With that, Hetty went back to business. Others might fritter away their time and money on the conspicuous consumption of the Gilded Age, but she had scores to settle, buildings to buy, and railroads to run.
Chapter 14
Texas
A man could travel the state of Texas for hours and count no more human beings than fingers on his hand. As sparse with people as it was thick with cattle, it was as cold and dry as a desert in some parts; in others, as hot and damp as a swamp. Texas stretched 773 miles from east to west and 800 miles from north to south; at its farthest points, from Beaumont, on the border of Louisiana, to El Paso, on the border of New Mexico, the distance was greater than that from Chicago to New York.
Mexican cowboys, whose roots went back to Spain, rustled the longhorn cattle and drove them north toward the stockyards. Germans and Czechs settled the hill country, where the soil was rich, and farmed the earth. Southerners brought their slaves with them to the Confederate state, planted their favorite crops, and watched them flourish. Cotton sprouted like daisies in the rich soil. Cattle fed happily on the green grass. Coal mined underground fueled the trains bringing the cotton to market and the cattle to slaughter.
Six thousand miles of railroads crisscrossed the state. Some belonged to major lines, others to small independents that charged high fees to link the larger ones. Some ran at a profit; others went bust. Hetty Green spent four years negotiating to buy a bankrupt branch of the Texas Central Railway. Her insolvent part came with fifty-four miles of track and almost half a million acres of land. Now she wanted Ned to take charge of the line.
In addition, she was eager to own a branch of the Waco and Northwestern Texas Railroad, a defunct piece that was of particular interest to Collis Huntington, her old enemy, who owned major amounts of track around the state. It would enable him to link his lines across Texas, connect them with grain states like Kansas and mining states like Colorado, and garner the lucrative fees for freight. Huntington was keen to own the branch. And so was Hetty. She wanted the fees, wanted badly to outwit Huntington, and ordered her son to buy the bankrupt line.
Shortly before the opening of the World’s Fair, Hetty dispatched Ned to the Lone Star State. The young man carried out his mother’s orders with the ease of an experienced entrepreneur. Looking older than his age and more dignified than his boldness might suggest, he appeared in the railroad town of Waco a few days before the sale. Streetcars, some pulled by mules, others fueled by electric power, rumbled through the town; cotton farmers drove their wagons to the depot to ship their crops; settlers stopped to buy goods on their way out west; and everyone gathered at the Old Corner Drugstore, where the pharmacist Charles Alderton, born in Brooklyn, created his drink Dr Pepper. Ned took a hotel room and scouted around. In his amiable way, he chatted with the locals and sought out the railroad buffs.
On the morning of the auction, he lumbered up the steps of the brick courthouse where the sale was being held. His competitors were three other men, but it soon became clear that his chief rival was Julius Kruttschnitt, Collis Huntington’s representative. As soon as the bidding started, the auction took off at a fevered pitch. Kruttschnitt made the $800,000 opening bid and Ned immediately upped the offer. Kruttschnitt raised his hand at $1,250,000, certain he had won, but Ned increased his bid to $1,375,000. Only then did the auction screech to a halt: Huntington’s man lacked the authority to go higher. With the bang of the hammer, twenty-four-year-old Ned Green won the railroad. His success meant more than just the track and the quarter million acres around it: the win was a triumph for his mother over her nemesis. But the victory was short-lived.
Collis Huntington had as much antipathy toward Hetty as she had toward him. He quickly announced that the Greens could not own the line until they paid almost $100,000 in liens against the property that he claimed were due him. Just as quickly, the state announced that the liens belonged to Texas. Ned responded that as far as he knew, there were no liens, but if they did exist, he had no interest in owning the railroad. Huntington tried to force the sale on Hetty and Ned with or without the liens.
The case continued for three years and made news around the country. In California, where the crafty Huntington had made his fortune at the expense of many farmers, the feelings against him were so strong that a group wrote to Hetty: if she came to California, they said, they would welcome her as a hero. In the meantime, to reward her for her victory they sent her a gift: a forty-four-caliber revolver, a holster, and plenty of cartridges. They hoped she would use it on Huntington. She almost did.
