forwarded by explicit written permission of Michael Sol.
Norm Metcalf, Boulder Colorado
Michael Sol wrote:
>
>
> --- In MILW@yahoogroups.com <mailto:MILW%40yahoogroups.com>,
> "hiawatha101" <mcnorton41@...> wrote:
> >
> > Haven't seen it mentioned here before, but maybe I missed it. Anyway,
> there was a very serious but short recession in 1921, which caused
> problems like the one described in this quote. That's why the train
> delivering a bunch of SP 2-10-2s from Baldwin in 1922 was called the
> "Prosperity Special."
> ---------------------------------------
> Seattle and Tacoma experienced depressions after World War I, and "the
> water front properties of the company in the two ports have to a large
> extent been lying idle." The Milwaukee had carried 457,515 tons of
> export and import traffic through the ports in 1918. By 1925, this had
> diminished to 42,656 tons. The worst year for the Milwaukee, 1921,
> demonstrated the Milwaukee's reliance on the giant Anaconda mines in
> Butte. A "copper depression" had struck in 1920, and by the April 1,
> 1921, the Butte mines had shut down entirely, causing successive
> shutdowns of auxiliary services, coal mining, and timber across Montana
> and Idaho, and, of course, a huge drop in shipments on the Milwaukee
> Road, Anaconda's preferred railroad.
>
> International Harvester's Cyrus McCormick recalled that the 1920's were
> a terrible time for American agriculture. To him, the "whole economic
> mechanism of American life was crippled; and the business of farming --
> together with everything dependent upon it -- suffered most of all." The
> price of wheat, "held down" during World War I to $3.00 a bushel,
> collapsed on its own in 1921 to a dollar a bushel. Corn remained
> unharvested in fields. "The price of cattle and hogs fell until every
> animal was a liability."
>
> Milwaukee's NROI in 1921 was only $9.8 million, which translated after
> fixed charges into an $11 million deficit.
>
> The misery was shared. Former N.P. President C.S. Mellen told Clarence
> Barron that by 1921 that the Northern Pacific and Great Northern were
> "going to pieces." In that particular year, the Northern Lines found
> themselves desperate for funds to refinance the mortgages they had
> incurred to purchase the Burlington in 1901.
>
> That purchase had greatly improved the performance of the Burlington –
> it had become the key link for two transcontinental railroads and,
> uniquely, was the "long haul" link for Northern Pacific traffic. This
> had resulted in tremendous growth for the Burlington. But, the cost to
> the Northern Lines had been substantial. The Great Northern and Northern
> Pacific had each issued $115 million in "Joint 4" bonds, $230 million
> total, to fund their purchase of the Burlington. These were falling due
> in 1921. Although the Burlington had profited greatly , the Northern
> Lines themselves, ironically, had seen few benefits accrue from the
> purchase. Indeed, their growth collapsed after the Milwaukee's Pacific
> Extension opened. The Northern Pacific, in particular, was already bound
> to the Burlington by the Billings traffic agreement, that had made it,
> in essence, a short haul transcontinental, handing the longer hauls over
> the Burlington.
>
> With an additional $115 million in debt, in addition to its own
> construction debt, the NP gained only an additional fixed expense. The
> only way past the 1921 "Joint 4" refinancing was to raid the Burlington
> treasury to the tune of $60 million in cash and stock.
>
> Milwaukee almost made it, but by 1925, still succumbed. In large part,
> this was because the ICC, pressured by bankrupting farmers to reduce
> rates, did so at compelling losses to railroads. A reduction in
> livestock rates following National Livestock Shipper's League v.
> A.T.&S.F.Ry. Co. reduced the income of the Milwaukee approximately
> $1,400,000 annually. A rate reduction following Rates on Grain, Grain
> Products, and Hay took another $3,400,000 from the Company's annual
> revenues. Granger commodities kept receiving special treatment from the
> ICC, and this particularly hurt the most prominent of the Granger
> Railroads: the Milwaukee Road. Finally, a general rate reduction in 1922
> of 10 per cent following the Reduced Rates Case took another $14,000,000
> out of the Railroad Company's bottom line. Wall Street "insider
> newsletters" put the St. Paul Receivership squarely at the door of the
> government rate-makers.
>
> You don't read that one in the general histories.
>
> best regards, Michael Sol
>
------------------------------------
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