-Caveat Lector- an excerpt from: The Man Who Found The Money Saul Engelberg & Leonard Bushkoff©1996 Michigan State University Press East Lansing. Michigan 48823-5202 ISBN 0-87013-414-0 257 pps. -- First Edition -- In-print --[2]--- 11 ENTER THE BOSTONIANS THE GREAT IRONY FACED by Hill, Kennedy and the others leading the Manitoba in the early 1880s was that increasing success brought greater volatility in the price of Manitoba securities and serious complexities in financing. A solution was eventually found in 1885, by bringing in new, truly committed investors-the Bostonians who controlled the Chicago, Burlington & Quincy line—but only after four years of mutual assessment, decision—making, bargaining and negotiation. The situation had developed as follows. The Manitoba was very much a growth stock, successful in financing (thanks to Kennedy), and equally so in construction and operations (thanks to Hill). And there was noticeable proof in the dividends it began paying late in 1882. The stock's high price, relative to earnings, attracted enthusiastic speculators. The bulls bought and sold to drive prices up, using legitimate news and not-so-legitimate rumors to trap unwary buyers. The bears thrived on bad news, and worked to force prices down by generating panic among unknowing investors. The Manitoba did, to be sure, enjoy some protection through the centralization of its holdings in the hands of Kennedy and the former George Stephen Associates: of its 200,000 shares, no more than 70,000 were traded. Should the floating supply increase unexpectedly, however, the line might face unpredictable price fluctuations. The threat derived from subtle, yet decisive, divergences at the peak of the Manitoba pyramid. As we have seen, George Stephen and Donald Smith were combining their involvement in the Manitoba with leadership of the Canadian Pacific project. Here was an idea whose political and nationalistic time had come; virtually every Canadian public figure stood behind it. It required mobilizing every dollar that a capital-short Canada could yield. And so Stephen and Smith had to sell small blocks of 1,000 or so from their Manitoba holdings (probably about 25,000 shares each), shifting the proceeds into the Canadian Pacific venture. Such sales of course depressed the price of Manitoba stock, and this troubled Hill and Kennedy—though there was little they could do about it, aside from discussing the issue with Smith and Stephen. The two Americans understood that their Canadian associates had little choice but to support the Canadian Pacific. The question was how to avoid the chaos inherent in unpredictable sales to unknown—and very possibly ill-intentioned—buyers. For the market was extremely "thin," i.e., sales of relatively small amounts result in highly volatile prices. As the leader in financing the Manitoba, Kennedy faced a corollary problem: how to use such "unreliable" stocks in securing loans? Certainly the bankers were impressed by the Manitoba's long-term prospects. But it was risky for them to accept as collateral a stock so unpredictable and wide-ranging in price as to create difficulty should a loan happen to go bad. Witness Hill's statement to Kennedy in September 1882 that he was unhappy about the increase in Manitoba stock to 165 because large blocks were being sold; he preferred steadier, consistent prices at around 150-55.[1] The predictable occurred. On 10 October, Kennedy sold 1,100 shares of Stephen's stock. These-and other-sales pushed Manitoba stock down, with Kennedy suggesting to Hill in late October that the fluctuations would continue so long as it was uncertain at what intervals and in what amounts the Canadians would try to market some of their holdings. And this Stephen and Smith, driven by the inherently unforeseeable requirements of the Canadian Pacific's construction crews, did not themselves know. As Kennedy later wrote, the large Canadian holdings—which might be sold at any moment—hung over the Manitoba like the sword of Damocles. In effect, events were in the saddle, and men could only ride.[2] Inevitably, news of these sales reached the press, and Kennedy complained that, despite his best efforts, this had a bearish effect on Manitoba stock. He proposed listing it on the London Stock Exchange: the broader the market, the less the Manitoba stock would become the plaything of speculators.[3] Kennedy and Hill were working closely together, buying and selling on joint account to try to stabilize the Manitoba stock price and thus retain control. In January 1883, for example, Kennedy decided to cease buying unless the price declined two or three points. Hill readily deferred to his judgment: "In regard to the purchase of stock, I can hardly advise you, but ... I am satisfied to do as you think best, being on the ground and able to judge from day to day."