WaltersRail

Livingston, Montana, sits quietly on the west side of the Yellowstone River. To the south stands Yellowstone National Park, while further west, Bozeman Pass separates the Bridger and Gallatin Mountains. To the east, the river flows peacefully through wide valleys and narrow McAdows Canyon on its way to junction with the Missouri River in far western North Dakota.

The Yellowstone commences in northwestern Wyoming in the Absaroka Range on the Western Continental Divide, then flows north into Yellowstone National Park, dropping over the Upper and Lower Yellowstone Falls, passing serenely through the Black Canyon of the Yellowstone, emerging at Livingston.

Building from the east, the Northern Pacific Railway followed the Yellowstone River from Glendive, Montana, to Livingston, where it left the tranquil waters to climb Bozeman Pass. In 1970, the Northern Pacific became part of the Burlington Northern. In 1987, the BN leased the former Northern Pacific line through the Yellowstone Valley to Montana Rail Link. The lease was terminated in 2022, when control of the tracks reverted to the BN's successor BNSF.

Westbound coal in the valley of the Yellowstone River.

More westbound grain.

https://blogs.loc.gov/maps/2022/09/mapping-the-northern-pacific-railroad/

The above image -- "Lloyd's American Railroad Map of the United States" -- was originally published in 1859 and shows a robustly developed railroad network in the Northeast, a sparsely developed system in the Southeast, and almost nothing west of the Mississippi River. Multiple proposed routes west are shown as dotted lines roughly following the authorization of Congress for five survey parties to scout what were then virtually unknown lands for a railroad to unite the fledgling country from Atlantic to Pacific.

All five routes were surveyed, but the War Between the States intervened. The route labeled "Central Pacific Railroad" was the first constructed. Next came the southern route, which became "transcontinental" when rails crossed Raton Pass on the Colorado-New Mexico Border and connected to the southern route at Deming, New Mexico.

The scale of American railroad construction in the last half of the 19th century is difficult to comprehend in the first half of the 21st. Imagine building a bridge across the Atlantic Ocean. If your head does not explode, you will begin to feel the adrenaline rush common to rail promoters of that era. Given the primitive construction methods of the time -- men, mules and dynamite -- only the brave and/or foolhardy (the dividing line between the two being miniscule) would dare to build a railroad across the uncharted West .

Eastbound grain in McAdows Canyon.

Yet the railroads were built. An earlier article [https://www.waltersrail.com/2023/04/powder-river-basin-part-two-union.html] discusses in detail the financial machinations involved in the Northern Pacific's construction; and they were many. For our purposes, suffice it to say that in 1870, groundbreaking commenced, with Jay Cooke as the railroad’s main financier. Cooke was also one of the Union Army’s main financiers during the War Between the States.

That is another facet of 19th century American life almost incomprehensible today (September 2025). In those days, the federal government had not become the behemoth that we know and love in our advanced society.

https://commons.wikimedia.org/wiki/File:Ill_dict_infernal_p0100-86_behemoth.jpg

There was no federal income tax. Instead, the government subsisted mostly on revenue from tariffs. When a really big project came along, such as financing a war, Washington turned to private money, which is where Jay Cooke enters. Cooke did not invest his personal funds in the war. Instead he sold government bonds to private parties who believed that the bond issuer (be it the United States or a private railroad such as the Northern Pacific) would ultimately pay a handsome return on the initial investment. The man in the middle took his cut almost without risk. ("Almost" is used, because eventually the Northern Pacific did Cooke in.) Unlike stocks, bonds do not constitute partial ownership of the issuing institution. Instead, bonds are a promise to pay a guaranteed rate of interest on the money invested, with return of principle on a date certain.

Jay Cooke with the long hair and beard popular in the 19th century. [https://pixels.com/featured/jay-cooke-1821-1905-granger.html]

Jay Cooke was born in Ohio and went to Philadelphia to enter the banking business. In January 1861, shortly before the outbreak of war, he opened his own firm -- Jay Cooke and company -- which is generally considered the first investment bank in the United States. His partner and brother-in-law, William Moorhead, a railroad promoter, provided most of the bank's capital -- about $10,000, the equivalent of about $365,000.00 today.

