-Caveat Lector-
an excerpt from:
Mellon's Millions
Harvey O'Conner�1933
Blue Ribbon Books
New York, N.Y.
--[4]--
4
Corporation Promoter
WAR is Pittsburgh's fairy godmother. The darker the pall that shrouds the
battlefield, the blacker the cloud over the City of Iron and Steel. Raging
fires leap through a thousand furnaces; great engines beat and hammer the
ruddy steel into munitions for Mars; the masters of the mills wring their
hands in glee as gold drips from the smoke and gas which are vomited into the
leaden skies.
It was so in the Civil War, which started stout little Andy Carnegie on the
road to millions and germinated a hundred lesser fortunes. In its pleasant
afterglow, judge Mellon turned banker and started his boys on their career of
"well doing."
It was so in the Spanish-American War. Pittsburgh leaped joyously to salute it
as the harbinger of fat contracts for armor plate, for shells and gun
carriages, for rifles and bayonets. Even the tinplate mills worked day and
night, turning out containers for Armour's canned beef.
Promoters roamed the country, buying up mills, organizing steel combines,
floating huge issues of stock of which the common usually represented faith,
hope and charity. U. S. Steel, its $1,400,000,000 capitalization poised
precariously on tangible values half that sum, was born of that war. Union
Steel was Mellon's small but able imitation of the great Morgan's wizardry.
The backwash of the war wave swept through the coal fields to which Pittsburgh
owed its very life. Promoters eyed with illdisguised scorn the little mines
that spotted the city's hinterland. They belonged to Judge Mellon's era of
rugged individualism. A hundred operators fought each other for markets. They
were out of step with these trustifying times. In their abysmal ignorance,
they failed to see that harmony paid better profits than competition. The
promoters would explain.
That careful observer of the new times, A. W. Mellon, assumed the role of
teacher and promoter. He was well qualified. The proprietor of Union Trust had
taken lessons himself from Frick and his friends in New York. He also knew
coal from an intimacy bred of his ownership of thousands of acres of choice
coal lands up and down the Monongahela and Youghiogheny. Some bad been
inherited from his father, others acquired judiciously by right of
foreclosure.
The Keystone Senators and Pittsburgh's Congressmen prepared the way for the
merger that was hatching in A. W. Mellon's mind. They persuaded the Government
to take over the old Monongahela Navigation Company, lock, stock and barrel.
The Government planned to smooth out the waterway and abolish the hateful
tolls. That was the signal that unleashed an army of eager speculators. The
entire Monongahela Valley went coal ,mad. Farmers forsook their plows to drive
sharp bargains with land hawks who bought only with an eye to quick resale.
Hundreds of thousands of acres were sold and resold. It seemed for a time that
the money was not so much in coal mining as in juggling the black-seamed
acres.
Mellon called in George I. Whitney, head of Whitney & Stephenson, most
influential of Pittsburgh brokerage houses, and financial confidant of the
banker. They sketched a scheme for a consolidation of all the coal mines which
shipped their black gold down the Monongahela. The merger would be financed by
$10,000,000 in 7 per cent non-cumulative preferred and $20,000,000 Common
Stock. As a tidbit each purchaser of a share of preferred was to be given a
share of common.
Mellon-Whitney agents scoured the valley to the West Virginia line, obtaining
the signatures of coal operators. Few resisted. Why should they? The combine
offered them 25 cents a ton above their cost of mining and guaranteed to take
their output. Or if they preferred to quit the game, the combine would give
them a good price. No need to haggle over the details. After all it wasn't the
combine's money that was being given them. It was the investing public's.
By July of 1899 Union Trust could announce that it would accept subscriptions
for preferred stock on August 21, covered by 10 per cent of the purchase
price, the rest to be paid by September 2 1.
By fall the Monongahela River Consolidated Coal & Coke Company-known locally
as River Coal-controlled 96 of the 102 working mines along the river, and 44
boat companies.
River Coal boasted 40,000 acres of coal lands near the river, 50 river
tipples, and docks and storage space at Cincinnati, Louisville, Vicksburg,
Memphis, Baton Rouge and New Orleans, served by a fleet of 80 steamboats and
3,000 barges. River Coal's flag waved now over those tremendous tows, 350 feet
long and 150 feet wide, that bore 25,000 tons of coal at a time down the river
to ports between Cincinnati and New Orleans.
