Russell Houston, longtime company attorney who held the presidency between June II, 1868, and October 8, 1868.
The dialogue over postwar policy began in earnest at the annual stockholders meeting in October, 1866. In the Annual Report for that year Fink advanced his first detailed plea for a new policy based upon expansion and an increased emphasis upon through business. His report led to a lengthy debate in which expansion policy won a partial and temporary victory. Nevertheless, the opposing camps on the matter formed early and endured for years, injecting an element of discord into the L & N’s management. A contemporary observer characterized the split in these quaint terms:
… the parties viewed this question from different standpoints. The one party said, “Let well enough alone, and pay us annually our accustomed dividends.” The other party saw in the future, by extension, the greatest railroad in the South, and perhaps in the United States.1
Even in the early debates the crux of the matter lay in the unknown dimensions of through traffic. In 1866 the L & N possessed top credit ranking. A combination of additional financial obligations and less prosperous times might injure that status irreparably. Since the importance of revenue from through traffic had not yet been established, conservative directors hesitated to gamble large commitments on uncertain returns. To gain their point, the expansionists within the company had to fight every battle on its own merits and hope for a continuation of prosperity. But, of course, the merits of each issue varied considerably, and the weaker projects required no little ingenuity by the expansionists to sustain them.
The postwar interruption of through service to Memphis ended on August 13, 1866, but the two Tennessee companies remained in wretched shape. Neither the Clarksville nor the Memphis & Ohio had the resources to effect more than a primitive rehabilitation of their lines, and prospects for improvement looked grim without financial aid from either the L & N or the State of Tennessee. The L & N was eager to help. As long as the link to Memphis remained tenuous, the company endangered not only that market but also any reliable connections to New Orleans, Mobile, and the Southwest. The board agreed that the situation had to be stabilized as quickly as possible. Accordingly it made similar proposals to both Tennessee companies: the L & N would operate their roads, advance funds to repair them, furnish rolling stock, pay interest on the state bonds, and apply all net earnings toward refunding the debt that would arise in the process. The stockholders of the roads could reclaim the management of their property at any time simply by repaying the advances made by the L & N.
In purely economic terms the offer was a fair and even generous one, yet it met vehement resistance. Some Memphis merchants continued to fear that L & N domination would result in commercial discrimination against their city. Goaded mainly by a public clamor over this anxiety, the Clarksville rejected every L & N overture and vowed to operate the road free of outside control. While this stance met with popular approval, it led to financial disaster. The Clarksville lacked any resources to rehabilitate its line, and earnings failed even to pay operating expenses. In July of 1865, the company defaulted on its Tennessee bonds, and the state promptly put the road in the hands of a receiver. The effect of this action was to increase the road’s indebtedness without changing its basic situation.
The course of events in Tennessee baffled the L & N management. It had helped nurture both Memphis roads from their inception with the understanding that eventually the three lines would be integrated under one management. The L & N assumed that the common interests of the three companies were so obvious as to squelch any charges of discrimination. Now that very charge had arisen and threatened to destroy any chance of an efficient through line to Memphis. Fink hastened to reassure opponents of L & N intervention:
Can there be any real ground for such opposition? It seems altogether to be based on the fear that the Louisville and Nashville Railroad might discriminate against the people of Tennessee in arranging the freight tariff. Certainly those who entertain such fears are altogether ignorant of the principles upon which railroads conduct their business; and they do not . . . appear to appreciate the fact that the Louisville & Nashville Railroad Company, controlling as it does the northern outlet of their Tennessee connections, is already in position to discriminate against them, were it disposed to do so. But it is rather to the interest of the Louisville & Nashville Railroad Company to discriminate in favor of their Tennessee termini, because they are not only reached by competing lines of railroads, but also by the river; and if the Louisville & Nashville Railroad Company desires to do any business at all over this road, it must adjust its tariff with a view of meeting this competition.2
Despite Fink’s cogent argument, the receiver continued the policy of maintaining the Clarksville as an independent road. In short order the road’s floating debt mounted as earnings proved inadequate to pay for salaries, supplies, and other necessities. When the state failed to make any provision for this shortage, a crisis ensued. On February 6, 1868, the company’s employees refused to stay on the job without some guarantee that their overdue salaries would be paid. No settlement could be reached, and the road suspended operation. For eleven days the L & N was forced to reach Memphis by shunting its trains through Nashville, over the Nashville & Northwestern’s tracks to McKenzie, Tennessee, and thence to Memphis via the Memphis & Ohio.
The Clarksville’s collapse drove the state and the company into speedy acceptance of a modified offer from the L & N. The latter company agreed to guarantee all wages and expenses for the Tennessee road. If earnings failed to meet these expenses the L & N would cover the deficit. All surplus earnings would be returned to the receiver. On these terms the L & N managed the Clarksville for three years and gradually improved the physical condition of the line. Finally, in September of 1871, the L & N purchased the Clarksville under foreclosure proceedings and made it a branch of the parent road.