[4] Without informing Hill, however, Kennedy had kept this trading secret from his junior partners in J. S. Kennedy & Co. Such secrecy was hardly unknown in a business world where partners whose relationship was essentially unequal often went their own way, and doubtless Kennedy, as the senior, could rationalize it in terms of the overriding need for security. But his secret trading might well injure any partner who also was trading in Manitoba. So Kennedy was embarrassed when Hill inadvertently spilled the beans in a letter that had been sent to the firm, not to Kennedy personally. The letter also referred to Kennedy's use of $71,462 of Hill's money in settling a transaction, Kennedy himself having been short of personal funds at that time. Kennedy explained matters to Hill in February 1883: My firm here referred your letter to them of [the] 1st to me. I am sorry you wrote them on the subject as I did not want any one here to know that you and I had been buying Manitoba stock and now I have had to admit and explain to them all about it so far as the 500 shares referred to in the letter are concerned ... I had not the money at the moment to pay my half so I drew the whole amount [$71,462] from my firm and had it charged to your account. On the 18 January having plenty of money then on hand I paid up my half of the cost ... My firm knew nothing about the transaction except that so much money was at one time drawn from and at another time so much paid in your account.[5] Kennedy's intense penchant for secrecy had caught him in a web of his own making. Throughout 1883, Kennedy and Hill continued to try to stabilize Manitoba stock, buying or selling as circumstances required. In May, Hill asked Kennedy to sell all of Hill's stock over 30,000 shares, leaving him with $3,000,000 at par. The price was left to Kennedy's judgment; Hill later wrote Kennedy that "you are on the ground and know what you can do."[6] After a price decline of several months, the latest of a long series of bear attacks came in July 1883; Kennedy and his associates responded very aggressively. Initially, Kennedy alone supported the market. But he lacked the resources to withstand the bears, and so joined in a pool of 40,000 shares that Stephen formed to fight back by buying Manitoba shares; Kennedy and Hill each contributed one-fifth. The onslaught continued, nevertheless, and with it, the sharp fluctuations in Manitoba stock prices that bedevilled Kennedy personally, not least during his customary European vacation that summer. "I had intended remaining here for a little while longer," he wrote to Hill in late August from St. Moritz, "but the advices I have had about the bear raids in New York on the Manitoba and the Canadian Pacific stocks and the unsettled aspect of affairs generally have made me feel uneasy so that I cannot derive any pleasure or comfort from a longer stay over here and will therefore leave ... I hope the bears will get caught and get such a twisting that they will not have the courage to attack the stock again."[7] The pool was the only instrument readily at hand with which to counterattack speculators. Though a small pool of like-minded men would doubtless hang together, they might well lack sufficient resources. A larger pool would indeed have the resources, yet probably would lack the cohesion and sense of common purpose required for a united front. In pools to defend the Manitoba and the Canadian Pacific, Kennedy trusted Hill completely, Stephen and Smith slightly less, and other financiers-who might be tempted by immediate profit-still less. For example, Kennedy abruptly withdrew from a Manitoba pool in October 1883, informing Hill that Thomas Pearsall, an investor and broker for George S. Scott & Co., which was managing the pool, actually had lent stock to the bears; Kennedy felt betrayed. In another case involving a pool member, Kennedy was outraged to discover that a good friend of Stephen and Smith had actually sold 1,400 shares of Manitoba, while buying 2,700 shares of Canadian Pacific. I am sure you will feel just as I do," Kennedy privately protested to Hill, "that it is folly ... [for] you and I to be in a pool to protect Manitoba stock if some of our friends are going either directly or indirectly to advise or allow their friends to sell out the one in order to buy the other, and that we had better even at some sacrifice and inconvenience close the pool."[8] Kennedy was partially mollified when the rules were slightly changed and the pool was revived. But he essentially distrusted pooling, wanted to end this particular example, and informed Hill that Stephen would accept their decision. The pool simply wasn't successful; it benefited the brokers, who drew commissions, but not the participants; and Kennedy felt no need for brokers to make decisions that he could make for himself. In a word, pooling made him "miserable."[9] "The whole thing," he wrote later, "is an outrage. I was never in such a thing and I certainly never will be again; it has made my life miserable for I feel that I am being humbugged and cheated and I cannot and will not endure it."'[10] The Manitoba pool was in fact dissolved in mid-November 1883; Kennedy was pleased. But this dissolution encouraged the bears, whose raids soon drove the stock down to its par of $100. This in turn spurred purchases by the solid, permanent investors whom Kennedy and Hill wanted. The constant leakage of Canadian shares nevertheless remained very worrisome, and, in March 1884, the price of Manitoba stock slid—unaccountably—to $90. Kennedy soon discovered that Duncan McIntyre, who had brought the Canadian Central into the Canadian Pacific, had sold 2,500 of Smith's holdings—and that Kennedy and Hill could do nothing whatever about it.