Wall Street History

---

Wall Street History

04/20/2001

Henry Villard

I saw a review of a new book titled "Villard: The Life and Times
of an American Titan" and while I can''t envision having the time
to read this particular tome, I decided to do a little of my own
research on this Villard chap. As it turns out, he''s no J.P.
Morgan, but he certainly deserves his place in financial history.

Born Ferdinand Heinrich Gustav Hilgard in Bavaria, 1835, he
migrated to America in 1853, changed his name to Henry Villard,
and found his way to Colorado. Later, he became one of the better
known Civil War correspondents as a member of Horace Greeley''s
New York Herald, having previously received recognition for his
work on the Lincoln-Douglas debates. After the war, and now an
agent for German interests in America, Villard headed back out
West.

At this time, the Plains west of eastern Kansas and Nebraska
were barely populated, save for a few mining towns in Colorado
and Nevada. But soon thereafter, the railroads opened the
territory up and Villard saw opportunity in the Pacific Northwest.
He began to build up a transportation network, labeling it the
Oregon Railway & Navigation Co. (ORN), which was a
combination of a steamship operation and Northern Pacific
railway. J.P. Morgan helped finance ORN but during the period
1881-83, as Northern Pacific was building out its network the
cost overruns were becoming quite prohibitive to the financiers.

But Villard was also employing a common practice at the time,
planting favorable news stories (no different than the "pump and
dump" of today), and the shares skyrocketed to $200 a share.
Additionally, ORN also operated like a classic Ponzi scheme, issuing
new stock and then using the proceeds to pay dividends on the
existing shares, thus giving the impression of a company that was
a veritable money machine.

But back during Villard''s acquisition phase, as Henry was
putting together ORN, he had made enemies with a fellow
German immigrant, Charles Woerishoffer. Charles was a major
operator on Wall Street who was a master short seller (betting
that a particular stock would decline in value), or "plunger" as
they were known in those days. Woerishoffer also was a straight
investor in various ventures and Villard accused him of not being
on the up and up concerning the investment pool that had
enabled Villard to originally acquire Northern Pacific. So in the
fall of 1883, Charles launched a bear raid (continually shorting
the stock until it collapses) that left Villard gasping for air.
Woerishoffer''s honor was at stake and he successfully bet his
whole personal fortune on the effort...at least for a time. Villard
was ruined and, as was often the case in this era, J.P. Morgan
came to the rescue and bailed out the company, while routing the
shorts (including Woerishoffer). "It is a great delight to see
those fellows who have been destroying other people''s property
severely punished," Morgan remarked at the time.

Morgan liked Villard, but clearly Henry couldn''t stay on as
president. Instead, Morgan paid him a yearly allowance of
$10,000. Villard was financially ruined, however, and suffering
from a nervous breakdown, he went back to Germany to recover.

[It does need to be noted that Villard had built a New York
mansion at 451 Madison Ave., right behind St. Patrick''s and
what today is part of "The Helmsley Hotel." The property had to
be signed over to the railroad after the ORN debacle.]

But in 1886 Villard reemerged in New York as the American
representative of Deutsche Bank, and by 1888 he was an adviser
to Thomas Edison as the inventor sought to consolidate his
holdings. Villard had been an early supporter of Edison''s and
the financiers of the day saw that money was to be made not in
making Edison''s light bulbs (October 1879) but rather through
controlling the production of electricity. And so, with the
support of some large German banks, Villard sought to create an
electricity cartel. Edison, himself, wanted out of the business
side of Edison Electric so that he could go back to focusing on
inventing, but for Villard, the key was once again J.P. Morgan,
and winning his blessing.

Villard and Morgan formed a partnership whereby they bought
out Edison and Edison Electric (Thomas Edison was well taken
care of) and Villard became the president of the new operation,
Edison General Electric. EGE was one of three big players at the
time, the others being Westinghouse Company and Thomson-
Houston Electric. [I have also seen the spelling as Thom(p)son.]
Villard then sought to merge with Thomson, but they were twice
as profitable as Edison General so Morgan arranged for the deal
to be the other way around. Thomson-Houston took over EGE.
Morgan then asked for Villard''s resignation and in 1892, the new
company was renamed General Electric Company.

And now you know.the rest of the story.

Wall Street History will return on May 4.

Sources:

"The Growth of the American Republic," Morison, Commager,
Leuchtenburg
"Morgan: American Financier," Jean Strouse
"Wall Street: A History," Charles Geisst

Brian Trumbore

---