New York was the financial capital of the country, but even by Philadelphia standards, Cooks' bank was tiny. Girard Bank, with capital of about $1,250,000, ruled the City of Brotherly Love. Yet somehow the House of Cooke became the primary financial engine of the Union's war effort.

Cooke's brother Harry had published the most prominent Republican newspaper in Ohio, which had supported Salmon P. Chase in his successful bid for the United States Senate. When Chase became Secretary of the Treasury under Abraham Lincoln, Harry followed him to Washington. Through Harry, Jay Cooke became friends with Chase.

Meeting beside the Yellowstone River.

River running.

To finance the war, the government tried to sell bonds to New York banks and private investors, but both refused to purchase except at steep discounts below face value -- because of significant doubt that the government could meet its obligations. Failing to sell bonds, the Treasury began literally printing money (paper currency) which spurred high inflation. Each time the Union lost a battle to Robert E. Lee, the country's financial standing fell lower.

Cooke convinced Secretary of the Treasury Chase that he (Cooke) could sell bonds where the government had failed. Seeing no viable alternatives, Chase gave Cooke a chance.

The government promised a sales commission of 0.5 percent of the first $10 million, and 0.375 percent of subsequent sales. Cooke took his sales campaign nation-wide to every northern and western state and territory, appealing not to bankers but to individual investors who wanted to support the war effort, appointing almost 2,500 sub-agents to sell bonds door-to-door in denominations as low as fifty dollars. Cooke also advertised in major newspapers, encouraging citizens to support the war and make money at the same time.

Cooke's agents responded as if they were part of the Union Army. "It is glorious work and spurs our blood," wrote one.

The images in this article were all taken in October 2024, when grain appeared to be the single biggest commodity carried on the railroad, with coal a close second.

Double track stops on the eastern edge of Livingston, where this meet is taking place.

Cooke paid all costs of publicizing the bonds in newspapers, but he had bigger ideas than simply selling war bonds. From the beginning of the conflict, his bank acted as a government transfer agent, holding federal funds until the government drew on them. This gave his bank the use of federal money, which he loaned to third parties to make more money. The War and federal business turned Jay Cooke and Company from a tiny bank with almost no capital into a major player on the American stage.

In the middle of the War, Salmon Chase needed a loan, which Cooke not only provided but invested free of charge, returning a $1,000 profit on a $13,000 principal in 60 days. Chase, in other words, pocketed $1,000 without any obligation to pay it back. Thereafter, Cooke and Chase mixed public and private business, though both attempted to follow the letter of the law and keep everything above board.

Chase was subsequently notified of a 1798 law limiting the Treasury Secretary's private investments in public securities. Chase then informed Cooke, who thereafter directed Chase's investments into private unregulated securities. Everything was perfectly legal, and profits continued to drop from the sky like spring rain.

Thus were fortunes made in the 19th century -- in the same manner as in the 21st.

Cottonwoods and Aspen are beginning to turn.

Eastbound.

Memories of the steam era.

Upon conclusion of the war, Cooke turned his attention to railroads, much as an armadillo turns its attention to the next grub worm. (If you are troubled that grub worms eat the roots of your Bermuda grass, armadillos will take care of the problem, though the friendly creatures will dig up your yard in the process.)

The Northern Pacific crossed lands often blanketed with snow in the winter, home to Natives not particularly thrilled by the coming of the railroad. Some tribes chose the path of least resistance, and the federal government moved them either to enclosed reservations in their home territory or else to temporarily uninhabited regions of the country such as what became Oklahoma.

Others chose to fight. One of many such confrontations was the Wounded Knee Massacre, in which nearly three hundred Lakotas were killed by the United States Army. Another 51 were wounded -- 4 men and 47 women and children, some of whom died later. Twenty-five soldiers were killed and 39 wounded, six of whom later died.

The event is called a "massacre" because the Army had advanced into a Lakota settlement to disarm the populace. No battle was fought. Instead, apparently, at least one Lakota objected to having his rifle confiscated. A shot was fired. Some of the heavily outnumbered Lakota, those who had not been disarmed, fired back. Below is an image of the mass grave in which the Lakota were buried.

https://en.wikipedia.org/wiki/File:Soldiers_at_a_burial_for_the_dead_at_Wounded_Knee,_South_Dakota,_c._1891.jpg

With the federal government removing Natives from the American West, the path was cleared for railroad construction. But with Natives gone, the land was vacant, as barren as the moon, if not quite as cold. So the railroad's job was not only to lay roadbed but was also to entice Europeans and European Americans to come take the land from displaced Natives.