[11] The bear raids continued during the stock market panic of May 1884, though Kennedy did receive limited help from sales by J. Kennedy Tod & Co. to English and Scots investors.[12] In October, Kennedy reported to Hill that the bears, having pushed Manitoba stock below eighty, were bragging that it would soon fall to seventy or even sixty. Kennedy, though ordinarily quite cool in difficult situations, was furious at men whom he saw, not as normal, hard-bargaining businessmen, but as wreckers and destroyers. "I feel like doing something to try and stop such people from making money out of their neighbors by such methods, and if the earnings are likely to turn out better than they did in the corresponding month last year ... to go on and buy stock enough to give the bears a twist."[13] The Manitoba had faced a complex situation for at least four years. It was young and booming, eager to use every dollar to expand, yet without the solid wealth needed to both continue constructing and also solidify its position. Kennedy did indeed have wealth, and Hill was putting all his limited funds into the line, whereas Stephen and Smith were taking money out, rather than putting it in. How, then, to solve the problem? Kennedy and Hill conceived of a solution: find an ally, reliable, reasonable and rich. As we shall see, this brought them to the Chicago, Burlington & Quincy, an outpost of Boston rectitude and sagacity in the Midwestern plains. The Burlington, a large, exceptionally well-managed line with dispersed ownership, was operating more than 3,000 miles of track in the early 1880s, extending from Chicago south to St. Louis and west to Denver. It compared favorably to the Pennsylvania as the best managed railroad in the country. Social class, family relationships, and shared backgrounds in the "Athens of America" contrasted sharply with the managerial elite of most railroads. The Burlington was dominated by John Murray Forbes and his cousin, Charles Elliott Perkins, who led a like-minded group of wealthy and prominent Bostonians. Their traditions were those of international trade, especially the China trade, in which the enormous distances and the virtual impossibility of enforcing moral strictures made integrity and mutual trust absolutely essential. The Bostonians therefore were far less interested in quick profits than in solid long-term relationships that could bring consistent yields. But, like all railroads in that free-wheeling era, the Burlington had to be prepared to fight for survival against other lines. One strategy involved alliances with neighbors, if only to ensure preferential treatment for freight (in those unregulated days) when it entered the neighbor's turf. Such alliances could be consolidated through purchasing sufficient stock to place a friendly representative on the board of directors. The Bostonians also had to contend with another survival issue: of the several lines battling in the intensely competitive market of the trans-Mississippi West, which would triumph and which would go under? An alliance with the Manitoba might give the Burlington an edge in its expansion to the Twin Cities—and perhaps beyond. More general considerations also favored an alliance. Experience had taught railroaders that it was unwise to reach too far, that it was very difficult to either finance or manage sprawling enterprises; far better to organize them into divisions, more responsive and accessible to meticulous leadership. All these calculations, both general and strategic, underlay the inspection trips which Perkins conducted in 1883 over both the Manitoba and the Northern Pacific; not surprisingly, he informed Forbes that he favored the Manitoba. Henry D. Minot, a Forbes grandson, studied both railroads in 1884. So momentous a potential transaction was being conducted very cautiously. High-level discussions began in April 1885, when Forbes and Perkins arrived in St. Paul to further study the Manitoba and start testing the waters with Hill. He informed Kennedy that he had told Forbes that, "while we had a good money making, property and were not seeking a customer, I thought any arrangement that would strengthen our system and be of real benefit to us would be fairly considered."[14] Buyer and seller gradually edged closer over the next several months. The Burlington was interested in expanding from Chicago to the Twin Cities. So it sought terminal rights at the Manitoba's facilities in St. Paul, as well as the use of Manitoba trackage from there across the Mississippi into Minneapolis. Above all, the Burlington, eager to guarantee traffic for its northern expansion, wanted the Manitoba to direct a specified amount of its freight via that line to Chicago. There also was the question of the number of shares that Hill, Kennedy, Stephen and Smith would sell to the Forbes consortium; the two Canadians were, as we have seen, eager to gain cash for the ever-expanding needs of the Canadian Pacific. Finally, the Bostonians wanted Minot to join the Manitoba board of directors and also become a vice president. Minot, living in St. Paul, would function as an ambassador, representing the Bostonians, and passing them the latest information from the Manitoba headquarters.