When it came to deciding upon the form of organization, the charter, and by-laws, and all that sort of thing, I was present and participated in it. Nothing was said about the form of the corporation until some time after the first meeting. I am very sure that up to that time Mr. Morgan had never given any thought to it, and certainly from that time Mr. Gates never had anything whatever to do with it except in representing, with others, the Wire Co., in trying to get all he possibly could for himself and other stockholders. Mr. BARTLETT. May I ask you a question there? This was in 1901, was it?

Mr. GARY. In 1901.

Mr. BARTLETT. At the time of the formation of the Federal Steel Co.?

Mr. GARY. No, no; the United States Steel. The Federal Steel was organized in the summer of 1908. I think it required two or three months' work-about three months' work-before we commenced operations; or, at least, the company was embarked about the 1st of November, 1908.1

Mr. BARTLETT. Was it in 19052 that the threat was abroad, or suggested, or afloat, that Mr. Carnegie was to build this tube works and the railroad?

Mr. GARY. Judge Bartlett, I never heard anything about the tube works, and I do not know anything about that.

Mr. BARTLETT. I find in Mr. Schwab's testimony before the Ways and Means Committee in 1908, the following on that subject:

Mr. COCKRAN. And in 1901, when there was an announcement or threat that there would be some competition through Mr. Carnegie's going into the tubing business, the Carnegie Co. going into it, there was another consolidation in which they were all merged in one company, and the price continued the same? Mr. SCHWAB. Quite correct.

That is from Mr. Schwab's testimony before the Ways and Means Committee.

Mr. GARY. I want to say this. I believe, so far as the business part of the organization of the United States Steel Corporation is concerned, that I am as familiar as anyone with it. I think I had more to do with that proposition than anyone else. I think Mr. Morgan relied upon me to a large extent with reference to the business part of it, and the question of a tube company, a proposed 1 Dates thus in original. Should be 1898, the year the Federal Steel Co. was formed.-Ed.

2 Date in error.-Ed.

tube mills, by Mr. Carnegie, did not enter into the calculations, so far as I know. I can not say what was in Mr. Carnegie's mind or in the minds of others.

Mr. BARTLETT. On page 1641 of the same hearing before the Ways and Means Committee, Mr. Schwab testified as follows:

Mr. SCHWAB. The consolidation, as you term it, of the steel corporations in about the year 1901 came about in this way:

Mr. Morgan asked me if Mr. Carnegie wanted to sell his interests in iron and steel; that he then had large interests in the Federal and other companies. I approached Mr. Carnegie, and Mr. Carnegie said he would sell, and we sold our company to Mr. Morgan, under conditions with which you are all familiar. We knew the properties Mr. Morgan controlled and upon which he was to give us a mortgage bond, and that is all there was to it.

Mr. GARY. I, of course, can not speak for anyone else but myself. I have given my recollection of the facts leading up to and resulting in the formation of the United States Steel Corporation, from my standpoint, and from my own connection and knowledge. I can not speak for others. I do not know what was in their minds. I only know of my connection.

Mr. YOUNG. Now, you will remember when we adjourned last night you were just starting to make a statement of the competition which existed between the different units of the United States Steel Corporation before they were consolidated into that company. Please proceed with that.

Mr. GARY. The Carnegie Steel Co., the subsidiary companies of the Federal Steel Co., the American Steel Hoop Co., and the National Steel Co. were to some extent in competition. The four companies were not competitive with one another on all the lines of the production of the respective companies. The greater part of the National Steel Co.'s product was billets and sheet bars and were sold to the American Tin Plate and also to the Sheet Steel Co. I thought I could give you now the percentage perhaps of the competition, but I can not do that without further inquiry.

The American Wire & Steel Co., the National Tube Co., the American Tin Plate Co., the American Sheet Steel Co., the American Bridge Co., and the Lake Superior Consolidated Iron Mines were not in competition with one another or with the other companies. When we commenced business

Mr. YOUNG (interposing). Before you go on with that, will you state what were the articles manufactured by these companies in the first group; what competing company did compete?

Mr. GARY. I stated that the other day about as fully as I can. I would say that the principal competition was between the Illinois Steel Co. and the Carnegie Co. in the sense of making the same articles or some of the same articles; they were substantially in competition. I do not wish to minimize that. That is true in the manufacture of rails particularly. So far as products are concerned, they were in substantial competition, and I would say that those were the principal articles.

However, as you know, the freight rates from Pittsburg to Chicago are quite large and I believe at that time were in the neighborhood of $3 per ton. The market of the Illinois Steel Co. was in the great and growing West largely. That is, they supplied largely the western railroads who had terminals in Chicago, and of course they did, to some extent, furnish rails to railroads which came from the East and had their terminals in Chicago, but the Carnegie Steel Co. in turn had a natural market which surrounded its plant-that is, the railroads having terminals in Pittsburg-and when you consider the respective territory or fields of the two, there was not so much competition as it would appear, although it is the fact that the Carnegie Co. did in time come into the western field and into territories which were not controlled to the extent at that time at least of selling rails, I believe, as low as $16 a ton, at a time when the Illinois Steel Co. was considering going into the hands of a receiver and came very near it. It did not pay any dividends, so far as I know, and I believe it did not pay any dividends at all, up to 1899.