The Memphis & Ohio profited somewhat from the Clarksville’s experience. Though preferring to remain independent, the company veered steadily toward insolvency. By 1867 it could no longer meet the interest on its state bonds and seemed ready to join the Clarksville in receivership. That prospect disheartened the L & N. The state would doubtless again not provide for payment of debts accrued during the receivership, which meant that the L & N’s advances of money and rolling stock would go unprotected. To avert receivership the Memphis & Ohio actually persuaded the Clarksville to join it in proposing a consolidation with the L & N. Guthrie was intrigued but balked at the terms. The consolidation would require the L & N to assume the entire debt of both roads, a figure that greatly exceeded their value. The L & N made a counter offer based upon a scaled-down debt structure, but it was declined and the Clarksville floundered into bankruptcy.
The board of the Memphis & Ohio proved more flexible. On July 1, 1867, it defaulted on its interest payments and the governor appointed a receiver for the road. Like the Clarksville the company had a backlog of unpaid salaries and supply bills, and it desperately needed funds to put the roadbed in operating condition. Since receivership offered no visible relief to this problem, the Memphis & Ohio board asked the L & N for assistance if it could be obtained without taking the road from the stockholders. Guthrie and his board readily agreed to lease the Memphis road on terms similar to those given the Clarksville: the L & N would pay all interest on state bonds, assume payment of debts incurred since the war, and reimburse itself from the line’s earnings. Any surplus earnings would go to the stockholders of the Memphis & Ohio.
The lease went into effect on September 1, 1867, and thereafter the Memphis & Ohio ran a steady deficit. The L & N had no choice but to make extensive improvements if it wished to put the line in decent working condition. That investment in turn prompted the company to seek a more permanent hold on the Tennessee road. In 1871 the L & N purchased a controlling interest in the Memphis & Ohio’s stock and immediately guaranteed a $3,500,000 issue of first mortgage bonds on the road. From the proceeds of these bonds the L & N reimbursed itself for the purchase price and applied the surplus to such purposes as improvements of the roadbed and new rolling stock. On October 9, 1872, the L & N formally consolidated with the Memphis & Ohio and thereafter the latter road, together with the Clarksville, was called the Memphis branch. That same year the company executed a $2,500,000 mortgage on the Clarksville.
By 1872, then, the L & N had at last secured its road to Memphis. The price had been high. The cost of the Memphis & Ohio was estimated at $2,621,091 and the Clarksville at $1,650,000. In addition the L & N held claims for advances to the Memphis & Ohio that totaled $468,797, and large expenditures for all types of improvements would be required for many years. In return the L & N had expanded its total mileage to 616, stabilized its connection to Memphis, and taken one major stride toward increasing its business to the Southwest. The potential of Memphis as a commercial and transportation center was receiving national publicity by 1870. Five different roads terminated in the city while two others were under construction on the Arkansas side of the river. That the L & N was willing to pay a high price to assure its entrance into Memphis only indicates the importance of that link in the company’s plans for the future.
The decision to absorb the Memphis line had been approved by virtually the entire L & N board and so caused little internal wrangling. The debate over extending the Lebanon branch was quite another matter. No other issue, except perhaps the later extension into northern Alabama, created such furious disagreement during the early postwar years. And no other issue more strikingly illustrated the different viewpoints of “progressives” and “conservatives” on the board. Like the venture into northern Alabama, the Lebanon extension involved a grand scheme seeking long-term strategical advantages as its major objective. The amount of capital required would be great and the returns minimal until the entire project was completed. Even then the long-term rewards could not be assessed with any certainty, for other competing lines might arise at the same time.
There was another, more disquieting factor, too. Success of the venture did not depend solely upon the L & N’s initiative. Neither of the primary connecting roads in Tennessee and North Carolina had yet been built. If the fabled through line to the Atlantic seaboard north of Atlanta were to be realized, all the companies involved would have to push their work with equal vigor. If the L & N extended the branch to the Tennessee border while the connectors dawdled, it would be saddled with a costly, elongated, dead-end spur line. None of the other companies possessed the financial strength of the L & N, and none had immediate access to enough capital for their work. The inability to control or even influence the destinies of these roads caused more than one L & N director to blanch at the overall picture.
Nor did the L & N itself face an easy task. Most of the terrain southeast of Lebanon was extremely rugged. Numerous tunnels and cuts would have to be blasted out of solid rock. For this expensive work the L & N would receive only the income of local traffic until the entire project was completed by every company involved. Any delays could be fatal, and a sudden tightening of the money market could wreak disaster. And, of course, resources allocated to the Lebanon extension would not be available for other expansion projects demanding attention—or for dividends to the stockholders. It was, in short, an enterprise of great risk.
Small wonder, then, that the assembled stockholders in 1866 discussed Fink’s report on the project at great length. Every other extension in the report was allowed to proceed at the discretion of the company’s officers, but the Lebanon branch encountered heavy opposition. After a heated debate Guthrie introduced a resolution to extend the branch to the state line on the condition that the city of Louisville would provide occasional financial aid “so as not to involve improvident expense.”3 When the ballots were counted, the resolution carried by a less than ringing majority of 6,448 out of a total of 43,286 votes cast. The “progressives” had won the first round.
