[CTRL] [3] Mellon's Millions

[Kris Millegan]

 -Caveat Lector-

an excerpt from:
Mellon's Millions
Harvey O'Conner�1933
Blue Ribbon Books
New York, N.Y.
--[3]--
3

Frick and Mellon-
Partners

WHO was that frail wispy young man with the handsome face and the pale blue
eyes, Henry Clay Frick wondered, as he sat in the inner sanctum of T. Mellon &
Sons Bank while the proprietor snapped out an order to a subordinate. Judge
Mellon obliged. "Mr. Frick, I would like to introduce to you my son, Andrew."

The rising young king of the Connellsville coke regions, 26 years old, faced
the successor to Thomas Mellon, now 22. Their handclasp began a partnership,
unrecognized in law but none the less real, which was not ended by Frick's
death in 1919 for Andrew W. Mellon became trustee for the $50,000,000 estate
of the coke and steel magnate.

The two young men fitted each other: the audacity of the cold, imperious Frick
was held in check by the equally cold but cautious and calculating Mellon; the
young banker gained self-confidence from the friendship of his dynamic friend,
who loosened Mellon's imagination and made him see tens of millions where his
prosaic brothers saw but millions.

"He is able, energetic, industrious, resourceful self-confident," judge Mellon
told his son after Frick left. "If he' continues along his own line as he has
begun, he will go far unless he over-reaches. That is his only danger."

If Frick owed his start to old judge Mellon, he repaid handsomely. He was to
be the bridge over which Andrew stepped from the routine of a mercantile
banker's life into the exhilarating world of big industry, which his father so
distrusted.

Had the destiny of the Mellon fortune been left in the hands of the two older
boys, Thomas and James, there would have been just another provincial tale of
successful realty dealers. Millionaires, yes, but there were a thousand more
like them in other American cities. Like their father, they shrank from the
new age of steel. Neither had the courage nor the ability to master the new
age's problems, nor did they care. They were satisfied.

Frick provided the link that connected judge Mellon, unconsciously perhaps,
with the new steel age. That link was coal, which passing through Frick's bee-
hive ovens, emerged as coke, an essential in the production of iron and steel.
Coal, judge Mellon knew and loved as well as land and money. In a way it was
land, and just as plain and simple. It held no such mysteries as the black
shells of the vast steel works springing up in the Pittsburgh area.

The gods had smiled the morning when Henry Clay Frick, not yet, 21, introduced
himself to judge Mellon and asked for $10,000. The banker liked the
aggressive, confident youth who stood before him, bursting with plans for his
coke works in Fayette County. Here was his ideal young man, ambitious, lustful
for money, determined. Those qualities were the best security for any loan.

He was talking about coal and the old man delighted to test his knowledge of
the mineral, to discover the amazing financial prodigies the youth had
executed, so far, on sheer nerve. Frick could tell him nothing new about coal-
for 20 years judge Mellon had been one of the leading operators of western
Pennsylvania. He was on familiar ground.

Frick could hardly have chosen a more propitious moment to enter upon both
manhood and the coke business. It was an age of giants in Pittsburgh. Machine
giants. Human giants. The lusty young steel industry was advancing with seven
league boots. The insatiable maws of its blast furnaces gulped tons of coke at
one feeding, and cried for more.

Iron masters of Birmingham and Sheffield, in the Old Country, rubbed their
eyes with astonishment as they examined the record sheets of the Lucy and
Isabella furnaces. They crossed the sea to observe these titans in operation
and to talk with Wizard Julian Kennedy, who had driven Lucy's original 50 tons
a day production up to 300 tons, with Andrew Kloman, the founder of Carnegie
Steel, and little Tom Carnegie, the presiding genius in the iron works for
which his brother claimed the credit.

More astonishing yet, firmly fixing Pittsburgh as the world's leader in heavy
industry, were the great Edgar Thomson steel rail mills at Braddock, near
Mellon's foundry. Here was black magic. Air, under blast, rushed into the
bottom of five-ton Bessemer converters. Oxygen mixed with the carbon in the
molten iron burned furiously, the temperature within a few minutes shot up
several hundred degrees. A sheet of flame and sparks rose a hundred feet into
the air from the roaring pot. Within 15 minutes the impurities were burned out
of the molten mass, workmen tossed in spiegeleisen, and steel poured from the
converter. In another few minutes the operation was being repeated. It was all
like Aladdin's lamp. The white-hot ingots were crushed and kneaded into
billets and finally emerged from the terrific pressures of the mills in long,
glowing rails, ready to be snipped by gigantic shears and laid in rows to
await shipment to the plains. Soon transcontinental trains would be speeding
over them, uniting the Atlantic with the Pacific, ending the frontier and
Thomas Mellon's individualistic America.

The banker cordially detested the great works which were springing up in
Braddock, Homestead and Duquesne. They destroyed forever the mercantile values
upon which his philosophy of life had been founded, just as they dwarfed his
little foundry in Braddock. Thousands of men, swarming under the towering
blast furnaces and roaming ant-like through the tremendous steel mills,
thought no longer in terms of individual success, of beating the other fellow.
They formed unions and periodically rebelled against the life-consuming
12-hour shift.