Mr. BARTLETT. Right there. When was the Federal Steel Co. formed?

Mr. GARY. In 1898.

I believe, perhaps, if unrestricted and unchecked destructive competition had gone on the Illinois Steel Co. would undoubtedly have been driven out of business and, perhaps, I might say more. I do not say it with a view of casting any reflection upon anyone's management, but it is not at all certain that if the old management or the management which was in force at one time had continued, the Carnegie Co. would not have driven entirely out of business every steel company in the United States. Perhaps you are sufficiently familiar with the facts to determine whether that is a justi

fied statement, but certainly that is the opinion of a great many different people, notwithstanding conditions had improved after the Federal Steel Co. was formed and everyone was getting on a better basis and we had reached the point where we saw it was possible to organize a company which would be self-contained and which would, as I have said, secure a very large proportion of the export business.

EXHIBIT 3

TESTIMONY OF CHAS. M. SCHWAB1

The CHAIRMAN. Tell us who sat next to you.

Mr. SCHWAB. Mr. Morgan sat next to me on my right and Mr. Simmons at my left. There were distinguished men of New York present-Mr. Harriman, Mr. Morton, Mr. Carnegie, Mr. Phipps, and a great number-70 or 80. The names are probably available, if you would like to have them. I went home from that dinner to Pittsburg, and thought no more about the matter for some time. One day I had a telephone call from Mr. John Gates, from New York, a long distance call, who asked me if I would meet Mr. Morgan in Philadelphia the following day. I told him that I would. I went to Philadelphia, and Mr. Gates telephoned that Mr. Morgan was ill, and so I met Mr. Morgan at his house in New York, I think, the day following, or probably the same day. Very shortly, at any rate.

Mr. Morgan then asked me to go over with him again in more detail the substance of what I had talked about at the dinner, and we spent several hours in doing so. There were other gentlemen present at that meeting, and the whole matter was discussed most thoroughly from the point of view that I have spoken of at that interview.

The CHAIRMAN. You were the only speaker at that dinner?
Mr. SCHWAB. I was.

The CHAIRMAN. And you spoke for an hour or so?

Mr. SCHWAB. I would say so; yes, sir.

The CHAIRMAN. And Mr. Morgan requested that you go over with him again in detail fully all the arguments that you had made at the previous dinner?

Mr. SCHWAB. I will not say arguments-statements of fact, statements of opinion, rather; quite so. Then, of course, he asked

'Hearings before the Committee on Investigation of United States Steel Corporation, 62nd Cong., 2nd Sess., 1911–1912, pp. 1278–79, 1311–14.

me questions about it, and finally said to me, within a day or so, that he was fully convinced about the advantages of such an organization.

The CHAIRMAN. That is, one corporate entity?

Mr. SCHWAB. The Steel Corporation as to-day formed; yes. He asked me if I could get a price from Mr. Carnegie at which he would sell his works. I had not taken the matter up with Mr. Carnegie at all, had not spoken to him of my visit to Mr. Morgan. In the course of a week or so, spending the day with Mr. Carnegie, a favorable opportunity arrived, and I did tell him what I had said to Mr. Morgan, and advised Mr. Carnegie, at his age and with his desire in life, philanthropic in character, that he ought to sell his plant, and I told him how I thought it might be done. It was with a great deal of reluctance that Mr. Carnegie finally did agree to sell his plant, and I might say to you that it was my opinion that he afterwards regretted very much that he had made a price upon his plant.

The CHAIRMAN. Did Mr. Morgan indicate to you anything about the limit of cost at which those properties could be bought? In other words, were you instructed to get an option at not to exceed $500,000,000, for instance, or to buy them at any price?

Mr. SCHWAB. No; I had no authority to negotiate anything of that kind?

The CHAIRMAN. Was there any concern on the part of the purchasers as to the price?

Mr. SCHWAB. My only advice from Mr. Morgan was to get a price from Mr. Carnegie, at which price he would see if they could afford to purchase the property. I got the price from Mr. Carnegie and took it to Mr. Morgan, and beyond being consulted with reference to general views, values of the properties, probable earnings, and so forth, I had nothing further to do with the organization of the United States Steel Corporation.

Mr. BARTLETT. The consolidation, as I understand, of the United States Steel Corporation was about 1901?

Mr. SCHWAB. Yes, sir.

Mr. BARTLETT. Prior to the consolidation, there were not only rumors, but a purpose on the part of the Carnegie Steel Co. to extend its business in building tube works?