 have the St. Paul. Soon after that I met Mr. Hill and I 
 said: " Mr. Hill, I think the best thing we could do — 
 I think your line perhaps is in the same condition — 
 I think we had better go to work and secure the St. Paul 
 road, or a road to Chicago, and if you will share with us 
 we will do it together." He said: "All right; who would 
 take it up? " I said : " I will. I think we had better take 
 the St. Paul." He said he thought we had better take 
 the Burlington. I said I would rather have the St. Paul, 
 because the financial responsibility would be less. He 
 did not agree with me, but he acquiesced in my decision, 
 and I took it up with the directors of the road. They re- 
 fused to sell the road on any terms — they would not 
 even name terms — so I went to Mr. Hill and told him ; 
 "You can go ahead and see what you can do with the 
 Burlington." 1 
 
 Inasmuch as Mr. Morgan's main object was to get 
 an entrance into Chicago for the Northern Pacific — 
 the road in which he was most interested — he 
 would have been quite satisfied with the acquisition 
 of the Chicago, Milwaukee & St. Paul. But Mr. Hill 
 had other aims. He, too, needed a Chicago terminus, 
 but he needed still more some means of independent 
 1 J. Pierpont Morgan's testimony in the Northern Securities case. 
 
294 E. H. HARRIMAN 
 
 access to the prairie States of Kansas and Nebraska 
 where he could market his lumber, and to the great 
 distributing centers of Omaha, St. Joseph, St. Louis, 
 and Kansas City where he could get cotton and 
 provisions for transportation to the Pacific States, 
 Alaska, and the Orient. The St. Paul line would not 
 give him access to any of these places, while the 
 Burlington would open them all to him. In a letter 
 written a little later to his friend and associate, Lord 
 Mount Stephen, he said: 
 
 The best traffic of the Great Northern and Northern 
 Pacific is cotton and provisions west- and lumber and 
 timber east-bound. The San Francisco lines run through 
 the cotton country, from New Orleans through Texas 
 and Arkansas. The great provision centers are Kansas 
 City, St. Joseph, Omaha, Chicago, and St. Louis, none of 
 which are reached directly by the Great Northern or 
 Northern Pacific. Both companies have to divide the 
 through rate with some other line to reach those impor- 
 tant points. Now as to lumber from the Coast, we have 
 to divide our rate with lines south to reach Chicago, Ill- 
 inois, St. Louis, Iowa, Nebraska, Kansas, etc. The Bur- 
 lington lets us into all these districts and commercial 
 centers, over better lines and with better terminals than 
 any other road. 1 
 
 In the early part of 1901, after having been author- 
 ized by Morgan to "go ahead and see what he could 
 do with the Burlington," Hill opened negotiations 
 with the president and directors of that road, with a 
 
 1 Pyle's Life of James J. Hill, vol. II, pp. 11^-20. 
 
CONTROL OF THE BURLINGTON 295 
 
 view to buying it outright for the joint use of the 
 Great Northern and Northern Pacific. Of these 
 negotiations Mr. Harriman seems to have been un- 
 aware. He was deeply absorbed at that time in the 
 gigantic task of rebuilding the Union Pacific and in 
 plans for the improvement of the Southern Pacific, 
 and it is quite possible that the acquisition of the 
 Burlington had temporarily dropped into the back 
 of his mind, as a matter either of secondary impor- 
 tance, or of no immediate urgency. Certain it is that 
 he did not attempt any active interference with the 
 Hill-Morgan plans, as he probably would have done 
 if they had been known to him. 
 ■ Mr. Hill afterward maintained that he began and 
 carried on his negotiations with the Burlington peo- 
 ple quite openly, so far, at least, as Union Pacific 
 interests were concerned. In a letter to a friend, 
 written on the 16th of May, 1901, Mr. Hill said: 
 
 To remove any ground for the charge that we were 
 working secretly to acquire the Chicago, Burlington & 
 Quincy I said to [a representative of the Union Pacific 
 interests] in January that if he at anytime heard that we 
 were conferring with the "Q" board of directors looking 
 to the joint acquisition of the property, I wanted to be 
 the first one to tell him that we intended to take the 
 matter up seriously. In April, after Mr. Morgan had 
 gone abroad and the Burlington matter was taking def- 
 inite shape, I again told him that matters were progress- 
 ing toward a close. ... I told him our plan was an open 
 
296 E. H. HARRIMAN 
 
 and fair attempt to agree with the "Q" board as the 
 only means of gaining control of the property. 1 
 
 If the unnamed person to whom Mr. Hill made 
 this statement was really a representative of Union 
 Pacific interests, he did not pass on the information 
 to the men who were actively in control of Union 
 Pacific affairs, namely, Harriman and Schiff. Nei- 
 ther of these gentlemen had any knowledge of the 
 Hill-Morgan negotiations until some time in March, 
 1 90 1. As soon as they became aware of the situation, 
 they asked Mr. Hill to meet them in conference at 
 the house of George F. Baker, a friend and associate 
 of Mr. Hill in New York. The interview, which was 
 brief, failed to establish any basis for agreement or 
 compromise. Harriman, in behalf of the Union Pa- 
 cific, asked to be given one-third interest in the pur- 
 chase of the Burlington and offered to furnish one 
 third of the purchase money. Hill declined even to 
 take this proposition into consideration. "Very 
 well," Harriman is reported to have said, "it is a 
 hostile act and you must take the consequences." 
 
 In a signed statement published nine months 
 
 later in the St. Paul "Globe," Mr. Hill explained in 
 
 the following words his refusal to allow the Union 
 
 Pacific to participate in the Burlington purchase: 
 
 About a year ago, the Union Pacific Company bought 
 
 1 Pyle's Life of James J. Hill, vol. n, pp. 138-39. 
 
CONTROL OF THE BURLINGTON 297 
 
 the Huntington and other interests in the Southern Pa- 
 cific, and at the same time made an effort to buy the con- 
 trol of the Chicago, Burlington & Quincy. With these 
 lines in the hands of the Union Pacific interests, the 
 Northern Pacific and Great Northern would be largely 
 shut out of the States of Nebraska, Kansas, Missouri, 
 South Dakota, Iowa, Illinois, and Wisconsin, except by 
 using other lines of railway, some of which were in the 
 market for sale and might at any time pass under the 
 control of, or be combined with, Union Pacific interests. 
 We, then, with the Northern Pacific, made proposals to 
 the directors of the Burlington to buy their entire prop- 
 erty. When this transaction was about being closed, the 
 people who represented the Union Pacific Company, 
 and who had previously tried to buy the Burlington, 
 asked to be allowed to share with us in the purchase of 
 that Company. This proposal we refused, for the reason 
 that it would defeat our purpose in buying the Burling- 
 ton, and, further, it was against the law of several of the 
 States in which the largest mileage of the Burlington 
 was located. 1 
 
 If Mr. Hill supposed that, by refusing to allow the 
 Union Pacific to participate in the purchase of the 
 Burlington, he could thwart the purposes of as reso- 
 lute and resourceful a man as Mr. Harriman, he 
 reckoned without his host. Absorbed in the affairs of 
 the two great Pacific systems which had so recently 
 come under his control, Harriman may have lost 
 sight temporarily of the Burlington danger; but 
 when it became imminent, he acted with character- 
 istic vigor, and met the unlooked-for move of his 
 1 St. Paul Globe, December 22, 1901. 
 
298 E. H. HARRIMAN 
 
 adversaries with a counter-move which, in the words 
 of Mr. Hill's biographer, was so "daring" in concep- 
 tion and so "swift and unsparing in execution" as to 
 "command admiration from friend and foe." 1 
 
 When Mr. Harriman discovered that the Burling- 
 ton had been captured and taken into the camp of 
 the enemy, he determined to make a sudden, sur- 
 prise attack on that camp itself. He had lost the 
 C, B. & Q.; but there was nothing to prevent him 
 from seizing the Northern Pacific by secretly buying 
 a majority of its capital stock. He would then con- 
 trol not only that company, but the half-interest 
 that it had just acquired in the Burlington. By this 
 move Morgan would be ousted and the joint owner- 
 ship of the disputed property would be vested in the 
 Great Northern and the Union Pacific, with the lat- 
 ter in the stronger if not the dominant position. As 
 Mr. Hill's biographer has justly said: 
 
 The boldness of this plan, so different now^fh Magni- 
 tude from the old days when Mr. Villard had realized it 
 — $78,000,000 to put up instead of $8,000,000 — allied 
 it to a work of genius. From those grim old lions [Mor- 
 gan and Hill] who guarded the way, the quarry was to be 
 snatched before they sensed the presence of an enemy. 
 The implications of the project were tremendous. Sup- 
 pose the Union Pacific gained control of the Northern 
 Pacific. At once the Great Northern would have to 
 make terms with its new owners, or bear the brunt of in- 
 
 1 Pyle's Life of James J. Hill, vol. it, p. 141. 
 
CONTROL OF THE BURLINGTON 299 
 
 cessant attacks along two thousand miles of battle 
 front. It would be shut into the narrow strip between 
 its line and the Canadian border. As the Union Pacific 
 would succeed also to a half-interest in the Burlington, 
 the situation there would be a permanent deadlock. 
 . . . There could be but one issue from a position so in- 
 tolerable. He [Mr. Hill] would have to make the best 
 terms he could. And the terms dictated by an interest 
 that would then reach from New Orleans and Galveston 
 to Winnipeg, and from San Francisco, Portland, and 
 Tacoma to Chicago, St. Paul, and Duluth, were not 
 likely to be tolerable. The victor could make them al- 
 most what he pleased. 1 
 
 Although an agreement between Mr. Hill and the 
 directors of the Burlington was virtually concluded in 
 March, 1901, the purchaseand sale were notformally 
 authorized until about a month later. On the 20th of 
 April, the directors of the Great Northern empow- 
 ered its president, with the cooperation and partici- 
 pation of the Northern Pacific Company, to buy the 
 whole, or not less than two thirds, of the Burlington 
 capital stock. The two companies thereupon bought 
 1,075,772 shares, or 96.79 per cent of the whole, and 
 in payment therefor issued their joint collateral trust 
 bonds and scrip to the amount of $215,154,000. The 
 price that they had to pay was high. The market 
 value of the shares was less than 180, but the Bur- 
 lington directors and stockholders would not sell for 
 less than 200, and that was the price paid. Mr. 
 1 Pyle's Life of James J. Hill, vol. 11, pp. 141-42. 
 
300 E. H. HARRIMAN 
 
 Hill, however, believed that he had made a good 
 bargain. 
 
 It is true [he said], we pay a great price for the prop- 
 erty. This could not be avoided. . . . The Burlington 
 road had a very heavy sinking fund. For many years 
 the miles of main track — something more than 8000 
 miles — had a bonded debt, less the sinking fund, of 
 $15,800 a mile, and its stock was about $13,000 a mile. 
 Take the Burlington stock at 200, and add to it the 
 bonded debt per mile of the road, and it would give the 
 average cost of the Burlington about $42,000 a mile, 
 which is about what it cost us; that is, $10,000 or $12,- 
 000 less a mile than any of these granger roads are sell- 
 ing at on the market. In other words, the Burlington 
 was the cheapest property altogether and reached the 
 points we desired to reach; and it would cost us less 
 money per mile than it would to have acquired any 
 other. 
 
 Satisfied that they had checkmated the Union 
 Pacific and made the Burlington safe, Mr. Morgan 
 sailed for Italy, while Mr. Hill went to the Pacific 
 Coast to look after his interests there. Harriman and 
 Schiff, in the meantime, were swiftly and secretly 
 carrying out their plan to get control of the Northern 
 Pacific by buying more than half its capital stock. 
 The first purchases seem to have been made by 
 Kuhn, Loeb & Co. for firm account; but on the 15th 
 of April they turned over to Mr. Harriman all that 
 they had accumulated — 150,000 shares of the com- 
 mon and 100,000 shares of the preferred — and 
 
CONTROL OF THE BURLINGTON 301 
 
 thenceforward bought steadily and aggressively for 
 account of the Union Pacific. When they began 
 buying, early in April, Northern Pacific shares were 
 selling at 102 for the common and 101 for the pre- 
 ferred; but under the influence of their purchases, 
 together with a large speculative demand from other 
 sources, quotations gradually advanced, on enor- 
 mous transactions, to 131 for the common and 109 
 for the preferred. 
 
 This speculation in Northern Pacific shares was 
 not regarded, at the time, as anything extraordinary. 
 Nobody suspected that the Union Pacific was ac- 
 cumulating the stock, and the general impression 
 seemed to be that it was being bought by brokers, or 
 by the general public, in anticipation of the enhanced 
 value that it would have as a result of the Burlington 
 purchase. Even the Northern Pacific people took 
 this view, and regarding such anticipations as too 
 sanguine, they sold their holdings, in order to take 
 advantage of what seemed to them absurdly high 
 prices. Mr. Hill himself did not take the possibility 
 of losing control of the Northern Pacific into serious 
 consideration. In speaking of it afterward he said: 
 
 As I remember it, one of our directors raised the ques- 
 tion that inasmuch as the purchase of the Burlington 
 stock, and the creation of a bond to pay for it, involved 
 the joint and several liability of the entire amount of the 
 purchase, it was a matter of consequence to the Great 
 
3oa E. H. HARRIMAN 
 
 Northern to know that the Northern Pacific would not 
 pass into the hands of people who might be interested in 
 other directions — in developing in other directions or 
 other sections of the country; and I remember I an- 
 swered that, with what my friends held at that time, 
 and what Morgan & Co. held, we would have some- 
 where in the neighborhood of 35 or 40 millions of the 
 stock out of a total of 155 millions, which is larger than 
 is usually held in any of the larger companies. I did not 
 think, at the time, that it was at all likely that anybody 
 would undertake to buy in the market the control of 155 
 millions of stock. 1 
 
 Hill's friends were as unaware of Mr. Harriman's 
 operations as Hill himself was, and in many cases 
 they played directly into their adversaries' hands by 
 selling their stock to brokers who were buying for 
 Kuhn, Loeb & Co. One large holder, for example, 
 sold to them 35,000 shares in a single lot. Even the 
 Northern Pacific Company, tempted by the high 
 prices, sold its own stock. As late as the 2d of May, 
 one of its subsidiary corporations, which happened 
 to have in its treasury 13,000 Northern Pacific shares, 
 sold them by direction of the Northern Pacific board 
 itself. So unsuspecting were Morgan & Co. that on 
 the same day they sold 10,000 shares which had hap- 
 pened to come into their hands in the ordinary course 
 of business. All of this stock, or most of it, went 
 directly to Kuhn, Loeb & Co., who were buying for 
 Harriman and the Union Pacific. 
 
 1 Pyle's Life of James J. Hill, vol. II, p. 144. 
 
CONTROL OF THE BURLINGTON 303 
 
 Toward the last of April, Mr. Hill finally took 
 alarm. He happened, just then, to be in Seattle, and 
 noticing in the market reports the enormous transac- 
 tions in Northern Pacific stock and the rapid ad- 
 vance in the quotations of both common and pre- 
 ferred, he felt a premonition of impending trouble. 
 He did not know what had happened, or what was 
 likely to happen; but inasmuch as his ally, Mr. Mor- 
 gan, was in Europe, he thought that he himself ought 
 to be in New York, where he could investigate the 
 exhibition of fireworks in Northern Pacific shares, 
 find out what caused it, and follow closely the course 
 of events. He therefore called upon the operating 
 officials of the Great Northern to give him at once 
 the fastest possible special train to St. Paul with 
 unlimited right of way over everything. The super- 
 intendent of the western division furnished the "spe- 
 cial" immediately and said to the locomotive en- 
 gineer: "The road is yours to St. Paul; everything 
 else on the line will be held up to let you pass." The 
 train pulled out of Seattle with a clear track ahead of 
 it and made the quickest run to the Mississippi 
 River that had ever been made up to that time. 
 
 Mr. Hill arrived in New York on the afternoon of 
 Friday, May 3d, and went at once to the office of 
 Kuhn, Loeb & Co. to see Mr. Schiff. 1 In reply to an 
 
 1 Hill and Schiff were old personal friends and the latter had been a 
 director in the Great Northern Company. 
 
304 E. H. HARRIMAN 
 
 inquiry as to the meaning of the rapid rise in North- 
 ern Pacific shares, Schiff informed Hill that Kuhn, 
 Loeb & Co. were buying them on orders from the 
 Union Pacific. "But," said Hill, "you can't get con- 
 trol. The Great Northern, Morgan, and my friends 
 were recently holding $35,000,000 or $40,000,000 
 of Northern Pacific stock, and so far as I know 
 none of it has been sold." "That may be," replied 
 Schiff, "but we've got a lot of it. You secretly 
 bought the Chicago, Burlington & Quincy and re- 
 fused to give us a fair share; now we're going to see 
 if we can't get a share by purchasing a controlling 
 interest in the Northern Pacific." 
 
 Hill, after a brief talk, left the office, saying that 
 he did not believe it could be done. He evidently 
 feared, however, that it might be done, because on 
 the following day, after making further investiga- 
 tions, he went to Robert Bacon, of the firm of Mor- 
 gan & Co., told him that the situation was critical, 
 and suggested that it might be well to cable J. Pier- 
 pont Morgan, who was then in Italy, for authority 
 to buy at least 150,000 shares of Northern Pacific 
 stock, preferably the common, which, for purposes of 
 control, was more valuable than the preferred. The 
 cablegram was sent to Morgan after the close of the 
 Stock Exchange, Saturday, May 4th. 
 
 But if Hill was anxious with regard to the out- 
 
CONTROL OF THE BURLINGTON 305 
 
 come of the contest, Harriman was hardly less so. 
 Kuhn, Loeb & Co. had advised him, Friday night, 
 that they had bought, for Union Pacific account, 
 about 370,000 shares of the common stock of the 
 Northern Pacific Company and about 420,000 shares 
 of the preferred, making a total of approximately 
 $79,000,000. This was a clear majority of the two 
 classes of stock taken together, but it lacked 30,000 
 or 40,000 shares of a majority in the common taken 
 separately. This deficiency in the common gave Mr. 
 Harriman a feeling of uneasiness, which he after- 
 ward expressed in the following words: 
 
 On the morning of Saturday, May 4th, I was at home, 
 ill. We had somewhat over $42,000,000 of the preferred 
 shares of the Northern Pacific, or a clear majority of 
 that issue, and somewhat over $37,000,000 of the com- 
 mon shares, which lacked being a majority of the com- 
 mon by about 40,000 shares. But we had a majority of 
 the entire capital stock, as represented by both the com- 
 mon and preferred shares, and I had been competently 
 advised, and was convinced, that this holding was suffi- 
 cient to enable us to control the Company. Neverthe- 
 less, the fact that the Northern Pacific could, on the 1st 
 of January following, retire the preferred shares, of 
 which we had a majority, bothered me somewhat, and I 
 felt that we ought not to leave open to them any chance 
 of retiring our preferred stock and leaving us with a 
 minority interest in the common stock, or involving us 
 in litigation about it. 
 
 Some of our friends, however, felt that our position 
 was secure enough, and that it wouldLbe foolish to go in 
 
306 E. H. HARRIMAN 
 
 and buy more Northern Pacific stock at the prices which 
 then prevailed. Nevertheless, I made up my mind that 
 we should have a majority of the common shares, and on 
 that morning I called up Heinsheimer (one of the part- 
 ners in the firm of Kuhn, Loeb & Co.) and gave him an 
 order to buy, at the market, 40,000 shares of Northern 
 Pacific common for my account. He said: "All right"; 
 and as dealings that day in Northern Pacific common 
 shares continued to be very heavy, I felt that, come 
 what might, I had control of Northern Pacific, common 
 stock and all. 
 
 On Monday, the 6th of May, Northern Pacific came 
 strong from London and opened with a burst of activity 
 in the Street; and having had no confirmation from 
 Kuhn, Loeb & Co. of the purchase of the 40,000 shares 
 of Northern Pacific which I had ordered on Saturday 
 morning, I called Heinsheimer up and asked him why I 
 had gotten no report of the execution of my order. He 
 told me that before giving out the order he had to reach 
 Schiff, who was at the synagogue. Schiff instructed him 
 not to execute the order and said that he (Schiff) would 
 be responsible- I then knew that matters were in a seri- 
 ous way and that the whole object of our work might be 
 lost. Meanwhile, the day (Monday) had become so ad- 
 vanced, and prices of Northern Pacific shares had gone 
 so high that I realized the impossibility of buying, in 
 such a market, 40,000 shares of stock. So I determined 
 to go down and see Schiff, find out what it was all about, 
 and fight the question out with what material I had in 
 hand. 1 
 
 SchifFs decision to ignore Harriman's order was 
 based on the belief — which is understood to have 
 been shared by James Stillman — that inasmuch as 
 
 1 As related by Mr. Harriman to G. W. Batson. 
 
CONTROL OF THE BURLINGTON 307 
 
 the Union Pacific had a clear majority of all the 
 shares of the Northern Pacific, taking common and 
 preferred together, it would be unnecessary and 
 wasteful to buy any more. But this proved to be a 
 tactical mistake. If Harriman had been well enough 
 to go downtown and see Schiff personally, his influ- 
 ence and his arguments might have overcome the 
 banker's reluctance to make further purchases; but 
 it must not be forgotten that the time available for 
 deliberation and action, on that critical Saturday 
 morning, was short. There were only a few hours in 
 which business could be transacted before the Stock 
 Exchange closed at noon; Schiff had neither time nor 
 opportunity to consult Harriman, and he was forced 
 to decide quickly on his own best judgment. But 
 the consequences were unfortunate. Before Harri- 
 man found out, on Monday, that his order to Kuhn, 
 Loeb & Co. had not been executed, the opportunity 
 to get a majority of the common stock had passed. 
 1 Some time in the course of Sunday, May 5th, Rob- 
 ert Bacon received a cablegram from J. P. Morgan 
 authorizing him to go ahead and buy 150,000 shares 
 of Northern Pacific common at the market. Im- 
 mediately the Hill-Morgan forces took the field. 
 With the reopening of the Stock Exchange, Monday 
 morning, their brokers swarmed over the floor, bid- 
 ding eagerly for Northern Pacific common, and tak- 
 
308 E. H. HARRIMAN 
 
 ing all that could be had at prices that advanced 
 steadily from no to 130. Tuesday they continued 
 this aggressive buying, and ran the price of the 
 common up to 149I — an advance of nearly forty 
 points in two business days. 1 But they attained their 
 object. Before Tuesday night they were in posses- 
 sion of the 150,000 shares that Morgan had author- 
 ized them to buy. With this addition to their hold- 
 ings, the Morgan-Hill interests had something like 
 30,000 shares more of the common than they needed; 
 but they had only a minority in the preferred, and 
 lacked also a majority in the common and preferred 
 taken together. Of the whole capital stock of the 
 Northern Pacific Company, Harriman and the Un- 
 ion Pacific owned 781,080 shares, or about 6000 more 
 than one half. As both classes of stock had equal 
 voting rights, this would enable Harriman to choose 
 a majority of the board of directors at the next elec- 
 tion; but whether it would give him power enough to 
 prevent the retirement of the preferred shares, in 
 which he had preponderating strength, was an un- 
 settled question. So far as control of the common 
 was concerned, he had lost the fight. 
 
