Memoirs of Henry Villard/Volume 2/Book 8

by Henry Villard

MEMOIRS OF HENRY VILLARD

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BOOK EIGHT

FINANCIAL CAREER

CHAPTER XXXVIII

Washington, Boston, Germany.—1863–1873

MR. VILLARD was compelled, by the return of his fever, to give up field work with the army in November, 1863. He spent the winter in Washington, where, early in 1864, with Horace White, who represented the Chicago Tribune in that city and held the clerkship of the Senate Military Committee, and Adams S. Hill, then in charge of the Washington bureau of the New York Tribune and now for the last thirty years Professor of Rhetoric at Harvard University, he organized the first news agency in competition with the Associated Press. By personal visits to the managers and editors, he succeeded in winning the Chicago Tribune, the Missouri Democrat, the Cincinnati Commercial, the Rochester (N. Y.) Democrat, the Springfield (Mass.) Republican, and the Boston Advertiser for the new undertaking, which was bitterly attacked by the Associated Press for disturbing its monopoly. But he was successful from the start. As the representative of this news agency, in May, 1864, he joined the Army of the Potomac under the chief command of General Grant at Culpepper Court House. He was the first correspondent to reach Washington with the news of the bloody drawn battles in the Wilderness. He returned to the army after it reached the Peninsula, and crossed the James River with it, witnessing the siege of Petersburg until after the explosion of the mine (July 30, 1864), when he responded to an urgent summons to Germany from his family.

He reached his native town of Speyer but a short time before the death from consumption of his elder sister Anna, which was preceded only a few days by that of her infant child. Mr. Villard's mother had died five years before. Most of the winter was spent in Munich with his father and with his remaining sister, who was married to an army officer stationed at Nuremberg. On the last day of March, 1865, he sailed from Liverpool, expecting to arrive in time to witness the final struggle between Grant and Lee, and was overcome with surprise on hearing, after landing in Boston on April 15, simultaneously the astounding tidings of the fall of Richmond, the surrender of Lee, and the assassination of President Lincoln.

Mr. Villard's friend, Horace White, having, in the meantime, assumed the chief editorship of the Chicago Tribune, offered Mr. Villard the position of regular Washington correspondent of the paper, which he accepted and filled for a year. Early in January, 1866, he married the only daughter of William Lloyd Garrison, and took his bride to Washington. In June, he received an invitation from the New York Tribune to go to Europe as one of two special correspondents, the other being George W. Smalley, to report the impending war between Prussia and Austria. He went gladly, and sailed for England with his wife early in July. There was no Atlantic cable at that time, and, according to the latest news received up to his departure, hostilities had not broken out. On landing in Southampton, he was amazed to learn that the battle of Sadowa had been fought, that the Prussians were advancing on Vienna, that peace negotiations were under way, and that, in short, the war was practically over. Nevertheless, he proceeded to Bohemia, and visited the several battlefields, followed in the wake of the Prussian armies through Bohemia and Moravia, and reached Nikolsburg, where the Prussian headquarters with King William, Crown Prince Frederick, and Bismarck were established after the cessation of hostilities. Mr. Villard subsequently spent some time at Vienna, where he was very kindly treated by the United States Minister, Mr. J. L. Motley.

The winter of 1866–7 Mr. Villard passed at Munich with his wife and her youngest brother. His sister had moved there in the meantime. In pursuance of his engagement with the Chicago Tribune as its special correspondent for the World's Exhibition of 1867, Mr. and Mrs. Villard went to Paris in March. They remained there until the following February, with the exception of a short visit to England, where they met Mr. William Lloyd Garrison, who was then being fêted in Great Britain. Mr. Villard also spent some weeks at the bedside of his father, who died in his presence early in September, 1867. In February, 1868, he and his wife set out from Paris for their first tour in Italy. On the way thither they paid a visit to John Stuart Mill at Avignon, of which Mr. Villard wrote an account for the Chicago Tribune. To the same paper he likewise contributed a description of a violent eruption of Mount Vesuvius, for which the well-known Professor Palmieri allowed him the privileges of his observatory.

Mr. and Mrs. Villard returned to the United States in May, 1868, and lived at the Garrison home in Roxbury, a suburb of Boston, till the fall of 1870, during which time their only daughter and eldest son were born. Mr. Villard became a contributor of editorial and other matter to the Boston Daily Advertiser and other newspapers, and also wrote an article on Bismarck for the North American Review. In the fall of 1868, he was elected Secretary of the American Social Science Association, with an office in Boston, which position he filled for two years. Through this connection he came in contact with leading men throughout the country, and was instrumental in promoting public interests in various ways. Among his labors, the most noteworthy was his pioneer work in civil-service reform, for he helped to organize the first societies for its furtherance in Boston, New York, and Philadelphia. The first public meetings in its behalf in the two former cities were arranged chiefly by him, in order to obtain a hearing for the first Civil Service Reform Bill, which had been laid before Congress. It was personally elucidated by its author, Thomas A. Jenckes, a member of the House from Rhode Island.

Mr. Villard's Social Science secretaryship led him to enter upon the investigation and study of public and corporate financiering, including that of railroads and banks. The subject of railroad securities especially interested him, and the knowledge acquired in this respect prepared him in a measure for his later business career, though he did not then dream that he would soon enter into that field. His attention was also attracted to the so-called "mortgage banks" so common on the continent of Europe, but as yet unknown in the United States, and he prepared and published a paper advocating their adoption.

The climate of Boston did not agree with him, and he suffered so much from catarrh that, in the fall of 1870, he decided to seek medical advice in Germany. During his stay there, he submitted to the management of a large bank in Berlin a project for the establishment of mortgage-banks in the United States. It was favorably received, and the institution agreed to raise the necessary capital in the Continental way, provided a special charter could be obtained for it in one of the older States. On his return to Boston early in 1871, he interested parties there in the plan, and it was decided to apply to the Massachusetts Legislature for a charter. The application failed, and nothing ever came of the scheme, but the relations into which it had brought him with financial circles in Germany proved subsequently of great value to him.

Mr. Villard's health began to fail during 1871, and he decided in the fall to go to Germany with his family, in order to recuperate. While passing the following winter at Wiesbaden, he was called on by some acquaintances from Boston to assist in the negotiation of a large railroad loan at Frankfort-on-the-Main and Berlin, and this business still further extended his circle of acquaintance among German financiers. The family, augmented by the birth of a second son, spent the summer of 1872 in Switzerland, and the winter, of 1872–3 in Heidelberg, where he had a number of relatives. Soon after going there, he had an apoplectic stroke, which was so serious that his physicians opined he would never be able to undertake mental labor again without great risk. But they themselves did not live long enough to see their predictions falsified.

While recovering from his severe illness, he received one day in February, 1873, a call from a gentleman residing in the place, with whom he was acquainted. His visitor asked Mr. Villard's opinion regarding an unfortunate investment he had made in American railroad bonds, and said that he had bought a considerable amount of the seven per cent. bonds of the Oregon & California Railroad Company of Oregon, on the strength of the statements made by the banking-house which had offered them for public subscription. Knowing nothing about the railroad company and but little of Oregon, Mr. Villard could not give the desired advice. At his suggestion, the gentleman obtained from the Protective Committee for the bondholders at Frankfort such information as it had regarding the company and the road. The material was ample, and in the light of it Mr. Villard gave an unfavorable opinion, and this led the chairman and another member of the committee to visit him and consult with him about the matter and to a subsequent invitation to join that body, to which he agreed after some hesitation, on the assurance that little work would be required of him. Such was the beginning of his business career. As shown in the preceding record of his first twenty years in America, he had never had any training for finance; but the determination and energy developed in him by his experience as a pioneer in Colorado and as a war correspondent, his extensive observation of and practical judgment in regard to national affairs, his wide acquaintance in the United States, the part he took in the mortgage-bank project and the bond negotiations just mentioned, all helped to prepare him for the new occupation upon which he was now to enter.

CHAPTER XXXIX

The Oregon Railroads.—1873–1879

THE Frankfort Committee had sent a delegation to Oregon, during the summer of 1873, for a thorough investigation of the railroad and the prospects of the State, and it was only after it had returned and made a report, and default had actually taken place in the payment of interest, that the labors of the committee began in October. There had been nearly eleven millions of the Oregon & California bonds sold at a little over 70 per cent. in Germany and England, of which the former country had absorbed by far the greater portion. The report of the delegates showed that only half of the nominal amount of the bonds had been received by the company in money; that, instead of 375 miles from Portland to the California State boundary, only 200 miles had been completed and were in operation, and that, owing to the small population and limited development of western Oregon, the road was producing only about one-third of the interest charge and could not well be expected to yield more for some time to come.

The first question before the committee was whether it should exercise the rights of the bondholders under the mortgage and take possession of the road by foreclosure proceedings, or compromise with the company, which was controlled by Ben Holladay, well known to the past generation as the owner of overland stage lines to California and of steamship lines on the Pacific coast. The latter course was decided upon after long deliberation. This necessitated the preparation of an agreement with the company for funding the interest and other purposes. As none of the other members of the committee knew English well, Mr. Villard soon found that the principal part of the work devolved upon him. All through the winter of 1873, he had to spend much time in Frankfort, and the outcome of it was that he was commissioned to go to the United States as the representative of the committee, in order to have the agreement put in form by American counsel, and to attend in person to its proper execution in Oregon. He sailed for this purpose for New York with his family in April, 1874.

He there met Ben Holladay, with whom and his lawyer, S. L. M. Barlow, and United States Senator Mitchell of Oregon, Mr. Villard, with his counsel, Professor James B. Thayer of the Harvard Law School, had a protracted tussle over the details of the compromise. Holladay proved a genuine specimen of the successful Western pioneer of former days, illiterate, coarse, pretentious, boastful, false, and cunning. Mr. Villard soon discovered also that Holladay's reputed great wealth was fictitious, and that he was, on the contrary, in financial extremities. That a man of such character should have found it so easy to command millions of foreign capital was quite a puzzle and shock to him. The explanation of this, he afterwards discovered, lay in the bad faith which the business men on the Pacific coast had shown to the European bankers who placed the bonds.

Mr. Villard set out for Oregon in May, accompanied by Richard Koehler, a German railroad engineer, who had been appointed resident financial agent of the bondholders at Portland under the articles of agreement, and who has remained there ever since and is now (1900) the general manager of the Southern Pacific Railroad Company for its Oregon lines. Mr. Villard spent some weeks in California, investigating the physical and financial condition of the California Pacific lines built independently of the Central Pacific with the proceeds of securities also marketed in England and Germany. He discovered that one of these lines, against which $3,000,000 seven per cent. bonds had been sold, had not been built at all, and that the same company's ten per cent. income bonds, which were held by bankers abroad as prime securities, were really worthless. The discovery of this fraud added much to his standing in financial circles in Europe.

Mr. Villard started with his companion from San Francisco about the middle of July for Oregon, via the overland route, which then involved several hundred miles of stage travel. He was met at Roseburg, the terminus of the Oregon & California, by Ben Holladay and staff. What he saw of the scenery of Oregon on the way to Portland in the California, Yoncalla, and Willamette valleys, filled him with great enthusiasm. He was much impressed also with the evidences of agricultural wealth along the route. The picturesque situation and surroundings of Portland were an agreeable surprise to him, as was the unusual number of large and solid business buildings and of handsome private residences, together with the commercial activity of the place. He remained only long enough for the completion of his business, and for some short excursions into the interior of western Oregon. He did not dream of what was in store for him, and thought he should never see the town again. Soon after his return to the Atlantic coast, he sailed for Germany, to report in person as to the success of his mission. His lengthy printed report to the committee contained favorable accounts of his impressions of western Oregon, and expressed his belief in the promising future of the country and consequently in the certain improvement in the prospects of the bondholders. The greatest assurance of this lay in increase of population, with reference to which he made a proposition to the committee for the establishment of a bureau in the Atlantic States for the promotion of immigration to Oregon. His plan was approved, and he was commissioned to carry it out.

There was another reason for Mr. Villard's return to America before the close of 1874. Early in the preceding winter, he had joined, upon urgent invitation, another committee, formed for the protection of the bondholders of the Kansas Pacific Railroad Company, which had been obliged by the severe crisis of that year to ask for the funding of two years interest on three classes of bonds, representing a total of $12,000,000, most of which were held in Germany. He was chosen the delegate of this committee to conclude the funding arrangement with the company in the United States. On reaching New York, he found a despatch from the financial agent, Koehler, at Portland, reporting that an open conflict had already broken out between him and Ben Holladay about the execution of the compromise contract. It turned out that the latter, both because of bad faith and because of inability from want of means to make certain cash payments for which he had personally obligated himself, had violated the contract in several respects, and, moreover, that he was unwilling and unable to carry it out at all. It was discouraging to Mr. Villard thus to have a whole year's hard work so quickly brought to naught, but he resolutely exerted himself to find a way out of the complicated situation that had been created. It being out of the question to conduct litigation for the enforcement of the bond holders' rights at a distance of 7000 miles from Germany, on account of the great inconvenience and expense and long delay, he devised another compromise plan, under which Holladay would, for a certain consideration involving but a small sacrifice on the part of Mr. Villard's employers, peacefully surrender the control not only of the Oregon & California Railroad, but of two other transportation companies. One of these was an unproductive railroad, the Oregon Central, running fifty miles south-westerly from Portland, and the other a line of steamers of the Oregon Steamship Company, running between Portland and San Francisco, which formed the only regular connection that Oregon had with the rest of the world. Holladay had obtained from the same syndicate of foreign bankers that took the Oregon & California bonds an advance of a million dollars against Oregon Central bonds, with which money the unproductive mileage had been built, and also a large loan of $800,000 against the properties of the Steamship Company, not worth a quarter of the amount loaned. As in the Oregon & California case, Holladay accomplished all this through the dishonest collusion of the San Francisco agent of the German syndicate.

Holladay came East for the winter, as was his wont, and agreed to the proposition, holding out for a time for better terms than offered. As not only the consent of the Oregon & California, but of the two sets of creditors mentioned, was necessary for the new compromise, Mr. Villard went to Europe once more, in the spring of 1875, to procure it. He had to labor strenuously all summer and most of the fall, and journeyed repeatedly between Frankfort and London before the approval of all parties in interest could be secured. According to the agreement as finally formulated, Holladay was to retire entirely from the management of the three corporations, and surrender all his interest in their share capital to the bondholders and the two classes of creditors respectively. There was to be friendly cooperation in the management of the companies between the former and the latter. Though the Steamship Company showed fine earnings, its wooden vessels were old, small, slow, expensive to run, and fast wearing out, and it was evident that, in order to preserve its business, the line would have to be re-stocked with modern steamers. To this end, the plan provided that the bondholders should furnish the necessary new steamers, in consideration of which they were to become the owners of the entire steamship stock upon the extinction of the creditors claim, out of the earnings with which a considerable part of the debt had already been paid off. The bondholders also obtained an option to acquire the creditors claim against the Oregon Central for one-quarter of the amount of their loan. The combination was based on the theory that the three transportation interests could, by working together, by increasing their earning capacity by new outlays of capital for improvements and extensions, and gradually coming under the single ownership of Mr. Villard's employers, be so developed as to make good the greater part of their losses. The ways which he proposed to follow in order to reach this result were to attract immigration to Oregon, to extend the Oregon & California to a connection with the Central Pacific system, to add to the mileage of the Oregon Central sufficiently to make it a paying investment, and to equip the steamer line with larger, faster, and more economical vessels.

His faith in the future of western Oregon was so great—greater, as it turned out, than its resources warranted—that he fully believed in the possibility of the satisfactory solution of the difficult problem he had set for himself. In pushing his scheme, he found a general disposition, both in England and in Germany, to condition its acceptance upon his consent to make himself responsible for its execution by assuming the management of the companies. There was no escape for him from this, and he expected to have to remove to Portland with his family and to reside there for a number of years; but it happened otherwise. He was back in New York by November, 1875, and immediately began to carry out the new programme. Having already opened an Eastern immigration bureau for the Oregon & California in the preceding spring, and from it carried on a vigorous agitation for immigration to Oregon by advertisements in the press and the wide circulation of pamphlets descriptive of the State, written by himself, he began to look about for the purchase of a new steamer, and, early in the spring, bought the George W. Elder from the Old Dominion Steamship Company, and started her for San Francisco. Holladay had come East again to close the deal with him, but various informalities caused delays, so that Mr. Villard could not leave for the Pacific coast before the end of April, 1876. He arrived at Portland two weeks later, and was at once elected president of the Oregon & California and Oregon Steamship companies, and assumed charge of them and, indirectly, of the Oregon Central. He remained several months in Oregon, making himself thoroughly acquainted with the business of the companies, and gaining the confidence of the community at Portland and of the public of the State at large by a number of reforms in the management of the railroads, and especially by proclaiming his determination that they should no longer be used, as they had been under the Holladay régime, as instruments for political party purposes. He devoted all his spare time to seeing as much as possible both of the western and eastern parts of the State, and came away confirmed in his conviction of the great future of Oregon, and inspired by the fine opportunities his new position seemed to open to him.

Mr. Villard intended to settle in Portland with his family in the fall of the same year, but was detained at the East by unexpected complications in the affairs of the Kansas Pacific Company. Owing to the utter failure of the crops in Kansas for several successive years, there had been a further decline, instead of an improvement, in that railroad's earnings, so that the company was unable to comply with the terms of the funding agreement. With the consent of the Frankfort committee of bondholders, it was decided to place the property under a receivership. As the representative in America of the bondholders, Mr. Villard was proposed as one of the two receivers to be appointed. He was reluctant to accept in view of his newly assumed responsibilities in Oregon, but, as it was mainly through his influence that the temporary funding of interest had been conceded in Germany, he could not well decline, and, accordingly, his appointment as receiver was made by the United States District Court for eastern Kansas on November 3, 1876. One of his first duties was an inspection of the main line and branches in company with the officers of the railroad, which took him to Denver, as the western terminus of the road, for the first time since he had left the place in 1859. It was a strange turn of fortune that he who, only seventeen years before, had started from a town of perhaps a hundred frame shanties and log-houses containing not over one thousand inhabitants, to cross the Plains in a very humble way with an ordinary team, should now return riding on a special train behind a steam locomotive to a fine city of between thirty and forty thousand inhabitants. Another striking evidence of the wonderful change in that short span of time which he noticed on this trip was that, whereas in the summer of 1859 he had passed enormous herds of live buffaloes on his way to the Rocky Mountains, he now found that they were entirely extinct, and that their bones were being hauled eastward by the train-load for manufacturing purposes.

The proper care of the Oregon and Kansas Pacific interests kept him hard at work in the East during the following winter and the spring of 1877. In pursuance of his Oregon programme, he continued the propaganda for immigration, and kept pressing his European employers for capital for more new steamers and for extending the Oregon Central. But, notwithstanding all his arguments, based on the rapidly increasing ocean traffic and the growing unseaworthiness of the ships in service, he succeeded only in securing two additional steamers, one by purchase and another by construction the latter only by contract ing individually for it. He failed to obtain anything for railroad construction. As for Kansas Pacific matters, owing to the continued bad earnings, nothing could be done beyond organizing a strong American committee of bondholders to support him, and for cooperation with the German committee in formulating a plan of reorganization later on.

Early in the summer of 1877, he started with his family for a stay in Colorado, to be followed by one in Oregon. After passing some weeks in the former State, the party continued on to San Francisco. On arriving there, Mr. Villard found a despatch from the War Department advising him that a regiment of infantry was being hurried overland by fast trains on account of the outbreak of the Modoc war, and that his Steamship Company was desired to hold a ship ready for the immediate shipment of the regiment to Portland on its arrival on the coast. Mr. Villard himself superintended the necessary preparations, and crossed the bay to Oakland to receive the regiment, in one of the cold fogs peculiar to the California coast in the summer. He had caught a severe cold while in Colorado, which the exposure at Oakland developed the same day into pneumonia. He was able to dine with his family in the evening, but was unconscious before midnight. (Shortly after, there were fearful nights, in which Kearney's "sand-lot" anarchists tried to fire the city.) The disease attacked both lungs, and in a week his life was despaired of, and his wife had finally to telegraph her relations that the physicians gave no hope and did not expect her husband to live an hour. Skilful treatment and his strong constitution saved him, but he was so reduced by the long illness that the contemplated sojourn in Oregon had to be given up, and the family returned to New York.

