Evening star., 1911-05-28
NOISE IN SECTIONS THE STORY OF STEEL
Georgetown University Stu Gates Tells of Fortunes Gre
dents Supply Motive Power. ated Almost in Breath
SENIORS TAKE BIT IN TEETH ROCKEFELLER BARRED OUT
Greet Smoker Program How Carnegie Curbed Though
With Locomotive Yell. Greatly His Financial
CHOO CHoo OF TRAIN HAULER WHAT LED TO COMBINATION
Claimed
Hotel Of Business
Gates Tells of Fortunes Gre
ated Almost in a Breath.
ROCKEFELLER BARRED OUT
How Carnegie Was Curbed, Though
Greatly to His Financial Gain.
WHAT LED TO COMBINATION
Claimed That Threatened Demorali-
cation of the Business Caused
Union Of Great Interests.

| The inside story of the formation Of
the United States Steel Corporation was
told yesterday by John W. Gates TO tht
| House committee on the investigation o
| the steel trust. His recital of the de
| tails followed a narrative of the alb
| sorption Of the Tennessee Coal anC
Iron Company by the United States
Steel Corporation in the great financial
panic of 1907.
He first told how the Tennessee Coal
land Iron was taken over at what he
called a forced SALE" growing out of
the embarrassment of one Of the New
York trust companies, which held a
large block OF Tennessee Coal and Iron
stock as collateral In order to relieve
the tension great financial interests met
at the house of J. p. Morgan and ar
ranged a deal by which the steel trust
absorbed the Tennessee Coal and Iron,
giving steel trust sinking fund bonds
in return for Tennessee Coal and Iron
stock, the stockholders In the latter
concern getting the worst Of the bar
gain. in Mr.. Gates opinion.
Rockefeller Barred Out.
Mr. Gates told also OF millions lost
and created almost in a breath; how
| the Carneigie mills. appraised at $780,
600. 600, were recognized as worth
$500. 100000 almost within the time re-
quired to make the transfer to the
corporations; the grim clash in the
formative days when John D. Rookie
feller was dissuaded from joining in
the creation of the corporation and
the manner in which others were pre-
vented from engaging in the steel
trade.
Relating how Carnegie had been
forced to abandon plans for extending
his steel business. Mr.. Gates frankly
admitted that the gigantic industrial
combination was formed to throttle
competition. and he surprised the COM
mittee with the further information
that when John D. Rockefeller had
sought to enter the steel business a
deal had been put through by which
tn Standard Oil magnate was forced to
sell our for 40 cents on the dollar.
Characterizing Mr.. Carnegie as "a
bull in a china shop" Mr.. Gates told
of midnight conference between him
self, Charles NJ. Schwab and J. Pier
pont Morgan. at which the steel cor
poration was conceived. and how 1t re-
suited in Carnegie getting $500 900. 600
in the corporations securities for his
steel interest, which he previously had
| offered for s16o,oo0,000 in cash.
Had its value been increased in any
other way than by the threats Carnegie
had NADER" Mr.. Gates was asked
You'll have to ask Mr.. Carnegie as
| TO that" replied Mr.. Gates.
Value of Corporations Property.
The obligations of the steel trust.
said Mr.. Gates. were more than he
could estimate. First. he said. were
| the underlying bonds OF the companies
that had been turned In; next the first
| mortgage bonds issued by the United
States Steel corporation to pay off Car
| negie; then bonds to cover purchase
mortgages. prior liens and the like
What is the tangible property be-
hind these bonds and this common
and preferred stock?" asked Chairman
Stanley.
''Oh. appraisers might estimate 1t
000. 0oO"
DO you believe there Is any tangi-
BILE value behind the common stock
you hold?" asked Mr.. Stanley
7 decline to answer" said Mr. Gates
Mr.. Gates said Carnegie had always
been like bull in a china shop"
kicking over every agreement that
was made between the competing com
panies.
I'VE had something like gentlemen's
agreements years ago." said Mr. Gates.
The boys would make 'em and ANDY
would kick them over. Frick wouiS @
make statement in the morning, and
after lunch would change 1T because
Carnegie had kicked. No one in the
Carnegie Steel Company controlled
in the corporation"
Cause Of the Combination.
Mr.. Gates said that twenty years ago
there was general agreement as to the
price Of steel rails. with heavy penalty
about S2o ton, for any cutting of this
price He said that Harry Smith. pur-
chasing agent of the Missouri, Kansas
and Texas railroad, in 1887 or 1883. had
met Carnegie in New York, and that
Carnegie had made strong cut on rails
in order 10 get his order
Il knew how he did it =" said Mr. Gates
| by throwing in the track bolts snikes
ana angle bars, which amounted to about
10 per cent of the value of the rails.
Finally | preferred charges against him,
but he denied having cut the agreement.
Later l taxed him with it and he admit
ted 1t all to me. but he would not pay
the fine
Mr.. Gates thought it was Carnegie s
general attitude in threatening the whole
llne or the steel industry that had
hastened and brought about the organiza-
ton OF the United States Steel Corpora
1 tion.
Mr.. Gates told of plans made by Mr..
/ Carnegie in 1899 and 1900 to circle his
steel interests with "a railroad of his
own and TO compete with the National
Tube. Company. just organized by Mr..
Morgan. by the erecting of a tube works
at Ashtabula. Ohio. which We're the fac
tors that led to the birth of the steel
combine. The story of the negotiations
which led up to the combination now
the subject of. congressional inquiry was
entertainingly told by Mr.. Gates
The All-Night Conference.
He revealed how Mr.. Morgan, alarmed