Thomas Mellon was too cautious to put his stake in steel mills. Iron and steel
alternated between prince and pauper and if Edgar Thomson works could report a
million dollar profit in one year, the annals of the industry were spotted
with immense failures and glaring deficits.

With this view Thomas and James concurred thoroughly, although eagerly enough
they followed after the new developments in steel. Millionaire and mechanic
alike bought industrial sites and home lots, lumber and building materials,
from Mellon Brothers. Mellon banks financed the sales. Mellon street car lines
transported tired clerks and mechanics to their homes in the East End.

Into such an era strode the son of the Swiss Fricks and the German Overholts.
Bookkeeper at $1,000 a year for the Overholt distillery, he dreamed figures
larger than could be found on the Overholt ledgers. Unconquerable was his
faith in the peculiar virtues of Connellsville coal for coking purposes.
Unshakable his determination to become lord of the coke regions.

Cautious Banker Mellon nevertheless took a first mortgage on the H. C. Frick
Coke Company's property in return for $10,000 for six months at 10 per cent.
In a few months Henry Clay was back in Smithfield Street. Another $10,000 was
needed for 50 more coke ovens. He could not keep up with the demand. Thomas
Mellon was glad to hear that, but it would be well to look into the young
man's business a little more closely. Reports were unsatisfactory. He was not
devoting all his time to his ovens; in the evenings he kept books for the
distillery; even worse, his room was cluttered up with pictures and drawings.

His patron refused to be convinced that he had misjudged. He sent his mining
partner, James B. Corey, down to Broadford. Corey was enthusiastic. Frick got
his second $10,000�and more later.

Jay Cooke's failure in 1873 was no less a disaster to the young cokemaster
than to his backers. In vain did he plead for cashthere was no cash. But if he
had no money himself, judge Mellon would help Frick negotiate the sale of a
short railroad line connecting the coke fields with the Baltimore and Ohio. By
sagacious maneuvering $50,000 was obtained, just in time to save the coke
company from bankruptcy. A year later the Mellon banking house was able to
advance $15,000 and agree to discount $25,000 of the Frick Company's paper.
The audacious youth worked miracles. In the panic, for example, Frick had
little money to pay his workers, and his store, a sideline, had few cash
customers. What more practical then, than to pay his men off in scrip
redeemable at the store? It worked so well that when good times returned,
Frick continued the scrip and it became a fixed custom in the western
Pennsylvania coal and coke regions.

When a revival came in the iron and steel trade by 1878, Frick was undisputed
king of coke. His competitors had been pushed to the wall. Backed by Mellon
money he had grabbed distress properties. Astonished steel men, letting
contracts for coke, found him in control of the majority of the Connellsville
supply. From go cents, coke soared to $5 a ton. Of that $3 was profit. In 1879
Frick was a millionaire at 30.

Such a coup called for a splurge abroad, far from gossipy Pittsburgh. Henry
Clay Frick and Andrew Mellon were off for Europe. In New York, they drove up
fashionable Fifth Avenue' stopping to admire the mansions of the Manhattan
money kingsThe new Vanderbilt palace excited Frick. He calculated the number
of rooms and servants and decided that the Commodore must be spending at least
$300,000 a year for its upkeep. "Lees see now," he figured, "that's 6 per cent
on $5,000,000 or 5 per cent on $6,000,000." "Yes," he mused, "that is all I
shall ever want." Thirty years later Frick's Fifth Avenue mansion was valued
at $5,400,000.

They knocked about Ireland, London and Paris. Then they were off for Venice,
to satisfy Frick's longing to see the city of the merchant princes and the
artists they patronized.

Frick's quiet young partner was a good listener. Frick's exuberance thrilled
his inhibited desire for expression. Frick's appreciation of the dash and
color of the Venetian artists awakened a response in the son of the austere
Scots banker who had been warned that the only profitable drawings were
surveyor's diagrams and architect's sketches. Andrew expanded beyond the
stuffy confines of his father's tight little world.

Returned to Pittsburgh, his slim, elegant figure was to be seen more
frequently at social affairs. His thin, handsome face was flushed by the
embarrassment of an introduction, by his hesitation in attempting chit-chat
with the puff-sleeved beauties of the time. Twenty-five years old, wealthy in
his own right, known to Pittsburgh as Thomas Mellon's successor, Andrew Mellon
would be the "catch" of the season. The sly attentions of pert young women
tickled his vanity, convinced him that he was something more than the cold-
blooded son of a cold-blooded banker.

Frick appealed to him for an introduction to Miss Adelaide Childs. He was
anxious to oblige, and was happy to serve as Henry Clay's best man at the gay
wedding in the winter of '81.

The newly-wed was to have been the best man at Andrew's wedding the next
spring. That wedding never came off. Instead young Mellon endured the agony of
watching hopelessly as his fiancee succumbed slowly to tuberculosis.