 Hill's biographer attributes this partial defeat of 
 the Union Pacific plan to Harriman's "oversight" in 
 not taking into account the right of the Northern 
 1 Commercial & Financial Chronicle, May 18, 1901. 
 
CONTROL OF THE BURLINGTON 309 
 
 Pacific Company to retire its preferred stock and 
 thus to leave him with only a minority of the com^ 
 mon. 1 But Harriman did not overlook this possibil- 
 ity. On the contrary; it was precisely for this reason 
 that he ordered Kuhn, Loeb & Co. to buy 40,000 
 more shares of the common on the morning of Sat- 
 urday, May 4th. He believed, with Schiff, that the 
 holders of a majority of all the stock — common and 
 preferred together — could prevent the retirement 
 of the preferred; 2 but he did not wish to take any 
 chances of litigation over this question. He wanted 
 to be sure, and his failure to make sure was due 
 not to oversight, but to accident. Illness alone 
 kept him away from the firing line when the con- 
 test reached its final and decisive stage. In his 
 absence and without his knowledge his bankers 
 ceased buying, while Morgan & Co. went into the 
 field, practically unopposed, and secured 150,000 
 shares. 
 
 Although the contest for control of the Northern 
 Pacific and the Burlington was carried on with more 
 or less secrecy and was imperfectly understood by 
 the general public, the rapid and sensational advance 
 of forty points in Northern Pacific common created 
 
 1 Pyle's Life of James J. Hill, vol. 11, pp. 141 and 153. 
 
 * This belief was based on the unanimous opinion of five eminent 
 authorities on corporation law whom Mr. Harriman had consulted. 
 {Edward Henry Harriman, by Otto H. Kahn, New York, 191 1, p. 32.) 
 
310 E. H. HARRIMAN 
 
 great excitement in Wall Street, and not only led to 
 an avalanche of "short" selling of the virtually 
 "cornered" stock, but brought on, two days later, 
 the memorable Northern Pacific panic. 
 
CHAPTER XII 
 NORTHERN PACIFIC PANIC 
 
 THE contest for control of the Burlington, 
 which ultimately developed into a struggle for 
 possession of the Northern Pacific, ended, so far as 
 the competing interests were concerned, on the after- 
 noon of Tuesday, May 7th. Each of the contending 
 parties then believed that it had won a victory over 
 the other. Harriman and Schiff were sure that they 
 owned a majority of all the Northern Pacific stock, 
 taking common and preferred shares together, while 
 Morgan and Hill were equally confident that they 
 had a safe majority of the common, which would 
 enable them to retire the preferred and thus leave 
 the Union Pacific with only a minority holding in 
 the capital that would then remain. Both sides, 
 therefore, ceased buying. Their purchases, however, 
 had given a great impetus to speculation in Northern 
 Pacific common. Nobody knew, with certainty, who 
 was accumulating this stock, or why it had risen 
 from H2 to 149I in less than a week; but more than 
 half of the public believed that the common shares 
 were selling far above their intrinsic value and that 
 they must soon fall to something like their normal 
 
312 E. H. HARRIMAN 
 
 level. Scores of speculators, therefore, sold them 
 "short," with the expectation of being able to buy 
 them for delivery, a few days later, at much lower 
 figures. 1 In this expectation, however, they were 
 grievously disappointed. Northern Pacific common 
 instead of declining, made a further advance of more 
 than fifty points, simply because everybody wanted 
 it while few brokers had any of it for sale. When, 
 therefore, the "shorts" were called upon to deliver, 
 they found it almost impossible to buy or borrow 
 shares enough to meet their urgent needs. Prices 
 continued to advance; money was scarce and hard to 
 get, and, in order to escape involuntary bankruptcy, 
 scores of brokers were forced to sell their other stocks, 
 at ruinous prices, and use the proceeds in buying 
 Northern Pacific. This, of course, depressed the 
 
 1 For the benefit of readers who are not familiar with Wall Street 
 operations, it may perhaps be well to explain that when a dealer sells 
 stock "short," he sells what he does not own, with the expectation of 
 buying it later at a lower price. By the rules of the Stock Exchange he 
 must make delivery to the purchaser on the next day after the sale, or 
 be declared insolvent. If, however, the stock that he has sold does not 
 fall low enough so that he can "cover " at a profit, he borrows it from a 
 dealer who happens to have it, paying the latter a specified sum for the 
 accommodation. With this borrowed stock he makes delivery to the 
 purchaser, and then, until he decides to buy the stock of which he is 
 "short," he continues borrowing it from day to day at whatever rates 
 may be current. It sometimes happens that the whole marketable 
 supply of a particular security has been bought by one or two persons, 
 or groups, who hold it, either for speculative purposes or for control* 
 In the technical language of the Street such a stock is said to be 
 "cornered," and dealers who must buy or borrow it may be compelled 
 to pay for it almost any price that the owners may choose to demand. 
 
NORTHERN PACIFIC PANIC 313 
 
 general market, unsettled confidence, and eventu- 
 ally brought on one of the worst panics that Wall 
 Street had ever known. 
 
 As early as Wednesday noon it became apparent 
 that trouble was impending, and on Thursday, May 
 9th, when the storm finally broke, Northern Pacific 
 common sold up to $1000 a share, while other stand- 
 ard securities were offered at half their intrinsic 
 value. United States Steel, for example, declined 
 from 46 to 24; Atchison, Topeka & Santa Fe from 76 
 to 43, and Delaware & Hudson from 163 to 105. 
 Call money, meanwhile, was bid up to 60 per cent, 
 and little could be had even at that exorbitant rate. 
 Before noon on Thursday nearly half the brokerage 
 houses in Wall Street were technically insolvent, 
 simply because they could neither buy nor borrow 
 the Northern Pacific shares that they had sold short. 
 
 Such a state of affairs threatened general ruin, and 
 all the conservative, constructive forces in the finan- 
 cial district were set in motion to support the mar- 
 ket and reestablish confidence. At the suggestion 
 of Frederick T. Tappan, fifteen prominent banks 
 formed a "pool," or temporary syndicate, to relieve 
 the money market by loaning about $20,000,000, 
 and at the same time several other banks, including 
 Morgan & Co. and Kuhn, Loeb & Co., agreed not to 
 call for the delivery of short-sold shares of Northern 
 
314 E. H. HARRIMAN 
 
 Pacific stock that day. A little later, Mr. Schiff, 
 with the approval of Mr. Harriman, made a proposi- 
 tion to Robert Bacon, of J. P. Morgan & Co., that 
 the "shorts" be permitted to settle with both firms 
 at $150 a share for all the Northern Pacific common 
 that they had sold to these firms. Mr. Bacon, fearing 
 that if he "let up" on the "shorts" he might lose a 
 considerable part of the stock that was coming to 
 Morgan & Co., seemed, at first, a little reluctant to 
 acquiesce in this proposition ; but he finally saw the 
 wisdom of it and agreed to it. As a large part of the 
 short stock had been sold to one firm or the other, 
 and as $150 a share was a very reasonable price for 
 it at that time, the proposal was gladly accepted by 
 the "shorts," and did much to relieve the tension 
 and quiet the excitement. 
 
 Morgan & Co., as well as Harriman and Schiff, 
 "had done what they could," and each side believed 
 itself sure of victory. But the fact that the market 
 was bare of Northern Pacific, while buyers were still 
 eager to get it, sent prices rocketing. Many share- 
 holders in the West and South sold their shares, but 
 could not deliver immediately. Speculators who 
 sold short saw the price jump, point after point, but 
 could not furnish the stock to stop their losses. But 
 it was not what was ordinarily called a "corner." 
 Nobody was trying to force prices up that he might 
 
NORTHERN PACIFIC PANIC 315 
 
 sell at a profit. "How could we sell at any price?" 
 said Mr. Hill; "we were investors, not speculators, I 
 never bought or sold a share of stock for gambling 
 purposes in my life, and I don't want to earn money 
 wrung from people by a 'corner.'" x 
 
 Mr. Hill, however, was unjust to Mr. Harriman — 
 perhaps inadvertently so — in saying that Union 
 Pacific interests " bid Northern Pacific up until there 
 was the largest stock 'corner' ever known." 2 This 
 is an error. Harriman and Kuhn, Loeb & Co. did 
 not "bid Northern Pacific up" until they created a 
 "corner." They made no purchases after Friday, 
 May 3d, and the "corner" was not established until 
 four days later. If anybody created it, Morgan & 
 Co. did so by buying 150,000 shares after Harri- 
 man and Schiff had gone out of the market. It was 
 Robert Bacon, not Kuhn, Loeb & Co., who bid the 
 stock up from 112 to 149I in the attempt to get 
 control of it. 
 
 As a matter of fact the "corner," as the "Com- 
 mercial & Financial Chronicle" said at the time, was 
 largely if not wholly accidental, and was the result of 
 wild and irrational speculation on the part of the 
 general public* Mr. Hill compared it to an Indian 
 
 1 Pyle's Life of James J. Hill, vol. n, p. 151. 
 ' Public statement made by Mr. Hill at the time of the formation of 
 the Northern Securities Company. 
 * Commercial & Financial Chronicle, May 18, 1901. 
 
316 E. H. HARRIMAN 
 
 "ghost dance." In an interview published in the 
 New York newspapers of Thursday afternoon, May 
 9th, he was quoted as saying: 
 
 All I can do is to liken it to a ghost dance. The Indi- 
 ans begin their dance and don't know why they are do- 
 ing it. They whirl about until they are almost crazy. It 
 is so when these Wall Street people get the speculative 
 fever. Perhaps they imagine they have a motive in that 
 they see two sets of powerful interests which may be 
 said to be clashing. Then these outsiders, without 
 rhyme or reason, rush in on one side or the other. They 
 could not tell you why they make their choice, but in 
 they go, and the result is such as has been seen here for 
 the past few days. 
 
 Mr. Harriman's description of the situation, and 
 particularly his own relation to it, was given in the 
 following words: 
 
 Our holdings [of Northern Pacific stock] were all ac- 
 quired prior to the supposed contest between Morgan & 
 Co. and ourselves. During the days of the panic we did 
 not buy any Northern Pacific stock, nor give orders for 
 any. Many of our shares had been bought in Germany, 
 Holland, or England, for delivery in New York, and the 
 certificates were on their way to their destination. 
 Meanwhile the agents of the foreign sellers were making 
 their deliveries by using stock borrowed from other 
 people. Then, when the supposed contest took place 
 and other parties bought Northern Pacific at very high 
 prices and demanded immediate delivery, the agents of 
 these European sellers had great difficulty in getting 
 stock to fill their contracts. But, in every case, we gave 
 
NORTHERN PACIFIC PANIC 317 
 
 them all the time they needed. We were not in the sup- 
 posed contest and had no hand in it. 1 
 
 On the day after the panic, brokers in Wall Street 
 were in a state of complete nervous prostration from 
 the strain of anxiety and apprehension; but there 
 were few failures, money soon became compara- 
 tively easy again, and the stock market returned to 
 something like its normal state. Millions had been 
 made and lost, and scores of firms had been threat- 
 ened with ruin ; but the panic was local, rather than 
 general, and the country at large was little affected. 
 
 So far as possession of the Northern Pacific was 
 concerned, the situation remained substantially 
 unchanged. Hill and Morgan held a majority of the 
 common shares, while Harriman and the Union Pa* 
 cific owned a majority of the preferred, as well as of 
 both classes of stock taken together. Owing, how- 
 ever, to certain peculiar conditions, neither of the 
 contending parties could regard its hold of the prop- 
 erty as absolutely secure. The plan of Morgan and 
 Hill was to retire the preferred shares on the 1st of 
 the next January and thus leave Harriman and the 
 Union Pacific with only a minority holding in the 
 common. 2 There was a question, however, whether 
 
 1 As related by Mr. Harriman to G. W. Batson. 
 
 * In the reorganization of the Northern Pacific Company in 1896, 
 the right was reserved " to retire this [the preferred] stock, in whole or 
 in part, at par, from time to time, upon any 1st day of January during 
 the next twenty years." 
 
318 E.H. HARRIMAN 
 
 the board of directors then existing (in May, 1901) 
 would have power to do this. If not, Harriman 
 would be able to prevent it, because, at the annual 
 meeting of stockholders on the first Tuesday in Oc- 
 tober, he, holding a majority of the whole capital 
 stock, could elect directors enough to give him con- 
 trol of the board, and then this newly constituted 
 board would refuse to retire the preferred shares. 
 In order to avoid this contingency, Morgan and 
 Hill proposed to have the annual meeting of stock- 
 holders postponed until after January 1, 1902, so as 
 to prevent Harriman from electing any new directors 
 friendly to the Union Pacific, until after the preferred 
 stock had been retired. There was grave doubt, how- 
 ever, whether the board of directors then existing 
 (in May, 1901) would have legal authority either to 
 retire the preferred stock, or to postpone the annual 
 meeting so as to prolong the term of its own exist- 
 ence. Mr. Harriman consulted five eminent legal 
 authorities in different parts of the United States and 
 they all unanimously agreed that the existing board 
 could not lawfully retire the preferred stock, nor, 
 without the consent of a majority of the shareholders, 
 postpone the annual meeting to another year. If this 
 opinion proved to be sound, Harriman, having a ma- 
 jority of the whole capital stock, could elect in Octo- 
 ber a board of directors friendly to the Union Pacific, 
 
NORTHERN PACIFIC PANIC 319 
 
 and thus prevent Morgan and Hill from getting con- 
 trol through the retirement of the preferred stock. 
 
 In order, however, to avoid further controversy, 
 Harriman and Schiff finally decided that if they 
 could bring about a compromise which would safe- 
 guard the interests of the Union Pacific by giving 
 that company adequate representation on the North- 
 ern Pacific and Burlington boards, it would be better 
 to do this than to keep the affairs of three companies 
 unsettled pending the outcome of long litigation. 
 As Mr. Hill's biographer has said: 
 
 Nothing was to be gained for either side by fighting. 
 Both might have continued to tear up Wall Street and 
 injure large property interests including their own. 
 They could have engaged in endless litigation, which 
 would have cost a lot of money without materially alter- 
 ing anything. They might have maintained their di- 
 vided ownership and kept up a tug-of-war until the 
 rope broke. The end of that would be two pieces of rope 
 and two parties covered with bruises from severe falls. 
 After all their animosities, and with all that they had 
 done or left undone, it has to be remembered that on 
 both sides there were big men. They were big not only 
 by the measurement of achievement, but also because 
 they were not actuated by a blind, vindictive desire just 
 to crush and kill. They had already accepted, not 
 merely as a theory, but as a conviction, the necessity of 
 community of interest to a certain extent. Recent 
 events had broadened and instructed their view. Things 
 being as they were, they were ready for agreement. 1 
 
 * Pyle's Life of James J. Hill, vol. H, pp. 153-54. Mr. Harriman 
 
320 E. H. HARRIMAN 
 
 The fact that there never had been any personal 
 animosity between Hill and Harriman made it easier 
 to bring about a compromise than it would have been 
 if they had hated each other. Working, as they did, 
 in practically the same general field, it was almost 
 inevitable that their business interests should clash; 
 but throughout their controversies their personal 
 relations were those of mutual respect and esteem. 
 In a talk with the well-known journalist, Frederick 
 Palmer, soon after the Northern Pacific contest, Mr. 
 Harriman expressed the belief that Hill was not 
 personally hostile to him. "Anyhow," he said, "he 
 calls me 'Ed.'" Eight years later, when Mr. Harri- 
 man died, Mr. Hill, in paying a tribute of respect to 
 his character, said: 
 
 His properties are in fine shape, but his place at the 
 head of them will be hard to fill. I have done a good deal 
 of business with him, and some of it was pretty strenu- 
 ous at times, but we were good personal friends through- 
 out. I had a very high regard for Mr. Harriman person- 
 ally.* 
 
 never doubted that he had lawful control of the Northern Pacific 
 Company and that if he had fought the case through the courts he 
 would practically have obtained possession of the company. As Mr. 
 Otto H. Kahn has said: "He held, beyond any question of doubt, the 
 winning hand; but instead of boldly playing it, he contented himself 
 with a drawn battle, and with terms of peace which gave to the other 
 side the appearance of victory. The course that he pursued, however, 
 showed his wisdom, foresight, and self-restraint, and his practice of 
 never using any greater force than was necessary for the substantial 
 accompslihment of his object." (Edward Henry Harriman, by Otto 
 H. Kahn, in New York, 191 1, pp. 32-33.) 
 1 New York Sun, September 10, 1909. 
 
NORTHERN PACIFIC PANIC 321 
 
 Throughout the early part of May, 1901, confer- 
 ences were held, either at Mr. Harriman's office or 
 the office of Morgan & Co., and late in that month 
 Kuhn, Loeb & Co. authorized publication of the 
 following statement. 
 
 It is officially announced that an understanding has 
 been reached between Northern Pacific and Union Pa- 
 cific interests under which the composition of the North- 
 ern Pacific board will be left in the hands of J. P. Mor- 
 gan personally. Certain names have already been sug- 
 gested, not now to be made public, which will especially 
 be recognized as representatives of the common inter- 
 ests. It is asserted that complete and permanent har- 
 mony will result under the plan adopted between all in- 
 terests involved. 
 
 On the 31st of May, at a final conference held in 
 the Metropolitan Club, the "understanding" above 
 referred to was embodied in a written memorandum 
 which was signed by Kuhn, Loeb & Co., Morgan, 
 Harriman, and Hill. By the terms of this memo- 
 randum Mr. Morgan was empowered to select di- 
 rectors to fill vacancies on the NorthernPacific board 
 with William K. Vanderbilt as referee in case of fur- 
 ther disagreement. Mr. Harriman and a number of 
 gentlemen friendly, or at least not hostile, to him 
 were to become directors of both the Northern Pa- 
 cific and the Burlington, and the Union Pacific was 
 to have certain trackage rights over the Northern 
 
322 E. H. HARRIMAN 
 
 Pacific between Portland and Seattle. So far as 
 competition between the Union Pacific and the Hill 
 roads was concerned, the Burlington was to remain 
 neutral, and it was not to embark in any new enter- 
 prise in the West — such as building through to the 
 Pacific — without the consent and approval of Har- 
 riman and the Union Pacific Company. 
 
 On the 17th of July, Mr. Morgan, in the following 
 letter to Hill, Harriman, and Schiff, gave the names 
 of the gentlemen whom he had selected to fill va- 
 cancies in the Northern Pacific board: 
 
 New York, July 17, 1901 
 
 Gentlemen: 
 
 In accordance with a memorandum signed by you 
 under date of May 31, 190 1, under which the composi- 
 tion of the Board of Directors of the Northern Pacific 
 Railway Company was to be left in my hands, I beg to 
 advise you of my conclusion as follows: 
 
 I nominate the following gentlemen as the new mem- 
 bers of the Board to fill the vacancies to be created : 
 
 Mr. James J. Hill, President of the Great Northern 
 Railway Company; 
 
 Mr. E. H. Harriman, Chairman of the Executive 
 Committee of the Union Pacific Railway Company; 
 
 Mr. William Rockefeller, Director of the Chicago, 
 Milwaukee & St. Paul Railway Company; 
 
 Mr. H. McK. Twombley, Director of the Chicago & 
 Northwestern Railway Company; 
 
 Mr. Samuel Rea, Vice-President of the Pennsylvania 
 Railway Company; 
 and I would suggest that the attention of the Board be 
 
NORTHERN PACIFIC PANIC 323 
 
 called to the advisability of arranging for these gentle- 
 men to assume their duties as Directors of the Company 
 as soon as possible, without awaiting the annual election. 
 It is my opinion that a Board thus constituted will 
 contain within itself the elements best adapted for the 
 formulation of the plan referred to in said memorandum, 
 in connection with Mr. William K. Vanderbilt named 
 therein as Referee. Every important interest will have 
 its representative, who will be brought into close touch 
 with the situation as a whole, and there should be no 
 difficulty in reaching a conclusion that will be fair and 
 just to all concerned and tend to the establishment of 
 permanent harmony among the different lines. To this 
 end I shall be very glad to cooperate in such manner as 
 will seem desirable. 
 
 I am, Gentlemen 
 
 Very truly yours 
 
 J. Pierpont Morgan 
 
 Of the gentlemen thus chosen, Rockefeller and 
 Twombley were friendly to the Union Pacific Com- 
 pany, while only Mr. Hill was certainly hostile to it. 
 
 In this final settlement of the contest, Mr. Harri- 
 man did not gain all that he had hoped for, because 
 the two roads that he wanted remained in the pos- 
 session of his adversaries. Inasmuch, however, as he 
 himself secured a seat in the directing board of each, 
 he guarded himself against secret, aggressive action 
 on the part of either, and thus made the interests of 
 the Union Pacific reasonably safe. 1 
 
 1 Mr. Harriman became not only a director on the board of the 
 Northern Pacific, but also a member of its executive committee. 
 
324 E. H. HARRIMAN 
 
 The nearly successful attempt of Mr. Harriman to 
 secure control of the Northern Pacific startled and 
 alarmed not only J. Pierpont Morgan, who was the 
 person most interested in that corporation, but also 
 Mr. Hill and the little group of men who had coop- 
 erated with him in the building of the Great North- 
 ern. They regarded themselves as responsible for 
 the future of the systems that they had created or 
 reorganized ; they had a natural feeling of pride in 
 them, and they wished to have carried out, even af- 
 ter their own retirement or death, the plans they had 
 formed for their future management and operation. 
 They determined, therefore, to bind them together 
 in such a safe and permanent way as to ensure uni- 
 fied control and, at the same time, prevent them 
 from falling into the hands of rival corporations or 
 alien interests. Mr. Hill was the first to think of and 
 suggest the idea of forming a holding company, to be 
 known as the Northern Securities Company, which 
 should acquire the stock of both the Great Northern 
 and Northern Pacific and issue in lieu thereof stock 
 certificates of its own. Such a company would have., 
 including the stock of the recently acquired Burling- 
 ton, a capitalization of three or four hundred million 
 dollars, and would be so large and strong that, in all 
 probability, no alien or hostile corporation could ever 
 get control of it by purchasing a majority of its shares. 
 
