ROBBER BARONS

GIANTS OF THE NORTHWEST

WHILE Huntington was overrunning California and the Southwest, James J. Hill and Henry Villard, two prodigious captains of fortune, arose to contest with each other the rule of the Northwestern territory lying between the Great Lakes and the Oregon coast.  Whoever seized the existing and future routes of trade here would have the control of an area embracing eight huge and barely populated states which held incalculable resources.  The panic of 1873 had been severely felt in the trans-Mississippi section ;  in its wake there lay scattered all the debris, broken rolling-stock and dissevered members of bankrupt railroad and steamship lines, tracks, terminals, lands, all waiting for the hand ready and willing to grasp them.

This Hill and Villard saw.  Both men had little means at the start ;  but both spied out the ground thoroughly, calculated the prize at stake and then strained every nerve to capture the river and seaports, the valley routes and mountain passes.  Hill proceeded westward from the Mississippi River as his point of departure, building upon a defunct railroad as the foundation for his future Great Northern system.  Villard centered upon the coast and rivers of Oregon and moved eastward over the incompleted line of Jay Cooke’s old Northern Pacific.  Each pressed for the crushing advantages of monopoly ;  and each sought by every means possible to clear the other from his path.

Nearly twenty years before this time Jim Hill, a boy of eighteen, had come from southern Ontario to Minnesota Territory to try his luck in the trading post of St. Paul (called “Pig’s Eye”).  Hill was methodical, abstemious, and laconic in speech, though now and then he was given to towering passions.  He also possessed a rugged constitution, a tremendous physical endurance, which was fortunate in a place where you might literally have to fight for your life at any moment with drunken Indians or wild pioneers.  Working at the river’s edge as a shipping agent and a trader, Hill grew up with the frontier community, married, saved money steadily until he had accumulated $100,000 by the age of forty, and was highly respected.

During his sojourn the experience of St. Paul accurately mirrored the revolution of the frontier everywhere.  Like the other outpost towns St. Paul quadrupled in size between 1856 and 1873.  Here one was at the head of navigation on the Mississippi.  Now in 1857 the first shipments of Minnesota grain, and soon after the famous Minnesota flour, passed through Hill’s hands, bringing presentiments of economic triumphs to come.  During the second year of the Civil War a torrent of grain, cereal and flour issued from the deep black soil of the Northwest, to be reshipped at St. Paul.  Hill, as a shipping agent for the new railroad branch that soon reached the frontier town, then as a warehouse owner and commission merchant on his own, found himself stationed at one of the natural crossroads of Western trade.  He had his hand at the pulse of the region’s industry ;  he knew the soil richness of Minnesota and the Dakotas beyond ;  he knew the mounting size of the crops from year to year ;  he knew the rate at which immigrants were coming into the territory and the pressing need for transportation.  As a part owner after the war of a small line of freight boats which ran up the Red River (of the North) to Winnipeg, he knew the development being carried on beyond the border over which he himself had come as a Canadian emigrant.  So Jim Hill knew the lay of the land ;  and when one of the two small railroads which had been chartered by Minnesota Territory in 1862 collapsed before his eyes in the panic of ’73, he became possessed with a dream.  He went perfectly “romantic.”  He had the pioneer’s vision of mountains of gold before him and it never left him.

The so-called St. Paul & Pacific which ran northward out of St. Paul had been blessed with a federal as well as a state charter, and with a grant of 5,000,000 acres of Minnesota lands ;  but it was cursed with a capitalization of some $28,000,000 in bonds of various classes, more than half of this sum being a first mortgage advanced by trusting Dutch investors.  Every species of up-to-date financiering had been tried on this little railroad :  part of its capital had been spent for promotion ;  its bonds had been watered ;  money had been diverted to construction companies, and tracks which were laid at such enormous cost could now scarcely be negotiated by any trains.  Moreover the purpose of the big Northern Pacific Railroad, which also ran through Minnesota from Duluth westward, had been to hold the little road down because its charter promised competition.  In 1874 for the second time in its brief history the St. Paul & Pacific was being operated by a receiver, this time by a Mr. Farley, an acquaintance of Hill’s.  Its bondholders were in despair, ready to sell out at any price.  Soon its valuable land-grant would be forfeited for want of construction according to the provisions of its charter ;  and it would dwindle away into the proverbial “streak of rust,” as ghostly as the abandoned mining towns in the Sierras.

Only Hill saw any future in this road.  He made his own investigations, scanned the reports of the receiver, and sought to arouse the interest of certain of his associates in the section.  Among these was a man named Kittson, his partner in the shipping business along the Red River.  Through two Canadians he met, Donald A. Smith (the future Lord Strathcona) and George Stephen (Lord Mount Stephen), he learned that the western provinces of Canada sought a connection between Winnipeg and St. Paul on the Mississippi.  To these three he confided his calculations concerning the St. Paul & Pacific Railroad.  In its franchise and acreage alone he saw tremendous future values.  Hill seemed to have “a perfect knowledge of the whole thing.”  After long conferences, the four men concluded that the railway would be a good thing for them to get possession of, if it could be had for nothing.  The country was terribly in need of railroad service.  Perhaps the Dutch bondholders would sell their claim cheaply ?  The would-be purchasers, at any rate, possessed almost no cash and could give little more than their promises to pay whatever was agreed upon.

