544 pp., 40 illus., notes, index

$34.95 cloth
ISBN 0-8078-2517-4

Published: Spring 2000

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The Life and Legend of E. H. Harriman

by Maury Klein

Copyright (c) 2000 by the University of North Carolina Press. All rights reserved.




Chapter 25.

[Harriman] was a dominant factor in the inner circles of the greatest banking institutions. The vast resources of the New York life insurance companies were at his disposition. Ramifications of his political power, Federal and State, extended to every quarter of the land. State and even national conventions took his orders. Members of Congress did his bidding. Laws were enacted at his will. Only two men ever dared to block his path. The late J. P. Morgan stood between him and the possession of the Northern Pacific Railroad in 1901; and Theodore Roosevelt thwarted his purpose to become an absolute dictator of the transportation affairs of the United States. —William Z. Ripley, "Federal Financial Railway Regulation"

On a wall in Harriman's office hung a picture taken during an inspection trip through Mexico. The party had paused to examine a small railroad servicing a copper mine, and the photographer captured a dozen men, including Stillman, William Rockefeller, and Epes Randolph. By far the most inconspicuous figure in the group was Harriman, who was ignoring the camera in favor of a Mexican policeman with whom he was shaking hands. The policeman towering above the slight man in the baggy clothes and battered felt hat looked far more important and impressive.[1]

Anonymity had served Harriman well for many years, but now it was gone just when he needed it most. He had become a public target at a time when he needed to husband his fading strength for the work at hand but instead had to spend it fending off attacks. The economy had turned sluggish and many financiers thought hard times lay ahead. Harriman's properties required close attention to remain at the high standard of performance he had established. He was approaching the age when many leaders think of retirement or begin grooming a successor. Harriman did neither. Time had not slaked his ambition nor attacks dented his determination. He knew only one way to fight, and that was to stand his ground until the right prevailed. "I would give up the whole business," he told Alex Millar, "if I could be sure my plans would be carried out."[2]

But Harriman knew there was no one able to carry out his plans. Far from looking to get out, he was looking to get deeper in. The problem was that his way of doing things consumed enormous amounts of energy. He relied on an assertive personality that took command in everything; on a bulldog tenacity that argued for a policy until he wore others down; on knowing more than anyone else by doing his homework; and on sound judgment that required clear, fresh thinking. The Harriman style taxed both mental and physical stamina, and it permitted no shortcuts. To maintain this high level of dedication while engaged in prolonged controversies and blocking out constant pain asked much of his ebbing vitality.

The drain on his strength forced him to economize in every way, made him more imperious and impatient, more curt even to his friends and more peevish when thwarted. A man already renowned for his lack of charm grew even more brutal as he pared every action down to its essence. Eventually, of course, death would block his plans, but death was a subject he scrupulously avoided. It was not to be thought of or discussed. In fact, Harriman had lived with the fear of death all his life, only he knew it by another name: failure.

During 1906 two incidents occurred amid the Equitable and Illinois Central fights that twisted what should have been personal triumphs into examples of how the prevailing climate of public opinion warped everything Harriman touched. Both arose as protests to Harriman's dividend policy, which one critic labeled "conservatism run mad." The first involved the Wells Fargo company. Few people knew that Harriman had anything to do with this fabled banking and express firm until headlines blared the news in the summer of 1906. He had gained control of it shortly after buying into the Southern Pacific. The big four express companies--Adams, American, United States, and Wells Fargo--depended on railroad contracts for their business. Harriman wanted Wells Fargo to handle the express business on all his western roads. The fact that it owned a bank especially appealed to him.[3]

After taking charge of Wells Fargo, Harriman separated the bank from the express business and in April 1905 merged it with a Nevada bank run by an associate. The bank stopped issuing annual reports and gave out no information on its assets, earnings, and activities. It was an open secret that Harriman tapped Wells Fargo's surplus for loans to finance his rail operations. Rumors about these low-interest loans exposed him to the same charges that arose in the Equitable scandal then unfolding. No one accused him of damaging Wells Fargo; on the contrary, trouble arose when some stockholders complained that he was paying only an 8 percent dividend while the company netted more than 30 percent on its stock.[4]

In May 1906 some minority holders launched a drive for higher dividends and access to financial information. Harriman grudgingly hiked the dividend to 10 percent and released some figures, but neither move appeased the dissidents. A proxy battle with a novel twist erupted. The minority holders had no desire to change the management; they wished only to compel it to pay larger dividends. As the fight heated up, however, it developed what one observer delicately called "glimpses of feeling entirely outside of the matter at issue." A minority circular bluntly defined the struggle as one "between Mr. Harriman on the one hand and the entire body of 1,900 stockholders on the other."[5]