NORTHERN PACIFIC PANIC 325 
 
 In a letter to a friend written in May, 1901, soon 
 after the Northern Pacific contest, Mr. Hill outlined 
 his plan as follows: 
 
 The cost of administering the affairs of a holding 
 company would be practically nil, as it would only 
 draw dividends on the shares held by it and divide the 
 money so received by check to its own shareholders. 
 You will see how strong the holding company would be. 
 It would control the Great Northern and Northern Pa- 
 cific, and those two roads would control by ownership 
 the Chicago, Burlington & Quincy. The holding com- 
 pany could also, if at any time it seemed best, hold the 
 shares of coal or other companies which, while of value 
 in themselves and of value to the railway company for 
 the traffic they would afford, the charters of the railway 
 companies are not broad enough to enable them to hold 
 with safety. I think the completion of the plan of which 
 the above is a fair outline would greatly enhance and in- 
 sure the value of every share we hold in the railway 
 companies. For myself, I feel that the future would be 
 secure, and we would have a certainty in the situation, 
 and the control of those properties safe. Unless we do 
 something of this kind, we will always be subject to at- 
 tacks like the recent one to secure control of one or other 
 of our properties. 1 
 
 In a somewhat later statement, Mr. Hill said : 
 
 We were particularly anxious to put a majority of 
 that stock [the Northern Pacific] where it could not be 
 raided again as it had been. We wanted to put it in a 
 corporation that was not a railroad company — a com- 
 pany that would hold it as an investment — and the 
 
 1 Pyle's Life of James J. HUl, vol. n, p. 166. 
 
326 E. H. HARRIMAN 
 
 larger the company the more difficult it would be to se- 
 cure a majority of it. . . . We were advised that it would 
 be safer with the shares held by an investment com- 
 pany, the stock of which could only be held by individu- 
 als, or by corporations that were not railroad companies, 
 and to that extent we would be more free from such 
 raids by interests that were anxious to destroy or re- 
 strict the growth of the country — such raids as had 
 been made by the Union Pacific interests so-called. 1 
 
 In saying that the Union Pacific interests were 
 anxious to "destroy or restrict the growth of the 
 country," Mr. Hill was not quite fair to Mr. Harri- 
 man. The latter had no intention of destroying or 
 restricting. He tried to secure control of the North- 
 ern Pacific, primarily, as a means of getting the 
 share in the Burlington which Mr. Hill had refused 
 to give him; but he had no thought of injuring the 
 Northern Pacific, or of restricting the growth of the 
 country tributary to it. On the contrary; his aims 
 were, first, to get a share in the Burlington, and, 
 second, to make the Northern Pacific stronger and 
 more useful than it ever had been before. If he had 
 succeeded, he would have done with the Northern 
 Pacific precisely what he was already doing with the 
 Union Pacific and the Southern Pacific; that is, he 
 would have spent tens of millions of dollars in im- 
 proving it and making it better able to serve the 
 country through which it ran. When he testified as 
 
 1 Pyle's Life of James J. Hill, vol. II, pp. 164-65. 
 
NORTHERN PACIFIC PANIC 327 
 
 a witness before the Interstate Commerce Commis- 
 sion in 1907 he said: 
 
 If we had not had the power to buy the Southern Pa- 
 cific with the credit of the Union Pacific, the country 
 tributary to the Southern Pacific would have been ten 
 years behind what it is now. If we had acquired the 
 Northern Pacific, the Northern Pacific territory would 
 have been ten years ahead of what it is now. 1 
 
 Mr. Harriman's genius was essentially and funda- 
 mentally constructive, and no railroad that he ever 
 acquired suffered injury from his management or 
 control. Eight years after his death, when the se- 
 curities of all railroads had been depressed by hostile 
 legislation and the restrictions of an incompetent 
 Commission, the shares of the Southern Pacific and 
 the Union Pacific were selling respectively at 115 
 and 122, while the shares of the Northern Pacific 
 and the Great Northern were offered at 86 and 85. 
 Traffic statistics, moreover, show that the country 
 served by the Hill system certainly did not develop 
 more rapidly than the country served by the Harri- 
 man lines. Mr. Harriman planned and built with 
 the future of the country constantly in mind, and 
 the prices of his stocks, as well as the prosperity 
 of his territory, show how sagacious and far-seeing 
 
 1 Hearings before the Interstate Commerce Commission in the 
 matter of "Consolidation and Combination of Carriers," February 
 25-27. 1907. P- 163. 
 
328 E. H. HARRIMAN 
 
 his plans were and how enduring his influence has 
 been. 
 
 The plan of the Northern Securities Company, 
 although suggested and advocated by Mr. Hill, was 
 practically put in shape by John S. Kennedy (rep- 
 resenting the Dutch committee of bondholders); 
 George F. Baker (a friend and associate of Mr. Hill) ; 
 Willis D. James; W. P. Clough; Samuel Thorne and 
 G. W. Perkins (of the firm of J. P. Morgan & Co.). 
 
 In a signed statement published in the St. Paul 
 "Globe" in December, Mr. Hill explained the pur- 
 poses of the company in detail as follows: 
 
 Several of the gentlemen who have long been inter- 
 ested in the Great Northern Railway and its predeces- 
 sor, the St. Paul, Minneapolis & Manitoba Company, 
 and who have always been among its largest sharehold- 
 ers, but not the holders of a majority of its stock, whose 
 ages are from seventy to eighty-six years, have desired 
 to combine their individual holdings in corporate form, 
 and in that way secure permanent protection for their 
 interests and a continuation of the policy and manage- 
 ment which had done so much for the development of 
 the Northwest and the enhancement of their own prop- 
 erty in the Northwest and elsewhere. Out of this desire 
 has grown the Northern Securities Company. 
 
 It became necessary (in order to prevent the North- 
 ern Pacific from passing under the control of the Union 
 Pacific interests and with it the joint control of the 
 Burlington) to pay off the seventy-five millions of 
 Northern Pacific preferred. The enormous amount of 
 cash required for this purpose, from a comparatively 
 
NORTHERN PACIFIC PANIC 329 
 
 small number of men, made it necessary for them to act 
 together in a large and permanent manner through the 
 medium of a corporation; and the Northern Securities 
 Company afforded them the means of accomplishing 
 this object without the necessity of creating a separate 
 company to finance the transaction for the Northern 
 Pacific. . . . The Northern Securities Company is organ- 
 ized to deal in high-class securities; to hold the same for 
 the benefit of its shareholders, and to advance the in- 
 terests of the corporations whose securities it owns. Its 
 powers do not include the operation of railways, bank- 
 ing, or mining, nor the buying and selling of securities or 
 properties of others on commission ; it is purely an invest- 
 ment company; and the object of its creation was sim- 
 ply to enable those who hold its stock to continue their 
 respective interests in association together; to prevent 
 such interests from being scattered by death or other- 
 wise, and to provide against such attacks as had been 
 made upon the Northern Pacific by a rival and compet- 
 ing interest. 1 
 
 Although the Northern Securities Company was 
 suggested by Mr. Hill in the spring of 1901, and a 
 plan for its organization drawn up by him and his 
 associates a few months later, it did not actually 
 come into existence until late in the fall. On the 12th 
 of November, 1901, it was duly incorporated under 
 the laws of the State of New Jersey with a capital of 
 $400,000,000. 
 
 Its first board of directors consisted of fifteen 
 members, six of whom represented the Northern 
 
 * St. Paul Globe, December 22, 1901. 
 
330 E. H. HARRIMAN 
 
 Pacific, four the Great Northern, three (including 
 Mr. Harriman) the Union Pacific, and two not rep- 
 resentative of any specific interest. Mr. Hill was 
 unanimously chosen president of the new corpora- 
 tion, and all holders of Great Northern and Northern 
 Pacific stock (including the Union Pacific) were in- 
 vited to exchange their shares for the stock of the 
 Securities Company on the basis of $180 for every 
 $100 surrendered (in the case of the Great Northern) 
 and $i 15 for every $100 (in the case of the Northern 
 Pacific). About 76 per cent of the Great Northern 
 stockholders and 96 per cent of the Northern Pacific 
 stockholders turned in their shares for exchange. 
 Mr. Harriman surrendered all the Northern Pacific 
 stock that he had acquired in his attempt to get 
 control of that road, and received in lieu thereof 
 about $82,500,000 in the shares of the new corpora- 
 tion. 
 
 If there had been no interference from outside, 
 the three companies would probably have worked 
 together more or less harmoniously under the terms 
 of the Metropolitan Club agreement and the charter 
 of the Northern Securities Company. Unfortunately 
 however, the latter was almost immediately at- 
 tacked in the courts, on the ground that it was an 
 attempt to restrain trade in violation of the Sherman 
 Anti-Trust Law. Owing partly to popular ignorance 
 
NORTHERN PACIFIC PANIC 331 
 
 or prejudice and partly to political demagogism, the 
 public mind at that time, particularly in the North' 
 west, was obsessed with the idea that combinations 
 and agreements among railroad companies were 
 made for the sole purpose of advancing or maintain- 
 ing rates, and that the only remedy for this alleged 
 evil was to enforce unrestricted competition in every 
 case where one railroad ran parallel to another. The 
 formation of the Northern Securities Company was 
 generally regarded as a covert scheme to extort more 
 money from the people by restricting or preventing 
 competition among the Hill and Harriman lines. 1 As 
 we now know, the creation of the holding company 
 was not related in any way either to competition 
 or to rates. It had its origin in a perfectly legitimate 
 attempt, on the part of a number of large sharehold- 
 ers, to keep their associated interests together in 
 the event of their retirement or death, and to pre- 
 vent seizure or control of their properties by outside 
 corporations, or groups, through the secret purchase 
 of stock. The State authorities of Minnesota, how- 
 
 1 "As a matter of fact, the Great Northern and Northern Pacific did 
 not compete, to an appreciable extent, with each other, and still less 
 with the Union Pacific. Only three per cent of the total interstate 
 traffic was subject to control by them individually in the making of 
 rates. There was competition, of course, for the Oriental trade, but it 
 did not affect at all the people in the Northwest, where only an inap- 
 preciable portion of the total interstate traffic was strictly competi- 
 tive." (History of the Northern Securities Case, by B. H. Meyer, Uni- 
 versity of Wisconsin Bulletin, p. 247.) 
 
332 E. H. HARRIMAN 
 
 ever, as well as the general public, disregarded or 
 disbelieved this explanation of the reasons for com- 
 bination, and on the 7th of January, 1902, the State 
 of Minnesota began suit against the Securities Com- 
 pany in the United States Circuit Court at St. Paul, 
 on the alleged ground that it was an illegal combina- 
 tion in restraint of trade. A few weeks later, the 
 Attorney-General of the United States advised Pres- 
 ident Roosevelt that, in his opinion, the so-called 
 "merger" of the Northern Pacific and the Great 
 Northern violated the provisions of the Sherman 
 Act of 1890; and on the 10th of March, 1902, the 
 Federal Government brought suit against the North- 
 ern Securities Company, the Northern Pacific, and 
 the Great Northern in the Circuit Court of Appeals, 
 a tribunal consisting of four Circuit Court judges 
 sitting as a trial court under a special Act of Con- 
 gress. 
 
 The decisions in the two lower courts were dia- 
 metrically opposed to each other. In the State case 
 it was held that the formation of the Northern Se- 
 curities Company did not involve any act or con- 
 tract in restraint of trade, while in the Federal case 
 the judges decided that the "Securities Company 
 accomplishes the object which Congress has declared 
 illegal perhaps more effectually than other forms of 
 combination generally known in 1890 when the Anti- 
 
NORTHERN PACIFIC PANIC 333 
 
 Trust Law was passed." The facts that the com- 
 bination might have been inspired by "wholly laud- 
 able and unselfish motives," and that it was, perhaps, 
 "the initial and necessary step in the accomplish- 
 ment of great designs," were said to make no differ- 
 ence. If the combination had power to "suppress 
 competition between two or more parallel and com- 
 peting lines of railroad engaged in interstate com- 
 merce," no matter whether it had actually exercised 
 that power or not, it was illegal. The Northern 
 Securities Company was, therefore, enjoined from 
 voting stock, acquiring additional stock, paying 
 dividends, or exercising corporate control. The prin- 
 cipal difference in the judgments of the two lower 
 courts was this: one held that the mere purchase of a 
 majority of the shares of the Great Northern and 
 Northern Pacific by the Securities Company was 
 illegal, because it gave the holding company power 
 to restrict competition and thus restrain trade; the 
 other declared that the mere possession of power 
 does not warrant the assumption that the power will 
 be criminally used. 1 
 
 Both cases were carried by appeal to the United 
 States Supreme Court in Washington, where they 
 were argued by some of the ablest lawyers in the 
 
 1 The records, briefs, and arguments in these cases made about 
 eight thousand pages, or sixteen large octavo volumes. 
 
334 E. H. HARRIMAN 
 
 country. On the 14th of March, 1904, after about 
 two years of litigation, the State case was dismissed 
 for lack of jurisdiction, while the Federal case was 
 decided against the railroad companies by a divided 
 court. Five justices regarded the combination as a 
 violation of the Sherman Anti-Trust Law, while four, 
 including the Chief Justice, could not see in it any 
 contract, or conspiracy — much less any act — that 
 restrained trade, or was intended to restrain trade. 
 Justice Harlan, who read the opinion of the majority, 
 said that Congress, "by the Anti-Trust Act, has 
 prescribed the rule of free competition among those 
 engaged in interstate commerce," and any combina- 
 tion which, by its necessary operation, restrains, or 
 tends to restrain, such free competition is clearly 
 illegal. "The Government charges," Justice Harlan 
 said, "that if the combination is not held to be in 
 violation of the Act of Congress, then all efforts of 
 the National Government to preserve to the people 
 the benefits of free competition among carriers en- 
 gaged in interstate commerce will be wholly unavail- 
 ing; and all transcontinental lines, indeed the entire 
 railway systems of the country, may be absorbed, 
 merged, and consolidated, thus placing the public at 
 the absolute mercy of the holding corporation." The 
 majority of the Court coincided in this view and af- 
 firmed the judgment of the Circuit Court of Appeals. 
 
NORTHERN PACIFIC PANIC 335 
 
 The decision of the Supreme Court, it will be ob- 
 served, is based almost wholly on the assertion that 
 "Congress, by the Anti-Trust Law, has prescribed 
 the rule of free competition among those engaged in 
 interstate commerce." It is a noteworthy fact, how- 
 ever, that Congress, in the Sherman Act, did not use 
 the words "free competition," or "restraint of com- 
 petition," or refer to "competition" in any way 
 whatever. The thing that it forbade was "restraint 
 of trade or commerce," which may be, and generally 
 is, a very different thing from "restraint of competi- 
 tion." The word "competition" is not to be found 
 in any section of the Sherman Anti-Trust Act; it was 
 read into that Act by the courts, on the assumption 
 that "restraint of trade" and "restraint of competi- 
 tion " are synonymous expressions. 
 
 Justice Holmes, in a dissenting opinion, called at- 
 tention to this wholly unwarranted assumption, and 
 said that the words "restraint of competition" and 
 "restraint of trade" do not have the same meaning. 
 The latter, which has "a definite and well-estab- 
 lished signification in the common law, means, and 
 has always been understood to mean, a combination 
 made by men engaged in a certain business for the 
 purpose of keeping other men out of that business. 
 . . . The objection to trusts was not the union of 
 former competitors, but the sinister power exercised, 
 
336 E. H. HARRIMAN 
 
 or supposed to be exercised, by the combination, in 
 keeping rivals out of the business. ... It was the 
 ferocious extreme of competition with others, not the 
 cessation of competition among the partners, which 
 was the evil feared." "Much trouble is caused," 
 Justice Holmes added, "by substituting other 
 phrases, assumed to be equivalent, which are then 
 argued from as if they were in the Act. The court 
 below argued as if maintaining competition were the 
 express purpose of the Act. The Act says nothing 
 about competition." 1 
 
 The minority of the Court, however, did not base 
 its dissent wholly, or even mainly, on this unwar- 
 ranted substitution of the words "restraint of com- 
 petition " for the words " restraint of trade." It took 
 the broader ground that the question in the case was 
 "not the power of Congress to regulate commerce, 
 but whether that power extends to the regulation of 
 ownership of stock in railroads, which is not commerce 
 at all." In the opinion of the minority, "The ac- 
 quisition and ownership of stock in competing rail- 
 roads, organized under State law by several persons, 
 or by corporations, is not interstate commerce and 
 therefore not subject to the control of Congress." 2 
 
 In commenting, some years later, on the origin 
 
 1 Senate Documents, vol. 6, 58th Congress, 2d Session. 
 ' Dissenting opinion of Justice White, in which the Chief Justice 
 and Justices Peckham and Holmes concurred. 
 
NORTHERN PACIFIC PANIC 337 
 
 and history of the Northern Securities Company, 
 Dr. B. H. Meyer (afterward a member of the Inter- 
 state Commerce Commission) rightly said that its 
 causes were "partly personal and partly economic." 
 The personal cause was the desire of a number of 
 aged stockholders to keep their holdings together 
 after their retirement or death, and to prevent their 
 properties from being seized or controlled by alien or 
 rival interests. The largest economic cause was a 
 desire to secure a permanent basis for the inter- 
 change of commodities between great producing 
 sections of the United States and of the Orient. 1 
 Neither of these causes had anything whatever to do 
 with interstate commerce, or with the rates to be 
 imposed on such commerce. They related to entirely 
 different matters. 
 
 Harriman and Hill were both deeply interested in 
 the through traffic to and from the Orient. Harri- 
 man already had a trans-Pacific steamship line, 
 while Hill was building on the northwestern coast 
 two of the largest steamers in the world for the Ori- 
 ental trade. Both wanted the Burlington system, 
 because it would give them access, over a line of their 
 own, to the cotton, provisions, and manufactures of 
 the South and Middle West, which they hoped to 
 exchange for tea, silks, and other products of China 
 
 1 A History of the Northern Securities Case, by B. H. Meyer; Uni- 
 versity of Wisconsin Bulletin, pp. 226-27. 
 
338 E. H. HARRIMAN 
 
 and Japan. The United States, at that time, had 
 only about one-fourteenth part of the total Chinese 
 trade. If, by providing better transportation facili- 
 ties, the Pacific roads could give American producers 
 cheaper and easier access to this great market, they 
 certainly would not be restraining trade — they 
 would be promoting and extending it. But they 
 could not safely make plans for increasing America's 
 exports to the Orient without forming a combination 
 that would ensure certainty of supply and stability 
 of rates. It was this, and not a desire to suppress 
 local competition, that led Hill and Harriman to 
 struggle for control of the Burlington, and later (by 
 way of compromise) to join in the- organization of 
 the Northern Securities Company. 
 
 In view of the fact that, for many years, Congress 
 and the people of the United States have made a sort 
 of fetish of railroad competition, it may be well to 
 repeat here that Mr. Harriman, with his synthetic 
 and constructive mind, always favored cooperation 
 and combination, as more advantageous both to the 
 railroads and to the public than unrestricted com- 
 petition. Indeed, in the last decade of his business 
 career he came to be regarded as the forafcost expo- 
 nent of the policy of combination and consolidation. 
 His motives were then misrepresented and his meth- 
 ods were described as autocratic and monopolistic; 
 
NORTHERN PACIFIC PANIC 339 
 
 but time has demonstrated the soundness of his 
 ideas. The world is coming at last to see that, in the 
 words of the first chairman of the Interstate Com- 
 merce Commission, "the more completely the whole 
 railway system can be created as a unit, as if it were 
 all one management, the greater will be the benefit of 
 its service to the public and the less the liability to 
 unfair exactions." 1 
 
 Dr. Meyer, in his "History of the Northern Se- 
 curities Case," is perfectly right in saying: 
 
 Competition, as a regulative principle of railways, 
 and as a force which will maintain proper relations be- 
 tween the railways themselves, and between the rail- 
 ways and the public, has failed in every country of the 
 world where it has been given a trial. ... I regard the 
 application to the railways of the Sherman Anti-Trust 
 Law of 1890 as one of the gravest errors in our legisla- 
 tive history. ... If railways had been permitted to co- 
 operate with one another, under the supervision of com- 
 petent public authority, and if the Trans-Missouri and 
 Joint-Traffic cases had never been decided, the railway 
 situation in the United States to-day would be apprecia- 
 bly better than it is. . . . The undiscriminating opposi- 
 tion to all forms of open concerted action on the part of 
 railways is, in my mind, the greatest single blunder in 
 our public policy toward railways. . . . We should have 
 cast away, dtti§ than fifty years ago, the impossible doc- 
 trine of protection of the public by railway competition.* 
 
 1 Opinion of Judge Thomas M. Cooley in the Board of Trade case. 
 * History of the Northern Securities Case, by B. H. Meyer; Univer- 
 sity of Wisconsin Bulletin, pp. 253, 305. 
 
CHAPTER XIIH 
 CONTESTS WITH CLARK AND KEENE 
 
 AT no other time in Mr. Harriman's career did 
 . he undertake more important enterprises, or 
 carry on a greater number of multifarious activities, 
 than in the three years between 1898 and 1902. Dur- 
 ing this period he began the reconstruction of the 
 Union Pacific; acquired control of the great Southern 
 Pacific system and began to rebuild that; directed 
 the recapitalization and reconstruction of the Chi- 
 cago & Alton; undertook the management of the 
 Kansas City Southern; organized and personally 
 conducted an important scientific expedition to 
 Alaska; planned and put up a five-story building for 
 the Boys' Club in New York; carried on a titanic 
 contest with J. P. Morgan and James J. Hill for con- 
 trol of the Northern Pacific, and finally cooperated 
 with these railroad financiers in the organization of 
 the Northern Securities Company, a corporation 
 which had a capitalization of $400,000,000 and which 
 linked together three of the most important railway 
 systems in the West. 
 
 One might suppose that activities of such scope 
 and magnitude would overtax the working capacity 
 
CONTESTS WITH CLARK AND KEENE 341 
 
 even of a superman; but Mr. Harriman was able to 
 carry them all on successfully, and at the same time 
 to act as president of the Southern Pacific; 1 pres- 
 ident of the Oregon Short Line; chairman of the 
 finance committee of the Illinois Central, and a di- 
 rector of the Baltimore & Ohio. His connection with 
 the last-named road began in 1899 (when F. D. Un- 
 derwood became its general manager), 2 and lasted 
 till 1901. During this period he was not only a di- 
 rector, but one of the most influential members of 
 the important committee on expenditures. 
 
