Harriman vs. Hill

Harriman vs. Hill: Wall Street’s Great Railroad War

LARRY HAEG
Copyright Date: 2013
Pages: 384
https://www.jstor.org/stable/10.5749/j.ctt4cggr5
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    Harriman vs. Hill
    Book Description:

    In 1901, the Northern Pacific was an unlikely prize: a twice-bankrupt construction of the federal government, it was a two-bit railroad (literally-five years back, its stock traded for twenty-five cents a share). But it was also a key to connecting eastern markets through Chicago to the rising West. Two titans of American railroads set their sights on it: James J. Hill, head of the Great Northern and largest individual shareholder of the Northern Pacific, and Edward Harriman, head of the Union Pacific and the Southern Pacific. The subsequent contest was unprecedented in the history of American enterprise, pitting not only Hill against Harriman but also Big Oil against Big Steel and J. P. Morgan against the Rockefellers, with a supporting cast of enough wealthy investors to fill the ballroom of the Waldorf Astoria.

    The story, told here in full for the first time, transports us to the New York Stock Exchange during the unfolding of the earliest modern-day stock market panic.Harriman vs. Hillre-creates the drama of four tumultuous days in May 1901, when the common stock of the Northern Pacific rocketed from one hundred ten dollars a share to one thousand in a mere seventeen hours of trading-the result of an inadvertent "corner" caused by the opposing forces. Panic followed and then, in short order, a calamity for the "shorts," a compromise, the near-collapse of Wall Street brokerages and banks, the most precipitous decline ever in American stock values, and the fastest recovery. Larry Haeg brings to life the ensuing stalemate and truce, which led to the forming of a holding company, briefly the biggest railroad combine in American history, and the U.S. Supreme Court ruling against the deal, launching the reputation of Justice Oliver Wendell Holmes as the "great dissenter" and President Theodore Roosevelt as the "trust buster." The forces of competition and combination, unfettered growth, government regulation, and corporate ambition-all the elements of American business at its best and worst-come into play in the account of this epic battle, whose effects echo through our economy to this day.

    eISBN: 978-1-4529-3988-9
    Subjects: Transportation Studies, History

Table of Contents

  1. Front Matter
    (pp. i-viii)
  2. Table of Contents
    (pp. ix-x)
  3. PREFACE
    (pp. xi-xiv)
  4. DRAMATIS PERSONAE, 1901
    (pp. xv-xvi)
  5. INTRODUCTION: A RAILROAD WORLD
    (pp. 1-9)

    In the spring of 1901 the two most powerful men in America’s railroads, then the nation’s dominant industry, got into a climactic fight for control of two pivotal western railroads, first the Chicago, Burlington & Quincy and then the Northern Pacific. The winner (if there was one) could be known, in the way newspapers spoke in those days, as railroad king of the world. He could control his access through Chicago, which was, in the newly ascendant American economy, the railroad capital of the world. He also could dominate the geography of four of the six major railroads in the western...

  6. 1 MR. MORGAN AND MR. HILL
    (pp. 10-40)

    It was two minutes before 10 a.m. and the trading floor of the New York Stock Exchange—“magnetic pole of the modern industrial world”—was ready to erupt, again. Chairman McPherson Kennedy, gavel in hand, stepped to the rostrum. He gazed out over a three-story expanse of fourteen thousand square feet, a cathedral of commerce designed to evoke the Italian Renaissance in an arabesque of green, gold, and auburn. Sixty-foot Corinthian columns blossomed up to stained-glass skylights. From the ornate, coffered ceiling hung three huge circular fan shades of translucent glass. A wrought iron railing of golden lattice, with visitor...

  7. 2 MR. HARRIMAN AND MR. SCHIFF
    (pp. 41-64)

    If you walked this April 3 morning a block west from the House of Morgan on Wall Street, took a right on Broadway, and strode another block and a half north, you would come to Henry Baldwin Hyde’s Equitable Life Assurance Society building at 120 Broadway, a stately ten-story office tower of gray Quincy granite in the ornate French second-empire style with mansard roof. Passing under its high arch and ornate, bronze grillwork you would enter a grand arcade a hundred feet long and forty-four feet wide with a barrel-vaulted ceiling of stained glass, lined with rose-colored marble columns and...

