Chapter 20

A Peculiar Hardship
1858

Wisconsin's economic depression deepened in 1858, and railroad revenues continued to fall-in fact, they were often so low that that the railroad lines could not pay the interest on their loans. When that happened, the companies fell into bankruptcy, as one, the Rock River Valley Union Railroad, already had in 1855. However, even in bankruptcy, companies kept trains running and continued to earn revenues, although not to an amount that would enable them to meet their debt obligations. At the end of 1858, Milwaukee & Mississippi President John Catlin wrote to his company's stockholders: “The year just closed has been one of great depression in this State, operating with peculiar hardship upon railroads.”1 This would indeed be a year of “peculiar hardship,” one that would make or break many of Wisconsin's railways. Clearly, under such conditions, financial adjustments were called for-more borrowing, renegotiation of loans, or even sale or reorganization of railroads.² Adjustment was also called for in sectors beyond the financial; at the beginning of the year one railroad company was deep in the throes of a major bribery scandal whose outcome would have more financial repercussions for railroads-and for the reputation of Wisconsin.

In January the La Crosse and Milwaukee Company's alleged bribery of the previous year's legislature was brought up by Governor Alexander Randall in his inaugural speech. The governor said that the people of the state had the right to know whether their representatives could be “bought and sold like slaves in the market or like cattle in the shambles.”3 He continued, saying that

grave charges have been made in the past year … [including] corrupt conduct in the Legislature…. Good citizens have become alarmed at such official misconduct, and the reputations of the members of that Legislature, and of the State have naturally suffered in consequence…. The man who would dare to approach a sworn public officer with a bribe to turn him from his honest conviction of duty, should be hunted down by the law and severely punished.”⁴

The legislature agreed to investigate.

On February 4 Governor Randall wrote United States Secretary of the Interior Jacob Thompson requesting that no land patents be issued the La Crosse and Milwaukee until he could determine whether or not the company had indeed fulfilled the conditions of the grant.⁵ A joint legislative committee was formed to investigate; its chairman was James H. Knowlton, the assemblyman from Janes-ville who had, while serving on the 1856 select committee that had disposed the grants, changed sides from supporting the La Crosse and Milwaukee to opposing it. Knowlton would do most of the interrogating himself. He subpoenaed Byron Kilbourn, the former president of the La Crosse and Milwaukee who had masterminded the alleged bribery; when Kilbourn refused to appear, Knowlton had him taken into custody, arraigned before the assembly, and cited for contempt. Kilbourn subsequently appealed to the Wisconsin Supreme Court, which upheld Knowlton and his committee.

Knowlton also cited Moses Strong for contempt and had him jailed until he agreed to testify two days later. Strong then inadvertently admitted distributing the bribes, referred to as “the package,” when he testified:

I cannot and do not pretend to any perfect recollection of the names of the persons to whom I delivered the “package.” I preserved no memorandum of the matter and have nothing with which to refresh my recollection. It has been the habit of my life to make and preserve written memoranda of all events or circumstances that I desired to remember. I had no desire to remember anything about the delivery of the “package.” My office for a day or two was thronged with members of the legislature and others, who I suppose came to receive their “package.” I got rid of them as soon as possible. I was acting as a ministerial officer of the company and delivered to the different members of the legislature, whose names were written upon them, and to others, the several packages in my possession. It would be invidious to mention the few, whose names accident enables me to recollect, and having already stated that I delivered all which were left at my office, I desire to be excused from making any more personal answer to this interrogatory. I delivered the “package” in person and took no voucher or receipt from any person.6