The tragedy was outlined by his father in the memoirs years later, as an
explanation of Andrew's unusual concentration on business deals. "Although of
a proper age for marriage," Judge Mellon wrote, "he shows no desire to change
his condition. This may possibly be accounted for by an unhappy experience
which he passed through. Being of a social disposition, he at first went into
society a good deal, and a mutual attachment sprang up between him and a young
lady acquaintance. She was of good family, and in every way worthy of him; and
the attachment between them ripened into a marriage engagement which was
entirely satisfactory to both families, and would have been consummated in the
spring of 1882, but her health began to fail, and as the disease developed, it
proved to be of so serious a nature that by the advice of her physician
marriage was deferred till the result would be known. She continued to decline
slowly, however, until all hope was abandoned, and she died about a year
afterwards. Since then he has gone but little into ladies' society, and become
more and more absorbed in business pursuits."

His father went off to Ireland to visit the haunts of his childhood, and the
grave young man took over the reins of the manyheaded Mellon enterprises:
realty, traction, coal, foundry, and the never ending routine of the bank.

Old Judge Mellon was not wholly disappointed by Andrew's celibacy. He felt age
creeping on him. It was well that Andrew could give his undivided attention to
affairs. The older boys seemed rooted to the East End. Both would die rich,
and unknown. The two younger boys were out in Bismarck where Dick was managing
a bank and realty business, and watching over George. His father had about
given up hope for George. Even if he conquered tuberculosis, it was a toss-up
whether his "character and ability for business" had not been ruined by long
idleness. "But I rely on his good common sense to restrain him at all times
within the bounds of his income."

That left Andrew the sole peg on which to hang the destiny of the downtown
bank and the conquest of the new times, which judge Mellon feared yet knew
must be subjugated. Andrew, his father sensed, was the young man who could do
it. He could form friendships with the rising young men which boded well for
the future; he had lifted his head above the routine which had already marked
his older brothers' limits. He could lay the banker's tape, to the old man's
taste, along the stature of an applicant for a loan and tell exactly how much
he was good for.

Andrew was a comfort to him, too, in his declining years. He was the only boy
now left at home, and many a long evening he read Spencer and Gibbon to his
father, whose eyesight was failing.

In witness of his confidence in his third son, judge Mellon made out a legal
paper which read:

"Know all men by these presents, that I, Thomas Mellon, do make, constitute,
and appoint and by these presents have made, constituted and appointed my son,
A. W. Mellon, my attorney in fact, and in law, generally, and with the most
comprehensive powers, in my name, place and stead, to do, perform, execute and
transact all and every act, matter or thing that I could lawfully do, perform,
execute, or transact in my own proper person. In witness whereof, I have
hereunto set my hand and seal this seventeenth day of January, A.D. 1880.
THOMAS MELLON."

Gradually the new age swept over the gray head of Thomas Mellon, and he was no
longer known in Pittsburgh, which fed upon the energy and the ambition of
young men.

The city's elders eyed the nervous, intent youth who aspired to fill his
father's shoes. Wraith-like, he had slipped out of judge Marshall's office
after a business call. judge Marshall turned to his son: "Watch that young
man," he said. "He has but one ambition in life. I predict that one day he
will be the richest man in Pittsburgh."

Single-minded, slashing out of his life every concern and every person which
failed to contribute to his aggrandizement, A. W. Mellon, as he styled
himself, became a power in his own right in the city of iron and steel. He and
Frick acquired the Pittsburgh National Bank of Commerce. By their side on the
board of directors was young Philander C. Knox, later to be regarded as the
Mellon-Frick representative in the United States Government, whether serving
as Attorney-General, Secretary of State or Senator. Impatient that Mellon
money was deflected into the coffers of alien insurance companies, Andrew took
over the Union Insurance Company in 1883 and became its president. Thereafter
the Mellons' widespread realty ventures insured with the Mellon company.

T. Mellon & Sons, private bankers, flourished. But more and more it became a
bank for industry, through which the profits of Mellon enterprises flowed, to
be invested in loans to iron and steel works, glass factories, coal mines. The
National Bank of Commerce, less austere, drew in the deposits of the smaller
fry and took advantage of national banking laws to issue its own currency
notes. As ever, the affairs of the main bank were removed from the prying eyes
of bank examiners. The older boys, recovering from the excess caution of their
father in closing the East End bank after the panic of 1873, -opened the City
Deposit Bank in 1886, to profit from the needs of the thriving suburb.

That year Frick gave his friend a lesson in labor relations. Noxious gases
from his thousand coke ovens laid waste the lovely countryside of Fayette
County. By day they fumed and by night they flared. The natives left. Frick
imported Hungarians and South Slavs. His agents pushed into southeastern
Europe, luring hopeful peasants to the Promised Land with wage offers that
seemed fantastic when translated into Old Country currencies.

The new-comers found themselves herded into drab, smokesmudged company towns,
whose huddles of clapboard shacks were checkered by muddy lanes, served by
medieval sanitary devices and a few common wells. The tight-lipped presbyters
of Pittsburgh believed the "Huns" were made of some inferior clay which
thrived on the volatile gases given off by baking coal.

