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Hand To Hand With The Coal Kings, 1901, Part I
T.R.: The Last Romantic ^ | 1997 | H. W. Brands

Posted on 11/28/2003 7:11:10 AM PST by William McKinley

Chapter Seventeen

Hand To Hand With The Coal Kings - 1902

If the big story of American politics in 1901 had been the ascent of Theodore Roosevelt to the presidency, the big story of American business was the creations of the United States Steel Corporation. The steel trust-- the first American corporation capitalized at over one billion dollars-- represented a marriage of the greatest names in American industry and finance: Andrew Carnegie, the strongman of steel, and John D. Rockefeller, the oil magnate whose holdings had long since spilled across the natural resources line into iron. J. P. Morgan, the banking Croesus, officiated; his blessing made the match possible.

The steel trust was the largest and most visible of the corporate combinations that increasingly controlled American corporate life. Rockefeller's Standard Oil overspread a sophicsticated system that brought petroleum out of the ground and refined it into kerosene for the lamps of the large majority not yet connected to the growing electrical grids, as well as into gasoline for the automobiles of that as yet very much smaller group that had traded horse power for horsepower. The American Sugar Refining Company had the country by the sweet tooth, while the hand of the NAtional Biscuit Company was in cracker barrels from coast to coast. The leather trust shod America; the life insurance trust consoled survivors with cash; the concrete trust put the country on a firmer foundation than ever before.

In 1890 Congress had passed an antitrust act. But the Sherman Act, especially as it soon found its way into practice, struck many as less an honest attempt to corral corporations than a prophylactic against real regulation by the populist types who already were alarming the boardrooms of America. The SuprememCourt reinforced this view by its decision in the 1895 E. C. Knight case, in which the court ruled that efforts by the Justice Department to break up the American Sugar Refining Company's monopoly were constitutionally unwarranted. Congress, the eight justices of the majority said, had the right to regulate commerce but not manufacturing. The sugar trust engaged in commerce only incidentally; therefore, it was beyond the reach of federal law.

From the perspective of the corporate consolidators, the Knight decision opened the door to a new wave of mergers leading up to the U.S.Steel combine in 1901. From the perspective of the Bryanites and others less convinced of the beficence of big business, the Knight decision and its denouement confirmed their suspicion that the captains of industry had captured the courts and suborned them to the plutocrats' profit-mongering purposes. The populist defenders of democracy counted scores of trusts fastened on the backs of the honest working folk of America; though this was many more than actually existed, the spectral ones were perhaps no less significant than the real in rallying the radicals and energizing their efforts against the corporate-kindly status quo.

While Theodore Roosevelt despised and abhorred the Bryanites as anarchists, he had scarcely more respect for the trustmakers. His disrespect evinced at once scorn for their narrow money-grubbing, recently at the expense of the expansionist national interest abroad, and disgust at the stupidity that fialed to see that each megamerger simply strengthened the forces of radicalism. The fact that the corporate types reciprocated Roosevelt's distrust and had worked against his political advancement simply added a personal element to the president's determination to bring them to account.

His annual message of December 1901 constituted his fair warning; in February 1902 he assumed the battle in earnest. In the third week of that month, he had his attorney general, Philander Knox, announce that the government was initiating a suit to force the breakup of the Northern Securities Company, a recently created holding company that comprised the leading railroads of the northwestern quarter of the country. Northern Securities wasn't the largest of the trusts (it weighed in at about $400 million soaking wet, substantially less when the water was wrung out of the stock). Nor did it enjoy the same kind of national market share as several other trusts, including the sugar, steel and oil combines. But it had some other factors working against it. It was new and consequently lacked the precedent forming attributes of age that kept the Justice Department at arm's length from some of the other trusts; moreover, having been formed on Roosevelt's watch, it was his responsibility to deal with, in a way its predecessors were not. It engaged indisputably in interstate commerce, and therefore fell undeniably under the purview of the Constitution's commerce clause. Last and perhaps least- but perhaps not- it exercised its monopoly powers against the common farmers and ranchers of that part of the country that had been Roosevelt's adopted home. Roosevelt knew firsthand the tribulations of small cattlemen in their unequal contest with the railroads; in attacking James Hill, J.P. Morgan, and the other principals of Northern Securities, Roosevelt possessed a peculiar credibility he would have lacked in a fight against Carnegie or Rockefeller. (He also possessed political allies: Governors of the affected states were already seeking legal redress against the railroad combination).