Here was a fight Harriman neither wanted nor needed, yet he could not avoid it or keep it from overlapping the other controversies splashing his name across headlines. One group of Wells Fargo holders filed suit against him and engaged the flamboyant Samuel Untermyer, who had defended Hyde in the Equitable fight. Harriman countered with William Nelson Cromwell, a high-powered attorney capable of dueling Untermyer in any battle of mouths. When the stockholders convened early in August, Harriman won a decisive but costly victory. During the meeting, Cromwell delivered an impassioned defense of the management in which he said of Harriman, "It is not on the business acumen of the officers but on his wonderful executive genius on which the stockholders must rely if the prosperity of the company is to continue. He cannot be replaced, for he moves in a higher world into which we may not enter."[6]

Critics across America pounced gleefully on Cromwell's "higher world" phrase as the perfect emblem of Harriman's aloofness, arrogance, and high-handed methods. Wells Fargo flourished while the other express companies struggled, but public attention ignored performance in favor of an image that fit the current perception of Harriman. A second incident at almost exactly the same time reinforced the impression, this one involving a dividend on the Union Pacific. For years analysts had heaped praise on Harriman's handling of the Union Pacific. While most of this attention went to its operation and reconstruction, thoughtful observers recognized that its financial record was no less brilliant.[7]

Early in 1906, as the road rolled up new records in traffic hauled and the surplus mushroomed, Harriman let the dividend go from 5 percent to 6 percent and fended off the clamor for more with his usual lecture on the need for conservatism. During the spring and summer, however, record earnings continued to pile up on both Pacific systems. The Union Pacific produced a surplus exceeding $25 million; it also owned $90 million worth of Southern Pacific stock on which Harriman had finally decided to pay a 5 percent dividend. This would put another $4.5 million into the Union Pacific treasury, and the securities acquired in the breakup of Northern Securities also poured dividends into the Union Pacific's coffers.[8]

At a board meeting on August 15 the directors absorbed these figures and agreed with Harriman to raise the dividend to 10 percent. Although the Union Pacific had never paid so large a dividend, the size provoked less of an uproar than the circumstances.[9]

Normally the board released news of a dividend at once, but several key directors missed the meeting and Harriman wished to inform them before it went public. The board left the timing of the release to the executive committee, which was to meet the next morning. That session was postponed until three in the afternoon so that Harriman could attend the funeral of an old friend. By then the absent directors had been contacted, but the New York Stock Exchange had closed. If the news went out at once, the London market would get the benefit of it before New York. "We decided that it was best to have the announcement made in New York before it was in London," Harriman explained, "that is, while the New York market was open." The "We" consisted of Harriman, Stillman, and Judge Lovett, the only members present that day.[10]

Normally news of a dividend was hardly the stuff of headlines, but in this case rumors of a major increase in the payment had excited Wall Street for weeks. When the announcement was delayed, two dozen reporters flocked to the Union Pacific office in the Equitable Building on the morning of the sixteenth only to learn that Harriman was absent and the meeting would be held later. When at last the news went out the next morning, an already boiling market sent Union Pacific and Southern Pacific soaring. Those who had lost heart over the delays and sold out or sold short howled in protest.[11]

Angry voices crying fraud soon drowned out the message of the remarkable dividends. "Harriman dividends amaze wall street," blared a Times headline, while beneath it in smaller caps ran the accusation that "the insiders made millions." Harriman was charged with delaying the announcement so that he and his friends could buy Union Pacific stock heavily and profit from the rise they knew the dividend would bring. The Times estimated that Harriman alone pocketed $10 million from this maneuver, which even a moderate journal deplored as a "wrongful use of corporate power." Criticism rained down on Harriman from every quarter even though no one had produced a shred of evidence that any director had bought stock.[12]

The fact that the dividends for both roads represented a sharp reversal of Harriman's past policy lent a veneer of plausibility to the charges. This was exactly the sort of insensitivity to public opinion that made Harriman's friends shudder. Schiff, Kahn, and Stillman tried repeatedly to warn Harriman that he lived in a world where the presence of smoke always heralded fire. "A man at the head of a great corporation," stressed Otto Kahn, "must not only do right, but he must be very careful to avoid even appearances tending to arouse the suspicion of his not doing right." But none of them could curb Harriman's tendency to ride "roughshod over conventionalities and amenities."[13]

Together these episodes imprinted on the public an image of Harriman as a sinister force worthy of the legendary Jay Gould. This negative image completely reversed his actual role and could not have been more distorted, yet it gained credence. Instead of rewarding him for his vision, the march of events elevated him into an unwitting symbol for a host of ills, real and imagined, in the body politic.