While he was struggling for life, an opposition steamer was put on the line to Portland, with the result that there was a great falling off in the earnings of the Steamship Company, which greatly discouraged his foreign supporters, and made his task of obtaining additional capital from them much more difficult. His principals at first approved of the vigorous policy he adopted in meeting the competition, but, after the struggle had lasted six months, they required him to make a compromise with the opposition, which went into force in the spring of 1878. This clouding of the prospects of the Steamship Company led to friction between the Oregon & California bondholders committee and the foreign Steamship creditors over the payments for the new steamers, which culminated in the termination of the union of interests under the second Holladay arrangement of 1876. A dissolution of the relations established at that date was effected by mutual consent, the Steamship creditors assuming exclusive control of the line. The bondholders, however, exercised their option for the Oregon Central and raised money for its extension for fifty miles. Mr. Villard remained president both of the Oregon & California and of the Steamship Company, but it was clear to him from the beginning that these new relations would not long be maintained.

Unexpected complications also arose from his connection with the Kansas Pacific. This company had been trying for years, ever since its junction with the Union Pacific by its branch line from Denver to Cheyenne, to get a share of the Utah, Nevada, and California business, to which it asserted a title under the Act of Congress subsidizing both roads; but the Union Pacific had steadily refused to pro-rate with it. The Kansas Pacific then sought relief both in Congress and in the courts, and made such a strong fight that the stockholding interests controlling the Union Pacific, of which Jay Gould held by far the largest part, adopted the plan which he had conceived of getting control of the rival company. Jay Gould and Sidney Dillon, the Union Pacific president, commenced negotiations to that end with the group of St. Louis men who owned a majority of the Kansas Pacific stock, and with Mr. Villard as representative of the bondholders, but proposed such a reduction of the principal and interest of the bonds that their offer was rejected by the committee. Gould vainly tried to win Mr. Villard over by the guarantee of a profitable participation in the syndicate to be formed for the reorganization of the Kansas Pacific. After a pause, Gould reopened negotiations, and, after many conferences, formally accepted the terms agreed on by Mr. Villard and the New York committee of bondholders. He even went so far as to form a reorganizing pool for the securities of the company other than the first-mortgage bonds, including, most of the stock, and, as a pledge of good faith, made Mr. Villard custodian of the deposited values, worth, according to the market quotations, over ten millions of dollars. Notwithstanding this, Gould changed his mind, went back on the bargain, and tried to force the bondholders to submit to his former terms by opening an offensive campaign, in which the St. Louis directors, who had at first stood by the bondholders, now joined him.

In order to frighten the bondholders, he caused the construction of a new line from Cheyenne to Denver, by which he could compel the Kansas Pacific to share its mainstay, the Denver traffic, with the Union Pacific. He made the company apply for the removal of Mr. Villard as receiver, on the ground that he acted partially as the representative of the mortgage-bond interest, and he was successful in this move, as Mr. Villard could not and would not deny that he had favored the bondholders in every possible way, having been appointed their representative. Gould also got the portion of the press which he influenced to heap slander and abuse upon Mr. Villard and the New York committee. But they and the German committees stood firmly together and ordered foreclosure proceedings to be commenced. Gould's ulterior object was, as he had repeatedly avowed to Mr. Villard when he tried to win him over, the consolidation of the Kansas Pacific with the Union Pacific by exchanging stock for stock, and issuing consolidated Kansas Pacific mortgage bonds against the other securities in the pool. As he had bought many millions of Kansas Pacific stock from the St. Louis directors and in the market below 12%, and the Union Pacific stock then ranged in the market between 60 and 70, and as the issue of the new bonds would also yield him a large profit, he played really for a harvest of millions. Upon the setting in of the great boom in Wall Street in 1879 with the approaching resumption of specie payments, Gould saw the great opportunity it offered for floating new securities, and, loath to lose it, made up his mind to come to terms with the bondholders.

One day, early in 1879, he appeared in Mr. Villard's office and told him that he was tired of fighting, and that he was ready to accept the committee's conditions. This time he was true to his word, and the result was, as he had anticipated, an extraordinarily rapid rise in Kansas Pacific securities. Under the terms of the settlement, two of the three first-mortgages were recognized in full, and of the third only the interest was reduced from seven to six per cent. When the receivers were appointed, the bonds under the former were selling at 50, and those under the latter below 30. They bounded up in jumps to above par; the last-mentioned bonds, with nearly six years unpaid back interest, rose even to 140. Gould having purposely let his intention to consolidate the Kansas Pacific with the Union Pacific be known, the stock of the former, which had sold as low as 3 less than four years before, was quickly quoted as high as the latter and followed it far above par. Gould, not long after the consolidation, sold all his stock. He was understood to have cleared more than ten millions of dollars by the operation, which was one of the principal episodes in that speculative time. The triumphant issue of Mr. Villard's contest with that most unscrupulous and most dreaded machinator, and his fidelity to his employers, raised him to a position of influence in American financial circles, while it added greatly to his reputation abroad.

CHAPTER XL

The Oregon Railway and Navigation Company
1879–80

THE peaceful relations thus established between Mr. Villard and the Union Pacific leaders bore important fruit in another direction. Ever since his first visit to Oregon, he had conferred from time to time with the parties controlling the Central Pacific, in both San Francisco and New York, regarding the possibility of a joint scheme for the connection of the Oregon roads with the Central Pacific system. The Central Pacific people were willing to build to Oregon, provided they could obtain a subsidy from the State, and had submitted a formal proposition to that effect in 1876. It had not met with a satisfactory response, and the plan was dropped. As it was a self-evident proposition that direct railroad communication between Oregon and the rest of the country would be of the greatest advantage to the local transportation lines, it occurred to Mr. Villard to make an effort to induce his new Union Pacific friends to build from Ogden to the Columbia River. The time was most propitious for new railroad enterprises, as the appetite of the public for new securities seemed insatiable. The Union Pacific had years before made a preliminary survey of a line from its western terminus to the Columbia under the direction of General Grenville M. Dodge. Mr. Villard studied the report of this expedition, and, with the material it contained and his own knowledge of the Upper Columbia country, prepared a formal project and submitted it to Jay Gould and Sidney Dillon. They were both favorably impressed with it, and, after several meetings, it was agreed in writing to form a construction company for carrying it out, to the capital of which the Union Pacific people should contribute one half and Mr. Villard and his friends the other half. On Mr. Villard's recommendation, they authorized him, as the first step, to acquire a controlling interest in the Oregon Steam Navigation Company, a flourishing company with its seat at Portland, which had a monopoly of the traffic of the Upper and Lower Columbia and Snake River through its ownership of the portages by short railroads around the obstructions to navigation on the Columbia at the Cascades and the Dalles. With this special object, he left New York in April, 1879, on his usual spring visit to Oregon.

In the meantime, new trouble had sprung up for the Oregon Steamship Company. The pooling arrangement with the first opposition had been in force only about seven months when a new competitor appeared on the Portland-San Francisco line. Some California speculators had bought the Great Republic, a laid-up old side-wheeler of great carrying capacity, put her in repair and on the route, evidently for blackmailing purposes. The cutting of passenger and freight rates to losing figures soon followed. The European creditors, who for a long time had received nothing on account of the principal and interest of their original advance, owing to the payments for the new steamers and the losses from the first competition, now became hopeless, and early in the year 1879 Mr. Villard was advised that they were willing to sell out at a large sacrifice. He urged them not to do so, but, as they persisted, he made his first effort to form a syndicate in New York to buy them out. He easily accomplished his object, and the transaction was closed before he went West. It ended his dependence on the creditors, much to his relief, as the duty of satisfying a group of disappointed foreign bankers had gradually become very irksome. The success of the new venture of himself and his friends depended upon the cessation of the opposition. He was surprised on his way overland by the news that the Great Republic had run ashore at the mouth of the Columbia and was completely wrecked, but fortunately without loss of life. These tidings led him to consider the practicability of forming, under the auspices of the new Construction Company, an ocean and river navigation company out of the Oregon Steamship and the Oregon Steam Navigation Companies, and he made up his mind, before he reached Portland, to try to accomplish this object. This was the germ of his remarkable creation, the Oregon Railway & Navigation Company.

The Oregon Steam Navigation Company was formed in 1862 with a capital of $2,000,000 by a combination of individual owners of steamboats running on the Willamette and Columbia Rivers. Subsequently the stock capital was increased to $5,000,000 after considerable additions to the properties of the company, paid for out of earnings. It was a close corporation, a large majority of the stock being held by five leading men of Portland, who formed the Board of Directors and exercised actual management. In 1871 these met the party, representing the Northern Pacific Railroad, which had come to the Pacific coast to locate the western terminus of the line and to arrange for the commencement of construction in Washington or Oregon. The directors of the Navigation Company, being alarmed by the prospect of railroad competition with their boats on the Columbia, tried to induce the Northern Pacific delegation to buy them out, and the latter took a proposition with them to the East for the sale of the whole of the Navigation stock for $2,000,000 or forty per cent. of the nominal value of $5,000,000. A deal was consummated in Philadelphia some months later with the purchase by Jay Cooke & Co., for account of the Northern Pacific, of three quarters of the $5,000,000 at forty per cent., half cash and half in Northern Pacific bonds at 90. The Portland directors retained the other quarter of the stock and continued in the management.

Jay Cooke & Co. held the three-quarters of the Navigation stock as collateral for their advances to the Northern Pacific when they failed in 1873, and the stock became part of their bankrupt estate and was distributed by the trustees managing it, mostly in small lots among the numerous creditors of the firm in part settlement of their claims. The recipients knew nothing about the Navigation Company, and the stock came into the market at very low figures. The Portland directors were not slow in improving this opportunity to buy back the control of the company, and they and their friends held again, in the spring of 1879, over four-fifths of the stock.

On his arrival in Portland late in April, Mr. Villard immediately asked J. C. Ainsworth, the president of the Navigation Company, whether he and his associates were willing to sell their holdings. After some deliberation, they informed him that they were disposed to sell, but they wanted a high price, and suggested that, before beginning formal negotiations, he should inspect all their properties, and to that end visit the Upper Columbia and Walla Walla country once more. Accompanied by one of their number, he spent ten days in doing this. His previous highly favorable impressions of the Upper Columbia country and of the present and future business of the Navigation Company were fully confirmed. On his return to Portland, an inventory of the company's properties was produced, aggregating $3,320,000, including a fleet of side- and sternwheel steamers and the twenty-one miles of portage railroads. A statement of earnings for several years was submitted, with an offer to sell 40,320 shares at par. The directors thought that it was too big a deal for Mr. Villard, but, as the earnings showed twelve per cent. on $5,000,000 for the past year, with a certain large increase for the current year, he considered it a fine bargain and one well worth securing. They readily entered into a plan he had matured on the Upper Columbia, after seeing the difficulties of handling the large and fast-growing grain traffic owing to the natural obstructions to navigation, which involved breaking bulk three times and the use of three sets of boats. It was to form a new company, which should absorb both the Oregon Steamship Company and the Oregon Steam Navigation Company, and which should be provided with capital enough to build a narrow-gauge railroad from the Lower Cascades up the left bank to a connection near the mouth of the Snake River with the existing narrow-gauge road Jto the town of Walla Walla. This railroad would secure, in his judgment, by the safe occupancy of the Columbia Valley, the only outlet of eastern Oregon and Washington to the Pacific, against both river and railroad competition—a far more important matter than the economical transportation of wheat.

After days of negotiation, it was agreed that the new company should be organized under the name of the Oregon Railway & Navigation Company, with a capital of $6,000,000 stock, and issue $6,000,000 six per cent. bonds. Mr. Villard secured for $100,000 cash an option till October 1, to call for 40,320 Navigation shares at par, paying for them fifty per cent. in cash, twenty per cent. in the bonds, and thirty per cent. in the stock of the new company. He was allowed $1,000,000 stock and $1,200,000 in bonds for the acquisition of all the Oregon steamship properties and for a fourth large new steamer; $2,000,000 stock and $2,500,000 bonds to raise the cash required for Ainsworth and friends, leaving $1,800,000 stock and $1,500,000 bonds for the purchase of the thirty-five miles of the Walla Walla railroad and the construction of the new railroad along the Columbia. For $10,000 he obtained an option, also till October 1, to buy the Walla Walla line at a satisfactory price.

The Navigation people did not think it possible for Mr. Villard to raise so much cash, and considered him a reckless fool to put up the stake of $100,000, which they felt certain of pocketing. He left Portland at the end of May in a high state of elation at what he had achieved, and reached New York on June 8. The scheme he brought with him differed from that agreed on with the Union Pacific people; but as it contained so much of immediate promise, he was confident that they would gladly accept it. He submitted it at once to Jay Gould, but the latter received it coolly, and within a few days sent a note to Mr. Villard saying that he and his associates preferred not to participate. Nothing daunted, but rather glad at this parting of their ways, Mr. Villard invited his financial friends to join in exchanging the new Oregon Steamship for Oregon Railway & Navigation securities, and to subscribe for the required cash payments for bonds at 90 with a bonus of seventy per cent. in stock. He met with such prompt response that within ten days he was able to telegraph to the Portland parties to send on their Navigation stock for delivery on July 1, when all the cash, bonds, and stock due on it would be ready to be paid and delivered to them. This was actually done, and in addition the balance due to the foreign creditors for the Steamship Company was remitted and enough cash left in the treasury of the new company for the fourth new steamship and for beginning construction on the Columbia River railroad line, which was being surveyed as rapidly as possible. This quick work caused astonishment in American as well as in European financial circles, and the achiever of it received far more public notice than he ever expected or cared to have. It would seem a trifling operation in these later years, in which scores of millions have often been raised by syndicates for the reorganization of railroads and the formation of industrial combinations, but in those early days it was an unexampled performance.

The reception of the securities of the new company by the public also made an extraordinary "record" best shown by the following incident. Mr. Villard was overworked, and, after setting up the Oregon Railway & Navigation Company, embarked for Europe with his family, early in July, for a rest of some months. The shares were listed at the New York Stock Exchange during the summer. He did not return until late in November, and, on reaching the dock, he noticed one of his counsel in the crowd waiting, waving a piece of paper at him. It turned out to be a broker's report of a sale at 95 of the stock that had been given five months before as a bonus. This rapid rise was due to the fact that the net earnings of the two constituent river and navigation companies were sufficiently large to warrant the payment of bond interest and eight per cent, dividends on the stock, payment at which rate had already been commenced. This astonishing increase naturally raised Mr. Villard to a still more commanding position in Wall Street. Yet it was but the beginning of a series of like successes.

The vast region drained by the Columbia and its tributaries formed a very empire in its extent. Its material development was entirely dependent upon the present and future transportation facilities within its limits. Mr. Villard's rule over these and, through them, over the whole future of that promising part of the country was rendered all but absolute by his personal success. He was fully conscious of the duties his great task imposed upon him to the new corporation and to the people of Oregon and Washington. He devoted himself to their fulfilment with all the energy at his command. Before going to Europe, he had closed a contract for the construction of the fourth steamer, named the Columbia, which was the finest in every respect that had left the yards of John Roach, the well-known ship builder. Having become interested in the incandescent electric lighting as perfected by Edison, he insisted upon having the Columbia provided with it. Roach was strongly opposed at first to the innovation, but yielded, and the first electric plant ever placed on a sea-going vessel went into the new boat and gave perfect satisfaction. The novel illumination was also at first objected to, strange as it may now seem, by the marine underwriters.

The shipment of railroad material for the Columbia line also occupied his attention. It having been decided to formally consolidate the two constituent companies with the controlling one, the acquisition of the outstanding minority of the Oregon Steam Navigation stock devolved upon Mr. Villard, and proved a troublesome undertaking. Last, but not least, a contingency arose in the resumption of construction activity by the Northern Pacific in Washington Territory, which threatened the monopoly of the Oregon Railway & Navigation Company on the Upper Columbia. The former company had succeeded in raising enough capital to build that part of the main line from Lake Pend d'Oreille to the confluence of the Columbia and Snake rivers, known for a time as the Pend d'Oreille Branch. The continuance of this line down the right bank of the Columbia, parallel to the Oregon Railway & Navigation Company's line on the opposite bank, was a menace to the latter, whose location really constituted an indisputable encroachment, moreover, on the right of the Northern Pacific to build on either bank. Mr. Villard entered into negotiations with the Northern Pacific early in 1880 to obtain, in consideration of a liberal traffic contract, a concession of the right of way on the left bank to his company, and an agreement on their part not to build on the other bank. It was then merely agreed, however, that he should meet the late Joseph D. Potts, of Philadelphia, one of the directors, on the Pacific coast, and with him go over the ground and find a basis for a mutually satisfactory arrangement. They met, travelled together, and joined in recommendations to their respective corporations, and early in the fall the preparation of a contract embodying the above suggestions was begun in New York. Mr. Villard spent the greater part of the summer on the coast, and expedited the construction work on the different lines as much as possible. In view of the negotiations with the Northern Pacific for using his company's Columbia River line, and of the surprising increase of the river traffic, it was decided to abandon the narrow for the standard gauge. An exploration trip which Mr. Villard made with Messrs. George M. Pullman and William Endicott, Jr., of Boston, through eastern Oregon and southeastern Washington led to the determination to commence at once the construction of a number of branch lines as feeders to the river line. During this tour he met and addressed gatherings of settlers at different points, explaining his purpose to give them railroad communication, and urging them to increase their wheat planting. He made it a point to ask his hearers what rate on wheat to tide-water would be satisfactory, and was able to promise them lower rates than they asked. He defined his policy as that of a beneficent monopoly, and his executive action bore him out, for, upon the completion of the Oregon Railway & Navigation Company's railroad system, the cost of transporting grain to the sea was at once reduced forty per cent. and more.

To provide the additional capital required by the change of gauge and for the construction of feeders, the capital stock of the Oregon Railway & Navigation Company was increased by $6,000,000, which was offered to the stockholders at par, who took it readily, as the market price of the shares had risen to above 180 before the new issue. In his first annual report as president, published in the summer of 1880, Mr. Villard announced that 115 miles of the river line were about being completed, and that the grading on the branch lines in southeastern Washington was done.

During his sojourn on the Pacific coast in 1880, a project for another company matured in his mind, the object of which should be the development of the natural resources, mineral, agricultural, and otherwise, of Oregon and Washington, and the North Pacific coast generally, in cooperation with the Oregon Railway & Navigation Company. The name of Oregon Improvement Company was adopted for it, and it was authorized to issue five millions of stock and five millions of bonds. The latter were offered at par with the full amount of stock as a bonus, and were eagerly subscribed for by Mr. Villard's followers. His success was even more immediate than with the Oregon Railway & Navigation Company, as the subscriptions sold at a premium of from forty to fifty per cent, before the lists were closed, and the shares reached 91½ at the New York Stock Exchange within a few months. The new company bought and worked a coal railroad and mine in western Washington, and purchased a large body of select agricultural lands from the Northern Pacific in the so-called Palouse country in eastern Washington; brought out three large new coal steamers from the Atlantic coast; erected a great coal dock at San Francisco, and eventually acquired the capital stock of the Pacific Coast Steamship Company, which had pooled its earnings with the Railway & Navigation Company for the San Francisco-Portland line. As the last-named company had a good many dealings with the Improvement Company, Mr. Villard decided not to assume the presidency or be a director of the latter, but he directed all the investments of its capital elsewhere referred to.

Early in the summer of 1880, a change occurred in his relations to the Oregon & California. During his visit to Germany in 1879, he had informally agreed with the Frankfort committee of bondholders to bring a proposition before the Oregon Railway & Navigation Company to buy all the interest of the bondholders in the two Oregon railroads for a guarantee of principal and six per cent. interest on half their nominal holdings of Oregon & California bonds. A committee of Navigation directors, consisting of Messrs. Pullman and Endicott, was charged to examine the roads and report upon the proposition. But Mr. Villard himself withdrew it when a Scotch company commenced the construction of a competitive narrow-gauge system in the Willamette Valley. As the Navigation Company operated boats on the Willamette which affected the traffic of the railroads, he deemed it his duty to resign as president of the Oregon & California and as a member of the committee, which he did at the time stated. But the severance of his relations with that company did not continue long. During 1879 and 1880, the control of the majority of the Oregon & California bonds had gradually passed from German to English holders, who started a movement in London for the reorganization of the roads. A plan was perfected, and, with Mr. Villard's knowledge and sanction, was unanimously approved at a special bondholders' meeting.

In order to provide capital for the completion of the Oregon & California to the California boundary, where its junction with the Central Pacific was expected, the issue of new six per cent. bonds, at the rate of $20,000 a mile and $12,000,000 preferred and $7,000,000 common stock to be given in exchange for the old seven per cent. bonds, was authorized. Under the direction of the Improvement Company, with Mr. Villard's assistance, an underwriting syndicate for $6,000,000 of the new bonds was successfully formed, after which he was reflected president of the Oregon & California Company, which had absorbed the Oregon Central. The work of continuing the main line southward from Roseburg was at once started and pushed energetically.

