On January 2, 1889, a circular marked "Private and Confidential,"
was issued  by  the  three  banking  houses  of  Drexel, Morgan &
Company, Brown Brothers & Company, and Kidder, Peabody & Company.
The most painstaking care was exercised that this document should
not find its way into the  press,  or  otherwise  become  public.
Indeed,   extraordinary  measures  were  taken  to  surround  its
contents with every precaution of secrecy.

Why this fear?  Because  the  circular was an invitation, tacitly
understood as a  command,  to  the  great  railroad  magnates  to
assemble  at  J.P.  Morgan's  house,  No. 219 Madison avenue, and
there form, in the phrase  of  the day, an iron-clad combination.
The plan  was  to  make  a  strict  compact  which  would  efface
competition among certain railroads, and unite those interests in
an  agreement  by  which the people of the United States could be
bled even more effectively than before.

That circular  was  a  historic  document,  well  worth more than
passing notice; and he who was familiar with the forces  then  at
work  rightly  considered  it  of  far  greater importance than a
series  of  Presidents'  messages,  ordainments  of  Congress  or
Courts' decrees.

At a time when the whole  gravamen of law and juridical precedent
was  being  used  to  insist  upon  industrial  forces  remaining
stationary and stagnant, this circular came as a proclamation  of
defiance.  Common and statute law sternly declared that the thing
called  competition  in  trade must be kept alive, and that if it
could not sustain itself by its own merits, the law should demand
its maintenance.  The causes producing and justifying competition
were passing away, but  none  of the law-making bodies recognized
the newer conditions, nor made any provisions for them.  But  the
magnates   realized   that   the  old  indiscriminate  system  of
competition was rapidly becoming  archaic,  and that the time was
ripe for a more systematic organization  of  industry.   And  so,
while  Congress  and  the  legislatures  were busily enacting law
after law, supposedly  edicts  of  "the  sovereign  people of the
United States," a few magnates  issued  a  brief  circular  which
intrinsically  was  of  far,  far more binding weight than entire
volumes of statutes impotent.

A momentous gathering it certainly was that assembled in Morgan's
mansion on  January  8,  1889.   Who  were  they  we  note there?
Apparently private citizens; in reality  monarchs  of  the  land:
Jay  Gould  with  his  son  George;  Stickney,  of  the Northwest
territory; Roberts, of  the  Pennsylvania  Railroad; sleek Depew,
echoing the Vanderbilts; Sloan, of  the  Delaware,  Lackawanna  &
Western  Railroad,  and  a  half  dozen  more  magnates  or their
accredited mouthpieces.  The  honorable legislature could gravely
discuss the advisability of this or that legislation;  the  noisy
"Congress  of  the  United  States" could solemnly meet and after
wearing out months in rodomontade, profess to make laws; the high
and mighty Courts could  blink  austerely and pompously hand down
their decisions.  But in that room in Morgan's house sat many  of
the actual rulers of the United States; the men who had the power
in the final say of ordering what should be done.

Morgan  was  chairman  of  the  meeting,  and with wonted brusque
directness went straight to the  point.  Thanks to a stenographic
report of the proceedings which fortunately we were able  to  get
hold  of,  the  work  of that meeting was clear.  The name of the
organization  was  to   be   the   "Interstate  Commerce  Railway
Commission"; its essential purpose the cessation  of  competition
among  its members.  But how was any magnate to be prevented from
competing  with  another,   or   stopped  from  encroaching  upon
another's domain?  What penalties should there be, and how  could
they  be  enforced?   Certainly no law could be invoked to compel
the carrying out of  such  an  agreement,  for the law explicitly
prohibited combinations, and any legislation would  not  only  be
outlawed,  but  would  reveal  the  extent  of the whole criminal

There was, however, a far greater power than that of law, namely,
the power of massed money.   If any magnate present were inclined
to balk at the prepared program he  was  brought  to  an  instant
realization of the punishment when Morgan announced:

  I  am  authorized to say, I think, on behalf of the banking
  houses represented  here  that  if  an  organization can be
  formed  practically  upon  the  basis  submitted   by   the
  committee,  and with an executive committee able to enforce
  its  provisions,   upon   which   the   bankers   shall  be
  represented, they are prepared to say that  they  will  not
  negotiate, and will do everything in their power to prevent
  the  negotiation  of any securities for the construction of
  parallel lines, or the  extension  of lines not approved by
  that  executive  committee.    I   wish   that   distinctly

The  threat,  or promise, as it could be differently interpreted,
was assuredly understood.  Vast as was the wealth of the magnates
present or represented, neither any one or a combination of them,
dared (had they been so disposed)  to defy such an ultimatum.  To
do so meant inviting the vindictive, crushing wrath of  a  clique
of national and international bankers whose money and power could
be used with the most destructive results.

[Excerpts  from  *History  of  the  Great  American  Fortunes* by
Gustavus Myers. (1936)]

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