CHAPTER IV

THE FORMULA FOR WEALTH AS IT WAS WORKED IN CHICAGO AND NEW YORK

ALL this is to forereach a little upon my narrative. Long before the Widener-Elkins combination had secured a grip on Philadelphia, Mr. Yerkes, having enlarged in Dakota and Minnesota his experience with a gullible public, bent all his gained knowledge upon the street-car system of Chicago, which had never been exploited. He came to Chicago with $20,000, said to have been borrowed money, and asked for an option on some scrap-iron street railroad on the North Side. He found that some one else had an option that would expire on a certain day.

"At what time on that day?" asked Mr. Yerkes. "At noon," said the cashier of the bank that was financing the deal.

Mr. Yerkes went away and on the specified morn

concern.

ing returned with his $20,000 certified check in his hand. He sat facing the clock, which he watched patiently. The instant the hands reached twelve o'clock, he leaped at the cashier with his check. The option gave him the required wedge into the In a short time he had hypothecated the stock, borrowed money on it, got more stock, secured control, started the printing-presses on a bright new line of stocks and bonds, and possessed himself of the whole institution; gaining moreover a surplus from which he repaid the $20,000 he had borrowed for the option, thus securing the property without investment or cost, which, I may say, is the universal rule in all these operations.

He now proceeded to apply his Philadelphia experience, issued more securities, bought more roads, milked them with construction company and other devices, and eventually, piling one corporation upon another and one "reorganization" upon another, emerged with the Union Traction Company of Chicago embracing all the lines of the city except those upon the South Side. As a concrete illustration of his methods and their results, I may say that the Union Traction Company was capitalized at $120,000,000 and in the height of its prosperity it was estimated by an expert examiner to be worth

I

as a going concern $16,000,000. Except for legislation, aldermen, and newspapers, it cost Mr. Yerkes nothing. As a system of transportation it was the most picturesque lot of junk ever seen in this world and furnished undoubtedly the worst service. Junk is the right word for it; Mr. Yerkes said so himself. "The secret of success in my business," he once observed, "is to buy old junk, fix it up a little, and unload it upon other fellows." may remark in passing that there was very little fixing up in the case of the Union Traction Company of Chicago. Why there should have been any more, indeed, is not apparent, since the good people of Chicago not only endured Mr. Yerkes and his methods, but in fifteen years supplied him with $40,000,000 of net profits on an investment of nothing; with the which comfortable assets he presently departed from the city that had, at such an expense to itself, made him so enormously rich. He used a part of the Chicagoans' money to buy control of the underground railroad system of London, to which untried field he devoted his energies the rest of his life.

But he had stayed long enough to make an enduring place for himself in Chicago's history. Only one cloud there obscured his success. The junk

that he manipulated was operated under franchises. That is to say that when the people of Chicago presented their streets to the street railroad companies, a date was set at which the right of possession should expire. For most of the roads the date was July 1, 1903, and its approach worried Mr. Yerkes. To his ability, energy, and foresight the expiration of the franchises seemed of very great importance. We know now that in this his ability, energy, and foresight deceived him, for it was of very small importance. The supposition was that when the date of the franchise' should expire the people would resume possession of their highways and the companies would be unable to operate their profit-making devices therein. Mr. Yerkes and many others believed this to be true. It never occurred even to him that the colossal good-nature of the people extended to the length of allowing the companies to operate these devices without any franchise or other rights. Yet such is the fact. In New York we have seen gas companies continue to occupy the streets many years after their franchises have expired and have even seen the expired franchises counted as assets of great value. In Chicago we have seen a street railroad franchise expire and the company placidly

continue to operate its cars exactly as if the franchise were still valid, defying meanwhile every attempt to eject it. Hence, Mr. Yerkes must certainly have been in error, and having once possessed himself of Chicago's streets, in all probability he could have continued until the day of his death to turn them into profits.

However, Mr. Yerkes thought it was necessary to have his franchises renewed and went sedulously to work for that end. The law of the State forbade the granting of any franchise for a longer term than twenty years. Mr. Yerkes went to the legislature, which he well knew how to manipulate, and secured the introduction of a bill repealing the twenty-year limit and granting him a franchise for fifty years. This was the celebrated Humphrey bill. A tremendous outburst of public indignation followed its appearance and its sponsors in the legislature lost heart. The bill was quietly allowed to die in committee. Mr. Yerkes waited a little and presently the equally notorious Allen bill made its appearance, authorizing the city council of Chicago to grant Yerkes a fifty-year franchise if it should see fit to do so. This bill was passed-in haste. As there was in the State of Illinois not one human being except Mr. Yerkes that desired to