In 1875 Hill and his Scotch friends began their campaign.  With seeming innocence they picked up whatever bonds could be had in the market at 6½ to 8 cents on the dollar.  Then they began to put out feelers to the foreign bondholders.

An agent who had been sent over from Holland to look over the property was met by Hill as well as by the receiver.  The Dutch visitor saw the thing darkly ;  it would take millions in money to place the road on its feet ;  and such further sums the bondholders would never contribute after the way in which they had been duped.  Moreover Hill and the receiver “knocked” the road pretty hard, as Pyle, Hill’s official biographer, relates.  The Americans were certainly combined in a sort of conspiracy of silence about the prospects of the enterprise as they saw it.  It has also been charged (and as stoutly denied) that Hill had the receiver of the railroad, Farley, as his confederate.

While speaking in the most doleful tones of the bad risks the business presented, Hill lay awake nights figuring out its actual value, and the best offer he could dare to make upon the foreclosed mortgage bonds.  In his own hand—the papers were published by his biographer—Hill estimated the value of the road as it existed to be $12,216,718 ;  he then added the value of the land and town sites at $6,500,000.  “How the eyes of the Dutch Committee would have bulged if they could have seen the prospective estimate of what he was going to get,” Pyle comments, as if he himself naturally would have entered into the scheme with the “most honest,” “most constructive” of American railroad-builders.  Hill would offer five millions.  “A total property value of twenty millions to be had at a little more than twenty-five cents on the dollar.”  Hill’s apologist fairly gloats over his hero’s shrewdness in overreaching the far-off Europeans.

Besides, there was more that Hill and his confederates knew, thanks to the complaisant receiver.  Hill had no means of paying five millions, nor any such intention ;  his group could muster up not a tenth that sum.  The negotiations extended themselves for one year, then a second year, while the plotters quietly hatched their affair.  Everything grew more promising, although no word leaked out.  In 1877 the accounts of the receiver were curiously juggled so that improved earnings were not revealed, except to Hill.  There was expended “on additions, improvements and equipment,” Pyle tells us, “$188,250, which had been charged to operating expenses instead of to construction.”  This item of false accounting, when properly understood, nearly doubled the reported earnings of the road, a point of great significance to Hill.  Besides, there was more that he saw ;  a continued influx of immigrants and town developments in the lonely and nearly empty territories near by indicated to Hill that there would be more crops raised in Minnesota and more traffic, by 50 to 6o per cent, the following year.  Of all this Hill said nothing and finally closed his deal with the distressed foreigners.  He and his friends assumed the bonded obligations of the road at one-fifth their value and gave their mere promissory note for $1,000,000 as a pledge of good faith.  Everything was at last “neatly corralled” by way of a friendly foreclosure suit on March 13, 1878.¹

Now during a strenuous period the partners labored to salvage the enterprise which they held at the start only by a thin shoestring.  With the receiver still officially in charge, and Hill directing, construction was rushed through to the Canadian border at Pembina, where junction was had with a branch of the advancing Canadian Pacific.  Thus a line was opened from Winnipeg to the Mississippi River.  To raise money Hill held rousing land sales before the immigrants at $2.50 to $5.oo an acre ;  the partners pledged every scrap of property they possessed ;  and Stephen found valuable credit resources in the Bank of Montreal, of which he was an agent.  By the added construction, their land grants had been saved, and by taking title to additional acreage more money could be raised.  Finally a boom year came in 1879.

“You can have no idea of the rush of immigrants to Minnesota this year,” Hill writes to his partners.  “We are laying a mile and a half of iron a day.”

The masses of Norwegian and Swedish peasants who flocked to Minnesota and produced by their labor a bumper crop of 32,000,000 bushels of wheat—though the state was only partly settled as yet—saved Hill and caused the earnings of the road to be tripled.  Soon the partners, as Pyle tells it in his colorful account, “were gloating over the statistics of operation of the St. Paul & Pacific.”  They reorganized the railroad under the name of the “St. Paul, Minneapolis & Manitoba” in October, 1879, and capitalizing it at $16,000,000 in bonds and $16,000,000 in stock, were able to distribute five million of the capital outright to each partner.  A pretty year or two of business.  “. . . The time was ripe,” Hill said afterward.  “The growth of the country just at that time helped us.”

Jim Hill was a short, thick-set man of about forty, with a massive head, large wrinkled features, long black hair, and a blind eye.  His unique exterior—like a “grim old lion”—reënforced by a naturally stern manner, gave him in time a formidable reputation in his territory.  He was known always to be “a very hard man in business,” among railroad men “the hardest man to work for.”  He carried everything in his head, worried, systematized, labored himself or drove on the others around him with unflagging energy.  He had no small scruples ;  rough-hewn throughout, “intolerant of opposition, despotic, largely ruling by fear,” his contemporaries said, “he was also given to personal violence in the department offices of his road.”

