An epic stock market battle took place in 1901. Two heavyweights fought for control of a railroad, cornered the market, and forced the biggest short squeeze of the last century.

The Union Pacific was a railroad nobody wanted to touch, not even J.P. Morgan, in 1898. It was mired in bankruptcy — receivership in the hands of the government. But Edward Henry Harriman saw an opportunity.

Through a syndicate of backers —  the Vanderbilts, Rockefellers, Goulds, Ameses, and Kuhn, Loeb & Co. — Harriman took control of the road. In total, they paid $75 million for 1,800 miles of railroad and got every penny back in profits within three years.

Harriman recognized that expansion through acquisition was the most efficient way to lower costs and ensure profitability for Union Pacific. He quickly bought up competing railroads until Union Pacific dominated the U.S. west of Omaha.

Harriman needed to expand east. So he set his sights on a key acquisition. Chicago was the railroad hub of the country. Anyone moving people or products by rail from east to west, or vice versa, had to go through Chicago. The Chicago, Burlington & Quincy Railroad was a critical piece in controlling that movement. Buying the Burlington railroad would make the Union Pacific the strongest railroad in the country. Continue Reading…