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Northern Securities Company

Page history last edited by Mr. Hengsterman 6 years ago

 

 

The Formation of Northern Securities

 

Image result for The Northern Securities Case + map

 

On November 13, 1901 (only two months after Roosevelt became President), J. P. Morgan, who controlled 21 railroads, including the Northern Pacific, and James J. Hill of the Great Northern  announced the formation of the Northern Securities Company to be a holding company for the common stock of the two competing railroads, This new combination was the second largest company in the world with annual revenues of $100 million and covering commerce from Chicago to Seattle and extending to China over Mr. Hill’s shipping lines.

 

A New York newspaper saw the new company as another step toward universal monopoly.

 

 

The Northern Securities Case (1904), which established President Theodore Roosevelt’s reputation as a “trust buster,” reached the Supreme Court in 1904. It was the first example of Roosevelt’s use of anti-trust legislation to dismantle a monopoly, in this case a holding company controlling the principal railroad lines from Chicago to the Pacific Northwest.

 

In 1901, railroad builder James J. Hill of St. Paul, Minnesota, fought off an attempt by his arch rival Edward H. Harriman for control of the Chicago, Burlington, and Quincy Railroad. Hill, who controlled the Great Northern and the Northern Pacific railroads, wanted to gain access to Chicago for his lines from the Twin Cities. After a protracted and potentially disastrous bidding war for the CB&Q, Hill and Harriman cooperated with banker J. P. Morgan and financier John D. Rockefeller to create the Northern Securities Company. Established in the state of New Jersey (which had laws favorable to this type of arrangement), Northern Securities held the majority of shares in the CB&Q, the Northern Pacific, and the Great Northern railroads, along with smaller roads associated with these three.

 

In 1902, President Theodore Roosevelt instructed his Justice Department to break up this holding company on the grounds that it was an illegal combination acting in restraint of trade. Using the Sherman Anti-Trust Act, the federal government did so and the Northern Securities Company sued to appeal the ruling. The case worked its way up to the Supreme Court, where the justices ruled 5-4 in favor of the federal government. Roosevelt’s action had ignored the advice of leading conservatives in the Republican Party and demonstrated his independence from party elders. It also increased his popular support and helped in his election campaign in 1904.

 

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