In 1871, the Hayden Expedition explored and mapped what became Yellowstone National Park one year later. Included in the expedition was Thomas Moran, financed by Jay Cooke. Moran's daguerreotypes and drawings sparked the interest of Easterners, to the benefit of the Northern Pacific, which had received from the federal government land grants to territory immediately north of the future park, territory that Natives had occupied and cherished for thousand of years.

https://www.loc.gov/item/86695638/?loclr=blogmap

The above map shows that the Northern Pacific's land grants extended 50 miles on either side of the Yellowstone River from what became Yellowstone National Park almost to the river's confluence with the Missouri. For each section (one square mile) granted to the Northern Pacific, the government kept a corresponding section, so that a detailed map of the land grant looked like a checkerboard. The grant was a potential gold mine, if the railroad could only determine how to extract the ore.

The railroad's plan was to construct branch line upon branch line off the main tracks. Each branch line would be financed by the sale of bonds and would, in theory, be like arteries and veins in a human body, providing links between new settlers in the extremities of the arms and legs and the vital pumping heart -- civilization to the east. In reality, the bond sale for each branch line enlarged the pockets of the owners of the construction company, primarily one Henry Villard, while carving several short, mostly useless paths into the wilderness. [Villard is discussed in detail in https://www.waltersrail.com/2023/04/powder-river-basin-part-two-union.html.]

Below is a map of the Northern Pacific, showing all the branch lines.

https://utpaqp.edu.pe/post/the-northern-pacific-railway-train-map-pacific-map-railroad-history/map-of-northern

Virtually all of the branch lines are now abandoned. From your author's viewpoint, the most tragic abandonment is the line across Homestake Pass into Butte. You can still see portions of the route today as you cross the Divide on I-90. And of course, the other line across the Divide into Butte -- the Milwaukee Road at Pipestone Pass -- is also gone. I never had the opportunity to photograph either line. Whenever I'm driving in Montana, if at all possible I avoid I-90 between Whitehall and Butte, because the sense of loss is just too great. If that classifies me as weird, then so be it.

Eastbound leaving Livingston.

Along the Yellowstone River.

Eastbound -- leaving the mountains behind and beginning to cross the High Plains.

After the war, Jay Cooke built a mansion on 200 acres northwest of Philadelphia and called it “Ogontz” after a Chief he had known as a child. The estate included parks and gardens, with a fifty-three-room house. Near his boyhood home in Ohio, Cooke bought an eight-acre island in Lake Erie and built a 15-room vacation home.

https://archive.org/details/jaycookefinancie02ober/page/152/mode/2up

Cooke's vacation home on Lake Erie.
https://en.wikipedia.org/wiki/Jay_Cooke

Initially, Cooke refused to sell bonds for the Northern Pacific, writing to his brother in 1866:

“[W]hat Wm. G. [Moorhead] & myself fear is becoming identified with any of these great projects, in such a way as to inevitably draw us into advances. Our true future is to keep out of large entanglements & to undertake nothing or be connected with nothing that will require any advances.”

Cooke did not follow his own advice. In 1870, because he perceived the opportunity to make a second fortune, Cooke raised $5.6 million for the Northern Pacific from the sale of bonds and stocks to private investors, money necessary to construct the new railroad from Duluth to the Red River of the North (the boundary of Minnesota and North Dakota).

Often, a man who has found success early in life believes that continued success is his birthright. This may have been the case with Jay Cooke, because he devised a scheme for the initial construction of the Northern Pacific that defies easy explanation. He called it the "pool," which required total cash subscriptions of $5,600,000, $5,000,000 in bonds, $600,000 in stock, subdivided into twelve shares to correspond with Jay Cooke and Company's twelve "interests" in the railroad. Each share called for $416,666.67 in bonds and $50,000 in stock. Each twelfth was divided and sub-divided to suit the financial means of the various subscribers, and the only entity that understood what was going on was apparently Jay Cooke and Company.

Westbound grain.