After questioning forty witnesses, Knowlton's committee concluded that Kilbourn, Strong, and other La Crosse company officials had distributed more than eight hundred thousand dollars worth of bonds. These bonds were distributed to fifty-nine assemblymen and thirteen senators, all of whom had voted for the company's bill, as well as former Governor Bashford, the clerks of the two houses, and others. By that time Bashford, who had cashed in fifteen thousand dollars' worth of his bonds with Kilbourn the previous April, had moved to Arizona Territory, thereby escaping the repercussions of the public outcry.⁷ The committee published a fifty page report of its findings; this report had several results, foremost among them the passage of a law that prohibited officers of railroad companies from having money interests in company contracts and from disposing company securities for any but legitimate purposes-violation of which would constitute a felony and be punishable by one to five years' imprisonment.⁸ Of course, the law was not retroactive; no one in this case was fined or punished. Still, the repercussions of such a case coming to trial were grave. By the time the new laws were passed, Wisconsin's reputation had been marred and the value of Wisconsin railroad securities in the East fell. The Madison Argus and Democrat said that the investigation

proved what everybody knew long ago, but have done nothing about it. They wasted public funds, about $30,000, to prove people rascals, proved it, and left the rascals just where they found them.⁹

Not surprisingly, the persons named in the report did all they could to remove blame from their shoulders, including buying all the copies of the report they could find and destroying them.¹⁰ Kilbourn was unrepentant and subsequently published a pamphlet in which he claimed that he had been forced to take such actions to counteract similar methods used by the rival Chicago, St. Paul and Fond du Lac Railroad Company. The Chicago company allegedly had fifteen legislators in its pay during that session, among them Knowlton. Knowlton's committee did not investigate the Chicago, St. Paul and Fond du Lac. Kilbourn argued that he had only acted in the best interests of Wisconsin by thwarting the Chicago company's aspirations to the grant. He asked his readers, “Suppose we had failed, and offered as an excuse that it would have cost a million dollars to have secured the grant, while at the same time by the expenditure of a million and a half, payable in its stock, the Chicago Company should have secured the prize? Would not every citizen and every stockholder have blamed us for our stupidity? Would they not have taunted us with the loss of land worth ten or twelve millions?” Whatever Kilbourn's intent, his actions had resulted in a flood of La Crosse and Milwaukee “gift” bonds on the Eastern markets in 1857 that undermined the value of all the company's securities and contributed to ultimately placing it in the hands of Eastern creditors in 1858.11

Despite this looming setback, the La Crosse and Milwaukee continued to move forward on its lines. In April work commenced at the western end of the La Crosse and Milwaukee at La Crosse. Grading began between La Crosse and the tunnel forty miles to the east.¹² Grading between Tomah and La Crosse had begun in April, the month Nehemiah P. Stanton became the company's new president. On August 1 the company failed to pay the interest due on the bonds secured by its land grant mortgage of 1856. On August 3, still hoping to acquire the granted lands, it filed a certificate with the governor's office in Madison stating that it had completed sixty miles of land grant road between Portage City and Tomah. However, Governor Randall maintained that the law required the company to commence the construction of the land grant road at Madison and Columbus, not Portage City, and that no lands should be granted until both the Madison and the Columbus roads to Portage were complete.¹³ The Department of the Interior would only grant the lands if requested by the state, so the La Crosse company was effectively blocked from receiving them. While the governor's objections were based on the stipulations in the grant, it may be assumed that he was opposed to the La Crosse company benefiting from a grant that it had obtained through underhanded methods.

On October 6 the La Crosse and Milwaukee finished its line to the Mississippi. Celebrations were held in La Crosse on October 14, with military, fire, and civic associations in attendance and trips to St. Paul offered by steamer. Regular service followed, with two trains leaving La Crosse at 12:30 a.m. and 6:30 a.m. for Milwaukee. Passengers taking the former train could arrive in Chicago in time for the 5:30 p.m. trains to the East, seventeen hours after leaving La Crosse.14 The new line lacked one critical feature-at Tunnel City, forty miles east of La Crosse, there was a north-south range of hills that separated the Mississippi and Wisconsin watersheds and blocked the railroad line, but there was as yet no tunnel. Eastbound or westbound, passengers had to descend from the trains and climb or be carried with their luggage over the hills through which the tunnel was to be made. Before the year was over, the company would install a great capstan on the brow of the hill. Oxen hitched to poles would turn this enormous pulley device, which in turning, would wind the cables fastened to the cars, drawing them up the hill. Upon reaching the top, the process would be reversed to lower the cars to the tracks and waiting locomotive on the other side. This would be the working arrangement for three years until the tunnel was completed.15