This transmutation of Harriman in the public mind did not go unnoticed by the first citizen of the land, who had his own quarrel with the little man. If there was one American who exceeded Harriman in physical and mental vigor, it was Theodore Roosevelt. Whatever one thought of him--and the range of opinions could not have been wider--Roosevelt was one of the most remarkable men who ever lived. His mind was less deep than cavernous, a vast closet of information through which he rattled at lightning speed to fetch what he needed. There was scarcely a topic on which he did not hold strong views and scarcely a prominent figure on whom he had not pressed them.[14]

He looked as much larger than life as he seemed. His body resembled an Easter Island icon with its square, solid head atop a squat but powerful trunk hardened by the outdoor life on which he thrived and which he relished as the supplicant embraced the cleansing blows of flagellation. His hair was short and thick, like his neck, and his complexion ruddy. The one flaw in his appearance, a pair of pitifully weak eyes, darted restlessly behind wire glasses or a pince-nez and were overshadowed by the famous, formidable teeth--shining rows of white tile that came together so perfectly they reminded one of a row of dominoes.[15]

They were strikingly alike in many ways, Roosevelt and Harriman. One had been born the child of privilege, the other of privilege denied. Both had come into the world frail and weak-eyed and challenged their physical limitations with a defiance bordering on recklessness. Both had voracious appetites for work and play. Their minds moved at speeds incomprehensible to most men, stoked by sources of energy that were apparently unlimited. They bristled with great plans which they were impatient to realize and hurtled toward them without regard for obstacles or setbacks, inspiring their followers to match the impossible pace they set, contemptuous of the weak, the slow, and the incompetent who fell by the wayside. They were unabashed in their hunger for power and delight in using it; full of themselves and their work, which they linked always to the greater good of patriotic duty.

One major difference separated them and proved decisive in their conflict: Roosevelt was a politician and Harriman was not. He knew how to manipulate and placate people as Harriman did not. And he could never conceal the colossus that was his ego. While Harriman subsumed his vanity beneath the work at hand, content to operate in the wings, Roosevelt craved the limelight. It was once said of him that he had to be the bride at every wedding and the corpse at every funeral. Ultimately his hunger for center stage cost him as dearly as Harriman's arrogance and remoteness did him.

But it served Roosevelt well in politics. He had that gift of solipsism, so necessary to politicians, for standing firmly on principles that could later be bent or broken when necessary under the guise of some belligerent denial or earnest rationalization. It was this quality that led his detractors to regard him as a fraud and charlatan if not a demagogue. Ironically, Harriman and Roosevelt were alike in realizing how radically industrialization had altered American life and institutions and how necessary it was to devise new instruments for harnessing these forces. But Roosevelt came later than Harriman to this revelation and never got past a tendency to put political expediency above his larger visions.

During the 1880s the two men had lived only a few blocks apart in New York, Roosevelt at 6 West 57th Street and Harriman at 14 East 55th Street. But they were distant neighbors with little in common beyond their membership in the Republican Party. State politics was what drew them together, which meant that most of their relationship was played out on Roosevelt's turf. Harriman was a neophyte in politics. No businessman with large concerns could avoid politics, but Harriman never grew comfortable with it. The nether world of dealing and compromise was too slippery in its footing and spongy in its results. He could not help viewing politicians as the Luddites of their age, ever willing to smash the machinery of progress if it threatened them.

Harriman owed his connection with New York State politics to Benjamin B. Odell Jr., who had grown up in the Orange County city of Newburgh. Six years younger than Harriman, the bright, ambitious Odell had taken early to politics and climbed onto the Republican state committee at the age of thirty. He served two forgettable terms in Congress, during which his eye never strayed far from the state arena. In 1898 he came home purged of national ambitions and happily installed as chairman of the state executive committee, which put him near the throne of state Republican rule occupied by the wily Senator Thomas C. Platt.[16]

The relationship between Harriman and Odell began with their mutual interest in Orange County affairs and ripened into a close personal friendship. By coincidence, the year 1898 marked a crucial juncture in the careers of both men. Harriman made his decisive move into the Union Pacific; Odell decided to back Theodore Roosevelt, who had just come home from Cuba a national hero, as the candidate for governor of a troubled Republican Party. He persuaded a reluctant Platt that Roosevelt was the only man who could save the party that fall, and his instincts proved sound. An arduous campaign enabled the Rough Rider to squeak out a narrow victory.[17]

