The Railroad Builders: A Chronicle of the Welding of the States

st began to take form, the United States had barely emerged from the Revolutionary period. Many of the famous men of that great day were still living. John Adams and Thomas Jefferson h

t Fulton, and steamboats were now carrying cargoes successfully against the swift currents up the Mississippi from New Orleans and were threatening the extinction of the aggressive flatboat traffic. Great strides h

io had been broached by George Washington before the Revolution, and he had also prophesied the union of the Hudson and Lake Erie by canal. H

South from the competition of New York and the East which would inevitably result from the construction of the Erie Canal and the Public Works of Pennsylvania. But discouragements in plenty frustrated the plan. The cost was believed to be excessive and the engineering difficulties were said to be almost insuperable. G

ng on February 12, 1827, including about twenty-five citizens, most of whom were Baltimore merchants or bankers, "to take into consideration the best means of restoring to the city of Baltimore that portion of the western trade which has lately been diverted from it by the introduction of steam navigation and by other causes." The outcome was an application to the Maryland Le

nly surviving signer of the Declaration of Independence of fifty-two years before, said on this occasion, as he laid the first stone: "I consi

fective source of power was supplied by mules and horses. The Flying Dutchman, one of the cars devised to furnish motive power, provided for the horse or mule a treadmill which would revolve the wheels and make the distance of twelve miles in about an hour and a quarter. Steam locomotives at this time were in their infancy and, until the opening of the Liverpool and Manchester Railroad in this same ye

n 1831, steam locomotives were tested, and one of them, the York, was found capable of conveying fifteen tons at the rate of fifteen miles an hour on level portions of the road.

1842 the line was completed to Cumberland, Maryland, and by 1853, to Wheeling. Meanwhile, the branch from Cumberland to Parkersburg, Virginia, was built. The road now comprised a total system of more than five hundred miles and reached two points of importance on the Ohio River, one northward near the Pennsylvania-Ohio state line and one southward in the di

ection, a remarkable change became apparent. Losses were turned into gains; deficits were converted into surpluses; and soon Garrett had gained the reputation of being the most remarkable and efficient railroad manager in the world. He seemed to be almost an Aladdin of railroad management for, even when he could not show increases in amount of business done, he reported greater profits by showing lower expenses. In those days the railroads did not furnish detailed reports of business to the stockholders or to the public. At

h bore heavily on the Baltimore and Ohio, interfered with these ambitious schemes. Early in 1861 the Confederates took possession of a large part of the line east of Cumberland; in the next four years important sections of the road were repeatedly destroyed and

an express company, a telegraph company, and a sleeping-car company. To carry out these ambitious plans the capital stock and debt were of course increased again and again, and in the course of these operations a large part of the new securities issued was sold to English investors. Notwithstanding these great increases in liabilities, the company continued to report large surpluses a

nnsylvania road refused to carry the Baltimore and Ohio cars over its line to New York on any terms whatever. Since this was the only way in which the Baltimore and Ohio could reach New York, the situation was a serious one. Garrett retaliated by making destructive reductions in passenger rates from Washington and Baltimore to Western points. The cuts were soon made on other roads and affected both freight and pas

cent dividend until 1877, when it somewhat reduced the rate. These dividend payments indicated, however, a prosperity that was only apparent, and they did not greatly deceive the bankers, for the credit of the Baltimore and Ohio weakened from day to d

sts strongly opposed Garrett's new project and many years before had gone so far, in their determination to block the Baltimore and Ohio from acquiring control of the Philadelphia, Wilmington and Baltimore Railroad, as to purchase that road themselves. Despite this opposition the Baltimore and Ohio went forward with their plans and secured an entry into Philadelphia by acquiring control of the Schuylkill East Side Railway, which was a short terminal road of great strategic value. North of Philadelphia the company arranged a traffic contract with t

to decline. Dividends were gradually reduced and by 1888 were omitted entirely. As is usually the case, the cessation of dividends awakened the sleeping stockholders. They began an

left on onerous terms, had been charging up millions of dollars of expenses to capital accounts-and as a matter of fact, instead of making money, it had for the most part be

