Monday, March 3, 2014

My Amazon Review of Larry Haeg's, "Harriman vs. Hill: Wall Street's Great Railroad War"

Larry Haeg brings to life an era when Wall Street was the wild west and regulation was nonexistent. The giants of finance and industry dominated the stage like never before or after. The great railroad war arises out of the the strategic dilemma faced by both Harriman's Union Pacific and Hill's Great Northern. The eastern terminus of the Union Pacific is St. Louis and the eastern terminus of the the Great Northern is St. Paul. In order to efficiently bring grain from the west and trade to and from China both needed access to the the great railroad hub of Chicago. That access could be provided by the Chicago, Burlington and Quincy which was controlled by the Northern Pacific. Each fears that control by the other would lock them out of Chicago.

Harriman starts the war by quietly gobbling up common and preferred shares of Northern Pacific though his banker Jacob Schiff of Kuhn Loeb. Hill seeing the activity in Northern Pacific starts buying too through his banker, J.P. Morgan. The war is on. Soon more stock is bought than can actually be delivered because short sellers seeing the rise in Northern Pacific stock come in and short the stock. A corner, where no deliveries can be made, ensues driving the stock of Northern Pacific up from $110 a share to an astounding $1000 a share in two days. Realizing a corner had taken place, Schiff and Morgan agree to settle at $150 a share and Northern Pacific drops precipitously to $150 a share.

The titans then settle there dispute with a three way merger bringing the railroads under the roof of a newly formed holding company, Northern Securities controlled by Hill and Harriman's Union Pacific. It is here where President Theodore Roosevelt intervenes with an antitrust lawsuit that goes all the way to the Supreme Court dissolving Northern Securities. Quite a yarn.

Along the way we get a peak into New York society, especially at the old Waldorf Astoria. There are aslo cameo appearances by Bernard Baruch and Jesse Livermore. Haeg's sympathy is with the titans and against the government and the crippling railroad rate legislation that was to come. However, he fails to fully appreciate that that the railroads of 1900 were quasi-monopolies that were in need of regulation. However, over time with federal subsidies for barges and the advent of trucking the rail monopolies would wither away and force much of the industry into bankruptcy.

Over the long run Harriman and Hill had it right. Consolidation was necessary and the Great Northern, Northern Pacific, and Chicago Burlington and Quincy along with the Santa Fe are now under one roof, the Burlington Northern owned by Warren Buffett's Berkshire Hathaway.

For those readers interested in getting a very real sense of what Wall Street was like in 1901, this book is a great read. My one and very real criticism of the book is that stock charts would have been very helpful to clarify the text.

See the full Amazon URL at: 

No comments:

Post a Comment