Periodically the serfs rebelled against wages which proved small enough when
measured against American prices, against the feudalism which insisted that
they trade only at Frick stores in Frick scrip, against the Frick police who
maintained a private brand of law and order. In 1880 the rising lord of the
coke regions beat down a strike of his freshly imported workers with little
trouble, but in 1886 they rebelled again on a rising market which had left
their wages stationary.

The sheriffs of pastoral Fayette and Westmoreland counties, unaccustomed to
industrial warfare as waged by the implacable Trick, appealed for help. He
obliged with the scum of Pittsburgh's slums, armed to the teeth. They were
quartered near his estate at Mt. Pleasant, making periodic sallies against the
strikers, whose weapons were confined pretty much to coke forks, kitchen
knives and such flintlocks as could be picked up in the neighborhood.

Other mine and oven operators, with no stomach for the Frick methods, forced
him to accede to the strikers' demands after six weeks. In 1887 another strike
was settled by Carnegie's peremptory order to Frick, in whose company he was
now a majority stockholder. Frick resigned. But Carnegie needed his organizing
genius for bigger jobs than establishing law and order in the coke fields, and
Frick returned to the fold. Unhampered now, he settled with the coke workers
in 1889-90. The union was beaten into the dust with bullets and starvation.
Two years later he smashed the heart out of the steel workers' union in the
historic struggle at Homestead and decided, once and for all, that the lords
of heavy industry would brook no insurgence among their laborers.

Mellon watched the struggle through his cold, gray-blue eyes, nodded
approvingly when Frick triumphed, and jotted down for future reference the
useful technique be had observed. After Alexander Berkman tried to settle
scores for the steel workers with his pistol and dagger, Mellon hovered about
the bedside of the wounded Frick, consulting over their joint enterprises,
providing a liaison between the stricken steel magnate and the financial world
that gasped at the audacity of Berkman's attempt and shrieked for his neck.

In 1889 Captain Alfred E. Hunt and George H. Clapp dropped in at 512
Smithfield Street to lay their troubles before the younger Mellon. Formerly
metallurgists in the employ of the steel companies, they now beaded the
Pittsburgh Testing Laboratories. They had picked up a young inventor, Charles
M. Hall, whose process for smelting aluminum seemed promising. But marketing a
new metal was more expensive than making it. They needed a loan.

A. W. Mellon was deeply interested in their enthusiasm for the future of this
featherweight metal. He investigated. He would be glad, he said, to advance
funds in return for a substantial share and financial control of a new company
he would form.

More momentous was that decision than the far-sighted banker could have
guessed. It was to lead him out of the quiet waters of commercial banking,
into the turbulent stream of industrial finance. His more frequent trips to
New York had revealed to him the possibilities of the new banking. There in
Wall Street the financial powers no longer lent money at stated interest for a
stated period. Instead they demanded a share in the appealing industry, took
over control of its fiscal destinies. There was no reason why it shouldn't be
done in Pittsburgh, too.

The Pittsburgh Reduction Company exchanged control for a $250,000 credit with
T. Mellon & Sons.

That year he prospected another gold mine. Corporations were succeeding the
partnerships and individual business of judge Mellon's times. There was a call
for a financial house to keep stock books and seals, to attend to transfer
business and to look after the estates and fortunes of Pittsburgh's nouveau
riche. The Union Transfer & Trust Company, capitalized at $250,000, was his
answer. A. W. Mellon was president.

The new company removed from his shoulders the burden of personal
responsibility for the numerous estates left in the care of old judge Mellon.
His flinty father's austerity had attracted confidence from hard-fisted
Pittsburghers, whose age and distrust of the younger generation impelled them
to confide their wealth to him as executor. Still under the new concern these
trusts continued to widen the Mellon influence, with their lands to be sold,
cash to be invested, securities to be held.

Within ten years the power of Pittsburgh centered in Union Trust. The meetings
of its board brought together the men who dominated western Pennsylvania
financially, industrially, politically. There James McCrea, first vice
president of the Pennsylvania Lines West; James M. Schoonmaker, manager of the
Pittsburgh & Lake Erie, Vanderbilt's steel road to the Lakes; Frank J. Hearne,
president of National Tube; William Frew, retired industrialist and chairman
of The Carnegie Institute; George E. Shaw, legal servitor of the Mellons,
Fricks and Carnegies; George I. Whitney of Whitney & Stephenson, brokers and
industrial promoters; John Porterfield of General Chemical; Philander C. Knox,
soon to join Roosevelt's Cabinet; Henry Clay Frick, chairman of the Carnegie
Steel Company; H. C. Fownes, president of Carrie Furnaces; D. E. Park,
president of the Park Steel Company, soon to be merged in Crucible; J. B.
Finley, president of the Monongahela River Consolidated Coal & Coke Company,
the river monopoly; James H. Lockhart, of oil and iron and steel; Henry
Phipps, original partner in Carnegie Brothers; Charles Lockhart; and James H.
Hyde of Equitable Assurance.