Harriman had little to do with the campaign, but shortly after the election he hosted a dinner in honor of Odell at the Metropolitan Club. The guest list ranged from political heavyweights like Platt, Mark Hanna, Chauncey Depew, and Elihu Root to businessmen like Stillman, Schiff, and D. O. Mills. Harriman sat at the center on one side of the banquet table flanked by Odell and Roosevelt. It was an impressive position for a man who played no major role in politics and had only that month joined the board of the reorganized Union Pacific. His presence at the dinner suggests that Harriman occupied a prominent place in New York financial and political circles before the public even knew his name.[18]

The celebration turned out to have a deeper significance, for both Harriman and Roosevelt launched the national phase of their careers during that November of 1898. Roosevelt's term as governor led to his being put on the Republican ticket in 1900. Some said the nomination as vice-president was intended more to bury than to praise him, but fate transformed it into an early residence in the White House. His successor as governor was none other than Odell, who served two terms and became a vital conduit for the political support Roosevelt counted on at home. Odell in turn relied heavily on men like Harriman to keep the Republican organization well financed.[19]

As governor, Odell stressed reform, economy, and pro-business policies. He struck impressive blows against waste and corruption and pushed through controversial changes in the tax system. On appointments he boldly separated himself from the aging Platt and strengthened his own power base by resuming his post as party chairman. While this dual role enabled Odell to maintain his independence from Platt, it drew harsh criticism and made the support of men like Harriman all the more vital.[20]

Harriman needed no invitation to gravitate toward any center of power, even one he did not personally wish to occupy. So interlaced were the worlds of finance and politics in New York that he could not have escaped the pull. Most of his friends were rock-ribbed Republicans, and few rivaled Harriman in their patriotic ardor. He was a regular contributor to the party coffers and did not hesitate to ask for favors or to express his views on legislation. Occasionally the Democratic papers linked his name to some local scandal or power play, as the New York Herald did in April 1901 when it charged Harriman with using Odell's help to grab control of a strategic bridge.[21]

Party leaders formed the habit of consulting Harriman on financial and economic questions. Roosevelt did not hesitate to sound his views along with other Wall Street men like Morgan. Harriman received frequent invitations to the White House for a meal and conversation. Always eager to pick the best brains he could find, Roosevelt considered Harriman a key figure in New York and the top man in his field. For his part Harriman asked an occasional favor and sought appointments for men he favored or had been asked by friends to support.[22]

All this was the normal stuff of politics, yet things had a way of never being quite normal with Roosevelt. While his left hand stroked the big business interests, the right hand attacked Northern Securities or Standard Oil as well as the character of the men who ran them. "The big New York capitalists seem to me to have gone partially insane in their opposition to me," Roosevelt complained late in 1903, "but I have long been convinced that the men of very great wealth in too many instances totally failed to understand the temper of the country and its needs, as well as their own needs."[23]

No mention was made here of Roosevelt's own needs, especially his burning desire to capture the presidency on his own in 1904. It was this ambition that led to the disastrous break between Roosevelt and Harriman. Like most political divorces, it was neither clean nor clear-cut. The muck dredged up by their quarrel clung more to Harriman than to Roosevelt only because the latter was the most artful dodger.

By 1904 New York State politics were in the throes of transition. Odell was at the height of his power, having dethroned Platt and taken charge of the party slate for the fall elections. Over Platt's bitter objections, he chose Frank Higgins, his dutiful lieutenant governor, to head the ticket and drummed up support for Roosevelt's reelection campaign. That spring Odell coaxed Harriman into serving as a delegate to the Republican national convention. Harriman had been asked, claimed one Roosevelt man, because he was "a little cool toward the Roosevelt cause." The reason for Harriman's coolness was no mystery: the Supreme Court had just handed down its decision on Northern Securities. Roosevelt welcomed Harriman's support, invited him down to Washington before the convention met, and took care to solicit his views on some appointments in which Harriman had an interest.[24]

Roosevelt had compelling reasons for courting Harriman. Teddy the Trust Buster needed money to finance his campaign, and he looked privately to the very business leaders he had savaged in public for the funds to keep the nation safely in Republican hands. A Senate inquiry later found that corporate donors provided nearly three-fourths of the party war chest in 1904. Harriman was a key figure in a key state whose influence extended through a wide circle of businessmen. But he sailed off to Europe on June 29 and did not return for two months. "As soon as you come home I shall want to see you," Roosevelt wrote him. "The fight will doubtless be hot then. It has been a real pleasure to see you this year."[25]