Meanwhile, the Milwaukee & Mississippi, the only railway company that could boast of a line that connected the bodies of water for which it was named, continued to lead the way in 1858-at least in terms of the way it handled its mounting debt. In February Edward H. Brodhead resigned the presidency of the company and John Catlin was called back to that office. Catlin would guide the company through its troublesome last years. For now, he borrowed money to pay back previously borrowed money, keeping the company out of bankruptcy. In March the directors executed another mortgage on all of the company's property to secure $1,800,000 worth of bonds that would be used to reduce the company's floating debt and pay off earlier bonds.¹⁶

The Milwaukee & Mississippi ballasted its line between Janesville and Monroe early in 1858. Trains began running on January 12, leaving Monroe at 8:15 a.m. and returning at 6:00 p.m. On January 19 the grand celebration of the opening of the line took place. From 5 a.m. to 7 a.m., Monroe shook and rattled due to the cannons being fired in the public square. A train left early that morning for Janesville, where it was joined with trains from Milwaukee and Prairie du Chien into one train that then made the trip back to Monroe. Passengers were taken on at Hanover, Orfordville, and Brodhead to number more than one thousand, with many standing in the aisles. Conductor George Church ordered the engineer to reduce speed because of the load and the still-settling road bed. Many of the passengers were frightened as the train traversed the quarter-mile-long, forty-foot-high Richland Creek trestle, just east of Monroe. The train arrived at 2:30 p.m. and was received by station agent William B. Strong and a large crowd. Although only twenty years old at this time, Strong had been with the company for three years, having previously served as station agent at Janesville, Milton, and Whitewater.¹⁷ The Monroe Sentinel reported the day's events, including the train to Janesville, the combined return train, the cheerfulness of the guests, the speeches, and the fare at the American Hotel where celebrants gathered. It finished with praise for one of the company's employees:

We cannot close without giving in our testimony to the very affable, kind and courteous manner in which Conductor Sanburn discharged all the duties of his station. He never wearied in answering the thousand questions that were given him by inquisitive folks unaccustomed to railroad travel, greeted all with same unvarying politeness, and assiduously labored for the comfort and safety of the large family he had to provide for. It is of vast importance to a railroad corporation to have obliging and courteous employees, such as we feel and know Mr. Sanburn to be, and we are twice glad that we have such upon the Southern Wisconsin Railroad [Milwaukee & Mississippi].18

With the route between Lake Michigan and the Mississippi complete and trains running regularly, President Catlin closed the Milwaukee & Mississippi's construction account in April. The costs of building and equipping the entire road, from Milwaukee to the Mississippi were:

April's schedule showed that the trip from Milwaukee to Prairie du Chien took thirteen and a half hours, while traveling from Milwaukee to Monroe took seven hours. Fares varied. A ticket from Stoughton to McFarland, a distance of nine miles, cost twenty-five cents; going to Edgerton, another nine-mile journey, was thirty-five cents; and a ticket to Madison, which was sixteen miles away, cost fifty cents. Yet a ticket to Janesville, twenty-five miles away, cost one dollar, and a ticket to Milwaukee, an eighty-five mile trip, cost two dollars.20

Despite a steady flow of passengers, there were still complaints concerning the Milwaukee & Mississippi's transfer schedule at Milton. Milwaukee passengers felt the company was giving Chicago passengers special treatment. The Milwaukee Free Democrat editorialized on June 21:

The mismanagement of this road is beyond human endurance. Milwaukee first breathed the breath of life into this road and has loaned its credit for over $530,000 to build it, and now that it is completed to the Mississippi, it is virtually a Chicago road, controlled by Chicago interests, and runs to Janesville half the time as a branch of the Chicago & St. Paul road, and passengers are duped there and compelled to lie over for the Chicago train. The Milwaukee trains east and west that connect with the boats on the Mississippi from St. Paul, and the upper towns, stop at Janesville five hours, while the Chicago trains go straight through. By this Chicago arrangement, passengers can start from Chicago some five or six hours later than from Milwaukee, and reach Prairie du Chien at the same time, and passengers from Prairie du Chien reach Chicago before the train leaves Janesville for Milwaukee. The result is, nearly all the trade of Minnesota and Iowa, which would naturally come to this city goes to Chicago, because it can go there directly. And the citizens have the satisfaction of seeing the road, which they have been mainly instrumental in getting built, act as a feeder to Chicago. We venture to say that if a Chicago railroad had treated Chicago as shabbily as this road is now treating Milwaukee, public meetings would have been promptly called, to devise some remedy.²¹

The company at this time decided to compare its service between Chicago and La Crosse (they actually compared the Chicago, St. Paul and Fond du Lac railroad from Chicago to Janesville, the Milwaukee & Mississippi railroad from Janesville to Prairie du Chien, and contracted steamboats on the Mississippi from Prairie du Chien to La Crosse) to that of its competitor, the La Crosse and Milwaukee (the Lakeshore Railroad from Chicago to Milwaukee and the La Crosse and Milwaukee Railroad from Milwaukee to La Crosse). In December constructing engineer Benjamin Edgerton measured the distance a steamboat would have to travel between Prairie du Chien and La Crosse on the Mississippi and found it to be sixty-five miles. The directors then compared the two routes between Chicago and La Crosse:

From Chicago via Janesville to Prairie du Chien … 230 miles. Thence to La Crosse by Miss. River 65 miles. Total 295 miles [via Milwaukee & Mississippi]…. From Chicago via Milwaukee & La Crosse road, 285 miles [via La Crosse and Milwaukee]. Savings of distance by La Crosse road, 10 miles.

The time … between Chicago and La Crosse … at twenty miles per hour including stops, is [as follows]…. From Chicago to Prairie du Chien, 11.5 hours. Thence to La Crosse by boat, 4 hours. Total 15.5 hours [using the Milwaukee & Mississippi]…. Time via Mil. & La Crosse, 14.25 hours miles [using the La Crosse and Milwaukee] … making no allowance for … transporting passengers by teams, from the Lake Shore railroad to the La Crosse road … say three quarters of an hour.

The fact is that whatever difference of opinion there may be as to the real time saved by the La Crosse road, it, at all events, is so small, that that road can never make a connection at Chicago that cannot be made by the Milwaukee & Mississippi road via Janesville, as in all probability through trains will never leave Chicago for the east within an hour of each other, and therefore, for all practical purposes, the time is the same.22

Per new governmental regulations, the tenth annual report of the Milwaukee & Mississippi Railroad Company listed any accidents involving injuries or death that the company had been involved in that year. Two casualties were reported that spring. On March 30 Matthew Connell, a switchman in the yard at Milwaukee, attempted to cross the track as an engine was backing; he tripped and was run over, dying two days later from his injuries. On April 23 fireman Joseph Westbury was killed at Waukesha while attempting to board a moving engine.²³ Several more accidents were reported that summer and fall, as the report detailed:

On the 19th of June, an Irish boy in attempting to jump from a freight car, where he had secreted himself, fell upon the track, and was run over and killed as the train was starting from Janesville Station.

On the 14th of July, Matthew Sullivan was killed at Milwaukee while engaged loading lumber into a car. The train was backing towards him, and failing to get out of the way, he was knocked down and run over by a freight car.

On the 14th of July, the passenger train ran into a wagon on road crossing, near Middleton Station. The driver, name unknown, was slightly injured.

On the 25th of August, a woman was killed in attempting to cross the track ahead of a passenger train at a road crossing one mile west of Madison. She was in a wagon drawn by two horses, driven by her son. Whistle was sounded and bell rang as usual.