At the bank Andrew now had Dick's help. His younger brother had returned from
Bismarck after George's futile fight for life was ended in 1882. They
complemented each other. Dick was genial,  open, frequented the clubs,
executed the stratagems hatched in Andrew's brain. Those who feared to hail
the frigid Andrew, slapped Dick on the back and passed on to him the latest
tidbit of Pittsburgh scandal. Even newsboys crying their papers in front of
the Mellon bank marked the difference. At the end of the day's work, A. W.
Mellon slipped noiselessly from the bank, trembled for a moment while the boy
handed him three penny papers for a nickel, and then fled up the street. "It
was as if the very Devil was after him," remarked one, now a Pittsburgh
attorney. At Christmas he handed out a shiny new half dollar to the newsy.

By the nineties another Mellon had arisen to warm the cockles of old judge
Mellon's heart. He was William Larimer Mellon, son of James. His uncles
apprenticed him to traction and to oil speculation in the western Pennsylvania
and northern West Virginia fields. Western oil was yet untapped.

Frick and A. W. Mellon dabbled in downtown realty. Working in close alliance
with the Magee-Flinn political ring, they widened alleys in the constricted
Golden Triangle into streets. Thoughtfully they bad bought up property facing
the alleys before their plans were introduced to obsequious city councils. In
Frick's steel domains appeared Mellon banks, petty compared with Union Trust,
but mighty in their respective bailiwicks. Independent business men danced to
the Frick-Mellon tune, or quit. The partners were imperious men, as hard as
the steel in Frick's mills, as cold as the gold in Mellon's vaults. Digging
coal and making steel for a nation was a rough job and neither intended to
pull on silk gloves for the task.

Only one great industry in the Pittsburgh region stood outside the Mellon-
Frick orbit. That was George Westinghouse's great electrical works. Into every
corner of the world Westinghouse sent his electrical machinery, lighting
fixtures, airbrakes and other masterpieces of the minds of inventors who
clustered about the East Pittsburgh workshop. The bankers eyed George
Westinghouse enviously, greedily. Their day came. The Baring Brothers' crash
in 1890 was heard round the world, and in Pittsburgh by Westinghouse, whose
rapid expansion had resulted in top-heaviness.

The inventor-promotor summoned the local bankers and asked them for $500,000,
offering his plants as security. He had brought great renown to their city, he
reminded the Mellons and their companions. Now in his hour of need he would
appreciate a lift over a rough spot. Certainly, responded the bankers. But we
will name your general manager.

Westinghouse stalked out of the meeting in high dudgeon and took the first
train for New York, where August Belmont staked him. That taught A. W. Mellon
a lesson. He must come to an understanding with the financial powers in New
York. The next time a big Pittsburgh industry tried to slip away from its home
town for financing, it was reminded that the Iron City had banks big enough to
take care of its needs.

In 1908 Westinghouse was caught again. The bankers took over his enterprises
and gave the old man a nominal position from which he resigned in disgust, and
the immense Westinghouse business marched on without George Westinghouse.
Slowly the Mellons increased their holdings in his companies until, in the
next decisive panic, in 1930, they were able to assume a role equal to the
Kuhn-Loeb house in its control.

It was not often that Pittsburgh had the laugh on the Mellons. But for once A.
W. Mellon overreached himself.

In the early days the Pittsburgh Petroleum Stock Exchange took care of the
city's speculative gentry. In 1886, when mining shares in the West became
popular, the Exchange extended its operations. In the nineties, with the
increase in corporations and their securities, it became the focus of the
city's financial life until the panic of 1893 deflated the speculators.

It was then that bright minds in T. Mellon & Sons conceived the idea of
gaining control of the Exchange, as an advantage over other banks. A majority
of the stock was picked up from distressed members and in 1894 the brokers
discovered that their Exchange had become an adjunct of the Mellons' financial
operations. Rebellion flared on the floor. Nearly all the members walked out
and established a rump market-the present Pittsburgh Stock Exchange.

Thomas Alexander Mellon, senior partner in Mellon Brothers, died in 1899 at
the age of 55. His will revealed how deeply the Mellons had entrenched
themselves in the industrial life of their city. To his account were listed
stocks, bonds and notes of Pittsburgh Plate Glass, St. Clair Inclined Plane
Railway, H. C. Frick Coke Company, Central Passenger Railway, Southwest Water
Company, Pittsburgh, Bessemer & Lake Erie Railroad, Pennsylvania Railroad,
Union Insurance Company, National Glass Company, Sharon Steel Company,
Pittsburgh-Buffalo Coal Company, Campbell-Jones Glass Company. His realty
holdings covered Pittsburgh in a network. James Ross Mellon became trustee for
the estate. He 'continued Mellon Brothers' lumber and realty business in the
East End for a few more years. Then rich enough, he said, to satisfy anybody,
he withdrew from active life and devoted himself to sentimental pastimes, such
as carrying back, brick for brick, the old Mellon cottage in County Tyrone,
and rebuilding it in back of his own palatial residence.

Reporters were the delegates of the mob. Andrew W. Mellon shrank from them as
from a leper's touch. Fortunately, the welldisciplined Pittsburgh newspapers
did not intrude upon the privacy of the proprietor of Union Trust and T.
Mellon & Sons.

But this was an important announcement that he held in his hands. The
newspaper men had better be called in.

