Thursday, June 20, 2013

Citigroup's Texas Midwives

Eric P. Swenson
As we have shown previously, Freeport Sulphur actually owes its Texas birth to a network of men linked to powerful interests in financial and political forces outside the state, who owned non-liquid assets in Texas they wished to convert into income-producing resources. The first of these network partners was S.M. Swenson and his son Eric P. Swenson, who leveraged their holdings in three areas of Texas into a sub-empire within another then-budding empire set up by James J. Stillman, son of a Connecticut Yankee who made his fortune between 1825 and 1865 in Texas during two wars.

We will subsequently reveal why James J. Stillman's son did not permanently take charge of his father's empire after his death in 1918. Although he did briefly replace his father as president and chairman of National City Bank in New York, James Alexander Stillman was beset by marital problems, as we will explore later, which diverted his focus from his career, and in 1921 a new chairman of the bank was appointed in his place -- Eric Pierson Swenson -- the same man who would control Freeport Sulphur from its founding in 1912 until he lost control to a Stillman in-law, L.M. Williams, Jr., in 1930. Both the Stillmans and Swensons had long-term connections to Texas and to the National City Bank of New York.

The Swenson Roots of Citigroup

Excerpt from C. L. Sonnichsen, Cowboys and Cattle Kings: Life on the Range Today (Norman, OK.: University of Oklahoma Press, 1950), pp. 141-142:
Click map to enlarge
Swante Magnus Swenson landed at Baltimore in the middle 1830s with no money and no experience except a few months spent in a store. [He was, in fact, a bookkeeper for a railroad in Baltimore.] This, however, was enough to get him a job with a retail firm. He did well. And before long he was sent [by whom?] on a trading expedition to Texas.
In 1838, when S. M. made his first trip, that was no week-end excursion. Railroads [in this area, at least] were far in the future. The boat sailed up the Brazos as far as Richmond, and there the real business started. S. M. bought mules and a hack and sold the goods he had brought, traveling all over the parts of Texas that were then settled. Before long he was ready to set up in business for himself, first at Richmond and later [1850], when the capital was moved, in Austin. In time he became the biggest merchant in town, a close friend of Sam Houston's, and a power in the land. Swante Palm, the greatest Swede in Texas, was his uncle, and that undoubtedly helped. [Palm worked in Swenson's general store in La Grange, Fayette County.] All went well until the Civil War broke out. Like Sam Houston, S. M. was not in favor of secession. Sam was big enough to stand the storm, but Swenson "took to the hills." To be specific, he went to Mexico, and one story says that he managed to get a great quantity of contraband cotton across the border and reaped a small fortune.

Another legend, still told in the family, says that just before he left he converted all his assets into gold, got his family out of the house by sending them on a picnic, and called in a stone mason. Well, his chimney had been giving him trouble. But when the fireplace was ready to be put back together again, a metal box of gold coins was cemented in beneath the floor. S. M. did not come back to dig it up. When the war ended, he was established in New York. Swante Palm officiated at the exhumation, however, and S. M. got his gold. He invested some of it in a sugar plantation and spent the rest of his life at or between points in Sweden, New York, and Louisiana.
Quoted in a Swedes in Texas website from Swedes in Texas in Words and Pictures, English Edition, 1838-1918, the following excerpt helps to fill in a gap about Swenson's life:
"In his first marriage, Swenson was joined with Mrs. Jeanette Long, widow of Dr. [George] Long. She died after a short time without having had any children. He then married Cora S. McCready, a cousin of his first wife. In this marriage, he had two sons, Erik [Eric P.] and [S.] Albin, and two daughters, Margareta and Eleonora. The first real home the family had was on the Long plantation where Sugarland is now located, in Fort Bend County, Texas. He got possession of this property through the marriage to his first wife."
The company S.M. Swenson founded in New Orleans, before he moved to New York, brought in as a partner another Texan who would serve to be a valuable connection to the Stillman banking family. An heir to the Kenedy Ranch in south Texas, this new banker's father had been a partner of Charles Stillman and Richard King at the close of the Mexican War in 1850:
John G. Kenedy [son of Mifflin Kenedy] was born in Brownsville, Texas, April 22, 1856, and was educated at Spring Hill College, Mobile, Alabama. After leaving school in 1873, he accepted a position with Perkins, Swenson & Co., bankers and commission merchants at New Orleans, where he remained several years.... Mr. John G. Kenedy married Miss Marie Turcotte of New Orleans January 30, 1884, and has two children living, John G. Kenedy, Jr., and Sarita Kenedy East.
Swenson's partner, John G. Kenedy, was present, according the local newspaper, at a huge banquet in which railroad builder Uriah Lott would be the guest of honor in July 1904 :
Lon C. Hill presided as Toast Master. Besides the tributes paid Col. Lott, many and beautiful expressions of gratitude were addressed by Mrs. H. M. King [wife of founder of King Ranch and mother-in-law of Richard Kleberg], John G. Kenedy, Maj. J. M. Armstrong, and others who contributed so liberally of their money, lands and influence towards the building of the railroad. In addition to the prominent citizens there were present State Senator John G. Willacy, Hon. P. Merrill Griffith, U S. Consul of Matamoros, Hon. John G. Kenedy, Capts. Kilburn and Baldwin of U. S. Army, Royal Givens, President of the Corpus Christi Board of Trade, Hon. Geo. D. Palfrey, Franklin, La., and other distinguished guests. Col. Lott accepted with becoming modesty the many graceful compliments paid him on his success in bringing the St. Louis, Brownville and Mexico road to this city, and also passed out a few boquets [sic] to citizens here for their assistance in the great work.
C. L. Sonnichsen excerpt (cont'd):
In New York he [S.M. Swenson] became an investment banker, associated with such men as Frank Vanderlip and Mortimer Schiff. In Louisiana, where he passed his winters, he kept up one palatial home, and in Sweden he had another for summer use.….

