the executive board but not as chairman. If Harriman proved his strength,
he could most probably win the chairmanship.^42
Schiff had known Harriman only slightly, but the Union Pacific affair
began a close relationship. Harriman dreamed of making the line a weapon
for capturing control of western commerce, and Kuhn, Loeb became an
able partner. Until 1900 only Schiff saw Harriman’s intensive study of the
line—then known on Wall Street as the Kuhn, Loeb railroad—and his pro-
digious and ultimately successful labors to build it up. Soon the compro-
mise that Schiff formulated redounded to the banker’s benefit as well. In
1898, Harriman assumed the chairmanship; the Union Pacific, also in con-
trol of the Southern Pacific, prospered; and both Harriman and Kuhn,
Loeb made millions. After Harriman’s death, Schiff credited him for hav-
ing turned the Union Pacific, “a rusted streak of iron,” into one of the
greatest lines on the continent.^43
While Harriman carefully nurtured a railroad empire that continued to
expand and that would enable him to challenge Hill’s interest in the
Northwest, another obstacle surfaced. Since the Union Pacific had been
subsidized by public as well as private monies, successful reorganization
depended on purchase of the railroad’s debts to the government. Negotia-
tions began during Cleveland’s administration and continued into
McKinley’s. Although the reorganization committee promised the govern-
ment a handsome profit, opposition to the sale and a demand for govern-
ment control developed in Congress. In contact with his foreign investors,
Schiff attributed the lack of progress to “Populistic agitation,” a sensation-
alist press, and the jealousy of those who had failed to get “their finger in
the pie.” He lobbied strenuously with the secretary of the treasury and with
the attorney-general for a settlement in favor of the railroad. In one
lengthy memorandum he reviewed the steps taken by his committee to
satisfy the government’s demands, and he urged an end to the delay. The
government finally agreed, and in November 1897, for the sum of $81 mil-
lion, Schiff’s group took full possesion of the Union Pacific. It was a daring
move, and Schiff spent a sleepless night worrying about whether Kuhn,
Loeb had reached beyond its means. Nevertheless, within a matter of
weeks the banker assured Cassel that the railroad’s bonds were attracting
the “best” investors.^44
Harriman and Hill locked horns in a battle over the acquisition of the Chi-
cago, Burlington & Quincy Railroad.^45 Each wanted a line that linked his
western roads to Chicago and thus assure control of the carrying trade west
of the Mississippi. Each was also driven by naked ambition and self-
aggrandizement. Behind the railroad magnates stood the bankers, the
Morgan group for Hill and the Schiff group for Harriman.
The Making of a Leader 15