Hill

tending the system westward from Minnesota to
Puget Sound. The strength of the Great North-
ern was in its location, its low first cost, its con-
servative financial structure, and the skill of its
management. Hill built his lines where he knew
that rail traffic would blossom; he personally
supervised the construction, in small as well as
in large matters; he selected the routes with
favorable grades; he was a pioneer in recogniz-
ing the value of adequate terminal facilities; and
he insisted that the cost of operation should be
lower than that of any railroad in the region.
After its reorganization the Northern Pacific
fought him at every step. One of Hill's guiding
principles was that an intimate knowledge of a
rival undertaking was essential to effective pro-
tection of his own interests. He knew that the
Northern Pacific was over-capitalized, that its
ton-mile cost was substantially greater than that
of the Great Northern, and that he could beat it
in fair competition. What he feared was another
period of bankruptcy for the Northern Pacific,
with the attendant risk of an uneconomic rate
war.

These fears were not groundless. In the panic
of 1893, the year in which the Great Northern
reached Puget Sound, the Northern Pacific en-
tered upon its second receivership. Hill was
prepared to stabilize the rail situation in the
Northwest by assuming leadership in a reorgani-
zation which, on the one hand, would insure
proper cooperation rather than unwise strife be-
tween the two railroads, and, on the other, would
prevent the acquisition of the Northern Pacific
by a system alien to the region. In May 1895,
after nearly two years of negotiation, Hill, in
association with Lord Mount Stephen and Ed-
ward Tuck, entered into an agreement with the
representatives of the Northern Pacific bond-
holders, under which the Great Northern would
guarantee the principal and interest of the
Northern Pacific bonds, and the bondholders
would give Hill and his associates a majority on
the board of the new company and turn over to
them as trustees one-half of the capital stock.
The agreement, however, met with public op-
position and suit to enjoin the unification was
brought, by a stockholder of the Great Northern,
under the Minnesota law which prohibited the
consolidation of parallel and competing rail-
roads. The circuit court dismissed the case but
on appeal to the United States Supreme Court
the injunction was granted in May 1896. There
was, however, no legal barrier to the providing,
by Hill and his associates as individuals, of a
part of the funds for reorganization. They also
acquired personally a block of Northern Pacific

Hill
stock. That there was a community of interest,
even though Hill actually had but a small frac-
tion of the total stock, was shown by the joint
action of the two companies early in 1901 when
Hill and J. P. Morgan, acting for the Great
Northern and the Northern Pacific respectively,
negotiated with the board of directors of the Chi-
cago, Burlington & Quincy Railroad and bought
about ninety-seven per cent, of its entire capital
stock. The purchase was financed by the issuance
of bonds guaranteed jointly by the Great North-
ern and Northern Pacific. The motives were to
insure the two northern roads an entrance into
Chicago and St. Louis, to give them increased
traffic by reaching the markets and producing
points in the central states and upper South, to
reach the coal mines of Illinois, and to check-
mate the efforts of Edward H. Harriman [q.v.'],
who had been trying to obtain control of the
Burlington and through it an entrance into the
Northwest. Hill regarded that possibility as a
menace to the Northwest and to the two northern
roads.
Hill had thwarted Harriman in acquiring con-
trol of the Burlington but he was not through
with that great master of railroad strategy. The
Burlington was now beyond Harrirnan's reach
but the Northern Pacific, a half-owner of the
Burlington, was vulnerable. Before Hill and
Morgan realized the danger the Union Pacific
group, by May 1901, had acquired a majority of
the total stock, common and preferred combined,
both of which had voting power. Hill and his
friends had a bare majority of the common stock,
but had the power to postpone the date of the
forthcoming annual meeting, normally held in
the fall, until after Jan. i, 1902, retire the pre-
ferred stock, and thereby destroy Harriman's
majority before he could change the board. The
struggle between Harriman and Schiff on the
one hand and Hill and Morgan on the other pre-
cipitated the stock-market panic of May 9, 1901,
when Northern Pacific soared to $1,000 a share
and those who had sold short could not buy stock
to cover their commitments. The battle ended in
a draw. In the interest of peace and in order to
calm the general disturbance in financial circles,
Harriman was given minority representation on
the Northern Pacific board, but the relations be-
tween the Northern Pacific and the Great North-
ern and their joint control of the Burlington
were not disturbed.
The incident caused Hill to put into effect a
plan he had had in mind for many years. He
was growing old; many of his associates were
even older. The death of any one of them, and
the settlement of his estate, might upset balances