When editors read it, telegraph keys clattered and Wall Street shook. Henry
Clay Frick and Andrew W. Mellon had declared war on Andrew Carnegie!

That was the purport of the bland announcement that the two men had decided to
build the "largest rod and wire mill in the world" on the banks of the
Monongahela. Eventually Union Steel was to be a complete steel works with two
"monster" blast furnaces and batteries of open hearth furnaces to produce the
iron and steel for the finishing mills. $1,000,000 had been deposited with the
Union Trust Company to provide capital, which would ultimately be raised to
$10,000,000.

Only a few days before, on December 5, 1899, Frick had presented his
resignation as chairman of the board of Carnegie Steel. The two impresarios of
steel had grown too big to fit together in one company. One or the other must
move out.

Carnegie, as usual, had underestimated the fighting qualities of the
vindictive Frick. When the little Scots bond salesman philanthropist had
ordered his puppet directors to oust the manager of his vast works, he thought
he had played his trump card and that the trick was his. He was mistaken.

Only vanity matched Carnegie's greed. He basked in the limelight of two
continents, both because he was majority stockholder in Carnegie Steel, whose
profits had marched up from $7,000,000 in 1897 to $11,500,000 in 1898, to
$21,000,000 in the following year and were to be $40,000,000 in 1900 and
because he scattered these profits in Britain and America with a lavish
disregard for those principles which Thomas Mellon held dear. But more and
more, when the newspapers referred to his steel company, they talked of its
chairman, Henry Clay Frick, the organizing genius who had welded the
unintegrated properties of Carnegie Brothers, Ltd., into a perfect industrial
mechanism.

Being inordinately wealthy, Carnegie wished now to retire from business. But
Frick must retire too. Wall Street promoters tried to buy Carnegie out but
their price wasn't high enough.

Frick now consulted with Mellon, who had been advancing short term loans to
Carnegie Steel in sums of $700,000 or so. The partners in finance made a
pilgrimage to Skibo Castle to get an option from Carnegie for a $160,000,000
bid for an enterprise valued on its own books at $75,000,000. A. W. Mellon
volunteered to raise $80,000,000. He and Frick then went to Morgan, to offer
him the other half. Morgan was contemptuous. The price was outrageous, he
said. Two years later he paid $492,000,000!

When the deal fell through, Carnegie kept the option price of $1,170,000, part
of which Frick and Mellon had advanced. They were furious. They drew up a new
plan, providing for capitalization of the Carnegie Steel Company at
$250,000,000, to be paid in stock to Carnegie and the minor partners. Of
course he turned it down. Nothing less than cash and bonds would satisfy him.

The price Carnegie Steel paid H. C. Frick Coke for fuel for the furnaces
provoked the open break. Carnegie was majority stockholder in both and Frick
charged that he bled the coke company on low-price contracts to benefit the
steel company. Many of the coke company's minority stockholders were Frick's
old friends. Carnegie swept down on Pittsburgh, summoned the directors of
Carnegie Steel, ordered Frick's discharge and retired to New York to observe
the results.

Frick's answer was the announcement of the formation of Union Steel, backed by
the Frick-Mellon millions. W. H. Donner, tin-plate executive, would be
president and operating chief, the papers said. A. W. Mellon "of the well-
known banking house of Mellon & Sons, who was associated with Mr. Frick in his
efforts to reorganize the' Carnegie-Frick interests and to buy Mr. Carnegie's
holdings" was a principal backer, the article added. As a matter of fact,
Donner had been given a fourth interest in Union Steel while the Mellon
brothers, A. W. and R. B., held one-half and Frick the remaining quarter.

The canny Scotsman was perturbed. It was bad enough to have Morgan money
financing steel combinations around the country, without Frick and Mellon
organizing a company right in the heart of the Carnegie territory, in the
shadow of the smoke of his own mills. He threatened to invoke the ironclad
clause of the Carnegie partners? contract to force Frick to accept only the
book value of his stock in the firm�a mere $4,900,000.

Frick retaliated with a suit declaring the ironclad clause inoperative and
revealing the immense profits Carnegie, the pacifist, had made out of the
Spanish war. England and America rocked with amazement. Frick intimated that
the trial would bring out certain Carnegie formulae for success that perhaps
were better left untold. Knox & Reed, Carnegie Company attorneys, turned down
a fat retainer from Carnegie and remained faithful to Frick and Mellon.

The Scotsman was dismayed. His foe refused to quail. Either Frick would get
his price out of Carnegie Steel or pull it down to destruction. Carnegie
capitulated. His former manager got $15,484,000 in stock and $15,800,000 in
bonds.

In the meantime, Mellon had solved a personal problem no less important than
Frick's. The 45-year-old bachelor had married the daughter of a Dublin
distiller, the vivacious young Nora McMullen, and was on his honeymoon in
England. Frick could not contain his pride in beating his adversary. He sent
the good news to Mellon in London, adding that the steel and coke companies
had made $5,000,000 in March. "Pretty satisfactory figures, aren't they?"