[15] Word began circulating by summer that Hill was willing to offer $5 million in Manitoba stock to the Burlington men. Nevertheless, uncertainties remained regarding what they would do and when: Forbes had at least a dozen -prospective investors-many of them relatives-to nudge into line. Kennedy was miffed by the continued uncertainty. He wrote Hill on 1 July to announce that there was definite information from brokers that the Bostonians were buying. Yet neither he nor Hill had received a direct offer as yet.[16] An alliance also had its appeal to Kennedy. To join with the powerful Burlington offered a way to defend the Manitoba against incursions by the Chicago, Milwaukee & St. Paul, and also by the Chicago, Rock Island & Pacific. Both he perceived as "bent on revenge," as they contested territory in the Manitoba's backyard, in Iowa and southern Minnesota.[17] So Kennedy wrote to Hill in July that "it is therefore all the more important that we make the alliance that now presents itself, and that we make it as soon as we can ... and then I think our jealous neighbors and especially the Rock Island and the Milwaukee and St. Paul will be very careful about what they do for they must know the inevitable consequences should they provoke conflict."[18] Kennedy himself was not personally disturbed by the need to offer some of his 25,000 Manitoba shares to the Bostonians; the capital he gained would enable him to follow his preference of diversifying his holdings. Moreover, the minority block the Bostonians would obtain sufficed for influence, but not control. That remained securely in the hands of Hill, Kennedy, Stephen and Smith. So Kennedy traveled to Boston that summer of 1885 to close the deal, wiring Hill that a Forbes emissary had predicted that all would go well, though Forbes needed time to settle various legal technicalities.[19] Kennedy met with Albert E. Touzalin of the Burlington, and Henry Lee Higginson of Lee, Higginson & Co., the Boston private banking firm. He reported to Hill "that he [Touzalin] and two others of his associates had ... [conferred] with Forbes who had returned to town with them, and ... that Forbes would not close until they had ascertained through one of their counsel that the mortgages of the St. Paul & Pacific had all been properly foreclosed and ... that 'little Minot' [Henry D. Minot] had suggested this as a matter that should be looked into ... and when Forbes took a position there was no use trying to move him from it."[20] Too many players were involved among the Bostonians for a quick decision, however, and this in turn meant a leakage of information regarding what would, after all, be a major boon to the Manitoba. Inevitably, its price rose, as buyers were attracted. Stephen and Smith had promised to sell to the Bostonians at par; they could hardly be expected to do so as the price rose above it. What to do? Hill and Kennedy were forced to intervene to try to bring the price down by selling, though this would cost them when they eventually bought the stock back. Conceding all this, Touzalin was apologetic. Kennedy impressed on the Bostonians that he and the other associates would indeed sell their Manitoba stock to them well below par, but only if it were held for investment. This moral guarantee was, in fact, a corollary to the ultimate agreement.[21] That was signed on 3 August 1885. It involved Kennedy on one side, and Touzalin, Higginson, and Charles A. Whittier, a Higginson partner, on the other. Railroad securities were marketable at seven to ten times their earnings. The $5,000,000 the Bostonians now paid certainly was in that range, though close to its upper end. The purchase occurred in two stages. First, Kennedy contracted to sell-at below the market price- 12,500 shares owned by Stephen and Smith. Then, in mid-September, Kennedy sold 7,500 shares from the joint account held by him and Hill: 4,750 shares from Kennedy's total, and 2,750 from Hill.[22] This two-stage formula reflected caution and prudence: would the Bostonians honor their moral commitment to hold, rather than sell, the Manitoba stock? By consulting the stock transfer books at his disposal, Kennedy learned that they had indeed been true to their word, and stage two therefore could proceed.[23] V V V Kennedy suggested to Hill in October that they sell some Manitoba stock, as a recently-formed pool apparently had raised the price. With the Manitoba now firmly controlled by him and Hill, Kennedy felt free to follow his natural bent toward diversification, fearing the risks of excessive investment in any one company.[24] The speculators nevertheless remained interested in the growing and profitable Manitoba, despite its increased solidity. Furthermore, although the Canadian Pacific had been completed, there was always the possibility that Stephen and Smith, preferring to hold less Manitoba and more Canadian Pacific, might be tempted into selling by an attractive offer. Speculative success required participation—or at least toleration—by either Kennedy or Hill. Witness the action in February 1886 of Thomas Pearsall, who offered either to buy or option Kennedy's entire holding of some 20,000 shares. Kennedy refused, capably analyzing the situation for Hill: Pearsall, in addition to the parties he is working with here, is working with our friends in Montreal [Stephen and Smith] and that they are ready for any scheme that will run the stock up. They want to capture either you or me.... If either of us were to sell out entirely, that means resigning our positions as director and officer of the Road and then we would be chargeable with bad faith by those who have taken an interest in the property on the faith of our connection with it. Kennedy's position was quite clear: "I will be delighted," he concluded, "to see the day when the speculative element is completely eliminated from the stock."