The original extension of the branch, begun in 1863 under the short-lived agreement with General Burnside and the federal government, had proceeded steadily for three years. After passing through Stanford on April of 1866, the extension reached Crab Orchard on July 1, some forty- eight miles from Lebanon. The right-of-way from Crab Orchard to the state line, a distance of eighty-seven miles, had already been located through the rough terrain and the cost of construction estimated at $1,774,897. It was this last and most difficult stretch that had been the subject of debate at the stockholders’ meeting. The earlier construction had been financed by a $600,000 loan from the city of Louisville and the sale of $600,000 in L & N first mortgage bonds. The final eighty-seven miles would require nearly twice that amount, and for tactical reasons Guthrie wanted to avoid any cutback in the dividend rate to provide funds. Instead he authorized engineer George McLeod to let contracts on only eight miles of the route and to accept bids for only forty-three miles.
Despite this initial approval, the Lebanon extension never received wholehearted support from the L & N board. The sluggish pace of construction enabled opponents to regroup their forces and seek suspension of the project. A financial squeeze late in 1868 aggravated the situation, as did the persistent inability of the connecting roads to make any real progress. Three separate roads were building toward the extension from different directions. Southward the Knoxville & Kentucky Railroad was plodding slowly from Knoxville toward Jellico on the state line. To the east the Cincinnati, Charleston & Cumberland Gap Railroad planned to construct a connecting line between Cumberland Gap and Morristown, Tennessee, a station on the East Tennessee, Virginia & Georgia Railroad.
In Virginia General William Mahone was struggling to organize three separate companies into a through line between Norfolk and Bristol, Tennessee, the northern terminus of the East Tennessee road. After successfully consolidating the companies into the Atlantic, Mississippi & Ohio Railroad in 1870, he announced his intention to extend the road from Bristol to Cumberland Gap. In essence, then, the Lebanon branch involved two separate projects south of London, Kentucky: one reaching the state line at Jellico and the other going to Cumberland Gap. Which one the L & N built first depended entirely upon the relative progress of the connecting roads. The uncertainty over this issue did nothing to ease the stockholders’ apprehensions over the entire scheme.
Under these circumstances the Lebanon extension weathered one crisis after another. The city of Louisville voted on January 19, 1867, to approve a million-dollar loan to the L & N for the extension, but bad weather severely limited the turnout and the issue passed by only 1,101 to 698. That summer a group of L & N stockholders petitioned the company for a stock dividend equal to the current net surplus. The petitioners admitted that expansion projects were important but insisted that stockholders deserved first crack at surplus funds. Immediately rumors developed that the pressure would force a suspension of work on the Lebanon branch, and that an attempt would be made to elect new directors more sympathetic to the petitioners’ demands.
Despite failing health, Guthrie met the challenge energetically. He continued to pay 8 per cent dividends, and eventually he approved a 40 per cent increase in the company’s stock. In November of 1867 the board ordered the new stock distributed to the stockholders and added the following provisions: that whenever net earnings pay all interest, provide a sinking fund for the debt, and pay 6 per cent on stock and 10 per cent additional stock, then the capital stock of the company should be increased by the 10 per cent and distributed to the stockholders. This policy, ostensibly devised merely to equalize the company’s equity and debt ratio, effectively blunted the demands of the petitioners. On the extension issue, however, Guthrie yielded nothing. At a board meeting on August 1, 1867, he moved that, “Resolved that it is inexpedient to suspend the Lebanon Branch Extension.” Five directors, Guthrie, James B. Wilder, W. B. Hamilton, R. A. Robinson, and W. H. Smith, supported the motion. Only two directors voted no: Russell Houston, the L & N’s attorney, and H. D. Newcomb, a wealthy Louisville merchant and close friend of Guthrie.
Guthrie’s apparent victory soon began to resemble a stay of execution. Money grew so tight that by the end of 1867 the board had to borrow $150,000 to pay dividends. The company obtained the money from the Western Financial Corporation, a firm whose officers included H. D. Newcomb and Albert Fink. The following May, Guthrie was forced to borrow $50,000 from Newcomb himself to meet interest on the Tennessee state bonds. The L & N was in no real financial trouble, but expenditures on expansion projects continually exceeded current income and gave rise to a persistent floating debt. The million-dollar Louisville subscription could have virtually solved the problem, but funds trickled in slowly from the city. Meanwhile the floating debt continued to accumulate.
To relieve this dearth of ready cash Guthrie proposed an amendment to the company’s charter. The first section authorized the board, by majority vote, to consolidate or connect with any railroad chartered by a state whose roads connected with the L & N. This general provision was essential if the company were to expand beyond the state borders without having the legislature approve each merger or connection individually. A second section authorized the board to execute an $8,000,000 mortgage, of which $2,500,000 would be set aside to retire existing bonds and the remaining $5,500,000 used for extensions and improvements. Such a mortgage would relieve the floating debt and insure an available capital supply for the Lebanon branch and other projects. The amendment passed the legislature on February 21, 1868, and was approved by the stockholders a month later.
