2i6 PHILANDER C. KNOX 



The Northern Pacific and Great Northern railroads, hav- 

 ing their eastern termini at the head of Lake Superior, and 

 extending westwardly via Minneapolis and St. Paul to the 

 Pacific ocean, occasionally intersecting and again separating, 

 and generally no farther distant from each other than 100 

 miles, and being in 1901 practically the only competitors in 

 the transportation of traffic to and from most of the states 

 traversed by them, combined together and purchased the 

 capital stock of the Chicago, Burlington & Quincy railroad 

 system. Thus those two transcontinental lines became the 

 joint owners of another great system which was gradually 

 pushing its rails northwesterly into the territory occupied by 

 the purchasers, and westwardly to the Pacific ocean. 



To effect this purchase the Northern Pacific and Great 

 Northern companies issued joint bonds for $200,000,000. 

 Shortly after the purchase of the Burlington road the prin- 

 cipal owners of the Northern Pacific and Great Northern roads 

 caused to be organized, under the laws of New Jersey, the 

 Northern Securities company, with a nominal capital of $400,- 

 000,000, of which $30,000 was paid in. That company was 

 organized to become the owner of the capital stock of the 

 Northern Pacific and Great Northern railroad companies, and 

 this was accomplished by an exchange of the stock of the New 

 Jersey corporation for the stock of the two railroad companies 

 at such a price that, if the securities company got all of the 

 stock of both roads, its entire $400,000,000 of capital would 

 be absorbed in the exchange. 



At the time of the purchase of the Burlington road the 

 capital stock of the three railroad systems was about $390,- 

 000,000. That was the capital upon which the combined 

 traffic carried by those roads might, after paying expenses of 

 operation, reasonably be expected to provide dividends. By 

 the bond issue to secure the Burlington and the inflation of 

 the " securities" capital that same traffic was expected to 

 provide dividends upon more than two hundred millions of 

 stock in addition to the original $390,000,000. 



When the department of justice came into possession of 

 these facts a suit in equity was at once begun to restrain the 

 operation of the proposed merger and to restore the independ- 