In the course of the dispute over the liens, Ned refused to make payments on the property. Angry and eager to prosecute, Huntington, who had built a mansion on Fifth Avenue, made his way down to Wall Street to visit Hetty. As the bushy-bearded man reached her desk, she offered him a hard-backed seat and some friendly conversation. But when he made threats against Ned, Hetty flashed her steely eyes and said: “Up to now, Huntington, you have dealt with Hetty Green, the business woman. Now you are fighting Hetty Green, the mother. Harm one hair of Ned’s hair and I’ll put a bullet through your heart.” With that, she reached for the gun she kept on her desk. The bald-headed Huntington ran out the door, leaving his top hat behind him.
Not much later, Ned returned the deeds. Huntington bought the branch, paying more than the original price. But by then Ned was busy with the other Texas railroad Hetty had recently purchased.
One month after the auction, Ned traveled north from Waco on a hundred-mile trip past endless fields of white fluff. At Terrell, a transit point for local cotton, cattle, and timber, the broad streets were filled with carts carrying bales of cotton, waiting for the buyers who made the town rich. With three thousand people, two banks, three weekly newspapers, nine churches, and three cotton gins, Terrell would become the headquarters for the northeast portion of the Houston and Texas Central Railway.
Ned arrived at the start of 1893, carrying a check from his mother for a half million dollars. He deposited the funds like a New Year’s gift to the bank. Despite its grand name, the American National Bank had few assets. Stunned by the size of the check, and aware that their deposits had just tripled, its officers quickly made the young man a vice president.
The money was to be used to improve Hetty’s insolvent portion of the Houston and Texas Central. The new board of directors, which included her husband, Edward H. Green, and the Chemical Bank president, George G. Williams, renamed the line the Texas Midland Railroad and appointed Ned as president. Although older men joked that the road was little more than a pile of iron, the youngest railroad president in the country boldly announced he would turn it into “one of the best railroads in the Southwest.”
The Texas Midland consisted of fifty-two miles of north–south track running east of Dallas between the tiny communities of Roberts and Garrett. But Ned had bigger plans in mind. Years of his mother’s training had taught him to study every aspect of the subject, from the condition of the roadbeds to the state of the rolling stock to the rates to charge for freight. But he was sometimes too nervous to make a decision and telegraphed Hetty for advice. “You are on the ground,” she answered. “Mind your own business.”
Once when he was visiting his mother, she told him about the New Bedford whaling captain whose two sons served as officers on his ship. They carried the titles and wore the uniforms but stood aside while their father did the work. When their father died, the two young men tried to steer the ship, but, without experience, they lost control; the boat ran aground and all was destroyed. The story may have been apocryphal but the message was clear: Ned had to learn how to take command. “I sent you to Texas to learn the railway business,” Hetty said. “I can’t teach you by telegraph from New York.”
She wanted him to learn from his own mistakes and urged him to use the railroad money as he wished. When he returned to Texas, she treated him like an experienced sailor, allowing him to find his strength, giving him slack to make his own way. But Hetty also k
new how a young sailor could go astray; when conditions seemed questionable, she tightened her control. In a note to his mother in August 1893 Ned made a poignant plea for her to loosen her grip:
Dear Mama:
I am 25 years old today. I think you might send me money so I could go to the fair at Chicago in about two weeks, before the Fall rush comes. It would only cost about $200. I can get passes to Chicago and return. Let me know as soon as you can, so I can get ready. I want to see the fair so bad. Please let me go.
Your affect. son,
Ned.
The highlight of Ned’s trip to the fair was his visit to the United States government pavilion; he was mesmerized by the exhibit of valuable postage stamps, some worth as much as $1,000 each. Excited by the display, he purchased a full set of Columbus commemorative issues, the start of a stamp and coin collection that in his lifetime became one of the most rare and treasured in the world.