CHAPTER XLI

Completion of the Northern Pacific Railway
1880–3

THE negotiations with the Northern Pacific were resumed in September, 1880, by Mr. Villard, assisted by Thomas F. Oakes, whom he had induced to resign as general superintendent of the Kansas Pacific and assume the functions of vice-president and general manager of the Railway & Navigation Company. The Northern Pacific parties were lukewarm and hard to satisfy, but a contract was signed on October 20. Mr. Villard's side secured in it all the essential points it had been striving for except a covenant by the other party not to build down the north bank of the Columbia, which it could, however, hardly make without risking a forfeiture of a large portion of its land grant in Oregon and Washington. The Northern Pacific recognized the other company's right of way on the southern bank and its title to the station grounds, and waived all claims for damages, and, most important of all, agreed to a division of territory, with the Snake and Columbia as the dividing line, except that it consented to the construction of a line into the Palouse country by the Railway & Navigation Company. In consideration of all these concessions, the latter agreed to complete a standard-gauge road within three years from the western end of the Pend d'Oreille division at the mouth of the Snake River to Portland, and to grant the Northern Pacific the right, with out the obligation, to run its own trains over it at a fixed charge per train mile. It also agreed to carry Northern Pacific construction material at reasonable and fixed rates, and to effect the sale at $2.50 an acre of three hundred thousand acres of Northern Pacific land along the Palouse line to the Oregon Improvement Company.

Mr. Villard and his friends were exultant, and the Navigation stock rose considerably on the announcement of the signing of the contract, to which the Northern Pacific would not have assented if the negotiations had been protracted a little longer. Its management had not found it easy to raise money for the resumption of construction east and west, and would not have been able to command the means to build along the Columbia. Moreover, it had shrunk from a contest with a young and vigorous concern like the Oregon Railway & Navigation Company, with apparently unlimited financial resources, under a bold and aggressive leadership. Its defensive position was entirely changed within a month of the execution of the contract by the sale of $40,000,000 of its first-mortgage bonds to a powerful syndicate headed by Drexel, Morgan & Co., Winslow, Lanier & Co., and A. Belmont & Co. The transaction, then unparalleled in its magnitude, assured to the company $36,000,000 of money, which was then generally assumed to be sufficient for the completion and equipment of the entire main line.

Mr. Villard heard of this portentous operation only a few days before its consummation. He now understood why his own offer during the negotiations with President Billings to raise $10,000,000 for the Northern Pacific against its mortgage bonds was at first warmly received but afterwards declined. He perceived at once distinctly what damaging consequences the great financial strength thus secured to the other company might have for the interests represented by him. The fear, indeed, was justified that his company would be struck in its vital part by the continuance of the Northern Pacific main line down the Columbia. He knew that the mere threat of this would greatly affect the market value of his company's securities, and much impede the raising of additional capital for it. In a short time he decided upon the adoption of a radical remedy for these threatening consequences. He formed the boldest resolution of his whole business career. It was nothing less than the acquisition of a sufficient amount of Northern Pacific shares to influence the direction of Northern Pacific affairs, to which stock interest should be permanently joined the large majority of Oregon Railway & Navigation stock held by himself and his followers, so as to insure lasting harmony between the two corporations.

In pursuance of this object, he conceived the plan of forming a new company which should purchase and hold a controlling interest in the Northern Pacific as well as in the Oregon Railway & Navigation. Foreseeing that a regular supply of capital would be needed for years for the development, by branch lines and otherwise, of the enormous stretches of wild country tributary to the two companies, he enlarged the scheme so as to make the new corporation also a financiering company for the two others. He had gained enough experience in Wall Street by this time to know that, if his intention to form such a company for such a purpose became public, he would never be able to secure his main object the purchase at reasonable figures in the open market of the large amount of the two stocks he needed. He therefore determined to begin by buying as secretly as possible all that his private means and credit permitted. Only a few of his most intimate friends were aware of his operations. Having gone as far as he could on his own account, he decided, in February, 1881, to call on his supporters generally for further funds in such a manner as not to disclose the object he sought to accomplish. With his absolute faith in the soundness of his project, he felt justified in taking large responsibilities, and did not hesitate to make the boldest possible appeal to personal confidence by asking his followers to intrust their money to him without being told what use he intended to make of it. Accordingly, he issued a confidential circular to about fifty persons, informing them that they were desired to subscribe towards a fund of $8,000,000, to which he himself would contribute a large part, in order to enable him to lay the foundation of a certain enterprise the exact nature of which he would disclose on or before May 15, 1881. Payments were to be made in three instalments.

The effect of the circular was astonishing. The very novelty and mystery of the proposition proved to be an irresistible attraction. One-third of the persons and firms appealed to signed the full amount asked for before the subscription-paper could reach the other two-thirds. Then a regular rush for the privilege of subscribing ensued, and, within twenty-four hours of the issue of the circular, more than twice the amount offered was applied for. The allotments were made as fairly as possible, but hardly one of the subscribers was satisfied with the amount allowed him. All wanted more, and Mr. Villard's offices were crowded with persons pleading for larger participations, including some of the first bankers of New York, of whom several protested angrily when refused. The subscriptions commanded twenty-five per cent. premium at once, which rose to forty and fifty per cent.; in other words, people were willing to pay fifteen hundred dollars for every thousand they were permitted to contribute. The eight million dollars was promptly paid, notwithstanding the great stringency of the money market at the time.

The subscribers received a personal receipt from Mr. Villard, reading as follows:

Received this day from ……… the sum of ……… dollars, as his contribution to, and which entitles the holder hereof to a proportionate interest in, the transactions of a Purchasing Syndicate to be formed with a capital of $8,000,000, by agreement in writing of the parties in like interest, for the acquisition of properties, real, personal and mixed, for the purpose of the sale thereof to and the consolidation with the Oregon Railway & Navigation Company or the Oregon Improvement Company or both, or to serve as the basis for the formation of a new Company. It is understood and agreed that the undersigned shall account to the holder hereof for the use of the moneys for which this and like receipts are given on or before May 15, 1880, but not sooner, and that the holder hereof shall participate equally in all the profits and benefits of every description with all other persons in like interest in proportion to said contribution. This receipt is not transferable except with the written consent of the undersigned.

The promised accounting was postponed until June 24, when the subscribers met by invitation of Mr. Villard in his offices, and received for the first time full explanations of his plan to form a new company for the double object already explained. The project was so well received that his simultaneous invitation to subscribe $12,000,000 more was generally responded to. The new company was organized immediately in Oregon, under the name of the Oregon & Transcontinental Company, with an authorized capital stock of $50,000,000, of which $30,000,000 was issued and distributed among the subscribers for the $20,000,000 cash paid in.

This unique financial feat, without precedent or parallel, gained for Mr. Villard much of the kind of reputation which he least coveted. Wall Street dubbed it the "blind pool," and the newspaper exaggerations and fictions indulged in throughout the country regarding it gave him a most distasteful notoriety. The new corporation was the first of the companies, now called "proprietary," which have since become numerous. Its conception was considered by eminent bankers as a stroke of genius, and the belief in its practicability by men of the highest standing was evidenced by the composition of the company's board of directors and the list of stockholders. Yet the company was destined to prove a grievous disappointment and the greatest possible trial to its originator. Even before the purchasing syndicate was wound up, unexpected troubles were born with the new company. In forming it, the founder had no intention of ousting the existing management of the Northern Pacific, but only to bring about a close alliance between it and the Oregon Railway & Navigation Company. But President Billings rejected his advances, and would not even listen to his request for a small representation in the Northern Pacific board. Thereupon he offered to purchase the stock holdings of Mr. Billings and his fellow-directors, but this offer was also declined. The Northern Pacific directors, knowing that this would result in their displacement at the next annual election, then tried to fortify themselves by the sudden distribution of the $18,000,000 of common stock still in the treasury. Mr. Villard got wind of this and sued out an injunction against the issue. After some litigation, a compromise was effected. A new board of directors was agreed upon, with a majority of representatives of the Oregon & Transcontinental, and elected at the annual meeting in September, with Henry Villard as president, T. F. Oakes as first vice-president, and Anthony J. Thomas, an officer of the Oregon & Transcontinental Company, as second vice-president. Thus, in a little over two years from the birth of the Oregon Railway & Navigation Company, Mr. Villard had assumed the burden of forging a new rail chain across the continent, twenty-seven hundred miles long, by connecting the existing links.

The new management considered its most important duty the pushing of the construction of the main line of the Northern Pacific with the utmost energy. It found a balance of no less than $34,000,000 from the sale of the $40,000,000 first-mortgage bonds available for this purpose. Yet, in spite of this seeming abundance, serious financial embarrassments arose during the first year of the new administration from two sources. In the first place, large expenditures were incurred for grading, bridging, and tunnelling at points in Montana, a long distance from the two ends of the track; but no money could be drawn from the building fund for outlays not resulting in finished road. Under the terms of the mortgage, the proceeds of the bonds became available only upon the completion and acceptance by the United States Government of the main line in 25-mile sections of road. In the second place, there was serious trouble owing to the lingering illness of President Garfield and the refusal of his successor, President Arthur, to appoint commissioners to inspect completed sections because bills forfeiting the company's land grant were pending in Congress. Although Mr. Villard induced one Republican leader after another to appeal to the Executive on behalf of the company for the appointment of commissioners, President Arthur remained immovable until September, when he yielded to the arguments of Roscoe Conkling. For more than a year, the company had been obliged to meet requirements for construction and equipment at the average rate of over $2,000,000 a month without reimbursement from the proceeds of the bonds. It was a period of most harassing anxiety for Mr. Villard. More than once the situation seemed desperate, and he prevented a breakdown only by the unhesitating use of his personal credit and by assistance from the Oregon & Transcontinental Company, the availability of which fully demonstrated the practical value of its creation. Notwithstanding these financial hindrances, the progress of construction was not delayed an hour.

During the whole of 1882, and up to midsummer of 1883, Mr. Villard devoted himself unceasingly to the double duty of meeting the money requirements for construction and equipment and of accelerating the grading, bridging, tunnelling, and track-laying by the several companies under his presidency. He sought to inspire the engineers in charge and the contractors with determination to do their utmost to complete the main line of the Northern Pacific and the river road of the Oregon Railway & Navigation by the end of the summer of 1883. Construction was also proceeding on the Oregon & California. Moreover, Mr. Villard, through the Oregon & Transcontinental, in accordance with its programme, had taken in hand in 1883 the building of nearly five hundred miles of Northern Pacific branches in Minnesota, North Dakota, Montana, and western Washington, including the important Yellowstone Park branch. The forces employed by the several companies formed a total of over twenty-five thousand railroad men, mechanics, and laborers, including fifteen thousand Chinamen, and the total disbursements on all accounts reached fully four millions of dollars a month. He aimed at an achievement the like of which had never before been attempted in the civilized world—nothing less than the completion of not far from two thousand miles of new road in two years, or nearly three miles a day, including scores of miles of tunnels, bridges, and trestles. No man in this country, indeed, had ever before at one time had supreme charge of such gigantic operations, extending from the Upper Mississippi to the Pacific Ocean, and from Puget Sound to the northern boundaries of California.

After protracted negotiations with the Union Pacific officials in the early part of 1883, Mr. Villard finally induced them to agree definitely to construct their Oregon Short Line to the Snake River as fast as possible, in consideration of which he undertook to continue the Baker City branch of the Oregon Railway & Navigation Company to a junction with their extension. The enlargement of the construction programme of the latter company had called for another issue of $6,000,000 stock in 1882, and the agreement with the Union Pacific now led to a third issue of the same amount, so that the total outstanding stock capital was $24,000,000. As the net earnings of the company had risen in the first three years of its existence from less than a million to nearly three millions, the successive issues of stock were readily absorbed. The company was then the only one in the United States that met all its pecuniary requirements without putting out a single additional bond after the first issue, of which fact its president was justly proud.

Mr. Villard spent many months, both in 1882 and in 1883, on the road in personal visits to the principal construction columns. In April, 1883, occasion arose for him to be in Portland by a certain date, which he could only do by making an accelerated trip across the continent. Owing to the courtesy of the lines between Chicago and San Francisco, he was able to arrange for a special train running through without stopping anywhere except for a change of locomotives about every two hundred miles. The run was watched by the whole Western public, and the newspapers reported regularly the progress of his train. Everywhere along the route, people turned out to see it fly past and cheer its occupants. It went through in less than half the time of the regular passenger trains, being the fastest trip hitherto made.

Mr. Villard's sojourns in Portland had always been times of hard work, but the one following the flying journey overland was an extraordinarily busy one. He worked out the details of a lease of the Oregon & California lines by the Oregon & Transcontinental Company on what seemed advantageous terms to the latter; the lease was subsequently submitted to and approved by the stock holders of the two companies. The construction of the extension from Roseburg had far exceeded the estimates, and the proceeds of the new bonds were exhausted before the very costly lower end, crossing the Siskiyou Mountains, was reached. The lease therefore provided for the completion of the line by the lessee for the remainder of the authorized Oregon & California first-mortgage and all of the second-mortgage bonds. Mr. Villard also closed a lease of the narrow-gauge system built with Scotch capital in the Willamette Valley. Next, he perfected the organization of a separate Terminal Company, which was to create the terminal facilities, including a large passenger station, a bridge over the Willamette, machine-shops, freight-houses, round-houses, docks, etc., required for the three railroad systems, the Oregon & Transcontinental Company, Oregon Railway & Navigation, and Northern Pacific, which would terminate at Portland. The estimated outlay of the Terminal Company was nearly $3,000,000, which was provided for by the issue of bonds to be guaranteed by the three railroad companies. As Portland did not have a single decent hotel at the time, Mr. Villard also purchased a suitable site for a large modern one, and gave a leading firm of New York architects charge of its erection. Its completion was delayed for some years, but "The Portland" stands to-day, as planned by him, the finest establishment of the kind on the Pacific coast north of San Francisco.

Oregon had an institution which went by the name of University, of which it represented, however, but a very small beginning. It had received little support either from the State or from the public, and was so embarrassed by indebtedness that it would probably have been obliged to close its doors, had not Mr. Villard come to its relief by paying its floating debt in response to an appeal from the Board of Regents. He also presented it with the nucleus of a library. In May, 1883, he offered to donate fifty thousand dollars to it on condition that the State would levy a tax sufficient for its maintenance on a moderate scale. This being done, he paid over the promised sum, in recognition of which gift a hall was named after him. About the same time, he intervened to save the Territorial University of Washington from suspension by the failure of the Territorial Legislature to make an appropriation for it.^[1] He also helped various local charities on the North Pacific coast.

Before leaving for an overland trip to St. Paul along the finished and unfinished parts of the Northern Pacific main line, he delivered a speech to a large audience at Portland. Referring to the fact that construction on the Oregon Railway & Navigation lines had progressed more rapidly than had been expected, as shown by the completion of the Columbia River line the previous November, three months ahead of time, and in view also of the advanced state of the work on the Northern Pacific, he said he hoped the announcement he was about to make without hesitation would find credence that he would come to Portland again early in the fall, and be the first passenger to alight from the first through-train from St. Paul to that city. He further announced the terms of the understanding he had reached with the Union Pacific regarding the coming junction of the Baker City branch of the Oregon Railway & Navigation Company with the Oregon Short Line. Thus he could promise them not only one but two railroad connections with the East within a short time. In response to this, the enthusiastic audience gave him a great ovation. He was able fully to redeem his promise regarding the time and manner of his next arrival in Portland.

Accompanied by a party of railroad officials, he set out for the eastward land journey. At that time there was still a gap of four hundred miles between the eastern track end on the Upper Missouri near Gallatin and the western on Clark's Fork of the Columbia, which he traversed by vehicle and on horseback. At one time he drove in a buggy over a grass-covered height, rising in less than half a mile about three hundred feet, which divides the source of the Columbia from that of the Missouri. His observations impressed him greatly with the agricultural richness of the company's lands in eastern Washington and the timber value of those in Idaho and Montana. The immense unexplored region he traversed gave rise in his mind to a desire to start a thorough scientific exploration of the entire unknown portion of the Northern Pacific land grant; this was subsequently carried out by the organization of a transcontinental survey under Professor Raphael Pumpelly. The hearty welcome which Mr. Villard received in all the towns and settlements cheered him, but cause for depression also arose on this journey. His conferences with the superintendents of construction and contractors, and what he himself saw of the local difficulties that had already arisen and that had still to be grappled with, led for the first time to apprehension on his part that there would be a large excess of actual outlay over the estimates of the chief engineer. On arriving at St. Paul, after having spent nearly three weeks on the way, having also inspected the work on the new branch lines in Dakota and Minnesota, he immediately ordered the chief engineer to make a special report to him as to the money requirements for the completion of the main line that summer, of the possibility of which his tour had satisfied him.

In St. Paul he was occupied chiefly with the formation of a terminal company in the interest of the Northern Pacific. The company had insufficient grounds in St. Paul, and as good as none in the sister city of Minneapolis, yet there was urgent need of ample facilities in both places in view of the approaching change of the Northern Pacific from a local into a transcontinental line. The reason was that its line connecting the main line at Brainerd with the Twin Cities was only partially owned by the Northern Pacific. He conceived and carried out the project of acquiring the connecting line entirely, through a reorganization of it under the name of St. Paul & Northern Pacific Company; a new bond issue providing for the necessary acquisition of real estate and other improvements. He concealed his plan until the large grounds needed had been quietly bought up by third parties for his private account without attracting attention, as publicity would at once have resulted in such a rise in prices that the purchase at reasonable figures would have been impossible. When he had secured all that was needed, he turned the whole over to the St. Paul & Northern Pacific Company at cost and interest. The properties acquired cost about $300,000, but became worth several millions, and without them the Northern Pacific would have been simply strangled in the two cities. This disinterested action was especially recognized and commended by resolution of the Northern Pacific board. The St. Paul & Northern Pacific Company was very successfully financiered by the same syndicate that had taken the Northern Pacific first-mortgage bonds. Mr. Villard also received at St. Paul a deputation of officials of the Canadian province of Manitoba, with whose Government he had been in communication for some time regarding the breaking up of the Canadian Pacific's statutory monopoly of the through east-and-west business from the province. As, under Dominion law, in order to prevent American lines from being extended into the province, no railroad competing with the Canadian Pacific could be built within fifteen miles of the international boundary, a plan was adopted to build a Northern Pacific branch from the main line to the boundary and another from Winnipeg, the capital of the province, down to the forbidden belt, and to carry passengers and goods across the interval by ordinary vehicles. It proved an impracticable scheme, and had to be abandoned after the construction of the line to the boundary from the south had been commenced, and Mr. Villard regretted the mistake he had made in entering into it. The enterprise was sold to the St. Paul, Minneapolis & Manitoba Railroad Company, which was allied to the Canadian Pacific at that time.

The report of the chief engineer on the cost of the new part of the main line reached Mr. Villard soon after his return to New York late in June. It contained the startling admission that the actual requirements for the completion of the main line would exceed the estimates by more than fourteen millions of dollars. This revelation was a doubly staggering blow to him, because it discredited all his confident statements to his associates and followers based on the original estimates and confirmed time and again to him as true by the engineering department, that the cash resources in hand were ample for all wants, and because it imposed new financiering burdens on him. It was certain, too, to affect unfavorably the securities of his several companies. At this time, there became perceptible, indeed, the first signs of a reaction from the great rise in prices which had continued almost uninterruptedly, especially in railroad shares, since the resumption of specie payments. The shares of his companies had followed the general upward tendency and more than led the market. The Northern Pacific preferred stock rose above par and the shares of the Oregon & Transcontinental almost to par in September, 1882, with enormous transactions in both, aggregating some days seventy thousand shares for the one and thirty thousand for the other.^[2] Both stocks were believed, even by cautious bankers, to hold out promise of much greater appreciation. They assumed that the gigantic land grant would yield a great deal more in money than the principal of the first-mortgage bonds, that upon the completion of the line the preferred stock would receive a full eight per cent. dividend, and therefore rise far above par and be quickly retired out of the lands especially pledged for its redemption. Assertions that this assured extinction of the prior securities made the common shares more certain of a greater rise than any others on the list, were frequently heard, and the most sanguine prophesied that it would double and triple their nominal value.

