Baltimore_Ohio_Railroad_

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The story that the B&O Railroad Museum can tell better than any other organization on earth is the story of how railroads and railroaders shaped the course of American history during pivotal moments of the conflict. – B& O Railroad Museum

Through the years, railroads have always played an integral part in the settlement of America and its industrialization. They carried people from coast to coast and through the placement of stations enabled the establishment of urban centers that served rural populations. Major industrial centers developed alongside the railroad’s major transportation hubs. Railroad centers provided links to the other major form of bulk transportation, river transportation and ocean-going vessels.

The Baltimore and Ohio Railroad, pioneered by Philip E. Thomas and George Brown in Baltimore, Maryland, was the location of one of the first commercial railroads

Here’s how history plays out in the Baltimore and Ohio’s beginning days…

In 1826, Thomas and Brown carefully studied the railway systems in England, at the time, commercial ventures. Following their findings, they called a meeting on February 12, 1827, with some twenty-five citizens, primarily Baltimore merchants or bankers, “to take into consideration the best means of restoring to the city of Baltimore that portion of the western trade which has lately been diverted from it by the introduction of steam navigation and by other causes.”

The meeting resulted in submission of an application to the Maryland Legislature for chartering a company that was to be known as “The Baltimore and Ohio Railroad Company.” The company’s purpose was to build and operate a railroad from the city of Baltimore to the Ohio River.

The formalization of the Company was effective April 24, 1827, and Philip E. Thomas was its president and George Brown its treasurer. The company’s capital was five million dollars.

A map of the Baltimore & Ohio Railroad

 

Pictured above: A map of the Baltimore & Ohio Railroad and its principal connecting lines uniting all parts of the East & West/A. Hoen & Co./CREATED/PUBLISHED/Baltimore, Lith. by A. Hoen & Co. [1860]/SUMMARYOutline map of the eastern half of the United States to about the 95th Meridian. [From published bibliography]/LOC

On July 4, 1828, construction of the railroad began. Charles Carroll of Carrollton, who was some ninety years old at the time and the only remaining surviving signer of the Declaration of Independence, said of the occasion, as he laid the first stone…”I consider this among the most important acts of my life, second only to my signing the Declaration of Independence.”

The railroad as constructed…

The first section of road constructed extended to Ellicott’s Mills, with the actual laying of the rails beginning in the fall of 1829, and opened for traffic on May 22, 1830.

Steam locomotives, at this time, were in their infancy and they had attained a speed of only six miles an hour. Despite its deficiencies, the traffic on the new railroad was booming, and the company could simply not handle the amount of merchandise for transport in the initial months of operation.

Construction continues…

In 1832 the railroad was opened to Point of Rocks, with a branch to Frederick, Maryland, thus, making seventy-two miles of rail.

The York steam locomotive, tested in 1831 and ably conveyed fifteen tons at a rate of fifteen miles and hour on level portions of the railroad, was implemented for use on the growing lines. The directors of the railroad were heartened and enthused with “the great increase in velocity” and what it would mean for the railroad.

Expansion of the railroad proceeded with a new fervor…

A railroad branch was established in Washington and the main line was extended to Harper’s Ferry.

Financial woes beset the railroad construction and it wasn’t until after the panic of 1837 that intense building again took place. In 1842, the railroad line was completed to Cumberland, Maryland. In 1853, the line extended to Wheeling and, the branch from Cumberland to Parkersburg, Virginia, was constructed.

The road’s total network was more than five hundred miles. It reached two locations of importance on the Ohio River, one northward near the Pennsylvania-Ohio state line and one southward in the direction of Cincinnati.

The Parkersburg extension was hugely significant because it opened a through route to St. Louis, by means of the Cincinnati and Marietta Railroad…at this time completed from Cincinnati to Belpre, Ohio, opposite Parkersburg—and the Ohio and Mississippi, that extended some three hundred plus miles from St. Louis to Cincinnati.

