The Invention that Built (and almost destroyed) America: Wells Fargo & Co (WFC), Union Pacific Corporation (UNP)

Chief among the causes cited for the panic was a rumor that the U.S. Attorney General was preparing to indict railroad tycoon E. H. Harriman on antitrust charges. At the time, Harriman controlled a number of major railroad and transport companies, including both the former Dow component Pacific Mail Steamship and Wells Fargo & Co (NYSE:WFC) , which had maintained both express delivery services and banking operations under the same corporate umbrella (why do you think their logo is a stagecoach?) until just two years prior to this crash. Union Pacific Corporation (NYSE:UNP) , one of Harriman’s largest holdings, was one of the hardest-hit stocks on the market, posting a drop of roughly 15%. The railroad had lost a third of its value from the start of 1907 to March 14’s close.

Harriman was asked his opinion after the close, but the executive passive-aggressively demurred to questions as to what had happened. “I would hate to tell you to whom I think you ought to go for the explanation of all this.” When pressed, Harriman flatly denied rumors that he had been behind the sales of Union Pacific Corporation (NYSE:UNP) and Southern Pacific, another of his large railroad concerns.

The day’s crash occurred halfway into a two-year bear market that would wipe out nearly half of the Dow’s value. During this time, a combination of President Theodore Roosevelt’s trust-busting efforts and a string of shocks to the financial markets ultimately led to the Panic of 1907, a series of devastating bank failures that were directly responsible for the creation of the Federal Reserve. Harriman lost a great deal of his wealth during this period, but after the crash ended, he recovered to a net worth of approximately $100 million. His good fortune was short-lived, as Harriman died only two years later. Union Pacific Corporation (NYSE:UNP), which controlled Southern Pacific at the time of Harriman’s death, was forced to divest itself of Southern in 1913. The two railroads came together again in 1996, and they remain together to this day.

The article The Invention that Built (and almost destroyed) America originally appeared on Fool.com and is written by Alex Planes.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Wells Fargo.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.