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| Home > Topics > USA > Northern Pacific Railway |
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Share certification Northern Pacific Railway |
Deutsche Bank took delivery of Northern Pacific bonds in the amount of 20 million dollars. However, in that same year (1883) the share price fell so far that Villard was forced to resign. A syndicate headed by Morgan Bank and including Deutsche Bank pumped fresh money into the railroad company. In 1886, Deutsche Bank began to list its Northern Pacific bonds on the Berlin stock exchange, and over the next few years it placed further loans on the German capital market. On the down side, this did not result in its gaining any influence over the way in which Northern Pacific was managed.
Siemens continued, so far as his American activities were concerned, to value the judgement and advice of Henry Villard, even asking him in 1886 whether he would look after the interests of Deutsche Bank in New York. Villard accepted, not least because for him the offer meant rehabilitation in the New York financial world. It was the start of his comeback, and in 1887 he was re-elected to the Northern Pacific board.
However, the situation of Northern Pacific did not change. The company remained in financial difficulties, and in 1893 it collapsed completely. So far as Deutsche Bank was concerned, the position was so serious that Siemens once again had to travel to New York in person. This is his wife, writing in August 1893: "George plans to visit New York at the end of the month, and delighted as I am that for ten days there and ten days back he will have the benefit of the refreshing sea air, I shall be equally delighted to see him back once again, with this whole burden of worry behind him. This Northern Pacific business has left him no peace, day or night. It is the uncertainty about what is happening over there and how things might really be that torments him so. And then the many reproachful letters every day from all the people who hold such securities. The poor man is not having an easy time."
In New York, Siemens set up a reorganisation committee for the owners of railroad bonds. The committee was chaired by banker Edward D. Adams, who continued to represent the interests of Deutsche Bank in the United States until 1914. Henry Villard finally resigned from Northern Pacific in 1893, by which time his involvement with Deutsche Bank was also a thing of the past.
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| Foundation statute of Deutsch-Amerikanische Treuhand-Gesellschaft |
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In Germany, Siemens had meanwhile set up a body for the protection and promotion of German investments in the USA - what he called a "stock attorney" ["Rechtsanwalt auf Aktien"]. The company was founded in March 1890 with the title Deutsch-Amerikanische Treuhand-Gesellschaft AG and in 1892 became simply Deutsche Treuhand-Gesellschaft. It is the oldest German auditing and accounting firm.
"Probably no other failure of his enterprises ever hit Georg von Siemens so hard and shook him so severely as the collapse of Northern Pacific" - such was the verdict of the banker's biographer, Karl Helfferich. In the nineteenth century, railroad construction was the equivalent, in terms of speculative business, of real estate today. Siemens put much of his personal fortune into it at the time, buying back share certificates from disappointed investors - an indication, incidentally, of the extent to which, in this early period of joint-stock banks, even salaried bank managers (which legally speaking Siemens was) saw themselves almost as being personally liable in the manner of old-style bankers.
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James Hill |
Northern Pacific continued to decline for a while, until in 1895 the company threw in its lot with James Hill, president of its major competitor. Hill's disciplined leadership of the Great Northern Railway, whose line ran largely parallel to that of Northern Pacific, had made a profitable enterprise of it. In the eyes of Deutsche Bank, therefore, Hill looked like the right partner. However, the projected merger was blocked in November 1895 by the Minnesota Supreme Court, which ruled that it was incompatible with current anti-trust legislation. In the end, a sort of "defensive alliance" was formed, with the two companies agreeing not to inflict any direct harm on each other.
Northern Pacific thus remained independent. Its reorganisation and financial consolidation were eventually pushed through by Siemens and his fellow member of the board of managing directors, Arthur von Gwinner, in conjunction with the powerful banker John Pierpont Morgan. In 1896 the company's bonds recovered their original price, and in the following year Deutsche Bank could already announce in its annual report that the Northern Pacific Railroad Company had begun to distribute dividends.
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