While a great deal of traffic was established for the Baltimore and Ohio Railroad, the panic of 1857 took its toll on the company. While the company had just begun its recovery from its effects, John W. Garrett, son of a Baltimore banker and one of the large stockholders in the company was elected as president to the Baltimore and Railroad. Following Garrett’s election, the company began to immediately rally and Garnett garnered a sterling reputation as railroad manager. In a decade where detailed reports of business and ledgers were not required to be provided to the stockholders or to the public, the president or the directors, simply announced or presented a brief printed statement, regarding the gross business and profits for the preceding year. Thus, when Garrett shared glowing reports of increases in profits, his word was his guarantee.

Expansion continues on a railroad branch to Pittsburgh and plans were devised for initiating a line of steamships from Baltimore to major European ports before the Civil War, interrupted…

In 1861, as the war raged, the Confederates claimed a great span of the line east of Cumberland; and repeatedly over the ensuing four years, sections of the railroad were ravaged, only to be rebuilt, as they fell into the possession of either the Federal or Confederate troops.

The Civil War proved to be first major conflict where railroads played a major role, and the B&O was the major line that straddled a divided country. Between April 19, 1861 (The Baltimore Riot of 1861), and April 21, 1865 (Lincoln’s funeral train leaving Baltimore for Illinois), the B&O was a witness to and participant in the greatest conflict the United States had experienced.

President Lincoln’s Funeral Train…

With little damage to the railroad’s finances, in 1865, after peace was proclaimed, the Baltimore and Ohio began, once again, expansion.

The railroad, with it’s constructed or purchased connections, has made its way to Pittsburgh, then Sandusky, and beyond to Chicago. Meanwhile, connections with Cincinnati and St. Louis were further solidified.

Docks, steamboats, and grain elevators, were purchased by the railroad as well as constructions and buildings of hotels to serve as mountain summer resorts. Dry docks were constructed in Baltimore and the railroad created and ran a telegraph company, an express company, and even a sleeping-car company.

The Baltimore and Ohio vied for its share of Western business and thus resulted in a rivalry with the Pennsylvania railroad…

In 1874, with the rivalry heightened the Pennsylvania road refused to carry the Baltimore and Ohio cars over its line. As the only route Baltimore and Ohio could reach New York, the situation was dire.

In response, reductions in passenger rates from Washington and Baltimore to Western points were made by the Baltimore and Ohio railroad, under Garrett’s direction. Other cuts elsewhere soon followed. Rates and fares continued in the struggle between the railroads…first class tickets from Chicago to New York cost twelve dollars and something as complex as say, shipping grain to New York was twelve cents.

The Baltimore and Ohio, despite losses, maintained good profit results until 1886.

John W. Garrett died in 1884, and his son Robert, succeeded him as president, and thus continued the same route as his father had.

The Baltimore and Ohio Railroad had finally managed an entry into the New York district without the guise of the Pennsylvania Railroad…

Robert, hoping to access an entrance into Philadelphia and thereby reach New York, began a plan for a branch from Baltimore to Philadelphia to meet, at the northern boundary of Maryland, the Baltimore and Philadelphia Railroad—a line which independent interests were then building through Delaware with the intention of obtaining an entrance into Philadelphia.

Not surprisingly, the Pennsylvania holdings opposed Garrett’s new project and planned to purchase that road themselves.

Nevertheless, the Baltimore and Ohio moved forth and attained entry into Philadelphia by acquiring control of the Schuylkill East Side Railway a strategic terminal road, north of Philadelphia the company forged a traffic contract with the Philadelphia and Reading, of whose lines reached into to Bound Brook, New Jersey. The Baltimore and Ohio railroad consequently connected with the Central Railroad of New Jersey beyond Bound Brook to Jersey City.

In purchasing the Staten Island Rapid Transit Company the Baltimore and Ohio gained terminals at tidewater on Staten Island and thereafter constructed a connection in New Jersey with the New Jersey Central.

At last, following years of competition and struggles, the Baltimore and Ohio had finally managed an entry into the New York district without the guise of the Pennsylvania Railroad.