The "pool" members were assigned proportionate ownership interests (stock) in the railroad, a total of $40,000,000, to be raised and then distributed as the road proceeded on its way to the Puget Sound, amounting to about $3,400,000 for each one-twelfth interest. The funds for this payout had not yet been raised, but no one, least of all Jay Cooke, doubted that money would be readily available. He had never, no once in his life, failed to convince others to invest in his projects.

Jay Cooke and Company also created and owned a company that would develop and speculate in town sites and water along the railroad. The Lake Superior and Puget Sound Company was capitalized at $2,400,000 and divided into 24 shares, 12 of which were kept in the province of Jay Cooke and Company and 12 of which were divided into the pool, subject to assessments that Jay Cooke and company might make during construction.

If the Northern Pacific made money, in other words, Jay Cooke and Company would be the primary beneficiary. But the jackpot was conditioned upon the railroad's success. Unlike the construction companies that built the railroad, owned primarily by Henry Villard, companies that were paid as the railroad progressed westward, whether or not the railroad made money, profits to Jay Cooke and Company, and the many investors in the pool, would materialize only if the Northern Pacific itself turned a profit.

Eastward into the Yellowstone Valley.

It was soon regarded as a compliment to be asked by Jay Cooke and Company to subscribe to the "pool," which from the company's viewpoint served to purposes: (1) to secure money for the immediate use of the railroad, and (2) to gather leading financiers, politicians, journalists and brokers whom Cooke hoped to use as sub-agents (echoes of his success with war bonds) to raise additional funds as construction proceeded west. He asked his strong financial friends to go into the thing "man-fashion," taking two-twelfths.

Thomas A. Scott and J. Edgar Thomson of the Pennsylvania Railroad took large interests, as did Schuyler Colfax, Vice-President of the United States; Baron Gerolt, the Prussian Minister to United States; and Senator T. J. Robertson of South Carolina.

By this time, Salmon Chase had become Chief Justice of the United States Supreme Court. Cooke offered his old friend and business associate the opportunity to invest, but Chase initially declined, writing:

"Though the prospect of future profit is very inviting, it is rather too remote for one who does not expect to live longer than I do. I wish I could be connected in some way with your magnificent undertaking, but I do not see how. Perhaps something may occur."

Cooke offered to hold the bonds at no charge to Chase -- as he did for many whose influence he thought would be valuable -- until they could be sold at par when bonuses would accrue. Chase accepted the offer "with thanks." He ended his correspondence with: "I am fully aware what a busy man you are. You really amaze me by your activity, energy and achievement."

Chase visited Duluth in 1870, as construction of the new railroad was beginning, and wrote to Cooke:

"Hurrah for the Northern Pacific! I wish I was able to take four times as much as has been assigned to me. This is your greatest work. The world will be astonished by it."

Because of fierce opposition from proponents of a southern route across the Desert Southwest, Cook failed to secure Congressional support for subsidies or bond guarantees, the first time in his meteoric career that he had not been dealt a winning hand. But he was not deterred. In 1871, he launched another bond sale and raised an additional $13.5 million.

Construction of the railroad was much more difficult than anticipated. Even before the mountains were reached, the terrain was treacherous, and severe winter weather slowed progress for sometimes as much a half a year. The Sioux fought the railroad almost inch by inch, culminating in Little Big Horn in 1876.

Eastbound empy oil train.

Pusher on westbound grain.

The Northern Pacific did not have a bridge across the Missouri River for many years. Until 1882, box cars were ferried across. Same for passengers. Eventually, on October 21, 1882, a 1,426 foot long railroad bridge crossed the Missouri River from Bismarck to Mandan. This gives some idea of the construction headaches on the Northern High Plains.

https://www.ndstudies.gov/gr8/content/unit-iii-waves-development-1861-1920/lesson-1-changing-landscapes/topic-6-railroads/section-2-northern-pacific-railway-north-dakota

Because construction was behind schedule and above budget, interest payments to bond holders were in jeopardy. Cooke did not want his investors to lose money, because that would cause his bank to lose customers and reputation, so he invested his company's money to keep the railroad solvent to pay bond obligations, the very pitfall that Cooke had wanted to avoid.

As long as his company was merely selling bonds, it had no liability, much as an automobile salesman has no liability if a car he has sold breaks down. But if the salesman steps in to repair the vehicle and spends his own money, and if he keeps spending more and more of his own money to keep the car running, eventually he goes broke. That is exactly what happened to Jay Cooke and Company.