[25] Pearsall was not dissuaded, however. In October, he proposed yet another bull pool to Kennedy. The strategy was simple enough. Kennedy, Hill, Stephen and Smith were all to hold their stock off the market, thus driving the price up until they—and certainly the two Canadians-could rake in big profits by selling. Kennedy was noncommittal, but dismissed this scheme, writing to Hill: I am not going to tie up my stock in order that a ring of speculators may safely ... go to work to '"jeremy diddle" the market, get prices up fictitiously, and then dump out their stock on the innocent public at a good Profit, and I am sure you are not going to aid or abet any such scheme.... They simply want us to hold the cow while they milk it, and I think we have both had enough of that sort of thing already. Very possibly Stephen and Smith are to be in the pool and get their share of the "swag" for tying up their stock. You and I cannot afford to be ... mixed up with such schemes. I think we have both established a reputation for fair and honest dealing and as officers of the Company the stockholders look—and have a right to look—to us to protect their interests in every respect and how then could we either by express consent or by silence give aid to such a scheme as Pearsall proposes? Were we to do so and should it become known, as sooner or later it probably would, you would find that the credit of the company would soon stand very different from what it now does.[26] Though Hill agreed, Stephen and Smith-who no longer were Manitoba directors or officers-may well have joined in Pearsall's scheme, which was carried out. The rumor mill. was used to encourage heavy sales to unsophisticated outsiders. Much to Kennedy's satisfaction, the pool ended by midOctober 1885.[27] The Manitoba -Burlington alliance took tangible form when the Chicago, Burlington & Northern opened for traffic in mid-1886. The Northern did indeed rent the Manitoba's terminals in the Twin Cities, as well as the track connecting them. Kennedy opposed granting the same privilege to other lines, anticipating that the Manitoba itself would eventually need the facilities.[28] By the decade's end, the Manitoba had emerged unscathed from the speculators' attacks. Stephen and Smith had ceased to be vital stockholders. In any case, the Canadian Pacific had been completed, and they no longer felt pressured to constantly sell their Manitoba stock. The Bostonians were too conservative to be tempted by the speculators. Finally, the Manitoba's net operating income stabilized during 1883-89, even as it financed its construction by selling bonds, rather than capital stock. So the speculators turned to more attractive targets. The new relationship with the Bostonians had broad significance. It brought together two groups who were eventually to coalesce into one, when the Manitoba/Great Northern bought the Burlington in 1901. And it brought to the Manitoba's headquarters in St. Paul a new vice president, Henry D. Minot, "young Minot,"—he was twenty-six, and Forbes' grandson-as both the watchdog of Bostonian interests and tangible proof to the financial world that the Manitoba now had direct access to the Boston investment community. Kennedy soon wrote to Hill that "it is certainly to your interest and mine to have a good block of our stock amongst such Boston investors as Minot appears to be associated with." What mattered about Minot was who, not what, he knew.[29] There was, nevertheless, a certain inherent tension between Minot's loyalty to his associates in Boston, and his new position as the de facto second vice president at the Manitoba headquarters in St. Paul and as a member of the executive committee: tact and sensitivity were required on all sides. Minot, however, was very eager to make a name for himself. The Manitoba, and especially the closeness to Hill it afforded, was to be his opportunity. The key to that opportunity, apparently, was financing. Hill ran the line, and Minot fully accepted that reality. But Kennedy, at age fifty-five, and far off in New York, may have seemed vulnerable to this highly ambitious young man, with his Lee, Higginson connection to the Boston capital market. Minot even suggested to Hill in November 1885 that Kennedy might, perhaps, sell much of his Manitoba stock and then resign from the board of directors. That would, of course, leave the way wide open for Minot himself. It was not long before Kennedy grew aware of these ambitions. Though he had dealt with Hill for many years, theirs was a long-distance relationship, primarily by letter. Minot, however, now stood at Hill's right hand. And Kennedy was disturbed by various pinpricks from Minot. The latter, for example, asked for a personal share of the Manitoba stock sold to the Bostonians. Kennedy believed that Minot's cut should come from those sold to Lee, Higginson & Co., but he and Hill ultimately decided to each provide 1,000 Manitoba shares for Minot to buy-at par.