 After the reorganization of the Baltimore & Ohio 
 Company in 1899, the road was found to be urgently 
 in need of capital betterments, and Mr. Harriman 
 aided Vice-President Underwood in raising and ex- 
 pending about $32,000,000 for improvements and 
 new equipment. In an interview many years later 
 Mr. Underwood said: "From the time when I be- 
 came associated with Mr. Harriman on the Balti- 
 more & Ohio I knew him intimately. I was very 
 much attached to him as well as filled with respect 
 and admiration for his character. He helped me 
 to get about $32,000,000 for improvements on the 
 
 1 Elected September 26, 1901. 
 
 * Mr. Underwood had previously been general manager of the 
 Minneapolis, St. Paul & Sault Ste. Marie Railway. He became general 
 manager of the Baltimore and Ohio in January, 1899, and second vice- 
 president about five months later. In May, 1901, he was elected 
 president of the Erie. 
 
342 E. H. HARRIMAN 
 
 B. & O. and for that assistance I have always been 
 
 grateful." x 
 
 In addition to all the work that he accomplished 
 between 1898 and 1902 (and perhaps by reason of 
 such work), he acquired during this period three 
 very powerful and influential supporters, namely, 
 James Stillman, William Rockefeller, and H. H. 
 Rogers. Mr. Stillman, the president of the National 
 City Bank, had known Harriman slightly before 
 1898, but it was not until that time that he was 
 brought into close business relations with him. He 
 had, at first, a little prejudice against him, because, 
 as he afterward said : 
 
 A very prominent man had told me to "look out for 
 Ed. Harriman. He is not so smart as some people think, 
 and he is not a safe man to do business with." For that 
 reason I steered clear of him until the matter of the 
 Union Pacific reorganization came up. In my associa- 
 tion with him after that time he impressed me as a re- 
 markable man — a man of unalloyed frankness and 
 honesty, and in all respects loyal and trustworthy. He 
 soon showed, moreover, great money-making possibili- 
 ties. 2 
 
 1 Speaking afterward of this partial reconstruction of the Balti- 
 more and Ohio, Mr. Harriman said : " I put in eighteen months of hard 
 work at it." He did not mean, of course, that he gave to it his undi- 
 vided attention, but merely that for eighteen months he made it a 
 subject of study and thought. (See "Harriman: The Colossus of 
 Roads," by Carl Snyder; Review of Reviews, January, 1907, p. 48.) 
 
 2 James Stillman, in an unpublished interview with G. W. Batson, 
 February 9, 191 1. 
 
CONTESTS WITH CLARK AND KEENE 343 
 
 The National City Bank, at the time when Mr. 
 Harriman began the reconstruction of the Union 
 Pacific, was the bank of the Standard Oil Company, 
 and James Stillman, its president, was very closely 
 associated with William Rockefeller and H. H. Rog- 
 ers. It was only natural, therefore, that when he 
 became satisfied that Harriman was "a remarkable 
 man, and a man of unalloyed frankness and hon- 
 esty," he should introduce him to the Standard Oil 
 managers. This he did about 1 901, and Rockefeller 
 and Rogers were soon afterward added to the group 
 of influential and powerful men upon whom Harri- 
 man could confidently rely. This group, as John 
 Moody afterward said, "certainly surpassed in finan- 
 cial resources any set of men in the history of the 
 financial world." 1 
 
 Many times in later years its members gave Har- 
 riman financial support when he needed tens of mil- 
 lions of dollars, in credit or cash, for the realization 
 of his far-reaching plans. 
 
 The first time that the interests of the Harriman 
 lines were menaced, after the purchase of the Bur- 
 lington by the Northern Pacific, was in 1901, when 
 Senator William A. Clark, of Montana, who had 
 made a great deal of money in the Butte copper 
 
 1 "Masters of Capital in America," by John Moody and George 
 Kibbe Turner; McClure's Magazine, December, 1910, p. 347. 
 
344 E. H. HARRIMAN 
 
 mines and who had ambitions in the railway field, 
 projected a road from San Pedro and Los Angeles 
 to Salt Lake City. This road, when completed, would 
 not only open up a new competing route to southern 
 California, but might, by consolidation or agreement 
 with the Gould lines, create a new transcontinental 
 system from the Middle States to the Pacific Coast. 
 Such a combination, if effected, would be more or 
 less prejudicial to the interests of both the Union 
 Pacific and the Southern Pacific, because it would 
 not only compete with those lines for transconti- 
 nental business in general, but would very likely take 
 away from them a considerable part of the profit- 
 able fruit traffic between southern California and 
 the Eastern markets. Mr. Harriman determined to 
 avert these dangers by building a line of his own from 
 Los Angeles to a junction with the Union Pacific at 
 Ogden. 
 
 Upon investigation, he found that ten or twelve 
 years earlier, the Oregon & Utah Northern Railway 
 Company, a subsidiary of the Oregon Short Line and 
 the Union Pacific, had begun and partly completed a 
 road from Salt Lake to Los Angeles over this very 
 route. The section from Salt Lake City to Milford, 
 about two hundred miles in length, had been prac- 
 tically finished, while grading for the track had been 
 carried ninety miles farther into the head of a long, 
 
CONTESTS WITH CLARK AND KEENE 345 
 
 narrow canon known as the Meadow Valley Wash. 
 In the period of financial depression that followed 
 the panic of 1893, a part of this uncompleted line had 
 been abandoned by the Union Pacific, while in other 
 places the rails had been taken up and carried away 
 for use elsewhere. Harriman was informed by his 
 engineers that any railroad between Ogden and Los 
 Angeles would have to follow the route of this aban- 
 doned line and pass through the hundred-mile canon 
 known as the Meadow Valley Wash. He therefore 
 directed his construction forces to take possession 
 of the old right of way of the Union Pacific through 
 this canon, while at the same time he gave orders 
 to prosecute the work of construction between the 
 canon and southern California. Senator Clark's 
 construction parties followed Mr. Harriman's into 
 the Meadow Valley Wash, and after a number of 
 physical clashes between the rival forces, both sides 
 appealed to the courts to sustain the rights which 
 each claimed to have in this narrow gorge. In the 
 course of litigation it was found that, under the laws 
 of the United States with regard to the occupancy of 
 gorges and canons, neither side could exclude the 
 other, and if both persisted in building through the 
 canon, their respective tracks would have to cross each 
 other twenty-six times within a comparatively short 
 distance on account of the narrowness of the gorge. 
 
346 E. H. HARRIMAN 
 
 When this state of affairs was realized, a truce was 
 declared and negotiations were begun for a friendly 
 settlement of the controversy. The result was a 
 compromise between Senator Clark and the Union 
 Pacific by virtue of which they agreed to sell to each 
 other a half-interest in their respective properties 
 and rights, and to form a new company for the com- 
 pletion of the road, which was to be called the San 
 Pedro, Los Angeles & Salt Lake Railway. Under 
 this agreement, which was dated July 9, 1902, the 
 road was built and the Union Pacific acquired one 
 half of its capital stock with joint control over its 
 management. 1 
 
 Hardly had this struggle ended when Mr. Harri- 
 man became involved in another contest which 
 threatened, at one time, to deprive him of the man- 
 agement, if not the control, of the whole Southern 
 Pacific system. In pursuance of a well-considered 
 and settled policy, he had been putting all the earn- 
 ings of the Southern Pacific into betterments, in- 
 stead of into dividends, with the intention of so im- 
 proving and upbuilding the road as to increase its 
 usefulness as well as its earning capacity. This pol- 
 icy created dissatisfaction among some of the short- 
 sighted holders of the company's shares, and in the 
 
 1 See Hearings before the Interstate Commerce Commission in the 
 matter of "Combination and Consolidation of Carriers," pp. 137-38, 
 and Millar exhibits 52 and 53. 
 
CONTESTS WITH CLARK AND KEENE 347 
 
 latter part of 1 901, the noted speculator and Wall 
 Street operator, James R. Keene, conceived the idea 
 of acquiring a large amount of Southern Pacific 
 stock and then bringing such pressure to bear upon 
 Mr. Harriman as would induce or force him to begin 
 the payment of dividends and thus largely increase 
 the value of his (Keene's) holdings. He seems to 
 have thought, at first, that he could get Mr. Harri- 
 man to join him in this speculative scheme, by tempt- 
 ing him to enrich himself at the expense of the road 
 whose best interests he was in honor bound to pro- 
 mote. Failing, however, to make any impression 
 upon him, Keene, in the early part of 1902, with the 
 assistance of the Stock Exchange firm of Talbot J. 
 Taylor & Co., 1 formed a strong combination, or pool, 
 for the purpose of buying from 200,000 to 400,000 
 shares of Southern Pacific stock and then forcing 
 the company to begin the payment of dividends. 
 The plan of the managers of the pool was to bring an 
 action in the courts in which they would allege that 
 the Southern Pacific Company was earning more 
 than enough money to pay regular dividends, but 
 that the directors of the Union Pacific, who had con- 
 trol of it, were using it for the benefit of their own 
 road. They (the pool managers) would therefore ask 
 for an injunction to restrain the Union Pacific Com- 
 
 1 Taylor was Keene's son-in-law. 
 
348 E. H. HARRIMAN 
 
 pany from voting its 750,000 shares of Southern 
 Pacific stock. With these shares tied up in litigation, 
 the pool managers hoped to be able, at the next an- 
 nual meeting of Southern Pacific stockholders, to 
 oust Harriman, elect a board of directors of their 
 own, and begin the payment of dividends. Then, 
 when the market value of Southern Pacific shares 
 had largely increased, the pool members would un- 
 load their stock upon the public and pocket their 
 profits. 1 
 
 The history of this scheme, up to the time when 
 litigation began, was briefly given by Mr. Harriman 
 in the following affidavit: 
 
 One evening in the autumn of 1901, Mr. Edward Lau- 
 terbach 2 called me at my house on the telephone and 
 stated that a friend of his had a matter of importance to 
 communicate to me and he would like me to have an in- 
 terview with the party at once. To this I assented and 
 during the evening the card of Mr. David Lamar, ac- 
 companied by a card of Edward Lauterbach identify- 
 ing him, was presented to me. I saw Mr. Lamar for 
 about ten or fifteen minutes, during which time he 
 stated that he had friendly relations with Mr. James R. 
 Keene, who had a large holding in Southern Pacific and 
 
 1 The members of the pool succeeded in getting about 240,000 
 shares of Southern Pacific stock; but there was no evidence that they 
 bought it for permanent investment. They had acquired it for specu- 
 lative purposes only, and were carrying a large part of it on margins. 
 (See New York Times, April 12, 1914, and Railroads: Finance and 
 Organization, by William Z. Ripley, p. 217.) 
 
 * Mr. Lauterbach was Keene's legal counsel and afterward counsel 
 for the pool. 
 
CONTESTS WITH CLARK AND KEENE 349 
 
 was contemplating some adverse action against its man- 
 agement, and that he (Lamar) was assured that there 
 could be obtained an injunction against the Union Pa- 
 cific somewhat similar to that obtained against the Geor- 
 gia Central, in which latter case Mr. Lamar stated he 
 had been an influential and important factor. He stated 
 that he would like to work with me, and that if I would 
 make an alliance which would be of some advantage to 
 him, he had such influence over Mr. Keene that he could 
 induce him not to instigate any adverse action against 
 myself and allied interests. I informed Mr. Lamar that 
 I did not see that I could do anything regarding the 
 matter, but that if I should change my mind I would 
 let him know. I walked to the door with him, and he 
 was very insistent as to when I would again communi- 
 cate with him. I finally took his telephone number and 
 agreed to telephone him the next day, which I did, and 
 stated to him that I had no desire to pursue the matter 
 further. 
 
 About that same time I had several interviews with 
 Mr. James R. Keene, brought about at the requests of 
 others. Mr. Keene stated to me that he had a large 
 holding in Southern Pacific Company stock, that he 
 would like to join with me in purchasing the shares in 
 the market, that he believed there could be a great deal 
 of money made thereby and that he would act for me, 
 either in purchasing for our joint account, or for myself 
 if I wished it; that it would be advantageous for the 
 Union Pacific to take all the Southern Pacific stock and 
 issue its four per cent bonds therefor, and stated that he 
 was an adept in carrying out successful large stock mar- 
 ket operations and that he had shown this capacity es- 
 pecially in the manipulation of United States Steel 
 stocks. 
 
 I carefully explained to Mr. Keene the requirements 
 of the Southern Pacific properties, such as the replace- 
 
350 E. H. HARRIMAN 
 
 ment of old light rails with new heavy ones; new and 
 heavier equipment — both motive power and cars — to 
 replace old small-capacity ones; that in order to carry 
 this equipment of larger capacity the track would not 
 only require heavier rails, but additional ballasting and 
 renewal of ties, heavier and new steel bridges to replace 
 old light steel and wooden structures, the lengthening of 
 present side-tracks, and additional ones, as well as addi- 
 tional second tracks ; the remodeling and enlargement of 
 terminals, as well as the elimination of grades and curva- 
 tures; and that all the surplus net earnings for some 
 time would have to be applied for such requirements, 
 improvements, and repairs ; that I believed it would be a 
 mistake to create a speculation in the shares of the stock 
 and advance their price to a basis that would justify the 
 buyers in expecting a dividend in the near future ; that 
 it was also necessary to make such repairs and improve- 
 ments from surplus earnings, so far as they would go, 
 in order to establish for the company a basis of credit 
 upon which it could refund the bonded indebtedness of 
 its subsidiary companies, a large part of which would 
 mature in a few years, and that there was nothing be- 
 tween the stock and the bonded indebtedness of those 
 companies which could be pledged to raise the neces- 
 sary funds for such work, and that I believed that our 
 method of procedure, as outlined to him, would inure to 
 the benefit of the stockholders in the future much more 
 advantageously than in any other way. Mr. Keene as- 
 sured me that he did not want to act in any way antag- 
 onistic to me, and I stated to him that I would let him 
 know if I saw any reason to change my mind, and he 
 said that he would do nothing without informing me. 
 
 In the autumn of 1902, through various persons, I 
 was informed that Mr. Edward Lauterbach and Mr. 
 Talbot J. Taylor would make trouble for us unless we 
 settled in some way with them. Mr. Lauterbach tried 
 
CONTESTS WITH CLARK AND KEENE 351 
 
 in various ways, through such third persons, to get an 
 interview with me, and at one time called me on the tele- 
 phone for such purpose, but I declined to see him, and 
 during the autumn and winter of 1902 and the winter of 
 1903 I had several calls on the telephone from Mr. La- 
 mar ; but my answer through the messenger announcing 
 the call was that I was too much engaged to talk with 
 him. Some time in January, 1903, Mr. Lauterbach ap- 
 proached a mutual friend, a man of high standing and 
 well known, and made to him statements which made 
 him believe that it would be for my interest to take the 
 matter up; and he telephoned and requested an inter- 
 view with me. At the interview he explained to me that 
 Lauterbach had said to him that Mr. Keene represented 
 a pool holding about 170,000 or 175,000 shares [of 
 Southern Pacific stock] and that Mr. Keene himself 
 held about 70,000 shares; that they contemplated action 
 which would make us a great deal of trouble and might 
 be disastrous to our interests (especially laying stress 
 upon the large expenditures we were making upon the 
 Central Pacific portion of the Southern Pacific proper- 
 ties) unless we purchased such shares from them; that he 
 would sell the pool shares at about 70 and his own 
 shares at about 78. I explained to this friend that there 
 was nothing in the situation which we had to fear from 
 those people, or in the management of the company, 
 which would justify any criticism or objection upon the 
 part of any stockholders, and that I certainly would not 
 be forced by fear of anything they might do into recom- 
 mending a course which would be adverse to the inter- 
 ests of the general body of stockholders of the Southern 
 Pacific. I had two interviews with this friend on this 
 subject, substantially as above stated, he in the second 
 interview having informed me that he had communi- 
 cated what I had said to Mr. Lauterbach. Since that 
 time there have been several attempts made by Mr. 
 
352 E. H. HARRIMAN 
 
 Lauterbach and Mr. Lamar to take the matter up with 
 me, but without success. 1 
 
 After trying first to bribe Mr. Harriman by offer- 
 ing him a share in the profits of the speculation, and 
 then to intimidate him by threatening legal proceed- 
 ings which would cause serious "trouble," if not 
 "disaster," Mr. Keene and his associates, in the 
 spring of 1903, began a suit in the United States 
 Circuit Court at Nashville for the purpose of getting 
 an injunction which would prevent the Union Pacific 
 Company from voting its Southern Pacific shares at 
 the annual meeting of Southern Pacific stockholders 
 to be held at Beechmont, Kentucky, in April of that 
 year. Senator Foraker, of Ohio, who acted as coun- 
 sel for the Keene pool, was very confident of success, 
 and is said to have declared that if he did not win 
 the suit he would abandon his profession; but the 
 result showed that he was over-sanguine. When the 
 case came to trial, Evarts, of New York, and Max- 
 well, of Cincinnati, who represented the Pacific 
 roads, argued that the court had no jurisdiction, and 
 as the court itself was of that opinion, the applica- 
 tion for an injunction was denied. This practically 
 ended the litigation, because on the very next day 
 after the court rendered its decision the annual meet- 
 
 > Affidavit of E. H. Harriman in the suit of Talbot J. Taylor & Co. 
 against the Southern Pacific and Union Pacific Companies. 
 
CONTESTS WITH CLARK AND KEENE 353 
 
 ing of Southern Pacific stockholders was held at 
 Beechmont and the Union Pacific Company was able 
 to vote its shares and retain its control. This, how- 
 ever, would have been the result, even if the Keene 
 pool had obtained the injunction that it sought, be- 
 cause Mr. Harriman, in order to guard against the 
 possibility of an adverse decision in the court, had 
 previously sold 300,000 shares of Southern Pacific 
 stock to his friend and supporter, William Rockefel- 
 ler, of the Standard Oil Company. These shares 
 would not have been affected by the injunction, and 
 Rockefeller would have voted them against the pool 
 and in support of Mr. Harriman's policy. On the 
 1st of May, 1903, when the danger had passed, this 
 stock was resold to the Union Pacific Company. 
 Thus Mr. Harriman, through the support of his 
 powerful group of friends, would have been able, in 
 any event, to frustrate the plans of the strongest 
 combination of speculators that had ever been ar- 
 rayed against him. 
 
 The pool, after failing to paralyze the Union Pa- 
 cific by means of an injunction, was forced to liqui- 
 date its holdings on a declining market and eventu- 
 ally sold its stock at a loss, it was said, of about 
 $3,000,000. Talbot J. Taylor & Co., who had co- 
 operated with Keene in the formation of the pool, 
 were so weakened by its collapse that they soon 
 
354 E. H. HARRIMAN 
 
 afterward went out of business. 1 Thus ended one of 
 the boldest and best-planned attempts that had ever 
 been made to compel a railroad company to distrib- 
 ute in dividends money that it needed for repairs, 
 betterments, and new equipment. It made for Mr. 
 Harriman a new lot of enemies, but it enhanced his 
 reputation as a conservative railroad manager and 
 as a formidable antagonist in a fight. 
 
 A number of successful or unsuccessful attempts 
 were made, in the first decade of the twentieth cen- 
 tury, to wrest the control of railroad properties from 
 managers who happened to hold less than a majority 
 of the capital stocks. Harriman and his associates, 
 for example, nearly succeeded in ousting Morgan 
 and Hill from the management of the Northern Pa- 
 cific by purchasing a majority of that road's out- 
 standing shares, while they themselves, in turn, were 
 deprived of control of the Chicago & Alton by sim- 
 ilar means. Many railroads, at that time, were man- 
 aged by men who owned only thirty or forty per cent 
 of the capital stock. If a single group of associated 
 interests controlled, say, one third of the outstand- 
 ing shares, its supremacy was regarded as assured, 
 because it could almost always get support enough 
 from the other scattered stockholders to give it a 
 safe majority at every annual meeting. Hill and 
 1 New York Times, April 12, 1914. 
 
CONTESTS WITH CLARK AND KEENE 355 
 
 Morgan, prior to 1901, never controlled more than 
 forty per cent of the outstanding stock of the North- 
 ern Pacific, and yet they managed the property as if 
 they owned it all. Harriman and his associates, in 
 1 90 1, held only thirty-seven and a half per cent of 
 the stock of the Southern Pacific, but, so far as the 
 direction of its affairs was concerned, their power 
 was virtually supreme. 
 
 There was always a danger, however, that a mi- 
 nority group might be deprived of its control by the 
 secret stock purchases of a similar but perhaps more 
 powerful group. From the correspondence of Schiff 
 with Harriman in 1 901 and 1902, it is evident that 
 this danger was always present in their minds, and 
 that they tried to minimize it, as far as possible, by 
 organizing pools or syndicates of friendly capitalists 
 who were willing to buy, and to hold for a term of 
 years, stock or convertible bonds enough to offset any 
 secret purchases that might be made by rival or 
 hostile interests. Such, for example, was the Union 
 Pacific convertible bond pool of 1901 and 1902. In a 
 letter written by Mr. Schiff to Mr. Harriman in 
 September, 1901, the former said: 
 
 Concerning the winding up of the Union Pacific con- 
 vertible bond pool, of which you speak, I think it would 
 be inadvisable to give up the call which you and Kuhn, 
 Loeb & Co. practically now have on these holdings for 
 over two years yet. It cannot be foreseen how this may 
 
356 E. H. HARRIMAN 
 
 stand us in good stead hereafter; and until we are abso- 
 lutely certain that our rear is safe, and that no attempts 
 are likely to be made by others to get control of the 
 Union Pacific, which has become the most important 
 and valuable system in the United States, I should not 
 advise to let go of the convertible bond pool, though we 
 should continue to liquidate it as heretofore. This liq- 
 uidation must necessarily be slow, assuring us, for a 
 long time, the control of a considerable amount of the 
 bonds in case of need. ... It is not possible that we 
 permanently hold a sufficient amount of Union Pacific 
 stock to absolutely control the company (nor can any 
 one else), and we shall for this control have to rely, in 
 the first instance, on the good-will of our shareholders. 
 I have long felt, and feel now more than ever, that we 
 must strengthen our holdings of Southern Pacific stock; 
 for while it is not likely that, with the thirty-seven and 
 a half per cent of stock which the Union Pacific holds, 
 any other combination can get control, it is safer, with 
 so able and unprincipled a manipulator as James R. 
 Keene holding a very large amount of the stock, to have 
 an additional considerable amount in friendly hands. 1 
 
 About a year later (August 31, 1902), Mr. Schiff 
 wrote another letter to Mr. Harriman on the same 
 general subject in which he said: 
 
 That we must find ways and means to tighten and 
 make permanent our hold on the Union Pacific becomes 
 more evident every day; but it is also very clear to me 
 
 1 Three hundred thousand shares were afterward placed in the 
 "friendly hands" of William Rockefeller to be used against Keene in 
 case the latter should try to get control. Whether Rockefeller bought 
 for himself, individually, or for a syndicate of which he was the head, 
 does not appear; but the object of the investment was to offset Keene's 
 ^purchases and thus strengthen Harriman. 
 