This aggressive figure, who seemed to have roused himself in middle age, saw things in a large way.  In his conquering march through the Northern territories, he developed new methods of business, departing widely from the petty mercantilism of the age which preceded his.  He wrote to his partner Lord Mount Stephen his plain view :  “It is our best interest to give low rates and do all we can to develop the country and create business.”  This was no mere philanthropic intention ;  he labored for large volume rather than for small orders at high rates.  He was “sounder” and by far more “efficient” than his confreres in this business ;  and he ended by becoming something of an engineer himself.  It is characteristic of him that although when he came into the railroad business the locomotives, like resplendent pet animals, bore names, Hill gave them numbers, doubled their tractive power until his road had the most powerful engines, the longest trains.  In the same way he laid his roadbeds only after the most exhaustive surveys of grades and curves.  The bridge he threw over the Mississippi between St. Paul and the present Minneapolis was one of the most massive granite structures ever made at the time.  So his own headquarters in St. Paul were made as “solid and bare as a prison”;  his house too, “grimly strong as a feudal fortress,” rendered burglar- and cyclone-proof through the use of huge beams of steel.  This efficient groundwork by an undoubtedly able administrator, surmounted by shrewd buying and selling and ruthless “hiring and firing,” brought fundamental economies year after year, and cleared the way for tremendous expansion.

Steadily, the “Manitoba” advanced its lines and branches over the prairies of Dakota and Montana, while Hill seemed to ride before it in many expeditions, spying out the unknown country at his personal risk, camping in the open, studying soil, water, climate, resources.  “Before the other lines got a foothold,” Pyle relates, Hill threw his railroad into the Red River country, and was soon trafficking in the greatest part of its huge wheat crops.  His chief adversary, the slowly reviving Northern Pacific, he blocked off or undermined by rate competition.  Westward into the foothills and mountains of Montana he proceeded, tapping the new mines of Daly and Clark, whose enormous copper tonnage he wrested from rival railroads in 1882.  Then like Cooke, Hill sent agents into every corner of Europe, armed with stereopticon slides, to bring immigrants by the hundred thousand at low fares into his domain.  For these he founded schools, churches and communities, encouraged cattle raising and tree planting.  For would they not be his subjects, sending out and calling in a flood of goods forever ?

The Manitoba soon became a power ;  in its rear were accumulated a defense system of grain elevators and lake steamers which rounded out its shipping business ;  in its van lay the West Coast.  Hill could not go backward.  Pyle tells us how, on a camping expedition in 1884, over an open fire, Hill burst out expansively to his companions :

With a prophetic look he pointed to the Rocky Mountains then growing golden, and said :  “The Manitoba will even cross those great piles of rock and earth and press on to the Pacific Ocean, until Seattle, Tacoma and Portland are connected with the East by the best constructed transcontinental road in America.”

But there was already a railroad chartered to traverse all this region :  the Northern Pacific, of such unhappy fame, which Hill’s line paralleled just under the Canadian border.  The new interests connected with Cooke’s old enterprise looked with bitterness at the encroachments of Hill.  With his low costs, his economical planning, he was equipped to compete as mercilessly as Rockefeller in his large-scale oil-refining.  And like Rockefeller, Hill meant to “rule or ruin.”

He played his hand warily while laying future plans.  He sought to propitiate certain of his powerful rivals such as the union Pacific lying to the south of him.  But with Villard, who, having taken the place of Jay Cooke, managed the Northern Pacific in spectacular fashion.  Hill would have no peace ;  nor would he permit himself to be bought off.  He would tear the Northern Pacific, its tracks and land grants, from Villard’s hands, and thus double-track his own system.  The Northwestern states between the Great Lakes and Puget Sound were soon as loud with the alarm of railroad war as any other region.

2

A man of wide culture (compared to our indigenous economic leaders), of varied adventure and high imagination, Henry Villard (né Gustavus Hilgard) had come from Bavaria to the United States in 1853 at the age of nineteen, and soon proceeded as far west as Colorado.  After working as a traveling journalist for German newspapers, then as a war correspondent for Greeley’s Tribune, Villard had entered the service of Jay Cooke as an immigration agent.  Quick-witted, magnetic and eloquent, Villard seemed to win successes with but the least exertion ;  he attracted friends and followers everywhere.  In 1871 he revisited his native country and there was received with public ovations as a daring traveler and journalist.  The knowledge of railroad affairs he had gathered brought him an appointment as financial agent for the groups of defrauded German bondholders.  Thus, having returned to the United States, in 1874 he toured Oregon to examine the affairs of the Oregon steamship lines and railways in the interests of the foreign investors.

Introduced to the transportation business on the Pacific Coast, all he learned determined Villard to acquire and unite these various properties which had fallen from the hands of Cooke and as to whose value the foreign creditors were permanently disillusioned.

He was dazzled by the discovery of a beautiful frontier province, giant forests, mineral deposits, rich farm lands in the broad Oregon valleys.  His memoirs, written in the Victorian manner in the third person, say :

What he saw of the scenery of Oregon on the way to Portland in the California, Yoncalla and Willamette valleys filled him with enthusiasm. . . . His lengthy printed report to the committee contained favorable accounts of his impressions of western Oregon, and expressed his belief in the promising future of the country and consequently in the certain improvement in the prospects of the bondholders.  The greatest assurance of this lay in increase of population. . . .

He saw that “the vast region drained by the Columbia and its tributaries formed a very empire in its extent.”  Deep into this inland empire the ships proceeded up the long Columbia and Snake rivers.  Its material development was absolutely dependent, he felt, “upon the present and future transportation facilities within its limits.”  At this time the western limit of the Northern Pacific Railroad lay only at Bismarck, on the Missouri River.