The new mortgage was Guthrie’s last major act as president. Too ill to continue his post, he resigned on June 11 and was replaced by Russell Houston. Guthrie’s departure left a power vacuum within the board that the contending factions rushed to fill. Houston had generally opposed Guthrie and Fink’s expansion program and especially resisted the Lebanon extension. But he had little taste for the presidency and most of the board gave him only grudging support. Fink’s influence remained strong within the management (he was to become second vice president as well as general superintendent in 1871), and he contined to push the expansion projects. Confronted by a divided house, Houston refused to run for reelection in 1868 after only four months in office. He also surrendered his seat on the board and thereafter functioned only as company attorney. In his place the stockholders elected H. D. Newcomb.
Newcomb’s election did nothing to clarify the policy situation. He had voted to suspend work on the Lebanon extension, but his attitude toward expansion was flexible. In many ways he embodied the conflicting desires for income and vigorous expansion. As an individual he had a substantial investment in the L & N to protect; as a businessman he was involved in a host of enterprises in Louisville and wanted to promote the city’s commercial growth. These conflicts tended to reduce him to a kind of neutrality that could be swayed by a good argument. Since Newcomb himself was a man of many interests with no background in railroading, he leaned heavily upon Fink for advice. The result of that collaboration was the eventual defection of Newcomb to the expansionist side and a renewal of strife within the board.
Russell Houston, longtime company attorney who held the presidency between June II, 1868, and October 8, 1868.
Times were still hard when Newcomb took office. The L & N could not dispose of its bonds at decent prices. The company held onto the securities rather than sell under duress, and the floating debt mounted. At a board meeting only a few days after the stockholders’ meeting, director James Whitworth offered a new resolution to suspend work on the Lebanon branch. It died for lack of a second, but McLeod followed with a gloomy report on the state of the extension. Work plodded along slowly, hampered by the rugged terrain and the poor financial climate. The Knoxville & Kentucky had suspended all work after only thirty-one miles of slipshod construction. The other roads were in no better shape and their future looked clouded. With no prospects for a working connection in the foreseeable future, the board approved a resolution to suspend work beyond Gresham’s Ferry. Newcomb hurried off to New York in search of money, and Fink was ordered to cut expenditures wherever possible.
The financial situation seemed to have the last word on the Lebanon extension; yet other forces were at work to revive it. During the winter of 1869 both the city council and the Louisville Board of Trade passed resolutions urging that work on the branch be continued. An editorial in the Commercial and Financial Chronicle had already called national attention to the exciting possibilities for transportation between the West and the Atlantic seaboard and described it as “the supreme commercial necessity of the times.”4 A commercial convention in Norfolk eagerly demonstrated support for any rail project connecting that port with the Mississippi and Ohio valleys. A line of steamships between Norfolk and Liverpool was contemplated, and plans were being considered for a great canal between the James and Kanawha rivers. The rail link clearly emerged as the most stubborn obstacle, and some promoters were unwilling to wait upon the L & N and its connectors. In January, 1869, a new enterprise, the Louisville, Harrodsburg & Virginia, was organized to supply the missing line. If it made serious headway, it would usurp the Lebanon extension’s ambition and perhaps deal it a death blow.
The momentum of these activities placed the L & N in a quandary. In February the board approved a weak resolution to push work on the extension “at as early a day as practical.” Fink continued to insist that the project be given top priority, warning in his 1869 report that “the large capital already invested in the Lebanon Branch can not be expected to yield proper returns so long as that Branch is operated as a local road, which must necessarily continue to be the case until a connection is made with the roads in East Tennessee.”5 Newcomb swung ever closer to Fink’s point of view and thereby enraged the more conservative directors. By the summer they were openly maneuvering to seize power in the company. A rival ticket developed under the leadership of J. B. Wilder, a wholesale druggist who had been ousted from his directorship along with Houston in 1868.
In campaigning for the presidency Wilder emphasized Newcomb’s far-flung interests. A New Englander who had moved to Louisville in 1832, Newcomb owned a large wholesale whiskey firm and was major partner in a grocery and commission house. His other primary interests included the Cannelton Cotton Mill, the Western Financial Corporation, and the Galt House, Louisville’s most elegant hotel. Wilder charged his opponent with being too inexperienced in railroad affairs and too preoccupied with his other enterprises to manage the L & N properly. Some Wilder supporters sneered that a prominent name was not enough to run a great transportation company; what was needed was a dedicated servant with few outside distractions. In return Newcomb’s supporters denounced Wilder as an opportunist and retorted that he and Newcomb had served as L & N directors for nearly the same length of time.
Another round of controversy over rates lent added fuel to the election fire during the summer of 1869. Some Louisville merchants complained that the L & N was discriminating against Louisville’s southbound freight in favor of Cincinnati cargoes. Fink denied the charges categorically, but they persisted, and Wilder tried to enlist support among the complainants. His efforts were thwarted by a committee of the Board of Trade, whose report exonerated the L & N from all charges. When the city council voted to throw its 18,000 shares behind Newcomb, Wilder realized his cause was lost. He withdrew his ticket before the election and the entire incumbent board gained reelection. The Louisville Courier- Journal, which had described the L & N as “about the best managed railroad in the South and Southwest,”6 hailed the settlement as a statesmanlike closing of ranks.