CONTESTS WITH CLARK AND KEENE 357 
 
 bhat to attempt to lease, until we have a very firm hold, 
 would be extremely dangerous, with all the possibilities 
 that we may have to face. I feel we would have saved 
 aurselves much and frequent uneasiness if we had classi- 
 fied the board. 1 
 
 Mr. Harriman evidently shared Schiff's anxiety, 
 and six weeks later (November 11, 1902), with the 
 reoperation of Kuhn, Loeb & Co., he formed a pool 
 ar syndicate of nine members which agreed to buy, 
 as a more or less permanent investment, approxi- 
 mately 500,000 shares of Union Pacific preferred 
 stock. The members and the amounts taken by them 
 respectively were as follows: 
 
 E. H. Harriman $10,000,000 
 
 Kuhn, Loeb & Co 10,000,000 
 
 James Stillman 10,000,000 
 
 William Rockefeller 5,000,000 
 
 H. H. Rogers 5,000,000 
 
 W. K. Vanderbilt 5,000,000 
 
 James H. Hyde 2,000,000 
 
 H. C. Frick 1,250,000 
 
 P. A. Valentine 1,250,000 * 
 
 Harriman, Schiff , and Stillman were made mana- 
 
 1 So as to provide for the election of only two or three directors at a 
 time. This would prevent a clean sweep of the board at any single 
 annual meeting in case hostile interests should succeed in getting 
 temporary control. 
 
 1 Unimportant changes were subsequently made from time to time 
 in the membership of the pool or in the amounts subscribed. Vander- 
 bilt, for example, transferred his stock to the Chicago & Northwestern 
 Railway Company and acted for the latter as trustee. The partici- 
 pants in this pool, taken together, probably represented, potentially, 
 the greatest aggregation of capital then existing in the United States. 
 
358 E. H. HARRIMAN 
 
 gers of the pool, with discretionary power to buy or 
 sell, and it was agreed that, unless previously liqui- 
 dated by general consent, the pool should continue 
 to hold the stock for a period of five years. This ac- 
 cumulation of 500,000 shares in the hands of a few 
 men who were in sympathy with Mr. Harriman and 
 his plans would have been an almost insurmountable 
 obstacle in the way of any group of speculators who 
 should seek to capture the Union Pacific by means of 
 a sudden and unexpected raid. 
 
 Covertly organized pools of this kind were re- 
 garded by the public, at one time, with a good deal 
 of suspicion, for the reason that their object was 
 supposed to be the secret manipulation of railway 
 stocks; but for this suspicion there was, in most 
 cases, no valid foundation. Harriman, in reconstruct- 
 ing and reequipping the Union Pacific and Southern 
 Pacific systems, was engaged in a highly important 
 and beneficent piece of work, and his friends, who 
 had faith in his plans, resorted to defensive combina- 
 tions as a means of protecting him from alien and 
 often purely speculative interference. Such com- 
 binations had to be made secretly, in order to pre- 
 vent hostile interests from becoming aware of their 
 existence. It would have been little short of a public 
 misfortune if Harriman's plans for the extension and 
 betterment of railroad transportation in the Great 
 
CONTESTS WITH CLARK AND KEENE 359 
 
 West had been thwarted, and he himself eliminated, 
 as the result of a change in control brought about by 
 alien interests for speculative and purely selfish pur- 
 poses. It was to guard against such a possibility that 
 the fifty-million-dollar pool was formed; and its 
 managers bought the preferred stock, rather than 
 the common, for the reason that the former had 
 equal voting power, with less liability to extreme 
 fluctuation in market value. 
 
CHAPTER XIV 
 HARRIMAN AND THE ERIE 
 
 ONE of the first of the Eastern trunk-lines to 
 attract Mr. Harriman's attention was the 
 Erie. The fact that his great country estate at Arden 
 was situated on that road naturally gave him a per- 
 sonal interest in it, and in 1894, when it was in the 
 hands of a receiver, he became one of the most ener- 
 getic opponents of the plan of reorganization that 
 had been devised and proposed by Drexel, Morgan 
 & Co. When that plan failed, as Mr. Harriman pre- 
 dicted that it would fail, he withdrew for a time 
 from active participation in Erie affairs; but, as a 
 security-holder as well as a resident on the line, he 
 continued to take a watchful interest in the manage- 
 ment of the property. After Mr. F. D. Underwood 
 was elected president of the company, in 1901, Mr. 
 Harriman expressed a wish to become a director. 
 He and Mr. Underwood had previously been asso- 
 ciated in the management of the Baltimore & Ohio, 
 and both were desirous of continuing that friendly 
 association in the Erie. The only obstacle in the way 
 was a possible objection on the part of J. P. Morgan, 
 whose firm had done most of the financing of the 
 
HARRIMAN AND THE ERIE 361 
 
 company after the receivership, and whose interests 
 were dominant at that time in the board. Morgan 
 had had two or three clashes with Harriman, and it 
 was thought that the latter's election as director 
 without his approval might cause friction. For a 
 time, therefore, the matter was held in abeyance. In 
 September, 1903, the death of Abram S. Hewitt left 
 a vacancy in the board, and Mr. Morgan was in- 
 formed that it would please the directors if Mr. Har- 
 riman could be chosen to fill it. Mr. Morgan ex- 
 pressed neither approval nor disapproval, but merely 
 said that "the matter rested entirely with the board 
 of directors and the president." Thereupon, at a 
 meeting of the board held September 30, 1903, Har- 
 riman was elected to fill the vacancy, and a little 
 later (June 28, 1905) he became a member of the 
 executive committee. 
 
 As subsequent events proved, the president and 
 directors could not have secured a more valuable 
 adviser and supporter in the great work, which they 
 had already begun, of transforming the Erie into a 
 first-class trunk-line, which could compete, on some- 
 thing like equal terms, with the New York Central 
 and Pennsylvania. The road, at that time, was suf- 
 fering from a freight-traffic congestion in several 
 parts of the main line where grades were heavy and 
 operating facilities inadequate. This was particu- 
 
362 E. H._HARRIMAN 
 
 larly the case in the New York and Alleghany divi- 
 sions, where trains had to be moved over grades that 
 ranged from 0.8 per cent to 1.5 per cent. With a 
 view to improving these parts of the system and thus 
 relieving the congestion, the company decided to 
 build two low-grade branches, or extensions; one of 
 them forty-two miles in length in the New York 
 division, and the other thirty- three miles in length 
 in the Alleghany division. These branches subse- 
 quently became known as the Erie & Jersey and the 
 Genesee River railroads. 
 
 In order to provide funds for this new construc- 
 tion, the directors authorized the issue of Erie con- 
 vertible bonds; but before the work had been long 
 under way, financial conditions became such that 
 the bonds could not be sold at prices that would war- 
 rant their flotation. Meanwhile, contracts had been 
 made for a large part of the construction material 
 and some of it was already on the ground. In 1905, 
 after the company had spent about $1,500,000 on 
 the projected extensions, work was temporarily sus- 
 pended for lack of funds. Mr. Harriman then pro- 
 posed that the new lines be organized as independent 
 companies, subsidiary to the Erie, but separate from 
 it. They could then issue their own first mortgage 
 bonds, at an attractive price, and earn the interest 
 on them by leasing the roads to the Erie when com- 
 
HARRIMAN AND THE ERIE 363 
 
 pleted. This seemed to be a perfectly practicable 
 plan, but, unfortunately, the State Commission 
 fixed a minimum price, at which the bonds could not 
 be sold. Mr. Harriman then proposed, and success- 
 fully negotiated, a loan of $5,000,000 upon short- 
 term notes, secured by these bonds and the Erie's 
 guarantee, the two subsidiary companies agreeing 
 not to issue any additional bonds without the con- 
 sent of the note-holders. In this way the necessary 
 funds were finally obtained and the Erie & Jersey 
 and Genesee River railroads were built. 
 
 The completion of these two branch lines greatly 
 benefited the Erie by lowering grades, cutting down 
 operating expenses, and providing capacity for in- 
 creased traffic. On the New York division, for ex- 
 ample, the maximum grade was reduced from 74 feet 
 to 26 feet per mile eastbound, and from 75 feet to 53 
 feet westbound, while, at the same time, the full 
 train-load was increased from 556 tons to 3193 tons 
 eastbound and from 520 tons to 18 12 tons west- 
 bound. On the Alleghany division the grade was 
 reduced from 42 feet to 10 feet eastbound, and from 
 53 feet to 16 feet westbound, while the train-load 
 was increased from 1350 tons to 3812 tons eastward 
 and from 1106 tons to 3071 tons westward. 
 
 After these two branches had been completed, Mr. 
 Harriman urged the importance of increasing equip- 
 
364 E. H. HARRIMAN 
 
 ment. "You may fix your grades," he said, "so as to 
 move a large traffic; but you will lose the benefits 
 that should accrue if you don't keep your equipment 
 in balance with your track betterments." Some 
 railroads, prior to that time, had been in the habit of 
 saving money, when hard-pressed financially, by 
 going without equipment that was really needed. In 
 one case, cited by Mr. Harriman, the president of an 
 important railway company in the West made it a 
 practice to go over his line regularly, once every year, 
 and systematically cut down the expense estimates 
 of his subordinates, no matter how reasonable they 
 were. That road never prospered and eventually 
 went into the hands of a receiver. In another case, 
 an equally prominent Eastern road tried to save 
 money by using cheaper lights — and even oil lan- 
 terns — in its passenger coaches. Mr. Harriman 
 strongly disapproved of such cheese-paring economy, 
 and when one of the directors of the Erie proposed to 
 stop altogether, for a time, the making of equipment 
 purchases, Harriman interposed an emphatic objec- 
 tion. "The way to save money," he said, "is to 
 spend it." By this he meant not that money should 
 be squandered, but that it should be spent freely 
 where the expenditure would increase earning power 
 and thus bring in more revenue. 
 At a meeting of the Erie executive committee one 
 
HARRIMAN AND THE ERIE 365 
 
 day a requisition was presented for a comparatively 
 small sum of money — ten or twelve thousand dol- 
 lars — to buy mules for hauling purposes in the com- 
 pany's coal mines. There were differences of opinion 
 with regard to the matter, and after listening to the 
 discussion impatiently for a time, Harriman said: 
 " If the manager in charge cannot be trusted to buy 
 mules without bringing the subject to the executive 
 committee, a new manager should be selected. My 
 time is worth about a mule a minute and I can't stay 
 to hear the rest of this discussion. I vote 'Aye' on 
 the requisition." He then left the room. 
 
 On the question of spending money for permanent 
 improvements and better equipment, Mr. Harriman 
 almost always voted "Aye," and his influence, abil- 
 ity, financial experience, and personal prestige were 
 very helpful to the Erie between the years 1903 and 
 1906, when, with limited resources and impaired 
 credit, the company was taking the first steps to- 
 ward the realization of a far-sighted and compre- 
 hensive plan for the betterment of the property. In 
 speaking of this plan, many years later, the "Rail- 
 way Age Gazette" said: 
 
 The history of the Erie since 1902 is unique, in that it 
 is the only instance in American railroad history where 
 a large system, with a funded debt utterly dispropor- 
 tionate to the value of the property, has been reha- 
 bilitated without the intervention of the courts and a 
 
366 E. H. HARRIMAN 
 
 receivership, and without reorganization. In the years 
 prior to 1902, not only did the Erie have a top-heavy 
 load of bonds, but its credit was almost exhausted and 
 its physical condition was such as to make its operation 
 uneconomical. The morale of its organization was al- 
 most equally bad. The history of the development of 
 the Erie Railroad since then is, in considerable part, 
 an account of the domination of one man's personal- 
 ity, sound common sense and persistence, in the face 
 of an unusually large proportion of " unsurmountable 
 difficulties." 
 
 The Erie pulled itself out of its hole by its own boot- 
 straps; or, to put it in another way, its rehabilitation 
 went on "under traffic." The physical condition of the 
 road was such as to make it impossible to effect econo- 
 mies in operation without the additional investment of 
 large sums of money. With the small margin of earnings 
 above fixed charges, the company's credit was such as to 
 preclude the possibility of any large issue of securities to 
 provide funds for a general programme of additions and 
 betterments. Before the service and economy of opera- 
 tion could be much improved, modern facilities would 
 have to be provided, and this was a question of estab- 
 lishing credit, and so the circle of "impossibilities" was 
 complete. 
 
 In 1901, Frederick D. Underwood was made presi- 
 dent, and among the first things he did was to gain the 
 confidence of his board of directors so securely that he 
 held it even through the trying times of 1907 and 1908. 
 . . . This backing of the directors has been of great im- 
 portance in the success of the development of the prop- 
 erty. There have been numerous instances where a 
 board of directors could be carried, by a more or less 
 temporary burst of confidence, into granting authority 
 to inaugurate a large system of expensive improve- 
 ments; but the Erie's case demanded a continuing faith 
 
HARRIMAN AND THE ERIE 367 
 
 In the face of difficulties which arose one after another, 
 year in and year out, for a long period of time. The pro- 
 gramme of physical betterments had to be carried out 
 bit by bit as the money could be raised. . . . The key- 
 note to the upbuilding of the Erie has been the orderly 
 carrying out of a plan adopted after careful considera- 
 tion and thereafter adhered to strictly. 
 
 After stating that the road weathered its most 
 difficult time while Harriman was a member of the ex- 
 ecutive committee, the " Railway Age Gazette " says : 
 
 The Erie, unquestionably, owes to Mr. Harriman and 
 his immediate associates much, as regards the breadth 
 and scope of the plan of rehabilitation and the tenacity 
 with which it was adhered to under the most trying cir- 
 cumstances. 1 
 
 Not long after Mr. Harriman became a director of 
 the Erie, there were two serious strikes of workmen 
 in the company's shops. The first one was begun by 
 the boiler-makers, who insisted that no foreman 
 should be appointed without their approval; that 
 the number of apprentices should be limited; that 
 double pay should be given for overtime, and that 
 there should be no piece-work. A little later a strike 
 was begun by the machinists, who made substan- 
 tially the same demands. The question then came 
 up: Should the company yield, or compromise, or 
 fight? It was Mr. Harriman's judgment that these 
 
 1 "Studies in Operation — The Erie Railroad"; Railway Age 
 Gazette, April 28, 1916, pp. 939-42. 
 
368 E. H. HARRIMAN 
 
 two strikes should be fought out to a finish, and it 
 was largely through his courage and his influence 
 in the board that they were so fought out. They cost 
 the company about $1,800,000, but the wisdom of 
 the policy that Harriman advocated and the board 
 adopted was shown by the fact that after the partly 
 new force of workmen had been organized, sixty per 
 cent more work was done than had been done before 
 on the same floor area, and there was industrial 
 peace in the shops for a period of ten years. 
 
 One of the most extraordinary episodes in the 
 history of the Erie after Mr. Harriman became a 
 member of the executive committee was the pur- 
 chase of a controlling interest in the Cincinnati, 
 Hamilton & Dayton Railroad from J. P. Morgan, on 
 the 20th of September, 1905, at a cost of $12,000,000, 
 and the resale of the same interest to the same 
 banker, at the same price, two and a half months 
 later. The circumstances that brought about the 
 purchase were stated by the Interstate Commerce 
 Commission as follows: 
 
 The acquisition of the C. H. & D. by the Erie was not 
 a new subject in the minds of Erie officials and directors. 
 It had been seriously considered at different times for 
 several years prior to the actual purchase. The value of 
 the C. H. & D. to the Erie, from a traffic standpoint, had 
 been investigated and favorably reported, 1 the southern 
 
 1 By H. B. Chamberlain, third vice-president and general traffic 
 manager of the Erie Company, in a report dated May 23, 1904. 
 
HARRIMAN AND THE ERIE 369 
 
 connections through Cincinnati and western connec- 
 tions through Indianapolis being looked upon as of par- 
 ticular value. . . . According to the testimony of Presi- 
 dent Underwood, of the Erie, there were no negotiations 
 carried on for this purchase, by him or by any one else in 
 behalf of the Erie, prior to an interview he had with 
 J. P. Morgan, at the latter's request, on August 16, 1905, 
 at which Morgan said : 
 
 "When I was more active in the Erie than now, and 
 during Mr. Coster's time, it was always thought that 
 sometime the C. H. & D. would become the property of 
 the Erie. Now I have to say to you that if it is still the 
 intention of the Erie board, and it is desirable on the 
 part of the Erie Company, to acquire the C. H. & D., 
 they will have to move quickly in the matter, for it is to 
 be sold soon and there are other purchasers after it." 1 
 
 He then submitted a statement showing the condi- 
 tion of the C. H. & D., which was taken under advise- 
 ment by President Underwood and his staff. 2 ' 
 
 Without making an inquiry as to the date, au- 
 thenticity, or trustworthiness of this statement, and 
 without investigating independently the financial 
 condition of the C. H. & D. Company, the Erie of- 
 ficials decided to make the purchase, and on the very 
 next day (August 17, 1905) President Underwood 
 personally authorized J. P. Morgan to buy for the 
 
 1 The "other purchasers" were the members of a syndicate sup- 
 posed to represent the so-called "Hawley interests." It was composed 
 of Edwin Hawley, D. G. Reid, Newman Erb, John W. Gates, T. P. 
 Shonts, Paul Morton, and others. 
 
 s "In Re Pere Marquette Railroad Company and C. H. & D. Rail- 
 road Company," Interstate Commerce Commission Reports, No. 6833 
 (March 13, 1917), p. 159. 
 
370 E. H. HARRIMAN 
 
 Erie a majority of the C. H. & D. stock. In a letter 
 to Mr. Morgan, dated August 18, 1905, President 
 Underwood said that grade reductions and other 
 improvements which were then in progress on the 
 Erie would enable the road to handle more traffic 
 than was then tributary to it; that the properties 
 which it was proposed to acquire would largely in- 
 crease such traffic, and that they "were worth more 
 to the Erie than to any other interest on the map." 
 He predicted that in five years' time, the increase in 
 revenues from the haul of anthracite coal on the 
 Erie, and the sales thereof in the territory traversed 
 by these lines and their connections across Lake 
 Michigan to the northwest, would, in itself, go a long 
 way toward paying the interest on the proposed 
 investment. 1 
 
 In explaining subsequently the haste with which 
 he acted on Morgan's suggestion, President Under- 
 wood said that he was influenced by the rumor that 
 the C. H. & D. was in danger of falling into other 
 hands. "I did not at that time want," he said, "to 
 see the C. H. & D. get into the hands of any interest 
 that would divert its traffic from the Erie Railroad, 
 and that was one of the prime factors that made us 
 move when we did." 2 
 
 On the 9th of September, 1905, J. P. Morgan, as 
 
 1 "In Re PSre Marquette," etc., p. 160. ! Ibid., p. 164. 
 
HARRIMAN AND THE ERIE 371 
 
 banker for the Erie, entered into a contract for the 
 purchase of about 74,000 shares of C. H. & D. stock 
 at $160 a share. Three weeks later (September 20, 
 Jo^i) the board of directors approved the action of 
 the president in orally agreeing to take the stock 
 from Morgan, and on the 10th of October the Erie 
 shareholders ratified the purchase. At the same time, 
 the Erie Company issued its short-term notes for 
 the sum of $11,835,000 in payment to Morgan & 
 Co. for 74,059 shares of C. H. & D. stock, including 
 $392,630 in commissions. It then virtually took 
 possession of the C. H. & D. by electing directors 
 and general officers of that company. 
 
 In making this purchase, the Erie relied wholly 
 upon the statement furnished by J. P. Morgan, 
 which seemed to show that the C. H. & D. was earn- 
 ing its fixed charges and was consequently solvent. 
 Such, however, was far from being the case. The 
 real condition of the company, and the causes that 
 had brought about that condition, are briefly sum- 
 marized by Professor Ripley as follows: 
 
 Within three years prior to 1905, the road was passed 
 in succession through no less than four syndicates. The 
 first pool was formed in 1902 to purchase the Pere Mar- 
 quette road, which ran crosswise of the main trunk- 
 lines up into Michigan. The plan was, by threat of ex- 
 tending it east and west to Buffalo and Chicago, to 
 force it upon the Vanderbilt roads at a profit. This 
 
372 E. H. HARRIMAN 
 
 project failed, leaving the bankers with a heavy burden 
 of unsalable and non-dividend-paying securities. In the 
 meantime another independent cross-line, the Chicago, 
 Cincinnati & Louisville, had been constructed almost 
 into Chicago by a second syndicate. A third pool al- 
 ready controlled the Dayton road. These three groups 
 all overlapped in membership. All parties finally de- 
 cided to join forces. The Pere Marquette was sold to the 
 Dayton road, by payment in Dayton bonds and notes at 
 the rate of $125 for Marquette stock which had cost $85 
 per share. This recompensed the first syndicate liber- 
 ally. The second syndicate, which had built the line 
 toward Chicago, was paid for its services in Marquette 
 notes. The third syndicate, controlling the Dayton 
 road, now made its profit in turn by selling the com- 
 bined properties to a fourth syndicate. 1 
 
 And it was this fourth syndicate, headed by H. B. 
 Hollins & Co., which offered the G. H. & D. to Mor- 
 gan, with the intimation that if he did not take it, 
 others would. 
 
 As the result of the sales, purchases, stock-water- 
 ing, and speculative manipulation above outlined, 
 the C. H. & D., when the Erie bought it, was prac- 
 tically bankrupt and was liable for the deficits of 
 three other companies, namely, the Pere Marquette, 
 the Chicago, Cincinnati & Louisville, and the Toledo 
 Railway & Terminal. In the words of the Interstate 
 Commerce Commission: "The Erie, in buying the 
 
 1 Railroads: Finance and Organization, by Professor William Z. 
 Ripley, pp. 215-16 
 
HARRIMAN AND THE ERIE 373 
 
 C. H. & D., was not buying a system which was then 
 paying its fixed charges, but a system which had 
 fallen short of doing so by over a million and three- 
 quarters of dollars," not including interest charges of 
 nearly half a million on the Erie's own securities, 
 issued to raise funds for the purchase. 
 