On the 23d of November, Lorenzo Wiltzer, a brakeman, was struck by a road bridge, two miles east of Palmyra, and so injured that he survived but four hours. He was standing at the time upon the top of the baggage car.

On the 11th of December, Jacob Snyder was killed about one mile west of Genesee. He was leading a cow along the track. After the engine passed, the cow was struck by a car, and the man was thrown under the train and instantly killed.24

The report also listed the cost of these casualties, followed by final commentary:

The amount of loss to the company from casualty, is $421.25.

Whole number killed 7, of whom 3 were employees of this company, (passengers none), and 4 persons not in the employ of this company. Of the above casualties, none resulted from the carelessness of employees of this company.²⁵

As accidents such as these became a more regular occurrence, safety was becoming a bigger concern for all the rail lines. Following the current trends of other railways, the Mineral Point company had strict regulations regarding safety and speed. Instructions stated that “[t]rains must be run at such speed as to enable the mail to be exchanged at Stations where there are Post-offices” and required trains to “[r]educe speed to eight miles per hour over all Bridges, and Trestle work, and shut off Steam and close ash pan.” It also provided the following directions concerning signals:

1st. One Red Flag by day, or one Red Light by night, carried upon an engine, indicates that another engine is following, which engine will be allowed all the rights and privileges of the engine bearing such.

2nd. Two Red Flags by day, or two Red Lanterns by night, carried upon an engine, indicate that another engine or train is following, which must be treated as part of the forward train. No train, after meeting two flags or Lanterns upon an engine, will leave the station where it meets the two Flags or Lanterns so carried, until the flagged train arrives, or is positively heard from.

3rd. It must be distinctly understood that when such Flags or Lights are carried, the train for which they are carried must be in sight at every station. If it is not in sight, then the forward train must leave a written communication to that effect for the following train with the station agent, and then the following train must run under the rule of signals.

4th. A Red Flag by day, or Lantern by night, waved upon the track, signifies that a train must come to a full stop.

5th. A stationary Red Flag signifies that the track is not in perfect order, and must be run over with great caution.

6th. Two Red Signal Lights must be exhibited on the rear of each Passenger train in the night time and one on Freight trains, until the train arrives at its destination.

7th. One puff of the steam whistle is a signal to Brake; two puffs is the signal to loose the brakes; three puffs is the signal to back; five or more rapid puffs is the signal for Wooding up, or calling in Signal men stationed out on the road.

8th. A Lantern swung over the head is the signal to go forward; raised and lowered perpendicularly, to stop; swung sideways, to back.26

The revenues of the Mineral Point Railroad fell sharply during the year. This was due to the poor economy, a poor wheat harvest, and the failing lead mines. During the year the Mineral Point had carried ten million pounds of freight and nine thousand passengers. The revenues more than met operating expenses but fell short of paying the interest on the company's loans-a common fate for many of the railroads that year.

At the end of 1858 it was obvious to Milwaukee & Mississippi President Catlin that his company would not be able to pay the half a million dollars in interest that it owed at that time-this despite the fact that the Milwaukee & Mississippi had transported over two million bushels of wheat during the year. The company's annual report for 1858, like those of all other Wisconsin railroad companies, followed a new format required by Wisconsin law:

First. The whole length of the road in operation is 234 41/100 miles. Second. The amount of capital actually subscribed is 38,556 shares, $3,855,600. Third. The whole cost of the road is $8,114,126.43. Fourth. The amount of indebtedness is 4,809,852.64.

Fifth. The amount due the corporation on bills, accounts, &c., is $61,141.56. Sixth. The amount received for transportation is as follows: $883,186.02. Seventh. The amount expended for the year is as follows: Operating costs and salaries 443,242.49

Interest on debts               487,321.96

Interest on Construction accounts; sinking fund            330,945.18

    Total                            $1,261,509.63

Eighth. No dividends have been paid or declared during the year.

Ninth. The number of passengers transported and rate of fare is as follows: Through passengers, 24,829. Rate per mile, 3.03 cents. Way passengers, 143,081. Rate per mile, 3.40 cents.