While made anxious by the construction deficit and the premonitions of the approach of a period of decline, Mr. Villard kept up his courage, and tried to infuse it into the minds of the doubters beginning to appear among his followers. He strengthened himself and others with the seemingly indisputable proposition that the Northern Pacific could certainly be expected to earn much more as a through transcontinental line than as one operated in disconnected sections, and he looked forward to the completion of the main line as the end of all his present troubles and the dawn of halcyon days. Buoyed up also by the renewed affirmation in the report of the chief engineer that the two ends of the track would be united before the end of September, he overcame the remaining difficulties with his usual resoluteness and fertility of resource. With a view to attracting European attention to his enterprises, he thought it well to make the opening of the Northern Pacific as a new transcontinental route the occasion for an international celebration. At his instance, the company extended invitations to the members of the United States Government and the governments of the seven States traversed by the road, to leading members of the United States Senate and House of Representatives, to over a hundred representative men from all parts of the country, and to the leading newspapers, to be present at the driving of the last spike. The whole diplomatic corps was also invited, as well as several score of prominent Englishmen and Germans. As nearly all those invited accepted, it was necessary to arrange for four special trains from the East and one from the Pacific coast. For the benefit of the Company's guests, he had had printed a history of the Northern Pacific Company, forming a large volume,^[3] together with a guidebook descriptive of the cities, towns, and the country along the line, as well as a small pamphlet with special instructions for the trip. The preparations for the excursion across the continent added much to his labors, but they were all completed, so that it got under way from the East on August 28.

Mr. Villard led it himself, accompanied by his whole family, including his baby boy, Henry Hilgard, who was only three months old. Two special trains started from the Atlantic; one was added at Chicago, and another at the Twin Cities. The Ministers of Great Britain, Germany, and Austria were of the party. From England, Lord Justice Bowen, Charles Russell (the late Lord Chief-Justice), James Bryce, Judge (afterwards Lord) Hannen, Horace (now Lord) Davey, Lord (now Earl) Carrington, Albert H. G. Grey (now Earl Grey), Earl and Countess of Onslow, Sir W. Brampton Gurdon, Hon. St. John Brodrick, and a dozen others had come over to join the party. The German guests were Professor Dr. Gneist, Professor Dr. A. W. Hofmann, the great chemist, Professor Zittel, the famous geologist, Georg von Bunsen, Dr. Paul Lindau, the novelist, official representatives of the cities of Hamburg, Bremen, Berlin, Stettin, and Frankfort-on-the-Main, General Robert von Xylander, his wife (only surviving sister of Mr. Villard), Colonel (now Lieutenant-General ) Emil von Xylander, several well-known financiers, including Dr. Georg Siemens of the Deutsche Bank and Otto Braunfels of the Jacob S. H. Stern firm of Frankfort-on-the-Main, several correspondents of leading newspapers, and some old personal friends of the host. Among the Americans were General U. S. Grant, several members of President Arthur's Cabinet, several ex-secretaries, seven governors, distinguished judges, United States Senators and Representatives, mayors of Western cities, and over a score of journalists.

The movement of the special trains over the continent formed a leading daily topic in the American and foreign press. The first formal reception given to Mr. Villard and his guests took place at Chicago, and was arranged by the municipal authorities and the Board of Trade. From there on they had a triumphal procession, the people all along the route turning out in vast numbers to give them an enthusiastic welcome. These popular tributes far exceeded Mr. Villard's expectations, and often embarrassed and burdened him as the central figure in the demonstrations. With their traditional rivalry, St. Paul and Minneapolis had striven to outdo each other with decorations, triumphal arches, salutes, parades, and entertainments. Military and civic associations more than twenty thousand strong passed in review before Mr. Villard and his guests in the morning in St. Paul, and over thirty thousand in the afternoon in Minneapolis. President Arthur, who was travelling in the West, and General Grant were also present.

There were other noteworthy incidents on the journey to the coast, One was the laying of the cornerstone of the State Capitol of Dakota at Bismarck by Mr. Villard in the presence of a great multitude. His address was followed by remarks made by the famous Indian chief, Sitting Bull, who had been brought there for the occasion from his place of captivity. Another was the gathering, by permission of the Secretary of the Interior, in eastern Montana, right on the line of the railroad, of a tribe of Crow Indians numbering two thousand warriors, squaws, and pappooses, with wigwams and fifteen hundred ponies. The men appeared in full war array, and performed war dances for the benefit of the excursionists. So weird a spectacle, the like of which will never be seen again in the United States, naturally appealed very strongly to all the European guests. The act of driving the last spike (not a golden one, as the press had it, but the very first one driven in 1872 on the Minnesota Division) was performed in the waning light of September 3 in western Montana, at the point where the train with guests from the Pacific coast was met. It was preceded by addresses by Mr. Villard and Mr. Frederick Billings, his predecessor as president, an oration by William M. Evarts, and short speeches by the seven governors and United States Senator Nesmith of Oregon. A thousand feet of track had been left unfinished in order to give the guests a demonstration of the rapidity with which the rails were put down. This having been done, amidst the roar of artillery, the strains of military music, and wild cheering Mr. Villard hammered down the "last spike." He had his family next to him, as also the head chief of the Crows, who formally ceded their hunting-grounds to the railroad after the baby Hilgard had touched the spike with his little hands. Mr. Villard's emotions at that moment may be imagined. Speedy relief from the load of anxiety which the gigantic task had imposed upon him seemed to be promised. What wonder that he felt indescribably elated at this consummation of his peaceful conquest of the West?

During the passage of the trains over the new track in Montana, Idaho, and Washington, Mr. Villard realized to the full the serious responsibilities he had assumed in providing for the comfort and safety of his guests. There were as yet no stations on hundreds of miles of the line, which rendered the direction of the movement of the trains most difficult. This devolved upon him. There were no supplies to be had for half the distance, and the different trains had to be stocked daily from a special provision-train. Mr. Villard was in constant trepidation, too, lest accidents should upset the schedule of the trains. Several minor ones did occur, indeed, east of the Rocky Mountains, but they caused no injury to persons, and but little delay. In descending the western slope, after passing over the switchback road above the Mullen tunnel, not then completed, he was much alarmed by the breaking into two parts of his own train, owing to a defective coupling. A collision ensued, the end of the car occupied by the British Minister and six other prominent guests being smashed, without, however, doing injury to any of the inmates.

The closing receptions at Portland, Tacoma, and Seattle were not surpassed by those at the eastern end of the Northern Pacific in lavishness of hospitality and in enthusiastic popular participation. In Tacoma, Mr. Villard put himself at the head of his guests, and, preceded by a military band, marched them from the station to Commencement Bay, where they first saw the waters of the Pacific Ocean, and where they embarked for Seattle. The magnificent giant of the Cascades, Mount Tacoma, rose right before them, covered with an alpine glow wonderful to behold, for the sun was setting just as they reached the shore. Seattle was reached with an escort of more than a score of steam vessels. The last scene of the transcontinental celebration was fittingly enacted in the grounds of the University of Washington, which Mr. Villard had relieved from distress. An address to him, the most eloquent and most moving of all, was delivered by the daughter of the president.

CHAPTER XLII

The Wheel of Fortune.—1883-1890

MR. VILLARD returned to New York, where his presence was urgently needed, after an absence of only six weeks. The decline in his stocks had continued, and worried him so much while away that he could only at times forget, during the festivities of the opening of the road, the dangers that threatened him. The Northern Pacific construction deficit had assumed still larger proportions. The Oregon & Transcontinental Company was carrying a very heavy debt, incurred partly by the assistance given the Northern Pacific and by further purchases in the preceding summer of the stocks of the companies he controlled, for which it expected to pay by means of another issue of its own stock. This had been rendered impracticable by its decline in the market. Some relief was obtained by the creation of a second mortgage on the Northern Pacific and the issue of twenty millions of bonds under it. The wisdom of inviting the foreign guests to the opening of the road was now demonstrated, the German bankers being so much impressed with the vast regions tributary to the road that they promptly undertook to market the greater part of the new Bonds in Germany. The financial connection of the Deutsche Bank with the company, which was of such great help to it in after years, dated from that negotiation. The sale of the second-mortgage bonds relieved both the Northern Pacific from the embarrassment of the construction deficit, and the Oregon & Transcontinental to some extent through the repayment of its advances. But the placing of another mortgage ahead of the stock inevitably depressed the Northern Pacific shares, and with their fall those of the proprietary company went still lower. Mr. Villard hoped for a counteracting effect from the expected large increase of earnings from through-business. But though he eagerly watched from day to day and week to week for better figures, the receipts showed, after a short spurt, not only no gain, but an actual loss, from the stoppage of the transportation of construction material.

With these unfavorable developments, the burden of carrying the great floating debt of the Oregon & Transcontinental grew heavier and more fraught with danger of a collapse during the latter part of the autumn. Mr. Villard learned then the lesson taught him so often in Wall Street, that the throng of people which follows with alacrity the man who leads them to profits, will desert him just as quickly when he ceases to be a money-maker for them. He soon found that many of his most trusted friends, who formerly visited his offices regularly, had sold out their holdings and stayed away. He even discovered downright treachery among his confidential advisers, two of the Oregon & Transcontinental directors using their private knowledge of the condition of the company for enormous "short" sales of its shares. The press, too, that had sung Mr. Villard's praises hitherto, contained criticism of his companies, became more and more hostile, and gradually even vented bitter attacks upon his management and his personal character. His unshaken faith in his enterprises and his naturally sanguine disposition led him to make the double mistake, in the first place, of assuring anxious stockholders that the downward movement in his securities was the result of bear operations, and that an upward reaction was bound to set in directly, and advising them to increase their holdings at the lower prices; and, secondly, of trying to sustain his shares by large purchases for his own account. He utterly failed to perceive that, besides the specific reasons for the fall of his stocks, the financial markets generally were already showing the first symptoms of that sweeping and wide-spread crisis which had been brought on by overspeculation during the preceding years, beginning in the fall of 1883 and extending all over the civilized world for many years. His personal embarrassment was much increased by the collapse of the West Shore (New York) Railroad enterprise, in which, to oblige friends, he had taken a large interest, the greater portion of which was lost.

Mr. Villard struggled on, using all his mental and pecuniary resources; but, in the latter part of November, he lost courage and became conscious that neither he himself nor the Oregon & Transcontinental could be saved. His physical powers of endurance were fast being exhausted, and sleeplessness threatened him with nervous prostration. The desertion of friends became more and more frequent, the abuse of the press more and more violent, and the pressure of his own and the Oregon & Transcontinental creditors harder to meet. He was finally in such desperate straits that he called a council of his most faithful and influential friends and disclosed to them his condition, with an appeal for advice and help, pledging himself in advance to accept any decision they might reach as to himself, no matter what consequences it might have for him personally.

These friends, Messrs. Fabbri, Endicott, and Rolston, at once began their investigation, and worked day and night in examining his books and accounts, as well as those of the Oregon & Transcontinental Company. On December 16–17, Mr. Villard was aroused by one of the number after midnight at his hotel, and then informed of their findings and conclusions. He was told that he was practically insolvent, and that the Oregon & Transcontinental Company was on the verge of bankruptcy. A syndicate had been formed ready to advance to him, on pledge of all his real and personal property, a sufficient amount to meet all his individual liabilities, and to take care of the indebtedness of the Oregon & Transcontinental Company, provided he resigned the presidency of it and of the Oregon Railway & Navigation Company, Although he had often thought of his possible retirement from the management of his companies, this sudden declaration was, nevertheless, a terrible shock to him, for he saw at once that his deposal as president of the former company meant also his loss of the Northern Pacific presidency. Knowing his own helplessness, remembering his pledge, and deeming no personal sacrifice too great for the salvation of his companies, Mr. Villard immediately accepted the terms proposed to him. The next day (December 17) the afternoon papers announced his resignation from the two companies founded by him; and the news of his downfall, like that of his triumph, went everywhere.

His fate was certainly tragic. Within a few years, he had risen from entire obscurity to the enviable position of one of the leaders of the material progress of our age. But a few months before, he had reached the pinnacle of contemporaneous fame, and received on his transcontinental journey such homage as few men have ever received in this country. But his fall from might to helplessness, from wealth to poverty, from public admiration to wide condemnation, was far more rapid than his rise, and his brief career was everywhere used to point a moral. At first, journalistic vituperation of him continued more vehemently than before. Hostility towards him was fanned by the untoward circumstance that, shortly after his resignation, he had moved with his family into his large private residence behind the cathedral on Madison Avenue, which he had begun to build a year before, when his fortune warranted its erection. He was loath now to occupy it, but he did so for reasons of economy, as the house was furnished and the family had no other city home. The house formed part of an imposing block, the whole of which he had built, and which presented the appearance of a palace, though it really consisted of six residences. Mr. Villard was attacked by a portion of the press for occupying a princely edifice in defiance of public sentiment and in mockery of the many who had suffered losses in his stocks, and was charged with having saved his own fortune while sacrificing that of his followers. When, however, the committee of investigation announced that he had turned over all he possessed for the benefit of his creditors, and that nothing had been found to throw a doubt on his honesty of purpose in the management of the companies, a reaction quickly set in. Defence of him appeared in the press under the signatures of leading men, many expressions of sympathy and praise from public bodies in the West and from prominent individuals all over the country reached him, and many persons of high standing called to express their admiration of his conduct. Some offers of financial aid were also made to him, but were not accepted.

The fearful strain to which he had been subjected for months ended in nervous prostration. His physical condition would not have permitted him to discharge his executive duties any longer. For months he had had but little sleep, and was in such a state of exhaustion that he could not perform any mental work. His retirement from the presidency of the Northern Pacific followed by the end of the year. He continued to hold that of the Oregon & California, however, in accordance with the wishes of his London friends, but he was not expected to do any work in connection with it until he had recovered his health. What he needed, and secured, was relief from all responsibilities and complete rest. As freedom from disturbance could not be had in the city, the family removed to their country home on the Hudson early in the spring of 1884. They bade farewell to their grand city abode without regret, and they never returned to it.

After Mr. Villard had recovered sufficient strength, he considered it due to himself, to his family and friends, in view of the wide misrepresentation to which he had been subjected, to prepare an authentic record of his administration of the Northern Pacific. To this he devoted himself in the country, and his statement was published in pamphlet form in English and in German, It was apparent that Mr. Villard's complete restoration to health could not be brought about as long as he remained near the scene of his rise and fall. The sense of the falseness of friends and the outrageous vilification he had undergone remained in his mind, and the family concluded that he could recuperate better in different surroundings. Accordingly, he sailed for Europe on June 4, 1884, accompanied by one of his brothers-in-law, in order to select a temporary place of residence for the family in Germany. On his way there, he was presented in London by his English guests with a rich testimonial of their appreciation of the good care he had taken of them on the overland excursion, in the shape of a gold loving-cup.

In response to pressing invitations, he also visited his native province. It was the first time he had been there since his public benefactions to it. These embraced foundations for the support of the libraries and poor students of the two Latin schools (gymnasia) at Zweibriicken and Speyer, followed by two other gifts, one for scholarships to promising graduates from these two institutions to provide for their university education, and another for the support, at the Academy of Fine Arts in Munich, of young men of pronounced artistic talents from his native province. He had presented Zweibriicken with a fund for small loans to deserving mechanics, and built an American workingman's home there to serve as a model for others, which it has done; had helped the Provincial Industrial School and Museum at Kaiserslautern out of pecuniary difficulties; and had given freely to the Improvement and Historical Societies of Rhenish Bavaria for their respective purposes. When the Eastern Palatinate was devastated by a flood of the Rhine, he collected in this country by his personal efforts a large sum for the relief of the sufferers. At the instance of a schoolmate, Pastor Scherer, he gave the money for the erection of a hospital and training-school for nurses (deaconesses) in his native town, which has since grown into one of the largest institutions of the kind in Germany, with over two hundred nurses, who nurse the sick all over Rhenish Bavaria. He had responded further to a great many minor appeals for charitable and other purposes. Escorted by the Governor and a reception committee, on a special train, Mr. Villard was honored like a king in the three principal towns of the Palatinate. The streets were decorated, the authorities received him formally, and banquets, serenades, and torchlight processions awaited him. Speyer and Zweibriicken each presented him with the freedom of the city. These ovations were entirely unexpected by him, and formed a most soothing and flattering compensation for the bitter trials he had passed through.

Having decided to make his new home in Berlin, he returned to America in August, embarking again with his family two weeks later. By October, they were fully installed in commodious apartments. He had purposely selected lodgings near the home of his old friend Friedrich Kapp (who played a prominent part in the United States between 1850 and 1870), in order to enjoy his company as much as possible. To his great disappointment and sorrow, Mr. Kapp died suddenly after Mr. Villard had seen him only once. With this exception, the two years in Berlin proved to be most gratifying to the family in every respect. Mr. Villard's sister and brother-in-law had lived there for years, and they, together with other relatives and his German guests of 1883, made him acquainted with official society and with the leaders in science, art, literature, and finance, and their families. It seemed as if his misfortunes excited real sympathy, and that people were glad to have an opportunity to manifest it.

The family spent the winters in Berlin and the summers in southern Germany and Switzerland. Mr. Villard's presidency of the Oregon & California Railroad made frequent journeys to London necessary during the year 1885, and the consequent long separations from his family led him to resign the position at the end of that year. In the winter of 1885–6, two singular propositions to resume railroad work were made to him. One was contained in a letter from Oscar Straus, then United States Minister to Turkey under President Cleveland, conveying an invitation from the Sultan to go to Constantinople and take charge of the proposed construction of a system of railroads through Anatolia in Asia Minor. To one who had thrown open a vast wild region in the New World to civilization, there was something tempting in the opportunity to instil new life into the ancient regions of Asia Minor. However, the thought of settling with his family for years in the Orient was utterly repulsive to him, and he declined the proposal. He called the attention of the Deutsche Bank to the scheme, and found that the institution was already working for a concession to build roads in Anatolia, which it eventually obtained and under which a main line and branches, representing a large aggregate mileage, have since been constructed. The other offer was of an even stranger kind, it being nothing less than a proposition to take in hand the financiering and building of a long narrow-gauge line from the coast of German East Africa to the interior. He felt, of course, even less inclination to enter upon that venture than upon the other.

His stay in Berlin really led, however, to his return to business life, not in foreign parts, but in his former American field. He was frequently consulted by the managers of the Deutsche Bank regarding American affairs generally and their own transactions with their correspondents in New York. The close relations thereby established gave rise to the consideration of the advantages of a regular representation of the Bank in New York City, for the purpose of enlarging its American business. After due consideration of the matter, it was agreed that he should undertake that duty for the Deutsche Bank and another powerful banking-firm at Frankfort-on-the-Main. Not being a trained banker, Mr. Villard was not to do general business for them, but to confine himself to transactions in good public and corporate securities chiefly, indeed, to can railroad securities. As his reappearance in the financial sphere of New York under such auspices would be tantamount to his complete rehabilitation, he hailed such a prospect with profound satisfaction.

The family started for England at the end of September, 1886, on their way to America. While in London, Mr. Villard received, a few days before sailing from Liverpool, a cable offer from Whitelaw Reid for his residence on Madison Avenue, which had been vainly offered for sale during the intervening years. After the exchange of some despatches, a sale was effected. This was a great relief to the owner, as the price received discharged his last obligations resulting from the breakdown of 1883, and left him with sufficient capital for a new start in business. On his arrival in New York during the following month, he at once opened offices at his old place in the Mills Building. With the letters from his new constituents accrediting him as their representative, he was sure of the respectful reception he afterwards met from the leading houses in Wall Street, and he found them very glad to do business with him. The press, as a rule, announced his return to financial activity in a kindly tone. The welcome which the family received in private circles, too, left nothing to be desired.