 On June 30, 1905, the C. H. & D. proper had out- 
 standing short-term and demand obligations in the form 
 of loans and bills payable aggregating over $2,300,000. 
 In addition there was $1,009,000 due on audited ac- 
 counts which were unpaid because of lack of funds, not 
 to mention sundry bills held up and not even vouchered 
 for the same reason. It soon became apparent that the 
 C. H. & D. would be wholly unable to perform its ob- 
 ligations under its lease of the Pere Marquette; that 
 neither the Chicago, Cincinnati & Louisville nor the 
 Terminal Company was earning operating expenses, 
 and consequently their interest charges and more would 
 have to be met; that $15,000,000 of C. H. & D. notes 
 would mature in about three years, and that heavy 
 interest charges would fall due in January with no 
 funds to pay them. 1 
 
 President Underwood first began to suspect that 
 all was not right with the C. H. & D. when he made 
 a tour of inspection over that road in November, 
 1905. In the course of this trip he met the control- 
 ler of the company, who said "that he was not pre- 
 pared to give the exact figures of the C. H. & D. 
 finances, because he did not ' have them on the books. ' 
 
 1 "In Re Pere Marquette," etc., p. 170. 
 
374 E. H. HARRIMAN 
 
 Asked to explain, the controller said it was under- 
 stood that there were contracts and commitments 
 that he knew nothing of. He did, however, disclose 
 some obligations not shown on the books, and it 
 then appeared that the statement Mr. Underwood 
 had looked at, and on which he and Mr. Morgan 
 traded, was inaccurate." 1 
 
 Surprised, if not startled, by these discoveries, 
 Mr. Underwood cut short his trip, left the train at 
 Lima, and hurried back to New York. 
 
 It may naturally enough be asked: Where was 
 E. H. Harriman when Morgan and the Erie Com- 
 pany bought a twelve-million-dollar railroad with 
 less inquiry and investigation than a prudent busi- 
 ness man would make before purchasing an automo- 
 bile? As an influential member of the executive 
 committee, could he not have prevented the Erie 
 from making an investment that he must have 
 known would be unfortunate, if not actually disas- 
 trous? 
 
 Mr. Harriman sailed for Japan on the 16th of 
 August, 1905, and did not return to New York until 
 October 26th. Presumably, therefore, he knew noth- 
 ing about the transaction at the time, and certainly 
 he was not consulted with regard to it. When, some 
 
 1 Open Letter to the Stockholders of the Baltimore & Ohio Railroad 
 Company, by Isaac M. Cate (Baltimore, 1917), pp. 6-7. 
 
HARRIMAN AND THE ERIE 375 
 
 months later, he became aware of the facts, he 
 strongly disapproved the purchase, and urged Presi- 
 dent Underwood to see Morgan and try to have it 
 rescinded. In testifying before the Interstate Com- 
 merce Commission some years later Mr. Underwood 
 said: 
 
 Several days before the rescindation process was had, 
 I talked with Mr. Harriman in his office in the Equit- 
 able Building. Now I cannot give you any idea where 
 he had been in the interim, but I very distinctly remem- 
 ber my conversation with him. I could not forget it, nor 
 could you forget it if you had heard it — about what 
 was necessary to be done. He said: "You made the 
 trade with Mr. Morgan yourself. No one was present. 
 You had better go and see Mr. Morgan, and you had 
 better not depend on any one else but yourself. It is up 
 to you. You had better go and better go now." Then I 
 went down and had an audience with Mr. Morgan and 
 told him that practically the C. H. & D. had a floating 
 debt that was not visible in the statement he showed 
 me. He said: "Well, we will look at the statement," 
 and there was some attempt made to find it, but it was 
 unsuccessful; it was not produced. I said: "Mr. Mor- 
 gan, the statement that I made to you of the effect of 
 the acquisition of the C. H. & D. on the Erie's finances 
 is null and void, because the statement [the Morgan 
 statement] was inaccurate." He looked at me and said: 
 "Well, if the statement that we made to you was inac- 
 curate, and for any reason you think that the Erie Rail- 
 road has made a bad trade, your duty is very simple — 
 you have only to convene your board of directors and 
 rescind it, and I advise you to do it at once." I bade 
 him good afternoon and walked out of his office. 1 
 
 1 "In Re Pere Marquette," etc., pp. 172-73. 
 
376 E. H. HARRIMAN 
 
 After buying a twelve-million-dollar railroad from 
 Morgan, unconditionally, in August, it must have 
 required a good deal of courage to go to him in No- 
 vember and ask him to take the road back at the 
 same price that the Erie had paid for it. So far as 
 Mr. Harriman inspired that courage, he is entitled 
 to the credit of saving the Erie Company from a 
 serious, if not a disastrous loss. But perhaps Mr. 
 Underwood would have made the appeal in any 
 event. 
 
 On the 28th of November, Mr. Morgan himself 
 appeared before the Erie executive committee, and 
 offered to take back the C. H. & D. stock at the 
 price paid for it, "because," as he said, "he under- 
 stood that some dissatisfaction was felt, and had 
 been expressed, with reference to the purchase ef- 
 fected by his firm as agents for the Erie." The com- 
 mittee, by a unanimous vote, decided to recommend 
 tothe board the acceptance of the offer, and the 
 board did so accept on the following day. At the 
 same time the board authorized the delivery to Mr. 
 Morgan of a copy, "suitably engraved, under the 
 Erie's corporate seal, and signed by every director." 
 of the resolution of thanks adopted at the meeting, 
 "for his extraordinary service and assistance to the 
 company; first in his quick and efficient compliance 
 with the direct personal appeal of the company, 
 
HARRIMAN AND THE ERIE 377 
 
 through its president, to obtain for it a large ma- 
 jority of the common stock of the Cincinnati, Hamil- 
 ton & Dayton Railway Company; and, finally, after 
 the development of doubt in this board as to the 
 continuing ability of the Erie Company satisfac- 
 torily to maintain and extend that system, in view of 
 the demands of its own railroad, in his magnificent, 
 unparalleled, and absolutely voluntary offer himself 
 to assume the entire purchase, and to relieve the 
 Erie Company from all contracts and cost in connec- 
 tion therewith." 
 
 The freeing of the Erie from its purchase was form- 
 ally accomplished through an agreement with J. P. 
 Morgan dated December 2, 1905, whereby the Erie 
 agreed to sell to him its C. H. & D. stock at the price 
 paid under the purchase contract. While Morgan as- 
 sumed this obligation personally, the firm paid for the 
 stock and treated it as a firm matter, without formal as- 
 signment from him. 1 
 
 Two days after the signing of this agreement, both 
 the C. H. & D. and the Pere Marquette went into 
 the hands of a receiver. While the whole transaction 
 above outlined is more or less extraordinary, perhaps 
 the strangest feature of it is the apparent ease with 
 which H. B. Hollins & Co. palmed off upon Morgan 
 and the Erie Company the watered stock of a bank- 
 rupt railroad at $160 a share. 
 
 1 "In Re Pere Marquette," etc., p. 171. 
 
CHAPTER XV 
 THE CONTEST WITH THE SANTA FE 
 
 IN the early years of the twentieth century, mana- 
 gers of all the trunk-lines west of the Missouri 
 River were striving to lessen operating expenses and 
 quicken the movement of trains by cutting down 
 heavy grades, eliminating sharp curves, and other- 
 wise improving their tracks. When these transcon- 
 tinental roads were originally built, comparatively 
 little attention was paid to operating efficiency. 
 The important considerations at that time were 
 economy and rapidity of construction; and in select- 
 ing locations, engineers and managers chose routes 
 over which it would be cheapest and easiest to build, 
 rather than routes over which trains could be most 
 economically and rapidly hauled. Experience proved, 
 however, that this was a mistake, and that it would 
 be better to relocate and rebuild parts of the roads 
 where there were sharp curves, or steep grades, than 
 to waste money unnecessarily in heavy operating 
 expenses. Mr. Harriman was one of the first to see 
 this, and between 1899 and 1904 he spent scores of 
 millions of dollars in improving both the Union Pa- 
 cific and the Central Pacific by relocating and re- 
 
CONTEST WITH THE SANTA FE 379 
 
 building their tracks. He turned his attention first to 
 the mountainous region between Ogden and Reno, 
 partly because that section was most important and 
 partly because grades there were heaviest and curves 
 most frequent. He always intended, however, to 
 carry out,a plan long contemplated by Mr. Hunting- 
 ton, which was to improve the main line of the South- 
 ern Pacific by changing its location between Lords- 
 burg, New Mexico, and Yuma, Arizona, where the 
 road crossed the Rocky Mountains and where maxi- 
 mum grades ran from one and one half to nearly two 
 per cent. 
 
 A glance at a contour map"of the United States 
 will show that from Canada to Mexico there is no 
 watercourse that cuts entirely through the Rocky 
 Mountains and their outlying foothills except the 
 Gila River in southern Arizona. Everywhere else 
 the range is practically unbroken, and in order to 
 surmount it the builders of the first transcontinental 
 lines had to carry the work of construction up more 
 or less steep grades, where, in many places, there was 
 a rise of one hundred feet or more to the mile. The 
 advantages of the Gila Valley route had been known 
 for many years, and the engineers who made sur- 
 veys for the Southern Pacific were well aware that 
 by adopting it they could get across the mountains 
 with a maximum grade of only twenty-six feet per 
 
380 E. H. HARRIMAN 
 
 mile. They were deterred, however, from taking 
 this course by a very formidable obstacle. Just west 
 of the San Carlos Indian Reservation, the Gila River 
 runs into what is known in Arizona as a " box canon " 
 — a very narrow defile between high rocky cliffs. 
 This canon is about eighteen miles in length, and its 
 walls rise perpendicularly, almost from the water's 
 edge, to heights of from eight hundred to a thousand 
 feet. The engineering work involved in building 
 through such a gorge would be very expensive and 
 would take a good deal of time; so it was finally de- 
 cided that a better plan would be to cross the moun- 
 tains fifty or sixty miles farther south, where the 
 road could be more quickly and easily built and 
 where the initial cost would be less. Mr. Huntington 
 and Mr. Kruttschnitt, however, always kept the 
 Gila route in mind, and fully intended to build over 
 it as soon as the financial condition of the Southern 
 Pacific should be such as to justify the necessary 
 expenditure. 
 
 Meanwhile.'the Atchison, Topeka & Santa Fe, the 
 most enterprising and powerful rival of the South- 
 ern Pacific, began to show a disposition to get control 
 of the Gila Canon by building toward it from Phoe- 
 nix. In the summer of 1902, the Phoenix & Eastern 
 Railroad Company, a corporation backed by Santa 
 Fe interests, obtained an Arizona charter, filed the 
 
CONTEST WITH THE SANTA FE 381 
 
 necessary location maps, and began the construction 
 of a line from Phoenix to Benson, by way of the Gila 
 and San Pedro Valleys. The ostensible object of this 
 enterprise was to secure a connection with the El 
 Paso & Southwestern and thus get an entrance into 
 Texas. To this move the Southern Pacific offered no 
 objection, although the projected road invaded its 
 territory and for a distance of one hundred and 
 eighty-five miles nearly paralleled its main line. In 
 December, 1903, however, the Phoenix & Eastern 
 abandoned the location along the south bank of the 
 Gila River on which it had originally filed, crossed to 
 the north bank, where it had no right of way, and 
 began making location surveys eastward in the gen- 
 eral direction of the Gila Canon. This, and other 
 moves made by the Santa Fe about the same time, 
 seemed to indicate an intention on the part of its 
 managers to preempt the only practicable approach 
 to the canon, and perhaps build through the canon 
 itself, thus preventing the Southern Pacific from 
 constructing its proposed line from Lordsburg to 
 Yuma by way of the Gila Valley. 
 
 When this state of affairs was reported to Mr. 
 Harriman, he took steps at once to protect Southern 
 Pacific interests. By his direction, and under the 
 immediate supervision of Epes Randolph, vice-presi- 
 dent and general manager of Southern Pacific lines 
 
382 E. H. HARRIMAN 
 
 in Arizona and New Mexico, a new company was 
 incorporated under the name of Arizona Eastern, 
 which was empowered by its charter to build a road 
 from Yuma to Lordsburg by way of Phoenix, Dud- 
 leysville, the Gila Canon, and the San Carlos Reser- 
 vation. This new company began at once to make 
 location surveys and pushed them with all possible 
 speed to completion. Meanwhile, the Phoenix & 
 Eastern was also making location surveys, with a 
 view to preempting a strip of land about eighteen 
 miles long on the northern bank of the river, where, 
 under its original map and location, it had no right 
 of way. As this strip furnished the best and easiest 
 means of access to the Gila Canon, each of the con- 
 tending parties strove eagerly to get possession of it 
 by prior location. The Arizona Eastern completed 
 its surveys early in March, 1904, and on the 14th of 
 that month at 9 A.M. filed its route map in the United 
 States Land Office at Tucson, as required by the Act 
 of Congress of March 3, 1875, granting rights of way 
 to railroad companies over the public domain. The 
 Phoenix & Eastern filed its own route map on the 
 same day, but not until 9.20 A.M., so that the Arizona 
 Eastern had a small margin of twenty minutes' pri- 
 ority. Both companies began grading operations on 
 the disputed strip, and as the rival gangs of labor- 
 ers were working almost side by side, they natu- 
 
CONTEST WITH THE SANTA FE 383 
 
 rally interfered and clashed frequently with one 
 another. 
 
 The contest, thus far, had been for possession only 
 of the eighteen-mile strip on the northern bank of 
 the river below Dudleysville, which may be described 
 as the western approach to the Gila Canon, but a 
 struggle soon began for possession of the canon itself. 
 On the 6th of April, 1904, the Santa Fe brought 
 about the organization and incorporation of still 
 another company, called the Gila River Railroad 
 Company, whose charter authorized it to establish a 
 connection with the Phoenix & Eastern at or near 
 Dudleysville, and to build thence through the Gila 
 Canon and across the Arizona-New Mexico bound- 
 ary to the terminus of the Santa Fe branch line at 
 Deming. So far as the Gila Canon was concerned, 
 this route had already been preempted by the Ari- 
 zona Eastern in the map that it filed in the United 
 States Land Office on the 14th of March, 1904; but 
 the Gila River Company, nevertheless, made ap- 
 plication to the Interior Department in Washington 
 for right of way. 
 
 The various controversies involving preemption 
 rights on the northern side of the river soon became 
 the subject of litigation, and in the trial court the 
 Arizona Eastern's right of way through the Gila 
 Canon was sustained. The case was then appealed 
 
384 E. H. HARRIMAN 
 
 to the United States Supreme Court, but before a 
 final decision had been rendered, the managers of 
 the Santa Fe, anticipating defeat, approached Mr. 
 Harriman with a proposition to compromise. • The 
 negotiations that followed ended in an agreement on 
 the part of the Southern Pacific to purchase the 
 capital stock of the Phoenix & Eastern at cost. This 
 was a clear victory for Mr. Harriman, because it not 
 only gave him undisputed possession of the Gila 
 Canon and the road leading thereto, but put an end 
 to the encroachments of the Santa Fe upon Southern 
 Pacific territory in that part of Arizona. 
 
 Mr. Harriman was always desirous of maintaining 
 peaceful relations with the Santa Fe, and even went 
 so far as to offer its managers seats for two of their 
 representatives in the Southern Pacific directorate, 
 provided they would reciprocate by giving him a 
 similar privilege in their own directorate. "We 
 should work in harmony," he said to them, "and not 
 live in strife. You give me two seats on the board of 
 the Santa Fe and I will give you two seats on the 
 board of the Southern Pacific." But this offer was 
 not accepted. Perhaps President Ripley and his 
 associates were afraid of the influence that might be 
 exerted in their organization by a man of Mr. Har- 
 riman's energetic and dominating character. But 
 the privilege that they would not concede volun- 
 
CONTEST WITH THE SANTA FE 385 
 
 tarily was eventually extorted from them. In the 
 summer of 1904, while the contest for possession of 
 the Gila Canon was still going on, Mr. Harriman 
 and his associates bought in the open market 300,000 
 shares ($30,000,000 par value) of Santa Fe stock. 
 This gave them power to elect two directors, and 
 H. H. Rogers and H. C. Frick were shortly after- 
 ward chosen to represent Union Pacific and South- 
 ern Pacific interests on the Santa Fe board. 
 
 Although Mr. Harriman was a keen rival when 
 competition became necessary, he was always of 
 opinion that competitive railroad-building is not 
 permanently advantageous, either to the public, or 
 to the companies that engage in it; and that where 
 competing lines are already in existence, it is best for 
 them either to work harmoniously together by means 
 of cooperation, or to combine under a single manage- 
 ment. This was the central thought in the address 
 that he delivered at the opening of the Louisiana 
 Purchase Exposition in St. Louis on the 30th of 
 April, 1904. "The combination of different rail- 
 ways," he then said, "should be regulated by law. 
 So far as may be necessary, the public interest should 
 be protected by law; but in so far as the law obstructs 
 such combinations, without public benefit, it is un- 
 wise and prejudicial to the public interest." 
 
 This was not then the view of Congress, or of the 
 
386 E. H. HARRIMAN 
 
 American people. Combination was prohibited by 
 the Sherman Anti-Trust Law, even when it was 
 clearly beneficial to the public. Time and experi- 
 ence, however, showed the soundness of Mr. Harri- 
 man's judgment. During and after the World War, 
 the advantages of railroad combination were almost 
 universally recognized, and Congress itself adopted 
 the very policy for which Mr. Harriman had been 
 condemned. 1 
 
 1 The bill introduced in 1919 by Senator Cummins, chairman of the 
 Senate Committee on Interstate Commerce, authorized railroads to 
 combine voluntarily in geographical groups, and provided that at the 
 end of seven years such combination should be compulsory. 
 
CHAPTER XVI 
 NORTHERN SECURITIES COMPANY DISSOLVED 
 
 WHEN the United States Supreme Court, on 
 the 14th of March, 1904, decided that the 
 Northern Securities Company was "an illegal com- 
 bination in restraint of trade" and ordered that it be 
 dissolved, the question arose: How should the disso- 
 lution be brought about? Should the corporation 
 terminate its existence by cancelling its stock and 
 giving back to every holder the same kind and the 
 same number of shares that the latter had put into 
 it? Or should it dissolve by distributing its total as- 
 sets, pro rata, among its stockholders, without regard 
 to the kinds of stock originally received from them? 
 Regarded as a question of equity, it would seem to 
 depend upon the nature of the agreement between 
 the parties at the time when the combination was 
 formed. If a Northern Pacific stockholder put in his 
 shares with the understanding that they were to re- 
 main his property until the combination should be 
 legally and effectually established, he might right- 
 fully demand the return of those very same shares 
 when the combination was dissolved by judicial 
 decree. If, on the other hand, he sold his shares 
 to the combination unconditionally, and without 
 
388 E. H. HARRIMAN 
 
 regard to the latter's effectual and permanent estab- 
 lishment, he could equitably claim only his pro rata 
 share of the combination's assets. To the average 
 small stockholder it made little difference, perhaps, 
 whether he got back the same shares that he had 
 turned in or not; but to Mr. Harriman it made a very 
 great difference. If, on the dissolution of the com- 
 bination, he recovered all the shares of the Northern 
 Pacific Company that he had originally contributed, 
 he would still retain controlling power in that or- 
 ganization, because he had turned in more than a 
 majority of its capital stock. If, however, he got 
 back only a part of his Northern Pacific shares and 
 had to take with them a part of the shares of the 
 Great Northern, he would have only a minority 
 holding in each corporation and comparatively little 
 power in either. 
 
 Mr. Hill and his associates, very naturally, pre- 
 ferred to make a pro rata distribution of the holding 
 company's assets, including both Northern Pacific 
 and Great Northern shares, so on the 22d of March, 
 1904, they sent out a circular to the stockholders of 
 the Northern Securities Company, apprising them 
 of the impending dissolution and proposing to return 
 to them, not the same kind and the same number of 
 shares that they had put in, but $39.27 in stock of 
 the Northern Pacific and $30.17 in stock of the Great 
 
NORTHERN SECURITIES COMPANY 389 
 
 Northern for every share of Northern Securities 
 stock that they surrendered. The circular also gave 
 notice of a special meeting of Northern Securities 
 stockholders, to be held on the 21st of April, 1904, 
 for the purpose of voting on the proposition. 1 
 
 On the 2d of April, 1904, only eleven days after 
 the Hill plan of dissolution was announced, counsel 
 for the Oregon Short Line (a subsidiary of the Union 
 Pacific) applied to the courts for permission to inter- 
 vene, on the ground that it (the Short Line Com- 
 pany) was still the owner of the Northern Pacific 
 shares that had been turned in, and that the pro- 
 posed distribution of the holding company's assets 
 would be unjust and inequitable. Permission to 
 intervene was denied, whereupon Harriman brought 
 suit in the United States Circuit Court for an in- 
 junction to prevent the Northern Securities Com- 
 
 1 Mr. Hill afterward stated, in a letter to a friend, that this plan, 
 when first proposed, had Mr. Harriman's approval (Life of James J. 
 Hill, by J. G. Pyle, vol. II , pp. 178-79) ; but such does not seem to have 
 been the case. The first plan was presented at a conference held in Mr. 
 Hill's office soon after the United States Supreme Court rendered its 
 decision. The gentlemen who attended that conference were Mr. Hill, 
 Messrs. Grover, Stetson, and Johnson, his legal counsel, and R. S. 
 Lovett, general counsel for the Harriman lines. The plan, as pre- 
 sented, was discussed and developed, mainly by Stetson and Johnson, 
 and the conferees separated with the understanding that they should 
 meet again on the following morning. When Mr. Lovett reported to 
 Mr. Harriman what the plan was, the latter dissented at once. Mr. 
 Lovett thereupon telephoned Mr. Grover, counsel for Mr. Hill, that 
 Mr. Harriman was "not prepared to commit himself to the plan sug- 
 gested," and that he (Lovett) would not return to the conference. 
 