After his return, Harriman cleared his desk and on September 20 offered to run down to Washington even though it seemed to him "that the situation could not be in better shape." Evidently Roosevelt agreed, for he told Harriman not to trouble himself. By early October, however, things had changed radically. Roosevelt learned that the campaign in New York State had run out of money and was floundering. Raising funds proved more tricky than usual. Earlier Odell had agreed with Republican national chairman George B. Cortelyou and national treasurer Cornelius N. Bliss that the national committee would do all fund-raising and disburse the proceeds to individual states as needed. New York needed $200,000, but the national committee had no money to give it.[26]

Roosevelt was aghast at the news. "I would rather lose the election in the country than be defeated in my own State," he growled at Senator Nathan Scott on the phone. After being told that his own campaign was safe but that Higgins was in danger of losing, Roosevelt dashed off a note asking Harriman to come talk to him about "the trouble over the State ticket in New York." Harriman was already aware of the problem and had delayed a trip west to do some work for the party. "I am giving a very large part of my time to correcting the trouble here," he told Roosevelt, and offered to come to Washington in a few days if conditions did not improve.[27]

Two days later Harriman received from Roosevelt one of those cryptic letters that sound as if they had been written more for the record than for the recipient:

A suggestion has come to me in a roundabout way that you do not think it wise to come on to see me in these closing weeks of the campaign, but that you are reluctant to refuse, inasmuch as I have asked you. Now, my dear sir, you and I are practical men, and you are on the ground and know the conditions better than I do. If you think there is any danger of your visit to me causing trouble, or if you think there is nothing special I should be informed about, or no matter in which I could give aid, why of course give up the visit for the time being and then a few weeks hence, before I write my message, I shall get you to come down to discuss certain government matters not connected with the campaign.[28]

The "government matters" referred to the railroad question and what Roosevelt planned to say about it in his annual message. Harriman had been led to believe that he would be consulted on the draft of this statement. Two items, then, were on the agenda of any meeting between them: the campaign in New York and Roosevelt's views on railroad regulation.

Well might Harriman have puzzled over this adroit piece of circumlocution. He had suggested no such uneasiness and probably had no inkling of what the president was driving at. The object was to create evidence that any visit to Washington was being made on Harriman's initiative for business of his own. Roosevelt was responding to a series of attacks launched by the New York World on October 1, when Joseph Pulitzer noted in a signed editorial that the Bureau of Corporations had been in existence for 583 days and accomplished nothing. Was it a coincidence that the bureau's chief, George B. Cortelyou, happened also to be head of the Republican national committee? Were the corporations pouring money into the Republican war chest buying protection? Could a man soliciting money from corporations also regulate them?[29]

Day after day Pulitzer hammered at this theme. The New York Times and the Brooklyn Eagle joined the attack, which grew steadily more shrill. Never a man to leave his flank unguarded, Roosevelt created the letter to Harriman as a form of protection. Harriman could not go to Washington at once anyway; he had to be in Rochester for a funeral. After his return, he telephoned Roosevelt for another appointment to see him. By then Pulitzer's crusade had begun to sputter.[30]

But the problems in New York remained. When Harriman came back from Washington, he told Judge Lovett, "They are in a hole, and the President wants me to help them out. I've got to do it, and I'm going to raise the money." He told the same thing to Odell, Charles Peabody, and other friends, all of whom recalled this fact later when Roosevelt denied that he had ever asked Harriman to raise money for the campaign. True to his word, Harriman came up with $250,000 for the national committee, including $50,000 from his own pocket. Of this sum, $200,000 went back to the New York State committee and helped Higgins eke out a victory.[31]

All should have been well that ended well, but one item of unfinished business still clouded New York's political agenda. Chauncey Depew hoped to retain his Senate seat and had the support of Platt and Roosevelt; Odell preferred former governor Frank S. Black. To devise a graceful exit for Depew, Odell got Harriman to extract a quid pro quo from Roosevelt during their conference in late October: Harriman would raise money for the party in New York if Roosevelt promised to make Depew ambassador to France after the election.[32]

Largely on the basis of this pledge, Odell announced that Black was his choice for the Senate seat. The wily Platt, fortified by a talk with Roosevelt, rose gleefully from his political grave to drum up support for Depew. Harriman had taken his family to Virginia on a short vacation trip. On the return trip he stopped in Washington to see Roosevelt, who blithely told him that he favored Depew's reelection to the Senate. This position was remarkable in two respects: it violated a pledge Roosevelt had given (though he later denied giving it), and it put him behind a man who, whatever his other credentials, was exactly the type of corporate Hessian Roosevelt was fond of railing against in public.[33]

