HARRIMAN VERSES GOULD
It was also revealed that the holdings of the Huntington estate
in the Southern Pacific had been acquired by the same interests
which purchased the Speyer stock and that the two blocks, in
connection with recent purchases in the open market, which had been
responsible for the sharp advance in Southern Pacific securities,
gave the purchasers working control of the Southern Pacific Company.
The Union Pacific-Harriman interests were predominate in the syndicate which was composed of the capitalists who had been behind Harriman, including Kuhn, Loeb & Co., who had very close relations with the Pennsylvania Railroad interests, and, second, the Rockefeller interests, represented by the National City Bank.
It was said that the Huntington stocks had been secured some weeks before the announcement, the amount of such holdings not being a matter of public knowledge. They were bequeathed by Mr. Huntington, Mrs. Huntington receiving two-thirds and Henry Edward Huntington one-third, subject to the condition that “such shares should not, in whole or in part, be disposed of during the life time of either, except with the consent of both such legatees or the survivor of them."
About a year prior to Huntington’s death, what was known as the Speyer-Huntington syndicate had acquired, according to published reports, the Crocker holdings, par value $29,000,000; the Stanford holdings, $30,000,000, and the Hubbard holdings, $2,000,000. It was also reported at the time that the syndicate had purchased the Searles holdings at $26,000,000, but this was subsequently denied. At the previous annual meeting of the Southern Pacific Huntington had voted nine-tenths of the stocks, which included the proxies of Speyer & Co. and their friends.
The total authorized stock of the Southern Pacific was $209,000,000, including $67,274,247 exchanged in 1899 for Central Pacific stocks. The Southern Pacific Company owned no stock in fee, but principally through ownership of stock and partly by lease, it operated a great system of roads extending from San Francisco to New Orleans (thence by company's steamers to New York, etc.), and to Portland, Oregon, and to Ogden, Utah, with branches. The importance of the new deal was even greater when viewed in connection with the October acquisition by the Harriman interests of the Pacific Mail Steamship Company, with its immense distributing power on the Pacific Coast.
The acquisition of the Southern Pacific though was merely another move in the "community of interest" policy, which had already secured such a vast hold on the railroads of the country. It meant the establishment of an all rail transcontinental road governed directly by this policy. Harriman was president of the Chicago and Alton road. He was also a director in the Union Pacific, in the Illinois Central, in the Oregon Railroad and Navigation Company and in the Oregon Short Line Railroad Company. In the Alton syndicate, by which Harriman obtained control of that road, the Vanderbilt’s were generally credited with participating to the extent of $5,000,000 and the Gould and Rockefeller interests each to the same amount.
George Gould now dropped in on Harriman. "I think you ought to let me have half of that Southern Pacific stock," he said, "or, if you don't want it, I should be willing to take the whole thing off your hands."
Harriman merely smiled at this naive suggestion.
The Union Pacific already had an outlet to the Pacific Coast through its stock control of the Oregon Short Line and the Oregon Railroad and Navigation Company. But those lines reached the extreme Northwest in Washington and Oregon. The Central Pacific branch of the Southern Pacific, however, gave the Union Pacific a direct route from Ogden, its present westernmost terminal, to San Francisco. The Union Pacific would also now have a direct route eastward from San Francisco to Omaha and Kansas City.
Reports were also circulating that negotiations were pending for the control of the Chicago, Burlington and Quincy, which would meet the Union Pacific at both Omaha and Kansas City, and afford a direct route to Chicago, where traffic would be divided among the trunk lines, which were already being operated under the "community of interest" plan. Such a plan, however, was not necessary for a direct transcontinental line, for the Chicago and Alton already connected with the Union Pacific at Kansas City and then proceeded to Chicago, and the Illinois Central connected at Omaha and also proceeded to Chicago. At Chicago connection was made with the Baltimore and Ohio for the Atlantic seaboard and thus was established a complete "Harriman" transcontinental route.