The ranch empire which A. J. Swenson and his sons have managed for almost half a century does not belong to them. It is the property of a corporation started by S.M. Swenson before he left Texas. He bought scrip covering railroadlands, purchased additional land, and eventually had three enormous blocks of real estate which he called the Ellerslie, Flat Top, and Throckmorton ranches…

In 1880 the new regime came in. E. P. Swenson was the powerhouse of the family from then on until his death in 1942 when he was well over ninety.… Under E.P.'s control the Swensons acquired a fourth ranch at Paducah and finally, in 1906, organized the corporation which bought the huge and historic Spur Ranch on the high plains at the base of the Texas Panhandle. The stockholders were Vanderlip, Schiff, Emery, and Swenson. Emery owned three-fifths of the stock. The story of the Spur Ranch is one of the great tales of the range—how this empire of grass was taken over by a bunch of New York bankers—how they developed a town in the middle of their holdings and sold off thousands of acres of farmlands between 1910 and 1915—how they combined the sturdy traditions of the Old West with the grim business methods of Wall Street.
Historic Texas Ranches Linked?

We find the Swenson family had close ties to three geographic regions of Texas (depicted visually in the inset map below):
  1. The area west and south of Houston within the old Austin's Colony, which would become the town of Freeport;
  2. The area west of Fort Worth and south of Vernon (adjacent to the Matador Ranch and Waggoner Ranch) where SMS Ranches would have headquarters at Stamford; and
  3. The area between the Nueces and Rio Grande Rivers that was won from Mexico by the U.S. during the war in 1845, when Texas was annexed by treaty as a state of the Union.
Known as the "Spur Syndicate," the Americans who bought the assets of the faltering Espuela Land and Cattle Co. in 1905 and the adjacent Spur Ranch in 1907 consisted of:
  • Eric P. and Swen Albin Swenson of the New York firm of S.M. Swenson and Sons, 
  • James J. Stillman,
  • Sigmund Neustadt (one of four principal partners of Hallgarten & Co, bankers, which opened a London office in 1912),
  • John J. Emery (grandson of a Cincinnati lard oil refiner/chemical magnate, whose company ultimately became part of National Distillers & Chemical Corp.), and 
  • Benjamin F. Yoakum.
Click map to enlarge
Espuela was a cattle-raising entity set up in 1884 in London, managed in Fort Worth, with securities issued and sold abroad to raise funds, but the unpredictable weather and market conditions proved too much for absentee owners. According to author Mira Wilkins there was a proliferation of mostly Scottish companies between 1880 to 1900 investing in cattle lands. Many of the directorships of these companies interlocked, and managers were often sent to America from Scotland, although ownership of the companies continued to be fragmented. As bonds or debentures came due, creditors' committees were formed by original investors, their heirs or assignees, as well as by creditors, to salvage assets by "winding up" or reorganizing into new companies with stock issued in the new names. It was a complicated process handled under the laws of the states where the land was situated. All the ranches shown on the inset map to the left were in part financed or in some way linked to these interlocking directors, though each ranch was a separately operated entity, each of which saw the importance of developing the old trail drives into a more modern rail distribution system to deliver beef on the hoof to the slaughterhouses located in the vicinity of Chicago.

