the public's franchises for public utilities were to be sold to the highest bidder instead of being given away by bribed aldermen. When the Fulton Street franchise was offered under this law, competitive bidding ran the price up to thirty-eight per cent. of the gross receipts to be paid to the city.

The company was the first in New York to adopt the underground electric system. It failed, and the franchise passed into the hands of a contracting firm, Dady & O'Rourke, of Brooklyn, which completed the road and operated it, but with horses, not electricity. It was unprofitable chiefly because of the heavy tax paid to the city.

At this juncture, about 1890, the Whitney syndicate came in. It organized a new company called the Fulton Street Railroad, and issued $500,000 of five per cent. bonds and $500,000 of stock, having incidentally neither property, business, nor rights of any kind upon which to base these securities. The syndicate then went to Dady & O'Rourke and offered $150,000 of the new bonds in exchange for the franchise and property of the old company. This offer was accepted. Mr. Whitney then used his great influence with Tammany Hall and secured the reduction of the tax from thirty-eight per cent. to one-eighth of one per cent. of the gross receipts.

This done, the syndicate sold at par to the Metropolitan Street Railway Company (which was the name under which it was then operating the street railroads of New York) the $500,000 of stock and had the Metropolitan Street Railway Company guarantee the $500,000 of bonds.

From this transaction the net profits (without the investment of a dollar) were $850,000 made in a few weeks. The time was to come when it would look paltry compared with other gains of these fortunate gentlemen.

2. From bond issues made according to the Formula upon only one of the properties absorbed by the syndicate, the Houston, West Street & Pavonia Ferry Railroad, there was derived a net profit of $6,000,000. The ability, energy, and foresight involved in this transaction consisted in picking up the money. The service to society lay in loading an already heavily burdened enterprise with more obligations that the public must pay. Certainly, in these instances, the gifts of the gifted hardly shine forth as anything phenomenal; the brain-cells involved may be thought to be very much like certain other brain-cells of which we have a not too inspiring knowledge.

CHAPTER V

THE STORY OF THE GREAT MILWAUKEE DEAL

"IF Thomas F. Ryan," said Mr. Whitney reflectively one day in 1889, "lives out the ordinary span of life, he will be the richest man in the world."

Mr. Ryan was then a comparatively obscure operator, whose achievements in New York had been small and who, except for one thing, was chiefly remembered as the treasurer of Mr. Whitney's unsuccessful New York Cable Railroad.

But Mr. Whitney had other knowledge of Mr. Ryan. As soon as Jake Sharp had won the Broadway prize, Mr. Whitney dropped the cable project

and wasted upon it no more of his good time, so that it lapsed into a thing for financial faddists and for the charges of the "black horse cavalry" at Albany. But when he saw his way back into the street railroad business and founded his syndicate and regained the Broadway franchise, he placed his

greatest dependence upon Mr. Ryan, who became in all his deals his chief lieutenant and executive.

One reason why Mr. Whitney thought so well of Mr. Ryan was that Mr. Ryan had just pulled off a thing that showed he knew the Agreeable Formula and could work it as well as anybody else could.

On November 30, 1888, with Fahnstock & Co., of New York, Mr. Ryan bought the Milwaukee City Railway Company, the largest of the four street railroad concerns then in Milwaukee. It owned thirty-six miles of track, 700 horses, and 100 cars. The price nominated in the deed of conveyance was $1 and other good and valuable considerations; but the price on which the purchase was actually figured was $1,293,750. Mr. Ryan and Fahnstock & Co., applying the Formula by which Something is made from Nothing, property is acquired without cost, and fortunes and golden palaces are built in a night, immediately bonded their purchase for $1,000,000, and the next day, December 1, were filed the articles of incorporation of a new company with $1,500,000 capital, 4,000 shares of preferred stock, and 11,000 shares of common. This gave a total capitalization of $2,500,000, against a nominal purchase price of $1,293,750. In other

words, it enabled the purchasers to secure the railroad without expending one cent for it and also provided a handsome balance in cash, or its equivalent, all furnished by the indulgent public-a result for which the Formula is unrivaled. The Central Trust of New York took the bonds. There were some claims against the old company, amounting to a few thousand dollars, that were assumed, and some other claims that were not assumed. these certain lawyers had bills to be settled, but Mr. Ryan and his associates from New York came into Milwaukee so quietly and did their business so unostentatiously that they were gone before the sheriff had a chance to serve his writs.

For

Eighteen months later, in June, 1890, through negotiations conducted by Henry C. Payne, afterward Postmaster-General of the United States, Mr. Ryan and Fahnstock & Co. sold the entire stock of the Milwaukee City Railway Company to the Villard Syndicate for about $1,750,000, a sum that, in view of the bond and stock issues, represented almost clear profits. Later the Villard Syndicate went into the hands of a receiver. In the receivership proceedings the fact was disclosed that soon after the sale of the Milwaukee City Railway had been effected, the Villard Syndicate had offered a