The United States Civil War, or War Between the States, had a very profound effect on the railroads in place at the time. The Union had a vast railroad network, and used it to help in the war effort. Indiana saw a large increase in rail traffic as troops and war materials went one way, and prisoners of war came the other. But after the war, there were some questions as to what was going to happen to the rail industry.
During the four years of the war, maintenance was put off as long as it could be, and rolling stock had been beat to almost death. There was some hope that the post-war era would lead to a “quieter” time along the lines. But like every war since, that quieter time almost led to the collapse of some of the rail lines due to overbuilding…and a lot of consolidations to make stronger, supposedly more financially secure, roads.
Between 1861 and 1865, rail capacity had increased due to the traffic demands. While this helped during those years, afterwards, it would be a hinderance to the companies that spent that money for that capacity.
The first thing that happened after the war was the companies started plowing their war profits back into getting the rail lines in shape. This would take a lot of that money. Add to that the almost expectant recession as industrial output had to slow down from war time highs. Passenger rates were rising due to the increased costs. The railroads were taking a public relations hit due to those rate hikes.
Competition for traffic between Chicago and the east coast (whether New York or Philadelphia) had already brought on a series of freight rate cuts as early as 1861. The traffic was there, the question was which railroad was willing to do what it took to get it. By 1865, the Pennsylvania Railroad was already telling its investors that eastern railroad mileage was far outpacing the business requirements for the area.
Indiana found itself in the middle of the consolidations. One railroad, the Cincinnati & Chicago Air Line, had a working relationship with the Baltimore & Ohio to bring traffic from the east coast to as far as Valparaiso, where it had to depend on the Pittsburgh, Fort Wayne & Chicago to carry that traffic into Chicago. The building of a new road, the Chicago & Great Eastern, let the C&CAL have a second, and preferred, route into the Windy City. This would bring the C&CAL out of its poverty, and allowed, as stated in the Lafayette Journal, the railroad to “rival and damage her own haughty mistress, the Pittsburgh, Fort Wayne & Chicago.”
One railroad, which had depended on handshake deals and friendly connections to expand its own traffic across Indiana was the Pennsylvania Railroad. A lot of this was due to the management in Philadelphia that balked at investing in any road that would be outside the scope of its mandate – to connect Philadelphia and Pittsburgh. Yes, the company did invest in other routes. But most of the time, it was to allow agreements between those independent routes and the Pennsy. But that attitude in Philadelphia was about to not only be tested, but thrown out the window when the age of the robber baron started.
Speculator Jay Gould forced the Pennsylvania to wake up from its conservative slumber. Gould had swept in to buy the Erie, a weak road that ended in New York. Gould knew that he would have to increase the footprint of his railroad if he was to salvage a massive investment in his company. He set his sights on the Indiana Central. Traffic along that road mostly came from the Panhandle, a Pennsylvania company that connected to Columbus, Ohio. The Indiana Central carried that traffic on to Indianapolis. The Panhandle found itself dependent on the IC, but they did have a handshake agreement between the two companies.
At this time, the IC not only connected the capitals of Indiana and Ohio, but had purchased other routes that could carry traffic to Logansport, and from there, to Chicago. The IC had also acquired the Great Eastern and the C&CAL. The entire line, in 1868, had become known as the Columbus, Chicago & Indiana Central.
Gould swept in to purchase large blocks of stock in the CC&IC. So much so that the management of the line agreed to, if Gould wanted, allow the Erie to lease the road. The Pittsburgh, Columbus and St. Louis Railway, known as the Panhandle, was basically controlled by the Pennsylvania. But this was not by ownership, the PRR didn’t actually own it. The PRR did, however, have a large amount of the company’s bonds as investment in the building of the line. Gould’s possible lease of the CC&IC scared the PRR into action.
But Gould would not be defeated. While his financial resources were limited compared to the Pennsylvania, he would do what it took to put the PRR on its knees. While playing around with the CC&IC, he also showed interest in the PFtW&C. When the PRR took over the CC&IC, Gould tried to pry the already restless PFtW&C from the PRR’s hands. Again, it was a friendly agreement between the PRR and the PFtW&C. And the PFtW&C blamed the PRR for diminished value due to traffic congestion at Pittsburgh. Gould had acquired controlling interest of the shareholder votes.
PRR management in Philadelphia, which still saw their city as the most important city on the east coast, feared that control of the PFtW&C by the Erie would route traffic to New York instead of Philadelphia, worked with the management of the Fort Wayne to lease the road out from under Gould for 999 years starting in July 1869. This would require the PRR to pay a 12% dividend on Fort Wayne stock for the duration of the lease. It didn’t come cheap, but the PRR saved its connection to Chicago.
By 1871, the Pennsylvania had acquired control of both the Panhandle and the Fort Wayne. The Panhandle had already leased the Jeffersonville, Madison & Indianapolis, allowing its traffic to connect, via the only bridge across the Ohio at the time, into Louisville…and the southern traffic that ended there.
The major stumbling block, at this point, was west of the Hoosier Capital. Traffic was routed onto the Terre Haute & Indianapolis, which was staunchly independent. The Pennsylvania had invested heavily into a line that connected Terre Haute to St. Louis, Missouri. But the fear that the TH&I would not cooperate with the dreaded PRR when it came to traffic led the PRR to team up with interests that would become the Big Four to build a separate line connecting Indianapolis to Terre Haute. That line would be called the Indianapolis & St. Louis, and would leave Indianapolis on a due west route through Danville.
If the Terre Haute & Indianapolis would not play ball with the Pennsy, it would still have a route to get to the Mississippi River. The TH&I would later fall into the Pennsylvania fold, but that was after a merger with the Pennsy controlled St. Louis, Alton & Terre Haute, known as the Vandalia.
The Pennsylvania also invested, in 1869, in another company that would have, were it built to its intended extent, connect Indianapolis to Cairo, Illinois. But that company only made it as far as Vincennes. While the Pennsylvania had members of the Board of Directors as early as 1872, the formal lease wouldn’t occur until 1879.
Most of the Pennsylvania Railroad holdings in Indiana were added to that company by 1870. Those companies would operate as separate entities until the 1920’s, when they were all consolidated into the Pennsylvania itself.