Mr. Villard resolved not to engage at once in active work, but to content himself for some time with a careful observation of the general investment field, and a thorough study of the railroad and other enterprises with which it might be desirable to do business. He was inactive for so long a time that his German friends began to show signs of disappointment. The first opportunity that commended itself to Mr. Villard's judgment came only in the following spring of 1887, when he bought the entire issue of several millions of prime mortgage bonds of a Western road, and resold them within a few days at a handsome profit. In the course of the summer, a marvellous turn of affairs, almost stranger than fiction, occurred, which, with all but magic suddenness, raised him once more to his former position before the public. The Oregon & Transcontinental Company had remained inactive, though holding its own, after the crisis of 1883; but its management, although it represented so large an interest in Northern Pacific shares, had not been able to come to a satisfactory settlement of its former financial relations with the Northern Pacific. The board of directors of the railroad company also refused to recognize its legitimate demand for a representation in that body. The parties in control of the Oregon & Transcontinental Company thereupon formed a combination to change the directory of the Northern Pacific at the next annual election in the fall. For this purpose, they largely increased the company's holdings of Northern Pacific shares and thereby its floating liabilities. The Oregon Railway & Navigation Company, in which the Oregon & Transcontinental Company still held a controlling amount of stock, had created after 1883 $5,000,000 seven per cent. debentures, due April 1, 1887. To provide for their payment, the company issued $5,000,000 five per cent, consolidated mortgage bonds. The firm of Chase & Higginson, of New York, had purchased in November, 1886, on time, $4,000,000 of them at 102 plus accrued interest, which Mr. Villard had vainly tried to secure for his German supporters. The firm named made a public issue, but failed to dispose of more than $700,000. Chase & Higginson not calling for more bonds before the maturity of the debentures, the Oregon Railway & Navigation Company borrowed $3,300,000 on the remainder of the bonds from the Oregon & Transcontinental Company, which in turn negotiated loans on them. The tight-money spell which set in in the latter part of August made it impossible for the latter company to renew its loans then maturing. Its failure was imminent, and would have involved that of Chase & Higginson, as they were liable for the remainder of the purchase price of the bonds, and would have embarrassed the Oregon Railway & Navigation Company as a borrower from the Oregon & Transcontinental Company. Mr. Villard was called on for help on August 27, 1887, by Elijah Smith, president of the Oregon & Transcontinental and of the Oregon Railway & Navigation Companies, and a representative of the imperilled firm. After explaining the threatening situation, they asked him for immediate assistance to the extent of not less than $5,000,000, for which they offered the Oregon Railway & Navigation bonds not taken by Chase & Higginson at 94, and twenty thousand shares of Oregon Railway & Navigation stock at 85 less 4¼ commission. They appealed strongly to his loyalty to save the two companies created by himself, and coupled with their terms an offer not only to turn over to him the management of both the Oregon & Transcontinental and Oregon Railway & Navigation Companies, but to place in his hands, unconditionally, sufficient proxies for the next Northern Pacific election of directors to put it in his power to elect to the board of that company any one he liked.

What a revolution of the wheel of fortune! But his first duty was to his foreign clients, and, after obtaining the best possible conditions, he cabled them the details of the proposed transaction,^[4] laying particular stress on the necessity of an immediate decision which meant nothing less than the cable transfer of the full amount of $5,000,000, He did not himself believe that this sudden large call would be responded to, but, to his great surprise, his friends accepted, and the entire sum was at his disposal in New York within thirty-six hours. So sudden a transaction had never before taken place in the financial dealings between Europe and the United States. Its direct effect in Wall Street was to completely upset the exchange market. The press proclaimed the event with sensational comments, and with positive inference that it meant nothing less than Mr. Villard's immediate resumption of the control of the three companies. He was hailed as the railroad king restored to his reign. Congratulations by telegraph and mail at once poured in upon him.

Seductive and overpowering as this sudden reelevation was, it left him sober and with a clear perception of what the acceptance of his old position would signify to himself. He had received too severe a lesson as to the fleeting character of quickly-acquired wealth and the fickleness of public favor to be very eager to expose himself again to a like fate. After several days reflection, he concluded not to accept any of the positions offered to him, but to remain entirely independent, and not even to allow himself to be reflected a director in any of the three companies, but to continue to act simply as a financier. But when he made his decision known, a great pressure was brought to bear on him from all sides to induce him to change it. His nearest friends argued with him that it was his duty to himself and to the corporations not to shrink from resuming his post, and that it would be to his lasting discredit if he failed to do so. Some of the Northern Pacific directors, who had before not been friendly to Mr. Villard, sought him and urged him to at least allow himself to be reflected a director, so that the company, which was in a bad way financially, could get the benefit of his advice and help. He finally yielded so far as to agree to reenter the Northern Pacific board, but only after he had submitted the case to his German friends and received their consent. He had the satisfaction of voting at the annual meeting of the company nearly one-half of the share capital, (365,799 out of 754,193), although he did not himself own a single share of it. Mr. Villard's own judgment never approved the step, and he always looked upon it as the greatest mistake he ever made to burden himself again with corporate responsibilities. Subsequent events showed that he was right, and made him rue it bitterly. He found the Northern Pacific in serious financial embarrassment, mainly owing to the excess, over estimates, of the cost of building the extension of the main line over the Cascade range to Puget Sound, as well as to the approaching maturity of the preferred-stock dividend scrip issued in 1882, and to the adoption of a badly conceived plan for the construction of a number of branch lines to mining camps in Montana. From these causes a large floating debt had accrued, measures for the funding of which were urgent. Against his advice, the board voted to issue, for this purpose and the current requirements, twelve millions of bonds under a third general mortgage. He considered this issue altogether too small, and advocated the creation of a large consolidated mortgage for present and future wants, but was outvoted. He took, however, most of the new bonds for his German friends, who placed them in their home market. Next, he thought out a scheme for the formation of a new company that would absorb all the Montana branches and issue uniform bonds at a fixed rate against them all. It was approved by the board and carried out in the following summer. Mr. Villard took all the branch bonds that could be issued for Germany, but resold them at a large advance in this country.

Mr. Villard took a strong interest in electric lighting from its earliest stages. He was one of the first stockholders and a director of the original Edison Light Company, which had acquired the patents for the incandescent lamp. His faith in the incalculable value of the invention was, like that of most of his fellow-stockholders, so great that he did not dispose of his holdings even when the shares, on the par value of one hundred dollars of which only thirty per cent. had been paid in, rose to four thousand. In Berlin he had become acquainted with Werner Siemens, the eminent German discoverer and inventor in the electrical field, and head of the great firm of Siemens & Halske, and also with the parties managing and controlling the General Electricity Company of Berlin, which has since grown into the principal electrical manufacturing and contracting company in Germany. He proposed to them and to his syndicate, before his return to New York, that they should join with him and enter the electrical business in the United States by an alliance with existing American interests. In conjunction with leading New York firms, and helped by the invaluable counsel of the late C. H. Coster, he matured a scheme for the absorption of all the Edison Light and Manufacturing Companies into a new corporation, with sufficient fresh capital for manufacturing electrical apparatus on a large scale. Out of this grew the Edison General Electric Company, organized in April, 1889, with a capital of $12,000,000, of which he and the German parties named held over one half. He became president of it, and remained such until the summer of 1892. In that time, the capital of the company was increased to $15,000,000. The German friends made a handsome profit by the sale of their holdings before his retirement from the presidency owing to the consolidation of the Edison General Electric Company with the Thomson-Houston Electric Company as the General Electric Company, of which he disapproved. His judgment against uniting with the Thomson-Houston Electric Company was fully borne out by the collapse of the General Electric Company within a year and a half.

It is in place to mention here that Mr. Villard was a firm believer from the outset in the availability of electricity as a motive power for transportation. Just as he was the first to introduce an electric light plant on an ocean steamer, it was under his presidency that electric street and other railroads obtained considerable development. He was also convinced that the certain progress in the art of using the electric current for power and traction purposes would, sooner or later, lead to its substitution for steam even in factories and on standard railroads, and, as early as January, 1892, he convened a conference of electrical and railroad experts in New York to consider the problem of operating the Northern Pacific terminal lines in Chicago, as well as some of the branches of the main line, by electricity. The practicability of this at that time was negatived, but the growth of electric traction in the meantime has certainly rather confirmed than gainsaid his theory of the ulterior prevalence of current over steam. One of his transactions was the acquisition of all the street railway lines in Milwaukee, their change from animal to electric power, and their consolidation with the local electric lighting interests into one corporation, resulting, for the first time in the United States, in the distribution of electrical energy for light, power, and traction purposes from one central station. This combination has since grown into one of the largest and most successful light, traction, and power companies in this country.

Some very serious and complicated questions pending before the Northern Pacific board at the time of his reelection were its traffic relations with the Union Pacific, and the competition arising from the extension of the Montana Central system, now known as the Great Northern, into Montana. By means of the Utah & Northern line, the Union Pacific had enjoyed a monopoly of the Montana business until the completion of the Northern Pacific main line, and naturally opposed any encroachment upon its territory. The building of a Northern Pacific branch to Butte, where the bulk of the Utah & Northern's traffic originated, led to hostilities between the two roads in that quarter. Another bone of contention between them was the eastern Oregon and eastern Washington business. The managers of the Oregon & Transcontinental Company who succeeded Mr. Villard had abandoned his purpose of making the Oregon Railway & Navigation Company the outlet to the Pacific Ocean of the two transcontinental lines, and leased its system to one of them, the Union Pacific. This produced great friction; and actual hostilities, such as the building of new branch lines into each other's territory north and south of the Snake River, resulted. As to the Montana Central, Mr. Villard looked upon it as a grave danger, especially in view of the openly announced intention of James J. Hill to build on to Spokane Falls and Puget Sound. But the executive officers not only made light of the effect of the completion of the Montana Central to Helena, but even contended that the loss from it would be made up by its furtherance of the growth of northern Montana. Their contention was borne out by the earnings at the time, but Mr. Villard, upon a close investigation of the case, became convinced that it was most important to prevent the completion of the rival line to the Pacific coast, or, if this could not be done, to forestall possible harm to the Northern Pacific in some other decisive way. It will appear hereafter what he did in this direction.

At his instance, in pursuance of his purpose to utilize the transaction with Chase & Higginson to bring about permanent peace between the Northern Pacific and Union Pacific, committees were appointed by the two boards to find a basis for a settlement of all the differences, but the negotiations were conducted mainly by Charles Francis Adams, then president of the Union Pacific, and by Mr. Villard. They extended from the fall of 1887 to the following spring, during which time many personal conferences were held and a voluminous correspondence was conducted by the chief negotiators. After considering a number of propositions from both sides, a formal agreement was finally reached which was to be submitted to the boards for ratification.

Mr. Villard went to Germany for the double purpose of trying the cure at Karlsbad for his gout, and of having personal consultations with his financial backers. The principal subject discussed with the latter was his relation to the Oregon & Transcontinental Company. While he had declined a reelection to the presidency or even to the board, he was being steadily urged to reconsider his declination and to again take charge of the company. He deemed it incumbent upon him to submit the question to his principals, as there were indications that the advantages of the combination suggested by himself for the joint control of the Union Pacific and Northern Pacific for their common good had so impressed the managers of the Union Pacific that they themselves contemplated acquiring control of the Northern Pacific through the Oregon & Transcontinental. As the Deutsche Bank had already made itself morally responsible for the introduction of nearly thirty millions of Northern Pacific and Oregon Railway & Navigation bonds into the German market, this prospect was a serious matter, since the Union Pacific would surely manage the other companies mainly for its own benefit. It would also mean the loss to the Bank of the current business of the two companies, and of the steadying financial influence over them which the German bankers wished to and were entitled to exercise. The conclusion was reached that Mr. Villard should resume the Oregon & Transcontinental presidency, and that, in order to give him a proper backing, a syndicate should be formed to buy and hold 75,000 shares of the company's stock. Accordingly, he was chosen president on June 28, 1888, some weeks before his return from Germany.

From Berlin, Mr. Villard went to Karlsbad for treatment. While walking there on the principal promenade one day, he was surprised to meet Mr. Gardiner M. Lane, assistant to President Adams, who said to him: I came here by special order of President Adams to deliver an important message to you by word of mouth." Mr. Villard suspected at once that he had changed his mind regarding the settlement between the two companies, and so it turned out. The message was, in substance, that the contract could not be ratified by the Union Pacific unless certain modifications of it were conceded. As these seemed to him unimportant, he cabled at once to the Northern Pacific, recommending the concession. The reply came that it had already been made, but that the Union Pacific had backed out of the agreement altogether. On resuming the reins in New York, Mr. Villard found himself reluctantly obliged to resort at once to offensive measures when he ascertained that there was no hope left of coming to a peaceful understanding with the Union Pacific, and that the latter had already resorted to open hostilities by inducing the management of the Oregon Railway & Navigation Company to begin the construction of new lines into Northern Pacific territory. To stop this, legal proceedings were instituted to restrain the president and board of directors of the Oregon Railway & Navigation Company from the "misuse of the funds of the company in wasteful construction." But this injunction suit did not bring the building of the roads to a halt. The Northern Pacific retaliated by encouraging the duplication of the Oregon Railway & Navigation branch lines in southeastern Washington, and starting the construction of a line in Montana to break up the other company's monopoly of the Butte and Anaconda mining traffic. This state of things led to a determination on the part of Mr. Villard and his party to keep control of the Oregon & Transcontinental at the annual stockholders meeting in June, 1889, and through it of the Northern Pacific, and to oust the hostile management of the Oregon Railway & Navigation Company, which defiantly refused to surrender, although the other side represented the majority of the stock. The Union Pacific party, on the other hand, resolved also to secure possession of the Oregon & Transcontinental at any cost for the better protection of its lease of the Oregon Railway & Navigation Company, and to put a permanent end to all harm from the Northern Pacific by making themselves masters of it. Mr. Villard received early warning that a most formidable combination was forming against him, consisting not only of the Union Pacific people, but of James J. Hill and his followers and some of the largest financial corporations and leading brokers firms. Mr. Villard too was openly supported by strong institutions and firms, and both parties published calls for proxies, that of the opposition being signed by Sidney Dillon, Elijah Smith, John H. Hall, and Samuel Thomas.

Wall Street was divided into two camps, and the contest between them absorbed its attention for the time. Both sides strengthened themselves by purchases of Oregon & Transcontinental stock in the open market. As is usually the case, the crowd of speculators also became eager buyers, and the result of the scramble was the rise of the shares, with enormous transactions, from below 30 to 64, and a regular "corner," which came very near producing a crisis. The excitement grew from day to day with the approach of the closing of the books. It was the bitterest fight Mr. Villard ever had to engage in, and he had not only constantly to watch the market, but to conduct a protracted controversy in the press. A great deal of slander and vituperation was aimed at him, and he had also to meet injunction proceedings begun by the other side. It was the severest strain ever put upon him. He was victorious, and elected his ticket by an absolute majority of the stock; but the triumphant outcome was no compensation to him for the unenviable notoriety which the battle had once more given him. It was but proof to him how well founded his fears had been of the disagreeable consequences to himself personally of his return to power, and he could not help upbraiding himself, even after the struggle was over, for not having followed his own better judgment and remained a private business man.

Mr. Villard proceeded to Portland, accompanied by counsel, in order to be personally present at the annual stockholders meetings of the Oregon & Transcontinental and Oregon Railway & Navigation Companies; travelling over the Canadian Pacific. On reaching Seattle, than which no community on the Pacific Northwest was more friendly to him, he found that the whole business part of the city had been reduced to ashes the day before. The great conflagration had destroyed all supplies of food, so that the whole population had to be fed from public tables for several days—a very sad sight. On reaching Portland, he learned that an injunction would be applied for to prevent the holding of the Oregon Railway & Navigation election. This led to negotiations which culminated shortly in the sale of all the holdings of Oregon Railway & Navigation stock of the Oregon & Transcontinental Company to the Union Pacific, at a satisfactory price. Mr. Villard came to the conclusion that this solution was the best one for his side, as he was advised by counsel that the lease of the Oregon Railway & Navigation system could not be broken, and as he knew, further, that the hostile branch lines north of the Snake River were completed and would have to be recognized as existing factors. In other words, the Oregon Railway & Navigation stock no longer embodied the power to protect the Northern Pacific, and, therefore, its principal value to the Oregon & Transcontinental Company was lost. From that time on, Mr. Villard never had anything to do with the management of the Oregon Railway & Navigation Company, whose creator he had been.

After the annual Northern Pacific election in September, 1889, Mr. Villard held for a month the chairmanship of the Finance Committee, and then, yielding once more to the importunities of his friends, consented to take the chairmanship of the board, a new office especially created in order to facilitate the more efficient supervision of the general affairs of the company other than the actual operation of the system, of which the president and the heads of departments had charge. The growth of the earning power of the road had been very satisfactory during the three years from 1886 to 1889, the earnings rising from $12,789,448.10 to $19,707,467.95 gross, and from $5,884,831.30 to $7,843,926.48 net, while the mileage had increased only from 2876 to 3419. With this favorable showing and the restoration of the company's credit by the financial relief Mr. Villard had obtained for it, the new chairman looked upon his task of providing for coming needs as a not very difficult one. According to the reports of the president to the board, a steady yearly gain in gross and net of from fifteen to twenty per cent, could be surely relied on, and this prediction was made good during the next few years. Encouraged by this prosperity, the executive department came before the board with one recommendation after another for the improvement of the track, the replacement of wooden by metal bridges, additional motive power and rolling-stock, the enlargement of terminal facilities, and the purchase and construction of new branch lines. It was but a repetition of the general experience of all Western roads developed under like conditions. A progressive spirit animated the board, and they yielded, no doubt too readily, to the arguments of the operating and engineering officers. But it was evident that a new departure in the financial policy of the company would have to be taken in order to supply the means for the proposed large new expenditures. The financiering of it had been only a desultory one, so to speak, since the creation of the first mortgage, which was expected to meet present wants but which had no reference to the future. Three separate general mortgages had already been made on the main line, and there existed three other mortgages on parts of it, besides nearly a dozen special ones on branch lines. Mr. Villard devoted himself to the problem of devising a financial scheme comprehensive enough to provide not only for the current requirements, but also for the gradual absorption of all the securities issued under existing liens into one form of indebtedness. A general mortgage large enough for both purposes seemed to him to offer the only practicable solution, and was finally decided upon. The details were worked out by himself together with the finance and executive committees, and the project was then placed in the hands of the several counsel of the company. Several of the legal questions involved were very intricate, and the lawyers spent many months in solving them. The plan was considered at several meetings of the board and definitively approved on August 21, 1889. It authorized the issue of no less than a total of $160,000,000 of consolidated five per cent, bonds, of which $75,000,000 were to be reserved to refund first-, second-, and third-mortgage bonds; $26,000,000 were to be issued against existing branch lines; $20,000,000 were to be reserved for additional roads and extensions; $20,000,000 were to be reserved for terminals, etc.; $10,000,000 were to be reserved for premiums on bonds exchanged or refunded; $9,000,000 were to be issued for general purposes of the company.

It was by far the largest mortgage ever created up to that time on any American railroad, and its size excited much wonderment and varied comment, but its reception upon the whole was rather favorable. Its author became the subject of a good deal of banter in the press and in social circles. At a reception given to the late James G. Blaine, with whom Mr. Villard had been well acquainted for nearly thirty years, Mr. Blaine inquired after his health, and, on being told that he suffered a good deal from rheumatism, replied that it was not to be wondered at that a man who could float a $160,000,000 mortgage was afflicted with rheumatic pains.

His German friends had approved of the consolidated mortgage, and once more showed their faith in him and the Northern Pacific by purchasing immediately $6,000,000 of the new bonds and acquiring thereafter $4,500,000, all of which were introduced in the German market. His and their confidence was fully borne out by the gratifying growth in the earnings of the road from the figures of 1888–1889 to $25,151,544.09 gross and $10,211,141.91 net. This great gain was the more hopeful as it was earned notwithstanding the fact that the mining branches in Montana had begun to show a loss of traffic, owing to the decline in the market value of silver bullion. It even justified, in the judgment of the board, the distribution of a dividend at the rate of six per cent. on the preferred stock. Altogether, up to the spring of 1890, Mr. Villard was carried upward again by the high tide of success, and the prospects before him seemed never more serene and promising. Notwithstanding the apparent clearness of the horizon, Mr. Villard judged that the gravest danger the Northern Pacific had encountered up to that time was the extension of the Great Northern transcontinental line to Spokane Falls and Puget Sound, for which, it was announced early in the winter of 1889-90, the necessary capital had been secured. In spite of all the reassuring arguments of the operating officers of the company, Mr. Villard was persuaded that the Northern Pacific would be put at a great disadvantage by a competing through-line which, owing to the decline in the cost of labor, material, and equipment, could be built for about half the cost of the Northern Pacific. The danger was all the greater because, since the rupture with the Union Pacific, President Charles Francis Adams had formed an alliance with James J. Hill, under which trackage rights over the Union Pacific line from Spokane to Portland were granted to the Great Northern. This alliance shut the door even to a compromise traffic arrangement. One way, however, for the prevention of serious consequences to the Northern Pacific remained open, and that was to acquire a majority interest in the stock of the St. Paul, Minneapolis & Manitoba, which controlled all its western extensions. After ascertaining, through intimate friends of James J. Hill, that he was disposed to sell his own holdings with those of his group of friends at a reasonable figure, Mr. Villard matured a plan for raising the necessary funds, estimated at $20,000,000, by the creation of collateral trust bonds guaranteed by the Northern Pacific and secured by the stock to be purchased. Good dividends had been earned on the latter, exceeding the proposed rate of interest on the collateral trust bonds. The plan was approved by his German friends, who were willing to market the bonds in Europe. Formal negotiations for the purchase were then opened. Several sets of James J. Hill's friends failed to come to conclusions with him. Finally, Calvin S. Brice, General Samuel Thomas, and Frederick P. Olcott undertook the task. The last two appeared late one evening at Mr. Villard's residence in the Tiffany House, New York, to announce that they had dined with James J. Hill and that he had positively agreed to sell a majority of shares at 120, and that they were all to meet at Mr. Villard's office the next morning to sign the papers. Mr. Villard told his visitors that he was very glad to hear the news, but he still doubted, in view of past vacillations of Mr. Hill, whether the bargain would go through. The callers protested against this, and insisted that Mr. Hill could not back out of his promise, and that he had positively agreed to sell. An appointment was made for ten o'clock the next morning, but Mr. Villard was the only one who kept it. After waiting an hour in vain, he called up Mr. Olcott by telephone and learned that Mr. Hill had slipped away again. In the light of the collapse of the Northern Pacific on the one hand and the great success of the Great Northern on the other, it is certainly not too much to say that, if this scheme had been carried out, it would have constituted the most important achievement in Mr. Villard's whole career, and the Northern Pacific would have had a record of unbroken and growing prosperity instead of passing a second time through insolvency.