According to one account given in Barron’s diary by W.H. Starbuck, a colleague of Villard’s, an account graphic enough though perhaps faulty in its recollection of details, Villard, while studying and occupying himself with the shipping business on the Northwest Coast, made inquires concerning the Columbia River Line ships.  These were owned by the Oregon Steam Navigation Company, and Villard “unexpectedly found that they were earning handsomely, but could be bought for three million dollars.”  Thereupon he acquired from the owners a four months’ option for $100,000, which he and his associates bestirred themselves to raise, and which permitted the purchase of a majority stock control in these shipping properties.

Villard went to New York, incorporated his option under the name of the “Oregon Railway and Navigation Company” with 60,000 shares of capital stock, not paid.  He then went to the Farmers’ Loan & Trust Company of New York, and by a wonderful piece of legerdemain executed a mortgage against the properties to be acquired.  He was able to use the proceeds, as well as the funds from further bond sales, to purchase in accordance with the terms of his option control of the steamship companies of Oregon.  Thus with a single stroke (like so many of his brilliant contemporaries) he had actual possession of a property which was soon valued at $10,000,000.  “Then came the boom of 1879 and soon Villard and I were rolling in money,” concludes Starbuck’s account.

Shortly afterward, Villard took steps to unite certain other shipping companies of the Pacific Coast and river trade with his own holding company.  To these were added various allied short railroads, already constructed in the region, including a line running up the Columbia Valley, and soon the daring Villard was issuing glowing statements to the speculative public of Wall Street, according to Henry Clews’s account—“a carefully prepared report showing immense and unprecedented earnings.”  The stock of Oregon Railway & Navigation which had cost him nothing and which Villard confesses “five months before had been given as a bonus” to certain Wall Street leaders, rose to a price of 95.  This was simply due, as his autobiography tells us, to the fact that

net earnings of the two constituent . . . companies were sufficiently large to warrant the payment of bond interest and eight per cent. dividends on the stock, payment at which rate had already been commenced.  This astonishing increase naturally raised Mr. Villard to a still more commanding position in Wall Street.

We see here a style of campaign which has become familiar to a modern generation.  Stock issues flowed rapidly, and dividends seemed to be paid almost as soon as the capital was raised, without the least delay for use of the capital.  Soon, against visible assets estimated at $3,500,000 (fully mortgaged) some $21,000,000 in stock was issued and placed on the market.  With the aid of the Wall Street pool leader, Woerishoffer, Villard, as Henry Clews relates, “had the stock bulled to 200.”  Here the old broker in his own memoirs comments, with unkindness or with envy—it is hard to tell—“as a stock waterer Villard had probably no superior in that important department of railway management.”

Having “glory and cash” aplenty and standing high in Wall Street, Villard now for two years pursued a brilliantly conceived campaign to consolidate his gains and fix his grip on the “narrows” of the Northwestern arteries of trade.  First, he and his group began preëmpting a route along the Columbia River, by “laying down a cheap narrow gauge road.”  It was an expensive process ;  the line would be useless in a few years and would have to be torn up ;  but thereafter, at least, no other adventuring knight of railroads could move down the south bank of the Columbia River, the only side on which railroad tracks could be laid.

He and his men then secretly scoured the huge region, spying out the valleys and mountain passes and river banks that must be possessed.  Villard, with imagination aflame, had a tremendous plan afoot which envisaged nothing less than seizure of all the possible routes and approaches to the Pacific Ocean in the Oregon and Washington country, thus blocking the line of march of the second transcontinental railroad, the Northern Pacific.

One stroke follows another, as Villard moves among the rival railroad groups, mysteriously skirmishing for vital positions, as in a game with pawns and mock artillery.  Now he seizes the confluence of the Columbia and the Snake River, destined, as his engineers showed him, to be the gateway to the Pacific Northwest ;  now he occupies the northern approaches to the Columbia River Valley in Washington, “the most strategic positions and richest agricultural areas.”  It was, as his agent in the field reported to him, “a country well worth fighting for,” since it prevented the forging of a link of some 200 miles by the Northern Pacific between Lake Pend Oreille and the head of navigation on the Columbia.

In the meantime he conducted campaigns to hamper the enemy’s construction, setting the rival towns against each other, lobbying in the state capitols, or now shifting his movements with almost comic haste when he learned that the opponent was circumventing him by moving up another valley.

“Let me drop everything else,” his lieutenant Thielsen reports, “and let me get our road up Union Flat . . . and some distance over into the Clearwater country located, with right of way secured, and even commence work on it before the other party can make preparations or is aware of what we are doing.”

Huntington understood the process quite clearly.  He himself had railway interests in Oregon, and he set up a cry of alarm, “threatened and remonstrated with the Union Pacific people,” so strongly that Gould and Dillon, who had been conniving passively with Villard, were detached as allies.  But the progress of Villard could no longer be stopped.

