expended it for that purpose. In 1902 the stock-holders furnished $12,000,000 for electrically equipping 80 miles of street railways still operated by horse-power. The company has equipped only thirty-six miles, and the money has all disappeared.

History of the Third Avenue under the

Metropolitan

In the preceding article the writer related how Whitney and Ryan had profited by the difficulties besetting Henry Hart to purchase the controlling interest in his Third Avenue Railroad. Incidental to this dramatic performance, it will be recalled, Whitney and Ryan made anywhere from $1,000,000 to $5,000,000 by “squeezing" James R. Keene, who had gone short of Third Avenue stock many thousands of shares. The history of the Third Avenue, under the Metropolitan, repeats, on a larger scale, the story of the other subsidiary lines. In the first place, the terms on which Whitney and Ryan sold their stock to the Metropolitan are not entirely clear. The official records show that the Metropolitan raised the money twice to pay for this stock, once in 1900 and again in 1902. It is not here insisted that Whitney and Ryan actually received this payment twice, but merely that the records of the Metropolitan show that the money was raised twice for that particular purpose. In 1900 the Metropolitan leased the Third Avenue and mortgaged its entire property for $35,000,It expended $23,000,000 in the payment of the floating debt; and thus had $12,000,000 in its treasury, which was to be expended, according to the terms of the mortgage, in electrically equipping the Third Avenue's horse-car lines. In the last seven years that $12,000,000 has vanished; and the horse-car lines have not been reconstructed. In addition, the Metropolitan has run up a floating indebtedness on the Third Avenue of $8,000,000. In other words, the Metropolitan has spent $20,000,000 on the Third Avenue property without appreciably increasing its assets. Nor is this all. When the Metropolitan leased the Third Avenue, the latter road owned $10,000,000 of securities in other railroads. Although these were part of the pledge for its $35,000,000 bond issue, the Metropolitan bodily transferred them from the Third Avenue's treasury into its own. It afterward sold them all to the New York City Railway for a consideration of one dollar. In every way the Third Avenue is in a worse condition than at any time under Henry Hart. It has a larger debt; it has smaller actual assets; and its earning power has materially decreased.

In view of the fact that the Metropolitan has destroyed all the books that might possibly explain the waste of this money, the precise details will probably never be ascertained. Enough is known, however, to indicate clearly enough where much of the money has gone. Unquestionably, millions originally obtained for construction purposes have been used in payment of unearned dividends. The Metropolitan has for years charged up to construction account large sums properly chargeable to operating expenses. The reason is perfectly clear. Its net profits, from which dividends are properly payable, is the amount left after deducting from its gross earnings its operating expenses. Manifestly, if it charged to other accounts large sums expended in operating expenses, it would, by just that amount, increase the surplus available for dividends. In other words, these unearned dividends have been paid with money obtained for construction, in order to give a high market value to Metropolitan stock.

Many more millions, ostensibly charged to construction, have been spent purchasing the support of politicians and other influential citizens. From 1902 up to date the Metropolitan "yellow dog" fund, charged up to construction work, has amounted to nearly $1,000,000. In order to conceal the details, the company has destroyed all books, checks, and vouchers bearing upon these transactions. In its treatment of the politicians the Metropolitan has been strictly non-partizan; it has purchased the favors of the leaders of both political parties. Lemuel E. Quigg, for several years chairman of the Republican County Committee in New York, has publicly confessed to spending $150,000 of Metropolitan money, all charged up to "special construction," in creating public sentiment favorable to that corporation.

Widener and Elkins in Chicago It is not believed, however, that these expenditures, large as they have probably been, explain the great discrepancies noted above. The conclusion is inevitable that the Metropolitan insiders have themselves made money from construction. Some light upon this subject may be obtained by comparing the reconstruction history of the Chicago lines, on which we have all the essential facts.* P. A. B. Widener and William L. Elkins made large fortunes in this work, and it is not unreasonable to suppose that they introduced in New York the methods they found so personally profitable in Chicago. In

*In 1899 Charles T. Yerkes, then in control of the Chicago lines,

opened all the books for the previous twenty-five years for the examination of the Civic Federation of Chicago.