Besides the consolidated mortgage, another very important proposition came before the Northern Pacific board at its meetings in the years 1889 and 1890. The parties who had been elected directors with Mr. Villard in 1887, in recognition of the claims of the Oregon & Transcontinental for representation, controlled the Wisconsin Central Railroad Company and the ownership of the terminal company that had been formed in order to secure an inlet into Chicago for that railroad. The terminal company had acquired a large body of real estate for right of way and for a passenger and freight station near the business centre of Chicago, for which the necessary buildings were near completion. The directors in question brought the subject of a lease of the Wisconsin Central and the terminal by the Northern Pacific before the board, which referred it to the chairman, the executive committee, and the executive officers, for investigation and report. This brought up the general question whether it would be wise, with regard to other roads, for the Northern Pacific to establish its principal eastern terminus at Chicago instead of St. Paul. There were strong reasons for and against the change. In the board, too, opposition was shown at first, but, after the operating and legal advisers of the board had, upon long consideration of the subject in all its bearings, recommended the lease of the Wisconsin Central and the terminals, it was authorized by resolution of the board on April 1, 1890, and executed. The terminals were organized and leased as a separate company under the name of Chicago & Northern Pacific. In its organization, the chairman followed the same plan that had proved so successful in the case of the St. Paul & Northern Pacific Company, so that the Northern Pacific received one-half of the stock as part of the consideration of the lease. It was expected that this stock would, as in the other case, become valuable assets. These consequential steps, which were believed to be a great advantage to both lessor and lessee, turned out to have been grave mistakes, and were corrected in the reorganization of the Northern Pacific.

CHAPTER XLIII

The Guest of Bismarck.—1890

MR. VILLARD'S financial successes with the Kansas Pacific and the Oregon Railway & Navigation had made him in a few years a rich man, although his accumulations were by no means so great as they were reputed to be. As soon as he had an abundance, he bethought himself of ways of benefiting others. What he then did for the Fatherland has already been related. He was equally desirous to use his means for the benefit of his adopted country. Having been a journalist, he knew well the power of the press for good or evil, and that led him to the idealistic conception that he could render no better public service than by founding, or getting control of, a newspaper of absolute independence and outspokenness on public matters, one devoted to the discovery and advocacy of truth, regardless of party and of all other considerations, and with such recognized ability in editorial management as would secure for it not only a local but a national influence. The idea ripened into a fixed purpose when the cooperation of his friend Horace White was assured by the latter's removal to New York, and when Mr. Villard ascertained from Carl Schurz that he would be glad to be one of the editors, upon the expiration of his term of office as Secretary of the Interior, and that Edwin L. Godkin was willing to enlarge his sphere of journalistic activity as editor of the Nation by joining the two other eminent men.

Having accidentally learned in 1881 that the Commercial Advertiser was for sale in New York, he authorized Horace White to enter into negotiations for its purchase; but, while these were progressing, he was informed that the half-interest of Parke Godwin in the New York Evening Post could be bought. This proved to be true, and a purchase was soon effected for his account by Mr. White, who took part of the stock. Not long afterwards, the interest of Isaac Henderson was also acquired by Mr. Villard, and the stock of the Nation exchanged for Evening Post stock. A new business management was installed, and Messrs. Godkin, Schurz, and White took charge of the editorial department. Mr. Villard was prouder of this combination of journalistic ability than of any of his business triumphs. He was confident that, under such auspices, the Evening Post would prove not only equal to the mission he desired it to fulfil, but also a good investment. Convinced, however, that his purchase of the controlling interest in the paper would become known, and that, owing to his prominence in Wall Street, the paper would surely be accused of being his personal organ and of being used for the promotion of his financial interests, and thus find it difficult to establish a character for entire independence, he determined upon an unusual step. He decided to take away from himself all power over the paper as a stockholder, by creating a trust with his entire holding for the benefit of his family, with full authority to the three trustees to protect the editorial department from all interference. This abdication of the right of ownership and practical self-effacement has continued to this day, and not a line of the editorial writing has ever been dictated by Mr. Villard. Every reader of the Evening Post, the whole American press, and in fact the American people generally, know that the paper has ever been true to those high aims for which he was ready to make many sacrifices when he purchased its control.

Once more, in 1890, Mr. Villard was the possessor of wealth. The joint operations with his German clients in railroad and electrical securities and other fortunate investments had enabled him to recover in a few years what he had lost in 1883. As soon as he was able to do so, he resumed his practice of using his spare means for the benefit of others, and made good the promise of a donation to the Law School of Harvard University, which his misfortunes had prevented him from completing. He contributed largely to the building fund of the Bed Cross Hospital and Nurses Training School at Munich, Bavaria. He also added to his previous gifts to the hospital at Speyer and to the Industrial Museum of his native province, and made a large subscription towards the Protestant Memorial Church at Speyer in honor of the famous Protest of 1529 at the sitting of the Imperial Diet in that city. Mr. Villard had a documentary history of Speyer compiled and printed at his own expense, and paid for the publication of an historical work on the Palatinate by the historian Professor Friedrich Menzel, of Bonn, a native of the province. At the request of the historian Von Sybel, he paid the salaries of two of his assistants pursuing special studies in Germany and Italy. On this side of the water, he provided the means for three years for an archaeological exploration of the antiquities of Peru by A. F. Bandelier, and presented the collections resulting from it to the American Museum of Natural History in New York. He furthermore again became a regular contributor to numerous public charities and other enterprises for the public good.

While his business interests were thriving, Mr. Villard did not overlook the danger which menaced the whole country from the introduction into Congress of the Sherman silver-purchasing act. He saw at once that, if it became a law, the substitution of the silver for the gold standard would be but a question of time, and that very short. Hence, he tried to arouse the most influential bankers to realize the threatening prospect, and to urge them to an active agitation against it in the press and at Washington, but with only limited success. He found hardly any one willing to go with him to the capital to work against the passage of the measure. Indeed, Mr. Villard had, years before, formed the opinion that there was a great lack of foresight and too much of a happy-go-lucky disposition among most Wall Street men, and this impression was now fully confirmed. His predictions that a general crash was bound to come in the wake of that law were simply sneered at. The head of one of the greatest houses even expressed the opinion that a little more currency would do no harm, but would on the contrary help the bankers to relieve themselves of the stocks and bonds they had been obliged to carry for want of a good market.

The detachment of the Oregon Railway & Navigation Company from the Oregon & Transcontinental Company, and the financial independence secured to the Northern Pacific by the creation of the consolidated mortgage, had rendered unnecessary the pursuit of one of the two principal purposes for which the Oregon & Transcontinental Company was organized, viz., to extend financial aid to the companies controlled by it. It was therefore decided, on Mr. Villard's recommendation, to absorb it by making a new company, after paying off the outstanding Oregon & Transcontinental bonds issued against Northern Pacific branches. The absorption was effected in a remarkably quick time by the exchange of share for share of Oregon & Transcontinental stock for North American Company stock in the early summer of 1890.

In the spring of 1890, a great domestic grief came upon Mr. Villard's family. The youngest son, a handsome, gifted lad of seven, passed through a long illness, and, after apparent convalescence, had a relapse and died. The whole family felt the affliction deeply. His friends urged Mr. Villard to seek diversion by a long stay abroad, and he decided to sail for Europe with his family early in July. After travelling some weeks in Ireland, England, and France, they went to St. Blasien in the Black Forest, and subsequently to Freiburg in southern Baden.

Suddenly, cable news of a most alarming character from America plunged Mr. Villard into the gravest anxiety. He had taken the greatest pains to arrange his own private affairs as well as those of the Northern Pacific, North American, and Edison General Electric Companies so that he should not be disturbed by business cares while abroad, and he felt the more assured of unbroken peace of mind as he knew that the absorption of the Oregon & Transcontinental by the North American by the exchange of shares had succeeded with unparalleled rapidity. The cable informed him that, owing to the passage of the Sherman Act, a very severe stringency had set in in the money market, in consequence of which the North American Company found it impossible to renew loans maturing to the extent of $2,000,000, so that forced sales of securities at heavy loss were inevitable unless he could raise that amount at once in Germany on the assets of the company. The message burst upon him like a thunder-clap from a clear sky, but he promptly started for Frankfort and Berlin to appeal to his supporters for the money. He was successful, and made telegraphic transfer of the amount within forty-eight hours of the receipt of the cablegram. This was his sorry first act as president of the North American Company, to which place he had been elected after his departure. He heard at Berlin the first mutterings of the severe financial volcano that later affected the whole civilized world through the suspension of the great house of Baring Brothers. Being assured by cable that the remittance would make everything snug and safe, he went back to Freiburg, but his hope of unbroken quiet proved an illusion. No sooner was Barings failure announced, a few weeks later, than there was flashed to him across the Atlantic another even more peremptory call for several more millions, as the only means of preventing the bankruptcy of the North American Company. Coupled with it was a most pressing sum mons to return to New York at once. This second danger was even more of a staggering surprise than the first, but there was no escape from immediate action. Mr. Villard summoned his German friends to a conference at Frankfort, where they promptly met him. As he expected, it was for him a most trying and embarrassing meeting, owing to the positive assurances he had given on the strength of his own advices that the loan already made would relieve the North American Company of all difficulties, and he at first found very unwilling listeners to his proposition for a further and larger advance. But, after two days of hard pleading, the desired help was granted once more. He was conscious, nevertheless, that the trust of his financial friends in him was shaken and that nothing more could be expected from them.

He declined, however, to follow the summons to New York, and offered his resignation as president of the North American Company, when the message was repeated every few days. He refused to go solely on account of his daughter's health. In other respects it would have been a boon to him to start for the other side, thereby ending the harassing condition of mind he endured day and night, as he had not a single person to advise with at Freiburg, and as the reports regarding the conditions in Wall Street grew more and more ominous from day to day. An all but crushing blow fell upon him finally when the news came of the failure of Decker, Howell & Co., who had been for years his principal brokers, for twelve millions of dollars, on November 11, 1890. Press despatches of the same date announced that it was generally expected that his own bankruptcy would follow that of the firm. There was not the remotest danger of this, as he was a large creditor of theirs, and not a debtor; but he knew that the collapse of the house imperilled the North American Company, for which it had carried loans of millions. This culmination of troubles really left him no choice but to cross the Atlantic. This he did after another visit to Berlin, during which an unusual incident worth recording occurred.

Mr. Villard received a call at his hotel from the aide-de camp of the Imperial Chancellor, General Count Caprivi. The aide stated that the Chancellor, although he had never met him, knew that he was an authority on all American matters, and hence was desirous of conferring with him on an important subject affecting Germany and the United States. Mr. Villard at once offered to pay his respects to the Chancellor, and met him by appointment, the evening of the same day, at his official residence. He found Count Caprivi a truly imposing personality in every way, of commanding physical presence, most polished manners, and a ready conversationalist. He impressed one at once as every inch a gentleman, with a superior mind, of strict integrity, natural frankness, and quick and correct judgment, all of which qualities he really possessed. The Chancellor told Mr. Villard that he wished to consult him confidentially regarding a serious problem that had come before him within a few days. The passage of an extreme protection measure by the American Congress (the first McKinley tariff) had moved one of the Continental Powers to suggest to the others that the time for a retaliatory policy against the United States had come, and to propose a conference for the consideration of joint offensive measures. He wished to know Mr. Villard's opinion as to the course Germany ought to pursue regarding the matter. His own judgment was against the proposed action.

Mr. Villard replied that he thought the Chancellor's conclusion the correct one. As for himself, he was a radical free-trader, and therefore his judgment might be biassed, but he was confident that the very extreme to which the new tariff bill had gone, and the suspicious circumstances under which it was passed, would immediately produce a reaction in the United States. He believed, too, that this reaction would find expression in the election of a new Congress in the following month. He could but urge the Chancellor to await the result of that election, which would no doubt of itself put a stop to the suggested demonstration of the Powers. Mr. Villard offered to cable to good judges of the political situation as to the outcome of the election and advise him of their answer. The Count accepted the offer, and another interview took place the next day, at which Mr. Villard produced the answers to his telegraphic inquiries confirming his views. The Chancellor then told him that he would remain passive and thanked him warmly for his courtesy. As Mr. Villard was still on the Continent at the time of the election, he telegraphed its result to the Chancellor, who was then on a visit to the King of Italy at Monza, and who, in acknowledgment of his despatch, said that he had proved to be a true prophet.

Mr. Villard had not made the personal acquaintance of Caprivi's predecessor, Prince Bismarck, during his two years residence at Berlin in 1884–6. Although as willing as any German to render grateful homage to him as the creator of national unity, and to recognize the power of his giant mind, he still held to the unfavorable opinion of Bismarck's personal character, and his political methods before the Franco-German war, to which he had given expression in an article in the North American Review in 1869, then under the editorship of James Russell Lowell and Charles Eliot Norton. His prejudices against the Chancellor had been strengthened, too, by the latter's return in 1879 to a reactionary policy in the internal affairs of Germany, and especially by his openly proclaimed purpose of abandoning the revenue tariff for a protective one.

Early in the summer of 1890, a few months after the acceptance of Bismarck's resignation, while discussing that great event one day with the late Ludwig Bamberger, the well-known liberal leader in the Reichstag and the principal advocate of the gold standard in Germany, Mr. Villard mentioned incidentally that he had never met the Prince. "What," exclaimed Bamberger, "how has that happened?" On being told that it was from want not of opportunity but of inclination, Bamberger rejoined that he had made a great mistake in avoiding an introduction, and went on to say: "You know, I fully share your views of Bismarck's character and as to the vacillations of his policy, which I am opposing strongly in the Reichstag. Moreover, I have not only public but private reasons for finding fault with him, because he has treated me badly, although I have never shrunk from any sacrifice of time and labor when he called upon me for service in the interest of the public. You may not be aware that I went to Versailles at his summons, and remained there a long time as one of his advisers in the peace negotiations with the Thiers Provisional Government. Nevertheless, although he is both selfish and unprincipled, he is at the same time, in my deliberate judgment, the greatest man of our age, and one of the most interesting. Why, I believe that as a conversationalist he is unequalled, and to listen to him for an hour would alone be worth a voyage from America. Be sure not to leave Europe again without having made his acquaintance. That is my urgent advice." Mr. Villard decided to follow it. It so happened that the very next day he was introduced by General von Xylander, his brother-in-law, who was also in Berlin, to Professor Schweninger, the Prince's medical adviser, who, after numerous medical authorities had failed, had successfully treated him for rheumatism and neuralgia by simply opposing and conquering the patient's willpower and making him restrain his inordinate appetite for food and drink. It occurred to Mr. Villard to ask the professor what the chances were of being received at Friedrichsruhe. "Why," he answered, "the Prince will bid you welcome at once. He knows all about you, and likes nothing better than to meet men who have accomplished something in the world. Just ask leave by letter to pay your respects to him and you will get a prompt reply. I expect to be with him myself in a few days, and I hope you will come while I am there. Mr. Villard wrote to the Prince on the same day, and, receiving a cordial invitation to come at any time that suited him and spend a few days with him, set out within forty-eight hours.

Professor Schweninger and a servant in livery received him at the station, which was only a few hundred yards from the mansion. The latter proved to be a very plain building, being really but an enlarged country inn, and neither the exterior nor the interior revealed the splendor which the fame and wealth of the owner led one, not unnaturally, to expect. The guest was shown into a commodious chamber on the second floor, and was just making his ablutions when he heard heavy steps approaching his door, and immediately there appeared in it the erect form of the Prince, dressed in black, with a slouch hat of the same color,—the same costume in which Lenbach painted his best portrait of him—with a heavy stick in his right hand, and followed by two large Danish dogs. The Prince welcomed Mr. Villard heartily, and, when the latter apologized for being in his shirt sleeves and for not offering his wet hands, the Prince said: "Just go on with your toilet. I will sit down and we can talk while you wash and dress." One of the dogs, encouraged, no doubt, by his master's friendly words, now approached Mr. Villard, standing up before him and putting his paws on his shoulders and trying to lick his face. "There is another hearty greeting for you," the Prince remarked, calling the animal off. I am really glad you came," he said, "first, because you are a German who has gained a high position in a foreign country, a sort of success which I have always especially admired, because I know how difficult it is to achieve; and, secondly, because I like company, and you are the only visitor I have had in a week except Schweninger." On Mr. Villard's expressing astonishment at this, he said: "Yes, it is just as I state it. The fact is that I am under a regular boycott. Ever since I lost my position, everybody is afraid to have anything to do with me from fear of displeasing the young chap who discharged me. Why, formerly my trouble was to keep people away from here. Everybody wanted to come, especially the officials who needed my good will. Now, none of the latter dare come lest their names should appear in the newspapers as my visitors and be seen by the new man on the throne. I know that men travel by here every day who, a few months ago, would have no more dared to pass this place without paying their respects than they would have ventured to pass me on the street in Berlin without saluting me. But I ought not to have expected anything else, for hounds follow those who feed them." This outburst was a clear indication of what was uppermost in the Prince's mind, and prepared his hearer for what was to follow on the same line during his stay.

Mr. Villard's toilet being finished, the Prince and the dogs led the way to the rear of the mansion, where the two took seats on a sort of veranda. Professor Schweninger joined them, followed by Bismarck's private secretary, the Princess, her married daughter, Countess Rantzau, and the latter's children. The Prince, noticing the gouty formations on his visitor's hands, said: "I see you are suffering from gout. How long have you had it?" When told for nearly twenty years, he pointed to the Professor: "That is the man to help you. But for him I should have been obliged to retire from office long ago. Perhaps it would have been better for me if I had done so. All the medical professors had practised their arts upon me without doing me any good. He alone gave me relief and made life tolerable for me. You had better try him, although he is a great tyrant and exacts strict obedience. I found it hard to change my habits of life, but he made me do it. I now eat and drink only what he sees fit to allow me. See how gentle he looks. But I tell you he can be as rough [grob] as any old Bavarian [Altbaier], of which stock he comes."

The Prince then began to question his guest regarding himself, about his early life in Germany, how long he had been in the United States, and about the course of his career there. He wanted to know how many miles of railroad he had built, in what time it had been done, how many steamships had been under his control, how many men he had employed, being very much surprised that fifteen thousand Chinamen had been among them, and saying: Why, you had a whole army corps under your command!" He asked how much capital Mr. Villard had been obliged to raise and how it was raised, and about the relative value of white and Chinese labor. He inquired whether he had named Bismarck, the capital of Dakota, after him, to which his guest had to reply that the place had been founded and baptized before he had anything to do with the Northern Pacific. Bismarck remembered that he had received thence telegraphic greetings from the German participants in the Northern Pacific opening excursion, and asked whether it had a future. In reply, Mr. Villard had to confess that it was not then very prosperous, and he explained that all the capitals of the several American States were as a rule of slow growth. This the Prince could not understand in the light of the contrary European experience. He remarked that what his guest had accomplished in a foreign country he never could have done in the Fatherland, owing to tradition and to the clinging to accustomed ways so characteristic of old countries. Did he not encounter a great deal of prejudice among native Americans against him as a foreigner in the pursuit of his undertakings? To this Mr. Villard replied that, on the contrary, he had found his chief financial backing and his main support among them, and that there was no people on earth among whom enterprise and energy prevailed to a greater extent, or that more readily appreciated those who possessed such qualities. To this the Prince said that he was well aware that the Americans were the most progressive people in the world, for which he admired them, but it was new to him that they were so free from national jealousies in appreciating merit.

