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Brandeis and the New Haven-Boston & Maine Merger Battle Revisited*

Published online by Cambridge University Press:  24 July 2012

Richard M. Abrams
Richard M. Abrams
Affiliation:
Assistant Professor of History, University of California, Berkeley
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Abstract

Despite Louis Brandeis' well-publicized opposition to the New Haven-Boston & Maine railroad merger of 1907–1909, a large number of public-spirited men, including many progressive reform leaders whom Brandeis had worked with and admired, favored the combination. They saw the merger not as a conspiracy against the public interest, but a necessary response in the public interest to a commercial crisis in Massachusetts. This examination of their reasoning and action tempers Brandeis' widely accepted assessment of the controversy.

Type
Articles
Information
Business History Review , Volume 36 , Issue 4 , Winter 1962 , pp. 408 - 430
Copyright
Copyright © The President and Fellows of Harvard College 1962

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References

1 Brandeis to Norman Hapgood, 1911, cited by Hapgood in his Foreward to Brandeis, Louis D., Other People's Money and How the Bankers Use It (New York, 1914).Google Scholar

2 In 1903, Roosevelt sought Mellen's advice before he decided to challenge Mark Hanna to declare openly if he was going to oppose him for the presidency in 1904. Roosevelt to Henry Cabot Lodge, May 27, 1903, Morison, Elting E. (ed.), The Letters of Theodore Roosevelt (8 vols., Cambridge, 1951–1954), vol. II, pp. 19–20.Google Scholar

3 Roosevelt to W. H. Moody, Nov. 20, 1905, Roosevelt Memorial Association Collection (Widener Library, Harvard University).

4 Boston Herald, March 7, 1907.

5 Mellen had an appointment to see President Roosevelt on this matter on May 1, 1907. Mellen to [Presidential Secretary] William Loeb, Jr., April 19, 1907, and Loeb to Mellen, April 20, 1907, Charles Sanger Mellen Collection (New Hampshire Historical Society); Mellen's testimony before ICC, in New York Times, Nov. 11, 1915. Roosevelt later regretted his assent. Roosevelt to Lodge, May 28, 1908, Morison (ed.), Letters of Theodore Roosevelt, vol. VI, p. 1040.

6 Mellen to H. M. Whitney, May 22, 1907, cited in Staples, Henry L. and Mason, Alpheus T., The Fall of a Railroad Empire: Brandeis and the New Haven Merger Battle (Syracuse, 1947), pp. 172–73.Google Scholar

7 J. P. Morgan, Jr., informed Mellen on April 25, 1913, that the directors had voted his ouster. Mellen resigned his presidency of the B. & M. effective July 16, 1913, and submitted his resignation from the New Haven July 17, 1913, effective Sept. 1. Mellen to A. E. Clark, July 17, 1913; to E. J. Chamberlin, Aug. 26, 1913; to J. W. H. Crum, Oct. 14, 1913, Mellen Collection.

8 “Evidence taken before the Interstate Commerce Commission relative to the financial transactions of the New York, New Haven & Hartford Railroad Company, together with a report of the Commission thereon,” Senate Documents, 63 Cong., 2 Sess., No. 543, p. 2. (Hereafter cited as “ICC Hearings.”)

9 Brandeis summarized his own story in Business — A Profession (2nd ed., Boston, 1933), pp. 262–312, and in Other People's Money, pp. 189–201. Alpheus T. Mason has re-told the story with some embellishment in Brandeis: A Free Man's Life (New York, 1946), pp. 177–213, and again, in slightly greater detail, with Henry L. Staples in Fall of a Railroad Empire, though in neither book apparently do the authors use any manuscript sources but those of Brandeis himself. They evidently left untouched the many available manuscript collections of New England business and political leaders, including the Mellen collection itself. Nevertheless, many historians seem to refer to the Staples and Mason works as “definitive.” See, for example, Link, Arthur S., Wilson: The New Freedom (Princeton, 1956), pp. 421–23.Google Scholar