ions which would never be returned had been advanced to subsidiary lines, or had been spent, and therefore should have been put down in the books as losses. When these facts became public, the capital stock of the Baltimore

fairs of the company on a sound basis. Samuel Spencer, who afterward became a partner in the banking house of J. P. Morgan and Company, was elected president and active manager. He introduced radical reforms, en

balance of power. As the bad bookkeeping and other irregularities of the past naturally reflected on the Garretts, it was their interest to suppress further investigation as far as possible; and their antagonistic attitude toward the p

year, while the debt and interest charges constantly grew. Despite these ominous facts, dividends were paid regularly on the preferred stock and in 1891 they were resumed on the common stock. In the latter year a twenty per cent dividend was declared "to compensate shareholders for expe

nues. Such conditions made even the Garrett interests feel that something should be done, and in 1890 a "community of interest" scheme was proposed. To control the stock of the Baltimore and Ohio Railroad, Edward R. Bacon in New York, acting harmoniously with the Garrett family, formed a syndi

ter condition than for several years and that on the whole it was in a stronger position than at any time since 1880. But in this same year it became necessary to stop all dividend payments; the company began to have difficulties in securing ready money; and before the close of the year the situation seemed

om were deposited the Garrett shares as well as those of the Morgan and New York and Philadelphia interests. A full investigation of past management disclosed that the records for the interim extending from the brief Morgan control under Spencer to the receivership contained the same kind of irregularities and errors of policy that had prevailed under the earlier G

d been progressive in matters of expansion and had built up its system to meet the needs of modern times. Its trackage and equipment compared favorably with similar systems, and most of its extensions and branches had been wisely planned and had proved profitable. The operating management of the railroad was generally good and it usually secured its proportion of what business was to be obtained. B

ll its cash in dividends, the equipment had been going into the scrap heap. For two years the receivers made large expenditures on equipment and roadbed, borrowing money for this purpose; the result was that when

by assessments and the sale of new securities; the liabilities of the Company were greatly reduced; and its credit was promptly restored. Formerly the Baltimore and Ohio had been struggling under a burden of floating indebtedness, with so little money in its treasury that it could not even put a new coat of paint on the passenger cars and had

developing traffic, increasing earnings, and rounding out the general system. They adopted careful measures for unifying the system by adding other lines and connections of value; they paid much atte

rmour, Norman B. Ream, and James J. Hill jointly purchased a large interest in the stock. But this purchase, while perhaps representing a dominating interest, did not involve actual control. Soon afterward, interests identified with the Pennsylvania Railroad began to

on that, if continued, would ultimately ruin them all. The Supreme Court had decided that the "pooling" arrangements which had so long prevailed among great competing roads violated the Sherman Anti-Trust Act; and the American public, which now was cultivating a new interest in railroad problems, believed that the "community of interest" plan was merely a scheme to defeat the Interstate Commerce Act and the Sherman Act and to maintain secretly all the old railroad abuses. These inter-railroad purchases therefore became so unpopular that the Pennsylvania sold its Baltimore and Ohio stock. At this time Edward H. Harriman of the Union Pacific, who had at his disposal vast

ich controlled the Philadelphia and Reading Railroad and the Philadelphia and Reading Coal and Iron Company. It did not obtain a majority interest but, with the Lake Shore and Michigan Southern Railroad of the New Y

stem of doubtful value radiating through the State of Ohio and, by additional extensions, into the soft coal fields of West Virginia. New energy w

In that year, however, the Union Pacific liquidated its holdings by distributing them to its own individual stock

e to an end with the death of Harriman, the typical railroad president was usually a man of great wealth who had secured his position by owning a large financial interest in the property. The country was full of "Wall Street Railroad Generals." But in recent years the efficient railroad head has come more and more to be the practical railroad man who has risen from the rank

Baltimore and Ohio of the present decade has reached an enviable position as one of the great Eastern trunk lines, comparing well with other progressive properties like the Pennsylvania, the New York Central, the Southern, the Illinois Central, and the Louis