43b. The Trust Buster
Teddy Roosevelt was one American who believed a revolution was coming.
He believed Wall Street financiers and powerful trust titans to be acting foolishly. While they were eating off fancy china on mahogany tables in marble dining rooms, the masses were roughing it. There seemed to be no limit to greed. If docking wages would increase profits, it was done. If higher railroad rates put more gold in their coffers, it was done. How much was enough, Roosevelt wondered?
The Sherman Anti-Trust Act
Although he himself was a man of means, he criticized the wealthy class of Americans on two counts. First, continued exploitation of the public could result in a violent uprising that could destroy the whole system. Second, the captains of industry were arrogant enough to believe themselves superior to the elected government. Now that he was President, Roosevelt went on the attack.
The President's weapon was the Sherman Antitrust Act, passed by Congress in 1890. This law declared illegal all combinations "in restraint of trade." For the first twelve years of its existence, the Sherman Act was a paper tiger. United States courts routinely sided with business when any enforcement of the Act was attempted.
For example, the American Sugar Refining Company controlled 98 percent of the sugar industry. Despite this virtual monopoly, the Supreme Court refused to dissolve the corporation in an 1895 ruling. The only time an organization was deemed in restraint of trade was when the court ruled against a labor union
Roosevelt knew that no new legislation was necessary. When he sensed that he had a sympathetic Court, he sprung into action.
Teddy vs. J.P.
Theodore Roosevelt was not the type to initiate major changes timidly. The first trust giant to fall victim to Roosevelt's assault was none other than the most powerful industrialist in the country — J. Pierpont Morgan.
This 1912 cartoon shows trusts smashing consumers with the tariff hammer in hopes of raising profits.
Morgan controlled a railroad company known as Northern Securities. In combination with railroad moguls James J. Hill and E. H. Harriman, Morgan controlled the bulk of railroad shipping across the northern United States.
Morgan was enjoying a peaceful dinner at his New York home on February 19, 1902, when his telephone rang. He was furious to learn that Roosevelt's Attorney General was bringing suit against the Northern Securities Company. Stunned, he muttered to his equally shocked dinner guests about how rude it was to file such a suit without warning.
Four days later, Morgan was at the White House with the President. Morgan bellowed that he was being treated like a common criminal. The President informed Morgan that no compromise could be reached, and the matter would be settled by the courts. Morgan inquired if his other interests were at risk, too. Roosevelt told him only the ones that had done anything wrong would be prosecuted.
The Good, the Bad, and the Bully
This was the core of Theodore Roosevelt's leadership. He boiled everything down to a case of right versus wrong and good versus bad. If a trust controlled an entire industry but provided good service at reasonable rates, it was a "good" trust to be left alone. Only the "bad" trusts that jacked up rates and exploited consumers would come under attack. Who would decide the difference between right and wrong? The occupant of the White House trusted only himself to make this decision in the interests of the people.
The American public cheered Roosevelt's new offensive. The Supreme Court, in a narrow 5 to 4 decision, agreed and dissolved the Northern Securities Company. Roosevelt said confidently that no man, no matter how powerful, was above the law. As he landed blows on other "bad" trusts, his popularity grew and grew.