Having seized the mountain passes and valleys, Villard relates how he also gathered valuable coal deposits to unite with his transportation business.  Thus fortified, having the Northern Pacific well bottled and clashing with it at every point, he tried to negotiate an accord for dividing the traffic.  After some resistance the hostile Northern Pacific men in October, 1880, signed a presumably friendly prorating agreement with the Villard roads and ships, allowing passage of freight and travelers from one line to the other.  But by this means the enemy was only treacherously biding his time.  His intention was to raise great sums of money in order to crush Villard in Washington and also Jim Hill, whose Manitoba in the Dakotas paralleled his line.

But in November, 1880, Villard learned of the secret sale by Northern Pacific of $40,000,000 of its first mortgage bonds to a powerful banking syndicate headed by Drexel, Morgan & Co., August Belmont and others.  Villard relates :  “The transaction, then unparalleled in its magnitude, assured to the company $36,000,000 of money, which was then generally assumed to be sufficient for the completion and equipment of the entire main line.”  Thus within a month the Northern Pacific was in a position to advance against him and his “entire defensive position was entirely changed.”

The case was desperate.  Should the Northern Pacific, crossing Idaho, reach the Columbia River, then certainly the market value of Villard’s whole pyramid of sprawling little rail and ship lines would crumble away overnight.  Villard therefore resolved upon measures as desperate as his circumstances warranted.  He hurried to New York and formed the famous “blind pool” of 1881 which for its Napoleonic boldness of conception long represented a peak in the high finance of the epoch.

All through 1880 Villard had been making secret purchases of Northern Pacific stock.  But now he called together all the moneyed persons who had been following him in his exploits and who heartily admired him because wherever he went almost instantly securities bloomed and flowered with rich dividends.  Earnestly and confidentially he addressed a gathering of about fifty persons in his office asking them to subscribe to a “syndicate” in the sum of $8,000,000.  The purpose of the syndicate, or pool, he did not divulge in his confidential circulars save to a very few trusted associates such as George Pullman and the German plunger, Woerishoffer.  Beside himself with emotion, with the strange eloquence he possessed in such emergencies, he indicated to his followers that the undertaking had such tremendous potentialities for profit and power that one dared not speak of it.  The very mystery of the affair caused a rush of subscriptions.  Villard’s office in New York was crowded with speculators, and the subscriptions soon commanded a premium of from 25 to 40 per cent.

In the summer of 1881 Villard called another meeting of the subscribers to reveal his plans for buying the Northern Pacific, and they now agreed to subscribe $12,000,000 more to the formation of a new corporation, the “Oregon & Transcontinental Company,” a holding company which at once issued $30,000,000 of stock among the subscribers for the $20,000,000 of cash paid in.  Finally in September, 1881, after sensational maneuvers in the market, control of the long railroad passed to Villard.  He then joined it with his Pacific Coast properties under the new holding company, which had the widest powers to “construct for the others” as usual, to merge the others, to engage in mining, shipping, land-jobbing, town-building, or to seize every possible natural site or position of advantage.  Nothing seemed to have been overlooked in the charter.

Thousands of men now labored in the mountains to finish the main line of the Northern Pacific.  No sooner was he in full charge of the system than Villard, in 1881, declared a dividend of 11¹/₁₀ per cent to its stockholders “against improvements made from earnings,” a gesture typical of him.  At the same time the new president made a tremendous effort to populate his railroad barony.  He filled the entire world with his pictures, stereopticon slides and “literature” illustrating the Eden-like Northwestern territories.  Hundreds of his immigration agents spread their dragnet throughout Europe and England, hauling the peasants in by the tens of thousands to Oregon and the Columbia Basin ;  depopulating sometimes whole villages in Germany, Russia and Sweden.  These vast migrations, which brought, in one instance a train of 6,000 wagons across the Rockies, were inspired of course by an excessive enthusiasm.  In the case of the Scandinavians especially, agents were reported to have deceived the peasant “by painting too bright a picture of the future awaiting him in the new land.”

When the road was completed Villard, who had a passion for publicity and for eye-filling gestures, advertised the business to the whole world by making a record-breaking passage across the continent “on business.”  Through the courtesy of other railroad officials he was able to arrange for a special train running through without stopping except for a change of locomotives every 200 miles.  The Whole Western public watched his progress and cheered him on, he recalls with pride, as he descended at Portland in less than half the regular time, the fastest trip ever made.

The completion of the main line to the Pacific in 1883 was attended with a series of celebrations through which Henry Villard moved like a great prince occupying the whole stage.  His private train passed in a triumphal procession through the newly made towns along the way.  In his car his guests of honor were President Arthur, General Grant, Secretary Evarts and other cabinet members, ambassadors such as Viscount James Bryce, Congressmen, governors ;  newspaper reporters, soldiers and Indians filled four special trains.  In the incidental entertainments, exhibitions of track-laying were held, followed by artillery salutes, speech-making and the music of brass bands.  Sitting Bull was brought from captivity for one occasion.  And for the final festival of the Golden Spike, on September 8, 1883, the Crow Head tribe and their chief appeared and in a symbolic gesture formally ceded their hunting grounds to the big chief of the Northern Pacific, who described the historic affair of the Golden Spike in his memoirs :

A thousand feet of track had been left unfinished in order to give the guests a demonstration of the rapidity with which the rails were put down.  This having been done, amidst the roar of artillery, the strains of military music, and wild cheering Mr. Villard hammered down the “last spike.”