Not the least of the financiers' satisfaction was the knowledge that they had
achieved a 100 per cent monopoly on the river coal trade. Not only had they by
now bought up every mine on the Monongahela, but nearly every coal craft that
floated on the vast inland waterway to the Gulf flew River Coal's flag.
To add the perfect touch, A. W. Mellon's Union Trust underwrote a $10,000,000
bond issue. It was secured by a mortgage underlying every scrap of land and
property the combine owned. Obviously it was better, in this new era of
finance, not to be burdened with too much watered stock. Much better to sell
the stock, even to widows and orphans; and keep the bonds.
Every fact hatches its own contradiction. The new Mellon monopoly found itself
challenged by Forsythe & Company, which rescinded its contract with River
Coal, to sell directly with a New Orleans dealer. Forsythe alleged that the
monopoly had not taken coal as fast as it had contracted to. River Coal
retaliated with direct and legal action. It bought up the New Orleans dealer
and sued Forsythe. The court upheld Forsythe, but that didn't matter much.
More serious was William C. Jutte's defection. He had sold out to River Coal
for $1,000,000 and signed a contract not to mine, market or ship coal on the
Monongahela, Ohio or Mississippi. But he was back in business on advice of
counsel who charged in court that River Coal's contract broke the Sherman
anti-trust law. So it did, the court agreed, in so far as interstate Commerce
was Concerned. But the contract was valid in so far as the Monongahela was
concerned. River Coal's attorneys smiled.
At that time Monongahela was the source of nearly every bushel of coal sold
down the river.
Pittsburgh Coal Company made River Coal seem rather picayi~nish- judge Moore,
who had worked with Frick and Mellon on the $160,000,000 offer to Carnegie for
his steel company, felt Pittsburgh Coal was worthy of his mettle. He took
personal charge. Union Trust helpfully extended the use of its facilities.
The new scheme called for the merger of all the "rail" mines in the Pittsburgh
district, i.e., all the mines that shipped by rail rather than by river. Rail
Coal was to work with River Coal, each respecting the other's preserves.
Judge Moore's terms were no less generous than Whitney's. Owners of 150 mines
with 80,000 acres of coal land and 5,000 cars hastened to throw their
properties into the common pot. Eager investors snatched up $32,000,000 in 7
per cent preferred stock, the more so as Moore and Union Trust threw in seven
shares of common as a bonus with every ten shares of preferred. The remaining
30 per cent of the common stock�a mere $9,600,000�the promoters kept as a
reward for their efforts.
How was the $64,000,000 coal corporation ever going to justify promoters'
promises of 7 per cent on preferred and 9 per cent on common stock? The reply
was reassuring. In each year since 1891 coal production had expanded 25 per
cent in the Pittsburgh district. Production for 1899 would be 19,000,000 tons
against 15,274,000 in the preceding year. The estimated profit in '98 was 7.5
cents a ton. Monopoly economies made possible another 10 cents a ton saving in
production costs and 2.5 cents on sales and overhead. Throw in another 10
cents a ton for the increased charge for monopolized coal, and you had a total
profit Of 30 cents a ton, or $5,700,000.
Add to that $217,000 clear profit on renting company houses to miners;
$575,000 clear profit on food and merchandise sold to miners from company
stores; $332,000 profit on docks on the Lakes. Deduct $2,240,000 for the
preferred stock dividend, and you have enough for 9 per cent on the common and
a tidy surplus.
The figures were irreproachable. If the country could sail along forever in
the favoring breezes of 1898-99, all would be well.
The suspicious United States Industrial Commission probed the new merger for
water. Only half the $64,000,000, it reported, represented tangible values.
Was Pittsburgh Coal a monopoly? it inquired. E. R. Chapman of Judge Moore's
firm replied: "It is not a monopoly exactly. There are properties not owned by
the company, but there are few producing properties that are not owned by the
company." Independents, he added, had a hard time selling their coal.
Pittsburgh Coal hugged its monopoly position to its breast. When an
independent tried to get access to the market by building its own railroad,
the company bought up a strip of land that lay across the right of way.