10 See Ripley, William Z., Railroads: Finance & Organization (New York, 1915), pp. 462–70.Google Scholar

11 Adams, Charles Francis Jr, et al, Report of the Commission on Commerce one Industry (Boston, March, 1908), p. 21.Google Scholar

12 The eight were: the New York, Providence & Boston, the Old Colony, the New York & New England, the Fitchburg, the Connecticut River, the Boston & Albany, the Boston & Maine, and the New Haven. The New Haven later absorbed the first three; the B. & M. consolidated with the next two; and the New York Central leased the B. & A. See Baker, George P., The Formation of the New England Railroad Systems (Cambridge, 1937)Google ScholarKirkland, Edward C., Men, Cities, and Transportation: A Study in New England History 1820–1900 (2 vols., Cambridge, 1948)Google Scholar, vol. II.

13 Massachusetts Board of Railroad Commissioners, 30th Annual Report (Boston, 1899) p. 15.Google Scholar (Hereafter cited as Mass. Bd. RR. Commnrs….)

14 Ibid., 27th Annual Report (Boston, 1895), pp. 31–32.

15 Ibid., 33rd Annual Report (Boston, 1902), p. 55. Cf. Mason, Edward S., The Street Railway in Massachusetts: The Rise and Decline of an Industry (Cambridge, 1932), pp. 12–14.Google Scholar Mason points out that consolidation of street railways produced the effects desired by the Railroad Commission, but ultimately (after 1910) overburdened the stronger companies with too many “weak sisters” and led to their collapse. (I am obliged to Professor Albert Fishlow for calling the Mason book to my attention.)

16 Mass. Bd. RR. Commnrs., 30th Annual Report (Boston, 1899), p. 15.

17 Ibid., 34th Annual Report (Boston, 1903), p. 52; and 36th Annual Report (Boston, 1905), p. xxxvi.

18 See Allen, Walter S., “Street Railway Franchises in Massachusetts”, Annals of the American Academy of Political and Social Science, XXVII (Jan., 1906), pp. 91–110, esp. p. 108.CrossRefGoogle Scholar

19 See Ripley, Railroads: Finance & Organization, pp. 465–66; Mason, Street Railway in Massachusetts, pp. 9–10, 64.

20 See Mass. Bd. RR. Commnrs., 41st Annual Report (Boston, 1910), p. 112.

21 H. C. Forbes to A. E. Adler, Aug. 26, 1905, Joseph B. Eastman Collection (Amherst College). Forbes headed a company which sought a charter to construct a railway from Boston to Providence and eventually to New York; he ran into opposition from the New Haven Railroad with which the projected railway would have directly competed. He and his associates received some “unofficial” advice from Joseph B. Eastman, Secretary of the Public Franchise League, on how to beat the big financiers behind the railroads. See Eastman to David Whitcomb, Nov. 19, 1906, and Dec. 7, 1906, in Eastman Collection.

22 Boston Herald, June 27, 1906.

23 Boston Herald, March 9, 1905.

24 Boston Herald, April 15, May 4, 1905.

25 Boston Globe, April 19, 1905.

26 J. B. Eastman to G. B. Upham, Oct. 20, 1905, Eastman Collection. As late as 1907, Eastman reported, the League was uncertain as to whether the merger of the Berkshire Trolley system with the New Haven would be in the public interest, and recommended only that the legislature postpone action on enabling legislation for another year. See Eastman's Annual Report for 1907, in Louis D. Brandeis Collection (Law Library, University of Louisville).

27 Boston Globe, June 23, 1906.

28 Boston Herald, June 29, 30, 1906; Boston Post, June 29, 1906. The letter, which was signed by Charles F. Choate, Jr., the New Haven's attorney, was reprinted in full in the Boston Herald, June 13, 1907. The General Court did re-enact the earlier state law which prohibited direct or indirect acquisition of a railway company by a railroad corporation, and called for a test case to decide whether this applied to the New Haven and its affiliated holding company, the Consolidated. The Railroad Commission in 1909 observed that this amounted to “a declaration of the common law, and, as such, a statement of the policy of the Commonwealth itself.” Mass. Bd. RR. Commnrs., 41st Annual Report (Boston, 1910), p. 111.