The credit of the Baltimore and Ohio is on a trajectory of decline and Dividends were gradually reduced. Heretofore ambivalent stockholders of the railroad launched an investigation to determine the surplus and growth that were alluded to in the previous years under the competent management of the elder Garett.

The investigation revealed that the company had been accumulating deficits regularly, engaging in excessive borrowing and had been charging millions of dollars to capital accounts. Rather than accumulating masses of dollars, the railroad was losing it.

The Baltimore and Ohio Railroad needed cash and began to liquidate its assets, selling its telegraph business, express business, and sleeping-car business.

John W. Garrett’s years of doing business, rather than being deducted from the income had been credited to the surplus. With the facts of these financials gone public the capital stock of the Baltimore and Ohio, plummeted to near zero. With the end of 1887, only the most aggressive financial plans could prevent the company from going into bankruptcy.
The Baltimore and Ohio Railroad directors, appealed to New York bankers for cash to reestablish the company as a sound investment.

Samuel Spencer,  an eventual partner in the banking house of J. P. Morgan and Company following his association with the Baltimore and Ohio Railroad, was elected president and active manager of the railroad. Through his aggressive interventions the railroad was on the road to a healthy outlook.

Despite the remarkable findings, record and swift policies of the senior Garrett, the Garrett family maintained a balance of power in the company. With a need to supress any further investigation into the financial dealings of their doing, the Garretts, as witnessed in the annual election of directors in November, 1888 found President Spencer removed and Charles J. Mayer elected in his place…only five of the members of the board were reelected.

This incoming management waylaid the plans Spencer has implements and the financials of the Baltimore and Ohio Railroad showed little growth in financials or change afterward.. The company experienced a depression as net profits did not increase, and eight years after Spencer was removed, profits were, in fact,  smaller than in 1888.  Debt and interest charges continued to grow. Dividends, however, were paid regularly on the preferred stock and in 1891 they were resumed on the common stock.  The directors, as well,  were even able to raise five million dollars of new capital for expenditures vital to handling the increased traffic created by the World’s Fair at Chicago.

Transportation problems continue…

Freight rates were constantly being cut until 1893,  The opening of the Baltimore and Ohio connection to New York had brought keener competition from the Pennsylvania Railroad and had made deep inroads into the Baltimore and Ohio revenues. Such conditions made even the Garrett interests feel that something should be done, and in 1890 a “community of interest” scheme was proposed. To control the stock of the Baltimore and Ohio Railroad, Edward R. Bacon in New York, acting harmoniously with the Garrett family, formed a syndicate of capitalists representing the Richmond Terminal system, the Philadelphia and Reading Railroad, the Northern Pacific Railroad, and other properties. The ultimate plan, which proved too visionary, was to consolidate under one control a vast network of lines extending all over the continent.

The syndicate had made little progress toward rehabilitation when the panic of 1893 occurred. In this year and the next the earnings of the Baltimore and Ohio fell off rapidly and the dividend was reduced. Nevertheless, as late as January, 1895, the directors insisted that financially the company was in better condition than for several years and that on the whole it was in a stronger position than at any time since 1880. But in this same year it became necessary to stop all dividend payments; the company began to have difficulties in securing ready money; and before the close of the year the situation seemed hopeless. Early in 1896 Mayer tendered his resignation, and John K. Cowan succeeded him. The new president did his utmost to obtain money to meet the current needs, but he was unsuccessful. A receivership and reorganization seemed absolutely necessary, and in February, 1896, the receivership was announced.

With the property now in the hands of the courts, the opportunity at last came to make real the reforms which had been proposed and begun nearly a decade earlier under the wise but quickly terminated administration of Samuel Spencer. A thorough housecleaning was now carried through without interference or interruption. A reorganization committee was formed, with whom were deposited the Garrett shares as well as those of the Morgan and New York and Philadelphia interests. A full investigation of past management disclosed that the records for the interim extending from the brief Morgan control under Spencer to the receivership contained the same kind of irregularities and errors of policy that had prevailed under the earlier Garrett management. Statements of profits had been swelled by arbitrary entries in the books and nearly six million dollars which had not been earned had been paid out in dividends. Furthermore the company had endorsed the notes of certain subsidiary roads to the extent of over five million dollars, and had made no record whatever of this action for the stockholders.