Tenth. The amount of freight transported over the road during the year is 163,917 tons.27

The fate of smaller companies such as the Mineral Point Railroad—and uncertainty over the larger ones—was of central concern as the financial crisis deepened. Many railways were making changes due to the financial crisis. Earlier in the year the Beloit and Madison had made arrangements with the Milwaukee & Mississippi to allow use of its tracks between Hanover Junction (Plymouth) and Janesville. This agreement went into effect on May 17. Galena trains now left Chicago at 9:30 a.m. and 5:00 p.m., arriving at Janesville at 2:40 p.m. and 10:00 p.m., respectively. Return trains left Janesville at 12:00 a.m. and 11:30 a.m., arriving in Chicago at 5:30 a.m. and 4:20 p.m., respectively. The Galena trains shared the Janesville depot with those of the Milwaukee & Mississippi and the Chicago, St. Paul, and Fond du Lac. Despite these arrangements, the Beloit and Madison would not be able to meet its obligations in 1858. It continued to lease the finished portion of its line to the Galena and Chicago Union Railroad Company, which responded to the hard times by dropping the Chicago-Beloit passenger fare from $3.00 to $2.35.

The investors of the Chicago, St. Paul, and Fond du Lac were also suffering. Henry Southwell of Fort Atkinson commented:

This road, like most other roads, was built to develop the country and relied on the country filling up to give it support. Failing to get this, the road was forced into bankruptcy. The bonds sold at 30 cents and the stocks at 5 cents on the dollar.

Farm mortgages and town bonds given for stock were put up as collateral to the Company's notes and sold out at a small percent of their face value. Most of the Towns repudiated their bonds and judge Nagle of the circuit court declared the farm mortgages given for stock illegal and uncollectable.

From the panic of 1857 to the civil war, farm products were low in price and general business very dull. Failures were a common occurrence and labor commanded very low price.²⁸

Meanwhile, Fond du Lac trains, like those of Wisconsin's other troubled lines, continued to run and earn revenues.

The Chicago, St. Paul and Fond du Lac responded to the crisis by becoming more competitive. In October it began extending its tracks north from Janesville. They crossed those of the Milwaukee & Mississippi at what would be called Milton Junction, one mile west of Milton. There, on the northwest quadrant of the crossing, Mr. G. W. Mathews erected a small, one-story frame house, which he opened as a depot and hotel. Several of the Irish railroad workers' families settled at the junction and established the village of West Milton (Milton Junction). While the road was being constructed, an engine went through a bridge over Otter creek and sank in the quicksand. It was never recovered.29 Meanwhile, work began at Fond du Lac to extend the road to Oshkosh, and that extension was completed by the end of the year.³⁰

In June the Kenosha, Rockford & Rock Island began using a two-story, forty-foot-long boarding-house car for its workers on the line. The company had begun operating twelve miles of track out of Kenosha at the beginning of the year and had purchased more rails earlier in the spring. It ran its first passenger train on July 5, a special, taking Kenoshans to the Independence Day celebrations at the Linus Woodworth farm in Bristol Township. The thirteen-car train made four additional runs that day, stopping at all stations, a round-trip ticket costing 25 cents. On one of these runs the train carried one thousand passengers. There were more excursions that summer, one taking a large group of school children to Bristol for an outing. More rails arrived at Kenosha in mid-July. The company advertised for one hundred laborers, and track laying resumed. The rails of the Kenosha, Rockford & Rock Island reached Silver Lake in mid-September and Fox River at the end of the month, where they stopped because the bridge was not finished. The bridge was completed in November, and rails were laid for a few more miles before the supply ran out.

