The San Francisco call., 1903-12-26

tCopyright 1903 by Joseph b Bowles)
Here is the story of the origin and
promotion Of the Northern Securities
Company. the s400. .O00, 600 securities
holding corporation whose right of eX-
istence has been so strenuously opposed
by the Government.
About seven years ago James J. Hill,
president Of the Great Northern Rail
way. spoke to some Of his business as
sOciates OF the desirability OF cor
poration in which could be concen-
trated the control of the great sys-
TEN Of rail and water transportation
20 the upbuilding Of which he had
given the greater part OF his business
career. Practically all Of the large for
tune accumulated by Mr.. Hill was in
vested in the Great Northern system.
With a few personal friends as part
ners he had secured absolute control Of
the property. These friends were Lord
Strathcona, Lord Mount stephen, John
s Kennedy, D. Willis James and one
or two others. All Of these men were
considerably past middle age and they
felt that as they grew old together 1t
would be gratifying to have assurance
Of the permanency Of the property that
had been developed and conserved by
their capital and efforts.
Said Mr.. Hill 10 Lord StrathcOna, who
was then past 20 years Of age: That
my death or your death or the demise
Of our partners should disrupt and con-
fuse our well-laid plans for the future
Of this property is something can
only contemplate with sorrow. We
must make such provision as win Keep
this system intact and insure the COM
,r al.
ment." Up to that period Of Mr.. Hills
idea Of a securities holding company
embraced Great Northern interests
only. He had previously suggested,
however that some steps be taken 10
harmonize the policies Of the Northern
Pacific and the Great Northern, IN
order that these two Northwestern rail
road systems be restrained from cat
ting into each others territory and in
turing each others business. OvertUres
for q lease Of the Northern Pacific to
the Great Northern were made, but
such vigorous opposition was raised by
shippers and politicians throughout the
Northwest that the project was abar-
doned.
J. Pierpont Morgan reOrganized the
Northern Pacific about this time and
looked around for purchaser. He was
determined TO keep the property out
of the hands Of spectators and sug-
gested to John 5. Kennedy, ID. Willis
James and other New York friends Of
Nr Hill that the reorganiZed road af
forded a good field for investment
Soon thereafter several large blocks Of
Northern Pacific stock passed 10 the
control Of Mr Hill and his friends, and,
although Mr. Morgan practically re-
tained the management, the dominant
influence was that Of James J. Hill. 1t
was the latter who negotiated the joint
purchase Of the 5000 miles of Chicago.
Burlington and Quincy lines by the
Northern Pacific and the Great North
ern. and it was Mr.. Hill who said No"
peremptorily when E. H. Hartman
asked that the Union Pacific be ad-
mitted 70 partnership in the Burling-
ton purchase.
Mr. Hills peremptOry No precipi-
tated the stOck-buying contest for con-
troll Of the Northern Pacifir which
waged with panic fierceness for two
days early in May. 1902 Mr.. Morgan
was in Europe just then, but his firm
Joined with Mr.. Hill in seeking to pre-
vent Mr.. Hartman and his associates
from getting majority of Northern
Pacific shares. 1t was virtually a drawn
battle. Each party TO the fight con-
sented TO truce in order to avert a
wild panic in Wall street, The Harri-
man party counted up about SIS. .OOO. 900
Of the $l55.0OO,OOO Of Northern Pacific
stock and the board Of directors were
recast by Mr.. Morgan-at tn quest of
all parties interested-and The Union
. Pacific received proportionate repre-
sentation. What TO do with these enor-
nous accumulations Of Northern Pa
cifc stock was the question. Neither
party wanted to carry their heavy bur-
dens permanently, and Mr. Hill and
Mr. Morgan realized the necessity of
fixing the control Of the property in
such a way that it could not be easily
disturbed nor again made a football in
Wall street.
It was then that James J. Hill
brought forward his securities holding
scheme, with such elaboration as was
necessary to take in the capital shares
OF both the Northern Pacific and the
Great Northern railroads. The capital
ization Of the Northern Securities Com
pany was fixed at $400, 600 900 for two
reasons. as explained by both Mr. Nor
gan and Mr. Hill One reason was that
il was desirable to have the securities
holding company so large that no spec
ulative or aggressive interest could 20
into the open market at any time Z n
buy control of it. The other reason
was that Mr.. Morgan. Mr. Hill and
Mr.. Hartman wanted the new COM
pany 10 be in a position to take every
share Of Northern Pacific and Great
Northern stock on terms uniform 10
each individual holder. Mr.. Hill in
sisted that every small holder should
be enabled to convert his stock at the
same price the large holders received.
and as market quotations ruled when
the conversion was made the $4,000 .OOO
OF Northern Securities stock at par
would Just about pay for all of the
stock OF the two railroad companies.