An attempt to trace the convolutions of America's street railway and public lighting finance would involve a puzzling array of statistics and an inextricable complexity of stocks, bonds, leases, holding companies, operating companies, construction companies, reorganizations, and the like.Difficult and apparently impenetrable as is this financial morass, the essential facts still stand out plainly enough.As already indicated, the fundamental basis upon which the whole system rested was the control of municipal politics.The story of the Metropolitan's manipulation of the New York street railways starts with one of the most sordid episodes in the municipal annals of America's largest city.Somewhat more than thirty years ago, a group of New York city fathers acquired an international fame as the "boodle aldermen." These men had finally given way to the importunities of a certain Jacob Sharp, an eccentric New York character, who had for many years operated New York City railways, and granted a franchise for the construction of a horse-car line on lower Broadway.Soon after voting this franchise, regarded as perhaps the most valuable in the world, these same aldermen had begun to wear diamonds, to purchase real estate, and give other outward evidences of unexpected prosperity.Presently, however, these city fathers started a migration to Canada, Mexico, Spain, and other countries where the processes of extradition did not work smoothly.Sharp's enemies had succeeded in precipitating a legislative investigation under the very capable leadership of Roscoe Conkling, who had little difficulty in showing that Sharp had purchased his aldermen for $500,000 cash.In a short time, such of the aldermen as were accessible to the police were languishing in prison, and Sharp had been arrested on twenty-one indictments for bribery and sentenced to four years' hard labor--a sentence which he was saved from serving by his lonely and miserable death in Ludlow Street Jail.In the delirium preceding his dissolution Sharp raved constantly about his Broadway railroad and his enemies; it was apparently his belief that the investigation which had uncovered his rascality and the subsequent "persecutions" had been engineered by certain of his rivals, either to compel Sharp to disgorge his franchise or to produce the facts that would justify the legislature in annulling it on the ground of fraud.
Though the complete history of this transaction can never be written, we do possess certain facts that lend some color to this diagnosis.Up to the time that Sharp had captured this franchise, Ryan, Whitney, and the Philadelphians--not as partners, but as rivals--had competed with him for this prize.At the trial of Arthur J.McQuade in 1886, a fellow conspirator, who bore the somewhat suggestive name of Fullgraff, related certain details which, if true, would indicate that Sharp's methods differed from those of his rivals only in that they had proved more successful.
Thirteen members of the Board of Aldermen, said Fullgraff, had formed a close corporation, elected a chairman, and adopted a policy of "business unity in all important matters," which meant that they proposed to keep together in order to secure the highest price for the Broadway franchise.The cable railroad, which was the one with which Mr.Ryan was identified, offered $750,000, half in bonds and half in cash.Mr.Sharp, however, offered $500,000 all in cash.The aldermen voted in favor of Sharp because cash was not only a more valuable commodity than the bonds but, to use Alderman Fullgraff's own words--"less easily traced." That Whitney financed lawsuits against the validity of Sharp's franchise appears upon the record, and that Ryan was actively promoting the Conkling investigation, is likewise a matter of evidence.Sharp's victory had the great result of bringing together the three forces--Ryan, Whitney, and the Philadelphians--who had hitherto combated one another as rivals; that is, it caused the organization of the famous Whitney-Ryan-Widener-Elkins syndicate.If these men had inspired all those attacks on Sharp, their maneuver proved successful; for when the investigation had attained its climax and public indignation against Sharp had reached its most furious stage, that venerable corruptionist, worn down by ill health, and almost crazed by the popular outcry, sold his Broadway railroad to Peter A.B.Widener, William L.Elkins, and William H.Kemble.Thomas F.Ryan became secretary of the new corporation, and William C.
Whitney an active participant in its affairs.
This Broadway franchise formed the vertebral column of the New York transit system; with it as a basis, the operators formed the Metropolitan Street Railway Company in 1893, commonly known as the "Metropolitan." They organized also the Metropolitan Traction Company, an organization which enjoys an historic position as the first "holding company" ever created in this country.Its peculiar attribute was that it did not construct and operate street railways itself, but merely owned other corporations that did so.Its only assets, that is, were paper securities representing the ownership and control of other companies.This "holding company," which has since become almost a standardized form of corporation control in this country, was the invention of Mr.Francis Lynde Stetson, one of America's greatest corporation lawyers."Mr.Stetson," Ryan is said to have remarked, "do you know what you did when you drew up the papers of the Metropolitan Traction Company? You made us a great big tin box."The plan which Whitney and his associates now followed was to obtain control, in various ways, of all the surface railways in New York and place them under the leadership of the Metropolitan.