Harriman found himself in an impossible position. Depew could not be pushed out of the Senate without having another place to go. He was a friend, a colleague on several boards, and an officer in the New York Central system. But Odell had already come out for Black; if Depew kept his seat, Odell would be left out on a limb that Platt was waiting eagerly to saw. As a reward for the service he had rendered, Harriman had to disappoint one of his closest friends. The grand irony was that none of it had to do with anything Harriman wanted for himself. Seething with resentment, he saw no choice but to persuade Odell to eat crow by switching to Depew. Only a close friend could have asked such a favor or agreed to it. Odell swallowed his pride and withdrew his support of Black, allowing Platt to hail the change as proof of his resurrection. Some papers unwittingly rubbed salt in the wound by charging that Harriman had inspired Odell's change of front as part of a secret deal: Depew kept his Senate seat while Harriman got one on the board of the New York Central.[34]

Harriman walked away with his reputation soiled and Odell with his prestige and power in New York badly damaged. Although Harriman said little about it, this act of duplicity soured him on Roosevelt and politics. Nor was it an isolated incident. The president had said repeatedly that he wanted Harriman's input on that part of his annual message dealing with railroad affairs, but he never got around to consulting him. "When you were down here," Roosevelt explained in another of those letters that sound as if they were written to be read by someone else, "both you and I were so interested in certain of the New York political developments that I hardly, if at all, touched on governmental matters."[35]

"It was natural," retorted Harriman, "for me to suppose that railroad matters would be included in any discussion you and I might have before writing your message." At issue was a paragraph urging Congress to strengthen the ICC's power over rates. Harriman wanted it left out, arguing that it would cause more harm than good. "While, as I say, I should have been delighted to go over it with you," declared Roosevelt in his inimitable way, "I must also frankly say that my mind was definitely made up."[36]

Harriman remained on friendly terms with Roosevelt and that winter arranged to have his portrait done for the state capitol in Albany. He also advised the president on some appointments but found his views ignored. Then in 1905 the Equitable bombshell exploded, dragging Harriman, Odell, and Depew through the heat of publicity that scorched the entire New York political machine with allegations of influence peddling. It did not help that Francis Hendricks, the state superintendent of insurance who so infuriated Harriman, owed his place to Roosevelt and remained a staunch loyalist.[37]

The Armstrong investigation set in motion a series of fateful changes in New York. As public indignation swelled in the wake of revelations from the hearings, Roosevelt smelled political blood. He saw an opportunity to deal the old machine a death blow by allying with Higgins against Odell and Platt. The investigation delivered him a perfect reform candidate for governor in the person of Charles Evans Hughes, who had gained wide respect for his handling of the hearings. At the Republican convention in September 1906 the Roosevelt-Higgins forces won a sweeping victory over Odell and what one Buffalo paper called the "corporation pirates."[38]

Harriman watched these events with mounting anger. His own distrust of Roosevelt had grown during 1905, and now the president had gone after his good friend Odell. After a visit by Harriman to Oyster Bay in July, contact between the two men dwindled; after the wedding of Alice Roosevelt in February 1906, which the Harrimans attended, it ceased almost entirely. Still another issue soured relations between them: railroad regulation.[39]

After ignoring Harriman's advice to drop the subject from his 1904 message, Roosevelt launched a concerted effort to get a railroad act. By the winter of 1906 the president was trying to herd through Congress the Hepburn bill, which would increase the ICC's power over rail rates. Harriman opposed the bill and lashed out at what he called an "anti-railroad conspiracy" bent on destroying the credit of the railroads in order to promote Roosevelt's pet project, the Panama Canal. "I am not opposed to the canal," he insisted, "but the attack on railroads, apparently, is to create a sentiment in favor of some other method of transportation."[40]

These remarks did not endear Harriman to Roosevelt or slow the bill's progress. During 1906 the president's keen political nose sniffed the shift of public sentiment against Harriman as the Armstrong investigation unfolded its sordid revelations, the fight with Fish splashed through the daily headlines, and a furor erupted over the timing of the Union Pacific 10 percent dividend. The fact that Harriman and Odell were close friends made it easy for Roosevelt to lump them together in his own thinking. Apart from the real issues that separated the two men, Harriman had become to Roosevelt that most dreaded of creatures: a political liability.

