When the roads refused to conform to the law of 1871 it became the duty of the attorney-general to bring suit for forfeiture of charters, the prescribed penalty for disobedience. John D. Blake and others sued the Winona and St. Peter Railroad Company in the district court of Olmstead County, alleging that said corporation had exacted for a certain service one dollar and ninety-nine cents, whereas the statute had determined the sum of fifty-seven cents to be the reasonable maximum charge. This court held, with the defending company, that the legislature had no power under the constitution to fix and determine railroad rates. The state intervened and the case was appealed to the Supreme Court of Minnesota, which reversed the decision of the court below, thus sustaining the validity of the act of 1871. The case was then carried to the Supreme Court of the United States and was numbered among the well-known “granger cases,” held under consideration for four years and disposed of according to the principles laid down by that court in the case of Munn vs. Illinois. In the “Blake case,” decided in October, 1876, it was held that the legislature of Minnesota was within its constitutional powers in regulating and fixing railroad rates and charges and prescribing penalties for violations of her laws in that behalf.
In this interval the prostrated and nearly bankrupt corporations were in no condition to conduct themselves offensively. In 1874 a state board of three railroad commissioners was created. Mr. Edgerton was retained as a member, with Ex-Governor Marshall as one of his colleagues. Under their powers they made and published a complete schedule of reasonable maximum fares and rates according to distances, and reported at the close of the year a general and substantial compliance on the part of the companies. Their representatives showed such good nature and made such fair showing of their meagre profits that the commissioners found good reason to allow them all they could reasonably claim. This led to the suggestion that the commissioners had been deluded or corrupted by the smart and able railroad men. The next legislature (1875) accordingly replaced them with a single commissioner to be chosen by the electors, with such meagre powers as to justify a guess that some ingenious railroad attorney drafted the bill. Ex-Governor Marshall held the office for six years, discharging the duties with admirable discretion.
As an example of the liberality, not to say criminal recklessness, with which railroad operators in the decade following the Civil War made use of other people’s money, it will be well to follow the fortunes of one of the great land grant companies. The Minnesota and Pacific Railroad Company was one of the four corporations created by special act in 1857 to receive the colossal land grant made in that year to aid railroad building in Minnesota. This company was obligated to build from Stillwater via St. Anthony to Breckenridge, and from St. Anthony to St. Vincent, a hamlet on the Red River near the crossing of the Canadian boundary. Along with the rest it defaulted, and in the summer of 1860 its property and franchises were sold to the state upon foreclosure. An effort to recover these by conforming to conditions imposed by the legislature as already stated, proved abortive. In 1862, however, the franchises, rights of way, the land grant, and other property thus forfeited were bestowed upon a new corporation styled the St. Paul and Pacific Railroad Company, which built ten miles of road that year and opened business between St. Paul and St. Anthony. The year after, seventeen and one half miles of track were added, and trains run to Anoka. This rate of progress did not satisfy the corporation nor the expectant people. Circumstances not now well known opened the way for borrowing money in Holland. To give the great enterprise a less tremendous aspect, it was resolved to separate it, so that the portions of road lying in districts already settling up might be immediately “financed,” while those running to distant regions known only to hunters and Indian traders might be left to the future. Accordingly in 1864, under legislative authority, a new and separate corporation was formed by the interests controlling the existing company, under the name and style of “The First Division of the St. Paul and Pacific Railroad Company.” To this new company was transferred the “main line” from St. Paul to Breckenridge and the “branch” from St. Anthony to St. Cloud. The early building of these lines within the bounds of civilization would not, it was believed, appear a romantic undertaking to investors. The scheme had its intended effect. Money poured in galore. When the “branch” was finished to St. Cloud in 1866 (76 miles), $7,000,000 of bonds had been sold. That amount of cash would have built 350 miles of road, as roads were then built in level regions. Five years later (1871) the “main line” reached the Red River at Breckenridge (217 miles), and the bond issue had been swelled to $13,500,000. The two lines might have been built for much less than half as many dollars. Upon the completion of the main line and branch it was believed to be feasible and judicious to go on with the construction of the remaining mileage retained by the original St. Paul and Pacific Company. This consisted of the so-called “extensions”: the “St. Vincent Extension,” from St. Cloud to the Canada line on the Red River, and the trifling “Brainerd Extension,” from St. Cloud to Crow Wing. To build these a loan of $15,000,000 was obtained in Holland. The bonds were placed at seventy-five cents on the dollar, and twenty-one per cent. of the proceeds were retained to meet three years’ interest. These discounts left a little short of $9,000,000 in available cash. This amount would have built and equipped both the extensions (about 470 miles) according to the building standards of the time. In November, 1872, the money was all gone and there had been built 140 miles of road, 100 miles having no connection with the existing portions of the system. Collections of rails, ties, and bridge material, not actually paid for, remained on hand, a useless asset. In his message to the legislature of 1873 Governor Austin characterized the finance of the companies by implication as injudicious and dishonest, and vaguely suggested that the just claims of the foreigners should be consulted. The lawmakers, however, were disposed to allow the foreign investors, who had placed their funds according to their own judgment, to use their own wits to recover their losses. It is difficult to see what relief the legislature could lawfully have rendered.