An early dinner ended this first talk. The Prince sat at one end of the table, the Princess at the other. On his right sat Mr. Villard, on his left Professor Schweninger. The secretary and the Rantzau family formed the rest of the party. Behind the host at a distance of about six feet lay the two dogs next to each other, watching the proceedings eagerly, but not stirring until towards the end of the repast, when, upon a sign from their master, they approached and sat on their haunches on each side of him. Then from time to time the Prince threw morsels into their open jaws. The table talk was of an ordinary kind, but one amusing incident is worth remembering. The Prince had one glassful of light Rhine wine, and then called for another. Schweninger at once interposed, saying: "Your Highness, you have had your allowance for one meal, and you can't have any more." The Prince looked at Mr. Villard quizzically, and remarked, "Now, you see how I am treated. I have to submit, but at times when the censor is not here I jump the traces. He doesn't know, but I will tell him now [and he chuckled heartily] that I celebrated my last birthday by enjoying several bottles of wine and several glasses of beer." "Yes, you did," retorted the doctor, "and when I came here a few days afterwards, you growled dreadfully over fresh neuralgic pains."

After dinner, the Prince excused himself for his afternoon nap, after inviting Mr. Villard to go with him on his usual four o'clock drive. Punctually at that hour, the two set out for a tour of the "Sachsenwald," or Saxon Forest, as the extensive woods adjoining the mansion grounds are called. They consist largely of grand old oak-trees free from all undergrowth, under the canopy of which the carriage passed, now following roads, now regardless of them.

After describing his estate, the Prince began speaking English "so that that fellow," pointing to the coachman, "may not understand us," and surprised his companion by his fluency, his command of idiomatic expressions, and his very slight accent. He began with these words: "Since I have been kicked out of office," which so astonished his hearer that he begged pardon for interrupting him and said: "Prince, that is an Americanism; where did you pick it up?" He answered that he did not remember where, but the expression fitted his case exactly, for the manner of his dismissal was but the equivalent of an application of the toe of a boot. He then proceeded to tell the story of his forced resignation. Such a rapid flow of keen wit, of cutting sarcasm and bitter denunciation as followed for half an hour Mr. Villard never heard before and never again. It was a strange mixture of eloquence and loquaciousness. Bismarck's voice seemed not as deep and strong as his stature led one to expect, but it had a pleasant sound. A most intense sense of the wrong and ingratitude he claimed to have suffered made itself manifest. As an example of his unjust treatment, he recounted what he had done to unify the nation and to aggrandize the Hohenzollern dynasty. There was not only an unhesitating assertion of his own deserts as the founder of the German Empire, but an almost sneering and even contemptuous depreciation of other performers in the historic drama of his time, including even the old Emperor William, the unfortunate Emperor Frederick, and the Empresses Augusta and Frederick. His language became a perfect diatribe when he referred to the present Emperor and some of his ministers, whom he held responsible for his removal. His expressions regarding them were not only amazing but embarrassing to his hearer, who had close social relations with the ministerial objects of his scorn. To quote but one phrase: "Some of those rogues I picked out of the very gutter." Fortunately, he did not stop for any word of assent, but went right on until his pent-up wrath was expended. As he remarked, when it was all spent: It was quite a relief to me to have this opportunity to speak without restraint to a gentleman who I am sure will honor my confidence. Even were it not for this restriction, some of the sayings the visitor heard and noted down at the time were so extraordinary that, if they were repeated, their reality would probably be doubted, and certainly the lese-majesty they involved would render it unsafe for one who repeated them to venture again on German soil.

The Prince's countenance during the excited delivery of his philippic was a study. The working of every vein and muscle of the face showed his intense feelings. The play of his great eyebrows was also very remarkable. Most impressive of all were the spirit and light shining from his wonderful eyes. No one ever felt the presence of the Chancellor without a deep sense of the mind-power reflected from those large grey-blue orbs. Their flashing brilliancy and the piercing penetration of the glances shot from them were never to be forgotten. They seemed incapable of expressing affection, and their steel-like hardness only inspired awe for the towering intellect, the irresistible will, the defiant courage, the fiery energy of their owner. To watch the lightning changes of expression mirrored in them, reflecting the strong emotions evoked by humbled pride, wounded ambition, and thwarted selfishness, and above all by the loss of his absolute sway, was, indeed, an enviable privilege.

The Prince himself turned to other subjects when the fumes of ire had passed from him during the rest of the two hours drive. He dwelt upon the marvellous rapidity of the material growth of the United States, and mentioned that he had felt a desire for a long time to see it with his own eyes. Before his retirement it was, of course, out of the question, but now he seriously thought of accepting the invitation of the Hamburg Line and crossing the Atlantic on the steamer named after him. He would have to overcome, however, the strong opposition of the Princess and of Dr. Schweninger to the voyage. "When Mr. Villard assured him that his visit would be hailed with general enthusiasm by Americans as well as Germans, he said: "This is just the reason of the opposition of my wife and doctor to it, and I own that I myself dread the pressure and fatigue of public attention, and should much prefer to travel in strict privacy." He asked his companion whether he believed that the Union could be permanently held together notwithstanding its vast territorial extent, the rapid swelling of the population to enormous proportions, the free admission of large masses of foreigners, and the diversity of climate and local interests. He looked upon the many millions of negroes, whose number was fast increasing, and the prevalence of strong racial prejudices against them, as a grave and permanent danger. He was answered that no man could foretell the fate of the American Republic in the course of the coming generations or centuries; but so far it must be admitted that the experiment of building up a federation of commonwealths under absolutely democratic institutions had been, upon the whole, a great success in both a political and a material respect. The problem of government was no doubt growing more and more complicated and difficult, both in the Union and in the several States, and might get beyond solution when the population should number hundreds of millions. There were even then symptoms of decadence, not material but moral; but the world had witnessed several serious popular aberrations which were followed by a return, sooner or later, to correct ways. Certainly, much could be expected of a people that successfully cut the cancer of slavery out of its body politic, at the cost of a million lives and of thousands of millions of dollars.

The Prince agreed to this and said that, for America, the existing democratic form of government was just as natural as a monarchy for Germany, and, indeed, the only feasible one. "I should be a devoted Republican, too, if I lived in America," he remarked. Mr. Villard ventured the inquiry whether Bismarck was satisfied with the workings of universal suffrage, the immediate adoption of which, upon the formation of the German Empire as the political basis of national life, was thought one of the boldest strokes, if not the very boldest, in his career. The Prince answered: "It cannot be said that the results of universal suffrage have been altogether satisfactory, but I always looked upon it as a just concomitant of, and compensation for, the general liability of our people to military service. Moreover, its adoption was indispensable as a sort of cement in the construction of the edifice of the Empire, as well as a means of overcoming the traditional centrifugal tendencies of some of our smaller potentates and tribes. The worst outgrowth of general suffrage he considered the Social Democrats, and he expressed the conviction that the State would some time be compelled to extirpate this evil by force.

It was very pleasant for Mr. Villard to have the Chancellor bring up the subject of their mutual friend, Carl Schurz. The Prince said that not only his great public career in America, but the personal attractions he discovered in him at their several meetings, excited his admiration. It was a great pity that such a man served a foreign and not his own country. Just that type of man was needed in Germany to supplant the Geheimrat (privy councillor) species which had given him so much trouble. Bismarck said that he could not understand, and it was not easy to explain to him, why such men as Schurz were not kept in public life. He pronounced it a great shortcoming in the American polity that the eligibility of Senators and Representatives was conditioned on their residence in the States and districts they represented. This inevitably tended to develop champions of local instead of national interests, while the privilege the English and German voters enjoyed of electing any of their countrymen otherwise qualified, regardless of residence, insured the election of the elite of the nation to the parliamentary ranks.

At the end of the drive, the Prince retired to his working-room with his secretary to attend to his correspondence until supper-time. After the evening meal, the whole family gathered around him in the spacious sitting-room. He seated himself in a large easy-chair, and was handed one of the old-fashioned long German pipes. It was lighted for him with a paper taper, and from it he sent forth clouds of tobacco-smoke with evident great enjoyment. He sat like a patriarch, listening to the telegraphic news of the morning and evening papers, which was read to him, and he accompanied and followed the reading with free comments on current events. Their frankness, clearness, and pointedness afforded another rich treat to Mr. Villard. The Chancellor's remarks led to no discussion, as he did not invite it, and everybody was content to listen to him. Something that was read led him to make interesting reference to the relations of Germany to Russia, to the pains he had always taken to keep on the best possible terms with the latter power, as of the most vital importance to his own country, and the fears he entertained that a change for the worse in this direction would come about under the new regime at Berlin. Schweninger broke up the evening's entertainment all too early by announcing to the Prince that his time for retiring had come. The doctor accompanied him to his bedroom to give him some treatment. He was the first one, too, to see him on waking. In fact, there never was a more faithful, self-sacrificing medical attendant than Schweninger. He did not reside at Friedrichsruhe, but had his office at Berlin. Owing to his success with the Prince, he had obtained a very large practice, extending all over Europe. Among his patients were some crowned heads, including the Sultan, a number of princes, and members of the highest aristocracy of birth and finance, so that he passed two-thirds of his time on railroad trains; but, no matter where he was, he never failed to look personally after the Chancellor at least once a month, and to pass from two to three days with him. While at Berlin, he was constantly at his beck and call, and often visited him once a week. Moreover, he would never accept any compensation for his services, but the Prince, who improved every opportunity to praise his fidelity and acknowledge his indebtedness to him, rewarded him in other ways by securing him a professorship at the Berlin University, together with titles and decorations.

Having suffered from neuralgic pains during the night, the Prince was ordered to stay in bed during the forenoon of the next day, but he worked with his secretary. About noon he appeared on the veranda, seemingly as well as the day before and as ready for conversation. Mr. Villard's second day was a repetition of the first; that is, lunch was followed by another drive, and dinner by another evening in the sitting-room. On the drive as well as at home, the Prince's conversation was again pregnant with substance, and original and fascinating in form. He also favored his guest with reminiscences of the Prussian-Austrian and Franco-German wars, and dwelt upon his memorable long sojourn at Versailles during the latter war, his peace negotiations with Thiers and Jules Favre, and the pains that accompanied the birth of the German Empire; on the profound humiliation of the French by the proclamation made in the grand palace of Louis XIV.—which was his (Bismarck's) conception. All this he narrated in his inimitable way. But, as the same incidents have been published in his own memoirs, they need not be repeated. Bismarck's experience, however, with the adjacent city of Hamburg, "his biggest and best neighbor," he called it, he related with great gusto, and it may well be told. When he proposed to bring Hamburg within the custom-lines of the German Empire, he became the worst-hated man in that city, for the people thought that if it lost its prestige as a free port it would be ruined. But the status of a free port with a custom zone within its limits not only did not diminish its prosperity, but multiplied it. Then the supposed oppressor became the recognized and worshipped benefactor of the old Hanseatic commonwealth.

Mr. Villard took his leave of the Prince on the second evening, as he was to start for home in the morning before the Prince would be up. He assured his host of his lasting gratitude for the generous hospitality received, and was told in return that he would be welcome again at any time. He left Bismarck with the fixed impression that the Prince never would or could forget or forgive those who caused his compulsory abdication from power, that he felt nothing less than implacable hatred towards them, that any apparent reconciliation on the Prince's part to the new regime that might follow would be only a stage-show and not a reality, and that his thirst for revenge would not be quenched as long as he lived.

CHAPTER XLIV

Last Years.—1890–1900

MR. VILLARD arrived in New York early in December, 1890. The North American Company had practically become insolvent by the suspension of Decker, Howell & Co., but actual bankruptcy had been avoided by the action of its principal creditors, who formed a committee which secured speedy repayment of the loans by a sale of the company's assets in the open market. He found the indebtedness of the company reduced to two millions, but it had been stripped, by the forced sales, of the great bulk of its assets at a heavy loss, and was prostrate and reduced to inactivity for years to come. There was really nothing for him to do but to try and keep alive what little there was left of the concern. He was not surprised to find that the collapse of the North American had affected his prestige hardly less than the crisis of 1883. His absence in Europe left him free from all responsibility for the new catastrophe, but he suffered just as much abuse as though he had been directly instrumental in bringing on the disaster, instead of having strained every nerve to save the company. This second breakdown utterly disheartened him, and he made up his mind then to resign all his corporate positions and absolutely retire from all business pursuits just as soon as possible. He was confirmed in this resolve by his conviction that the operation of the Sherman law would before long plunge the whole country into general disaster, and he determined to protect not only himself but also his German friends from the coming calamity. He addressed to them a letter in January, 1891, stating fully the reasons for his fears of the early advent of the silver standard, advising and urging them to abstain from all long engagements, and to keep their investments in the United States in as liquid a form as possible. He gave them formal notice at the same time that, holding his opinion of a rapid approach to the silver standard, he could no longer take any responsibility for the investment of German capital in this country, and hence should consider their business relations as terminated. The letter was looked upon at the time as exaggerated, but after the crisis of 1893 had set in he was often complimented on having written it.

The Northern Pacific had securely passed through the months of stress before his return, but, as its position would be rendered much safer by turning its short loans into long loans, Mr. Villard set about accomplishing this, and succeeded in forming an international syndicate for that purpose. By the end of February, all he could do for the several corporations having been consummated, he rejoined his family at Cannes late in March, remaining in Europe until midsummer, and was not further disturbed by untoward developments, nor did any such take place after his return. On the contrary, the Northern Pacific continued to show increasing strength right along. Its gross and net earnings for the year 1890–91 were respectively $25,151,544.09 and $10,211,141.91, being the best showing since the completion of the main line, and more than double the gross, and nearly double the net, of the year 1884–85. On the 27th and 28th of April, Mr. Villard and his family, with the exception of his younger son, were in Zweibrücken, to lay the corner-stone of an orphan asylum that was to be Mr. Villard's memorial to his lost boy.

In the fall of 1891, accompanied by his wife, he made what he meant and what proved to be his last official tour of inspection of the main line and principal branches of the Northern Pacific. He was everywhere very well received, and invited to address public bodies at different points on

the business situation of the country, much as in former years. In his speeches, as well as in published interviews, he did not hesitate to warn his audiences, in the strongest language, of the evil fruits the Sherman law was certain to bear. He told them that the blackest clouds were gathering fast, and would burst before long and sweep like a devastating tornado over the whole land, and exhorted them to put their houses in order, and especially to keep out of debt and new ventures, and prepare for the worst. From St. Paul to Tacoma and Portland, he got nothing for his pains except newspaper ridicule of him as a croaker and pessimist, and not a little abuse in the centres of silver sentiment. But he had the doubtful satisfaction, after the catastrophe of 1893, of being told by a number of his hearers that his predictions had proved but too true, and that they paid dearly for not having followed his advice. Scores of his acquaintances, among them the wealthiest men in St. Paul and Minneapolis and in the Pacific coast cities, were actually impoverished.

The journey depressed him not only because of the popular silver hallucination, but also because of his observation of ominous factors in the Northern Pacific situation. First and most threatening of all was the loss of business by the competition of the Great Northern line to Spokane. There was also the paralyzing effect of the great fires at Spokane and Seattle. The decline of silver production in Montana and the Cœur d'Alène regions in consequence of the steady depreciation of that metal in the market also portended more and more loss of traffic. But the most alarming impression of all made upon him was the revelation of the weight of the load that had been put upon the company by the purchase and construction of the longer branch lines in Montana and Washington, which he then discovered for the first time. There was the Missoula Branch to the Cœur d'Alène mines; the Cœur d'Alène Railway & Navigation, a mixed system of steamboats and rail lines; the Seattle, Lake Shore & Eastern; and the roads built into westernmost Washington, representing a total investment in cash and bonds of not far from $30,000,000, which together hardly earned operating expenses. The acquisition and building of these disappointing lines had in a few years absorbed the large amount of consolidated bonds set aside for construction purposes, which had been assumed to be sufficient for all needs in that direction for a long time. Under these circumstances, Mr. Villard came back to New York with increased apprehension as to the future of the Northern Pacific.

In his mind, there was but one way of saving the country and the road from a ruinous catastrophe, viz., by the earliest possible repeal of the Sherman Act, and the election of a President in 1892 who could be relied upon to exert executive influence for the repeal of the Act as well as for the establishment of the gold standard. All through the winter of 1891 and 1892, he devoted most of his time and his best energy to the pursuit of those two aims. He made several stays in Washington, and by incessant efforts with the leaders of both parties helped to bring about the introduction, reference, and report to the House of a repeal bill which failed to pass by only a few votes, owing to the jealousy entertained by certain Western Republican members towards Speaker Reed, who favored the measure. Mr. Villard had obtained promises from nearly two dozen New York political leaders, lawyers, and financiers to respond at any time to a summons from him to Washington to bring their personal influence to bear upon members in favor of the repeal. Of all these prominent men only one—Mr. William Brookfield—kept his word and appeared; so little even then did the elite of the professional and business community recognize the perils of the situation.

Although Mr. Villard had always taken an active interest in civil-service and tariff reform for he had belonged to the Manchester School ever since he had read Adam Smith, Bastiat, and John Stuart Mill he had never had anything to do with active party politics. His resolution to do all in his power for the election of a sound-money and tariff-reform candidate now drew him against his wish into the political whirlpool. The force of circumstances turned him, indeed, for a time, into a hard-working politician. Benjamin Harrison having signed both the first McKinley tariff bill and the Sherman bill (the price paid by the protectionists for the former's passage through the Senate), his candidacy for reelection called for the most earnest opposition. The whole Republican party was so impregnated with protectionism and silverism that there was not the remotest hope for salvation from that quarter. Only a Democrat, entirely sound on what seemed to Mr. Villard to be the two main issues, could meet the emergency. The record of Grover Cleveland pointed to him as the only available Democrat. There was, however, great opposition to him among the professional politicians of his own party, and most of them looked upon United States Senator D. B. Hill (who early in 1892 was receiving ovations in the South) as the rising star. It seemed, indeed, hopeless to renominate Mr. Cleveland, but Mr. Villard decided to try it. He first sounded Mr. Cleveland, and found him very reluctant to become a candidate, and obtained his consent to allow the use of his name only after several interviews. His next step was to win over the leading Democratic Congressmen to his plan. He went to Washington, and induced Speaker Carlisle to invite them to meet him at his house, and twenty-eight responded. Mr. Villard explained to them at length, and as forcibly as he could, the reasons for his conviction that the needs of the times called for the candidacy of Mr. Cleveland, and that he was the only Democrat who could be elected. Mr. Carlisle and William L. Wilson followed, expressing their full agreement with his views, while others expressed the belief that it was impossible to secure Cleveland's nomination, as Senator Hill was all but certain of being presented as the candidate of the Democracy of his own State to the nominating convention. Mr. Villard then announced that he and the other Independents and Democrats who were opposed to the machine controlling the Democratic organization of New York, would bring Mr. Cleveland forward at the national convention in spite of Hill's candidacy, and were confident of his nomination. Most of those present received this confident assertion with smiles, but it was made good to the letter.

Mr. Villard gave up most of his time during the Presidential canvass to campaign work at the National Democratic headquarters in New York, in conjunction with Don M. Dickinson, William C. Whitney, Josiah Quincy, and others. He raised money for the executive committee, and organized and conducted a German-American Cleveland Union with ramifications throughout the States. A few days after the election, he gave a large dinner-party to the President-elect and leading Independents and Democrats from all parts of the country. In his opening speech, he complimented Mr. Cleveland on his great triumph, and expressed his firm faith that the new Administration would meet the highest expectations of its supporters. He added that Mr. Cleveland was vouchsafed the finest opportunity since Washington and Lincoln of bestowing great benefits upon the Republic by insisting upon currency and tariff reform, which he would surely do much to further. Mr. Cleveland replied in what was generally said to be the most feeling utterance that he had ever made, and which moved the gathering deeply. The other speeches were also pitched in a very high key. The occasion attracted general attention, and the press immediately teemed with stories that Mr. Villard was to be a member of the new Cabinet, and otherwise play an important part under the new regime. The truth was that he had taken occasion to notify Mr. Cleveland immediately after his election that all he asked was leave to discuss pending public issues freely with him, which was readily granted and exercised up to the inauguration. The President-elect consulted him regarding Cabinet and high diplomatic appointments, but he confined himself to urging Mr. Cleveland persistently, all through the winter, to call an extra session of Congress immediately after March 4, for the repeal of the Sherman law, and to make his intention to do so known without delay. For he perceived clearly the portentous signs of a financial hurricane, and felt sure that if it came without an effort on the part of the new administration to prevent it through Congressional action, Mr. Cleveland would be held responsible for it, and its ravages would make the success of his administration impossible. He told Mr. Cleveland many times that, if he rode into power on the eve of a panic, nothing could save him from failure.