So far as Frick was concerned, Union Steel had served its purpose. But Mellon
had not the slightest intention of giving up his new company. In fact he now
began to dream of being a lord of steel as well as finance. He was watching
intently the moves of the money hawks of Wall Street, noting carefully the
technique of J. P. Morgan. It was admirable. For the trouble of organizing the
Carnegie properties and the newly formed steel "trusts" into United States
Steel Corporation, he had coolly pocketed $62,500,000. Millions meant nothing
to him. For the Carnegie Steel Company, valued on its own books in 1899 at
$75,000,000, for which Andrew Carnegie was willing to accept $160,000,000 in
the same year, Morgan had paid $492,000,000�in stocks and bonds, of course.
The old fox Carnegie had been clever, too. His threat to erect great tube
mills at Conneaut and build a railroad to the seaboard accounted in part for
the sudden spurt in the valuation Morgan placed on his properties.

Union Steel, if small, had a nuisance value. The rod and wire mills were
pushed to completion. Soon they were chief competitor to American Steel &
Wire, the U. S. Steel Corporation's subsidiary. Carnegie, before he sold out
to Morgan, had sought peace with Pittsburgh's leading bankers by offering a
favorable contract on ingot steel. Now U. S. Steel found itself bound by
Carnegie's contract to furnish steel to an enemy firm.

"I am strongly in favor of pushing Union Steel as hard as we can," declared
President Corey of Carnegie Steel in a board meeting. "There is nothing we can
do to smooth matters over with them, as they are determined to do all they can
against us." Union Steel, he reported, was the only company which took the
Corporation's raw steel, fabricated it, and then proceeded to cut the
Corporation's throat by competition.

If the Corporation meant to cut off his steel supply, he would check that,
Mellon decided. Orders went out for the erection of blast furnaces and open
hearth furnaces at Donora, Union Steel's specially made city, named for
President Donner and Mellon's wife, Nora. In return for a $1,500,000 loan, the
banker got a ten-year contract with Corrigan & McKinney for cheap ore. To
assure a coke supply, the Republic Coke Company was picked up at a bargain
price.

The head of the Smithfield Street banking house, strumming his desk with his
long thin fingers, gave himself over to daydreams. Through the blue smoke that
arose from his lean, diminutive cigar he saw the vague outlines of
shipbuilding yards, car and locomotive foundries, bridge and structural steel
plants. Their raw material would come from the very real, quite noisy steel
works down at Donora. Their finished products would breast the seas, span
rivers, carry the nation's traffic, be the framework for office and factory.

And be himself would no longer be just Mellon the banker the Money Lender. He
would be Mellon, the Steel Master. Before he died be would be as rich as
Carnegie-perhaps richer. Who knew?

Daydreams became reality. On the shores of the Delaware at Camden arose giant
ship-cradles of the New York Shipbuilding Company. Union Steel would furnish
the steel ribs, the tough iron skin for the ships to be built there.

Not far from his home city, at Butler, he built the plant of the Standard
Steel Car Company. Mellon was tired of lending money on equipment trusts to
railroads for cars and locomotives to be built at Pressed Steel Car or Scboen
Works. In future, equipment trust borrowers would get their money at the
Mellon bank, and spend it in the Mellon car works.

Two young men with ideas about bridge building happened in upon the banker.
They glowed with enthusiasm and confidence. The son of Thomas Mellon rejoiced
with them, and named the new company in which he took a three-fifths interest,
McClintic-Marshall Construction Company, in their honor. From bridges, it
expanded into general structural steel for factories and buildings of all
types, and even built the locks for the Panama Canal.

Frick was beginning to find his dual role of director of Union Steel and U. S.
Steel a trifle embarrassing. J. P. Morgan needed him badly. But Frick was
sulky. Charley Schwab, whom he had advanced to high position in Carnegie Steel
and who had deserted him at the height of the epic battle with Carnegie, was
now president of U. S. Steel. Very well, let Schwab run Steel. Frick read the
balance sheets of the Corporation and quietly sold his stock.

Morgan sensed trouble too. Schwab had been away from business a good bit
lately. Sickness, it seemed. And there wasn't another man on the board of U.
S. Steel who knew a thing about steel except Henry Clay Frick. Frick must
return.

It would have been strange if Andrew Mellon didn't know of the inner conflicts
in the Corporation. At any rate he decided that now was the time to act. On
November 20, 1902, Union Steel absorbed Sharon Steel, in which Boss Flinn,
Mellon's political coadjutor in Pittsburgh, was influential. No cash passed
hands. An exchange of stock took care of that.

Union Steel was no longer a nuisance, it became a menace to the Corporation.
The merger counted five blast furnaces, 24 open hearth furnaces, bar, rod,
wire and nail, skelp, tube, plate, tinplate and sheet plate mills. It had
reached up to the Mesabi Range to assure its supply of ore. Two steamers
brought the ore down to Lake Erie. It owned coking and steam coal lands and
coke ovens. In short, the Mellons had created a completely integrated steel
company, and at a trifling cost so far as cash outlay was concerned. By its
side stood three associate companies.

Judge Gary, H. H. Rogers, George W. Perkins and other magnates of steel
climbed into a private car and headed for Donora to inspect the new rival.
President Donner was courtesy itself. When the price was mentioned, Judge Gary
balked.

