One of the monumental battles between two Wall Street egos - that of Edward Henry Harriman, head of the Union Pacific Railroad and J.P. Morgan, the banking tycoon and owner of practically the rest of America’s railroad empire - came to a head this week in 1901.

Ominously referred to as a “panic” – the struggle started when Harriman backed by Kuhn, Loeb & Company finances, attempted to gain control of the Burlington and Quincy Railroad, to extend Union Pacific’s eastern terminus to Chicago. However, James J. Hill, head of The Great Northern Pacific Railroad, had similar aspirations, as did his benefactor, J.P. Morgan ... and managed to gain control. Harriman, miffed that his offer to secure one-third interest of Burlington (a common practice) was declined - began to “quietly” accumulate the outstanding stock shares ($155 million) in rival Northern, Pacific. Conveniently, Morgan was overseas and Hill in Seattle at that time, far from Wall Street.

The secret plan to corner the railroad’s stock became common knowledge however - and prices rapidly escalated, from $114/share on May 5 to a May 9 peak of $1000/share. In turn, the rest of the market plummeted as floor traders desperately dumped stocks to raise cash needed to cover their Northern Pacific short sales.

The "apes beating their chests" crested when Hill, ordering all rail tracks cleared, raced back to NYC (setting a coast-to-coast speed record) to overseer the battle for the few remaining shares of Northern Pacific - hoping to secure a majority position.

The pandemonium finally broke late in the day of May 9 - when Morgan and Kuhn, Loeb’s NYSE’s emissaries, offered to provide stock for those short of it at 150. Enough was enough. Harriman agreed to representation on Burlington and Northern Pacific boards ... which is more control than he had asked for to begin with.

news@doubledownmedia.com

5/5/08