29 “ICC Hearings,” pp. 24–25.

30 Boston Post, Aug. 17, 1906.

31 Boston Herald, Jan. 11, 1907.

32 Mellen to Rockefeller, Feb. 4, 1907, New York Times, Nov. 12, 1915. (State Democratic and Independence League political leaders at the time were attacking Standard Oil and the United Shoe Machinery Corporations.)

33 Ibid.

34 Mellen to William Loeb, April 19, 1907, Loeb to Mellen, April 20, 1907, Mellen Collection.

35 Whitney to Mellen, May 21, 1907, quoted in Staples and Mason, Fall of a Railroad Empire, p. 172.

36 Mellen to Whitney, May 22, 1907, ibid.

37 Interview in the Boston Journal, Jan. 8, 1908.

38 In Other People's Money, Brandeis presents an account of the Boston merchant and railroad magnate, John Murray Forbes, which reveals more about Brandeis — his traditionalism as well as his Bostonian “patriotism” (some would say provincialism) — than it does about Forbes: “He was a builder; not a combiner, or banker, or wizard of finance. He was a simple, hardworking business man…. He had the imagination of the great merchant; the patience and perseverance of a great manufacturer; the courage of the sea farer; and the broad view of the statesman. Bold, but never reckless; scrupulously careful of other people's money, he was ready, after due weighing of chances, to risk his own in enterprises promising success.” Thus equipped, Forbes built the Chicago, Burlington & Quincy. “Under his wise management, and that of the men whom he trained, the little Burlington became a great system. It was ‘built on honor’, and managed honorably.” By 1901, however, J. P. Morgan had swallowed up this great enterprise. Similarly, “one by one these western and southern railroads passed out of Boston control; the greater part of them into the control of the Morgan allies…. Now nothing is left of Boston's railroad dominion in the West and South … and her control of the railroads of Massachusetts is limited to … [thirty-two] miles of line….” From Chapter 8, “A Curse of Bigness.”

39 Louis Brandeis to Alfred Brandeis, Oct. 19, 1907, Brandeis Collection; also quoted in Staples and Mason, Fall of a Railroad Empire, p. 26. Of course, part of Brandeis' inference about the “gold brick” was based on his stated belief that the B. & M.'s financial condition was considerably better than the New Haven's, and was indeed steadily improving. Staples and Mason, Fall of a Railroad Empire, p. 34. This was not quite true. See Bradlee, Francis B. C., The Boston & Maine Railroad: A History of the Main Road with Its Tributary Lines (Salem, 1921), p. 73Google Scholar and Masson, Robert L., New Shares for Old: The Boston & Maine Stock Modification (Boston, 1958), pp. 28–29.Google Scholar According to Masson, the New Haven's management of the B. & M. only “completed the disorganization of the railroad's finances” that had begun with “the shortsighted policies of the preceding management.” p. 30. Much the same story was true of the street railway companies which the New Haven absorbed. See Mason, Street Railway in Massachusetts, pp. 39–40.

40 Ripley, William Z., Railroads: Rates & Regulation (New York, 1912), pp. 487–88.Google Scholar

41 From $130,000,000 in exports in 1901, Boston handled only $86,000,000 in 1902, the lowest since 1894. The loss, which persisted for several years, dropped Boston behind New Orleans to third place in total port activity for the first time in generations. Boston Chamber of Commerce, 18th Annual Report (Boston, 1904), pp. 21Google Scholar, 181, See also ibid., 16th Annual Report (Boston, 1902), p. 159; 19th Annual Report (Boston, 1905), p. 45; and Clapp, Edwin J., The Port of Boston (New Haven, 1916), pp. 93–94.Google Scholar

42 Boston Herald, Jan. 31, 1907. One crisis in grain shipments occurred in January, 1907, when (Boston merchants complained) the Central imposed a “grain embargo” on Boston, and only partially lifted it thereafter. Boston Herald, Feb. 3, 1907.