[30] Minot went farther in the autumn of 1885 by urging Kennedy to place 5,000 shares with him, at well below market price, to be sold to conservative Boston investors. Kennedy wanted immediate payment, but Minot refused, and Kennedy brusquely ended the deal.[31] This skirmish opened a war of attrition, as Kennedy, accustomed to deference and perhaps worrying that Minot wanted, eventually, to shunt him aside, found himself bombarded by selfaggrandizing letters from Minot that bore unsolicited advice and suggestions. Minot, for example, suggested that, "as a matter of propriety and prudence," he himself take over Kennedy's task as the agent in transferring stock. At one level, Minot's proposal was perfectly reasonable; at another, it was grossly insensitive.[32] Minot also differed from Kennedy in wanting to bring Lee, Higginson in on a small-scale transaction by which Hill, Kennedy, D. Willis James, Samuel Thorne and others bought-in a private venture, unconnected with the Manitoba-the Mason City & Fort Dodge Railroad in Iowa. Kennedy dismissed as absurd Minot's contention that using the Boston house as the lead banker would help deceive the railroad world regarding the true backers of the line. Kennedy also was disturbed by what he regarded as excessive personal profits for Minot and Lee, Higginson. This Minot of course denied, insisting that he could succeed honestly and had no reason "to seek any illegitimate success," but Kennedy was not satisfied, and voiced his accusations to others-—including Hill—in the Manitoba circle.[33] Thorne intervened as peacemaker, trying to heal a rift that not only might damage relations with the Boston investors, but even between Hill-who found Minot useful-and the New York side of the Manitoba: Kennedy, James and Thorne himself.[34] But Kennedy continued finding fault with Minot, weighing in on 25 February 1886, with a twenty-three page, handwritten letter to Hill cataloguing Minot's various indiscretions and outright errors and misjudgments. The financing of the Mason City & Fort Dodge project remained the principal issue, with Kennedy demonstrating that those supplying the capital would receive little, while Minot and especially Lee, Higginson—whose efforts would be marginal—would do very well.[35] The battle shifted to a new front the following month, that of minutes, records and information generally. First, Minot and Kennedy battled over placing Manitoba information in the minutes of the board of directors. Western railroads invariably had been more secretive than were their older, more established Eastern brethren, and the Manitoba was no exception. Kennedy wanted as little as possible on the record: why give anything away to Stephen and Smith-and the Canadian Pacific? Minot, however, sought to emulate the Burlington, which was impressing the financial community by publishing selected corporate records; shouldn't the Manitoba do the same? Although Hill agreed, and a three-volume draft had been prepared, Kennedy—predictably—was opposed, even hinting to Hill that Minot had ulterior motives: "For whose benefit have they [the documents] been prepare,]?"[36] Other incidents followed, with Minot and Kennedy essentially playing to Hill as they themselves exchanged criticisms over passing information between the offices in St. Paul and New York. There was, for example, the question of timely reporting by Minot to Kennedy on the Manitoba's construction plans in Montana. Kennedy insisted that he had not been informed; Minot disagreed-and eventually was proven right. Thereafter, Minot chose to provide Hill with carbon copies of all correspondence to Kennedy. After a patronizing letter from Minot in October 1886, Kennedy appealed—angril y—to Hill: "I desire ... to treat Minot courteously and show all the respect that is due him, but when he undertakes to write to, and of, his superiors as he has done ... I think it but proper that your attention should be called to it, for it is not the first time he has done it, and that he should be informed by you just what subjects he is at liberty to write about or discuss with me."[37] Kennedy may have been particularly touchy because he and Hill had recently been selling St. Paul & Duluth stock. They had kept Minot in the dark, and he had played into their hands by recommending its purchase to various Bostonians. As a further criticism of Minot, Kennedy pounced on the recent success by the Rock Island line in buying the Des Moines & Fort Dodge Railroad, which he and Hill themselves had wanted. Minot had failed in conducting the negotiations, as Kennedy chose to remind Hill.[38] By late 1886—early 1887, Minot's future was becoming clouded. He had considered resigning the previous summer, doubting that he was accomplishing much for himself, for the Manitoba, or for the Boston investors. Kennedy, who had a history of demolishing younger rivals, insisted confidentially to Hill in January 1887 that Minot must go—and at once. Hill, who respected and needed Minot's administrative skills and appreciated the links he provided to Boston capital, was not so sure: could they wait until June? Kennedy disagreed and demanded immediate action.