But only a battle had ended; the war went on. Complaints over rate differentials mounted and were intensified by occasional freight blockades. The bottleneck south of Nashville continued and lent new impetus to support of the Lebanon branch. In March of 1870 the L & N once again had to refuse freight for points beyond Chattanooga. To the inevitable charges of discrimination Fink replied that the blame lay with the vital Western & Atlantic, which had but 400 freight cars to handle its immense through business. Such a blockade could be relieved, Fink added coyly, by the creation of a new through line to the seaboard. Another Board of Trade investigation exonerated the L & N, but the rancor over rates persisted. At the 1870 annual meeting Newcomb barely beat down a resolution to reduce the local tariff.
A showdown on both the Lebanon branch and the rate questions was clearly looming for the 1871 meeting. In November of 1870 General Mahone completed his consolidation of the three Virginia roads between Norfolk and Bristol. With all work on the Knoxville & Kentucky still suspended, the L & N board shifted its attention to the Cumberland Gap extension. Mahone was organizing a subsidiary enterprise, the Virginia & Kentucky Railroad, to cover the 100 miles between Bristol and Cumberland Gap. No one doubted Mahone’s sincerity or his ability, but his company was still financially weak. The L & N hesitated to make any firm commitment until Mahone stabilized his position.
For nearly a year the company hedged on the Lebanon project. During the summer of 1871 a committee from the Atlantic, Mississippi & Ohio visited Louisville and asked for a decision. Mahone’s company had already surveyed the route to Cumberland Gap and was actively preparing for construction. In response the L & N board passed three cautious resolutions. The first reaffirmed that “the extension of the Lebanon Branch ... to Cumberland Gap, if ever reliable assurances should be received of its being there met by some road that would afford a safe and suitable outlet to the ocean, has long been a cherished purpose of the Louisville and Nashville Railroad Company, and this purpose ... is still entertained as strongly and as firmly as at any previous time.”7
With exquisite care the board avoided any definition of what constituted “reliable assurances.” The second resolution avowed the company’s intention to pursue the work at the same pace as the A M & O, with completion at “as early a day as its means and engagements will allow.” The final resolution noted carefully that the board could not bind the stockholders to any specific schedule but offered the “opinion” that, if the A M & O’s work progressed satisfactorily, the connection would be made by December of 1874.
On the southern connection the L & N took a more definite stand. With the Knoxville & Kentucky moribund, the board reluctantly suspended all work beyond Livingston, twenty-five miles from Crab Orchard and sixty-two miles from the state line. The directors briefly considered building beyond the state line on their own, but dismissed that alternative as too risky and complicated. At the 1872 annual meeting the board was allowed discretion to finish the extension if the city of Louisville paid the remaining $800,000 of her $1,000,000 subscription or if the city council withdrew that subscription and replaced it with a $2,000,000 loan of city bonds. Again the stockholders approved a resolution affirming their desire to complete the extension if some reasonable assurance could be obtained from any connecting road. But no satisfactory assurance was forthcoming, and for all practical purposes the Lebanon extension became a dead issue despite sporadic efforts to revive it.
The same interest groups that clashed over the Lebanon extension also fought over another of Fink’s pet projects, the Ohio River Bridge. Since its initial investment of $300,000 in the Louisville Bridge Company, the L & N had virtually taken over the company. The firm’s president, W. B. Hamilton, had been an L & N director until 1867, and most of the remaining stock belonged to men associated with the road. Fink himself drew up the plans and supervised construction of the span, which utilized the Fink truss. Work proceeded steadily on the bridge, and by 1868 it had become another symbol of the new expansion policy. “Progressives” saw it as opening the entire breadbasket of the West to the L & N’s cars; “conservatives” feared the connection with the Jeffersonville, Madison & Indianapolis Railroad (soon to be acquired by the Pennsylvania Railroad) would leave Louisville a mere whistle stop on the great through line.
This anxiety over commercial isolation erupted in 1867, when a committee of the Louisville Board of Trade reported that the new bridge, along with the proposed road between Louisville and Cincinnati, would “result in great injury to the commercial interests . . . making Louisville simply a way station . . . instead of the commercial center she now is.”8 Vene P. Armstrong, president of the Board of Trade, argued forcefully that the bridge would benefit not the city of Louisville but the L & N. His remarks illustrated the L & N’s inability to serve all the interests that sought to utilize if not dominate it. The dichotomy between corporate and community goals was widening, especially as the latter grew ever more diverse in its composition and therefore its needs.
Armstrong conceded that the bridge posed less of a threat than the connecting road, and the Board of Trade finally endorsed the project. Amidst great fanfare the bridge opened on March 1, 1870, the first connecting link between northern and southern railways. Fink asserted flatly that “perhaps no other improvement will exercise so great and beneficial an influence upon the prosperity of the Louisville & Nashville.”9 Heretofore, the amount of northern through business was entirely limited by the capacity of a transfer company to haul freight from Jeffersonville by wagon to the L & N depot. The bridge would eliminate this costly and time-consuming process.
