("Quid coniuratio est?")
On January 2, 1889, a circular marked "Private and Confidential," was issued by the three banking houses of Drexel, Morgan & Company, Brown Brothers & Company, and Kidder, Peabody & Company. The most painstaking care was exercised that this document should not find its way into the press, or otherwise become public. Indeed, extraordinary measures were taken to surround its contents with every precaution of secrecy.
Why this fear? Because the circular was an invitation, tacitly understood as a command, to the great railroad magnates to assemble at J.P. Morgan's house, No. 219 Madison avenue, and there form, in the phrase of the day, an iron-clad combination. The plan was to make a strict compact which would efface competition among certain railroads, and unite those interests in an agreement by which the people of the United States could be bled even more effectively than before.
That circular was a historic document, well worth more than passing notice; and he who was familiar with the forces then at work rightly considered it of far greater importance than a series of Presidents' messages, ordainments of Congress or Courts' decrees.
At a time when the whole gravamen of law and juridical precedent was being used to insist upon industrial forces remaining stationary and stagnant, this circular came as a proclamation of defiance. Common and statute law sternly declared that the thing called competition in trade must be kept alive, and that if it could not sustain itself by its own merits, the law should demand its maintenance. The causes producing and justifying competition were passing away, but none of the law-making bodies recognized the newer conditions, nor made any provisions for them. But the magnates realized that the old indiscriminate system of competition was rapidly becoming archaic, and that the time was ripe for a more systematic organization of industry. And so, while Congress and the legislatures were busily enacting law after law, supposedly edicts of "the sovereign people of the United States," a few magnates issued a brief circular which intrinsically was of far, far more binding weight than entire volumes of statutes impotent.
A momentous gathering it certainly was that assembled in Morgan's mansion on January 8, 1889. Who were they we note there? Apparently private citizens; in reality monarchs of the land: Jay Gould with his son George; Stickney, of the Northwest territory; Roberts, of the Pennsylvania Railroad; sleek Depew, echoing the Vanderbilts; Sloan, of the Delaware, Lackawanna & Western Railroad, and a half dozen more magnates or their accredited mouthpieces. The honorable legislature could gravely discuss the advisability of this or that legislation; the noisy "Congress of the United States" could solemnly meet and after wearing out months in rodomontade, profess to make laws; the high and mighty Courts could blink austerely and pompously hand down their decisions. But in that room in Morgan's house sat many of the actual rulers of the United States; the men who had the power in the final say of ordering what should be done.
Morgan was chairman of the meeting, and with wonted brusque directness went straight to the point. Thanks to a stenographic report of the proceedings which fortunately we were able to get hold of, the work of that meeting was clear. The name of the organization was to be the "Interstate Commerce Railway Commission"; its essential purpose the cessation of competition among its members. But how was any magnate to be prevented from competing with another, or stopped from encroaching upon another's domain? What penalties should there be, and how could they be enforced? Certainly no law could be invoked to compel the carrying out of such an agreement, for the law explicitly prohibited combinations, and any legislation would not only be outlawed, but would reveal the extent of the whole criminal compact.
There was, however, a far greater power than that of law, namely, the power of massed money. If any magnate present were inclined to balk at the prepared program he was brought to an instant realization of the punishment when Morgan announced:
I am authorized to say, I think, on behalf of the banking houses represented here that if an organization can be formed practically upon the basis submitted by the committee, and with an executive committee able to enforce its provisions, upon which the bankers shall be represented, they are prepared to say that they will not negotiate, and will do everything in their power to prevent the negotiation of any securities for the construction of parallel lines, or the extension of lines not approved by that executive committee. I wish that distinctly understood.
The threat, or promise, as it could be differently interpreted, was assuredly understood. Vast as was the wealth of the magnates present or represented, neither any one or a combination of them, dared (had they been so disposed) to defy such an ultimatum. To do so meant inviting the vindictive, crushing wrath of a clique of national and international bankers whose money and power could be used with the most destructive results.
[Excerpts from History of the Great American Fortunes by Gustavus Myers. (1936)]
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