Within a year of Ned’s arrival in Terrell, he bought the old Opera House, turned it into offices, and created a handsomely furnished apartment. He lined the walls with books, hung a portrait of the actress Lillian Russell over his bed, and for his kitchen, furbished with everything up-to-date, he hired the best chef in the state to prepare his meals. But his special residence was his private train car, the “Lone Star”: “a palace on wheels,” said the Dallas Morning News.
To expand the railroad, he purchased additional track to the north and south, connecting the small Midland road with major lines that ran perpendicular to it, east to west across the state. Before he built the rail from Garrett to Waco, he rode the eighty miles on horseback to assess the valuable land along the right-of-way. Hiring experts, listening to the needs of his clients, he heavied up the run-down rails and replaced the worn-out ties, strengthened the sagging wooden bridges with steel, introduced electric headlights, improved the passenger cars, added café lounges and observation cars, built new stations, and provided customers with scheduled, on-time service.
Besieged by people wanting free passage on the railways, Ned turned again to his mother for help. She spoke to Chauncey Depew, head of the New York Central Railroad, who offered some biblical wisdom. Hetty suggested Ned hand out cards with these phrases:
Monday—“Thou shalt not pass.” Numbers, xx, 18
Tuesday—“Suffer not a mass to pass.” Judges, iii, 28
Wednesday—“The wicked shall no more pass.” Nahum 1, 15
Thursday—“This generation shall not pass.” Mark, xiii, 30
Friday—“By a perpetual decree it can not pass.” Jeremiah, v, 22
Saturday—“None shall pass.” Isaiah, xxxiv, 10
Sunday—“So he paid the fare thereof and went.” Jonah 1, 3
In the months and years that followed, Ned became a popular figure around town. A generous host, he entertained on an elaborate scale and spent money lavishly to make friends with the local people; he bought uniforms for baseball teams in towns along the railroad line, supported theatrical groups, and started a brass band. “Eddie,” as he was known all over Texas, “is a capital fellow—hail-fellow-well-met with everyone,” said the Dallas Morning News a few years later. “He is generous, though level-headed, very charitable, especially thoughtful of his men in times of trouble, and a father to the orphans of his men who are killed on duty.” The paper added, “Eddie Green is his mother’s boy. She has the utmost confidence and pride in him.”
Despite his showmanship and boisterous living, he had his mother’s ability to focus on his work. “He has the reputation of being one of the shrewdest railroad managers in the country, and his business keenness is phenomenal,” reported the New York Times. The Texas Midland, serving as the connecting line between the St. Louis–San Francisco and the Southern Pacific Railroads, carried more cotton per mile than any other railway in the country. Passengers could board one of its dark green Pullmans furnished in green, gold, and buff, ride for five hundred miles, from Terrell to St. Louis, and never change cars. “The lighting in the cars is so good,” said the Dallas Morning News, that “passengers may read as comfortably as at home and the conductor has no need to carry a lantern to read the tickets.” By 1895 the once-insolvent line was earning $28,000 a year from passenger traffic and $165,000 from freight. Over the course of several years Ned turned the Texas Midland into the most efficient railroad in the state.
Efficiency was a rare commodity among the railroads. The bankruptcies of the two Texas roads that Hetty bought presaged the failure of many others. Excessive building of track, unwarranted buying of lines and equipment, and overextension of credit in the 1880s led the way to ruin. No longer able to fuel their expenses, in the 1890s they ran out of steam.
Chapter 15
The Glitter of Gold
A generation of Americans owed its way of life and its livelihood to the railroads, said Henry Adams. Furnace workers and financiers, shopkeepers and technicians, miners and manufacturers were all “mortgaged to the railways.” And the railways were mortgaged to the world. But after the Baring Brothers disaster in 1890, the withdrawal of European funds dried up an oasis of available money. In addition, although the railroads had enjoyed good profits transporting American crops across the country and overseas, by 1893 the crops were failing and freight traffic dropped. The Pennsylvania and Reading, unable to pay the $125 million debt on its loans, declared itself insolvent; the announcement tossed the stock market into turmoil. Three other major lines, the Northern Pacific, the Union Pacific, and the Atchison, Topeka and Santa Fe, all declared they were broke when their loans were called by the banks.