Roosevelt prepared his assault in strictest secrecy. An obvious adivser would have been Root, a former corporate lawyer and possessor of probably the sharpest mind and certainly the strongest spirit of the cabinet secretaries. But it was precisely because of this that Roosevelt bypassed Root. Certain that the war secretary would oppose the Northern Securities suit, the president preferred not to have to deal with his dissent. Roosevelt knew Root well enough to realize that once the decision to prosecute was announced, he would support it or at least keep his mouth shut.

Roosevelt also wanted to minimize the possibility of news leaks. As he recalled from the days of his battle with Jay Gould, the railroad business was unusually susceptible to speculative bubbles and raids; if word got out that the Justice Department was planning to attack Northern Securities, the raiders might spring into action, with disruptive effects that could ripple across the entire financial and commercial system.

Consequently, the administration kept quiet through the close of trading on February 19, 1902. Then, while the brokers were balancing their books for the day and getting ready to go home, Attorney General Knox dropped his bombshell. The news sent the market skidding the next day, with the bears driven from their dens by the explosion quickly taking control of the exchange.

J.P. Morgan, the underwriter of the railroad combine, interpreted the president's action as a direct affront. Ever since his bailout of the Cleveland administrations during a run on the U.S. treasury's gold supply in 1894, Morgan had considered finance a fourth branch of government, with himself as its head. He thought it discourteous, indeed impertinent, for the president-- and an accidental, stripling president at that-- to treat him and his interests so cavalierly.

Morgan shortly came calling at the White House. The great financier didn't complain so muych about the president's judgement that the railroad holding company contravened the principles of antitrust, although he certainly thought Roosevelt wrong in such a judgement. But Morgan did object to what he conceived as the ungentlemanly manner in which the president had gone about delivering his judgement. "If we have done something wrong," he said to Roosevelt (as Roosevelt recalled later), "send your man to my man and they can fix it up."

"That can't be done," Roosevelt replied. To which Knox, a railroad lawyer by background and one who had a few misgivings of his own about the president's hammer-and-tongs approach, loyally appended, "We don't want to fix it up; we want to stop it."

"Are you going to attack my other interests?" demanded Morgan. "The steel trust and others?"

"Certainly not," said Roosevelt, "unless we find out that in any case they have done something we regard as wrong."

Upon Morgan's departure, Roosevelt turned to Knox and declared "That is a most illuminating illustration of the Wall Street point of view. Mr. Morgan could not help regarding me as a big rival operator who either intended to ruin all his interests or else could be induced to come to an agreement to ruin none."

In fact, Roosevelt's comment was probably more revealing of Roosevelt than of Morgan. Morgan may or may not have interpreted the battle over the trusts in personal terms, but Roosevelt certainly did. Roosevelt didn't object to trusts in principle. As he acknowledged in his first annual message and on numerous occasions afterwards, the big corporations made possible the spectacular economic growth that underlay both prosperity at home and respect abroad. Even if he hadn't disliked Thomas Jefferson for political reasons, Roosevelt would have scant sympathy for the Jeffersonian vision of a nation of farmers inoffensively minding their crops. Roosevelt liked farmers well enough, but his romanticism was of a different sort-- not pastoral but martial, old-fashioned in virtue but modern in technique.