An expert

accountant, Edmund F. Bard, made a thorough examination. It is from his report that the facts given in the text are obtained.

the late eighties, with Charles T. Yerkes, they acquired, by lease and purchase, a large number of the Chicago lines. They then organized the United States Construction Company — a close corporation in which they themselves owned practically all the capital stock. Then Widener and Elkins, as the United States Construction Company, made contracts for building cablepower on the horse railroads which they controlled, either by lease or stock ownership. In this way they transferred many millions, both in cash and stock, from the treasuries of their railroads into their own pockets. They thus built, at a cost to themselves of $3,000,000, a cable line for the North Chicago City Railway Company, which they controlled, receiving in payment cash and securities which had a market value of $10,700,000. Their most notable performance was the lease of the West Division Railway Company to the West Chicago Street Railroad. Widener and Elkins controlled the West Division Railway; their partner, Charles T. Yerkes, controlled the latter corporation. Yet Widener and Elkins received a fee of $5,000,000 from the West Division Railway Company for negotiating this lease. On top of this, they charged the West Division Company $4,000,000 for constructing a cable railroad upon which they spent less than $2,000,000. By these methods, Widener, Elkins, and Yerkes, in fifteen years, issued securities on the Chicago lines to the extent of $118,000,000, of which $72,000,000, according to an official appraisement, represented no actual value, but merely the profits made by inside manipulators. It is thus clear that Widener and Elkins came to New York well equipped, by experience, for the work of reconstructing the Manhattan lines.

Whitney's Retirement

In 1902, when the wrecked Metropolitan Company was leased to the Interurban, - details

of which will be given in the next article, William C. Whitney retired from all personal identification with the New York street railways. As far as he was concerned, the Metropolitan had served its purpose. When it was organized, in 1893, he was virtually a poor man; when he died, in 1904, his fortune amounted to $40,000,000.* This estate, though representing for the larger part money made in the New York street railroads, contained not a share of Metropolitan Street Railway stock. Mr. Whitney had invested the profits of his Metropolitan deals in Standard Oil, American Tobacco, and other less uncertain dividendpayers. Mr. Whitney had clearly accomplished *This estimate of Mr. Whitney's wealth is furnished the writer

by Henry D. Macdona, the representative of the Whitney estate.

the supreme end to which his energies had been devoted from the time when, in 1893, he retired from active public life. He had acquired the millions which apparently were essential to his happiness and to the gratification of his expensive personal tastes. In his latter days he lived constantly in an atmosphere of luxury and ease; he had his beautiful city and country homes, his race-horses, his yachts, his books, his music, his paintings, and upon them he probably lavished almost as many millions as he left to his children. His luxurious habits, indeed, interfered with his work; in the latter years he gave less attention to details; relied more and more upon Ryan as his active partner; and made only infrequent appearances down-town. At the height of his career, the financial success of his Metropolitan and other flotations found expression in a magnificent home which he established on Fifth Avenue. Its furnishings were one of the wonders of New York. Mr. Whitney ransacked the art treasures of Europe; stripped medieval castles of their carvings and tapestries; ripped whole staircases and floors from their repose of centuries and relaid them in his new Fifth Avenue home. home. Here he entertained his friends with a lavishness that astounded even New York. Whitney did everything, indeed, on a large and extravagant scale. He could not confine his life within the precincts in which the average man is contented to move. Even in his corruption, the bigness of Whitney is apparent. The enormous scale on which the Metropolitan stockholders were robbed shows that in him we have no every-day petty grafter. You could not imagine Whitney descending to the little stealings at which the life-insurance trustees were caught; when he got his "rake-offs" he took millions, not thousands. This largeness of nature explains his popularity with politicians and his ability to do with the city government as he pleased. He did not give his political associates petty bribes; he took them into his deals and showed them how to make fortunes. Thus Whitney's character presents a combination of great talents, great ambitions, great lovable qualities, all misdirected by great weaknesses. Had he died in his fiftieth year, his fame as an honest public servant and a worker for the highest ideals of American citizenship would have been secure. The fact that at that age, when a man's principles are supposed to be pretty solidly fixed, Whitney suddenly turned his back upon his own career and rapidly descended the path of degradation marked out by the history of the Metropolitan Company makes him one of the most enigmatical as well as one of the most piti

ful figures in American history. He treated his friends so generously, however, that scores of men in high position love his memory and, in spite of the terrible evidence against him, still

defend his character.

