What was the reason for the cancellation of the lease? It is generally thought that the directors of the Corporation were impelled to their decision by the report of Commissioner of Corporations Herbert Knox Smith, who conducted a searching investigation into the Corporation’s activities and severely criticized the lease, and by the fear that it would be made much of by the Federal Government in its suit for the dissolution of the “Steel Trust.” This suit, it is true, had not actually been filed when the lease was abandoned; but it was so imminent that the Corporation’s directors must have believed it was about to be instigated. And these considerations did have weight in bringing about the decision. But the more cogent reason was a purely business one—the lease had not proved as profitable as had been hoped. The iron content of the Hill ores had not measured up to expectations, the cost of concentrating the ore proved too high, and on the whole the deal had become rather a burden than otherwise to the lessee.
Up to the end of 1906 the United States Steel Corporation had spent more than $200,000,000 in the acquisition of new properties, the construction of new plants and the extension of old. Its productive capacity had been increased enormously. Its plants were now in excellent shape, its organization in perfect working order. Prices were high and it had, at the close of the year, nearly 8,500,000 tons of business on its books. Its early difficulties were past and it seemed about to enter into the heyday of its prosperity.
CHAPTER IV
THE TENNESSEE PURCHASE
On the events of the year 1907 the United States Steel Corporation must, to a certain extent, stand or fall at the bar of public judgment. This was the year of the panic and of the Tennessee Coal, Iron & Railroad purchase.
The panic, enemies of the Corporation have asserted, was precipitated by the big “trust” by the immoral use of its immense financial resources to enable it to “gobble up” the properties of the Tennessee company, a competitor said to have been making big inroads into the business of the larger concern and which it had therefore become necessary either to destroy or absorb.
The friends of the Corporation, on the other hand, are emphatic in asseverating that the competition offered by the Tennessee company was not such as to cause anxiety to the management of the Steel Corporation, that it was not a very valuable property, and that the Corporation purchased its stock only upon solicitation by the interests controlling the company and their assurance that a refusal to do so would result in the failure of an important security house, which would add greatly to the severity and danger of the panic. They claim further that the price paid was more than the actual value of the stock and that, far from using any advantage it may have had to squeeze the smaller concern, the “Steel Trust,” against the better judgment of its management and with the single purpose of alleviating the panic dangers, paid for the securities it took over something like 60 per cent. more than good business practice seemed to warrant.
If the claims of the first are correct and the Corporation did use its power to force a competitor to the wall, regardless of the fact that in so doing it was bringing misery and calamity to the ninety millions of people of the United States, this act alone must be more than sufficient to convict it on a more serious charge than “monopoly in restraint of trade”—of high treason and betrayal of the trust which big business, willy nilly, undertakes. But if the Corporation, through its directors, put the national welfare before all other considerations this, conversely, should prejudice public opinion, properly informed, in its favor. And this is why the year was by far the most important epoch in the Corporation’s history and its events are worthy of careful consideration.
After a careful search made by the writer through all the evidence submitted by the Government to this end in its suit against the big company, he failed to find one iota of evidence which connected the Corporation with the panic or upheld the charge that it conspired to force the Tennessee stockholders to sell. A man who had been a member of the syndicate that controlled the fortunes of the Tennessee company before it was absorbed and who, if the allegations referred to are correct, was one of those who suffered at the Corporation’s hands, in reply to the question: “Did the Steel Corporation use its power to create the panic of 1907 so as to gain possession of the Tennessee stock?” replied: “Absurd. The charge is baseless—except in politics. The sale of the Tennessee company was an incident arising in the course of the panic, not a cause. The Corporation was offered a chance to get what I consider a valuable property and seized it. But let me tell you,” he added, “the Corporation did not get the property cheap.”