Those of his mines that he did not place in River Coal, A. W. Mellon put into
the Rail Coal Combine. In token of that, and in reward for his services in
helping to form the new merger, the grateful organizers placed him on the
directorate, where he was joined by Senator Oliver, his publisher-friend, and
later by H. C. Frick.
The new corporation was the unchallenged leader of its industry. It boasted
that no other company could have filled New York Central's order for 6,500
tons a day. Enormous quantities went to the steel companies and 4,000,000 tons
a year to the Lakes.
Fortune trod Pittsburgh's cindery pavements in golden slippers in those lush
years from 1898 to 1902. Money poured from that low ceiling of smoke and grime
that hung eternally over the city. Union Trust's vaults fairly burst with the
currency and the certificates that betokened the new wealth.
Crusty old Pittsburghers sold out their little iron and steel, glass, coal and
metal businesses, stuffed the greenbacks or stock certificates that impatient
promoters thrust upon them into the banks, and departed for Paris, Florida,
New York-anywhere, to escape their native city. In place of petty industries
arose in 1898 American Tin Plate, a year later American Steel & Wire, American
Steel Hoop, National Tube, American Sheet Steel, to be followed by American
Bridge and that crowning masterpiece of finance, U. S. Steel. In 1899 and 1900
eleven mergers gobbled up a hundred smaller concerns in the Pittsburgh area
alone.
Bankers worked overtime counting the cash that rolled in through their
wickets. Deposits in Pittsburgh banks rose from $59,000,000 in 1898 to
$84,000,000 in 1899 and to $116,000,000 a year later. Forty-one new banks
opened their doors. The price of seats on the local stock exchange soared from
$100 to $14,000.
The anemic little trust company which A. W. Mellon opened in 1889 with $274.75
worth of furniture and $4,500 in deposits now burst through its tight second
floor offices. Deposits leaped from $513,000 in 1898 to $5,130,000 in 1899, to
$17,194,000 in 1901. Its $250,000 capitalization was doubled in 1900 doubled
again in 1902, and fixed at $1,500,000 a few months later. Surplus and
undivided profits stood at $15,500,000, an amazing figure that called forth
civic pride even from those who looked upon its proprietor with a jaundiced
eye. Its $100 shares were quoted in the market at $2,000.
Then it was that the Mellons�James Ross, Andrew William and Richard
Beatty�called a family conference over the banks. Nephew William Larimer was
invited in. T. Mellon & Sons, private bank, was under consideration. Private
banks were going out of style. Trust companies�in this case Union Trust-had
usurped their functions. Why not scrap T. Mellon & Sons and open a national
bank? Call it, say, the Mellon National Bank. The name had a satisfying
sonority. Agreed.
In 1902 old judge Mellon's private bank gave way to the newcomer. Bankers and
public alike were astonished to read its first statement of deposits, $
13,800,000.
To complete the banking circle, the family conference decided to open another
institution, Union Savings, to cater to those who shied clear of institutions
suspected to be up to their necks in speculation.
If the darkness could have been lifted from judge Mellon's mind, as he sat
rocking to and fro out in the Negley Avenue mansion, how he would have gloated
in the figures of the Mellon bank deposits. Union Trust, $22,000,000; Mellon
National, $13,800,000; Pittsburgh National Bank of Commerce, $6,500,000;
Citizens National, $2,800,000; City Deposit, $1,800,000. Total, not including
Union Savings, $46,900,000. That was a third of the money on deposit in all
Pittsburgh banks. Next year Pittsburgh National merged with Mellon National
and Citizens National with Union Trust.
Mellon National's opening months were auspicious. It earned $100,717 in its
first ten weeks of business, or at the rate of 23 per cent a year. Accounts
which had formerly gone to New York or Philadelphia, now stayed in Pittsburgh,
because the Mellons could finance any undertaking short of U. S. Steel. Their
Mellon National became a banker's bank, drawing deposits from institutions in
western Pennsylvania, West Virginia and eastern Ohio. A good bargain in a
country bank found the Pittsburghers alert, and their holdings swept up and
down the Monongahela, Allegheny and Ohio River valleys.
Corporations which came to A. W. Mellon asking loans became a roll call of
Pittsburgh industry. Mighty Carnegie Steel itself relied on Union Trust for
short term financing. Those new mergers in the Pittsburgh area which A. W.