Mellon had foreseen that. He was adamant. Judge Gary and his party headed back
for New York, cursing Thomas Mellon's son.

On December 11, Iron Age, magazine of the trade, carried an alarming story.
Union Steel was planning to build a rail mill at Donora or Sharon almost as
large as the Corporation's Edgar Thomson works at Braddock, and of course more
modern. The West Side Belt Line Railroad was to be extended from Pittsburgh
into the Connellsville coke region to tie in with the Mellons' Connellsville
Central. In the other direction it would connect Pittsburgh with Lake Erie. At
Elk Harbor the Mellons had bought 2,000 acres for a railroad and steamship
terminal and townsite.

The Corporation was frightened. The Mellons had the reputation of being "very
strong people." A special committee of the House of Representatives, reviewing
the matter in 1912, summed it up in these words:

"The aggressive attitude of the company [Union Steel] and the capacity and
long experience in business of Mr. Frick and others associated with him caused
the Steel Corporation grave concern. The methods which had either destroyed or
rendered tractable the smaller companies could not be rendered effective to
eliminate the Union-Sharon Steel Company." Referring to President Corey's
threat, the committee commented: "It soon became manifest that this company
would not 'push.' Located in the midst of the Corporation's great plants, it
was in a position to render its competition especially troublesome. . . .
There remained but one solution�to pay such price as those in charge might
demand for an agreement not to further disturb industrial conditions which the
Steel Corporation sought to establish, or compete with them for the business.
The Corporation decided to pay."

Immediately after the article in Iron Age, Judge Reed of Pittsburgh, of the
firm of Knox & Reed, representing the Corporation, and A. W. Mellon of Union-
Sharon Steel, met to negotiate the transfer of the properties. The Corporation
agreed to guarantee payment on Union Steel's bonds. But Union Steel had no
bonds.

The directors met hurriedly. On the minute book appeared the notation:
"Resolved, That a stockholders' meeting be had to in-crease the indebtedness
of the company from nothing to $45,000,000." The stockholders thereupon met.
Notation:

"The action of the board of directors in accepting the proposition of T.
Mellon & Sons for the sale of capital stocks of certain companies, lands,
etc., is approved.

"The capital stock is increased from $1,000,000 to $20,000,000.

"Authorize the increase in indebtedness to $45,000,000."

A majority report of the House Committee which investigated the U. S. Steel
Corporation in 1912 claimed that the Corporation paid Union-Sharon
$75,000,000. After adjustments had been made for the confusion introduced into
the transaction by the merger of Union and Sharon the month before, and by
certain obligations that the company undertook in order to complete mills at
Donora, the United States Commissioner of Corporations calculated the purchase
price at $30,860,501.

He was caustic about certain valuations in the contract. An ore mine which had
cost Union-Sharon $150,000 a few years before, was passed on to the
Corporation for $4,O00,000. Fantastic values were placed on other ore and coal
properties. Julian Kennedy, who knew as much about steel as any man alive,
told the House committee that neither plant nor ore justified the price won by
the astute Pittsburgh banker. The committee remarked that the "inflation of
its securities, just prior to its absorption, is another instance of the great
difference in the amount actually necessary to operate a large steel plant and
the huge sums at which the same concerns are often capitalized when taken
under the control of a syndicate."

Not in vain had judge Mellon raised his boy to be a "smart man." This deal far
transcended in scope any that the founder of the Mellon fortune had ever
envisaged and would perhaps have reconciled him to the evils of the new Steel
Age, which he so detested. If in one piece of business Thomas Mellon had made
more in a day than his farmer father had in a year, now his son Andrew had by
a stroke of the pen realized a profit that exceeded judge Mellon's gains in
his first thirty years in law and realty.

Once his friend had unloaded, Frick left his tent and threw himself into the
fray to steer the U. S. Steel Corporation through trying years, Schwab found
another steel company over which to preside. Within a few years Frick regarded
the Corporation sound enough for him to buy back the shares he had sold under
the Schwab regime.

pps 44-63
--[cont]--
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End
Kris

DECLARATION & DISCLAIMER
==========
CTRL is a discussion and informational exchange list. Proselyzting propagandic
screeds are not allowed. Substance�not soapboxing!  These are sordid matters
and 'conspiracy theory', with its many half-truths, misdirections and outright
frauds is used politically  by different groups with major and minor effects
spread throughout the spectrum of time and thought. That being said, CTRL
gives no endorsement to the validity of posts, and always suggests to readers;
be wary of what you read. CTRL gives no credeence to Holocaust denial and
nazi's need not apply.

Let us please be civil and as always, Caveat Lector.
========================================================================
Archives Available at:
http://home.ease.lsoft.com/archives/CTRL.html

http:[EMAIL PROTECTED]/
========================================================================
To subscribe to Conspiracy Theory Research List[CTRL] send email:
SUBSCRIBE CTRL [to:] [EMAIL PROTECTED]

To UNsubscribe to Conspiracy Theory Research List[CTRL] send email:
SIGNOFF CTRL [to:] [EMAIL PROTECTED]

Om