His efforts to persuade the President to call an extra session were faithfully seconded by other close friends, and by none more so than by Don M. Dickinson, of Michigan. One morning in February, the latter came into his office with a beaming countenance, waving a piece of paper and exclaiming: "We are all right now." He had spent the night with Mr. Cleveland at Lakewood, and, after hours of argument, got him finally to agree to the extra session. The paper contained the announcement in Mr. Cleveland's own handwriting that the President-elect had decided to call an extra session directly after his inauguration, for the repeal of the silver-purchasing act, and that members of Congress might take notice that appointments for office would not be considered by the Executive until they had done their duty and abolished the obnoxious law. The announcement was to be made in the afternoon papers. Mr. Villard was overjoyed, and at once telephoned the glad news to a number of friends. In less than an hour, he was obliged to recall it in consequence of the reappearance of Mr. Dickinson with the disappointing message from Mr. Cleveland that he had changed his mind and would do nothing before the 4th of March. Some other friends, who were opposed to an extra session, had talked him out of his purpose in the meantime. When it seemed impossible in January, 1893, to overcome Mr. Cleveland's reluctance to summon an extra session, Mr. Villard and Don M. Dickinson got the President's consent, indicated by letters from him to leading Democratic members, to try to secure the repeal of the Sherman Act by the expiring Congress. They labored hard to this end for some weeks in Washington, and got the Democratic side ready for action, but the attempt failed on account of the unwillingness of certain influential Republicans to smooth the way for the incoming administration. Mr. Villard spent the last afternoon with the President-elect before his departure for Washington, and made a last plea for an extra session. But hours of talk only resulted in an invitation to come to Washington to repeat his arguments to the new Cabinet, and a promise that, if it voted in favor of an extra session, one should be summoned at once. He did as desired, witnessed the inauguration, and met all the Cabinet members except Mr. Olney in a parlor at the Arlington House. He presented his case as strongly as he could, but in the discussion that ensued after he had made his argument, it became evident that only the Secretary of Agriculture was unconditionally for the gold standard, and that the rest either were bimetallists or did not understand the subject sufficiently to express an opinion. So, the next morning, he told Mr. Cleveland he was satisfied that the Cabinet would vote against an extra session, and therefore he considered his mission ended and should go home. Once more, he had the sorry satisfaction of seeing all he had feared and prophesied as to the impending panic and its effect upon the fate of Mr. Cleveland's administration come to pass.

The campaign work in 1892 and Mr. Villard's labors for the gold standard withdrew him so much from his corporate duties that he felt their burden but lightly. This led him to postpone his intended retirement from his executive positions; but early in 1893 he announced his settled purpose to resign them. The last thing he did as chairman of the Northern Pacific was to devise a collateral trust mortgage for funding the floating debt, of which he himself held a large part. His formal resignation was accepted by the Northern Pacific board only at its meeting on June 21, 1893, to take effect on July 19, when, as on his first retirement, his services to the company were acknowledged by the passage of a gratifying series of resolutions. His resignation from the North American board was accepted only in June, 1893.

He was fully conscious that, in obtaining this release from official cares, he did not free himself from the heavy burden of anxiety with which the growing certainty of a catastrophe to the Northern Pacific oppressed him. The accelerated decline in the earnings, the increasing paralysis of silver-mining, and the fast-spreading stagnation of general business, convinced him that the breakdown of the company would come inevitably with the general crisis which he expected would befall the country in 1893. It was perfectly clear to him, too, that the collapse of that company would again mean for himself discredit, calumny, and abuse. It seemed a hard fate indeed that he should have to pass twice through the same ordeal and receive such severe punishment for once more loyally uniting his personal fortunes with the same ill-starred company. Considering default unavoidable, he advised making it as early as April, but the officers still believed in the possibility of early recuperation and managed to pay the April coupon. Early in 1893, a new temporary occupation fell to his lot which proved far more arduous, while it lasted, than he had anticipated when he accepted it. On his motion, the Chamber of Commerce of the State of New York appointed a committee, of which he was chosen chairman, to make suitable provision for the proper entertainment in New York of the foreigners who had been invited by the United States Government as guests of the nation in connection with the Columbian World's Fair. They included the Princess Eulalia, as the representative of the Queen of Spain, and the Duke of Veragua, a lineal descendant of Columbus, and family, and the officers of foreign squadrons that participated in the great international review in New York harbor. On entering upon his duties, he discovered that, although Congress at its first session had extended formal invitations in the name of the nation, which had been accepted, no appropriations for the expense of entertaining the guests had been made. As the Democrats were to assume power both in the Government and in Congress in March, the appropriation committees, controlled by Republicans, apparently out of sheer partisan spite were doing nothing to enable the new administration to redeem the pledge of hospitality made by its predecessor. Mr. Villard called the attention of Mr. Cleveland to the awkward predicament in which his Government would be placed by being left without money to take care of the guests of the nation. At Mr. Cleveland's request, he went to Washington with letters from the latter to prevent such a disgrace. He begged Secretary of State Foster to remind the appropriation committee of the urgency of the matter, which Mr. Foster did; and also exerted himself personally with the committee. But the shortness of time, and political prejudice, prevented any action, and Congress actually adjourned without having voted a dollar, so that the new administration had only the contingent fund of the State Department, really intended for other objects, to draw from for the purpose. Mr. Villard bethought himself of two ways of avoiding an international scandal, viz., the raising of a considerable fund by private subscriptions, and the financial help of the City of New York. The former he successfully undertook himself, and the latter was obtained to the extent of $100,000, with the help of some Democratic friends who engineered the necessary special act through the State Legislature in the nick of time. Thus the expense of the great street parade, the banquet at the Waldorf, the ball at the Madison Square Garden, and the other entertainments was provided for. As is usually the case on such occasions, the chief burden of responsibility fell upon the chairman, and he literally had to labor day and night for weeks to prevent the failure of the programme which he had proposed. One thing he was taught very thoroughly by this experience, viz., that Americans, however hospitably inclined they may be, do not care to bother with foreigners who do not speak their own language.

Mr. Villard went to Chicago to see the World's Fair. He was filled with the greatest admiration for this marvellous achievement of American genius, which had never been equalled before and, in his opinion, never would be thereafter. For weeks he spent every day and many evenings in the Exposition grounds, without being satiated by their great attractions; but his stay was terminated by an urgent summons to New York, in the middle of June, from the Northern Pacific's president, to which he responded at once. As he anticipated, the occasion was the question of the payment of the July coupon. The panic had in the meantime broken out in full force in Wall Street and throughout the country. There was a very tight money market, and extraordinary commissions—at rates often exceeding one hundred per cent.—were charged for loans. Mr. Villard argued against the payment, which could be made only by borrowing a large part of the required amount at a heavy extra cost, as only a short makeshift, but he was not heeded, and the payment of the coupon began with little over one half of the $1,500,000 needed in hand. As was to be foreseen, default was postponed for only a few weeks, and, by mid-August, receivers were appointed for the whole system.

The Deutsche Bank, which had placed in Germany the bulk of the junior bonds most to be affected by the suspension of interest payments, was morally bound to do its utmost for the protection of the holders. As Mr. Villard shared in its responsibility, he deemed it his duty to do all in his power to bring about the appointment of receivers whose character and experience offered a guarantee that the company would be extricated from its difficulties as early as possible; and in this he was successful. The importance of an immediate and effective organization of the majority of the bondholders in Germany under the guidance of the Bank was also perceived by him, and with the timely cabled notice to the institution of the inevitable default he sent an urgent appeal to lose no time in forming a strong and friendly committee, which should at once send a delegation with full power to this country, with a view to the formation of an American committtee willing to cooperate with the German. These recommendations were promptly acted on, and, in October, the delegation, headed by Dr. Georg Siemens, the principal director of the Bank, arrived in New York. The first thing Mr. Villard had to do was to demand a formal revocation of and an apology for an offensive circular issued by the Bank in hot haste to the bondholders, full of glaring misstatements, unjust criticism of the railroad management, and an evident attempt to make a scapegoat of himself. This was conceded, and the correction given even wider publicity in Germany than the circular. Mr. Villard informed the delegates, after he had fully posted them concerning the situation and the measures it called for, and initiated the organization of an American committee, that, having done all that was possible for him to do in the interest of the bondholders, he should withdraw altogether from Northern Pacific affairs and go abroad for several years. The delegation was much taken aback by this announcement, protested against his purpose, and insisted that he must remain in the country and take an active part in the reorganization of the company. He replied, however, that, owing to his failure in 1883 and the present crisis, his usefulness as a financial adviser and leader was obviously entirely gone, and that it was his firm belief that, in view of the bitter attacks upon him which had already begun, it would positively injure the work of the committees if he played a leading part in it.

After some exciting scenes, his proposed course was approved, provided a proper substitute for him could be found who would serve as chairman of the American committee of bondholders, and constitute the connecting link between the latter and the German committee and also act as confidential adviser to the Bank. He recommended Edward D. Adams, and, after some delay, the delegates voted to authorize him to offer the position to the man of his choice. Mr. Adams hesitated at first, but was finally persuaded to accept. The main share which he had in the extraordinary success of the reorganization of the company made a splendid record for him, and the managers of the Bank subsequently expressed to Mr. Villard at Berlin their great sense of obligation to him for having recommended Mr. Adams. The outcome of the reorganization was such that none of the holders of the company's securities, who held on to them, lost anything in the end. This result compensated Mr. Villard for the personal annoyances which, as he had foreseen, grew out of the Northern Pacific collapse. As men with similar experiences necessarily do, he made a number of bitter enemies, who then saw their opportunity for revenge. He and his associates in the formation of the Chicago & Northern Pacific Railroad (Terminal) Company were charged in the press with having made millions for themselves out of it, and a small stockholder was even procured to bring suit for the recovery of these alleged ill-gotten gains. In his answer to the bill of complaint, Mr. Villard made an absolute denial of every one of the charges, and so completely that no further move was ever made in the case.

He sailed with his family, except the elder son, in November, 1893, direct for Gibraltar. The party first travelled in Spain and then passed over to northern Africa. They visited Melilla, Oran, Blida, Algiers, Philippeville, Constantine, Biskra, the famous oasis in the Sahara; and reached Tunis by the middle of January, 1894. Thence they crossed to Sicily, and, at the end of the month, took steamer at Naples for Egypt, where they spent two months, during which they made the usual tour of the Nile. From Egypt they went to Greece and thence to Constantinople. In April, they reached Vienna, where their stay was somewhat protracted. The summer was spent in the Austrian Tyrol, on Lake Constance, and in Central Switzerland and on Lake Geneva. In October, the rest of the family went to Italy over the Mont Cenis, and visited the principal places from Turin to Naples. While in Florence, in the first week in December, Mr. Villard received a letter from his associate in the Northern Pacific management, Thomas F. Oakes, one of the three receivers, advising him of his arrival in Paris and his desire for a meeting with him. It was decided that Mr. Villard should proceed thither.

Since Mr. Villard's departure, developments had taken place in Northern Pacific affairs which affected him personally, and regarding which it was very desirable he should learn more details than he had received while travelling. Control of the Northern Pacific had been obtained, at the annual election held after the appointment of receivers, by parties bitterly hostile to the former management. They brought about the filing, early in 1894 in the United States Circuit Court, which had appointed the receivers, of a series of charges against Mr. Oakes and Mr. Villard, accusing them of having derived large personal profits out of the construction of certain branch lines, and moved for an investigation. This the court granted, without giving Mr. Villard an opportunity to be heard, and appointed a master to take testimony.

Mr. Villard heard of this only after arriving in Vienna, and he immediately by cable and by letter asked to be summoned by the master, but no summons ever reached him. Instead of the naturally expected report against further proceedings, to Mr. Villard's great surprise and indignation he learned in Switzerland that the master had exonerated Mr. Oakes, but recommended that the court order a suit to be brought against Mr. Villard for the recovery of alleged illegitimate profits in connection with the building of the Northern Pacific & Manitoba branch line to Winnipeg. It was assumed that the court would order the suit, and it was regarding this trouble that he wished to confer with Mr. Oakes.

He rejoined his family at Munich on his return from Switzerland on December 17. His sister and her husband resided there, together with several other relatives and a large circle of old personal friends. Mr. Villard had caused the receivers to be informed that he was ready to return and respond at any time to any summons in any suit against him, and in answer had received official information that they had been ordered to bring suit, but thought it proper to call on him first for certain explanations. He concluded to respond to this in person, and was able to notify the receivers early in May, 1895, that he was back and held himself at their disposal. Some correspondence with the receivers followed, but nothing further was done in the case until the following winter, when the court renewed its order to bring suit, which was then commenced. But the suit never passed beyond the first stage—that is, the filing of the complaint and the defendant's answer. The case remained there until after the completion of the reorganization of the Northern Pacific Company and the discharge of the receivers. Mr. Villard received then the fullest possible vindication by a dismissal of the suit without his solicitation, and a certification from the principal conductors of the reorganization, E. D. Adams, Francis Lynde Stetson and C. H. Coster, that no evidence whatever had been found to sustain the charges against him. This is the place in which to mention also that it was proved, through a most searching investigation of the Northern Pacific accounts made by order of the court, that not a dollar of the corporate funds had ever been improperly used.

When Mr. Villard announced his settled determination before his departure for Europe in 1893 to withdraw from all business pursuits, most of his friends did not believe that a man accustomed to such extraordinary activity could be content to live in retirement. These sceptics expected him to resume his role in Wall Street upon his return in 1895. But they did not know the man. Although he kept a small office in the financial quarter, and retained his interests as a security-holder in the North American Company and some other corporations in which he had been interested for years, he resolutely declined to become again responsible for their management as director or officer. He was always found ready, however, to help them with money and advice. He had three reasons for this retirement: one was his growing deafness, and a second one his unwillingness, in the light of past lessons of ingratitude from others, ever again to be responsible for the use of other people's money, directly or indirectly. The third reason was the sacrifices he had made as a consequence of his practice, out of kindness and generosity, to assist inexperienced relatives and friends of both sexes in their investments. He always looked upon advice given to such as involving a moral obligation, and never shrank from the personal consequences of this view, as is proved by the fact that he made good losses to numerous sufferers from his counsel, to the extent of hundreds of thousands of dollars, especially from losses in Northern Pacific bonds.

He was rendered proof against Wall Street temptations by another fact. In spite of his all-absorbing material occupations for so long a period, he had never lost his preference for a life devoted to what he considered higher and nobler objects, such as he had followed before he became a business man. With the attainment of freedom from all obligations to others, this feeling grew stronger, and he not only never had a moment's regret because of the obscurity which he had deliberately sought, but he rendered thanks every day for the abundance of leisure it had secured him for extensive reading, literary labor, reform work, and the philosophic contemplation of the momentous events following each other so rapidly in our time.

He had chosen two fields for literary occupation. One he had entered upon long before his withdrawal from business life. Nearly twenty years before, during periods of rest, he began to write his personal memoirs. As soon as he had command of his time, from the summer of 1895 till the winter of 1899-1900, when his health began to be seriously affected, he devoted himself steadily to their preparation. As a means of reviving and fixing his recollections as a war correspondent, he made a careful study of the Official War Records so far as they related to the campaigns of the Civil War on land and sea which he had witnessed. This work proved very fascinating to him, as the Government publications contained the documentary history of the operations not only of the Northern but also of the Confederate armies. It revealed to him for the first time the whole, instead of but one side, of the bloody pictures of the battle-fields of the great struggle. He found it most absorbing work to test the accuracy of the statements of the loyal commanders by those made by their antagonists, and to unite their separate accounts into one complete, consistent, and comprehensible description. The flood of new light radiating from this double source led him to enlarge the scope of the narrative of his own observations of the great collisions of the war into full battle descriptions. He was untiring in the collation, sifting, and testing of his material from all available sources, and took the greatest pains to be impartial and accurate. It required many months to bring some of his battle stories into a shape that satisfied him. When he was obliged to stop work, he had got no further than the second day's fighting at Chattanooga. The next subjects would have been Grant's battles in the Wilderness and the siege of Petersburg. He was very anxious to describe these later episodes, and had revisited both scenes in 1897, going over the ground carefully with the Official Records and accounts of war historians in hand.

His other literary scheme was to write a history of the Franco-German war of 1870–71. He had for some years employed two young German historians, trained by Professor von Sybel, to collect material for him, but gave up the project on finding that the French material procurable was altogether too scanty for as full and accurate a history of the part played by the vanquished as the abundant German sources permitted to be written of the part of the victors.

Although he was no longer a working participant in current affairs, it was not in his nature to be simply an indifferent observer of passing events. His sympathies were moved as quickly and deeply as ever by all good causes, and his indignation stirred as readily by public and private wrongs. It remained a standing grief to him, as a free trader, that the prospect of tariff reform had grown so apparently hopeless in these latter years. The thought that, through his instrumentality, it was rendered possible to wage an incessant war against public abuses of every kind through the Evening Post's relentless championship of political reform, was a source of just pride to him; but it did not surprise him that praise of this championship was followed by denunciation when the Evening Post had to oppose popular delusions, as in the case of the unjust war against Spain. That national frenzy roused his strongest antagonism, for he clearly foresaw all the moral decadence, all the blighting effect upon all reformatory movements, which that fatal aberration was certain to bring in its train. He and his wife could not stand the war-racket which broke out in the spring of 1898, and went to Europe, not returning until after the conclusion of peace.

With the exception of this absence, Mr. Villard passed his winters with his family in their apartment in New York, and his summers at their beautiful country-seat at Dobbs Ferry, on the Hudson, until the summer of 1899, when he made what he felt to be his last tour over the Northern Pacific system. The journey was extended to Alaska, which, though the Oregon Steamship Company had opened commercial intercourse with it under his original administration, he had never found time to visit. As he had not been over the road for eight years, he was prepared to be, if not forgotten, at least only slightly remembered. It was therefore an agreeable revelation to him to find that he and his work were well remembered all the way from the Lakes to the Pacific Northwest. He was heartily welcomed everywhere and by all classes, and met a great number of old acquaintances. The most pleasing reception given to him was at Eugene City at the State University of Oregon, of which he had been a benefactor. It interested him, of course, very much to compare what Oregon and Washington were when he first made his advent on the coast twenty-five years before, with their present stage of development. The two Territories in 1874 had together a population of only 100,000; now each of the two States claimed about half a million. Portland's had risen from 15,000 to 90,000, Tacoma's from 5,000 to 45,000, Seattle's from 6,000 to 65,000, and Spokane's from a few hundred to 40,000. Marvellous changes in one-third the length of a human life!

Mr. Villard was of such a fine physique that he was generally supposed to enjoy perfect health, which was not, however, the case. He had been for more than thirty years troubled with rheumatism and gout, and had passed through several dangerous diseases. After 1896, he had some attacks of heart disease and a slight apoplectic stroke. His real decline began in 1899.^[5]

No American citizen of foreign birth could have had a higher appreciation than Mr. Villard of the privileges of American citizenship, and of the incomparable advantages arising from the free play of the human faculties enjoyed in this country. He never forgot that he was himself a living illustration of the benefits of these conditions, and never failed to acknowledge his indebtedness to them. Yet, with all his faithfulness and gratitude to his adopted country, he also remained loyal to the land of his birth. Notwithstanding his residence of nearly half a century in the United States and all the American infiltration and engrafting he underwent in that long time, he always remained and was proud to be a true German. He sought to have his native language acquired by all the members of his family, and to make them personally acquainted with his relatives and friends in the Fatherland. The family altogether lived nearly twelve years at different times in Germany, and Mr. Villard visited his native province on an average every two years. He considered it a sacred duty to do all he could for the welfare of his countrymen in America, and for the promotion of close friendly relations between the two countries. He enjoyed the personal friendship and confidence of all the diplomatic representatives of Germany in the United States from the days of Lincoln, and was ever ready to give them the benefit of his long and varied experience and wide acquaintance on this side of the water. He always believed that the two countries ought to know more of each other's special characteristics, and this induced him to provide for sending thirty-three young German artisans, artists, and literati to the World's Fair at Chicago in 1893. The same motives led him to entertain at Thorwood the officers of the German squadron that was ordered over to join in the international naval review in the spring of that year.

END OF SECOND AND LAST VOLUME.

1. This "intervention" meant the support of the institution for two years. Mr. Villard was never reimbursed for this outlay by the Legislature.
2. On December 17, 1883, the day of Mr. Villard's resignation from the O. T. presidency, there were sold 113,800 shares of O. T. stock.
3. 'History of the Northern Pacific Railroad. By Eugene V. Smalley, New York: G.P. Putnam's Sons. 1883.' The chapter relating to Mr. Villard's presidency was dictated by him to the compiler. It has been partly drawn upon in the foregoing narrative.
4. In order to put an end once for all to the squabbles between the Northern Pacific and Union Pacific, threatening so much harm to each, he tried to bring about, in connection with the transaction described the election of boards for the two Pacific Companies, in each of which both companies should be represented; but this could not be attained.
5. Mr. Villard died at Thorwood, November 12, 1900.