In 1901 railroads were the core technology of American commerce, and two Western rivals both lacked a direct route into Chicago. James J. Hill controlled the Great Northern Railway and E.H. Harriman controlled the Union Pacific. The prize was the Chicago, Burlington and Quincy Railroad, which already had track, rights of way and terminal access in Chicago. Backed by J.P. Morgan, Hill’s side paid $200 a share and took the Burlington through the Great Northern and the Northern Pacific. Harriman noticed that the Northern Pacific held 49.3% of the Burlington stock and began quietly buying Northern Pacific shares to take control of its board.

Speculators shorted the climbing stock without knowing Harriman was locking shares away, and when they had to deliver, few were left. The May 1901 Northern Pacific corner drove the price to $1,000 a share, and forced selling of other holdings crashed the wider market. Hill and Morgan kept majority control, and the rivals pooled their holdings in the Northern Securities Company, a New Jersey holding company capitalized at $400 million. On February 19, 1902, Theodore Roosevelt’s Justice Department sued under the Sherman Antitrust Act, and in 1904 the Supreme Court ordered the company dissolved by a 5 to 4 vote. In 1970 the Court approved a merger of the same three railroads into the Burlington Northern.

• Short sellers borrowed and sold shares betting on a drop, then faced buying them back at any price.
• Through the 1890s, courts read the Sherman Act’s restraint of trade language narrowly and used it mainly against labor strikes.
• Morgan proposed that his lawyers and the president’s lawyers settle the matter privately, and Roosevelt refused.
• Over the next seven years the government filed 44 more antitrust cases, including ones that broke up Harriman’s other holdings.
• Merger talks among the three railroads began in 1955, and by 1970 highways, trucking and air cargo had changed the relevant market.