Those same packing houses would share a financial interest with the cattle men in obtaining alternative financing from New York and Boston bankers. Initially, they were drawn to Swenson's bank, which operated as a branch of the Moses Taylor establishment which financed important railroads through Texas with help from B.F. Yoakum.

House v. Faulkner at p. 308
Yoakum got his start with Jay Gould's International and Great Northern Railroad, created in 1873 by the merger of the International Railway Company of T.W. House, and the Houston and Great Northern Railroad. The merger was facilitated by a law enacted by the carpetbagger state legislature in 1875, promising land owned by the state to be used to pay railroad builders to construct the railroad from the southern areas to the northern markets. It was such land grants along railroad lines, or scrip certificates which sold for almost nothing, that S.M. Swenson and English and Scottish investors acquired with the hope of raising cattle on the Texas high plains and rolling plains. Not until oil was discovered under some of these lands did the shareholders see a penny of profit--but that was still many years in the future at this point.
Jay Gould's Octopus-Like Grip on Texas

Col. Edward M. House
Calvin Coolidge would remark just more than a decade after Woodrow Wilson took office that "the chief business of the American people is business." He could just as well have said the chief business of American politics is business, and it would have described the motivations of both parties in getting their men elected to the White House. More than anything else, the machinations of the House political machine in Texas were motivated by his own family's business concerns -- first in Texas, but which ultimately expanded onto the international scene.

When T.W. House, Sr. died in 1880, his youngest son Edward Mandell House was forced to give up college at Cornell and return to Texas, first spending a year in Italy with his bride. In 1881 Ed House settled his wife and newborn daughter in Austin, the state capital, and became the first real political strategist in the state -- determined to wrest power away from the carpetbagger financiers and create a banking system that allowed southern-born entrepreneurs a stake in national finance. His father's estate, heavily weighted with non-liquid real estate holdings, was assigned for management among the House brothers by category, with the eldest in charge of banking interests, another with the sugar and rice lands in the southern part of the state, and Edward in charge of the estate's cotton plantations in central Texas, as well as with completing the Trinity and Brazos Valley Railroad (T&BV), which was set up to get the cotton to port for distribution.

By early 1905, negotiations were well underway to sell the 90-mile T&BV -- which had financing from Boston capitalists including T. Jefferson Coolidge, a great-grandson of Thomas Jefferson -- to the St. Louis, Brownsville and Mexico system then being consolidated by B.F. Yoakum. The father ofT.J. Coolidge, Sr., Joseph Coolidge, had worked with Augustine Heard & Co. in Canton, China, in 1839 alongside John Murray Forbes, who made him president of the Atchison Railroad in 1880. Forbes had poured profits from China (opium being then highly lucrative) into construction of the Chicago, Burlington and Quincy Railroad and was also a large investor in the Atchison, Topeka & Santa Fe. The Coolidge and Ed House families each spent summers at Manchester-by-the-Sea, Massachusetts.

Benjamin Yoakum had been hired as traffic manager for the the San Antonio and Aransas Pass Railway, chartered by Uriah Lott in 1884, with financing from San Antonio bankers and businessmen. Lott had already by that time built the Corpus Christi, San Diego and Rio Grande line from Corpus Christi to Laredo, largely financed by Mifflin Kenedy. Yoakum was put in charge of the S.A. & A.P. when it was placed in receivership in 1890, while Eric P. Swenson served on its creditors' committee; Swenson in-laws, the Tilghmans, were also investors in this line.

Yoakum's mentor in railroading, Jay Gould of the Missouri Pacific system, entered Texas in about 1880, and he soon acquired control of the Texas and Pacific Railway Company and the International and Great Northern Railroad (I&GN) Company.

