Needing all the money I could get to handle this enormous enterprise, I suggested to Ralston that we hold an auction sale of our joint possessions. We had laid out New Montgomery street in good style. We had completed our plans for the Grand Hotel, and the inquiry for our holding was brisk. Besides, San Francisco was in the grip of a tremendous real estate craze, the biggest in its history. The railroad would be with us in a few months. Then everybody would be rich.
We had incorporated under the name of the Montgomery Street Land Company. The moment an auction sale of its properties was announced the whole town was alert. The offices of the company were crowded with investors eager to purchase at private sale, but were told that we were going to have an old-fashioned auction and nothing else.
It was less than a week before this historic event took place when the minimum prices were arranged. Ralston, Maurice Dore and myself met in a back office of the Bank of California one night and discussed this all-important question. Finally we agreed that each should write on a slip of paper his opinion of an average price per front foot. I based my figures on a profit of two and a half millions, which seemed to me a fair return. But when we came to compare the slips, Ralston’s figures were just double mine, while Dore’s were intermediate—nearer mine.
Ralston’s nature was sanguine. He never saw anything but success. He had supreme confidence in his judgment, not without foundation, and possessed a knack of bringing everyone to his own views. If he was right in this instance, of course five million dollars were more desirable than two and a half. I yielded to his arguments, but not without grave misgivings.
That auction sale was memorable for many a year. By consent, it was held on the floor of the Merchants’ Exchange, and there never was such a throng of moneyed men gathered together in San Francisco. Everyone seemed keyed up to buy a lot or have a free fight. Maurice Dore and his spieler, Cobb, were past masters in all the auctioneer’s arts to promote enthusiasm. Among his “cappers,” to bid the prices up, were Mills, Hayward, Sharon, Tom Selby and William Alvord. Pandemonium broke loose when the first offering was announced. Men fought and raved, like brokers filling “shorts” on a stock exchange. The same scenes were re-enacted time after time, but it became only too evident to insiders that our “cappers” were picking up everything ostensibly sold. The fact was that the public would have gone above my estimate, might have touched Dore’s, but stopped short of Ralston’s. After keeping up the hippodrome long enough to save our faces, the great sale was adjourned without a day.
But that wasn’t the worst of it. For months we had been living in a fool’s paradise over the boom that would follow the driving of the last spike. That day came, but what a disappointment! It may have seemed all right to the proletariat, but for the business people it spelled ruin. It brought in an avalanche of goods from Chicago and St. Louis, at prices which our local men could not meet. Many firms failed, some consolidated, some retired from business. Rents dropped like lead, real estate values shriveled up to nothing. It was ten years before those values recovered to the level of 1869.
Meanwhile my railroad in Sonoma was being rushed ahead. I do not think it would have encountered opposition had I stuck to my original plans of a coast line through Marin, Sonoma, Mendocino and Humboldt. But my vision began to broaden. I knew of Beckwith Pass and the almost increditable fatuity that overlooked it in constructing the Central Pacific Railroad. I employed General W. S. Rosecrans and a corps of engineers and began a railroad survey westward from the pass, to connect with the Humboldt system. I guess this gave the Big Four the largest scare they received in many years.
Instantly I found my enterprise blockaded with all kinds of petty obstructions. I had thirty miles of road graded and the ties strung. Peter Donahue had partly agreed to sell me the rails. Suddenly he withheld them from the market, and there were no more on the Pacific Coast. I had twenty miles of rail on the water from England. The vessel was detained at Valparaiso and at last sunk peacefully in the harbor. My agent, A. A. Cohen, always claimed the ship was scuttled.
I ordered another large shipment from England. Then the railroad people tried another tack. They appealed to Ralston to subdue me. Ralston had been the friend of the Big Four in the trying construction days. They had promised him all sorts of things in return, among others a concession to build all their cars, for which he made great preparations. They plainly told him that if he did not constrain me, his estimable partner, to abandon my railroad projects, the concession would be canceled and he could expect nothing but war.
Ralston laid the matter before me as a friend. He admitted that he had no right to influence my action, but said he was facing an enormous loss; that I could sell out at a large profit, and frankly asked me to strain a point. The matter once placed in that light, I yielded, with great reluctance. After some negotiations, I sold my railroad rights to Peter Donahue. These rights, only partially developed, constituted the bulk of his great fortune.