As in the case of numerous other railroads, the financial breakdown of the Baltimore and Ohio Railroad was primarily due to a bad or reckless financial policy, for there was nothing inherently insecure in the railroad property itself. During all the years of the Garrett regime, the company had shared in the general growth and expansion of industry, wealth, and population within its territory. It had been progressive in matters of expansion and had built up its system to meet the needs of modern times. Its trackage and equipment compared favorably with similar systems, and most of its extensions and branches had been wisely planned and had proved profitable. The operating management of the railroad was generally good and it usually secured its proportion of what business was to be obtained. But the steady increase in its debts over a number of years, its extravagance in dividend payments, and its painful efforts to keep down its operating expenses had so weakened the property that, when the hard times of 1893 to 1896 arrived, it was in no position to weather the storm. The only wonder is that the management succeeded in keeping the system intact and apparently solvent so long as it did.

The receivership at once adopted a vigorous policy of improvement. The rolling stock had run down until it could not handle even ordinary business. While the company had been depleting its credit and paying out all its cash in dividends, the equipment had been going into the scrap heap. For two years the receivers made large expenditures on equipment and roadbed, borrowing money for this purpose; the result was that when, in 1898, the courts surrendered the property, it was in splendid condition to take advantage of the tide of commercial and industrial prosperity which was just then beginning to flow throughout the United States.

While the reorganization of the Baltimore and Ohio was not so drastic as that of many other systems which went through the courts during this period, it was thorough enough to meet the situation. The fixed charges were cut down radically and the stockholders were assessed in large amounts. In all, more than thirty-six million dollars was raised by assessments and the sale of new securities; the liabilities of the Company were greatly reduced; and its credit was promptly restored. Formerly the Baltimore and Ohio had been struggling under a burden of floating indebtedness, with so little money in its treasury that it could not even put a new coat of paint on the passenger cars and had to continue to use oil lamps to light some of its best trains. But now the floating debt was replaced by a large available cash capital, and as a result of the liberal policy followed by the receivers, the equipment and roadbed were brought fully up to the standards required for handling the traffic of the road both economically and effectively.

With the reorganization of 1898 finished, the Baltimore and Ohio Railroad entered a new period in its history. The strong, progressive interests which now took control concentrated their energies on developing traffic, increasing earnings, and rounding out the general system. They adopted careful measures for unifying the system by adding other lines and connections of value; they paid much attention to the improvement and development of terminals; and they spent many millions in acquiring and expanding the terminal properties of the company at Chicago, St. Louis, Philadelphia, and Baltimore.

The financial history of the Baltimore and Ohio since the close of the nineteenth century is interesting chiefly in connection with changes in the control of the property. After the reorganization a group of prominent financiers, including Marshall Field, Philip D. Armour, Norman B. Ream, and James J. Hill jointly purchased a large interest in the stock. But this purchase, while perhaps representing a dominating interest, did not involve actual control. Soon afterward, interests identified with the Pennsylvania Railroad began to appear in the Baltimore and Ohio, and before long the Pennsylvania had a strong representation on the board. As a consequence, the Baltimore and Ohio almost lost its individuality and for a time was popularly regarded practically as a subsidiary of its old rival line.