The second project for cementing the L & N’s northern connection, the railway between Louisville and Cincinnati, aroused even more savage opposition than the Ohio River Bridge because it struck at the very heart of the rivalry between the two cities. Fink’s plausible argument that such a line would compel Cincinnati to throw its southern business over the L & N carried much weight with company stockholders but not with Louisville merchants hoping to shut the Queen City out of southern markets altogether. Here, too, the interests of the L & N and various commercial groups in Louisville collided. The latter argued that such a road would benefit the city only if the L & N discriminated heavily against Cincinnati freight. But, in their opinion, the opposite had been true: in its zeal for business the L & N had given preference to Cincinnati traffic (reaching Louisville by river) and thereby helped the Queen City to compete for southern markets. A connecting road could only aggravate this situation by eliminating the inconveniences of the water transfer.
Cincinnati merchants, of course, took the opposite position and accused the L & N of discriminating rates and shipment delays in handling their freights. As spokesman for the L & N, Fink firmly denied any such role in swaying the commercial destinies of either city. Though naturally supporting Louisville’s ambitions, he observed that the railroad merely serviced and did not create by itself commercial superiority in a given region. If southern customers chose to buy in Cincinnati, they would still receive their goods by some roundabout route no matter how loyal the L & N was to Louisville interests. In short, the railroad did not create markets; rather it created access to markets on the most favorable terms possible.
The 14th Street Bridge across the Ohio River, designed by Albert Fink and opened on March 1, 1870, as the first rail line across the river.
In his Annual Report for 1868 Fink got down to specific cases. The only advantage Louisville merchants enjoyed in the southern trade, he argued, was their closer proximity to the markets. But Cincinnati interests nullified this edge by controlling river rates. Cincinnati boats charged the same rate for Louisville and Cincinnati cargoes with no allowance for the reduced distance. Boats leaving Louisville generally charged these same rates, which forced the L & N to adjust its rates to meet the river competition. In this manner Cincinnati retained its advantage in eastern markets while neutralizing Louisville’s edge in the South. From this conclusion Fink argued that the competition for southern trade boiled down to a duel between the carriers, and to compete successfully the L & N had to loosen the stranglehold imposed by the riverboats. A railway connection to Cincinnati offered the most feasible solution.
The L & N had actually given encouragement to the Cincinnati project as early as 1865. The road, eventually known as the Louisville, Cincinnati & Lexington Railroad (L C & L), traced its roots back to the Lexington & Ohio Railroad, chartered in 1830. After building a 29-mile line between Lexington and Frankfort, the company defaulted on its bonds in 1847 and was purchased by the state. The state leased the road to private individuals until 1849, when it sold the line outright to the newly organized Lexington & Frankfort Railroad. Two years earlier another company, the Louisville & Frankfort Railroad, had begun construction ‘between those two cities. The completion of that road in 1851 connected Louisville and Lexington, though the two companies operated no through trains and forced all passengers to change at Frankfort. Not until 1869 did the two companies consolidate as the L C & L despite the angry protests of Frankfort interests, who resented being reduced to a way station.
Prior to the consolidation, in 1867, the Louisville & Frankfort undertook to build a road from LaGrange on its own line to Covington, Kentucky, just south of Cincinnati and the Ohio River. It was this project that became known as the Cincinnati Short Line or the Cincinnati Connection. The L & N supported the Short Line from its inception and welcomed negotiations for connecting the two lines in Louisville. At once a storm of opposition arose in Louisville, as the mercantile community voiced their alarm that their city would become a way station if the connection were made. The city council reflected these sentiments by objecting to every proposed right-of-way through the city for the Short Line. For over two years, even after completion of the Short Line in the spring of 1869, the right-of-way controversy lingered on.
At first the city council opposed any connection. Despite Armstrong’s speech against the bridge and the Short Line, the Board of Trade in March, 1867, petitioned the city council to grant some right-of-way. Soon afterward the dispute shifted to a small but vital detail: the gauge of the connection. Most northern roads, including those reaching Cincinnati, utilized the standard, or 4-foot 8½-inch, gauge, while nearly all major southern lines were built with a 5-foot gauge. The Louisville & Frankfort originally utilized the standard gauge but was converted to 5-foot gauge during the war for military purposes. For this reason the company built the Short Line with a 5-foot gauge, which corresponded to the gauge of the L & N.
This seemingly trivial fact made a world of difference. If the Short Line connected with the L & N, freight travelling in both directions could chug through Louisville without delay but would have to break bulk in Cincinnati. On the other hand, if no connection was made or if the Short Line were converted to standard gauge, all freight would be forced to break bulk in Louisville. As with the river trade, many Louisvillians depended upon the transfer process for their livelihood, and the delays involved gave the city’s merchants a decided advantage in the quest for southern markets. The welter of conflicting interests, then, between merchants within each city, between the commercial interests of each city, and between the L & N and the city of Louisville, quickly coalesced around the dispute over the gauge question. Needless to say, the fight got loud and hot.
The Louisville Board of Trade, speaking for the mercantile community, crystalized its position in July, 1868. After an animated discussion it passed four closely related resolutions on the matter. The first categorically opposed any connection that reduced Louisville to a way station. The second requested the city council to refuse any right-of-way through the city, and the third petitioned the state legislature to repeal that part of the parent road’s charter authorizing such a connection. If successful, these three resolutions by themselves would virtually doom the Short Line. The fourth one, however, offered terms for a satisfactory solution. In it the Board of Trade promised cooperation if the Short Line would convert to standard gauge. If it refused, the mercantile community stood implacably hostile.