43 Smith, Thomas R., The Cotton Textile Industry of Fall River, Massachusetts (New York, 1944), pp. 120–21.Google Scholar

44 Figures derived from Hall, Frederick S., “The Localization of Industry,” Twelfth Census, vol. VII, Manufactures, part 1 (Washington, 1902), pp. cxc-ccxiv.Google Scholar See also, Norton, Thomas L., Trade-Union Policies in the Massachusetts Shoe Industry, 1919–1929 (New York, 1932), p. 29Google Scholar, and Wolfbein, Seymour L., The Decline of a Cotton Textile City: A Study of New Bedford (New York, 1944), p. 61.Google Scholar

45 See Abrams, Richard M., “A Paradox of Progressivism,” Political Science Quarterly, LXXV (September, 1960), pp. 396–97.Google Scholar

46 See Ripley, Railroads: Rates & Regulation, pp. 161–63.

47 Lodge to Robert Lincoln O'Brien, May 16, 1907, in Henry Cabot Lodge Collection (Massachusetts Historical Society). See also Lodge to O'Brien, May 20, 1907. Contrary to the statement by Elting E. Morison that Lodge was “the persistent advocate of the New Haven” (Letters of Theodore Roosevelt, vol. VI, p. 1040n), Lodge opposed the B. & M. merger until at least the end of 1908, and he never gave up his opposition to New Haven consolidation with electric railways.

48 Boston Evening Transcript, June 6, 1907.

49 See Boston Globe, June 17, June 18, and especially June 19, 1907; Mason, A Free Man's Life, p. 181. Shortly afterward, Roosevelt wrote to his friend Lodge, “You did excellent work about that merger”, noting that Whitney “would be pretty well knocked out as a candidate.” Roosevelt to Lodge, July 4, 1907, in Lodge, Henry Cabot (ed.), Selections from the Correspondence of Theodore Roosevelt and Henry Cabot Lodge, 1884–1918 (New York, 1925), vol. II, p. 274.Google Scholar See also Lodge to W. E. Chandler, Oct. 19, 1907, in Lodge Collection.

50 See Bullock, Charles J., “Control of the Capitalization of Public Service Corporations in Massachusetts.” American Economic Association Quarterly, X (April, 1909), pp. 384–414Google Scholar; Calkins, Grosvenor, “The Massachusetts Business Corporation Law,” Quarterly Journal of Economics, XVIII (Feb., 1904), pp. 269–80CrossRefGoogle Scholar; Abrams, “A Paradox of Progressivism,” pp. 383–87, 391–94.

51 Boston Herald, June 12, 1907.

52 Lodge to O'Brien, Dec. 18, 1907, in Lodge Collection. Lodge probably was referring to a letter to him dated Dec. 11, 1907, from Gardiner M. Lane of Lee, Higginson & Company, reputedly the man who personally managed the sale of the B. & M. holdings to the New Haven. See “ICC Hearings,” p. 16. The letter may be found in the George von Lengerke Meyer Papers (Massachusetts Historical Society) together with a clipping of an interview in the Boston News Bureau, also dated Dec. 11, in which Mellen announced that he might sell.

53 Springfield Republican, June 5, 1907. Cf. Boston Evening Transcript, June 6, 1907.

54 See “The Financial Condition of the New York, New Haven & Hartford Railroad and the Boston and Maine,” pamphlet in the Brandeis Collection [c. Jan., 1908], summarized in Mason, A Free Man's Life, pp. 184–85, and in Staples and Mason, Fall of a Railroad Empire, pp. 29–34.

55 Springfield Republican, Jan. 8, 1908. Cf. Boston Journal, Jan. 8, 1908.

56 Mass. Bd. RR. Commnrs., 41st Annual Report (Boston, 1910), p. 115; “I.C.C. Hearings,” pp. 24–25. Cf. Boston Herald, May 11, 1908.

