After the reorganization of the Northern Pacific Railroad, which fell under the domination of Morgan, the affiliations of the Hill and Morgan interests became very close, and in a short time Hill had as secure a grip on the Northern Pacific as he had always had on the Great Northern. This powerful combination looked like a menace to the Harriman-Kuhn-Loeb interests which controlled the territory to the south and radiated throughout the State of Oregon. When, therefore, the Northern Pacific began a little later to build into territory in Oregon and Washington which the Union Pacific regarded as a part of its own preserves, much bad feeling was engendered between the two interests. Matters were brought to a climax in the spring of 1901 when the Harriman people suddenly made the discovery that the Hill-Morgan combination had been quietly buying control of the valuable Chicago, Burlington and Quincy Railroad, which operated a vast system west and northwest of Chicago, penetrated as far into the Union Pacific main-line territory as Denver, and connected at the north with the eastern terminals of both the Great Northern and Northern Pacific systems. This move meant but one thing to Harriman: the Hill-Morgan interests were trying to surround the Union Pacific and make it powerless, just as the Southern Pacific had attempted to do many years before.
Harriman now played one of his bold strokes. He immediately began to purchase Northern Pacific stock in the open market in order to secure control of that property. It was well known that while the Hill-Morgan alliance dominated the Northern Pacific, it did not actually own a majority of the stock, and to secure this majority was Harriman's purpose. This move would effectually check the invasion of the Union Pacific territory by giving the Harriman interests a voice in the control of the Chicago, Burlington and Quincy.
The price of Northern Pacific common stock soared day after day until on May 9, 1901, it sold at $1000 a share, and a momentary panic ensued. At the time Morgan was on the ocean and could not be reached. His partners were apparently not equal to the emergency. But Harriman was. When the panic reached its height, both interests had purchased far more than a majority of Northern Pacific stock—in contracts for future delivery. It was seen that to insist on the delivery of shares which did not exist would not only bankrupt every "short" speculator, large and small, but would undoubtedly bring all Wall Street tumbling down like a house of cards. So, in the midst of the excitement, the two interests reached a compromise.
The outcome was the formation of the Northern Securities Company with a capital of $400,000,000, nearly all of which was issued to acquire the capital stocks of the Northern Pacific and Great Northern railroads. All the properties, including the Burlington, thus came under the joint control of the Harriman and Hill groups. The division of territory on both the east and the west was worked out amicably: the Northern Pacific abandoned some of its plans for extensions in Oregon, and the Burlington system remained as it was, with the understanding that no extensions should be built to the Pacific coast. Later the Burlington acquired control of a cross-country system, the Colorado Southern, extending south to the Gulf, but to this day has made no attempt to build beyond the lines it owned to Wyoming in 1901.
As is well known, the Northern Securities Company was subsequently declared to exist in violation of the Sherman Anti-Trust Act, and on a decision of the United States Supreme Court in 1904 it was practically dissolved and all its securities were returned to the original holders. This dissolution left the Hill-Morgan interests in undisputed control of the Burlington properties, but harmonious relations had in the meantime been established among the contestants, assuring an equitable division of territory and traffic. The final outcome was that the Union Pacific Railroad Company, which had purchased with its large surplus and by the use of its high credit many million dollars' worth of the capital stocks of the Great Northern and Northern Pacific railroads, received these stocks back after several years of great prosperity and after the appreciation in the market values of the stocks had exceeded $60,000,000. There was no further necessity for holding them and most of the stocks were sold at the high prices of 1905 and 1906, with actual net profit for the Union Pacific Railroad in excess of $50,000,000. No such gigantic financial transaction as this had ever before been carried through by an American railroad corporation.
With an overflowing treasury in the Union Pacific, Harriman immediately turned his face toward the East. It had for years been one of his dreams to control a continuous line of railroad from the Atlantic to the Pacific. As early as 1902 he had all but completed negotiations for the acquisition of the New York Central lines in the interest of the Union Pacific; but this plan had met with opposition from the Vanderbilts and Morgan and had been dropped. Harriman now took advantage of an opportunity which presented itself to acquire for the Union Pacific what was practically a dominating interest in the Baltimore and Ohio, a large block of whose stock was disposed of by the Pennsylvania Railroad. Harriman had already largely added to the Union Pacific's holdings in the Illinois Central. Jointly with the Lake Shore of the Vanderbilt system, the Baltimore and Ohio had, as already described, acquired a dominating interest in the Reading Company, including all the latter company's interests and affiliations as well as its entry into the New York district through control of the Central Railroad of New Jersey. Harriman, therefore, by a single stroke, now found himself in practical possession of a coast-to-coast system of railroads extending all the way from New York to San Francisco, Portland, and Los Angeles, and passing through all the important cities of the country. The Illinois Central system, operating nearly five thousand miles of road southward from Chicago to New Orleans, passing through St. Louis, with an arm reaching out to Sioux City on the west and a network of branches covering the Middle States, had thus become the great link welding together the eastern and western Harriman systems.
Later the Union Pacific acquired large interests in other properties and purchased substantial amounts of stock in the Atchison, Topeka and Santa Fe, the New York Central, the St. Paul, and the Chicago and North Western railroads. It also acquired a dominating interest in the Chicago and Alton property, operating from Chicago to St. Louis, with Western branches. In the panic period of 1907, Harriman personally purchased from Charles W. Morse, who had acquired the property from Morgan a short time before, the entire capital stock of the Central of Georgia Railway, which he later turned over to the Illinois Central. The Central of Georgia lines connect at several points with the Illinois Central and have given the system various outlets on the South Atlantic seaboard.
Harriman died in September of 1909, and with his death the wizard touch was clearly gone. What would have been the later history of the Union Pacific had he lived can be only conjectured. The new management, with Judge Robert S. Lovett at its head, continued the broad and efficient operation which had characterized Mr. Harriman's regime, but it soon abandoned the policy of further growth and expansion. This alteration in policy, however, was perhaps more the result of changing conditions than of relinquishment of Harriman's aims. Many new laws for the regulation of the railways had been passed, and in 1906 the powers of the Interstate Commerce Commission were greatly augmented. A period of reform had now begun, and after 1909 a wave of "progressivism" overspread the country. New interpretations were given to the Sherman Act, and suits were soon under way against all the railroads and industrial combinations which appeared to be infringing that statute. The great Standard Oil and Tobacco trusts were dissolved in this period, and a suit which was brought to divorce the Union Pacific and the Southern Pacific Company was finally decided against the Union Pacific, with the result that the two big properties were separated. The Union Pacific turned a large amount of its Southern Pacific stock holdings over to the Pennsylvania Railroad, in exchange for which it received from the Pennsylvania the remainder of the Baltimore and Ohio stock which the Pennsylvania interests had retained after the sale to the Union Pacific in 1906. Immediately after this, the Union Pacific management, seeing no particular advantage in retaining an interest in the Baltimore and Ohio, gave the shares to its own stockholders in a special dividend.
Thus, since Harriman's death, the Union Pacific Railroad has once more returned to very much its original condition prior to its acquisition of the Southern Pacific. It still controls the Illinois Central and the Chicago and Alton and has investment interests in a large number of other railroads. It is still the premier system of the West and promises to remain so indefinitely; but the bold Harriman touch is gone and will never return.