Mellon did not form, he financed. In 1899 and 1900 Union Trust underwrote the
following firms, accepting underlying mortgages as security:
American Safe & Lock, $45,000; River Coal, $10,000,000; Monongahela Light &
Power (A. W. Mellon, President), $1,700,000; Wilkinsburg & East Pittsburgh
Railways, $2,000,000; Penn Heat & Power, $300,000; National Glass (a monopoly
of table ware glass), $2,000,000; Pennsylvania Water, $1,500,000; Union Gas of
McKeesport, $400,000; Manufacturers Light & Heat, a natural gas monopoly,
$1,500,000 (increased to $6,500,000 by 1903); Fort Pitt Gas, $1,000,000;
Macbeth-Evans Glass, $600,000; Pittsburgh Valve & Foundry, $200,000.
1900 was the big steel year for the Mellons. They financed their Union Steel
and McClintic-Marshall Construction companies privately, but permitted a
generous investing public to participate in buying securities of Crucible
Steel, a merger Of 12 small plants specializing in finer qualities of alloyed
steels. The properties were acquired for $19,000,000, but the firm was
capitalized with $25,000,000 seven per cent cumulative preferred and
$25,000,000 common. The stock was a favorite with widows and orphans, in view
of the presence on the board of A. W. Mellon, D. E. Park and other old-time
Pittsburghers. Pittsburgh Steel Company was floated in 1901.
The flood of money released by these mergers, dumped into Pittsburgh banks,
was reinvested in other mergers and in realtv. Realty prices in the Golden
Triangle soared to heights hitherto undreamed. Lots were sold and resold,
gaining tens and even hundreds of thousands in each deal. A. W. Mellon, for
example, bought five lots on Sixth Avenue in 1901 for $241,000, sold them to
his friend Senator Oliver a year later for $400,000 and he transferred them in
1903 to a third party for $600,000.
Out in the East End, James and the two young sons of Thomas Alexander sold
lots, abandoned in the panic Of 1873, for sums that ranged from $20,000 to
$100,000. Mellon plans marched on into the suburbs of Squirrel Hill, Swissvale
and Brushton. Mellon traction lines pressed on from East Liberty and
Wilkinsburg into the new suburbs of Edgewood, Swissvale, East Pittsburgh,
Wilmerding, and beyond to the Pennsylvania's Pitcairn shops; up the Allegheny
to Verona, and into the heart of the steel towns of Braddock, Homestead and
Duquesne. Their Pittsburgh & Birmingham Traction included a South Side line,
two incline planes which surmounted the formidable bluffs along the
Mononghahela, and electric lines that penetrated the West Liberty, Mt. Lebanon
and Brownsville sections.
In 1901 these properties were merged into the Pittsburgh Railways Company, a
traction monopoly, which allowed the Mellons $6,000,000 in stock and a
guaranteed rental to amount, within a few years, to $465,000 a year. A. W.
Mellon took his Place on the board.
The Mellons absorbed a fourth of the rentals of $2,279,000 a year which the
new merger had obligated itself to pay. The company, saddled with fixed
charges of $4,584,000 a year, bogged down badly in its task of furnishing
transportation. Bion J. Arnold, a traction expert summoned by City Councils to
look into the mess in 1910, reported that the company could be reproduced for
57 per cent of its $92,000,000 capitalization.
The ascending plateau of the Spanish-American War years dropped into an abyss
in 1903-4. Over the edge went many of the mergers, organized a few years back
amid assurances that the plateau was unending. Others clung desperately to
the. brink and wailed piteously to Banker Mellon to come to the rescue.
Pittsburgh Coal, Monongahela River Consolidated Coal Coke, Crucible Steel,
children of Union Trust's spawning, had failed in fact since their,
organization to pay a penny on their common stock of $77,000,000. These stocks
were now quoted on the exchange at 20 cents on the dollar.
The Pittsburgh Banker, organ of the numerous banking clan which stood outside
the Mellon orbit, charged bitterly that there was $75,000,000 of "dead
capital" in ten local corporations capitalized at $100,000,000. "A large class
of investors," it stated, "cannot be convinced that their properties enjoyed
beneficent, able and honest management." Their officers had been "reckless in
incurring debt, extravagant in their costs of operation, and generally
careless in looking after the interests of their properties."