  8. 3 THE END OF THE “DAYS OF SMALL THINGS”
    (pp. 65-86)

    In just two years Edward Harriman had done what many, including J. P. Morgan and James J. Hill, thought impossible. He took control of and refinanced the federal government’s foreclosed Union Pacific and began rebuilding large portions of its track and operations. It was a sort of secular fulfillment of Isaiah 40:4, “The uneven ground shall become level, and the rough places a plain.” Harriman restored it to profitability and saw its common stock grow sevenfold from 5⅞ a share on April 3, 1897, to 48½ on January 2, 1900. He began the new year pursuing its strongest competitor to...

  9. 4 THE BATTLE FOR THE BURLINGTON
    (pp. 87-96)

    The evening of Saturday, February 9, 1901, Stuyvesant Fish was in many ways at the peak of his career. He had been president of the Illinois Central Railway Company for fourteen very successful years. Patrician, a bit smug and self-absorbed, he presided over an elegant black tie dinner celebrating the fiftieth anniversary of America’s first land grant railroad. It was held in the ornate banquet room of Chicago’s Auditorium Hotel, in the city’s grand Romanesque complex of opera house, theater, convention hall, and offices. Chicago was snowbound. The second storm in a week had blocked all railroads in and out...

  10. 5 “PEACEMAKERS” ARMING FOR COMBAT
    (pp. 97-127)

    What were Harriman and Schiff doing while Hill maneuvered? They watched the Burlington start the year at $140, close over $150 on March 11, over $160 on March 16, over $170 on March 29, and well over $180 on April 3, the day Morgan departed for Europe. Hill and Morgan assumed Harriman was preoccupied with buying the Southern Pacific. Union Pacific had announced the purchase February 1, and Harriman and his managers must have been devoting much of their time to absorbing it. Given the size of the Southern Pacific, how could Harriman have time for anything else? Hill and...

  11. 6 “THE WEAK LINK IN YOUR CHAIN”
    (pp. 128-138)

    Monday morning, April 29, 1901, hundreds of members of the New York Stock Exchange led by President Keppler marched in two columns five blocks south down New Street from their shuttered building on Broad, through the east entrance of the New York Produce Exchange at 2 Stone Street, up a short, narrow stairway on the south side, and onto the expansive second-floor trading hall, their temporary home for the next two years. The hall was 221 by 140 feet, larger than any arena in the city except Madison Square Garden, staked out with the trading posts and the giant quotation...

  12. 7 THE CONSEQUENCES OF A “HOSTILE ACT”
    (pp. 139-159)

    On Wednesday, May 1, the day Morgan is thought to have arrived in Aix, the New York Stock Exchange went crazy again for Union Pacific common. It opened up nearly two points. Then it rose in a cyclone of bid and ask; with frantic, sweaty mobs of traders swaying, waving, screaming, pushing. Up and up, rocketing nine points in just minutes. In one span of five minutes 32,000 shares of Union Pacific changed hands.

    Otto Loeb, a widely known trader, bought Union Pacific at 118½ and sold it a half hour later at 129, pocketing $40,000. Broker H. G. Campbell,...

  13. 8 DECISION AT TEMPLE EMANU-EL
    (pp. 160-180)

    Saturday morning, May 4, dawned clear and crisp in Manhattan. It would be a very pleasant morning to walk to the synagogue. Jacob and Therese Schiff, in their Sabbath best, left their Fifth Avenue home facing Central Park and began their customary stroll down the thirty-one “short” blocks to their synagogue Temple Emanu-El at Fifth Avenue and Forty-Third Street. They knew all the landmarks by heart; the mansions four, five, and six stories, many designed by Richard Hunt Morris or Stanford White in flamboyant châteaux and castle styles. Historian Frederick Lewis Allen later called this multimillionaire’s row the “little world...