In Roosevelt's view, certain trusts were bad not because they were trusts but because they were run by bad men with evil motives. Such combinations deserved and should expect to be chastened by government, and Roosevelt made it his goal to see that they were. He explained his philosophy afterward: "If a corporation were found seeking profit through injury or oppression of the community, by restricting production through trick or device, by plot or conspiracy against competitors, or by oppression of wage-workers, and then extorting high prices for the commodity it had made artificially scarce, it would be prevented from organizing if its nefarious purpose could be discovered in time, or pursued and suppressed by all the power of government whenever found in actual operation." On the other hand, corporations run by good men with commendable objectives would be encouraged. "Where a company is found seeking its profits through serving the community by stimulating production, lowering prices, or improving service, while scrupulously respecting the rights of others (including its rivals, its employees, its customers, and the general public), and strictly obeying the law, then no matter how large its capital, or how great the volume of its business, it would be encouraged to still more abundant production, or better service, by the fullest protection that the government could afford it."

Such was Roosevelt's long range goal. At the beginning of 1902, he had yet to demonstrate that corporations were subject to any meaningful federal control at all. Roosevelt likened his job to that of the monarchs of the Middle Ages who spent their reigns subduing unruly nobles. Referring to "the reactionaries of the business world and their allies and instruments among politicians and newspaper editors," he later declared: "These men demanded for themselves an immunity from governmental control which, if granted, would have been as wicked and as foolish as immunity to the barons of the twelfth century." Many of these men were evil by intention. Others were evil inadvertently: well meaning, perhaps, but blind. "They were as utterly unable as any mediaeval castle-owner to understand what the public interest really was." Well-attuned to history, Roosevelt readily granted that aristocracy had once played an important role. "But we had come to the stage where for our people waht was needed was real democracy." He added, "Of all forms of tyranny the least attractive and the most vulgar is the tryanny of mere wealth, the tryanny of a plutocracy."

Toppling this tryanny was Roosevelt's purpose in prosecuting the Northern Securities case. Northern Securities wasn't the worst trust in America-- although if given time it might have become a contender for that title; but Roosevelt realized he had to start somewhere, and the railroad giant appeared as good a place as any. If Roosevelt had simply been interested in reforming the railroad, he might reasonably have cut a deal with Morgan. But Morgan and the railroad represented a whole category of corporate wrongdoing, and Roosevelt was determined to make an example of them. To have granted quarter would have eviscerated his entire enterprise.

TOPICS: Business/Economy
KEYWORDS: history; teddyroosevelt
Just a bit o' history.
1 posted on 11/28/2003 7:11:11 AM PST by William McKinley
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To: William McKinley
Interesting history.
Now, 80 percent of American coal is owned by Germans.
2 posted on 11/28/2003 7:22:08 AM PST by Eric in the Ozarks
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To: William McKinley
TR did not want to "topple" the trusts per se, in fact he endorsed them as good as necessary. Just read the Progressive party platform of 1912 for evidence.

Roosevelt's did object to *some* trusts but only because they didn't bow and scrape to his progressive agenda. His vision was a corporatist busines/federal government partnership with the feds (him) in the driver's seat. He was an enemy of a truly free market and had no desire to "restore" competition. His goal was control, pure and simple.

BTW, as historians such as Gabriel Kolko have shown the story at the turn of the century was toward more, not less, competition prior to Roosevelt's alleged trust busting.

3 posted on 11/28/2003 8:31:21 AM PST by Captain Kirk
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To: William McKinley
"Roosevelt prepared his assault in strictest secrecy.

In Roosevelt's view, certain trusts were bad not because they were trusts but because they were run by bad men with evil motives. Such combinations deserved and should expect to be chastened by government, and Roosevelt made it his goal to see that they were.

Roosevelt likened his job to that of the monarchs of the Middle Ages who spent their reigns subduing unruly nobles.

Many of these men were evil by intention. Others were evil inadvertently: well meaning, perhaps, but blind. "They were as utterly unable as any mediaeval castle-owner to understand what the public interest really was." Well-attuned to history, Roosevelt readily granted that aristocracy had once played an important role."

And Mr. Roosevelt was sworn in to the presidency to "preserve and protect the Constitution."

Karl Marx would have loved Mr.Roosevelt.

And Mr. Roosevelt believes his "intentions" and perception of the "public interest" are pure and without evil intentions.

What an arrogant, self-serving, gratuitous, evil human being Mr. Roosevelt is without the slightest respect for liberty and private property.

4 posted on 11/28/2003 11:51:42 AM PST by tahiti
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