The affair left an unforgettable impression upon Bryce who, pondering upon the character of the American institutions, wrote shortly afterward in his “American Commonwealth”:

. . . These railway kings are among the greatest men, perhaps I may say the greatest men, in America. . . . They have power, more power—that is, more opportunity of making their will prevail—than perhaps anyone in political life, except the President and the Speaker who, after all hold theirs only for four years and two years, while the railroad monarch may keep his for life.

Yet in this case the king was not fated to rule for long.  At the very time that Henry Villard stood sunning himself in glory, doffing his hat and bowing to the madly cheering throng, at this moment when six houses were being torn down in Madison Avenue, New York, to make way for the palace of the railroad “magnate,” his spirits were heavy and he felt himself in utmost danger.  Like a deadly disease the secret deficit of his whole enterprise was increasing, eating into the core of the thing.

In demeanor and in word he dared not show his great trouble, standing as before an abyss and with a mask of composure.  But three months before the festive completion of the road private report from his officers had showed the cost of construction through grievous miscalculation to have exceeded the original estimates by $14,000,000, which, added to an existing deficit of $5,500,000, made it impossible even for such a magician as he to escape disaster.  Magician though he was and elected by himself to develop a Northwestern empire, Henry Villard apparently knew little enough about railroad-building.  For the ceremony of the Golden Spike he had to borrow a good locomotive from Jim Hill, according to gossip retold long afterward in Barron’s journals.  In all his work there had been a woeful haste and waste, a costly series of errors and lootings by the inside “construction company,” typical of much of the hurly-burly empire-building of the day.

Here is the testimony of an able railroad chief at the time.  James Hill, in intramural correspondence with his old fellow conspirator, Lord Mount Stephen, spoke of the “long stretch of entirely worthless country on the other Pacific roads” (Union and Northern Pacific);  of their bad grades and high interest charges, winding up :  “I feel . . . that they are not really competitors,” that is, with an honestly capitalized well-constructed road.  He added also in a letter to Charles Elliott Perkins, head of the friendly Burlington, what he thought particularly of Villard’s “developments”:

The lines are located in a good country, some of it rich, and producing a large tonnage ;  but the capitalization is far ahead of what it should be for what there is to show, and the selection of the routes and grades is abominable.  Practically it would have to be built over.

Villard now realized that all his confident statements to his associates and followers would be discredited.  His securities would decline.  Moreover, blows seemed to fall upon him every day from unexpected quarters.  Small privateers who pounced upon franchises or built short rail lines in his territory practiced blackmail upon him.  In Washington his mighty adversaries, Gould and Huntington, lobbied to bring about the forfeiture of the Northern Pacific’s land grant, causing him to reply in outbursts of indignation—though he himself had used the same tactics yesterday when trying to capture the road from its previous owners.  Finally, at this evil hour the pressure of Hill’s competitive strokes was too much.  The Manitoba, the future Great Northern, crept steadily through Villard’s domain, preëmpting the business at lower rates, while Hill boasted privately that he meant for the moment to keep his tariffs down in certain regions so that “opposition enterprises must be bankrupt.”  Hill could show on a piece of paper what it cost exactly to haul a loaded car over the grades of the Northern Pacific and what it would cost over his own line.  According to Pyle, his intensely admiring biographer :

Mr. Hill let Mr. Villard have his fill of glory ;  did not sulk or protest when he became the talk of two continents ;  took care not to offend his amour propre, and thus succeeded very well in maintaining a working understanding by which the Manitoba Company was permitted to go its way in peace. . . .

The Northern Pacific . . . most powerful concern in the Pacific Northwest [its steamships having eliminated river competition] . . . had no terrors for Mr. Hill.  He knew its financial condition, notwithstanding the . . . apparent plethora of cash.  Better yet he knew its operating condition. . . . He was in no hurry or fret, because he knew that every day reduced the power of the Northern Pacific to carry its own burdens. . . .

Now in his extremity began the grim pursuit of credit for Villard, over whom a shadow hung.  He issued $20,000,000 more in mortgage bonds with ill success.  His securities continued to sink.  As his grip weakened his former associates stabbed at him from behind with the stiletto, according to the traditional ethics of their trade in Wall Street.  As he tottered they pushed hard.  His recollections are painful here :

Mr. Villard learned then the lesson taught him so often in Wall Street, that the throng of people which follows with alacrity the man who leads them to profits, will desert him just as quickly when he ceases to be a money-maker for them.  He soon found that many of his most trusted friends, who formerly visited his offices regularly, had sold out their holdings and stayed away.  He even discovered downright treachery among his confidential advisers, two of the Oregon and Transcontinental directors using their private knowledge of the condition of the company for enormous “short” sales of its shares.

Collapse came swiftly on the heels of his triumph.  In January, 1884, owning that “neither he nor the Oregon & Transcontinental could be saved,” Villard resigned from all his united enterprises, which sank into the gulf of bankruptcy together amid the tremendous clamor of investors who had been brought to ruin, a scandal as sensational as anything which Jay Gould had ever evoked.  Among promoters of “large railway combination,” Villard was long the butt of public anger and the popular press pointed bitterly to the luxurious palace on Madison Avenue in which he still continued to live after his reverses.  Here Villard dwelt amid so much costly and empty splendor because he had “no other city home” and “for reasons of economy,” while pondering new magic for the future.  Though his memory was hated in the Northwest country, where “the specter of monopoly haunted the settlers,” he had more or less knowingly, and after his own happy-go-lucky fashion, hastened the process of centralization taking place in the industrial life of America.