In the fall of 1892 a Galveston Daily News editorial lambasted land-grant legislation enacted 22 years earlier, entitled Act of the Legislature of the State of Texas, approved March 10, 1875, entitled "An Act for the Relief of the International Railroad Company, now consolidated with the Houston & Great Northern Railroad Company, under the name of the International Great Northern Railroad Company, as shown by Chapter 49. Acts Fourteenth Legislature. The editorial declared that the legislators had "transferred both public lands and public revenue to private hands. The measure worked mischief from the beginning" by distracting the corporate officers from their chartered business of railroading into land speculation. They had engineered a "political craze," led by Governor Richard Coke, followed by James S. Hogg, the attorney general, who, the writer said:

"made a grand dramatic display of litigious impetuosity to bear up the work of the former in the land subsidy and tax-exemption arrangement. Then on the heels of that impotent onset he dropped into the celebrated International and Great Northern receivership scheme with a complaisance that challenged universal admiration."
Governor Coke facilitated setting up a convention to enact the post-Reconstruction Constitution of 1876, which severely limited powers for both the legislature and the governor, imposed strict control over corporations, and forbade land subsidies for railroads. Coke then became a U.S. Senator and campaigned for Attorney General Hogg to be the new governor of Texas, who was elected in 1892 with the behind-the-scenes manipulations of Edward M. House. Hogg was a lawyer who had made it his mission to drive the outside looters from Texas, and determined the way to do that was to use a regulation scheme House had advocated in his anonymously published novel, Philip Dru, Administrator--first focusing on the railroads. According to a website styled The Railroad Commission of Texas:
While he was Attorney General, Hogg had taken on the railroads, prosecuting several of them as well as the rate-setting organization of railroads, the Texas Traffic Association, for monopolistic actions and conspiracy to discourage competition. In the race for governor which he won in 1890, Hogg had campaigned for the creation of a commission to regulate the railroads. In just a few decades, the railroads had turned from being the object of enticements by the state and many communities to being an object of derision. Why this change?...

In the Eastern United States, the railroads followed the people, connecting already existing population centers. In most of Texas, it was the other way around. From the time of the Republic, it was a recognized policy to set about attracting settlers from back east and the countries of Europe. One way to do that was to have a transportation system already in place. But, railroads are heavily capital intensive--it took a lot of money to do the necessary grading, buy and install the ties and rails, purchase the steam locomotives and cars. Since the companies did not want to invest if there was no market--no people and no goods--the state sweetened the pot by land grants, bond issuances, and loans.
Click image to enlarge
With the success that came from regulating railroads in favor of Texas consumers rather than Eastern capitalists, House and his associates broadened their interests and decided to expand Texas' influence nationally. By the fall of 1912, House had succeeded in finding his own malleable candidate and making him President--Woodrow Wilson, a Democrat from Virginia, then living in New Jersey. The same year he published a novel titled Philip Dru, Administrator, written under the name Anonymous, whose author would not be disclosed until 1918. A review of the pedantic tract, from Walter Lippmann, calls it a "didactic novel" intending to show an unknown "insider's" plans for America's future.

During his days in the state capital in Austin, Edward House had become close socially with James S. Hogg and W.T. Campbell of Lampasas, as well as with members of the Cruger banking family, though still maintaining ties with his mother's Shearn family, from Houston, and with his sister's family (the Caldwells and Munsons from the old Republic days). These mostly hidden ties would become part of the deep political roots lying beneath the 1913 Federal Reserve Act in Texas.

Click image to enlarge.
Before the Swensons could hope to extract and export sulphur from the area it was believed to exisit, they determined a need to build a distribution infrastructure into and out of that isolated location, a project best accomplished by linking themselves to an existing transportation network--the Gould system. The Galveston Daily News wrote in their April 8, 1914 edition that the Houston & Brazos Valley Railroad Company, operated by the Missouri, Kansas & Texas Railroad, and the Freeport Terminal Company, also operated by the "Katy," as it was called, met for its annual board meeting had in Freeport to elect officers and directors. At that time, Eric Swenson was a vice president of the H&BV but not a member of the Freeport Terminal board.

Northern Bankers Invest War Profits in Texas Railroad

Swenson originally headed to New York via New Orleans in the early days of secession, less than five years before Charles Stillman, from an old Connecticut family, retired to Hartford. Stillman, it will be recalled, had been one of the first to invest in Texas when it was still part of Mexico, he and two of his brothers spending several decades during the middle of the nineteenth century capturing much of the shipping and mining wealth accruing from two wars. Once the civil war ended, however, he returned to spend the last ten years of his life in Connecticut.

