Omaha daily bee., 1903-05-02
BURST OF YERKES' BUBBLE
Millions Made Out Of Chicago Street Rail-
ways by a Smooth Promoter.
WHY WAY OF A MAN WITHOUT CAPITAL
vast Public Properties Manipulated
for Double PrOat and Then
UnIOadedvBuyers Must
Pay the Cost.

When Charles T. Yerkes came to Chicago
from Philadelphia In 1886. relates the Chi
cage Tribune, he found the old North Chi
eago City railway running horse cars on
Clark street, Clybourn avenue, Wells
street, North avenue and a few other
streete. 1t was about this time that the
limits OF the North Chicago City railway
we're at Fullerton avenue. In the winter
the cars we're stuffed with straw in lieu
Of other kind Of artificial heat.
II was all primeval, including the capital
stock OF the company. which then amounted
to $500, 900. The bond issue outstanding was
$500, 900. or a total Of 1.OOO.O 600.
Yerkes, having begun his street railroad
career as cashier, car decorator and general
superintendent. saw the possibilities Of the
North Chicago City railroad. He saw how
extensively 1t was being operated, and
when he learned from the books how much
1t cost the company to run one car one
mile he said:
II will take your road"
II locked 30 we'll to Mr.. Yerkes that he
offered for a controlling interest, that is.
$3.50, 900 worth OF stock. $500 per share. His
offer was accepted. In addition. he agreed
10 pay 80 per cent dividends per annum. and
closed up a contract to run s9s years.
No Money, but Genius.
Mr.. Yerkes had no money with which to
buy this property, but he had ingenuity
such as had not previously been practiced
IN Chicago. He at once spread a mortgage
OF 1880, 900 over the stock he had agreed
10 buy, and then the modest capital of
$500. 900 was increased TO s., 900, 900. BY his
system Of fnanciering he mortgaged the
property to pay for It, and acquired some
thing for nothing. The old Indebtedness
against the property thus increased at once
$4,000 900.
Thereafter more securities we're Issued,
Clybourn avenue, Clark street and Lincoln
avenue were cabled, and when Mr.. Yerkes
finally disposed of the property II was cap
italized for $7,9 900 Of stock and S7,431, 900
Of bonds. or a total OF SIS. $50, 900.
The North Chicago City Railway company
was purchased by the North Chicago Street
Railroad company. organized in May, 1885.
to bring about the results indicated. The
new capital Of s., 900, 900 stock and 81. 800. 900
bonds took the form OF obligations Of the
North Chicago Street Railroad company,
although that concern owned nothing ex-
eept the %, 001 shares OF the capital of the
North Chicago City Railway, which were
purchased by mortgaging them.
Invades the West side.
The purchase OF the north side horse car
lines proved such a lucrative and promis-
ing venture that in the next year, or 1887,
Mr.. Yerkes. with whom, 1t may be added,
were associated p. A. b. Widener and W..
L. Elktns OF Philadelphia. turned his at
tention toward the west side lines. then
operated under the name of the Chicago
West Division street railroad company.
So far as equipment was concerned and
economy Of management both systems were
on q par. There was as much to be gained
by clever management of the Chicago West
Division lines as those OF the north side.
The capital stock and bond Issue were a
little larger. and this necessitated a more
pretentious financial plan. But the same
methods we're pursued.
The West Chicago Street railroad com
pany was organized in July. 1887, with a
capital OF $40, 900, 900. 1t had no assets, but
Mr.. Yerkes agreed TO buy a majority OF the
capital stock of the Chicago West Division
railroad company, paying therefor tS15 per
share. He secured 6.251 shares out Of a
total Of IL, 800 shares. giving him a majority
of one share. Expressed In dollars the out
standing capital was 1885, 900. But the
Chicago West Division shareholders had
seen the north side company receiving $50
a share rental, and they asked a little bet
ter, and Mr.. Yerkes agreed to pay SS5 a
year.
scheme Ia Repeated.
To pay for this stock the north side oper-
alton was repeated, and a mortgage of
"a, lOO,0 900 was spread over the 6.251 shares
of stock, and the proceeds Of the sale OF the
bonds was used to make part payment on the
purchase. The $40, 900. 900 capital Of the
West Chicago Street railroad company
went to the United States Construction
company for building the West Madison
street and Blue Island avenue cables.
This United States CONSTRUCTION company
was a wheel within a wheel. being one Of
Mr.. Yerkes' best devices for securing two
profits where two profits were to be had.
The Chicago West Division company had
prior TO It's sale acquired control Of the
Chicago Passenger railway. This company
operated on Harrison and some other streets.
The capital stock and the bonds Of that
company were S1,740, 900. The capital stock
of the West Division company itself was
II, $50, 900 and it's bond issue ts,Jse, 900,
making the total capitalization Of the
two lines 81. 1870. 900.
Through the operation OF the West Chi
eago Street Railroad company the property
was at once covered with an additional
t4.I0O.0 900 Of bond0 and $40. OOO. 900 Of stock.
IN increase Of fi4.lOo'OoO'
Becomes a Tunnel Builder.
In the four OF hve years succeeding 1887
Mr. Yerkes was busy developing the North
and West Chicago systems. and incidentally
found It necessary to organize the West
Chicago Street Railroad Tunnel company,
which built the tunnel under the river at
Van Buren, street.
There was an issue Of bonds Of si.5oO.O0O
and a capital stock issue of p.S0o,OOo.
What the tunnel cost Is not disclosed In
the records.
Another enterprise In connection with
building up the West Chicago street rail-
road system was the necessity for power
houses and real estate in connection there
with. In order to make the deal with the
street railroad company more easily eff
fected the insiders looked up a suitable
site. purchased the real estate and then
sold Il to the street railroad company, the
profit on the transaction not being dis
closed by the records.
But for all these devious ways OF making
individual profits the street railway systems
OF the north and west divisions OF Chicago
were reVolutioniEed. and MT. Yerkes was
always accustomed TO consider that the
person or persons who could hgure out such
enterprises were entitled TO profits on their