In September 1872, Harris Fahnestock, who owned 14 percent of the investment bank, wrote Cooke:

"Under no consideration must you allow your pride or interest in the company [Northern Pacific] to place us in a position of even possible complications with its troubles."

One year later, both the railroad and Jay Cooke and Company were facing failure. European investors (mostly German), who had previously purchased the railroad's bonds like candy, had now lost all taste for sugar. Fahnestock closed the bank's New York office, refusing to pay obligations, and Wall Street was rent asunder, as though the earth had opened and swallowed what was believed to be the most stable financial institution in the nation. The Panic of 1873 followed.

The immediate cause of the Panic was the Credit Mobilier investigation. Rumors of this scandal in connection with the Union Pacific had been in the air for years, but the exposure of the raw dishonesty and greed of the nation's highest lawmakers and businessmen upset those many people who previously had thought that people, even politicians and businessmen, generally operated in good faith.

From Washington, D.C.,Henry Cooke wrote his brother:

"You have no idea, nor can anyone have any idea who is not here from day to day, of the demoralization of Congress resulting from the Credit Mobilier investigation. Some of the purest and most powerful men in both branches have become involved to an extent which seems to reflect upon the whole body."

Jay Cooke had hoped to receive some additional financial support from Congress, but Credit Mobilier made that impossible. The death of Salmon Chase in 1873 almost perfectly coincided with the death of Jay Cooke and Company. Henry Cooke wrote:

We are all grieved at the announcement of the death of our dear friend Governor Chase, but not surprised. He left here Saturday morning intending to see you in Philadelphia that day and after visiting New York to go west to Colorado. He was in the bank Friday evening about five o'clock and spent over half an hour with me paying an installment upon his note and interest to date, and arranging some other matters. He remarked upon the firmness and clearness of his signature and spoke of his good health. He has not looked so well for a year past as he did then.

When Jay Cooke and Company closed its New York office, the news spread like a grass fire. "Like a thunderclap in a clear sky," said the Philadelphia Press. No one could have been more surprised, said the Philadelphia Inquirer, "if snow had fallen amid the sunshine of a summer noon." The headquarters on Wall Street was surrounded by a crowd of shouting and wildly gesticulating men and women.

About the announcement in the New York Stock Exchange of the closure of Jay Cooke and Company, an eyewitness stated:

"There was an uproar such as has scarcely filled the Exchange since it was built. Messengers fled every way with the story of ruin, and down came the stocks all along the line."

The Exchange became a mob, members pushing and shoving each other, screeching sell commands amid the deafening roar. Fahnestock explained that the bank could no longer stand the rapid withdrawal of its deposits on account of the Northern Pacific Railroad, which he had "never thought much of anyhow."

Construction on the Northern Pacific ceased that year and did not resume until 1877. Tracks did not reach Montana until 1881.

Deep in the river valley.

Westbound oil.

Eastbound departing Livington.

Construction then followed the valley of the Yellowstone River for about 350 miles to Livingston. For the most part, the valley is wide and bucolic, surrounded by moderate bluffs looking down from a dry land that sees about 12-15 inches of rain per year, which lifts the terrain just barely out of desert status. In the river valley, however, the grass is verdant. Even in the driest times, the water flows smoothly, surrounded by Cottonwood and Aspen that turn bright yellow in October.

The Aspen is one of the most unique plants in the world, with smooth white bark pock-marked by black scars where lower branches have fallen off. Leaves are heart-shaped, attached to branches via long thin stalks. Almost any breeze causes the leaves to flutter, which is why many people call the tree Quaking Aspen.

The most amazing thing about the plant is that a group of Aspen is a single huge underground organism. The roots remain below the surface until enough sunlight causes sprouts above ground which eventually grow tall enough to look like tree trunks. Branches form off the trunks and produce green petals that we call leaves. The Aspen thus reproduces asexually through its underground system. Only after severe fire and under ideal climatic conditions will the plant flower and reproduce sexually.

All the trees that sprout from the same root source have identical branches because they are genetically uniform -- clones, in other words. As Aspens change color in the fall, members of the same root source transition from green to yellow at the same time. However, different root sources change color at different times. You can tell which trees belong to which root source by when they change.