With Villard ousted, his holding companies bankrupt, the weakened Northern Pacific Railroad itself was to be pushed to the wall, according to the plan of empire in Mr. Jim Hill’s mind.  During the 1880s, the disposition of power upon a large or small scale must still be decided by the individual prowess, or the lust for combat, of the gladiators—whatever the effect upon the underlying population.  And though it was widely believed that Hill’s development of the Manitoba into the Great Northern Railway was for a long time the gratuitous fulfillment of his private ambition, causing great economic disturbance in the region, he proceeded unchecked toward the Pacific.  By 1887 his line extended 1,500 miles from St. Paul ;  and from the peaks of Montana which he had reached he could see the Pacific Coast.  This “greatest railroad autocrat of his time” could no more stand still or retreat than the others.  He too carried on great colonizing operations.  By pressing a button at his headquarters streams of “stereopticon slides, photographs and data concerning the advantage of settling on the Great Northern came forth,” as Hill’s son recalled.  He built more solidly, more painstakingly than Villard, but like Villard pressed always through traffic agreements, joint leases or rate wars with his adversaries toward the crushing advantages of monopoly.

In cementing what was finally to be the most perfect railroad monopoly in the country, Hill extended his sphere also through the Middle West.  He saw that the extensive network of the Burlington system would act as a “feeder” for his highway to Asia, while in the North he designed to add the Northern Pacific to his own transcontinental trunk line as a “double track.”

As the rival railroad under new hands found itself fighting for existence, it provided trouble for Hill, which he reflects in his correspondence of 1890 with Lord Mount Stephen :

You may think I am going pretty fast in the Northern Pacific matters. . . . It is pursuing a very aggressive course almost regardless of permanent cost and business judgment . . . doing both the “Manitoba” and the Canadian Pacific Railroad great damage and in such a way as to compel both to spend large sums of money to no good end. . . .

But I am very sure that if we get what we want there the results will be more than ever considered in another place. . . . The entire property controlled by the new company would have an earning capacity of about $3,000,000 a month.  And this, with the advantage of removing all expensive rivalry and competition, would alone save 5 per cent., which is $1,000,000 per annum. . . .

The more I think it over, the more I am convinced that the thing for us to do is to “take the bull by the horns” and get control of the Northern Pacific, and by one stroke settle all questions at once.

The first phase was to be financial war to the bitter end, union being long delayed, owing to the chaotic industrial upheavals of the ’90s.  Only after appalling waste and delay would the quarreling barons finally make common cause at the call of the leading banker of the age.

But in the meantime the victories or defeats of Hill, of Villard, of Huntington and Gould brought in either case little rejoicing to the settlers of the West.  It was a saying among the farmers of Minnesota and the Red River Valley :  “After the grasshoppers we had Jim Hill. . . .”  Their grain and cattle could move only over his highway to his huge lake steamers, and into his elevators and storehouses—from beginning to end at such terms as he fixed.  It passed not unnoticed that in 1883 the earnings of his Manitoba were tenfold that of his first year, and that he suddenly ordered a “melon” of $10,000,000 to the stockholders “against improvements and acquisitions.”

Nor did the population of the Columbia Basin love their conqueror, Villard, during his brief reign.  Since his ships controlled water competition, freight rates in Oregon and Washington had an arbitrary character ;  here as in California a shipment of fire bricks, let us say, from Liverpool to Walla Walla (by way of Cape Horn!) could be made as cheaply as over the direct route of the Northern Pacific.  Moreover Villard held his hand over the towns that grew up, determining their development, economic growth or decay according to his pleasure.  Thus at times Seattle and Tacoma would feel strangled or “d0wncast,” while Portland rejoiced because Villard centered operations at the mouth of the Columbia ;  or later Portland would howl while he built a connection to Seattle.

Turn where they would, the free pioneers of the West found their case equally desperate.  Jay Gould held the Union Pacific ;  Huntington, the Southern Pacific.  In California, for instance, as the historian H.H. Bancroft relates, there was hardly a county which had not burdened itself by incurring tremendous debts as ransom to the railroad systems ;  for they had been urged on by their local statesmen, and “all the newspapers paraded the benefits to be received from every railroad scheme. . . . Thus urged by the legislatures and the press, the people had passed under the rod with the greatest equanimity.”  But soon afterward in many a pamphlet or small-town gazette one could perceive the altered temper of the settlers as they sensed dimly the fact that while the great machines of steam and iron had opened larger opportunities to them, these opportunities were no longer under their control.  A threshing machine could be brought in short time from Chicago to the San Joaquin Valley, but as Frank Norris related in his tendentious novel, the article might have to travel several hundred miles beyond its destination to the “main reshipping point,” then be sent back to its purchaser and delivered at the pleasure of and the price fixed by “The Octopus.”  Or, when the market bespoke a pleasant profit to the farmer for his season’s toil, then “The Octopus,” with supreme cunning and omniscience, would remember to raise the freight rates high enough to dash all such hopes of profit.