At about this same time the Galena & Chicago Union Railroad decided to demonstrate that its new Chicago-Janesville service was better than the Chicago, St. Paul, and Fond du Lac's. Janesville was at this time becoming a major hub. On June 5 an observer noted rail cars in the yards belonging to eight different companies-the Milwaukee & Mississippi; the Chicago, St. Paul, and Fond du Lac; the Galena and Chicago Union; the Racine & Mississippi; the Milwaukee and Water-town; the Chicago, Burlington and Quincy Illinois Central; and the Fox River Valley. As author D. C. Prescott explains, each of these companies wanted to dominate:

About this time the Chicago & Galena Union R. R. looked with covetous eyes upon this St. Paul business, and proceeded hurriedly to arrange a connection for the purpose of gathering in a share of it. To that end they built a line from Bel-videre to Janesville, meeting the Milwaukee & Mississippi road at that place and coming in on the opposite side of the same depot occupied by the Fond du Lac road and the M. & M. road. They advertised extensively their ability to put trains into Janesville as quickly as the Fond du Lac, though they had some twelve miles further to run; still with this handicap they lowered the scheduled time usually made by the Fond du Lac road, and a train hauled by a big engine called the Whirling Thunder started in on the run. The Fond du Lac train leaving Chicago at the same time arrived thirty minutes ahead, and the boys lined up on the platform to welcome the Galena train. It came in with a scream and a rush and a roar, rounding the curve at full speed, fetching up at the depot almost with a bang. The engineer hauled his lever over to reverse and applied steam in order to stop at the depot. It was a great event and the Fond du Lac boys cheered; but the scheme did not work; the Galena did not have an engine that could turn its wheels fast enough to make the run as advertised, and they did not get the business; but it caused lively railroading, as will be understood.31

The Kenosha, Rockford & Rock Island inaugurated regular service from Kenosha on December 7. The end of the tracks now lay two miles beyond the Fox River bridge. Its train, consisting of ten new freight cars and one new passenger car, would leave Kenosha at 5:00 p.m., stay overnight, and leave Wheat-land Township the following morning at 8:00 a.m. Westbound freight could be routed to Milwaukee or Chicago, the cars being transferred onto the Milwaukee & Chicago track in Kenosha and reaching their destination the same day. Sadly, the company ended its first week of service with a derailment. On December 11 the eastbound train went off the tracks one mile west of the Fox River bridge. The locomotive and twelve cars of wood stayed on the track, but the freight car and the passenger car derailed. Brakeman Harry Clark, who had been riding on top of the freight car, was shaken up but soon recovered. The passengers were unhurt.

Despite a few success stories, the forecast for the rest of the railroad industry and its partners was grim. By 1858 nearly four thousand Wisconsin farmers had mortgaged their farms to buy railroad stock. Eastern investors had loaned the money and held these mortgages. Railroad companies with reduced revenues were defaulting on their loans and the value of their stock was plummeting. The Eastern creditors now began to foreclose. Faced with losing their farms, Wisconsin's farmers blamed the railroads, whom they claimed had misled them into mortgaging their farms. They cited excessive freight rates, mismanagement, corruption, and fraud. They claimed that railroad directors had watered down stock, misused corporate funds, and contracted with construction firms in which they held an interest. The Milwaukee and Superior and Milwaukee and Beloit companies had actually dissipated all of their money without laying a single mile of track.32

Farm foreclosures were often met with resistance. Local officials delayed proceedings. As a last resort, mortgagor's friends and neighbors sometimes packed foreclosure sales to intimidate prospective bidders. Wisconsin's legislators aided this effort by passing a law that delayed actual foreclosure for at least a year and another law that stopped foreclosure proceedings altogether when a mortgagor proved that he had signed his note because of “fraudulent representations by the railroad agent.” In 1858 and for some time following, these laws gave farmers relief.³³

