Frederick T. Gates And John D. Rockefeller


Gates’s reorganization of these investments is a fascinating story. With the help of an able mining engineer, the brother of Nicholas Murray Butler, he proved that the mining company was almost worthless. A two-million dollar railroad had been built to its mountain shafts before the veins had been properly tested! A costly lead smelter had to be scrapped; there was no lead. Other properties were jettisoned. But Gates’s shrewd eye saw that proper development of the Everett Timber Company might recoup all losses. He bought more forest land, and in due time sold it to the Weyerhaeusers and others at prices even five or six times the cost. “I was able to report to Mr. Rockefeller before I left him,” he later recalled, “that I had already made enough out of the Timber & Investment Company to repay him all his Puget Sound losses, and there remained an unsold surplus of one billion feet, at least, on which there had already accrued two or three millions more of profit.” To Gates a shrewd stroke of business gave great pleasure—veterans of Wall Street soon came to speak admiringly of his talents; but it gave him still greater pleasure to augment a fortune which he saw destined to public uses. He was creating resources for future boards, foundations, and institutes.

Sometimes a touch of drama enlivened Gates’s efforts to salvage the bad investments. A Cleveland promoter, acquiring a number of mining claims at Telluride, Colorado, had gotten Rockefeller and other friends to invest large sums in what he represented as rich mineral deposits. He talked of another Comstock Lode. Gates investigated. His suspicions grew. Finally he was directed in Denver to a mining engineer who knew the Telluride district intimately. Gates went to his office, and presented a card of introduction.

” ‘What?’ he shouted. ‘Do you mean to say that John D. Rockefeller has invested money in that damned swindle?’ And when I humbly confessed the truth, his eyes flashed, his face flushed, and he strode to and fro, making the air blue with oaths and imprecations.”

In this instance Gates failed to obtain any redress. The promoter, who paid himself a $15,000 a year salary, had long hoodwinked other investigators. When Gates called him and the officers of the company to his Telluride hotel, and bade them redeem Rockefeller’s stock at cost or meet the consequences, they gave him a note for the investment. But the note was never paid. In other instances, however, he achieved better results—sometimes spectacularly good. He made his office, which was transferred to 26 Broadway, a center for collecting information on investments, interpreting it, and systematizing Rockefeller’s holdings. Money went into public utilities, into real estate, into railroads, and into other channels. While this was being done, the flow of gifts was being organized and accelerated. In 1897 John D. Rockefeller, Jr., took his place at Gates’s side, for he instinctively felt that there was his place of greatest usefulness; and his tributes to Gates for the tuition he supplied in managing the fortune and using it for the best philanthropic objects have always been generous.

One accidental investment of Rockefeller’s involved Gates in the almost melodramatic story of the Mesabi ore lands, a story he has told with color and feeling in his thirty-page pamphlet, The Truth About Mr. Rockefeller and the Merritts . The five Merritt brothers and their three nephews, timber-cruisers and ore-prospectors in the Mesabi country, have long laid a spell on the American imagination. So has the Mesabi itself, a huge pine-covered basin filled with soft iron ore of almost unexampled richness. Rockefeller originally held no part of this particular area. His iron properties, when Gates began to assist in his financial affairs, were in Cuba, Wisconsin, Michigan, Colorado, and at one or two points in Minnesota outside the Mesabi. In fact, Rockefeller for a time refused to buy lands in this rich area. The Merritt brothers had obtained large claims, had formed companies in which they had about a forty per cent stock holding, and had piled debt on debt in trying to extent rails to their holdings. They had tremendous faith in their ores, not realizing that most steel companies distrusted the soft, powdery stuff, and that special new furnaces would have to be designed before it became usable. They and their chief partner, one Charles W. Wetmore, were already financially embarrassed when the Panic of 1893 came on. Everything fell to half value.

“By July, 1893,” writes Gates, “the Merritts could not have sold their stock in the open market at Duluth, which has a small Wall Street of its own, for more than one-half of their debts. The stocks were quoted or sold nowhere else. The Merritts weathered the storm of 1893, but in January, 1894, their Minnesota creditors . . . forced the Merritts to sell their holdings to whomsoever would pay the most money for them.”