stocks. He reasoned that such purchases were good investments and would
help to steady the market. But, as Kahn recalled, “Mr. Schiff replied icily:
‘If you want to buy stocks personally, you are free to do so. But Kuhn, Loeb
& Company will not, with my consent, make one dollar’s worth of profit
out of this calamity.’ ” Although Kahn was not particularly enamored of
Schiff, he respected the senior partner’s decision. “He foresaw that if the
other side was really determined to go ahead and buy every obtainable
share of Northern Pacific Common, an alarming if not critical situation
would be created, and he wanted to be able to say, if such a situation did
come, that he and those with and for whom he acted had no hand in bring-
ing it about.”^53
A quick end to the panic came on the afternoon of May 9, when the two
sides called a truce. Schiff also suggested that they deliver enough North-
ern Pacific shares at $150 each to rescue the “shorts.” He explained his
strategy to Cassel: “Notwithstanding Morgan’s refusal, we immediately
came to the relief of the legitimate arbitrage dealers, and the next day also
to the relief of the shorts—in both of which steps Morgans very unwill-
ingly followed.” Meanwhile, “we took good care to accumulate so consid-
erable an amount of the Preferred Stock, which could be more easily had,
that our interests now hold what we believe to be an absolute majority of
the entire capital stock of the Company.” He still disputed the claim that
common stock would determine the outcome, but he sought to achieve a
financial coup without alienating Morgan. “Believing... that we now con-
trol the situation, we feel that a settlement on large, and not on small, lines
should be made, especially in a manner, not to hurt Morgan’s pride and
prestige.”^54
New York newspapers called the panic “the most severe in the history of
Wall Street” and “without precedent in this country or in any other.”
While each side disclaimed blame for the panic, the public clamor for
curbs on the giant railroads grew louder. Morgan’s cavalier remark, “I owe
the public nothing,” only exacerbated the tension. Schiff, whose health suf-
fered under the strain, took comfort in the thought that “the mad race” had
ended before it could damage America’s vital interests. In an obsequious
tone that he adopted with no other businessman, he sought to convince
Morgan that both the Union Pacific and Kuhn, Loeb were ready to accede
to any reasonable suggestions for a permanent agreement with the Hill
group. He added: “We have at all times wished, as we continue to do, to be
permitted to aid in maintaining your personal prestige, so well deserved.”^55
The temporary truce between Hill and Harriman did not resolve the se-
rious issues at stake, and the two sides faced drawn-out litigation or a nego-
tiated settlement. Opting for the latter, they reached an “understanding” by
the end of May 1901. The Burlington remained in Hill’s hands, but a new
board for the Northern Pacific, to be chosen by Morgan, was to include
Harriman and a few of his allies. In addition, Harriman gained certain
18 Jacob H. Schiff
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