Bankers were nervous, with good reason. They had risked huge sums loaning money to railroads and other enterprises with weak financial underpinnings. Adding to their concerns, American exports were down while imports were up markedly. As Thorstein Veblen pointed out a few years later, the rich needed to spend more money in order to improve their social position; the newer their money, the more they spent. They were spreading their dollars abroad, buying more clothes, more jewels, more furnishings, more food, and more wines from Europe, creating a demand for more payments in gold from American banks.
Ships were sailing into the East River filled with fancy goods and leaving the New York harbor laden with gold. But because of the Sherman Silver Act, the ship of state at the Treasury was flooded with silver. Dollars may have been redeemable in both, but with much of the world on the gold standard, financiers everywhere requested their funds in bullion. They worried that American paper money was sinking in value.
With not enough gold in reserve to fill the demand, many financial institutions were forced to close their doors. The bankruptcies ruined railroads, injured investors, stranded farmers without enough funds to sustain themselves until harvest, and left small businesses without money to purchase goods or meet their payrolls. The rich still imported expensive clothes, dined on Lobster Newberg at Delmonico’s, and drank to their health and wealth at the new Waldorf Hotel, but the rest of the country bit their nails and spat out fear. “Everyone is in a blue fit of terror,” said Henry Adams, “and each individual thinks himself more ruined than his neighbor.”
Companies whose stocks had skyrocketed, whose dividends defied gravity, collapsed when their lack of capital was revealed. Money became so tight that short-term interest rates soared as high as 75 percent. The National Cordage Company, one of the most heavily traded stocks on the exchange, could not get credit and declared insolvency. The market plunged. Investors panicked. The Gilded Age, like other eras of avarice, opulence, and easy credit, burst from gluttony.
The New York Clearing House, a group of bankers led by George Williams of the Chemical Bank, put together an emergency fund to ease the flow of money. When Williams asked Hetty Green to help, she agreed. She would lend money to the fund, she said with an innocent air, if they would sell her Chicago railroad notes that were payable on demand. Williams consented, and Hetty provided millions of dollars to the fund. But as soon as she received the notes,
she called them in for payment. When the railroad men complained they did not have the money to pay her back, she made them a counteroffer they couldn’t refuse.
For many years, the Chicago men had supported Judge Collins in his campaigns for the Illinois Supreme Court. But he was the judge who had let her down on the sale of her land in Cicero: now she could settle the score. She would forgive their payments, she told the railroad executives, if they would assist her with Collins. “You put him on the bench,” she declared, and now, she told them, “you can take him off.” “Or,” she said with a shrug of indifference, “you can pay your loans to me.” The men had little choice. They flattered Collins, suggested he was worthy of a higher position, and proposed that he run as Republican candidate for governor. Collins agreed and resigned from the judgeship. But the railroad men never gave him the financial support they promised and backed his opponent instead. Collins withdrew; Hetty won. “There’s been dirty work at the crossroads,” said his advisers.
The influx of funds from the Clearing House brought interest rates down, but financial institutions had risked their funds and caused “a loss of confidence in the solvency of the banks,” wrote the former Treasury comptroller Thomas Kane. Investors remained agnostic. Their doubts were “inspired by a general knowledge of the unsound conditions in private and public life and the speculative and venturesome character of the investments and loans.” As a result, fortunes were lost, thousands of depositors left destitute. But in their perpetual greed for profits, bankers would repeat those risks again and again. The Great Recession of 2008, brought about by hazardous speculation and high-risk loans, and followed by years of high unemployment, harkened back to those times. Referring to 2008, the financial writer Andrew Ross Sorkin said, “The single most important factor was too much leverage.” Too much money borrowed, too much money loaned, and not enough assets behind it.
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