This stand provoked howls of protest in Lexington, whose merchants wanted the Cincinnati Connection and therefore favored a 5-foot gauge. But the Louisvillians stood firm, and on July 30 the city council approved the connection if the requisite change of gauge was made. When the L C & L balked at the terms unless the company was compensated for the expense involved, the city promptly agreed to pay 60 per cent of the cost. The combined protests of the L & N and those citizens involved in the transfer business made no dent in the city’s position. The L & N objected only to the delays involved; Fink, in his 1868 report, scrupulously abstained from commenting on the merits of the gauge controversy.
That autumn the stockholders of both roads involved in the L C & L approved a change of gauge if some suitable agreement could be worked out with the city of Louisville. That agreement proved difficult to achieve, however, and negotiations dragged on through the spring of 1869. Then a new controversy developed over the location of the route through the city. The simplest and cheapest route to the L & N depot at 9th and Broadway would have taken the Short Line through one of Louisville’s main streets. Numerous residents of the city vehemently opposed such a route, and their agitation forced the L & N and the city to search for alternative routes. The first proposal, called the “River Route,” was surveyed by McLeod himself only to be rejected by the Board of Aldermen in September, 1869. Neither the L & N nor the L C & L cared for this route anyway, but fresh alternatives were slow in coming.
Once the L C & L completed its consolidation in October the company came under the control of a Louisville-dominated board. This development simplified negotiations but heightened the resentment of central Kentucky, which did much more business with Cincinnati than with Louisville. The animosity of that region toward Louisville embraced the L & N as well, for the railroad was denounced as the tool of Louisville merchants anxious to build their trade by securing a monopoly over transportation facilities. One Lexington newspaper commented sourly that “this little spite of Louisvillians is cropping out on all occasions, and results from the fact that people from this section trade in Cincinnati, where they buy goods cheaper and more satisfactorily than in Louisville.”10
The demand arose to complete the connection at some point south of Louisville if the city remained intractable. That threat doubtless helped spur the negotiations, and two new alternative routes were devised. Both won adherents, but city officials, despite the protests of the two railroads and many Louisvillians, preferred the River Route. By early December both the city council and the Board of Aldermen had approved a connection along that route only to have the mayor veto the resolution on technical grounds.
The situation rapidly approached high comedy. Nearly everyone now agreed the connection was desirable (given the gauge change), but the bickering over the route’s location threatened to unravel the entire arrangement. Two events broke the logjam. An attempt to survey the River Route in January, 1870, had to be postponed when the surveyor found the route covered by water. When the railroads gleefully renewed their complaints about the route, the city council had no rebuttal. Then, on March 25, stockholders of the L C & L voted to start building a connection with the L & N south of Louisville if the city did not come to terms within thirty days. In three weeks the city council thrashed out a compromise ordinance based on one of the alternative routes. After some delays the connection was finished in December, 1870, and the gauge of the LC & L changed on August 13, 1871. The L & N joined the city in underwriting the cost of the switch.
The completion of the Cincinnati Connection had several momentous consequences. It helped solidify the L & N’s hold on its southern markets by frustrating Cincinnati’s efforts to establish a through rail line. In so doing, however, the L & N and the Louisville mercantile community convinced many Cincinnati interests that the only remedy lay in building their own railroad through central Kentucky parallel to the L & N. Hence there began a titanic struggle to prevent the construction of such a line. The battle over the Short Line, coupled with the usual chronic complaints over rates, further worsened the L & N’s public relations. Central Kentucky, never terribly friendly to the road, now became bitterly hostile for the most part, and that antagonism would cost the L & N dearly in the coming years. Moreover, the conflict drove another wedge into the deteriorating relationship between the L & N and the Louisville mercantile community. The depth of that division would emerge clearly at the stockholders’ meeting of 1871.
The accumulating tensions over expansion, rates, and other policy matters burst forth again in the company election of 1871. This time, however, the city council of Louisville took the lead in trying to oust the incumbent management. Nothing better illustrated the growing chasm that separated the city’s distended commercial interests and the corporate ambitions of the L & N board. Even the directors found their own diverse interests to be hopelessly irreconcilable, and therefore all had to establish some sort of priorities. Unable to satisfy every interest of the community, they could no longer function comfortably in the dual roles of director and customer, stockholder and shipper. Though the political rhetoric had not yet been fully articulated, it was plain by 1871 that the friction lay not between the corporation and the community but between equally ambitious interest groups with differing goals.
The city council’s campaign exemplified this pattern. On September 15 it nominated a slate of proposed L & N directors to be offered at the October meeting. The list contained only three incumbent directors: R. A. Robinson, a prominent merchant and manufacturer, Dr. W. B. Caldwell, James Guthrie’s son-in-law, and James Whitworth of Nashville. Mayor John G. Baxter headed the contingent of new candidates. A well-known manufacturer of stoves and tinware with a large business in the South, Baxter had served as an L & N director between 1868 and 1870. His running mates included S. P. Walters; J. H. Lindenberger, a wholesale druggist, insurance executive, and banker who had helped organize the Board of Trade and served as an L & N director during 1867–68; Dr. E. D. Standiford, president of the state’s largest deposit bank and the Louisville Car Wheel Company; and B. F. Guthrie, a wholesale grocer with investments in northern Alabama iron manufacturing. Conspicuously absent from the slate was Newcomb.