[39] The real question of course was the reaction of the Bostonians to Minot's departure. Would they back him strongly, moderately, or not at all? For Hill, this was a vital issue; for James, who was tilting against Minot, it was significant but not decisive; and for Kennedy, who wanted Minot out no matter what, it had become entirely irrelevant. Kennedy played his trump card that summer: a threat to resign. "I supposed Minot's case had been settled in view of his treatment of me. I will leave the Company if Minot is re-elected to the board." This threat, or promise, was successful. Minot resigned that summer as vice president and as a director. But Hill immediately found a place for him as president of the Eastern Railway of Minnesota, a Manitoba subsidiary. And Hill showed how important Minot was for him in 1889, when Hill reconstituted the Manitoba board-from which Kennedy, James and Thorne had resigned—with both Minot and his brother, William, Jr., as members. (Minot died in a railroad accident the following year. )[40] The Mason City & Fort Dodge Railroad, a critical battle in the Minot-Kennedy altercation, continued to be troublesome for those involved in its finances. Barely a hundred miles long, it had some appeal to Hill, first as a coal carrier between the Iowa coal fields and the Manitoba line, and then, by the mid-1880s, simply as an unconnected feeder line to the Manitoba. And Hill brought in Kennedy and a very few others; this was to be a closely-held enterprise, not the open and more public venture that Minot had envisaged. The purchase agreement in early 1886 called for Hill, Kennedy and Henry W. Cannon (a friend of Hill) to subscribe to a bond issue needed to expand and improve the line. It was hoped that Kennedy's name might help sales abroad. The line essentially became a joint venture between Kennedy and Hill, with each owning about forty percent of the stock, while the remainder was split between five associates.[41] But the line quickly proved disappointing. Its cost was high, the Iowa coal fields it was supposed to tap were themselves problematic, and its location on the extreme southern edge of the Manitoba's territory undercut its role as a possible feeder line. Many years later, Kennedy was to write, "we have never received a return of a single dollar, either in interest on the bonds or dividends on the stock. . . ." But even at the time, Kennedy recognized these problems: by November 1886, he was urging Hill to find a buyer.[42] Fully fifteen years passed before this happened, in part because Hill remained unwilling or unable to grapple with the issue. In April 1887, the Illinois Central expanded in Iowa. Kennedy hoped that it might be interested in the Mason City, and volunteered to open negotiations. He found yet another prospect in the Chicago, Milwaukee & St. Paul, but Hill replied with a contrary suggestion that they expand the Mason City by building to Omaha. Nothing came of this, nor of Kennedy's more realistic suggestions; as trial balloons, they all floated away. Ten years passed before one came to earth. In July 1898, Kennedy discovered that A. B. Stickney, the leader of the expanding Chicago Great Western, was considering building a line between Mason City and Omaha. Had an opportunity arrived to dispose of the Mason City, whose purchase would cost Stickney less than building a new line? The Chicago, Milwaukee & St. Paul was another potential buyer. Hill, at first mildly interested in selling, then said no. Kennedy, always eager to liquidate unprofitable investments, was not dissuaded for long. "James, Thorne, and myself," he wrote Hill, "feel it is necessary that something be done to protect our interests in the Mason City road which has been so disappointing from the very first, and if we do not make some arrangements now that we have an opportunity, we may practically lose our entire investment." But nothing substantial happened for a full year; Kennedy was extremely disappointed by Hill's rejection of his suggestions.[43] Kennedy nevertheless kept trying. In April 1899, he informed Hill that rumor had it that the Chicago, Milwaukee & St. Paul was seriously considering building to Duluth. Would the Milwaukee consider buying the Mason City's existing line at a price comparable to that of building its own new line? Kennedy grumbled, "I may say for myself and also for James and Thorne, that we are most desirous to get out of the investment at any sacrifice. . . ." Again the result was nil, until 1901, when Hill—at last!—sold the Mason City & Fort Dodge and the related Webster County Coal Company to the Chicago Great Western for $1.5 million.[44] V V V The infusion of reliable, non-speculative capital which the Bostonians brought to the Manitoba stabilized its financial situation-and shielded it against speculators—thus freeing it for the great drive into Montana that followed in the late 1880s. But there was a price. The entrance of newcomers brought difficulties to what previously had been an exceptionally cohesive cadre of leaders, men who had shared years of work, worry and mutual support under very trying circumstances. Kennedy, in what was hardly his finest hour, responded by forcing Hill to choose between Minot and himself. Predictably, Hill chose Kennedy, thus restoring the relationship that Minot had threatened. 141-156 --[NOTES]-- 1. J. J. Hill to J. S. Kennedy, 15 September 1882; J. S. Kennedy to J. J. Hill, 30 October 1882, James J. Hill Papers, James Jerome Hill Reference Library, St. Paul, Minnesota. 