Worse, the three major companies had now passed their preferred dividends. By
1904, Crucible Steel had omitted dividends for the year of $1,750,000; River
Coal, $700,000; Pittsburgh Coal, $2,240,000. Pittsburgh Coal stood at the edge
of bankruptcy. The promised 25 per cent. annual increase in production had
ended abruptly soon after 1901, and now the giant rail monopoly was selling
less coal than when it was organized.
Most pitiful of all was the plight of Crucible Steel. Intoxicated by the
surging prosperity of the post-war years, Crucible had decided to declare its
independence of U. S. Steel and build its own steel works, to furnish ingots
for its crucible furnaces. That story brought in another phase of the bitter
Carnegie-Frick feud.
Steel and coal interests had bought up nearly every site available for
industrial purposes along the Monongahela River, America's most important
industrial waterway. Fortunately, Frick and Mellon had a tempting site at
Peters Creek, admirably suited for a steel works. Promoters of new steel
combines hungered for it. Chairman Frick offered it to Carnegie Steel for what
he thought represented only a modest profit. Andy Carnegie, anxious to use any
club against his chairman to force his resignation, intimated to a mutual
friend that Frick had done well by himself in the sale. In a towering rage,
Frick withdrew, the Peters Creek site, and resigned soon after.
Details for the financing of Crucible passed through Union Trust. Hardly had
the $50,000,000 corporation been floated, than its directors, including A. W.
Mellon, decided to build a steel works. Frick and Mellon sold their Peters
Creek site to the new Clairton Steel Company, a subsidiary of Crucible,
secured by an underlying mortgage. Union Trust also underwrote a $2,250,000
bond issue, secured by the inevitable mortgage.
The crash of 1903 found the immense works still in process of construction.
Crucible was up to its neck in the swirling torrents of the financial
whirlpool. It was discovered, for example, that its officers had made a
$333,000 error in their financial statement for 1902. Union Trust forced a
receivership on Clairton Steel.
Overtures were made to U. S. Steel to come to the rescue.
Judge Gary was cool. Finally, his heart wrung by Crucible's tears, in 1904 he
took over the $10,000,000 Clairton works for $1,000,000 in bonds, in an
involved settlement which cost Crucible stockholders a $4,000,000 loss. In
return Crucible was bound by a ten-year contract to buy its steel from the
Corporation.
Judge Reed, Pittsburgh director for the Corporation, told the story in simple,
moving words, to a House Committee in 1911.
"The Clairton Company was put in the hands of a receiver and a lot of Crucible
stock, which was the favorite investment with widows and orphans around
Pittsburgh because of the respectability of its directors, dropped from 90 to
10. There was a lot of trouble all around. They were very glad to find
somebody to take over the plant." As a matter of fact Crucible preferred
dropped to 5 in 1904.
The debacle would have crushed the spirit out of prudent Judge Mellon. His son
gave no visible sign however that he was perturbed by the disasters which had
overtaken companies he had promoted, or by the distress visited upon investors
who had trusted in his name. Indeed, he was too busy with the affairs of
Pittsburgh Coal right now.
Not that President Robbins particularly appreciated his efforts. Robbins
needed cash. The board, A. W. Mellon present, had empowered him to sell a
$25,000,000 bond issue. In that they were following the excellent example of
U. S. Steel, which found that a bond issue was a great help in providing ready
cash in an emergency.
President Robbins set out for New York to talk to the bankers. Yes, they would
take the issue. Gossip set the buying price at 95, the selling price at 96.5
Back in Pittsburgh, he told the president of Mellon National of his good
fortune. Mellon was frigidly silent.
A few days later Robbins received disconcerting news. Unfortunately the New
York bankers would be unable to do anything about the bond issue right now.
But doubtless he could arrange it with some Pittsburgh bank. Robbins set out
for Chicago. No luck. Cleveland. The same. Every door was closed to him save
one-Union Trust. Around he went to its proprietor, whose sobriquet of "Uncle
Andy" was being heard more now on Pittsburgh street corners. Uncle Andy was no
more jovial than before.
Union Trust bought Pittsburgh Coal's $25,000,000 bond issue for $20,000,000.