57 Boston Herald, Jan. 21, 1908.

58 Tuttle to Mellen, June 3, 1908, Mellen Collection.

59 No one, that is, except perhaps the aged abolitionist and banker Henry Lee Higginson: “Brandeis and [Representative Norman] White … do not believe that Mellen sold the Boston & Maine shares, which to my mind shows that they probably are themselves in the habit of lying.” Higginson to Lodge, May 25, 1909, in Lodge Collection. Higginson was in a position to have known better; his reaction suggests the “hear no evil, see no evil” propensities of many members of Massachusetts' “Establishment” when one of their “kind” was charged with improprieties. In 1909, after the General Court had in effect legalized the merger, Mellen explained to the New Haven board of directors about the $2,000,000 which dummy Billard had received from the company: “For his services in securing to the New Haven Company immunity from attack by the Massachusetts authorities because of the holding by the New Haven of Boston & Maine stock … Mr. Billard's compensation was modest and moderate, and he might well exclaim, as did Warren Hastings at his celebrated trial, ‘My God, when I consider my opportunities, I wonder at my moderation’.” “ICC Hearings,” p. 30.

60 Mellen to B. W. Warren, July 28, 1908, quoted in “ICC Hearings,” p. 25.

61 See Lodge to H. L. Higginson, April 28, 1909, and May 19, 1909, in Lodge Collection.

62 For a more detailed account of the financial developments, see Masson, New Shares for Old, Chapter 2.

63 Springfield Republican, Feb. 15, 1908. Cf. Brockton Enterprise, Feb. 17, 1908.

64 See Bradlee, Boston & Maine, pp. 70–71.

65 See Springfield Republican, Jan. 20, 1908. The ICC hearings confirmed these facts, “ICC Hearings,” pp. 16–17.

66 See Calkins, Grosvenor, “The Massachusetts Anti-Stock-Watering Law,” Quarterly Journal of Economics, XXII (Aug., 1908), pp. 640–45CrossRefGoogle Scholar; Bonbright, James C., Railroad Capitalization: A Study of the Principles of Regulation of Railroad Securities (New York, 1920), pp. 138–39.Google Scholar

67 Secretary J. B. Eastman's Annual Report for 1907, in Brandeis Collection. The P. F. L. appeared before the General Court to argue that the charges against the old law had been exaggerated, but, Eastman reported, “the League did not oppose a change in the law which would make it more flexible and somewhat less stringent…. In this way the law was relaxed without abandoning public supervision.” The old law had required public service corporations to sell new stock issues to stockholders at market price; the new law permitted offering new issues to stockholders at less than market price, though at no less than par.

68 For an idea of how unfamiliar many Massachusetts leaders were with the holding company device, see Joseph Eastman's letter to Charles L. Underhill, Majority Leader of the House, June 2, 1909, in which he undertook to explain the technique. Cf. Underhill to Eastman, May 31, 1909, and Eastman to Samuel Bowles, June 14, 1909, in Eastman Collection.

69 See Clapp, Port of Boston, pp. 93–100; Boston Chamber of Commerce, 19th Annual Report (Boston, 1905), p. 18. In 1909, in defiance of the ICC and in deference to Boston shippers, the New Haven and other New England railroads lowered their rates on imports bound westward. A rate war ensued, culminating in an ICC arbitration decision in 1912 which compelled New England railroads to raise their rates to a point higher than they had been in a decade. Clapp, Port of Boston, pp. 98–100. The decision could not have helped the already weak financial condition of the New Haven and B. & M.

70 Congressional Record, 59th Cong., 1st Sess. (Feb. 2, 1906), pp. 1972–73.

71 See Ripley, Railroads: Rates & Regulation, pp. 487–88.

72 Transcript of testimony taken Dec. 17, 1908, in Brandeis Collection.

73 Adams, Jr., et al, Report of Commission on Commerce and Industry, p. 21, et passim.

74 Boston Post, Nov. 3, 1909. Cf. William E. Soule [Boston Post financial editor] to Mellen, Oct. 29, 1913, in Mellen Collection.