390 E. H. HARRIMAN 
 
 pany from distributing its assets in the manner pro- 
 posed. The court issued a temporary restraining 
 order, and on April 21, 1904, just before the special 
 meeting of the Northern Securities stockholders, 
 Harriman sent to them the following "Notice": 
 
 Notice is hereby given to the special meeting of stock- 
 holders of the Northern Securities Company that the 
 undersigned claim that the shares of the capital stock of 
 the Northern Pacific Railway Company delivered by 
 Edward H. Harriman and Winslow S. Pierce to the 
 Northern Securities Company, on or about November 
 18, 1901, and consisting of $37,023,000, par value, of the 
 common stock of said railway company and $41,085,- 
 000, par value, of the preferred stock of said railroad 
 company, and the common stock into which said pre- 
 ferred stock has been converted, belong to the Oregon 
 Short Line Company, as the legal and equitable owner 
 thereof; that the Northern Securities Company is not 
 now, and never became, the owner thereof, but is simply 
 a custodian, and that the undersigned are entitled to 
 the return and delivery to them of certificates for said 
 stock of the Northern Pacific Railway Company, upon 
 the surrender by them of $82,491,871, par value, of the 
 capital stock of the Northern Securities Company and 
 the payment of $8,915,629 in cash received by them on 
 such delivery of Northern Pacific stock to the Northern 
 Securities Company as aforesaid. 
 
 Notice is further given that the said Northern Securi- 
 ties Company has no right to distribute the said North- 
 ern Pacific stock, pro rata, among the stockholders of the 
 Northern Securities Company, or otherwise dispose of 
 the same except to return the same to the undersigned. 
 
 Notice is further given that the undersigned have in- 
 
NORTHERN SECURITIES COMPANY 391 
 
 stituted a suit in the Circuit Court of the United States 
 for the district of New Jersey to have it adjudged that 
 they are entitled to the return of the said Northern Pa- 
 cific stock to them, and that in said suit a restraining or- 
 der has been granted by the Hon. Andrew Kirkpatrick, 
 U.S. Judge, restraining and enjoining the Northern Se- 
 curities Company, until the hearing and decision of the 
 application of the undersigned for a preliminary writ of 
 injunction, from parting with, disposing of, assigning, 
 transferring, or distributing said stock of the Northern 
 Pacific Railway Company so received from said Harri- 
 man and Pierce, or the certificates which now represent 
 the same, and that a copy of said restraining order and of 
 the bill of complaint, exhibits and affidavits on said mo- 
 tion for a preliminary injunction have been duly served 
 on the officers of the Northern Securities Company. 
 Edward H. Harriman 
 Winslow S. Pierce 
 Oregon Short Line Railroad 
 The Equitable Trust Company 
 
 In arguing this case before the Circuit Court judge, 
 counsel for Mr. Harriman contended that the Hill 
 plan of dissolution, if carried into effect, would put 
 the control of the two roads into the hands of the 
 same men who had combined to organize the North- 
 ern Securities Company and who were still endeavor- 
 ing to secure such control in another way. It would 
 be unfair, counsel argued, to allow the Hill-Morgan 
 interests to take away from the Harriman interests 
 the majority of Northern Pacific stock that they had 
 held prior to the organization of the Securities Com- 
 
392 E. H. HARRIMAN 
 
 pany, and to give them in exchange only a minority 
 of Northern Pacific shares and a still smaller minor- 
 ity of Great Northern shares. The latter they had 
 never bought and never desired to buy, and the Hill 
 plan, if carried through, would merely force them to 
 take about $25,000,000 of Great Northern stock in 
 which they had no interest whatever. 
 
 Although Mr. Harriman secured an injunction 
 and thus blocked temporarily the proposed distribu- 
 tion of the Securities Company's assets, he was un- 
 able to hold his advantage. Gn the 1 8 th of August, 
 1904, Hill and his associates carried the case by ap- 
 peal to the Circuit Court of Appeals, and succeeded, 
 on the 3d of January, 1905, in getting the injunction 
 dissolved. Mr. Harriman thereupon obtained a writ 
 of certiorari and took the case to the United States 
 Supreme Court, where it was argued March 2, 1905. 
 Four days later the Supreme Court handed down a 
 decision in which Harriman's plea for the return of 
 his Northern Pacific shares was denied and the Hill 
 plan for the distribution of the holding company's 
 assets was approved and sanctioned. The Northern 
 Securities Company then called in for cancellation 
 ninety-nine per cent of its shares and gave to the 
 holders thereof $39.27 in Northern Pacific stock and 
 $30.17 in Great Northern stock for every share sur- 
 rendered. This distribution not only deprived Mr. 
 
NORTHERN SECURITIES COMPANY 393 
 
 Harriman of his control of the Northern Pacific 
 Company, but affected his interests injuriously in 
 another way. If he recovered all of the Northern 
 Pacific shares that he turned in when the Securities 
 Company was formed, he would have, at the par 
 value of such shares, $78,108,000, with an annual 
 income (at the current dividend rate) of $5,467,560. 
 If, on the other hand, he got back only his pro rata 
 share of the Securities Company's assets (including 
 both Northern Pacific and Great Northern shares), 
 he would have only $56,709,330, at par value, with 
 an annual income of only $3,969,667.' 
 
 In carrying through his plan for such a distribu- 
 tion of the holding company's assets as would de- 
 prive Mr. Harriman of power in Northern Pacific 
 and Burlington affairs, Hill won a decisive victory; 
 but he was not satisfied, nevertheless, with the out- 
 come of the litigation as a whole. 
 
 The dissolution of the Northern Securities Company 
 [says his biographer] was one of Mr. Hill's few great dis- 
 appointments. It cannot properly be said to mark a fail- 
 ure. The plan, as it was outlined in his mind, away back 
 in 1893 to 1895, was a limited holding company for 
 Great Northern stockholders only. Time and circum- 
 stances, rather than individual judgment or desire, had 
 compelled its expansion to the form taken by the North- 
 
 1 History of the Northern Securities Case, by B. H. Meyer, Univer- 
 sity of Wisconsin Bulletin, p. 295. 
 
394 E. H. HARR1MAN 
 
 ern Securities. The forces which struck at this, both 
 State and Federal, were inspired, in part at least, by a 
 political motive. The decision pictures the court in 
 doubt. The vote of five to four was almost equivalent to 
 "not proven." The after event amounted to a vindica- 
 tion. For, just as the reorganization of the Northern 
 Pacific, planned in 1895 and prohibited by the court, 
 was accomplished in another fashion, to the same end 
 but in conformity with the law, so the main business 
 and economic purposes of the Northern Securities have 
 since been realized. The only thing actually accom- 
 plished by the court's decision was to prevent eight or 
 ten old men from placing their investments where they 
 would be secure after their death. 1 
 
 If the dissolution of the Northern Securities Com- 
 pany was a disappointment to Mr. Hill, the failure 
 to secure complete control of the Northern Pacific 
 in 1 90 1 and the adverse decision of the United States 
 Supreme Court in 1905 were equally disappointing 
 to Mr. Harriman, because they defeated his plans 
 and left the Union Pacific with only a minority hold- 
 ing of stock in each of the Hill-Morgan companies. 
 Great disappointments, however, are sometimes at- 
 tended by compensating advantages, and it hap- 
 pened to be so in this case. The Great Northern 
 stock, which Mr. Harriman did not want, but which 
 he was forced to take when the Securities Company 
 dissolved, proved to be a veritable bonanza. In the 
 fall of 1905, the Great Northern Company added 
 
 1 Life of James J. Hill, by J. G. Pyle, vol. 11, pp. 183-84. 
 
NORTHERN SECURITIES COMPANY 395 
 
 $25,000,000 to its capital stock and gave to its stock- 
 holders the privilege of subscribing to the new issue 
 at par. As the stock at that time was selling at a 
 premium, Mr. Harriman, of course, took the amount 
 allotted to the Union Pacific, and thus increased his 
 holdings by 37,444 shares. Then, in the latter part 
 of 1905 and the early part of 1906, there happened to 
 be an extraordinary boom in the stock market which 
 carried railroad securities, and especially the Hill 
 stocks, to almost unprecedented figures. Northern 
 Pacific sold up to $232.50 a share, while Great North- 
 ern, notwithstanding the recent expansion of its cap- 
 ital, was bid up to a maximum of $348 a share. Dur- 
 ing this period of speculative excitement, and upon 
 this steadily rising market, Mr. Harriman disposed 
 of nearly all his Northern Pacific and Great North- 
 ern shares at prices that gave the Union Pacific a net 
 profit of about $58,ooo,ooo. 1 It is doubtful whether 
 a greater sum was ever made out of a single stock 
 investment, and certainly no investor ever secured 
 $58,000,000 as pecuniary compensation for a series 
 of failures and defeats. Mr. Thomas Woodlock, a 
 
 1 Professor Ripley estimated the profit of the Union Pacific at about 
 $83,000,000 (Railroads: Finance and Organization, p. 506); but his 
 figuring, apparently, was based on the assumption that the stocks 
 were sold at the highest prices that they reached. Such, however, was 
 not the case. Mr. Harriman sold the Northern Pacific stock at an 
 average price of $208.75 a share (maximum quotation, $232.50) and 
 the Great Northern stock at an average of $304.51 per share (maxi- 
 mum quotation, $348). 
 
396 E. H. HARRIMAN 
 
 railroad expert of that time, when asked by Carl 
 Snyder what he regarded as Mr. Harriman's greatest 
 achievement, said: " I think it was this; to get licked 
 in a fight and to pull out of it with a colossal fortune 
 as the result." V The "colossal fortune," however, 
 was the result of good luck, rather than of clear pre- 
 vision and deliberate intention. Mr. Harriman took 
 advantage of the stock-market boom and sold the 
 holdings of the Union Pacific at an immense profit; 
 but the causes that brought about the enhancement 
 of value were largely fortuitous. 
 
 Mr. Harriman has sometimes been accused of "cor- 
 porate speculation," and of managing the finances 
 of his railroads "with an eye to the Wall Street 
 situation"; 2 but for this charge (at least in the 
 sense of stock gambling with corporate funds) there 
 never was any justification. He usually spent fifty 
 per cent more for the maintenance and improve- 
 ment of his properties than was spent by other rail- 
 way managers in the same territory, and when he 
 invested corporate funds in the securities of other 
 railroad companies, it was not "with an eye to the 
 Wall Street situation," but rather with a view to 
 strengthening the position and increasing the busi- 
 
 1 "Harriman: Colossus of Roads," by Carl Snyder, Review of Re- 
 views, January, 1907, p. 48. 
 
 * Railroads: Finance and Organization, by Professor William Z. 
 Ripley, pp. 511, 514, 515. 
 
The New Colossus of Roads. 
 
 '-' -&'.v." 
 
 -^fr 
 
 V.-.. "\ 
 
 A NEWSPAPER CARTOON 
 
NORTHERN SECURITIES COMPANY 397 
 
 ness of the Union Pacific and Southern Pacific sys- 
 tems. 
 
 His investment in the stock of the Northern 
 Pacific, which is a case in point, was a strategic move 
 rather than a speculative venture. His object was to 
 get a share in the advantages of the Burlington pur- 
 chase, which Hill had refused to give him. Circum- 
 stances and the course of events, however, defeated 
 his original plan and turned what was meant to be 
 a strategic move into an enormously profitable trans- 
 action. He failed to get control either of the North- 
 ern Pacific or of the Burlington, but, by way of com- 
 pensation, he was able to put into the treasury of the 
 Union Pacific $58,000,000 in cash by selling Great 
 Northern stock which he had been forced to take and 
 Northern Pacific stock which he had bought without 
 any reference whatever to "the Wall Street situa- 
 tion." He did show, however, an accurate judgment 
 of values when he quickly got rid of these stocks by 
 selling them at prices which he believed to be far 
 above their intrinsic worth. 
 
 At the end of the fiscal year 1905-06, 1 the ex- 
 tremely prosperous condition of the Union Pacific 
 
 1 Professor Ripley, commenting upon the company's financial 
 status at that time, says, "its revenues from operation were enor- 
 mous," "its repayments from advances to subsidiary companies were 
 steadily increasing" : and "its treasury was literally bursting with free 
 assets." {Railroads: Finance and Organization, p. 507.) 
 
398 E. H. HARRIMAN 
 
 Company and the receipt of $58,000,000 in cash 
 from the sale of Northern Pacific and Great Northern 
 stocks enabled Mr. Harriman to extend the influence 
 of his roads, facilitate traffic, and stabilize rates, by 
 investing largely in the securities of other railway 
 systems with which his own lines indirectly connected 
 or competed. Up to that time he had never bought 
 stocks of other railroad corporations with a view to 
 the establishment of closer and more sympathetic 
 business relations; but in 1906 he began to make 
 purchases for the express purpose of creating what 
 was then known as a "community of interest." Be- 
 tween June 30, 1906, and March I, 1907, he invested 
 for the Union Pacific more than $130,000,000 in the 
 securities of nine different railway companies, whose 
 lines covered almost the whole country from ocean to 
 ocean and from the Great Lakes to the Gulf. The 
 several amounts of stocks thus bought were as fol- 
 lows: 
 
 Atchison, Topeka & Santa F6, preferred $10,395,000 
 
 Baltimore & Ohio, preferred 6,665,920 
 
 Baltimore & Ohio, common 38,801,040 
 
 Chicago, Milwaukee & St. Paul 5-997.750 
 
 Chicago & Northwestern 51303,673 
 
 Fresno City Railway 106,410 
 
 Illinois Central 41,442,028 
 
 New York Central 19,634,324 
 
 St. Joseph & Grand Island 2,022,540 
 
 $130,368,685 » 
 
 1 Reports of Interstate Commerce Commission, vol. 12, p. 20. 
 
NORTHERN SECURITIES COMPANY 399 
 
 These amounts of stock were not sufficient, in any 
 case, to secure absolute majority control; but, as 
 Professor Ripley has rightly said, "there can be no 
 doubt that such substantial fractions could exercise 
 a powerful influence upon the traffic policy of the 
 properties concerned." With regard to the wisdom 
 of this policy, or its expediency in view of the state of 
 public opinion at that time, there have been differ- 
 ences of opinion. Mr. Otto H. Kahn, who was a close 
 and sympathetic associate of Mr. Harriman, in com- 
 menting afterward upon these large stock purchases, 
 said: 
 
 Whatever be the cause or explanation, he [Mr. Harri- 
 man] took action that year which, it has always seemed 
 to me, was the one serious mistake in his management of 
 Union Pacific affairs. I refer to the purchases of very 
 large amounts of stocks of many other companies, 
 which were made for the account and placed in the 
 treasury of the Union Pacific. For some of these acqui- 
 sitions it must be said, there were valid, legitimate, and, 
 in fact, almost compelling reasons, even at the then pre- 
 vailing high prices ; but for others it was and is difficult 
 to discern sufficient warrant, especially considering the 
 time and the cost at which they were made and the ef- 
 fect which they were likely to have and actually did 
 have upon public opinion. It is but fair to add that the 
 problem of how to deal with the huge cash fund realized 
 by the Union Pacific through the sale of its Northern 
 Pacific stock holdings was an exceedingly difficult and 
 complex one ; that the operation of selling Northern Pa- 
 cific stock and reinvesting the proceeds in the stock of 
 
400 E. H. HARRIMAN 
 
 other lines did largely increase the annual income to 
 the Union Pacific; and that Mr. Harriman . . . never 
 changed his belief that the entire transaction, looked 
 upon primarily as a change of investments, was advan- 
 tageous to the company, in that it greatly augmented its 
 income, and would ultimately be found to carry with it, 
 as to all the stocks concerned, important and legitimate 
 benefits. 1 
 
 Mr. Kahn's disapproval of Mr. Harriman's policy 
 seems to have been based mainly on the unfavorable 
 effect that it had on public opinion. " It lent color," 
 he said, "to the impression that Mr. Harriman was 
 aiming at a gigantic illegal monopoly of the railroad 
 industry." It may well be doubted, however, whether 
 fear of hostile public opinion ought to deter an ex- 
 perienced and far-sighted railway manager from 
 adopting a policy that he believes will be beneficial 
 to all concerned. Public opinion is seldom well in- 
 formed, and popular judgments, in many cases, are 
 largely influenced by prejudice, politics, or dema- 
 gogic misrepresentation. Every business man natu- 
 rally prefers to have popular approval of his acts, 
 rather than general condemnation of them; but Mr. 
 Harriman never allowed fear of public censure to 
 influence his policies or his decisions. This was 
 shown in many cases. His purchase of a controlling 
 interest in the Southern Pacific "lent color to the 
 
 1 Edward Henry Harriman, by Otto H. Kahn (New York, 191 1), 
 P- 39- 
 
NORTHERN SECURITIES COMPANY 401 
 
 impression that he was aiming at a gigantic illegal 
 monopoly" of transcontinental traffic; but subse- 
 quent events proved that the popular "impression" 
 was an erroneous one, and that the reconstruction of 
 the Southern Pacific with the capital and credit of 
 the Union Pacific was as beneficial to the people of 
 the Great West as it was to the stockholders of the 
 two companies. It is difficult to see why this was not 
 equally true of Mr. Harriman's stock purchases in 
 1906 and 1907. They affected public opinion un- 
 favorably, for the reason that Mr. Kahn has stated ; 
 but it does not appear that they were actually in- 
 jurious to anybody. 
 
 Professor William Z. Ripley, who seldom took a 
 favorable view of Mr. Harriman's financial methods 
 and policies, 1 seems to have seen clearly, in this case, 
 that the investments in question were highly advan- 
 tageous to the Union Pacific and Southern Pacific 
 systems. After giving a list of the securities bought, 
 he says: 
 
 By this good stroke of business the Union Pacific's in- 
 come from investments was enhanced by more than 
 fifty per cent. Such income had in fact risen from less 
 than $3,000,000 in 1900 to $6,497,000 in 1905. Now it 
 jumped to $10,333,000 — a sum greater than all the 
 Union Pacific dividend disbursement in the preceding 
 
 1 At least after 1907, when he seems to have been unduly influ- 
 enced by the Interstate Commerce Commission. 
 
4 02 E. H. HARRIMAN 
 
 year. . . . The aggregate cost of these securities, pur- 
 chased within a few months, was, as we have seen, over 
 $130,000,000. As a reinvestment of surplus funds the 
 list speaks for itself. The next question is as to their 
 strategic importance for purposes of transportation. 
 Absolute majority control of none of these properties 
 was secured. Less than one third of Illinois Central; 
 one fifth of Baltimore & Ohio; only about eight per cent 
 of New York Central, with perhaps as much more in 
 friendly individual hands; and even smaller percent- 
 ages of the granger roads — was all that was held. But 
 there can be no doubt that such substantial fractions 
 could exercise a powerful influence upon the traffic 
 policy of the properties concerned. And considered in 
 their entirety, they made up a network of lines reaching 
 every part of the United States. Most directly valuable, 
 probably, was the Illinois Central, as giving both the 
 Southern Pacific at New Orleans and the Union Pacific 
 at the Missouri River direct access to Chicago. And 
 with the acquisition of the Central of Georgia in 1907, 1 
 a through line from the South Atlantic ports to the 
 West was afforded. The important coal and iron and 
 cotton manufacturing districts of the South were given 
 their first through routing to important inland and Ori- 
 ental markets over a single system. And of course, con- 
 trariwise, the Illinois Central gave opportunity for par- 
 ticipation in the large grain export business through the 
 Gulf ports, as well as ready access to the new trade 
 routes to be opened up by the Panama Canal. Inciden- 
 tally, it may be noted that the distance to Chicago from 
 the Atlantic seaboard was, by comparison with the 
 
 1 This road was bought by Oakley Thorne and Marsden J. Perry 
 from the Richmond Terminal Reorganization Committee in June, 
 1907. It was shortly afterward sold by them to E. H. Harriman who 
 turned it over to the Illinois Central. (Tke Earning Power of Rail- 
 roads, by Floyd W. Mundy, New York, 1913, pp. 329 and 365.) 
 
NORTHERN SECURITIES COMPANY 403 
 
 northern trunk-lines, shortened by about one sixth by 
 this new southeastern trade route. 
 
 The Union Pacific now also enjoyed part control of 
 two great Atlantic trunk-lines. The New York Central, 
 with its trans-Mississippi extension, the Chicago & 
 Northwestern, had long made up, with the Union Pa- 
 cific, the shortest and probably the best ocean-to-ocean 
 line. And the Baltimore & Ohio shares, being one half 
 of the Pennsylvania's former holdings, gave access to 
 the remaining North Atlantic seaports, as well as 
 amounting, in connection with powerful joint directors 
 in the Union Pacific and Pennsylvania boards, to a sort 
 of partnership with this most powerful company. As 
 for the St. Paul road, was that not an important rival in 
 a rich western territory? And even more important, 
 was it not, at that very time, announcing a Pacific 
 Coast extension which should give entry to the North 
 Pacific ports, served by the rival Morgan-Hill proper- 
 ties? 1 
 
 From the above statement of the advantages se- 
 cured by Mr. Harriman's stock purchases, it seems 
 to appear, not only that they were highly profitable 
 to the two Pacific systems, but that they conferred a 
 benefit also upon the general public by opening more 
 
 1 Railroads: Finance and Organization, by William Z. Ripley, pp. 
 508-10. 
 
 Authorities on railway economics generally agree that when pur- 
 chases of stocks are made — as Harriman made them — for the pur- 
 pose of "opening communications, or modifying competition, they 
 have a sound foundation." (See Railroad Reorganization by Stuart 
 Daggett, Cambridge, Mass., 1908, p. 260.) With regard to purchase 
 made to establish a "community of interest" see also American 
 Railway Transportation, by Emory R. Johnson, Professor of Trans- 
 portation and Commerce in the University of Pennsylvania (New 
 York, 191 1), pp. 253-55. 
 
404 E. H. HARRIMAN 
 
 direct through routes, by stabilizing rates, and by 
 greatly improving traffic facilities. Incidentally, of 
 course, they increased Mr. Harriman's power; but if 
 he did not use that power to promote corporate inter- 
 ests at the expense of the public welfare, his policy in 
 making such investments can hardly be regarded as 
 unwise, or mistaken. 
 
 In the light of all that we now know of transporta- 
 tion affairs in the first two decades of the present 
 century, Mr. Harriman's activities between 1899 
 and 1909 were, to say the least, far more beneficial to 
 shippers, producers, and consumers than were inter- 
 state regulation and Government control between 
 1909 and 1920. He left every railroad that he man- 
 aged better than he found it; he stimulated produc- 
 tion throughout the Great West by furnishing ade- 
 quate transportation to markets, and he moved 
 many million tons of freight that never would have 
 been moved if he had not lived. 
 