The purpose of the Pennsylvania in obtaining this ascendency over the Baltimore and Ohio was to regulate the soft coal traffic. Already it had acquired dominating interests in the Chesapeake and Ohio, the Norfolk and Western, and other soft coal properties. These purchases were merely manifestations of that “community of interest” policy which at this time led several large systems to acquire interests in competing lines. Several of the railroad leaders of that time, notably James J. Hill and Edward H. Harriman, believed that if these great systems actually owned large blocks of stock in each other’s properties, this common association would ipso facto end the competition that, if continued, would ultimately ruin them all. The Supreme Court had decided that the “pooling” arrangements which had so long prevailed among great competing roads violated the Sherman AntiTrust Act; and the American public, which now was cultivating a new interest in railroad problems, believed that the “community of interest” plan was merely a scheme to defeat the Interstate Commerce Act and the Sherman Act and to maintain secretly all the old railroad abuses. These inter-railroad purchases therefore became so unpopular that the Pennsylvania sold its Baltimore and Ohio stock. At this time Edward H. Harriman of the Union Pacific, who had at his disposal vast funds of the latter property which he had obtained by the settlement of the Great Northern and Northern Pacific deal, decided to acquire control of a system of roads in the East in order to establish a complete transcontinental line in the interest of the Union Pacific. It was the theory that such a purchase by the Union Pacific would not defy the law or outrage the popular conscience because the Union Pacific, unlike the Pennsylvania, did not compete with the Baltimore and Ohio, but was only a western extension of that system. Harriman in August, 1906, therefore purchased nearly all the Pennsylvania holdings in the old Garrett property and thus obtained virtual control.

At this same time the Baltimore and Ohio had been developing a “community of interest” plan on its own account. In the year 1908, it acquired a substantial stock interest in the newly reorganized Reading Company, which controlled the Philadelphia and Reading Railroad and the Philadelphia and Reading Coal and Iron Company. It did not obtain a majority interest but, with the Lake Shore and Michigan Southern Railroad of the New York Central system, it now controlled the Reading system. The Reading Company meanwhile had secured control of the Central Railroad of New Jersey, over the lines of which the Baltimore and Ohio reached New York City.

In the following years the Baltimore and Ohio property was still further rounded out by purchasing the Cincinnati, Hamilton and Dayton, a small system of doubtful value radiating through the State of Ohio and, by additional extensions, into the soft coal fields of West Virginia. New energy was put into the expansion and improvement of the southwestern lines to St. Louis, while the eastern terminal properties were still further improved.

The practical control of the Baltimore and Ohio remained in the hands of the Union Pacific interests until 1913. In that year, however, the Union Pacific liquidated its holdings by distributing them to its own individual stockholders in the shape of a special dividend. The Baltimore and Ohio thus became once more an independent property.

The story of the Baltimore and Ohio for the past decade has been mainly a record of a growing, well-managed, and efficient business. It is closely identified with the personality of its notable and efficient president, Daniel Willard, a conspicuous example of the modern type of railroad manager. In the earlier days of railroading, and especially in the long period which came to an end with the death of Harriman, the typical railroad president was usually a man of great wealth who had secured his position by owning a large financial interest in the property. The country was full of “Wall Street Railroad Generals.” But in recent years the efficient railroad head has come more and more to be the practical railroad man who has risen from the ranks, who has no important personal financial interest in the property but who is paid an adequate salary to operate a system in a purely businesslike way. Notable examples of this modern type of railroad president are, besides Daniel Willard, Edward P. Ripley of the Atchison, Topeka and Santa, Fe, Benjamin F. Bush of the Missouri Pacific, and Fairfax Harrison of the Southern.

The efficient management of today is abundantly shown in the recent record of the Baltimore and Ohio. President Willard has been unmolested by financial interests and has been continuously backed up in his policies by the owners of the road. As a result the Baltimore and Ohio of the present decade has reached an enviable position as one of the great Eastern trunk lines, comparing well with other progressive properties like the Pennsylvania, the New York Central, the Southern, the Illinois Central, and the Louisville and Nashville. Millions have been poured into the property in the past fifteen years; its main lines have been largely rebuilt; its rolling stock is chiefly of the most modern types; and its terminals and structures are such as modern conditions demand.

The B&O Railroad Museum brings alive the adventure of railroading. This historic national landmark allows visitors to see, touch, hear and explore, perhaps, the most important railroad collection in America.

 

References: http://cprr.org/Museum/Railroad_Builders/Railroad_Builders_05.html


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