The bonds, said the contract, could be redeemed before maturity at 110. Mellon
retained $10,000,000 of the issue in his own portfolio, and sold the rest.
Now it was time, he decided, to merge Rail and River. Already their
directorates interlocked. Accordingly Pittsburgh Coal paid $4,500,000 for
$15,000,000 of River Coal's common. For 50,000 shares of its preferred,
Pittsburgh Coal agreed to pay $2,250,000, to be handled by a 6 cents a ton
levy on River Coal's production.
The $25,000,000 bond issue, which at one stroke financed the supermerger, paid
off Pittsburgh Coal's indebtedness to the Mellon banks, and provided working
capital, was secured by an underlying mortgage on all property.
All Pittsburgh was boiling with rage. It was charged that the Mellons had
known that the overcapitalized Rail and River Combines could never meet their
dividend requirements. And now investments represented by $94,000,000 of
capital stock had been made secondary to the basic claims of the Mellons,
represented by $35,000,000 of first mortgage bonds. It was a poor reward, it
was observed, for those solid old American virtues of thrift, foresight, and
prudent investment exercised by people who had trusted in the reliability of
the Mellon name, as built up by Thomas Mellon in fifty years of active
business.
They forgot that new times bring new morals.
Prosperity in 1905 brought dividends for preferred stockholders, but the
crisis of 1907 again plunged the watered corporations, into deficits.
Pittsburgh Coal, River Coal and Crucible passed on their preferred. Common
stockholders, who by this time expected nothing, were not disappointed.
Frick now was an active director of U. S. Steel, the Mellons had sold out
their Union Steel, and relations between Union Trust and the Corporation were
friendly. Pittsburgh Coal in 1905 contracted to supply the Corporation with
its fuel needs for 25 years. Stockholders in Rail Coal complained bitterly to
the House Committee probing the steel trust in 1911-12 that they were being
milked for the Corporation's benefit. The Corporation was paying Pittsburgh
Coal $1 a ton, against a bare production cost of $1.02 which failed to take
into account 14 cents a ton for dividends and 10 cents for the bondholders.
Stockholders and miners held the bag, it was charged.
In 19 11 the Mellons took advantage of the clause in Rail and River bonds
which called for $1.10 for every $1 on bonds redeemed before maturity. The
Steel Corporation's H. C. Frick Coke Company bought all of both River and
Rail's coking coal lands. The purchase price was used to retire $8,600,000 of
Pittsburgh Coal bonds held in the Mellon vaults, at a price of $110 At this
juncture River Coal ended its painful career by complete absorption in
Pittsburgh Coal. Union Trust floated a $6,000,000 20-year bond issue for
Pittsburgh Coal, which bought the remaining River Coal stock with the
proceeds.
Each period of prosperity brought its harvest of added millions to A. W.
Mellon; in each succeeding depression he wielded energetically the broom of
foreclosure. Criticism passed him by. The well-ordered press of Pittsburgh
never dared to question the great banker; the malicious gossip of the street
corner failed to penetrate the recesses of the Mellon National Bank. In any
event he would have brushed it to one side. From his father he had acquired a
disdain for the unkempt, unthrifty mob; it was always to be expected that the
have-nots would be covetous of those whose foresight and shrewdness prospered
them.
Thomas Mellon's son lacked his father's common touch with the world. He had
not been forced to fight his way up from poverty. From the start he was the
son and successor of the proprietor of T. Mellon & Sons Bank; people either
fawned before the power of money, or avoided him.
Mellon didn't bother to see how his miners lived in squalid little company
towns�"patches" they were called. didn't concern himself with the "hunkies"
who labored in his steel and aluminum mills. Certain subordinates were
delegated to deal with the hands; in him was vested a fortune that now ran
high into the tens of millions and proper attention to that would absorb all
his capacities.
The closer he drew into the shell of his bank, from which he ran his
industries through hired men, the further away the rest of Pittsburgh
withdrew. He was rarely seen in clubs; men met him on this or that business
occasion but seldom had opportunity to pass a half hour on subjects not
related to bonds, turnover, output. As the years passed, he became almost a
legendary figure in his own city. When he decided to enter public life, it was
necessary to introduce him to the populace of Pittsburgh.