It was an odd state of affairs: railroads were in bankruptcy and farmers were losing their farms, yet so much wheat was flowing into Milwaukee by the fall of 1858 that new methods for handling it were needed. Earlier in the year the Board of Trade and the Corn Exchange had consolidated to form Milwaukee's Chamber of Commerce, which had implemented improved grading and weighing standards. This year saw the first large grain elevators erected in Milwaukee that were specifically designed to handle wheat shipped in bulk (not bagged) by rail. L. J. Higby built the first such elevator on the Milwaukee & Mississippi property on the Menomonee River. It had a capacity of fifty thousand bushels, which soon proved inadequate. Angus Smith built a giant grain elevator to serve the La Crosse and Milwaukee line on the Milwaukee River at Chestnut Street. Smith's elevator, when finished, would have a capacity of four hundred thousand bushels and would be able to receive and ship one hundred thousand bushels per day.³⁴ Gone were the days when commission buyers met farmers coming into town to purchase wheat on the wagons. Now they assembled each morning at Higby's warehouse, where they traded, then made the rounds to the other warehouses. In the afternoon they would take care of paper work, but after supper they would be found in the lobby of the Newhall House, buying and selling again.³⁵

By the end of the year, as financial reports started to be filed, the repercussions of the financial downturn became clear in the number of railways that were forced to sell or close. On October 1 the Watertown and Madison Railroad Company was sold by the court to Russell Sage of New York. The company had defaulted on its debt payments in January and a trustee for the bondholders had filed for foreclosure on April 21. On October 12 Sage “quit-claimed” the property to the Milwaukee, Watertown and Baraboo Valley Railroad Company, which owned the Brookfield Junction-Watertown-Columbus and the Watertown-Waterloo lines. On December 20 that company leased those lines back to the La Crosse and Milwaukee. The Racine and Mississippi had only laid a few miles of track in 1858. On December 3 the bondholders of its 1855 mortgage filed suit to foreclose the company's Wisconsin property from Racine to Beloit. The Milwaukee and Horicon, along with its partner in operation, the La Crosse and Milwaukee, had defaulted on interest payments on its bonds in 1858. A receiver was appointed on behalf of its bondholders and several lawsuits were filed to foreclose the different trust deeds given to secure their bonds.

The Wisconsin Central Railroad Company had also failed. It had finished most of the grading between Geneva and Whitewater in 1857 and its officers had already placed orders for the rails when the bottom fell out due to the recession. The company would build no more. A two-mile spur of rail had been built southward from the line's junction with the Milwaukee & Mississippi in Whitewater to receive the rails when they arrived from the East over the latter line. But the spur would remain unused and would eventually be disassembled by one of the company's creditors.36

The continuing depression, along with its attendant bankruptcies, unemployment, the evaporation of travel for pleasure, and reduced demand for merchandise and lumber, had taken an incredible toll on Wisconsin's railroads in 1858. Almost all of them-the Milwaukee & Mississippi; the La Crosse and Milwaukee; the Milwaukee and Horicon; the Mineral Point; the Chicago, St. Paul, and Fond du Lac; the Watertown and Madison; the Racine and Mississippi; and the Wisconsin Central- had defaulted on loan payments and now faced foreclosure.³⁷ The state legislature had contributed to these problems by chartering competing railroads in the same region or along the same route. A case in point was the extension of the charter of the Milwaukee and Watertown Railroad in 1856, which allowed that company to build from Watertown to Madison and then to the Mississippi. Although the company wasn't actually prepared to build such a route at that time, the authorization highlighted the fact that this proposed route was twenty-two miles less from Milwaukee to Madison and fifty miles less from Milwaukee to the Mississippi than the Milwaukee & Mississippi's lines. This information permanently damaged the latter company's credit and lowered the value of its stocks and bonds, contributing, ultimately, to its bankruptcy. However, it was the national state of depression, more than any other factor, which caused Wisconsin's railroads to fail.

Still, there was a bright side amidst all this bad news. In 1858, despite the nation's financial struggles, there had been construction, and trains were kept running. The La Crosse and Milwaukee had completed its line to the Mississippi (the line that would carry Chicago-Twin Cities Amtrak trains 150 years later), and the Kenosha, Rockford & Rock Island opened twenty-two miles of its line out of Kenosha in December. Sixty-one miles of track had been laid in Wisconsin during the year, bringing the state's total to 762.