As the state campaign of 1906 approached, the Republican convention nominated Hughes as a reform candidate for governor and dumped Odell as party chairman. In this strange campaign Hughes was pitted against William Randolph Hearst, whose papers had long blasted the corrupt Republican machine. Republicans running for state office made a display of shunning corporate contributions in favor of direct appeals to the voters, but the congressional candidates had no intention of jettisoning the big donors. James S. Sherman, head of the Republican Congressional Committee, remembered Harriman's key role in the 1904 campaign and decided to ask his help again.[41]

Sherman's timing could not have been worse. For months Harriman had been brooding over Roosevelt's breaches of faith and the problems they had spawned. Late in 1905 he had received a letter from Sidney Webster, his old friend from the Illinois Central board, warning him against being drawn into politics because he was not fit for it. The advice struck a chord in Harriman and prompted a lengthy reply that revealed his curious mix of naïveté and guile:

The trouble originated in my allowing myself to be drawn into other people's affairs, and partly from a desire to help them and at their request. I seemed to be like the fellow who got in between the man and his wife in their quarrel. As to my political instincts . . . I am quite sure I have none, and my being made at all prominent in the political situation is entirely due to President Roosevelt and because of my taking an active part in the autumn of 1904 at his request, and his taking advantage of conditions then created to further his own interests. If it had been a premeditated plot it could not have been better started or carried out.

With this preface Harriman launched into a detailed account of his role in the 1904 campaign and Roosevelt's reneging on his pledge to appoint Depew. "So you see," he concluded, "I was brought forward by Roosevelt in an attempt to help him, at his request, the same as I was in the insurance matter by Hyde and Ryan by their request for my help."[42]

Clearly Harriman was venting months of frustration and anger toward Roosevelt's behavior as well as the insurance fiasco, which was then marching toward the Armstrong hearings. Both episodes represented to him something sordid and unclean, and he wanted desperately to wash his hands of them. Yet he was also taking care to protect himself the same way Roosevelt had, by putting down his version of events as a matter of record. Behind his well-known impulsiveness lay a layer of guile he took pains to conceal as best he could. He sent the letter to Webster but kept a copy for himself.

James Sherman knew nothing about this letter, but he did know that Harriman still harbored resentments from the 1904 campaign. Before approaching him for a contribution, he asked Maxwell Evarts, who was counsel for the Southern Pacific, to see Harriman about it. Evarts broached the matter several times only to be rebuffed. Harriman declared irritably that he had better uses for his money; privately he was also bitter over Odell's ouster from the inner circles of the party. Roosevelt had managed this by getting Higgins, who had ridden Odell's coattail to the statehouse, to defect and join the president. In a letter to Harriman, Odell denounced Higgins as "the worst ingrate I know of . . . a weak-kneed & spineless man." Neither Odell nor Harriman cared for Hughes as a candidate, and both were tired of being made scapegoats by men they considered nothing more than rank opportunists.[43]

This was Harriman's mood when he finally agreed to see Sherman. Fortunately for Harriman, Evarts came along as well. The meeting took place in September, less than a month after Harriman had received Odell's letter blasting Higgins and at a time when criticism of the 10 percent dividend still rang in his ears. In this combative mood, eager to give someone a piece of his mind, Harriman wasted no time on amenities when the unsuspecting Sherman walked in. He reached into his desk, pulled out a copy of the letter to Sidney Webster, read it to Sherman in his flat voice, and said again that he would not give one dollar to the Republican campaign.[44]

Evarts's jaw dropped almost as far as Sherman's at this performance; he could not fathom what bearing the letter had on the issue at hand. Why Harriman chose this peculiar way to refuse Sherman can be explained only by the circumstances. He was a tired man wracked with pain and forced to endure in silence one frustrating controversy after another. Here was a chance to unleash some of his deep resentment over the shabby treatment accorded him and his friend Odell. He had poured those frustrations into the letter and now the letter exploded out of him to Sherman, who was merely a surrogate target. In fact, Harriman had once before hauled out the Webster letter and read it to an old friend after swearing him to silence.[45]

Unfortunately, there was no vow of secrecy this time. A short time later, Sherman told Roosevelt about the interview with Harriman. The president took so keen an interest in the account that he sat down that same afternoon and wrote Sherman a letter restating what Sherman had told him. Here was yet another of those letters written for the record, and this one recorded hearsay with a vengeance. It summarized what Roosevelt said Sherman had said about what Harriman had said.