2. J. S. Kennedy to J. J. Hill, 15, 17 November, 29 December 1883, 9 January 1884, Hill Papers. 3. J. S. Kennedy to J. J. Hill, 1, 9, 24 November 1882, Hill Papers. 4. J. J. Hill to J. S. Kennedy, 10 January 1883; J. S. Kennedy to J. J. Hill, Personal, 16 January 1883, Hill Papers. 5. J. S. Kennedy to J. J. Hill, 5 February 1883, Hill Papers. 6. J. J. Hill to J. S. Kennedy, 4 May, 14 August 1883, Hill Papers. 7. J. S. Kennedy to J. J. Hill, St. Moritz, Switzerland, 23 August 1883; J. W. Sterling to J. J. Hill, 26 July 1883, Hill Papers. 8. J. S. Kennedy to J. J. Hill, Private, 10 October 1883, Hill Papers. 9. J. S. Kennedy to J. J. Hill, 10 November 1883, Hill Papers. 10. J. S. Kennedy to J. J. Hill, 12 November 1883, Hill Papers. 11. J. S. Kennedy to J. J. Hill, I March 1884, Hill Papers; "Duncan McIntyre, Dictionary of Canadian Biography, 12: 635-37. 12. J. S. Kennedy to J. J. Hill, 12 May 1884, J. S. Kennedy to J. J. Hill, Private, 29 May 1884, Hill Papers. 13. J. S. Kennedy to J. J. Hill, I I October 1884, Hill Papers. 14. J. J. Hill to J. S. Kennedy, 21 April 1885, Hill Papers. 15. J. J. Hill to J. S. Kennedy, 29 April, I May 1885; J. J. Hill to H. D. Minot, 8, 12 June 1885; J. J. Hill to J. S. Kennedy, Personal, 8 June 1885; H. D. Minot to J. J. Hill, 22 June 1885, Hill Papers. 16. J. S. Kennedy to J. J. Hill, Ristigouche, Canada, I July 1885; J. J. Hill to J. S. Kennedy, 20 June 1885, Hill Papers. 17. J. J. Hill to J. S. Kennedy, 8 June, 13 July 1885; J. S. Kennedy to J. J. Hill, 3 July 1885, Hill Papers. 18. J. S. Kennedy to J. J. Hill, Rye Beach, N.H., 18 July 1885, Hill Papers. 19. J. S. Kennedy to J. J. Hill, Boston, 21, 22 July 1885, Hill Papers. 20. J. S. Kennedy to J. J. Hill, Boston, Telegram, 22 July 1885; J. S. Kennedy to J. J. Hill, Rye Beach, N.H. 23 July 1885, Hill Papers. 21. J. S. Kennedy to J. J. Hill, Rye Beach, N.H., 23 July 1885, Hill Papers. 22. J. S. Kennedy to J. J. Hill, Rye Beach, N.H., 1 August 1885, J. S. Kennedy to J. J. Hill, Private, 25 August 1885; J. S. Kennedy to J. J. Hill, 26 August 1885, Hill Papers. 23. J. S. Kennedy to J. J. Hill, 18 September 1885, Hill Papers. 24. J. S. Kennedy to J. J. Hill, Confidential, 12 October 1885; J. S. Kennedy to J. J. Hill, 14, 20 October 1885, Hill Papers. 25. J. S. Kennedy to 1. J. Hill, Confidential, I February 1886, Hill Papers. 26. J. S. Kennedy to J. J. Hill, 5, 9, October 1886, Hill Papers. 27. J. J. Hill to J. S. Kennedy, Telegram, 11 October 1886; J. J. Hill to J. S. Kennedy, 11 October 1886, Hill Papers. 28. J. S. Kennedy to J. J. Hill, 15 October 1886; J. S. Kennedy to J. J. Hill, Private, 16 October 1886, Hill Papers. 29. J. S. Kennedy to J. J. Hill, 3 September 1885, Hill Papers. 30. J. S. Kennedy to J. J. Hill, Private, 25 August 1885, Hill Papers. 31. J. J. Hill to J. S. Kennedy, 23 September 1885; H. D. Minot to J. J. Hill, 5 November, 5 December 1885, Hill Papers. 32. H. D. Minot to J. S. Kennedy, 22 January 1886, Hill Papers. 33. H. D. Minot to J. Kennedy Tod, 23 January 1886; H. D. Minot to J. S. Kennedy, 12, 17 February 1886; J. S. Kennedy to J. J. Hill, Private, 16 February 1886; H. D. Minot to J. S. Kennedy, Personal, 19 February 1886; J. S. Kennedy to J. J. Hill, 20 February 1886, Hill Papers. 34. H. D. Minot to J. S. Kennedy, Telegram, 23 February 1886; S. Thorne to J. J. Hill, 24 February 1886, Hill Papers. 35. J. S. Kennedy to J. J. Hill, 25 February 1886, Hill Papers. 36. J. S. Kennedy to J. J. Hill, 21 May 1886, Hill Papers. 37. J. S. Kennedy to J. J. Hill, Private, 4 October 1886; J. S. Kennedy to J. J. Hill, 16 April 1886, Hill Papers. 38. J. S. Kennedy to J. J. Hill, 12 November 1886, Hill Papers. 39. J. S. Kennedy to J. J. Hill, Confidential, 20 January 1887; J. S. Kennedy to J. J. Hill, 11 February 1887, Hill Papers. 40. D. W. James to J. J. Hill, 17 July 1887; J. J. Hill to J. S. Kennedy, 22, 26 July 1887; J. S. Kennedy to J. J. Hill, 22 July 1887, H. D. Minot to J. J. Hill, 12 August 1887, Hill Papers; New York Times, 15 November 1890, 1: 5; Bos ton Transcript, 15 November 1890, 9: 4. 41. Richard S. Prosser, Rails to the North Star (Minneapolis: Dillon Press, 1966), 140; H. Roger Grant, The Corn Belt Route: A History of the Chicago Great Western Railroad Company (De Kalb: Northern Illinois University Press, 1984), 56, 60; Memorandum of agreement in regard to purchase of securities of the Mason City & Fort Dodge Railroad Company, 5 January 1886; J. S. Kennedy to J. J. Hill, 4, 5, 17 February 1886, Hill Papers. 42. J. S. Kennedy to J. J. Hill, 22 November 1886, 13 April 1899, Hill Papers. 43. Grant, Corn Belt Route, 58; J. S. Kennedy to J. J. Hill, 17 January 1890, 8 January 1891, 27 July 1898, 13 April 1899, 31 December 1900, Hill Papers. 44. J. S. Kennedy to J. J. Hill, 13 April 1899, Hill Papers; Grant, Corn Belt Route, 62; E. T. Nichols to W. C. Toomey, 16 March 1901; J. J. Hill to directors of the Mason City & Fort Dodge, 16 March 1901; W. C. Toomey to E. T. Nichols, 16 March 1901, Hill Papers. --[cont]-- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, All My Relations, Omnia Bona Bonis, Adieu, Adios, Aloha. Amen. Roads End DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance—not soapboxing! 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