The incumbent board, though split by the opposition movement, resisted any imposed change of its membership. It renominated Robinson, Caldwell, and Whitworth, and supported B. F. Guthrie as well. But in place of the new candidates it named all the other incumbent directors except George W. Norton, who wished to retire, and added two new faces: P. J. Potter, a Bowling Green banker with large holdings in L & N stock, and George H. Hutchins. The additional candidates were needed because the 1870 stockholders’ meeting had approved a resolution raising the number of directors from seven to nine, with the further stipulation that only three new directors should be elected each year. This “staggering” proviso explained why the Baxter forces put up only five new men for the L & N board; three of them were to replace incumbent directors and two were to fill the newly created seats.
Baxter and his cohorts waged their campaign against Newcomb personally as well as against his policies. Scarcely veiled allusions were made to the president’s unfortunate wife, a victim of mental illness whom Newcomb eventually divorced, and to his own alleged “peculiarities.” On the policy side he was accused of poor management and financial practices, selling off L & N securities at sacrificial prices, juggling the company’s accounts, profiting unduly on short-term loans to the company, and using company funds for his own private banking purposes. In addition the dissidents resurrected the issues of the 1869 election fight and accused Newcomb of engaging in too many enterprises to give any of them full attention. This accusation more than once hinted at conflict of interest as well as overextension of activity.
Newcomb stoutly denied every charge and leveled a few blasts of his own. He dismissed the city council’s revolt as a partisan movement designed to subvert the interests of the stockholders by putting the L & N under political domination. His supporters noted caustically that the proposed new board held less than 10 percent of the total stock owned by the incumbent board and accused Baxter of using his office for private gain in certain instances. They also bought whatever loose L & N stock they could locate, and in the end their efforts prevailed. On October 4 the entire incumbent board gained reelection along with Guthrie, Hutchins, and Potter. Newcomb received the fewest votes among the nine victorious directors but still ran nearly 6,000 votes ahead of his closest competitor, Dr. Standiford. Mayor Baxter finished twelfth among the fourteen candidates.
H. D. Newcomb, president during the key years of early expansion, from October 8, 1868, to August 18, 1874.
The election did not result in an unqualified triumph for Newcomb. At a meeting on October 5 the board passed a resolution prohibiting the company’s president from holding any executive office in another corporation. Only when Newcomb agreed to abide by this resolution did the directors reelect him as president. Perhaps the resolution was a concession to the complaints leveled at Newcomb, but it also signified something far more important. The board recognized that the L & N was entering a new era. It was no longer a local road or a small enterprise that could be operated out of the president’s hip pocket. Success had spawned rapid growth, which in turn had produced an increasingly complex corporation. Two obvious developments illustrated this trend: the increase of personnel in every department and the growing specialization of function at every level.
The campaign of 1871 also witnessed the election of Albert Fink as second vice president. The mere creation of this office testified to the need for more administrative officers. Other departments were creating new offices as well as adding to their total work force. Although Fink continued to hold the position of general superintendent, his duties centered almost entirely upon policy matters. Slowly but surely a distinction between staff and line functions was emerging. As the amount and range of responsibilities grew, the once fluid and informal administration of the L & N gradually became bureaucratized. To expedite business, the board in December, 1871, created an executive committee composed of the resident Louisville officers and directors. In less than two years the principle was established that the executive committee could make all decisions except those specifically requiring a majority vote.
By 1872 the press of business compelled the board to establish standing committees for the first time. Three such committees were devised: the Finance Committee (Newcomb, Guthrie, and Thomas J. Martin), the Committee to Protect the Company against Injurious and Unjust Legislation (Newcomb, Caldwell, Guthrie, and Martin), and the Committee on Suitable Buildings for Offices in the City and Depot (Newcomb, Caldwell, Fink, Guthrie, and Martin). So strong was the need for continuity felt that an attempt by the board to eliminate the 1870 provision staggering the election of directors met with a crushing 36,343 to 23,157 defeat at the stockholders’ meeting in 1872. Not until 1876 was the charter amended and the staggering proviso deleted, at which time the number of directors was increased to eleven.
The election of 1871 reflected the L & N in transition. None of its basic problems was solved and none of its most strident controversies was resolved. The fights over expansion, rates, and corporate objectives and strategy went on with undiminished fury. Already the advocates of territorial strategy were beginning to recognize the perils of their course. Successful expansion appeared not to eliminate competitors but to proliferate them. Moreover, it bred a distressing amount of internal conflict within the corporation and the community. And expansion fed upon its own impetus. The completion of suitable northern connections via the Ohio River Bridge and the L C & L, for example, only intensified the pressure to push through line projects at the southern end of the line. Such a push, of course, would generate more internal friction and drive alarmed competitors into retaliatory measures.
During the years of turmoil that lay ahead, one central question absorbed the L & N management: where would the spiralling escalation of developmental, territorial strategy end? So far the very success of that policy had proven anything but reassuring.