Another highly significant announcement was of the Harriman purchase of the control of the Chicago Terminal Transfer Company and its connecting lines. Harriman had purchased the Deutscher Bank holdings of this company through Kuhn, Loeb & Co., who were interested with him in the deal. Extensive terminals in and about Chicago were owned by the terminal company and they comprised 760 acres, with a total of 230 miles of track. The company also owned the Grand Central passenger station and 3500 feet of docks on the Chicago River.
Now freight could be taken from the port of New York across the continent by rail without breaking bulk, and sent forward by steamship to China and Japan; all under a bill of lading representing one centralized transportation interest.
At the same time the Harriman syndicate was gaining control of large holdings of Southern Pacific stock, is was also obtaining control of the Missouri, Kansas and Texas. Thus it was shown that the motives which led the Harriman syndicate to secure the Speyer and Huntington holdings in the Southern Pacific railroad, and thus a dominating interest in that property, involved a vaster scheme of railroad consolidation.
The Southern Pacific connection to San Francisco was essential to the Union Pacific's Denver line, lying between that of the Union Pacific and the Santa Fe, and reaching the Mississippi river at St. Louis, which gave an outlet to the lower Mississippi river essential to the broadest control of the markets of the west.
The Missouri Pacific and other Gould lines, particularly the Texas and Pacific, were, on the other hand, very closely interwoven with the Texas lines of the Southern Pacific. Both companies not only had long lines extending across the state of Texas from El Paso to the gulf of Mexico at Galveston, but in the eastern portion of the state both the Missouri Pacific and the Southern Pacific had an extensive mileage, largely competitive and reaching jointly all the important cities, including Fort Worth, Houston, Austin, etc.
Clearly, therefore, the acquisition of the Southern Pacific was taken as completing the syndicate's control of the transportation facilities in the southwest, south of the Union Pacific lines, rounding out a system which was thought to include, besides the Union Pacific and the Central Pacific, the Missouri Pacific, the Missouri, Kansas and Texas, and the Kansas City Southern, west of the Mississippi river.
Shortly thereafter, on February 7, 1901, C. M. Hays, president of the Southern Pacific Railroad, stopped off in Omaha where he conferred with officials of the Union Pacific Railway at their headquarters. Hays was bound for New York City, having been summoned by the new owners of the Southern Pacific Railroad.
While the reason of his mission to Omaha had not been ascertained, enough information had been gathered to be certain that the Southern Pacific and Union Pacific officials were getting together for the first time in the history of the two roads; that traffic deals which would revolutionize the traffic sheets between the great lakes and the Pacific Coast were to be formulated; that the Ogden gateway was to be shut and sealed against all business which it may be possible to route via the Union Pacific and Kansas Pacific from Missouri River points; that new train schedules were about to be put into effect which would reduce the running time between Chicago and San Francisco from six to eight hours; that close connections were to be made at Ogden by all through trains, and that the arbitrary practice long in vogue by the Southern Pacific people with reference to receiving business at Ogden would soon be supplanted by a concert of action which would greatly facilitate business.
Harriman was somewhat ruffled, however, at Gould’s next move, the purchase of the Denver and Rio Grande. Gould had quietly begun purchasing Denver and Rio Grande stock the previous year as part of his transcontinental dream. Those purchases had drawn little to no attention from the Harriman camp. That changed on February 12 when E. T. Jeffrey, president of that road said in a statement to the press; "The great prosperity of the state of Colorado and its large increase in output of precious metals has attracted the attention of investors and capitalists, among them Mr. George J. Gould, who has purchased an important interest in the Denver and Rio Grande, and who will enter its directory. The policy of the management will be to strengthen and improve the railroad, furnish the latest and best facilities for its patrons and to enlarge the system from time to time by branches and laterals as the business interests of the state may require.”
Through the Denver and Rio Grande, Gould, on March 25, 1901, acquired control in the interest of the Missouri Pacific, over the Rio Grande Western. The Denver and Rio Grande held an option on the Rio Grande Western and it was the exercise of that option by Gould, who provided the funds necessary in paying for the acquired control that enabled the transfer to be made.
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