The settlers who had welcomed the railroads as a blessing now perceived that in accordance with the “American system” they were operated as much with a view to hindering the industrial community as to serving it.  Their spokesmen, who came sometimes to Washington now, denounced the “railroad kings” in strange language, as “blood-sucking vampires” who practiced “licensed larceny.”  A bushel of wheat, they protested, worth fifty cents in Minnesota was put down in New York at from $1.20 to $1.25.  “Submit to our extortionate rates,” the railway officials said to them in effect, “or your wheat, corn and oats may rot in your granaries without a market ! ”

In the magnificent spaces of the West especially were the settlers helpless against the common carriers.  Thousands of them had undergone great hardships in order to arrive at the frontier, where as it is pictured to us they were presumably to live as automatons exporting and importing freight endlessly.  Boarding trains from New York or Chicago the immigrant had often been obliged, as Congressional records show,

to take his chances, living upon the hard benches of springless cars for many days at his own expense, very often without fire or water, owing to neglect of employees, who care nothing for the comforts or necessities of foreigners.

As early as 1873 a measure was actually placed before the United States Senate for the prevention of cruelty to travelers upon railroads, much like the humanitarian statutes afterward introduced for the protection of horses and other animals.

Once arrived, the settler in the new country sometimes found that the railroad kept him away from the best lands, which at the same time were not patented in order to avoid taxation.  Over the use of the land there would be many angry collisions, during which “homesteaders” would be expropriated by force of arms.

But while the tillers of the soil felt themselves subject to extortion, they saw also that certain interests among those who handled the grains or cattle they produced, the elevators, millers and stockyards, or those from whom they purchased their necessities, the refiners of oil, the great merchant-houses, were encouraged by the railroads to combine against the consumer.  In the hearings before the Hepburn Committee in 1879 it was revealed that the New York Central, like railways all over the country, had some 6,000 secret rebate agreements, such as it had made with the South Improvement Company.  The dry-goods house of A.T. Stewart, the New York merchant, had been especially helped by the Vanderbilts to “build up and develop their business.”

The counsel for the legislative committee asked :

“They were languishing and suffering ?”

“To a great extent.”

“This is deliberately making the rich richer and the poor poorer . . . through the instrumentality of the freight charge.”

In the meantime the political representatives whom the disabused settlers sent forth to Washington or to the state legislatures to bring redress seemed not only helpless to aid them, but were seen after a time riding about the country wherever they listed by virtue of free passes generously distributed to them.  That the farmers should be bound to their acres and have literally no way of moving about or seeing the world while their betrayers and tormentors went lording it over them in palace cars—this was simply too much.  Their envy and fury were roused particularly by the “free-pass evil,” as is shown by the frequent visits of farmers’ delegations to Washington on this ground alone.

Since formal opposition worked little good, the Western agrarians ended by banding themselves together in a vast organization called the Grange, which after several years of development during the ’70s accumulated a membership of a million and a half American peasants hailing from 15,000 different communities.  This secret society of the Patrons of Husbandry, by which the Americans sought to resist the railroads, had (like the Masonic Orders) its signs, grips, passwords, oaths, degrees and other impressive paraphernalia.  Its officers were called Master, Lecturer and Treasurer and Secretary ;  its subordinate degrees for men were Laborer, Cultivator, Harvester and Husbandman ;  for women, who took an important part in the whole ritualistic organization, there were titles such as Maid, Shepherd, Gleaner and Matron ;  and still higher orders entitled Pomona (Hope), Demeter (Faith), and Flora (Charity).  Soon in eleven Western states the Grange, though it was ostensibly fraternal and social in character, became a power in politics, packed the legislatures with its members and established railroad commissions which were to end railroad abuses of all sorts.

The railroad barons were in turn rendered furious by such intervention.  Huntington vituperated against his opponents in 1877, calling them alternately “agrarians” and “communists.”  He and the others devoted themselves to capturing the various railroad commissions in each state.  Those that were not so captured were in most cases utterly bewildered by the complexity of a problem which it was in the interest of the railroad owners to render still more complex.  The inept Granger laws were disobeyed and resisted.  In some cases a kind of cordon sanitaire was drawn about the disaffected regions, which were faced with a total loss of transportation ;  so that, after one or two years, commonwealths like Iowa, Minnesota and Wisconsin were forced to remove their regulative laws from the statute books, as at the point of a pistol.

Thereafter the agitation of the hard-pressed “agrarians” took other turns ;  for years after the “crime of ’73” there were crusades toward inflation or “free silver,” measures which were designed to cheapen or even pardon the debts of the farmers while raising the value of their product.  Yet little came of all these poorly directed efforts—save that the “pass evil” was certainly checked in great measure.  At any rate the famous optimism of the pioneers tended to subside slowly and heavily, while it was reported in the Western press everywhere along the lines of Huntington, Gould or Villard that “nothing is heard but one continuous murmur of complaint.”

¹ The receiver Farley, several years afterward, sued Hill for $15,000,000, alleging that he had conspired to get the property for Hill and had afterward been “left in the cold.”  The testimony of the receiver, by evidence of his own character, was considered untrustworthy by the Court and besides, no documents incriminating Hill were produced.