In Western forests, Aspen colonies are often crowded out by taller Pine and Fir, but the roots do not die. Instead, they wait patiently underground for sunlight to appear, which happens most often after a fire. Then, with the taller trees decimated, Aspen trunks begin to appear out of the ground. Forest fires do not destroy Aspen colonies. On the contrary, fires allow Aspen to reclaim territory previously ceded to taller species.

Cottonwood and Aspen turning along the Yellowstone River.

I don't know who owns the house across the river, but it has spectacular views.

Fall panorama along the Yellowstone.

Why, the astute reader may wonder, has the author digressed into a brief but enlightening study of the Quaking Aspen? As the Aspen are not killed by fire, so Jay Cooke was not exterminated by the Northern Pacific.

Like Job, Cooke lost almost everything except his life, including his mansion at Ogontz. He retained some small personal capital -- less then $10,000 -- and moved into a small cottage at which, by all accounts, he was quite content. He had never pursued world travel or the other luxuries enjoyed by the wealthy. His only extravagances had been his two houses, both of which were lost.

Like Job, he did not curse God. He remained stoic. Then one day a former associate told him of an opportunity in a Utah silver mine 200 miles southwest of Salt Lake City, reachable only by wagon over desolate alkaline flats that must be seen to be believed.

To the amazement of his family, Cooke expressed an interest, traveled to Utah to personally inspect the property, then invested $3,000 -- money that he really needed for the remainder of his life. Once a speculator, always a speculator.

Almost immediately, the mine became profitable and yielded to Jay Cooke about $80,000 per year -- about $215,000 per year in 2025 dollars. Eventually, Cooke sold his interest in the mine for one million 19th century dollars and repurchased the home on the island in Lake Erie. He wrote in his memoirs:

"Many years from now when we old ones are all gone I suppose my children and grand and great-grandchildren will read these Records with curiosity and interest. Let them all understand that this dear Gibraltar [his island home] was the gift of God to me; and I receive it as such; and have tried to enjoy it as such; and have tried to honor God here and show forth the Savior's love by doing good."

All of the furniture and other possessions at Ogontz had been sold by the bankruptcy trustee, as had twenty acres of the the estate. Cooke purchased the house and remaining land at auction but found the property too expensive to maintain and moved into Eildon, the next-door property with his daughter and son-in-law. There he would walk across the street to his old estate and peer through the windows of the neglected mansion as the once grand rooms gathered dust.

Valley of the Yellowstone River.

Again.

McAdows Canyon.

In 1883, Cooke offered Ogontz for a rent of $15,000 a year to The Chestnut Street Seminary, a "finishing school" for young women. (In the 21st century, finishing schools are as archaic as pay telephones.) The mansion became the Ogontz School for Girls; the great rooms were converted to classrooms and dormitories for one hundred privileged students.

The school navigated forward into the great unknown until 1915 when Joseph Widener, a member of one of the wealthiest American families, bought the property, paying enough for the school to relocate elsewhere. In 1916, Widener gave the mansion and surrounding acres to his niece, who tore down Cooke's old home and replaced it with the 60-room Ronaele Manor.

Cooke passed in 1905. His mausoleum still stands behind St Paul's Episcopal Church, which he founded at Elkins Park, Pennsylvannia in 1861.

Since 1925, Cooke's vacation home on the island in Lake Erie has hosted the Stone Laboratory of Ohio State University, one of the nation's oldest freshwater field research stations. The entire 8-acre island was declared a National Historic Landmark in 1966.

Westbound along the river.

When I took this image, I had driven my Jeep off I-90 down a fairly steep embankment to the fence. Someone driving past thought I had crashed and called the Highway Patrol. I was dozing in my Jeep when a trooper walked down the embankment and asked me what the hell I was doing. I told him. He could see I was a harmless old man and told me to park on the should next time. So I did.

An excellent source of information on Jay Cooke, written by a contemporary, is Jay Cooke: Financier of the Civil War, Vol. 1 & 2, Ellis Paxson Oberholtzer, George W. Jacobs and Company (1907).

To see my other posts, go to waltersrail.com.

To see my photographs on Flickr, go to https://www.flickr.com/photos/jpwalters/.

WaltersRail

Wednesday, August 20, 2025

Table of Contents

BNSF: East of Livingston

The Author