  14. 9 “HELL IS EMPTY AND ALL THE DEVILS ARE HERE”
    (pp. 181-217)

    The gavel came down. A roar erupted. A great, brawling, sweaty mob of traders stormed the Northern Pacific trading post on the floor of the Exchange Wednesday morning, May 8. Nipper common opened at 155. Three hundred shares quickly traded at 159. Ninety-five hundred at 160. A thousand at 165. Two thousand at 170. A thousand at 175. Two thousand at 180. The five hundred telephones just off the floor were all ringing at once, a lunatic jangle of buy and sell.

    One broker, Cornelius W. Provost, had an order from a customer to sell 1,000 shares of Nipper common....

  15. 10 NORTHERN INSECURITIES
    (pp. 218-233)

    John Pierpont Morgan had left New York thirty-two days earlier, on April 3, dreaming of rare art and thermal baths. Now he was stewing in Paris. While he was dozing under hot towels after massages in Aix, Harriman and Schiff were trying to steal “his” railroad. They would be in a real fix if it hadn’t been for Hill alertly remembering that a majority of the common stock could retire the preferred stock and thus keep Morgan’s board in control, Even now the outcome was uncertain. To make matters worse, Harriman had publicly embarrassed him, showing the world that Morgan...

  16. 11 THE “BIG STICK”
    (pp. 234-249)

    It was the afternoon of Wednesday, October 2, 1901 and J. P. Morgan settled in his seat at Trinity Church at the corner of Bush and Gough in San Francisco. He thumbed through his hymnal and prepared to worship God. Every three years over the past two decades he had dutifully set aside his business affairs, no matter how weighty and urgent, and traveled around the country to attend, as a lay delegate, the convention of the Protestant Episcopal Church of America. He believed his material wealth was not incompatible with his spiritual life. There was a juncture where his...

  17. 12 A THUNDERBOLT OUT OF THE BLUE
    (pp. 250-271)

    It was the afternoon of Wednesday, February 19, 1902, and Hill was coughing and sneezing and ached all over. He had always been vulnerable to deep bronchial chest colds. Now he was in bed with a bad one and felt lousy. From his bedroom on the second floor of his 36,000-square-foot Richardson Romanesque hulk of red sandstone on Summit Avenue, he could look out over the snow-drifted Mississippi River Valley in St. Paul. He could imagine himself the seventeen-year-old boy leaning over the steamboat railing for his first view around the bend of the settlement of St. Paul when there...

  18. 13 GREAT CASES AND BAD LAW
    (pp. 272-282)

    The previous quarter century the railroad empire of James J. Hill had grown from 656 miles of track in central and western Minnesota in 1880 to 19,263 miles across sixteen states and territories, and included one of the world’s largest fleets of ocean steamships on the Great Lakes and the Pacific. Its earnings had grown from just over a half million dollars in 1880 to $33.5 million in 1904. With every leap in scope, however, came more complexity, and with every new state a tangle of separate laws, with the advance through Indian nations in Montana, with the push to...

  19. EPILOGUE: THE LAST CORNER
    (pp. 283-294)

    After the U.S. Supreme Court broke up Northern Securities James J. Hill said, “I’ve still got the railroads, haven’t I?” It was true, he did, and they were as profitable as ever, for the time being at least. The court’s decision, in a way, changed nothing; it had about as much effect, said one writer to Hill, as a straw of wheat in front of a train. For at least six years before it overturned Northern Securities, Hill–Morgan had been managing the Northern Pacific in concert with the Great Northern as if they were one. Nothing in the court’s...

  20. ACKNOWLEDGMENTS
    (pp. 295-296)
  21. Supreme Court of the United States, No. 277, Northern Securities Company vs. The United States: Excerpts of Dissenting Opinion by Associate Justice Oliver Wendell Holmes (March 14, 1904)
    (pp. 297-299)
  22. North American Railroads, 1901
    (pp. 300-300)
  23. Wall Street Primer, 1901
    (pp. 301-302)
  24. NOTES
    (pp. 303-350)
  25. BIBLIOGRAPHY
    (pp. 351-364)
  26. INDEX
    (pp. 365-375)
  27. Back Matter
    (pp. 376-376)