In Roosevelt's version, Sherman described Harriman as being so dissatisfied with the president that he said in effect that "as long as I [Roosevelt] was at the head of the Republican party or as it was dominated by policies which I advocate and represent, he would not support it, and was quite indifferent whether Hearst beat Hughes or not, whether Democrats carried Congress or not." Roosevelt adamantly denied that he had made any promise to appoint Depew or asked Harriman to help raise money. Choosing his words carefully, he said, "I never requested Mr. Harriman to raise a dollar for the presidential campaign of 1904." This was true; the money had been solicited for the New York State campaign.[46]

The account Roosevelt set down was hardly casual. It filled more than six pages and included copies of his correspondence with Harriman except for one crucial omission betraying his assertion that he had asked Harriman for help in raising money. Then, in an astonishing paragraph, Roosevelt quoted Sherman as having told him that Harriman did not care who won the election because "those people were crooks and he could buy them; that whenever he wanted legislation from a State legislature he could buy it; that he 'could buy Congress' and that if necessary he 'could buy the judiciary.'" This remarkable allegation allowed Roosevelt to rise to the full height of his well-practiced indignation: "It shows a cynicism and deepseated corruption which make the man uttering such sentiments, and boasting, no matter how falsely, of his power to perform such sentiments, at least as undesirable a citizen as Debs, or Moyer, or Haywood. It is because we have capitalists capable of uttering such sentiments and capable of acting on them that there is strength behind sinister agitators of the Hearst type. . . . I was horrified, as was Root, when you told us today what Harriman had said to you." After this pious and patently calculated outburst, Roosevelt authorized Sherman to show the letter to Harriman but not to make it public without the president's permission.

In the bizarre annals of American politics there are few controversies stranger than this one. Harriman had written a private letter to a friend and read it to someone else who repeated its contents and accompanying remarks by memory to the president some days later. Roosevelt then penned a private letter summarizing what Sherman had told him and adding his own rebuttal of Harriman's alleged charges along with a vigorous denunciation of Harriman. How much Roosevelt embellished on Sherman's remarks, or how accurate Sherman's report was in the first place, cannot be established. Sherman left no account of the episode; his version comes entirely from Roosevelt's hands. Some years later, however, Evarts released a statement denying that Harriman had said much of what Roosevelt claimed Sherman said he had said.[47]

Since neither letter had been made public, no one knew about the controversy except those directly involved. That fall the bad blood between Harriman and Roosevelt grew worse. Hughes eked out a victory over Hearst, but most of the other Republicans on the ticket were defeated. Three days after the election, rumors circulated that the ICC was considering an investigation of the Harriman roads. Early in December the ICC announced it would examine "relations between the Union Pacific and Southern Pacific Railway systems growing out of their common management and control."[48]

The news caught Harriman at a bad time. He spent much of November on a trip west, going more public than usual, giving interviews to reporters and talks to business and civic groups. Early one morning he arrived in Chicago and had his car switched to a side track to conduct business until his connection arrived. Four stenographers and secretaries took down the letters and telegrams he rattled off while welcoming a procession of rail officials and bankers. Breakfast sat cooling in the galley, unable to penetrate the flow of business. A reporter slid through a seam in the line of visitors and was rewarded with a brief interview on the platform. Harriman stood before him draped in an oversized steamer coat "of loud pattern, such as can be bought for $15 or $16," the inevitable derby jammed down over his forehead.[49]

Despite the crush of business and lack of breakfast, Harriman showed unusual patience and courtesy. No, he was not a financial king and had no desire to be. He didn't run a single railroad by himself. Yes, he had bought into the Chicago subway because it would help reduce the cost of transportation, but he had no plans to move to Chicago. "Do you understand that?" Harriman asked often. "Do I make that clear?" He tolerated the interruptions because he was anxious to get across a message he repeated everywhere he went: the railroads were crucial to national prosperity and should not be hamstrung by suspicion and regulation.[50]

The trip wore Harriman down just as he faced a major investigation. Young Roland added to his worries by breaking his collarbone at school when his pony stumbled and rolled over him. Harriman himself was fighting intense pain from the hemorrhoids, which had grown worse. He tried to get the ICC to postpone the hearings and was told the commission had too crowded an agenda to change its schedule. He went so far as to appeal to Roosevelt, who spoke to the chairman but told Harriman he could do nothing.[51]

Disappointed, Harriman decided to try a more personal approach. He had no way of knowing what role Roosevelt had played in urging the investigation, but the timing seemed more than coincidence. For once Harriman was in no mood to fight. Leaving aside his personal feelings, a prolonged feud with a popular, newly elected president meant disaster for his interests, the interests of his friends, the Republican Party, and perhaps the country as well. The time had come for overtures of peace.


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