A 
 
 CHAPTER XVII 
 
 EQUITABLE LIFE INVESTIGATION 
 
 LMOST every man, at some time in the course 
 of his life, becomes involved in a contest, or 
 controversy, which he did not originate and for 
 which he is not in any way responsible. Such was 
 the case when Mr. Harriman, in 1905, was drawn 
 into a fight for control of the Equitable Life Assur- 
 ance Society. He did not begin this fight, nor was he 
 at all interested in the outcome of it; but circum- 
 stances happened to make him a participant, and, 
 as Mr. Kahn has said, he soon "became the prin- 
 cipal and probably the most attacked' figure of the 
 conflict, both the warring factions pausing in their 
 fight with each other to pour their fire of abuse and 
 innuendo upon him." l 
 
 The history of the Equitable, so far as it seems 
 necessary to give it here, may be briefly summarized 
 as follows: 
 
 About the year i859,'Henry B. Hyde, a well-to-do 
 employee of the Mutual Life Insurance Company of 
 New York, conceived the idea of organizing an in- 
 
 1 Edward Henry Harriman, by Otto H. Kahn (New York, 191 1), 
 p. 19. 
 
406 E. H. HARRIMAN 
 
 surance company of his own — or at least one that 
 he himself could control. As he did not have money 
 enough for such an undertaking, he applied for as- 
 sistance to his friend and pastor, Rev. Dr. J. W. 
 Alexander, of the Nineteenth Street Presbyterian 
 Church. Through the latter's influence, he succeeded 
 in raising nearly fifty thousand dollars, in addition to 
 what he already had of his own, and with a capital of 
 $100,000 he organized and incorporated the "Equi- 
 table Life Assurance Society of the United States," 
 a joint-stock company, a majority of whose shares he 
 held. In recognition of the aid given him by Dr. 
 Alexander, he made the latter's brother, William C. 
 Alexander, president of the society; but he himself, 
 as vice-president, was the real manager, partly be- 
 cause he had had experience in the business and 
 partly because he owned more than half of the cap- 
 ital stock. When, some years later, William C. Alex- 
 ander died, Hyde took the presidency, and caused 
 the election of J. W. Alexander, a son of Dr. Alex- 
 ander, as vice-president. 
 
 The society was prosperous and successful almost 
 from the first, and under Hyde's skillful manage- 
 ment its business steadily and rapidly increased, 
 year by year, until, toward the close of the century, 
 its available assets amounted to more than $400,- 
 000,000. When Henry B. Hyde died, in 1899, he left 
 
EQUITABLE LIFE INVESTIGATION 407 
 
 most of his property, including his Equitable stock, 
 to his son, James Hazen Hyde; but as the latter was 
 then only twenty-three years of age, the will con- 
 tained a stipulation that he should not become presi- 
 dent of the company until he reached the age of 
 thirty. J. W. Alexander was, therefore, elected presi- 
 dent and acted as a sort of regent until young Hyde 
 should become old enough to take his place. Mean- 
 while, the latter filled the position of vice-president. 
 
 Under the terms of its charter, the Equitable had 
 a board of fifty-two directors, who were supposed to 
 control its policies and manage its affairs; but, as is 
 often the case in large corporations, they discharged 
 their duties in a merely perfunctory way and left the 
 real management of the company to its president 
 and vice-president. 
 
 Control of any great insurance company carries 
 with it control of a vast amount of money; and there 
 are many ways in which such a corporation can be 
 "milked" — to use a colloquial expression — with- 
 out actual criminality or flagrant dishonesty. Its 
 officers, for example, may establish a trust company, 
 get possession of a large amount of its capital stock, 
 and then favor it by depositing with it one, five, or 
 even ten million dollars of the insurance company's 
 money at a very low rate of interest. If the trust 
 company pays only two per cent for the use of such 
 
4 o8 E. H. HARRIMAN 
 
 deposits, and then loans them out at five per cent, it 
 obviously makes a large profit, and in this the of- 
 ficers of the insurance company share as stockhold- 
 ers of the trust company. Then, too, the president 
 or vice-president of an insurance company can buy 
 stocks or bonds as an individual (although perhaps 
 with the money of the policy-holders) and then resell 
 them to the insurance company at an advanced 
 price. Finally, by carrying in their own names stock 
 in other corporations that belongs to the insurance 
 company, officers of the latter can get themselves 
 elected as vice-presidents of such other corporations 
 and draw large salaries from them in addition to 
 those that they receive from their own company. 
 All these and various other methods of "milking" an 
 insurance company were practiced by one or another 
 of the Equitable's high officers, but they did not be- 
 come known to the public, or even to a majority of 
 the directors, until a quarrel between the president 
 and vice-president brought them to light. 
 
 Under the terms of his father's will, James Hazen 
 Hyde, owner of a majority of the Equitable Com- 
 pany's stock, would become eligible to the presi- 
 dency when he reached the age of thirty — that is, 
 in June, 1906. Early in February, 1905, just before 
 the annual meeting of directors, President Alexander 
 and thirty-five other officers, who composed what 
 
EQUITABLE LIFE INVESTIGATION 409 
 
 may be called the Alexander faction, sent to the 
 directors severally a so-called "petition," in which 
 they set forth their views with regard to the existing 
 state of the company's affairs, and recommended 
 that the society be changed from a joint-stock to a 
 mutual corporation. Such a change was permissible 
 under its charter, and the petitioners expressed the 
 belief that it would be better for all concerned if the 
 controlling power were vested in the policy-holders, 
 rather than in the stockholders. James Hazen Hyde, 
 who regarded this as a covert attempt to keep him 
 out of the presidency when he should reach the age 
 of thirty, gathered together the supporters who com- 
 posed his own faction and offered strenuous opposi- 
 tion to the proposed change. This led to a bitter 
 personal controversy which lasted for weeks and 
 filled the newspapers with charges, counter-charges, 
 and accusations. Hyde declared that Alexander was 
 actuated by selfish motives and desired only to re- 
 tain power, while Alexander rejoined that Hyde was 
 "an unsafe official" who had been guilty of various 
 irregularities and improprieties which affected in- 
 juriously the company's reputation and standing. 
 
 It was at this stage of the proceedings that Mr. 
 Harriman became involved in the controversy. He 
 had had relations with the Equitable as early as the 
 spring of 1 90 1, when, in the ordinary course of busi- 
 
410 E. H. HARRIMAN 
 
 ness, he borrowed from the society $2,700,000, put- 
 ting up, as collateral security, stocks and bonds 
 which had a market value of about $3,200,000. This 
 loan was renewed several times, at intervals of six 
 months or a year, but was finally liquidated, in 1904, 
 when the society demanded a higher rate of interest 
 than Mr. Harriman was willing to pay. 
 
 In November, 1902, for reasons given in a previous 
 chapter, Mr. Harriman, with the assistance of Kuhn, 
 Loeb & Co., organized a syndicate for the purpose 
 of buying 500,000 shares of Union Pacific preferred 
 stock. Regarding this purchase as likely to be a 
 profitable one, he offered Mr. Hyde a small share in 
 it. Hyde was more than willing to associate himself 
 with such men as Stillman, Schiff, Rockefeller, Rog- 
 ers, and Vanderbilt, and he therefore became a mem- 
 ber of the syndicate and took 20,000 shares of the 
 stock. 
 
 With the exception of these two transactions — the 
 $2,700,000 loan and the syndicate proposal — Mr. 
 Harriman never had any business relations with the 
 Equitable or any of its officers; but he became in- 
 volved in the company's affairs in another way. In 
 the spring of 1901, about the time when the Equi- 
 table loaned him $2,700,000, Mr. Hyde proposed to 
 him that he become one of the society's directors. 
 "I told him," Mr. Harriman afterward said, "that 
 
EQUITABLE LIFE INVESTIGATION 41 1 
 
 I had very little time to give to such things, and that 
 I did not think the method of management of the 
 Equitable was the right one." Hyde replied that 
 "he intended, as time went on, to change it, and 
 that his desire was to surround himself with inde- 
 pendent men, who would have no other interest 
 than that of the Equitable, to help him in his man- 
 agement"; because, as he said, "Mr. Alexander was 
 growing old, and his (Hyde's) succession (to the 
 presidency) was probably not far off. I told him 
 that if that was so and that was his intention, I 
 would become a director." 1 
 
 Mr. Harriman then went on the Equitable board 
 and served as a director from 1901 to 1905; but his 
 connection with the management was purely nom- 
 inal, as was that of Frick, Bliss, Schiff, Depew, and 
 many other members of the board. He attended 
 meetings and listened to reports; but he was never 
 appointed on any committee, and in all the four 
 years of his term his advice was solicited only once. 
 On that occasion Vice-President Hyde consulted 
 him with regard to a vacancy to be filled in the board 
 of directors, and Mr. Harriman recommended James 
 J. Hill, president of the Great Northern Railway 
 Company, as a suitable man for the place. 
 
 1 Testimony o( E. H. Harriman before the Armstrong legislative 
 committee appointed in 1905 to investigate the business of life insur- 
 ance companies. 
 
412 E. H. HARRIMAN 
 
 When the fight for supremacy began between the 
 Hyde and Alexander factions, Mr. Harriman sug- 
 gested that a committee of the board be appointed 
 to investigate the charges and counter-charges made 
 by the contending parties. Several of the directors, 
 including Chauncey M. Depew, thought that such 
 action would be premature, and at their request 
 Harriman refrained from putting his suggestion into 
 the form of a motion. Some time later, however, the 
 committee was appointed, and he himself was made 
 a member of it. The other members were H. C. 
 Frick (chairman), Brayton Ives, Cornelius N. Bliss, 
 and M. E. Ingalls. This committee, after a thorough 
 and impartial investigation, reported that the or- 
 ganization and management of the Equitable were 
 generally bad, and that neither Hyde nor Alexander 
 was fit for the place that he occupied. The commit- 
 tee therefore recommended that the company be 
 reorganized; that the president, first vice-president, 
 and second vice-president be requested to resign, 
 and that a special committee of seven be appointed 
 to nominate candidates for election in their places. 
 
 In view of the possible loss of their positions and 
 power, both factions then combined, temporarily, 
 for self-protection; and at the next meeting of the 
 directors succeeded in having the report rejected by 
 a majority vote. Frick, Bliss, and Harriman there- 
 
EQUITABLE LIFE INVESTIGATION 413 
 
 upon resigned as directors of the society. Mr. Har- 
 riman, however, continued to take an interest in its 
 affairs and spent a good deal of time in trying to 
 reconcile conflicting views, get an amended charter, 
 and put the corporation on a sound basis. 
 
 Although Alexander and Hyde had been able to 
 prevent the adoption of the Frick report, they were 
 not strong enough to withstand the tide of public 
 opinion which turned against them when that report 
 was given to the press. Both therefore tendered their 
 resignations, and Hyde sold his Equitable stock to 
 Thomas F. Ryan, a noted speculator and promoter 
 of that time. Mr. Harriman did not think that Ryan 
 was a suitable man to have control of the Equitable, 
 with its $400,000,000 of assets, and he therefore tried 
 to buy from him a part of the Hyde stock. Ryan 
 declined to sell, but proposed to put the stock into 
 the hands of trustees. Harriman had no objection to 
 this, provided Ryan would sell him half the stock 
 and allow him to name two of the five trustees; but 
 Ryan would not consent. Harriman thereupon noti- 
 fied him that he should use his influence against 
 him. 1 In July, 1905, the Equitable Society was re- 
 
 1 Testimony of E. H. Harriman before the Armstrong legislative 
 investigating committee in November, 1905. Mr. Harriman was put 
 on the stand a second time, at his own request, in order that he might 
 reply to certain statements made by Ryan in testifying before the 
 same committee. 
 
414 E. H. HARRIMAN 
 
 organized, with Paul Morton, ex-Secretary of the 
 Navy, as president; but it was not mutualized, and 
 Ryan, as owner of a majority of the stock, had vir- 
 tual control of it, whether he exercised such control 
 or not. 
 
 Mr. Harriman's intervention in the affairs of the 
 Equitable and his negotiations with Ryan brought 
 upon him a storm of criticism and censure. By sign- 
 ing the Frick report he had incurred the hostility of 
 both factions. Hyde, whom he had advised to vote 
 for the adoption of the report, denounced him as a 
 traitor; the Alexander party, whose methods he had 
 condemned, also attacked him, while his enemies 
 outside of the insurance company availed them- 
 selves of the opportunity to prejudice public opinion 
 against him by accusing him of " borrowing huge sums 
 of money from a company of which he was a director; 
 of foisting off upon it millions of securities of rail- 
 roads with which his name was identified; of treach- 
 ery to young Hyde while pretending friendship; of 
 attempting to manipulate the funds of the policy- 
 holders, and of a conspiracy to oust the warring fac- 
 tions and gain control of the society himself." 1 
 
 To these unwarranted and often malicious at- 
 tacks Mr. Harriman made no reply. In commenting 
 
 1 "Had Harriman Lived," Metropolitan Magazine, May, 19x0, pp. 
 147-48. 
 
EQUITABLE LIFE INVESTIGATION 415 
 upon them, after his death, Mr. Otto H. Kahn said: 
 
 Amongst the many campaigns of vituperation of 
 which Mr. Harriman was the object in the course of his 
 career, none succeeded so well in poisoning and embit- 
 tering the public mind against him. Under this ava- 
 lanche of unfair, baseless accusations he went the even 
 tenor of his way, declining to dignify them by defending 
 himself in public. On this and similar occasions I urged 
 him to speak out — to make use of the means at his 
 command for hitting back at his detractors and those 
 who willingly and eagerly gave circulation to their slan- 
 ders. I was never able to move him. "Let them kick," 
 he used to say. "It's all in the day's work. After a 
 while they will tire of it. Nothing tires a man more than 
 to kick against air. Moreover, it disconcerts him, and 
 not finding any point of resistance he is apt to kick him- 
 self off his feet. Besides, for immediate effect they have 
 the advantage, because they will tell lies about me, and 
 I won't about them. As for the effect in the long run, 
 why, the people always find out what's what, in the 
 end, and I can wait. Let those fellows shout and kick 
 against air. I need my time and energy to do things." l 
 
 Harriman's attitude toward persons who attacked 
 him was almost exactly that of President Lincoln. 
 William Roscoe Thayer says, in his "Life of John 
 Hay": 
 
 When Fox, Assistant Secretary of the Navy, said that 
 retribution had overtaken Hale and Winter Davis, 
 "two fellows who have been especially malignant to 
 us," Lincoln replied: "You have more of the feeling of 
 
 1 Edward Henry Harriman, by Otto H. Kahn (New York, 191 1), pp. 
 19-20. 
 
416 E. H. HARRIMAN 
 
 personal resentment than I. Perhaps I may have too 
 little of it, but I never thought it paid. A man has not 
 time enough to spend half his life in quarrels. If any 
 man ceases to attack me, I never remember the past 
 against him." * 
 
 It may well be" doubted, however, whether the 
 policy of non-resistance, in Mr. Harriman's case, 
 was justified by its results. When a man's char- 
 acter and motives are assailed and he does not de- 
 fend himself, the public is apt to assume that he is 
 unable to do so, and that the charges made against 
 him are probably true. But Mr. Harriman almost 
 invariably remained silent, even when he had a per- 
 fect defense in an absolutely impregnable case. " I 
 have n't time to bother with newspaper attacks," he 
 once said to a friend. "It'll all come right in the 
 end." "But," his friend rejoined, "if you continue 
 to ignore the newspapers, they'll eventually get 
 your scalp." 
 
 That Mr. Harriman's reputation often suffered as 
 the result of his refusal to defend himself publicly, 
 there can be no doubt. In several notable cases, he 
 drew up in manuscript a reply to charges, which, if 
 it had been published, would have been absolutely 
 convincing; but in none of these cases was the reply 
 given to the press. Just before he sailed for Japan, 
 in the summer of 1905, he dictated to his stenog- 
 .' Life of John Hay, by William Roscoe Thayer; vol. 1, pp. 215-16. 
 
EQUITABLE LIFE INVESTIGATION 417 
 
 rapher the following statement of his relations with 
 the Equitable Society; but it was never published. 
 
 There has been nothing in the relations of myself, or 
 the interests I represent, to the Equitable Life As- 
 surance Society and its allied companies 1 that will not 
 bear the closest scrutiny. We have never requested or 
 received a favor from them. The financial transactions 
 between our interests have been insignificant, and never 
 on terms that could not have been readily obtained 
 elsewhere. On the other hand, we have given the Mer- 
 cantile and Equitable Trust Companies many valuable 
 trusteeships, and all the transactions between us have 
 resulted in material advantage and profit to the Equi- 
 table and its allied companies. 
 
 I, personally, had one loan with the Equitable Life 
 which could have been obtained without difficulty at 
 any other like responsible institution on as good or bet- 
 ter terms. It was paid because the rate of interest was 
 higher than I was willing to pay, and without my even 
 attempting to have it reduced. 
 
 There is nothing in the Union Pacific preferred stock 
 syndicate that can be criticized. Mr. Hyde availed him- 
 self of an opportunity to join myself and associates in 
 the acquisition of Union Pacific preferred stock on a fa- 
 vorable basis. There was no profit or advantage to any 
 one member of the syndicate over another, and neither 
 the Equitable nor any of its allied companies, or any one 
 else, was ever requested to aid in any way in financing 
 the syndicate. 
 
 Like many other of the fifty-two directors I attended 
 
 1 The Equitable owned 64 per cent of the capital stock of the Mer- 
 cantile Trust Company, 44 per cent of the stock of the Equitable 
 Trust Company, and 35 per cent of the stock of the Commercial Trust 
 Company of Philadelphia. 
 
4 i8 E. H. HARRIMAN 
 
 the regular meetings, which were held quarterly, but I 
 was not a member of any committee, nor active in the 
 management. 
 
 . The Equitable controversy was started by an at- 
 tempt on the part of the Alexander faction to oust the 
 Hyde faction, and it was during that contest that the 
 main body of directors became informed, for the first 
 time, of the prevailing methods of conducting the com- 
 pany's business by both of these factions. This led to 
 the appointment of the Frick committee, of which I was 
 a member, and to the Frick report, which I signed and 
 which fully expressed my views. I believe the new man- 
 agement will correct the extravagant methods of con- 
 ducting the company's business pointed out in that re- 
 port. In my opinion these methods involved a vastly 
 greater loss to the policy-holders than the particular 
 transactions dwelt upon so extensively by the public 
 press. 
 
 There has been too much mystery surrounding the 
 Equitable affairs. I have always been ready and willing 
 to answer any questions asked by any one entitled to 
 make inquiry, and have not tried in any way to avoid it. 
 I will return [from Japan] in ample time to give any tes- 
 timony that may be desired. 
 
 The presumption is that Mr. Harriman made this 
 statement, not for immediate publication, but for 
 future use in case he should be accused, during his 
 absence, of leaving the country to avoid investiga- 
 tion. As such a charge was never made, the state- 
 ment was not given to the press, although it would 
 manifestly have been better to publish it in any 
 event. 
 
EQUITABLE LIFE INVESTIGATION 419 
 
 In the fall of 1905, the New York legislature ap- 
 pointed a special committee "to investigate the af- 
 fairs and conduct of business of life insurance com- 
 panies," and Charles E. Hughes, afterward governor 
 of the State, was employed as its counsel. This com- 
 mittee called a large number of witnesses, including 
 Mr. Harriman, and made an exhaustive investiga- 
 tion of Equitable affairs. The result was to confirm 
 and sustain the facts and conclusions set forth in the 
 Frick report of the previous summer; but nothing 
 was elicited that threw discredit upon Mr. Harriman 
 except the fact that he had acted as a director of the 
 Equitable for a number of years without participat- 
 ing in its management or knowing anything about 
 it. In this, however, he was not alone. Half the 
 members of the board were as ignorant of its affairs 
 as he was. Mr. Schiff, for example, when he was ex- 
 amined by the committee with regard to his acts and 
 duties as director, said: 
 
 I directed as much as, under the prevailing usages in 
 corporations, I was permitted to direct. In other words, 
 I went to the meetings of the society when they were 
 called; I listened to the reports as submitted by the ex- 
 ecutive officers; I voted upon the same, and gave such 
 advice as was asked of me. The system of directorship 
 in great corporations of the city of New York is such that 
 a director has practically no power. He is considered in 
 many instances, and I may say in most instances, as a 
 negligible quantity by the executive officers of the soci- 
 
420 E. H. HARRIMAN 
 
 ety. He is asked for advice when it suits the executive 
 officers, and if, under the prevailing system, an execu- 
 tive officer wishes to do wrong, or wishes to conceal any- 
 thing from his directors, or to commit irregularities, 
 such as have been disclosed here, the director is entirely 
 powerless, and can only judge of such things as are sub- 
 mitted to him. 1 
 
 Mr. Harriman never regarded his connection with 
 the Equitable as particularly useful, to himself or to 
 anybody else. When he went into the society, in 
 1901, at the request of James H. Hyde, he thought 
 perhaps that he might be of service to a young and 
 inexperienced man; but Hyde never became presi- 
 dent, and Harriman, between 1901 and 1905, was so 
 absorbed in the gigantic enterprises in which he was 
 engaged that he gave little attention or thought to 
 an insurance company in which he had no financial 
 interest. In November, 1905, shortly after he gave 
 his testimony as a witness before the Armstrong 
 legislative committee, he wrote to his friend David 
 Willcox, vice-president and general counsel of the 
 Delaware & Hudson Company, the following letter: 
 
 New York, November 24, 1910. 
 
 Dear David: 
 
 Thank you very much for your kind expressions in 
 letter of 16th. My wonder is when I think over the Life 
 Insurance matters how I allowed myself to be in any 
 
 1 Testimony of Jacob H. Schiff before the Armstrong legislative 
 investigating committee, September 29, 1905. 
 
EQUITABLE LIFE INVESTIGATION 421 
 
 way mixed up in them. Nearly twenty years ago I fore- 
 told the probability of just what is happening. When 
 Hyde came to me, he seemed to want to correct the ex- 
 isting methods, and I believe he was sincere; but he fell 
 to temptation. 
 
 Yours sincerely 
 
 E. H. Harriman 
 
 At some time before Mr. Harriman died, probably 
 two or three years before, he succeeded, after per- 
 sistent and long-continued negotiation, in buying 
 from Thomas F. Ryan one half the latter's holding 
 of Equitable stock; but he never disposed of it, nor 
 made any use of it. What he would have done with 
 it, if he had lived, is a matter of conjecture; but so 
 long as he held it, Ryan could not control the Eq- 
 uitable Society, or exercise any preponderating in- 
 fluence in its affairs. All the Ryan and Harriman 
 holdings of Equitable stock eventually went into 
 the hands of J. P. Morgan. 
 
 END OF VOLUME I 
 
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