Northern Securities Company facts for kids

The Northern Securities Company was a big company formed in 1901. It was created by powerful businessmen like E. H. Harriman, James J. Hill, and J. P. Morgan. This company aimed to control several major railroads in the United States. These included the Northern Pacific Railway, Great Northern Railway, and Chicago, Burlington and Quincy Railroad.

In 1902, the U.S. government sued the company. President Theodore Roosevelt believed it was too powerful. The government won the case. The company had to break up, and the railroads became independent again.

What Was the Northern Securities Company?

The Northern Securities Company was a type of business called a trust. A trust is when one company holds the stock (ownership shares) of many other companies. This lets them control a whole industry. The Northern Securities Company was set up to control many important railroads. It was worth $400 million, which was a huge amount of money back then. James J. Hill was its president.

The Railroad Kings and Their Fight

Two of the biggest railroad leaders were James J. Hill and E. H. Harriman. Hill was in charge of the Great Northern Railway. Harriman controlled the Union Pacific Railroad. Both wanted to control the Burlington railroad. The Burlington connected their lines to Chicago, Illinois, a very important city for shipping goods.

Hill also owned some of the Northern Pacific Railway. He offered more money than Harriman for the Burlington. Hill agreed to pay $200 for each share of the Burlington. This was a high price.

The "Northern Pacific Corner"

The Great Northern and Northern Pacific railroads together gained control of almost all the Burlington's stock. Harriman knew that the Northern Pacific controlled a big part of the Burlington. So, he tried to buy up shares of the Northern Pacific. This was called a "stock raid." If he controlled the Northern Pacific, he could influence the Burlington. This would make the Burlington favor his Union Pacific railroad.

Harriman's stock raid happened in May 1901. It caused a big panic called the "Northern Pacific Corner." People who had promised to sell shares they didn't own were desperate. They had to buy shares at any price. Some shares reportedly sold for $1,000 each! Even with Harriman's efforts, Hill and J.P. Morgan managed to keep control of the Northern Pacific.

This big fight between the powerful businessmen affected the entire stock market. The men and their supporters decided to stop fighting. They formed the Northern Securities Company. This company would control all of Hill's main railroads. Some of Harriman's people were also given roles in the new company.

President Roosevelt Takes Action

Many people were upset about this new, huge company. They worried it would have too much power. Both state and federal officials started preparing lawsuits. On February 19, 1902, the United States Department of Justice announced it would sue the company.

J. P. Morgan tried to settle the issue privately with President Roosevelt. But Roosevelt refused. He later said that Morgan saw him "as a big rival operator." Roosevelt didn't want to be treated like just another businessman. He believed that some trusts were good, but he wouldn't let big companies control him. The lawsuit went forward.

The Supreme Court's Decision

The Justice Department won the lawsuit. The company was ordered to break up. This happened because of a 1904 Supreme Court ruling. The case was called Northern Securities Co. v. United States. The court decided five votes to four that the company was illegal. It broke the Sherman Antitrust Act. This law was created to stop monopolies and unfair business practices.

Over the next seven years, 44 other federal antitrust cases had similar outcomes. Many big companies were broken up. This included Harriman's own Union Pacific and Southern Pacific railroads.

A Lasting Impact

The Northern Securities case was one of the first big antitrust cases. It set an important example for many future cases. It showed that the government could step in to prevent companies from becoming too powerful. This ruling influenced later decisions, even one involving Major League Baseball.

Later Mergers

Decades later, in 1955, the Northern Pacific and Great Northern railroads talked about merging again. The Supreme Court approved this merger. On March 2, 1970, these railroads joined together. The Chicago Burlington & Quincy and the Spokane, Portland and Seattle Railway also joined. They formed a new company called the Burlington Northern Railroad.