At times it was necessary to proceed against an old business associate. In
19o8 it was George I. Whitney, who had been in charge of the promotion of
River Coal with Mellon in 1899. Whitney was half owner in the Hostetter-
Connellsville Coke Company, the Steel Corporation's H. C. Frick Coke Company
owning the other half. The Stel Corporation tired of paying him dividends
which ran as high as 36 per cent on a capital of $1,500,000. H. C. Frick, a
director of Union Trust, knew, Whitney declared, that the bank had lent him
money for which he had placed his Hostetter-Connellsville shares as
collateral. The Mellon bank thereupon threatened to call the loan and seize
his collateral, he claimed, to force him to sell at H. C. Frick's own price.
This he was obliged to do. As a result his credit was shat-tered and he was
adjudged a bankrupt.
John H. Jones found the Mellons no easier. As proprietor of the Pittsburgh-
Buffalo Coal Company, he had borrowed $2,500,000 (minus the Mellon discount it
was only $2,043,000) to acquire new coal lands in West Virginia. His
understanding was that the mortgage covered only the new property. Mellon's
attorneys held it covered all of Pittsburgh-Buffalo's lands. In any event the
company was thrown into receivership, and Jones was named one of three
receivers. In October, 1914, he went into court to pray that the Mellon bank
be restrained from selling the property to satisfy the mortgage. In view of
the hard times, he declared, the Pittsburgh-Buffalo Company would be sold for
a song. If the receivership were permitted to administer the property a few
more years, a more favorable market would permit a sale price commensurate
with its real value. Reed, Smith, Shaw & McClay, one of Pittsburgh's two
leading law firms, and representative of U. S. Steel, Union Trust and other
ponderable interests, pleaded the Mellon case. The firm was rarely defeated.
Jones' property was sold. Union Trust was the purchaser. The market for coal
picked up appreciably in the fall of 1915, a few months after the forced sale,
and the Mellon bank was able to make advantageous disposition of its coal
properties.
In July, 1913, the Kuhns' First-Second National Bank failed in Pittsburgh.
Even Wall Street felt a resulting flurry, because the Kuhns were the promoters
of the American Water Works & Guarantee Company, the largest holding company
in the country, with properties valued at $200,000,000. A. W. Mellon and H. C.
Frick looked over the resulting wreckage, picked out likely water properties,
and were reported to have paid 15 cents on the dollar for them. Thereafter
many of the Kuhn water power properties became known as Mellon concerns. The
Mellon National Bank took over the McKeesport National Bank, a Kuhn
institution.
The passing years-by 1909 the banker was approaching his fifty-fifth birthday-
failed to slow down the vigor of his mind or body. He darted through the
Mellon National Bank with the alacrity of a youth; his supple mind moved
swiftly from the affairs of Aluminum or Gulf Oil to Standard Steel Car,
Pittsburgh Coal, any of the hundred enterprises in which he had a financial
stake.
In the president's room at Mellon National Bank there was quiet; attendants
moved softly on thick carpets, spoke in hushed accents to their employer,
whose voice was hardly ever heard above a whisper.
For relaxation he rode or played golf-but always with that moderation which
was his father's motto in all things. Periodically he dashed away for England,
to amuse his wife's longing to return to her old home, or to the south of
France. There was some time too, for Ailsa and Paul, his two little children.
But he had little to do with their training. Mrs. Mellon and a corps of
underlings watched over them during every waking minute. Gone was the
simplicity of his father's home, where the Judge had boasted that he had but
one man and two maid servants. Everywhere in the gloomy castle on Forbes
Street hilltop flunkeys busied themselves with trifles. Quiet was the note of
that place, too. A hushed awe subdued the normal hum of the household when the
master returned home for the evening, to eat the meager dinner to which he
limited himself.
As the years went on the castle seemed to get gloomier and gloomier. Mrs.
Mellon now left more frequently for England with the children, unaccompanied
by their father. Other members of the numerous Mellon family shook their heads
sadlyall was not going well up on the Hill. Mrs. Mellon was too light-hearted
(or giddy, some said) an Irish girl for that somber house. She did not
understand that the management of coal and steel and finance in the center of
the nation's heavy industry was an absorbing task; that necessarily the time
her husband had to give his family was limited.
pps. 64-78
--[cont]--
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End
Kris
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