James J. Stillman, though born to Charles and his wife in Texas, spent his youth in Connecticut with his mother, but he reached adulthood after Charles was back with the family. James Jewett Stillman was the only one of Charles Stillman's six children to marry (his wife was Elizabeth Pamela Goodrich). A daughter, born in 1876, was given the name of his eldest sister,Isabel Goodrich Stillman (called "Aunt Bell"), and a son was named Chauncey for Charles' own brother who lived in Cleveland, Ohio--this according to the book written by Chauncey Devereaux Stillman, which was published in 1956.

James Jewett Stillman, named for a business associate of his father's in New York, was born in 1850 and his sister a year or two later, at which time their mother took them back to Connecticut, to live near her sister in Hartford, while Charles remained in Brownsville except to visit them there from time to time, usually in the summer. During the 1850's letters to his brother in Cleveland mentioned mining interests he was acquiring in Mexico, by then defeated in the the war which followed the annexation of Texas. In his letters to his wife he also wrote about his partnerships with men who owned huge ranches in the part of Texas over which the war with Mexico was fought--the Nueces Strip lying south of the Nueces River.


Kenedy and Co.'s monopoly on the shipping trade ended when the civil war officially began, but by then all the partners were extremely wealthy, both in money and land. During the war Charles Stillman transferred all his assets from Brownsville to Matamoros, on the Mexican side of the border, putting his ships under Mexican registry. The U.S. government instituted a blockade of all Southern ports to prevent goods being shipped to or from those locations. Stillman used his ships to load Texan and other southern exports, especially cotton, which was bound for textile mills in England. He paid the Southern growers for the cotton, but the profit came when he delivered it to the foreign buyers who credited his account in the bank in New York City.

Charles' death which came in 1875, when his son was 25, gave James the task of consolidating and converting the family's Texas holdings by forming a cotton brokerage business in New York. Swenson had begun operations in New York as early as 1860 as cotton broker and banker for southern planters. Of course, it was the blockade runners who made the highest profits, but the men like Swenson who handled their accounts in the financial center also made out well.

Moses Taylor
James J. Stillman, intriguingly, entered banking under the wing of Moses Taylor, a heavy investor in the Houston and Texas Central Railroad. Other investors in this road included a Massachusetts-born man, William Marsh Rice, who had made his wealth in Texas during the same era as Thomas W. House (father of Edward Mandell House) and S.M. Swenson, who arrived in the Republic of Texas from Sweden a decade after Charles Stillman went to Mexico. Rice was often, like Swenson, accused of favoring the Union cause, but he did not pack up his money and leave Texas until years after the Swede had gone north. Instead, Rice worked from Houston to complete the railroad, which his father-in-law, Paul Bremond, had begun to bring cotton from central Texas to a port they wanted to create in Houston. Bremond selected Rice as a Houston and Texas Central Railroad director in 1872, along with himself and James J. Stillman's mentor, Moses Taylor. Others included the following men:
  • William Earl Dodge (born in Hartford, Connecticut before moving to New York in 1818) established Phelps, Dodge & Co. for his wife's father, Anson G. Phelps, while his father built a cotton factory in Connecticut. The family had links to the Greens and Lows, who were also involved in opium trade in China with Joseph Coolidge. 
  • W.J. Hutchins, a Galveston banker; 
  • Abraham Groesbeeck (born in New York around 1830, who was a large investor in Houston business, including the hotel purchased by, and later named for, William M. Rice), 
  • Cornelius Ennis, and 
  • William R. Baker, associated with the Houston and Texas Central Railroad in 1852 and later mayor of Houston, he was one of the partners in a wholesale firm in Houston with Sam. K. McIlhenny, Benjamin. A. Botts, Walter B. Botts, Wm. M. Rice, Fred. A. Rice and Wm. D. Cleveland.
    It should be pointed out that Swenson was obviously not an investor with Rice or Moses Taylor in 1872, nor was Stillman, who was still a mere trainee at Moses Taylor's City Bank. It was not until after the Galveston hurricane of 1900 that things would begin to change for both the Swenson and Stillman families--the same year, incidentally--that William M. Rice was murdered.


    No comments: