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THE REORGANIZATION '. ". " .. OF THE AMERICAN RAILROAD SYSTEM, 1893-1900 .A Study if tit, Effiels if"It, Panic if 1893, lite Ensuing D,prmion, and;llte First Years if Recovery on Rai/nad Organization and Financing BY ___ E~~. ~1\1J?BE!-L!_A. ML_ , , Edx~rd Gro~~ Ca~~b811, A. M. l __________ _ SUBMlTl'ED IN PARTIAL FULFILMENT OF THE REQUIREMENTSt FOR THE DEGREE OF DOCTOR OF PHILOSOPHY IN THE FACULTY OF POLITICAL ScIENCE COLUMBIA UNIVERSITY o. 434 in tne .. studies in History, :Economics ..2ublic ~vi.t~ or COlumbia 11ni Yers:i..ty •. NEW YORK 1938 x.t4 It; .7~ .. N ~s 14' 3l COPYRIGHT, 1938 BY CoLUMBIA UNIVERSITY PRESS PRINTED IN THE UNITED STATES OF AMEIlICA PREFACE ALTHOUGH hundreds of hooks haye been written upon vari ous aspects of the history of the American railroad industry, there have been surprisingly few attempts to analyze its financial organization during the last half century. Yet the railway system in this country as we know it today is essenti ally different from what it was before the depression of the nineties. During that decade the first great transportation comb~tions were formed, simtiltaneously with the transfer of control over the industry to a small group of bankers. Nevertheless, the depression, per se, had less to do with these changes than might be thought; fundamentally they represented the culmination of trends already well established in the quarter century following the Civil War. It is the purpose of this study to analyze the I.!"ffects of the depression on the railroads. and to trace the beginnings of the new era in financial organ ization which had its origin in the depression years. For their willing assistance in facilitating the research for this work, I wish especially to thank the staffs of the Columbia University Library, the New York Public Library, the Harvard College Library, the Interstate Commerce Commission Library and the Bureau of Railway Economics Library. Professor T. W. Van Metre of the Columbia School of Business and Pro fessor John A. Krout of the Faculty of Political Science read, the entire manuscript and made many helpful suggestions for its improvement; Professor K;rout also very kindly helped read the proof. Thanks are also due to the many friends who have generously contributed of their time and efforts. Above all I am indebted to Professor Allan Nevins of Columbia University whose invaluable aid has. been liberally granted at every stage of my work. E. G. CAMPBELL. NEW YORK, 1938. s CONTENTS CHAPTER I Post-War Boom Times and Chaos ••••• • ~ • • • •• 9 CHAPTER II Ov~r.. Expansion. • • • • • • • • • • • . • • • • • • • • • • • •• 30 CHAPTER III Past Mistakes." • • • .•• ••••••••••.•••••••••• 62 CHAPTER IV Scandals ••••••••• • ••••.• -:.. 92 CHAPTER Y Morgan'. Reorganizations. • • .. • • • • • • • • J45 CHAPTER VI The Morgan-Hill Alliance. • • • • • • • • • • • • • • • • • • • • 190 CHAPTER VII Harriman's Transcontinentals • • • • • • •• • ••••••••• 217 CHAPTER VIII Prosperity in Depression ., • • • • • • • • • • • • • • • • • • • • 256 CHAPTER IX Small Roads ••••••• • •• ~ • •. • • • • • 303 CHAPTER X Developments During the Depression 319 BIBLIOGRAPHY •• 343 INDEX •••••••••••••••• 357 7 BIBLIOGRAPHY PERIODICALS Commercial and FiffItJnCialChronicle, 18g2-1899, New York City. The Economist, 18g2-1Bgg, London, England. The Evening Post, 1892-1899, New York City. Railroad GtJllette, 11!g2-1899, New York City. Railway Age and N orthwestem Railroader, 11!g2-'IBgg, Chicago, Illinois. RailwtJY Review, 18!)2-1899, Chicago, Illinois. Railway World, i892-iBgg, Philadelphia, Pennsylvania. United States ItllUesto" 18gB, New York City. Wall Street lournal, 1892-1899, New York City. ANNUALS AND ENCYCLOPEDIAS Appletotls Annual Cyclopedia and Register of Important Events of the Year, 1879-1899, New York: D. Appleton and Company. Dictionary of American Biography, edited by AUen Jobnson and Dumas Malone, Ne~ York: Charles Scribner's Sons, '1!)28-1936. Lamb's Biographical Dictionary of the United States, edited by John H. Brown, Boston: James H. Lamb Company, 1900. The National CYcloPedia of American Biography, New York: James' T. White and Company, 1922-1929. Poor's Mcmual of Railroads, 1880-1909, New York: H. V. & H. W. Poor. Who's Who in America, 1899-1900, edited by John W. Leona1"d, Chicago: A. N. Marquis and Company, 1899. OFFICIAL DOCUMENTS Report on Transportation Business in the United States at the Eleventh Census, Part I, Transportation by Land (Henry C. Adams, sopeciaJ agent), Washington: Government Printing Office, 1895. United States Industrial Commission Report (indluding reV'iew of evidence, . to'(>icai digest of evidence, testimony and conclusions of .the Commission), 20 volumes, 18g8-1902. United States Interstate Commerce Com111ission Annual Reports, 11!8?'-1903. United States Interstate Commerce Commission Annual Statistics, 1887-1903. United States Interstate Commerce Commission, Report. on Intercorporate Relationships of Railways in the United States as of lune 30, I906. United States Interstate Commerce Commission: Hearings in the 1KtJtter of consolidations and combinations of carriers, relations between such camers, and community of interest therein, their rates, facilities aM practices, begun November, 1906. No. 943. United States Interstate Commerce CommiS'Sion: ItllUestigation of facts as to combination or arrangement between the Pmn.iyl'/ItJKia Railroad and other railroads, by Martin A. Knopf, February 2, 19OO. 343 344 BIBLIOGRAPHY United States SupRme Court: Nortllera Securities Cue (transcript of evidence), ... volUllle9. United States Courts : Ufliota PtJCijic Receivership Records,,,, volumes (ISgJ ?). United States Congress: COJJgressionol Record, XXVII, Part 2, pp. IS3!>o 1S40. S3rd Congress, ,3J'd SessiOD (Reilly Bill). United States Congress: A Bill Directing the foreclosure of the ~ ment lien OD the Pacific railroads, and for other purposes (introduced by Mr. ADen in Semate January '/, 18g6), no. m, 54th ~, 1St Session. United States Congress: A Bill Directing the foreclosure of the G0vern ment lien on the Pacific railroads and for other purposes (introduced by Me. Sulzer in House, July 22, 1897), H. R. 3946. ssth Congress. 1St Session. United States Congress: l'l'Vestigatitm of Alleged Coal CombirlGliofl, H. R. Re/lorl 2278, S2Dd Congress, 2IId Sessioo. United States Coogress: Views of the Mirlorily of the House CDfMflitke ora PGCijic Railroads ora the Reilly Bill (includes as appendix Pattison's minority report submitted in 1888 together with report of majority of the committee to investigate the Pacific: railroads), H. R. Re/lorl 1290. SJrd Congress, 2IId Session. United States Congress: Letter from the Attomey-General transmitting pursuant to House Resolwoo dated Ocrober I.... 1893, a draft of a biB to reorganize the Union Pacific Railway Company, and to readjust and secure the claims of the United States against said company, H. R. Esecutiw Document 203, SJl"d Congress, 2IId Session. United States Congress: Report of Mr. Brice, chairmall of the Senate Pacific RailrOl!lis Committee, recommending a solution of the problems raised by the Government's claims against the roads, Serwle Re/lorl 830, SJrd Congress, ,3J'd Session. United States Congress: Notes of hearings before the CortImittee ora PtJCijic Railroads of the Sertale ora the subject of the itttlebkdness of the PtJCijic Railroads to the GOWnNnnIt. Serlale DocumerJI 314, 54th Congress, 1St Session. United States Congress: Re/lorl frortl _jonty of C_ittee 011 Pacijic Railroads, with statement and bearing thereon by C. P. Huntington in appendix (submittEd by Mr. Gear, May I, 18g6), SertlJte Re/lorl 778, 54th Congress, 1St Session. United States Congress: Re/lorl fro". C_ittee ora PGCijic Railroads (sub mitted April2S,l8g6), H. R. Re/lorl 1497, 54th ~ess, 1St Sessioo. Umted States Congress: Agreemerst witll Reorgaflisatiofl CortI".itke of the Ufliota PtJCijic Railroad CortIpaflY (submitted to Senate January 25, 1897), SertlJte Documerst 283, 54th Congress, 2Ild Sessioo. United States Congress: Re/lorl of the GovenNnnIf Directors of the Ufliort PGCijic Railway for year nuling June 30. 1896. Serlale Docwmeflt 12, 54th Congress, 2nd Sessioo. BIBLIOGRAPHY 345 United States Congre56: Report from the majority of the House Committee 011 Pacijie Railroads (submitted by Mr. Harr.ison, February II, 1897), H. R. Report 2906, S4'Ih Congress, 2nd Session. United States Congress: Hearings before the SelllJte Committee 011 Iliter state Commerce, May, 1900 (testimony of Frank Parsons), SeIIlJIe Docummt 420, 56th Cong1"ess, 1st Session. United States Congres&: IlI'IltIstigatioli of FilllJncial and Monetary ConditioM ill the Ullited States, before the Subcommittee of the Committee on Banking and CUJTe11CY (Pujo Iwvestigatioll), 1912-13. United States Congress: New York, NewHaTJm and Hartford Railroad: EvidellCe takm before the Iliterstate Commerce Commissioll relative to the financial 'raMOCOOM of the New York, New HaTJeli and Hartford Railroad Com/NJIIY, togeilief' with the report of the Commission thef'eon, SelllJte Documelll 543, 63rd Congress, 2nd Session. United States Congress: Ilivestigatioll of Railroads (St. Louis and San Francisco and its purchase of the Chicago and Eastef'n lIlioois and the St. Louis, Brownsville and Mexico, and its later failure) by the Intel" state Commef'ce Commission, Sellate Documellt 26, 63rd Coogress, 2nd Session. United States .Congress: Hearings before the Joint (Newlands) Committee of the Se1fI(Jte and the House of Representatives onIliterstate and Foreigll Commerce