Development of Thomas F. Ryan

of

William L. Elkins died in 1903, leaving a fortune officially appraised at $30,000,000. The death of Whitney and Elkins left Ryan and Widener the only surviving members of the syndicate which, in 1886, acquired Jacob Sharp's properties and thus laid the foundations of the Metropolitan monopoly. It had been a fruitful twenty years for Thomas F. Ryan. In that period he had become one of the richest and most powerful men in the United States. In 1886 he was a tall and slim young broker on the New York Stock Exchange; in 1905 he had become the dignified controlling personality in financial institutions representing resources more than a billion dollars and an influential factor in many railroad and industrial corporations. In 1886 he was a poor man; in 1905 his fortune easily aggregated $50,000,000.* The foundation of all this wealth and power was the Metropolitan Street Railway. With the profits made in the Metropolitan, Ryan engaged in numerous enterprises, almost invariably with success. He became an ally of the Standard Oil interests in the lighting monopoly of New York and other cities. With Whitney, Widener, and others, he secured control of the State Trust Company, and, when that corporation wound up under scandalous circumstances, he became the chief influence and vice-president of the Morton Trust Company. In 1903, supported by the three great New York life-insurance companies, he organized the National Bank of Commerce, the second largest banking

institution in the United States. He entered a

larger field in 1903, when he secured control of the Seaboard Air Line Railway, at that time in serious financial difficulties. In the early part of 1905 he purchased the Washington Life Insurance Company; and, in July of the same year, became famous in two continents by securing, from James Hazen Hyde, his majority interest in the Equitable Life Assurance Society. In 1906 the King of Belgium selected Ryan to head an American syndicate to which he subsequently granted a concession of 2,500,000

*This estimate of Mr. Ryan's fortune is furnished by Henry D. Macdona, Mr. Ryan's official representative.

acres in the Congo rich in rubber, ivory, and minerals.

In subterranean fashion, Ryan had participated in politics, always for business purposes, and had become the great though invisible power in Tammany Hall. Personally, Ryan has always remained an extremely quiet, gentle, modest, but immensely effective man. Everywhere he has displayed that same gift of opportunism which he evinced when, in 1886, he profited by Sharp's difficulties and acquired his properties. He has always been able to detect the weak points in any situation and turn them to his own advantage. Always selfreliant, confiding in no man, depending always upon his own counsel, he has many times justified Whitney's statement that he was "the most

adroit, suave, and noiseless man he had ever known." In recent years Ryan has sought to disentangle himself from his old associates and his old reputation; he has not found all the consolations of life in enormous wealth, but, in every possible way, has attempted to improve his personal and financial standing. With his wife, he has become widely known for his charities and religious benefactions. A convert to the Roman Catholic faith, he has disbursed many millions in cathedrals, chapels, hospitals, and other religious charities. He has recently finished, at a cost of $1,000,000, a beautifu. cathedral in the diocese of Richmond. In return for these benefactions, Ryan has been treated with every consideration by the Vatican. He has private chapels in his houses on Fifth Avenue, New York, and in Washington, and in his fine country establishment at Suffern, New York.

On the most conservative estimate, Whitney,

Ryan, Widener, and their associates must have made, in the nine years from 1893 to 1902, at least $100,000,000 in the Metropolitan Street Railway. In the whole financial history of the country, no similar group of speculators have made such enormous profits in so short a time. By 1902 the Whitney-Ryan methods had brought the whole Metropolitan system to such a condition that its bankruptcy could no longer be concealed. In spite of this, the inside syndicate has devised new ways of plundering the property. In the last five years the wrecked Metropolitan hulk has been slowly going to pieces on the rocks, surrounded by the old Whitney-Ryan-Widener syndicate, industriously removing all valuable parts of the cargo. The details of these more recent operations will be given in the next article.