The Railroad That Never Was: Vanderbilt, Morgan, and the South Pennsylvania Railroad

10 Cooler Heads and Colder Feet Emerge

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' ' 'F F F F F F U U U F F F . . .F F F S S S H H H F F F As early as mid-1884 some of the original euphoria had begun to vanish, and at least some syndicate members, including Vanderbilt, were having second thoughts. Vanderbilt was in poor health, suffering from his chronic high blood pressure and, later, from the effects of a mild stroke. Back in 1880 he had arranged with J. P. Morgan to sell half of his considerable New York Central stock holdings , and in May 1883 he had resigned the New York Central’s presidency, turning it over first to James H. Rutter and then, after Rutter died in 1885, to his trusted lawyer, Chauncey Depew. Two of his sons, William K. and Cornelius Vanderbilt II, took his place at the top in guiding the company’s fortunes. Furthermore, his company now had its hands full waging a rate war with both the Pennsylvania and the newly opened West Shore. The Central’s aggressive reaction had helped push the West Shore into bankruptcy in June 1884, only six months after its opening, which was a victory of sorts for Vanderbilt even though he was not yet able to control the new competitor.1 But at the same time the Central’s brutal actions were a sobering lesson to the South Penn syndicate. If the Central could bring down the West Shore so quickly, some members rather clearly reasoned, the Pennsylvania could well be expected to do exactly the same with their railroad. Circumstances had also changed. For one thing, the financial environment had turned distinctly unfriendly, and tighter money was beginning to pinch some of the members. In retrospect, it seems obvious that the South The Railroad That Never Was 82 Penn was conceived at just the wrong time. A business slowdown had begun in 1883, accompanied by falling steel prices and the inevitable wage cuts for workers. (Andrew Carnegie did his part, reducing wages 13 percent at his Edgar Thomson plant and 17 percent at his newly acquired Homestead Works, although thanks to his relatively enlightened labor relations at the time, the union accepted the cuts without trouble.) The slump continued through next year and, in fact, would not hit bottom until 1885.2 Equally worrisome was the status of the Reading, the South Penn’s sole eastern connection and one of its principal reasons for being. Thanks to Gowen ’s headlong expansion and often heedless management style, the Reading had already suffered one bankruptcy, lasting from May 1880 to February 1883. Gowen was ousted in 1881, but Vanderbilt helped bring him back in January 1882. Both his comeback and the Reading’s superficially improved finances proved temporary, though. Gowen had promised to resign after the reorganization , and he did so in January 1884, turning his job over to a trusted close friend, George DeB. Keim. Doubtless he expected Keim to be his puppet, as he had been in the past, but Keim was not and could not be. He immediately disowned Gowen and his financial policies, but still was unable to prevent another bankruptcy, which came in June of that year. Gowen attempted to be named a receiver, but was rebuffed, and Keim was appointed instead. So by mid-1884 the Reading’s future course was anybody’s guess, with the alwayspossible prospect of control by somehostile interest—perhaps even the Pennsylvania . By then even Vanderbilt had lost confidence in Gowen, and in late March1885,TwomblyaskedSayretotaketheReading’spresidency;prudently, perhaps, Sayre declined.3 Costsalsobegantoprey.InAugust1884,HenryOliver,representingsome of the Pittsburgh syndicate members, unofficially approached the local Baltimore &OhiomanagementinPittsburghaboutusingtheB&O’slinesbetween Somerset and Connellsville to reach the PMcK&Y at that point, thereby saving construction costs and speeding its opening by abandoning the South Penn’s route west of Somerset. Under the Garretts, the B&O had never taken a public position on the South Penn, possibly to keep on the good side of the Pittsburghers or the Reading (which it needed as a friendly connection itself...