United States Steel: A Corporation with a Soul

by Arundel Cotter

And the Supreme Court, in its opinion, said on this subject:

“There is, however, an important circumstance in connection with that of the Tennessee Company which is worthy to be noted. It was submitted to President Roosevelt and he gave it his approval. His approval, of course, did not make it legal, but it gives assurance of its legality, and we know from his earnestness in the public welfare he would have approved of nothing that had even a tendency to its detriment. And he testified he was not deceived and that he believed that ‘the Tennessee Coal and Iron people had a property which was almost worthless in their hands, nearly worthless to them, nearly worthless to the communities in which it was situated, and entirely worthless to any financial institution that had the securities the minute that any panic came, and that the only way to give value to it was to put it in the hands of people whose possession of it would be a guarantee that there was value to it.’ Such being the emergency it seems like an extreme accusation to say that the Corporation which relieved it, and, perhaps, rescued the company and the communities dependent upon it from disaster, was urged by unworthy motives.”

Mine Stables

The Tennessee Coal, Iron & Railroad Co. was a reorganization of an earlier concern of the same name located in Alabama. The reorganization brought into control of the company new and powerful interests, and these spent a good deal of money in improving the plants, so that, about the beginning of 1907, it was pointed to as a probable important competitor of the Corporation. It was also considered as the nucleus for a possible merger of the steel-making concerns of the South such as would be able to cut severely into the Corporation’s business. Not long before the panic broke the company secured an order from the railroads controlled by the late E. H. Harriman for 150,000 tons of steel rails and it was supposed by some that the loss of this order had caused considerable worriment to the heads of the Steel Corporation—which doubtless it did. Then came the panic, and when its dust cleared away the Tennessee company was a subsidiary of the “Steel Trust.” The sequence has served to lend plausibility to the charges made against the Corporation in connection with the purchase. But a full recital of the events bearing on the deal tends to throw a different light on the matter, and an attempt to set down the more important of these details will be made here.

Modern Coal Mining by Machinery

Emphasis has been laid on the Harriman order, particularly because the Tennessee company had contracted to supply the lines controlled by the great railroad magnate with the new open-hearth steel rail, then coming into popular favor with the railroad experts and which to-day are used almost exclusively by the larger transportation systems. It has been alleged that the Corporation was very desirous of adding to its properties the plants making this new kind of steel rail and getting immediate control of their manufacture. The facts are that the southern company did not make a pure open-hearth rail, its steel being made by a combination of the Bessemer and open-hearth processes, and the Corporation at the time was engaged in building its new plant at Gary, a plant which was to include a large rail mill to make open-hearth rails exclusively. When the Corporation took charge of the Tennessee properties it was found that the company’s rail mill was being operated at a loss of nearly $4 a ton. Further, a very large percentage of the rails which had been supplied the Harriman roads before the transfer of the properties proved defective and the new management had to bear the loss of replacing these.

It is unnecessary and futile, in this brief chapter, to go fully into the story of the panic of 1907, or of the events that preceded it. Suffice it to say that the panic followed a period of enormous expansion and of extension of credit eventually carried to a point where business overreached itself and, in a country lacking an elastic currency system, such as the United States then was, financial stringency was bound to follow. The first rumblings of the coming storm went unheeded, and it was not until late in the year that there was any realization of the desperate state of affairs. Then one big trust company closed its doors and was followed by others. Banks stopped specie payments, stocks tumbled headlong on the exchanges of the country, industry halted, throwing thousands out of employment, and the financial hurricane swept over the country, leaving ruin in its wake and making its effects felt over the whole world.

While the panic came like a thunderclap to the average citizen, without warning, the big bankers had seen the danger threatening and had made an effort to prevent any occurrence which might precipitate matters. In the latter part of October rumors gained circulation that the Knickerbocker Trust Co., one of the leading financial institutions of New York City, was in trouble and the late J. Pierpont Morgan, who had assumed the leadership of the country’s bankers in the crisis, and others had an examination made of the company’s affairs with a view to rendering it assistance. Apparently the result of this investigation was unsatisfactory. Anyway, the Knickerbocker Trust Co. was abandoned to its fate and, at fifteen minutes to one, on October 22nd, closed its doors after a sensational run, many stock exchange firms being overwhelmed in the crash.