That body had no sooner adjourned than in May (1873) the companies defaulted on their interest. Two corporations, parent and child, owned 433 miles of railroad of light construction and equipment, on which rested $28,000,000 of bonded debt running at seven per cent., and the net earnings for the previous year had been $112,745.57. In August the United States District Court for Minnesota put the mother corporation into the hands of a receiver, but left the stockholders and bondholders of the “First Division” company to wrestle with the business under their legal and stipulated powers. The legislature had in separate acts authorized the bondholders of that company to vote for directors, who might be foreigners, any or all, and provided that meetings of directors might be held abroad. The fact that the Northern Pacific Railroad “interest” had held the major number of shares in both of the Minnesota companies does not modify the foregoing account, but points to the quarter in which to seek for the residence of responsibility, in part at least, for a series of operations hard to account for on presumptions of honesty and common sense. The reader may be curious to follow further, on a subsequent page, the story of the St. Paul and Pacific.
The panic of 1873 was a typical example. An era of great prosperity had induced a fever of speculation which had spread through all social strata. Not railroads only but ships, mills, factories, mines, fisheries, farms had been built or bought with small sums of ready cash and large sums in mortgage notes. A huge cloud of debt rested over the land. Transactions were so rapid and enormous that bankers loaned out their swelling deposits with a reckless eagerness. One fine morning some conservative institution refused a new discount or declined to renew a customer’s paper. That customer could not pay his creditors, and those could not pay theirs. By nightfall alarm had spread wherever the telegraph lines extended. The next day there were no bank deposits of cash, and credit transactions ceased. Securities offered on the market by hard pressed debtors began to drop, and presently all forms of property depreciated. In the general distrust which ensued, all kinds of industries and business languished, and months passed before even the more modest of credit operations were adventured. Years passed before the full tide of prosperity was again in flow. In a country still new, where capital was small and opportunities for credit operations great, the havoc wrought was extreme. Liquidation and recovery were correspondingly tardy. In Minnesota the panic was accompanied by two disasters which added much to the general discouragement.
The morning of January 7, 1873, opened clear and bright over the south half of Minnesota, with no signs of foul weather in the sky. The country people had left their homes on their usual errands to mill, to post-office, to town, to distant wood lots or fields, without thought of danger. Soon after midday those who were still on the road were overtaken by one of those terrible winter storms known to old voyageurs as “blizzards.” The most learned authority in America on English usage has recently made the statement that the word “blizzard” is not more than twenty-five years old. It was in common use in Minnesota in the fifties. In a true blizzard the air is so completely filled with a fine granular snow as to cause absolute darkness. It is, as on this occasion, frequently accompanied by a furious wind. The temperature may or may not be excessively low. The voyageur did not attempt to travel when a blizzard overtook him, but got behind and beneath such shelter as he could find or make, and waited for it to blow over. These inexperienced Minnesota settlers pressed on, wandered from the unfenced roads, and if they found shelter it was by good fortune. Many perished in the terrible gusts which swept the prairie. The weather did not clear till the third day. The first accounts estimated the number of lives lost at many hundreds, but when the state statistician collated the local reports sent in he was happy to find that not more than seventy persons had perished. A much greater number, of course, were frost-bitten and maimed. There were cases in which farmers had been either injured or destroyed while attempting to reach their houses from their barns and fields. There has been no blizzard of any notable severity in Minnesota since this of 1873.
In June of the same year a southwest wind brought over the western border, south of Big Stone Lake, swarms of the Rocky Mountain locust (Melanoplus spretus), which soon spread themselves over large parts of fourteen southwestern counties as well as a considerable area of northwestern Iowa. Because not learned enough in entomology to distinguish, the people supposed these locusts to be grasshoppers, and soon adopted the abbreviated form “hoppers.” The growing crops were presently devoured. Settlers who had made their first plantings were impoverished and had to accept the generous aid of neighbors. The area visited was small compared with that of the state and its settled portions, and it was not conceived that grasshoppers could survive a Minnesota winter. The legislature of 1874 made an appropriation of $5000 to relieve cases of complete destitution, and another of $25,000 to be advanced to the farmers for the purchase of seed.
In July of this year (1874), to the astonishment of all, innumerable multitudes of “hoppers” suddenly appeared as if rising out of the ground; and they did so rise. In the previous fall the female locusts had deposited in cylindrical wells about an inch deep and one fourth of an inch in diameter, hollowed out on high ground, clusters of eggs inclosed in protecting envelopes and covered with soil. The midsummer heat hatched these eggs, and the brood at once fell on the growing crops. In a few days not a spear was left over large areas, and the hoppers had grown wings. Taking wing as if by a common inspiration, they flew over into Blue Earth, Sibley, Nicollet, and Renville counties, where they repeated the devastation of the previous season. But the counties thus abandoned were again in many places infested by fresh swarms from the southwest. In all twenty-eight counties were visited in 1874. Upon an appeal from the governor a subscription was opened for the relief of stricken settlers. General Sibley, at his request, undertook the disbursement, and later accounted for $19,000. The legislature of the following winter set aside $45,000 for immediate relief and $75,000 for seed, the latter sum to be repaid along with taxes. The devastations of 1875 did not extend more widely and were somewhat less damaging, but they added not a little to the discouragement and gloom resulting from the panic.